UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September ~~30, 2012~~29, 2013

TRANSITION REPORT PURSUANT TO SECTION 13

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

COMMISSION FILE NUMBER 1-3619

----

PFIZER INC.

(Exact name of registrant as specified in its charter)



DELAWARE (State of Incorporation)	13-5315170 (I.R.S. Employer Identification No.)

235 East 42^nd Street, New York, New York 10017

(Address of principal executive offices) (zip code)

(212) 733-2323

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.



YES X	NO ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



YES X	NO ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large Accelerated filer X Accelerated filer ___ Non-accelerated filer ___ Smaller reporting company ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



YES ____	NO X

At November ~~5, 2012, 7,362,573,528~~4, 2013, 6,481,070,845 shares of the issuer’s voting common stock were outstanding.

Table of Contents

~~FORM 10-Q~~

~~For the Quarterly Period Ended~~

~~September 30, 2012~~

Table of Contents



PART I. FINANCIAL INFORMATION	Page

Item 1.
Financial Statements

Condensed Consolidated Statements of Income for the three and nine months ended September 29, 2013 and September 30, 2012 ~~and October 2, 2011~~	3

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 29, 2013 and September 30, 2012 ~~and October 2, 2011~~	4

Condensed Consolidated Balance Sheets as of September ~~30, 2012~~29, 2013 and December 31, ~~2011~~ 2012	5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 29, 2013 and September 30, 2012 ~~and October 2, 2011~~	6

Notes to Condensed Consolidated Financial Statements	7

Review Report of Independent Registered Public Accounting Firm	50

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations	51

Item 3.
Quantitative and Qualitative Disclosures About Market Risk	9598

Item 4.
Controls and Procedures	9598

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings	9699

Item 1A.
Risk Factors	9699

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	97100

Item 3.
Defaults Upon Senior Securities	97100

Item 4.
Mine Safety Disclosures	97100

Item 5.
Other Information	97100

Item 6.
Exhibits	98101

Signature	99102

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three Months Ended					Nine Months Ended				Three Months Ended						Nine Months Ended
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	September 30, 2012			October 2, 2011		September 30, 2012		October 2, 2011		September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012
Revenues	$	13,976		$	16,609	$	43,918	$	49,118	$	12,643		$	12,953		$	38,026		$	40,766
Costs and expenses:
Cost of sales^(a)	2,665			3,409		8,162		10,449		2,287			2,309			6,792			7,068
Selling, informational and administrative expenses^(a)	3,847			4,457		11,801		13,635		3,395			3,491			10,203			10,834
Research and development expenses^(a)	1,981			2,176		5,734		6,487		1,627			1,887			4,867			5,461
Amortization of intangible assets	1,228			1,389		3,939		4,138		1,117			1,211			3,476			3,889
Restructuring charges and certain acquisition-related costs	302			1,090		1,089		2,458		233			312			547			1,085
Other deductions––net	962			547		3,283		1,802
Other (income)/deductions––net										411			937			(514		)	3,264
Income from continuing operations before provision for taxes on income	2,991			3,541		9,910		10,149		3,573			2,806			12,655			9,165
Provision/(benefit) for taxes on income	(119		)	1,216		1,882		3,167		985			(183		)	3,876			1,622
Income from continuing operations	3,110			2,325		8,028		6,982		2,588			2,989			8,779			7,543
Discontinued operations:
Income from discontinued operations––net of tax	104			96		249		303		36			225			326			734
Gain on sale of discontinued operations––net of tax	—			1,328		—		1,316
Gain on disposal of discontinued operations––net of tax										(25		)	—			10,393			—
Discontinued operations––net of tax	104			1,424		249		1,619		11			225			10,719			734
Net income before allocation to noncontrolling interests	3,214			3,749		8,277		8,601		2,599			3,214			19,498			8,277
Less: Net income attributable to noncontrolling interests	6			11		22		31		9			6			63			22
Net income attributable to Pfizer Inc.	$	3,208		$	3,738	$	8,255	$	8,570	$	2,590		$	3,208		$	19,435		$	8,255
Earnings per common share––basic:^(b)

Earnings per common share––basic^(b):
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.42		$	0.30	$	1.07	$	0.88	$	0.39		$	0.40		$	1.26		$	1.00
Discontinued operations––net of tax	0.01			0.18		0.03		0.21		—			0.03			1.54			0.10
Net income attributable to Pfizer Inc. common shareholders	$	0.43		$	0.48	$	1.10	$	1.09	$	0.39		$	0.43		$	2.80		$	1.10
Earnings per common share––diluted:^(b)

Earnings per common share––diluted^(b):
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.41		$	0.30	$	1.06	$	0.88	$	0.39		$	0.40		$	1.25		$	1.00
Discontinued operations––net of tax	0.01			0.18		0.03		0.20		—			0.03			1.52			0.10
Net income attributable to Pfizer Inc. common shareholders	$	0.43		$	0.48	$	1.09	$	1.08	$	0.39		$	0.43		$	2.77		$	1.09
Weighted-average shares––Basic	7,436			7,770		7,483		7,877
Weighted-average shares––Diluted	7,508			7,810		7,550		7,925

Weighted-average shares––basic										6,581			7,436			6,938			7,483
Weighted-average shares––diluted										6,656			7,508			7,016			7,550
Cash dividends paid per common share	$	0.22		$	0.20	$	0.66	$	0.60	$	0.24		$	0.22		$	0.72		$	0.66


^(a)	~~Exclusive of~~Excludes amortization of intangible assets, except as disclosed in Note 9B. Goodwill and Other Intangible Assets: Other Intangible Assets.


^(b)	EPS amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2012
October 2,
2011
September 30,
2012
October 2,
2011
Net income before allocation to noncontrolling interests $ 3,214
$ 3,749
$ 8,277
$ 8,601
Other Comprehensive Income/(Loss)

Foreign currency translation adjustments $ 153
$ —
$ (1,565 ) $ 2,546
Reclassification adjustments^(a)
—
(130 ) —
(137 )
153
(130 ) (1,565 ) 2,409
Unrealized holding gains/(losses) on derivative financial instruments 446
(1,051 ) 217
(516 )
Reclassification adjustments for realized (gains)/losses^(a)
(221 ) 653
(95 ) (81 )
225
(398 ) 122
(597 )
Unrealized holding gains/(losses) on available-for-sale securities 35
(74 ) 127
(94 )
Reclassification adjustments for realized (gains)/losses^(a)
(9 ) 23
24
32
26
(51 ) 151
(62 )
Benefit plans: Actuarial gains/(losses) (88 ) 1
(592 ) 4
Reclassification adjustments related to amortization^(b)
121
68
351
208
Reclassification adjustments related to curtailments and settlements, net^(b)
48
85
160
258
Other (36 ) (20 ) 18
(164 )
45
134
(63 ) 306
Benefit plans: Prior service credits/(costs) and other (3 ) —
23
1
Reclassification adjustments related to amortization^(b)
(19 ) (17 ) (53 ) (52 )
Reclassification adjustments related to curtailments and settlements, net^(b)
(4 ) (16 ) (86 ) (49 )
Other 4
—
—
(4 )
(22 ) (33 ) (116 ) (104 )
Other comprehensive income/(loss), before tax 427
(478 ) (1,471 ) 1,952
Tax provision/(benefit) on other comprehensive income/(loss)^(c)
73
(216 ) 72
(276 )
Other comprehensive income/(loss) before allocation to noncontrolling interests $ 354
$ (262 ) $ (1,543 ) $ 2,228

Comprehensive Income

Comprehensive income before allocation to noncontrolling interests $ 3,568
$ 3,487
$ 6,734
$ 10,829
Less: Comprehensive income attributable to noncontrolling interests 5
7
3
35
Comprehensive income attributable to Pfizer Inc. $ 3,563
$ 3,480
$ 6,731
$ 10,794



	Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012
Net income before allocation to noncontrolling interests	$	2,599		$	3,214		$	19,498		$	8,277

Foreign currency translation adjustments	$	(21	)	$	153		$	(1,068	)	$	(1,565	)
Reclassification adjustments^(a)	—			—			171			—
	(21		)	153			(897		)	(1,565		)
Unrealized holding gains on derivative financial instruments	490			455			336			242
Reclassification adjustments for realized gains^(b)	(313		)	(221		)	(64		)	(94		)
	177			234			272			148
Unrealized holding gains/(losses) on available-for-sale securities	(156		)	26			(57		)	101
Reclassification adjustments for realized (gains)/losses^(b)	(15		)	(9		)	(46		)	24
	(171		)	17			(103		)	125
Benefit plans: actuarial gains/(losses), net	(13		)	(88		)	34			(592		)
Reclassification adjustments related to amortization^(c)	137			122			438			351
Reclassification adjustments related to curtailments/settlements, net^(c)	54			48			147			160
Foreign currency translation adjustments and other	(28		)	(37		)	112			18
	150			45			731			(63		)
Benefit plans: prior service (costs)/credits and other	—			(3		)	3			23
Reclassification adjustments related to amortization^(c)	(16		)	(20		)	(45		)	(54		)
Reclassification adjustments related to curtailments/settlements, net^(c)	—			(4		)	(9		)	(86		)
Other	2			5			(4		)	1
	(14		)	(22		)	(55		)	(116		)
Other comprehensive income/(loss), before tax	121			427			(52		)	(1,471		)
Tax provision on other comprehensive income/(loss)^(d)	80			73			443			72
Other comprehensive income/(loss) before allocation to noncontrolling interests	$	41		$	354		$	(495	)	$	(1,543	)

Comprehensive income before allocation to noncontrolling interests	$	2,640		$	3,568		$	19,003		$	6,734
Less: Comprehensive income/(loss) attributable to noncontrolling interests	(32		)	5			(2		)	3
Comprehensive income attributable to Pfizer Inc.	$	2,672		$	3,563		$	19,005		$	6,731


^(a)	Primarily reclassified into Gain on disposal of discontinued operations—net of tax in the condensed consolidated statements of income.


^(b)	Reclassified into Other (income)/deductions—net in the condensed consolidated statements of income.


^(b)(c)	Generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, in the condensed consolidated statements of income. For additional information, see Note 10. Pension and Postretirement Benefit Plans.


^(c)(d)	See Note ~~5B.~~5C. Tax Matters: Taxes on Items of Other Comprehensive Income/(Loss).

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(MILLIONS OF DOLLARS)	September 30, 2012			December 31, 2011			September 29, 2013			December 31, 2012
	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	4,506		$	3,182		$	2,052		$	10,081
Short-term investments	18,462			23,270			31,627			22,318
Accounts receivable, less allowance for doubtful accounts	12,523			13,058			11,371			11,456
Inventories	7,516			6,610			6,482			6,076
Taxes and other current assets	8,849			9,380			7,835			8,956
Assets of discontinued operations and other assets held for sale	5,271			5,317			133			5,944
Total current assets	57,127			60,817			59,500			64,831
Long-term investments	13,429			9,814			15,731			14,149
Property, plant and equipment, less accumulated depreciation	14,606			15,921			12,359			13,213
Goodwill	44,370			44,569			42,400			43,661
Identifiable intangible assets, less accumulated amortization	47,209			51,184			40,549			45,146
Taxes and other noncurrent assets	5,862			5,697			4,982			4,798
Total assets	$	182,603		$	188,002		$	175,521		$	185,798

Liabilities and Equity
Short-term borrowings, including current portion of long-term debt	$	7,774		$	4,016		$	4,738		$	6,424
Accounts payable	2,967			3,678			2,287			2,921
Dividends payable	1			1,796			1			1,733
Income taxes payable	1,788			1,009			802			979
Accrued compensation and related items	1,736			2,120			1,750			1,875
Other current liabilities	13,455			15,066			10,774			13,812
Liabilities of discontinued operations	1,410			1,224			21			1,442
Total current liabilities	29,131			28,909			20,373			29,186

Long-term debt	31,083			34,926			31,812			31,036
Pension benefit obligations	6,560			6,341			7,588			7,782
Postretirement benefit obligations	3,309			3,344			3,423			3,491
Noncurrent deferred tax liabilities	19,133			18,861			22,432			21,193
Other taxes payable	6,011			6,886			7,024			6,581
Other noncurrent liabilities	5,261			6,114			4,515			4,851
Total liabilities	100,488			105,381			97,167			104,120

Commitments and Contingencies

Preferred stock	41			45			35			39
Common stock	447			445			452			448
Additional paid-in capital	72,317			71,423			76,756			72,608
Employee benefit trusts	(2		)	(3		)
Treasury stock	(36,703		)	(31,801		)	(63,272		)	(40,122		)
Retained earnings	51,256			46,210			70,381			54,240
Accumulated other comprehensive loss	(5,653		)	(4,129		)	(6,383		)	(5,953		)
Total Pfizer Inc. shareholders’ equity	81,703			82,190			77,969			81,260
Equity attributable to noncontrolling interests	412			431			385			418
Total equity	82,115			82,621			78,354			81,678
Total liabilities and equity	$	182,603		$	188,002		$	175,521		$	185,798

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012			October 2, 2011			September 29, 2013			September 30, 2012
Operating Activities
Net income before allocation to noncontrolling interests	$	8,277		$	8,601		$	19,498		$	8,277
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	5,716			6,568			4,818			5,548
Share-based compensation expense	362			347			418			362
Gain associated with the transfer of certain product rights to an equity-method investment							(459		)	—
Asset write-offs and impairment charges	865			773			926			865
Gain on sale of discontinued operations	—			(1,683		)
Gain on disposal of discontinued operations							(10,501		)	—
Deferred taxes from continuing operations	97			693			1,667			130
Other deferred taxes	23			145
Benefit plan contributions (in excess of)/less than expense	86			(270		)
Deferred taxes from discontinued operations							(23		)	(10		)
Benefit plan expense in excess of contributions							258			86
Other non-cash adjustments, net	(118		)	(93		)	(311		)	(118		)
Other changes in assets and liabilities, net of acquisitions and divestitures	(3,510		)	(102		)	(4,312		)	(3,342		)
Net cash provided by operating activities	11,798			14,979			11,979			11,798

Investing Activities
Purchases of property, plant and equipment	(833		)	(1,062		)	(789		)	(833		)
Purchases of short-term investments	(14,587		)	(13,457		)	(33,927		)	(14,587		)
Proceeds from redemptions and sales of short-term investments	19,377			7,221			29,008			19,377
Net proceeds from redemptions and sales of short-term investments with original maturities of 90 days or less	1,483			10,648
Net (purchases of)/proceeds from redemptions and sales of short-term investments with original maturities of 90 days or less							(2,177		)	1,483
Purchases of long-term investments	(8,694		)	(3,646		)	(8,746		)	(8,694		)
Proceeds from redemptions and sales of long-term investments	3,357			2,001			5,943			3,357
Acquisitions, net of cash acquired	(782		)	(3,188		)	(15		)	(782		)
Proceeds from sale of business	—			2,376
Other investing activities	(4		)	408			(2		)	(4		)
Net cash provided by/(used in) investing activities	(683		)	1,301
Net cash used in investing activities							(10,705		)	(683		)

Financing Activities
Proceeds from short-term borrowings	5,700			9,613			3,723			5,700
Principal payments on short-term borrowings	(3		)	(3,826		)	(3,776		)	(5,882		)
Net payments on short-term borrowings with original maturities of 90 days or less	(6,055		)	(6,243		)
Net proceeds from/(payments on) short-term borrowings with original maturities of 90 days or less							1,831			(176		)
Proceeds from issuance of long-term debt^(a)							6,618			—
Principal payments on long-term debt	(14		)	(3,486		)	(2,396		)	(14		)
Purchases of common stock	(4,834		)	(5,789		)	(11,643		)	(4,834		)
Cash dividends paid	(4,915		)	(4,710		)	(5,026		)	(4,915		)
Other financing activities	355			84
Proceeds from exercise of stock options and other financing activities							1,438			355
Net cash used in financing activities	(9,766		)	(14,357		)	(9,231		)	(9,766		)
Effect of exchange-rate changes on cash and cash equivalents	(25		)	48			(72		)	(25		)
Net increase in cash and cash equivalents	1,324			1,971
Net increase/(decrease) in cash and cash equivalents							(8,029		)	1,324
Cash and cash equivalents, beginning	3,182			1,735			10,081			3,182

Cash and cash equivalents, end	$	4,506		$	3,706		$	2,052		$	4,506

Supplemental Cash Flow Information
Non-cash transactions:
Sale of Zoetis (our Animal Health business) for Pfizer common stock^(b)							$	11,408		$	—
Exchange of Zoetis common stock for the retirement of Pfizer commercial paper issued in 2013^(b)							2,479			—
Exchange of Zoetis senior notes for the retirement of Pfizer commercial paper issued in 2012^(b)							992			—
Transfer of certain product rights to an equity-method investment^(c)							1,233			—
Cash paid during the period for:
Income taxes	$	1,895		$	1,539		$	1,799		$	1,895
Interest	1,675			1,872			1,512			1,675


^(a)	Includes $2.6 billion from the issuance of senior notes by Zoetis, our former Animal Health subsidiary, net of the non-cash exchange of Zoetis senior notes for the retirement of Pfizer commercial paper issued in 2012. See Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.


^(b)	See Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investment: Divestitures.


^(c)	See Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

See Notes to Condensed Consolidated Financial ~~Statements~~Statements.

Table of Contents

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Significant Accounting Policies

A. Basis of Presentation

We prepared the condensed consolidated financial statements following the requirements of the U.S. Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted.

Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three and nine months ended August ~~26, 2012,~~25, 2013 and August ~~28, 2011. We have made certain reclassification adjustments to conform prior-period amounts to the current presentation, primarily related to certain inventories (see~~ ~~Note 8. Inventories) and the reclassification of certain investments (see~~ ~~Note 7. Financial Instruments).~~26, 2012.

On ~~August 13, 2012,~~June 24, 2013, we ~~filed a registration statement with~~completed the ~~SEC for the potential initial public offering (IPO)~~full disposition of ~~up to a~~ ~~20%~~ ~~ownership stake in~~ our Animal Health business ~~Zoetis Inc.~~ (Zoetis)., and recognized a gain of approximately

~~On April 23, 2012, we announced that we entered into an agreement~~$10.4 billion, net of tax, related to ~~sell our Nutrition~~the disposal of this business ~~to Nestlé. As a result, beginning~~ in Gain on disposal of discontinued operations––net of tax in the ~~second~~ ~~quarter~~condensed consolidated statements of ~~2012, we report~~income for the nine months ended September 29, 2013. The operating results of ~~the Nutrition~~this business are reported as ~~Discontinued~~Income from discontinued operations––net of tax in the condensed consolidated statements of income for ~~all periods presented.~~the nine months ended September 29, 2013 and for the three and nine months ended September 30, 2012. In addition, in the condensed consolidated balance sheet as of December 31, 2012, the assets and liabilities associated with this business are ~~reported~~classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as ~~appropriate, in the condensed consolidated balance sheets (see~~appropriate. Prior period financial statements have been restated. For additional information, see Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures:~~Equity-Method Investments: Divestitures).

On ~~August 1, 2011,~~November 30, 2012, we completed the sale of our ~~Capsugel business.~~Nutrition business to Nestlé. The operating results ~~and the gain on the sale~~ of this business are reported as ~~Discontinued~~Income from discontinued operations––net of tax in the condensed consolidated statements of income for the three and nine months ended ~~October 2, 2011~~September 30, 2012 ~~(see~~ ~~Note 2B. Acquisitions and Divestitures: Divestitures~~).

~~On January 31, 2011, we acquired King Pharmaceuticals, Inc. (King) and in accordance with our domestic and international reporting periods, our condensed consolidated financial statements for the~~ ~~nine~~ ~~months ended~~ ~~October 2, 2011~~ ~~reflect approximately~~ ~~eight~~ ~~months of King’s U.S. operations and approximately~~ ~~seven~~ ~~months of King’s international operations (for~~ For additional information, see Note ~~2A.~~2B. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures: Acquisitions~~Equity-Method Investments: Divestitures).

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

We are responsible for the unaudited financial statements included in this Quarterly Report on Form 10-Q. The financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our ~~financial position~~condensed consolidated balance sheets and ~~results~~condensed consolidated statements of ~~operations.~~income.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our ~~2011~~2012 Annual Report on Form ~~10-K.~~10-K/A.

B. Adoption of New Accounting Standards

~~The provisions of the following~~There were no new accounting and disclosure standards ~~were~~ adopted ~~as of January 1, 2012:~~in the nine months ended September 29, 2013.

~~Presentation of comprehensive income in financial statements. As a result of adopting this new standard, we have presented separate Condensed Consolidated Statements of Comprehensive Income.~~

An amendment to the guidelines on the measurement and disclosure of fair value that is consistent between U.S. GAAP and International Financial Reporting Standards. The adoption of this new standard did not have a significant impact on our financial statements.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

C. Fair Value

Our fair value methodologies depend on the following types of inputs:

Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).

Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable (Level 2 inputs).

Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).

A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.

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(UNAUDITED)

Note 2. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures~~Equity-Method Investments

A. Acquisitions

~~Nexium Over-the-Counter Rights~~

NextWave Pharmaceuticals, Inc.

~~On August 13, 2012,~~In the first quarter of 2013, we ~~announced that we entered into an agreement with AstraZeneca~~finalized the allocation of the consideration transferred to the assets acquired and the liabilities assumed in the acquisition of NextWave Pharmaceuticals Incorporated (NextWave), a privately held, specialty pharmaceutical company, completed on November 27, 2012. The total consideration for the ~~over-the-counter (OTC)~~ acquisition was approximately $442 million, which consisted of upfront payments to NextWave's shareholders of approximately $278 million and contingent consideration with an estimated acquisition-date fair value of approximately $164 million. We recorded $519 million in Identifiable intangible assets, consisting of $474 million in Developed technologyrights ~~for Nexium,~~ and $45 million in In-process research and development; $166 million in net deferred tax liabilities; and $89 million in Goodwill. In the third quarter and the first nine months of 2013, as a ~~leading prescription drug currently approved to treat~~result of lowered commercial forecasts, the ~~symptoms of gastroesophageal reflux disease. Under the terms~~fair value of the ~~agreement,~~contingent consideration decreased and we ~~acquired the exclusive global rights to market Nexium for the approved OTC indications. We made an upfront payment~~recognized a pre-tax gain of approximately $~~250~~128 million ~~to AstraZeneca,~~ and ~~AstraZeneca is eligible to receive milestone payments of up to~~ ~~$550~~$109 million, ~~based on product launches and level of sales as well as royalty payments based on sales. The upfront payment was expensed and included~~ respectively, in ~~Research and development expenses~~Other (income)/deductions––net in our condensed consolidated statements of income. A marketing authorization application for OTC Nexium in a 20 mg tablet form was filed with the European Medicines Agency in June 2012. A new drug application filing for OTC Nexium in the U.S. in a 20 mg delayed-release capsule is targeted for the first half of 2013..

Alacer Corp.

On February 26, 2012, we completed our acquisition of Alacer Corp., a ~~privately owned~~ company that manufactures, markets and distributes Emergen-C, a line of effervescent, powdered drink mix vitamin supplements that is the largest-selling branded vitamin C line in the U.S. In connection with this ~~consumer healthcare~~Consumer Healthcare acquisition, we recorded $~~247~~181 million in Identifiable intangible assets, consisting primarily of the Emergen-C indefinite-lived ~~brand,~~brand; $9469 million in net deferred tax ~~liabilities~~liabilities; and $~~151~~192 million in Goodwill. ~~The allocation of the consideration transferred to the assets acquired and the liabilities assumed has been finalized.~~

Ferrosan Holding A/S

On December 1, 2011, we completed our acquisition of the consumer healthcare business of Ferrosan Holding A/S (Ferrosan), a Danish company engaged in the sale of science-based consumer healthcare products, including dietary supplements and lifestyle products, primarily in the Nordic region and the emerging markets of Russia and Central and Eastern Europe. ~~Due to the fact that financial information included in our fiscal year~~ ~~2011~~ ~~consolidated financial statements for our subsidiaries operating outside the U.S. is as of and for the year ended November 30, this~~This acquisition is reflected in our condensed consolidated financial statements beginning in the first fiscal quarter of ~~2012~~.2012. Our acquisition of Ferrosan’s consumer healthcare business increases our presence in dietary supplements with a new set of brands and pipeline products. Also, we believe that the acquisition allows us to expand the marketing of Ferrosan’s brands through Pfizer’s global footprint and provide greater distribution and scale for certain Pfizer brands, such as Centrum and Caltrate, in Ferrosan’s key markets. In connection with this Consumer Healthcare acquisition, we recorded $~~463~~362 million in Identifiable intangible assets, consisting of indefinite-lived and finite-lived ~~brands,~~brands; $~~119~~94 million in net deferred tax ~~liabilities~~liabilities; and $~~246~~322 million in Goodwill. ~~The allocation of the consideration transferred to the assets acquired and the liabilities assumed has not been finalized.~~

~~Table of Contents~~B. Divestitures

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~King Pharmaceuticals,~~Animal Health Business—Zoetis Inc.

On ~~January 31, 2011 (the acquisition date),~~June 24, 2013, we completed the full disposition of our Animal Health business (Zoetis). The full disposition was completed through a ~~tender~~series of steps, including the formation of Zoetis, an initial public offering (IPO) of an approximate 19.8% interest in Zoetis and an exchange offer for the ~~outstanding shares~~remaining 80.2% interest.

Formation of Zoetis—On January 28, 2013, our then wholly owned subsidiary, Zoetis, issued $3.65 billion aggregate principal amount of senior notes. Also, on January 28, 2013, we transferred to Zoetis substantially all of the assets and liabilities of our Animal Health business in exchange for all of the Class A and Class B common stock of ~~King at a purchase price of~~Zoetis, $~~14.25~~ ~~per share in cash and acquired approximately~~ ~~92.5%~~1.0 billion of the ~~outstanding shares. On February 28, 2011, we acquired~~$3.65 billion of Zoetis senior notes, and an amount of cash equal to substantially all of the cash proceeds received by Zoetis from the remaining ~~shares of King for~~ $~~14.25~~2.65 billion ~~per share~~of senior notes issued. The $1.0 billion of Zoetis senior notes received by Pfizer were exchanged by Pfizer for the retirement of Pfizer commercial paper issued in ~~cash. As a result,~~2012, and the ~~total fair value~~cash proceeds received by Pfizer of ~~consideration transferred for King was~~ approximately $~~3.6~~2.6 billion ~~in cash ($3.2 billion, net of cash acquired).~~were used for dividends and stock buybacks.

King’s principal businesses consist of a prescription pharmaceutical business focused on delivering new formulations of pain treatments designed to discourage common methods of misuse and abuse; the Meridian auto-injector business for emergency drug delivery, which develops and manufactures the EpiPen;Initial Public Offering (19.8% Interest)—On February 6, 2013, an ~~established products portfolio; and an animal health business that offers a variety of feed-additive products for a wide range of species.~~

~~The following table provides the assets acquired and liabilities assumed from King:~~

(MILLIONS OF DOLLARS)
Amounts
Recognized as of
Acquisition Date
(Final)

Working capital, excluding inventories $ 155
Inventories 340
Property, plant and equipment 412
Identifiable intangible assets, excluding in-process research and development 1,806
In-process research and development 303
Net tax accounts (328 )
All other long-term assets and liabilities, net 102
Total identifiable net assets 2,790
Goodwill^(a)
765
Net assets acquired/total consideration transferred $ 3,555


^(a)	~~Goodwill recorded as of the acquisition date totaled~~ ~~$720 million~~ ~~for our~~ ~~three~~ ~~biopharmaceutical operating segments and~~ ~~$45 million~~ ~~for our Animal Health operating segment. (Since the acquisition of King, we have revised our operating segments. See~~ ~~Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.~~)

AsIPO of the ~~acquisition date,~~Class A common stock of Zoetis was completed, pursuant to which we sold 99.015 million shares of Class A common stock of Zoetis (all of the ~~fair value of accounts receivable approximated~~Class A common stock, including shares sold pursuant to the ~~book value acquired. The gross contractual amount receivable was~~ ~~$200 million, virtually all of~~underwriters' overallotment option to purchase additional shares, which was ~~expected to be collected.~~exercised in

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition of King includes the following:

~~the expected synergies and other benefits that we believed would result from combining the operations of King with the operations of Pfizer;~~

~~any intangible assets that did not qualify for separate recognition, as well as future, yet unidentified projects and products; and~~

the value of the going-concern element of King’s existing businesses (the higher rate of return on the assembled collection of net assets versus if Pfizer had acquired all of the net assets separately).

~~Goodwill is not amortized and is not deductible for income tax purposes (see~~ ~~Note 9A. Goodwill and Other Intangible Assets: Goodwill~~ ~~for additional information).~~

~~The assets and liabilities arising from contingencies recognized as of the acquisition date are not significant to Pfizer’s condensed consolidated financial statements.~~

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~~Revenues from King are included~~full) in ~~Pfizer's condensed consolidated statements~~exchange for the retirement of ~~income from the acquisition date, January 31, 2011, through Pfizer’s domestic and international quarter-ends and were~~approximately $~~938 million~~2.5 billion of Pfizer commercial paper issued in 2013. The Class A common stock sold in the ~~first nine months~~IPO represented approximately 19.8% of ~~2011. We are not able to provide~~ the ~~results~~total outstanding Zoetis shares. The excess of ~~operations attributable to King~~the consideration received over the net book value of our divested interest was approximately $2.3 billion and was recorded in ~~the first nine months of 2011 as those operations had been substantially integrated into the larger Pfizer operation shortly after the acquisition.~~Additional paid-in capital. For additional information, see Note 6. Certain Changes in Total Equity.

IfExchange Offer (80.2% Interest)—On June 24, 2013, we exchanged all of our remaining interest in Zoetis, 400.985 million shares of Class A common stock of Zoetis (after converting all of our Class B common stock into Class A common stock, representing approximately 80.2% of the ~~acquisition~~total outstanding Zoetis shares), for approximately 405.117 million outstanding shares of ~~King had occurred~~Pfizer common stock on ~~January 1, 2011, the change~~a tax-free basis pursuant to ~~Pfizer’s~~ ~~Revenues, Income from continuing operations attributable~~an exchange offer made to Pfizer ~~Inc. common shareholders~~shareholders. The ~~and~~ ~~Diluted earnings per share attributable to Pfizer Inc. common shareholders~~ ~~for the first nine months of 2011 would not have been significant.~~

~~B. Divestitures~~

~~On April 23, 2012, we announced that we entered into an agreement to sell our Nutrition business to Nestlé for~~ $~~11.85~~11.4 billion ~~in cash. The transaction is expected to close~~of Pfizer common stock received in the ~~next few months, assuming~~exchange transaction was recorded in Treasury stock and was valued using the ~~receipt~~opening price of Pfizer common stock on June 24, 2013, the date we accepted the Zoetis shares for exchange. For additional information, see Note 6. Certain Changes in Total Equity. The gain on the sale of the ~~required regulatory clearances and satisfaction of other closing conditions. Beginning~~remaining interest in ~~the~~Zoetis was approximately ~~second~~ ~~quarter of~~ ~~2012~~$10.4 billion, ~~we report the operating results~~net of ~~the Nutrition business as~~income taxes resulting from certain legal entity reorganizations, and was recorded in ~~Discontinued~~Gain on disposal of discontinued operations––net of taxin the condensed consolidated statements of income for ~~all periods presented. The transaction also includes~~ the ~~sale~~nine months ended September 29, 2013.

In summary, as a result of ~~certain prenatal multivitamins currently commercialized by~~ the ~~Pfizer Consumer Healthcare business unit.~~ above transactions, we received approximately $6.1 billion of cash and Treasury stock valued at $11.4 billion.

The operating results of ~~this product line~~the animal health business are ~~also included in~~reported as ~~Discontinued~~Income from discontinued operations––net of taxin the condensed consolidated statements of income for ~~all periods presented.~~the nine months ended September 29, 2013 (through the disposal date) and for the three and nine months ended September 30, 2012. In addition, in the condensed consolidated balance sheet as of December 31, 2012, the assets and liabilities associated with ~~the discontinued operations~~this business are classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as ~~appropriate, in~~appropriate. Prior period financial statements have been restated.

In connection with the ~~condensed consolidated balance sheets.~~above transactions, we entered into a transitional services agreement (TSA) and manufacturing and supply agreements (MSAs) with Zoetis that are designed to facilitate the orderly transfer of business operations to the standalone Zoetis entity. The TSA relates primarily to administrative services, which are generally to be provided within 24 months. Under the MSAs, we will manufacture and supply certain animal health products to Zoetis for a transitional period of up to 5 years, with an ability to extend, if necessary, upon mutual agreement of both parties. These agreements are not material and none confers upon us the ability to influence the operating and/or financial policies of Zoetis subsequent to June 24, 2013, the full disposition date.

Nutrition Business

On ~~August 1, 2011,~~November 30, 2012, we completed the sale of our ~~Capsugel~~Nutrition business to Nestlé for$11.85 billion in cash, and recognized a gain of approximately $~~2.4~~4.8 billion ~~in cash.~~ , net of tax. The divested business includes:

our former Nutrition operating segment and certain prenatal vitamins previously commercialized by the Pfizer Consumer Healthcare operating segment; and

other associated amounts, such as direct manufacturing costs, enabling support functions and other costs not charged to the business, purchase-accounting impacts, acquisition-related costs, impairment charges, restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives, all of which are reported outside our operating segment results.

The operating results ~~and the gain on the sale~~ of this business are ~~reported~~classified as ~~Discontinued~~Income from discontinued operations––net of tax in the condensed consolidated statements of income for the three and nine months ended September 30, 2012.~~October 2, 2011~~.

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Total Discontinued Operations

The following table provides the components of Discontinued operations—net of tax:


	Three Months Ended				Nine Months Ended				Three Months Ended^(a)					Nine Months Ended^(a)
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		September 30, 2012		October 2, 2011		September 29, 2013			September 30, 2012		September 29, 2013		September 30, 2012
Revenues^(a)	$	564	$	699	$	1,665	$	2,068	$	—		$	1,587	$	2,201	$	4,817
Pre-tax income from discontinued operations(a)	$	129	$	121	$	365	$	397	$	32		$	314	$	421	$	1,110
Provision for taxes on income^(b)	25		25		116		94		(4		)	89		95		376
Income from discontinued operations––net of tax	104		96		249		303		36			225		326		734
Pre-tax gain on sale of discontinued operations	—		1,695		—		1,683
Pre-tax gain on disposal of discontinued operations									(38		)	—		10,501		—
Provision for taxes on income^(c)	—		367		—		367		(13		)	—		108		—
Gain on sale of discontinued operations––net of tax	—		1,328		—		1,316
Gain on disposal of discontinued operations––net of tax									(25		)	—		10,393		—
Discontinued operations––net of tax^(a)	$	104	$	1,424	$	249	$	1,619	$	11		$	225	$	10,719	$	734

^(a)

I~~ncludes~~Includes the Animal Health (Zoetis) business for the nine months ended September 29, 2013 (through the disposal date) and for the three and nine months ended September 30, 2012, and the Nutrition business for ~~all periods presented~~the three and nine months ended September 30, 2012. For the ~~Capsugel business for 2011 only.~~

three months ended September 29, 2013, includes certain post-close adjustments.

^(b)

Includes a deferred tax ~~expense~~benefit of $94 million and $30 million for the three months ended September 29, 2013 and September 30, 2012, respectively, and a deferred tax benefit of $~~10 million~~ ~~for the three months ended~~ ~~September 30, 2012~~ ~~and~~ ~~October 2, 2011, respectively, and a deferred tax expense of~~ $23 million and ~~a deferred tax benefit of~~ $1710 million for the nine months ended September 29, 2013 and September 30, 2012, ~~and~~ ~~October 2, 2011~~, respectively. These deferred tax provisions include deferred ~~income~~ taxes related to investments in certain foreign subsidiaries resulting from our intention not to hold these subsidiaries ~~permanently.~~indefinitely.


^(c)	~~Includes deferred tax expense of~~ ~~$162 million~~ ~~for~~For the ~~three and~~ nine months ended ~~October 2, 2011. These deferred tax provisions include deferred~~September 29, 2013, primarily reflects income taxes onresulting from certain ~~current-year funds earned outside the U.S. that will not be permanently reinvested overseas.~~ legal entity reorganizations.

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~~(UNAUDITED)~~

The following table provides the components of Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations:


(MILLIONS OF DOLLARS)	September 30, 2012		December 31, 2011		September 29, 2013		December 31, 2012
Accounts receivable, less allowance for doubtful accounts	$	523	$	550	$	—	$	922
Inventories					—		1,137
Other current assets	433		419		—		550
Property, plant and equipment, less accumulated depreciation	1,046		1,118		133		1,318
Goodwill	492		498		—		1,011
Identifiable intangible assets, less accumulated amortization	2,652		2,648		—		867
Other noncurrent assets	125		84		—		139
Assets of discontinued operations and other assets held for sale	$	5,271	$	5,317	$	133	$	5,944

Current liabilities	$	554	$	385	$	21	$	874
Other liabilities	856		839		—		568
Liabilities of discontinued operations	$	1,410	$	1,224	$	21	$	1,442

The net cash flows of our discontinued operations for each of the categories of operating, investing and financing activities are not significant for ~~any period presented.~~the nine months ended September 29, 2013 and September 30, 2012.

C. Collaborative Arrangement

Collaboration for ertugliflozin

On April 29, 2013, we announced that we had entered into a worldwide, except Japan, collaboration agreement with Merck & Co., Inc. (Merck) for the development and commercialization of Pfizer's ertugliflozin (PF-04971729), an investigational oral sodium glucose cotransporter (SGLT2) inhibitor currently in Phase 3 development for the treatment of type 2 diabetes. Under the terms of the agreement, we will collaborate with Merck on the clinical development and commercialization of ertugliflozin,

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and ertugliflozin-containing fixed-dose combinations with metformin and Januvia(sitagliptin) tablets. Merck will continue to retain the rights to its existing portfolio of sitagliptin-containing products. Through September 29, 2013, we received payments totaling $60 million and we will be eligible for additional payments associated with the achievement of future clinical, regulatory and commercial milestones. The payments received to date have been deferred and are being recognized in Other (income)/deductions––net over a multi-year period. We will share potential revenues and certain costs with Merck on a 60%/40% basis, with Pfizer having the 40% share. Each party has the right to terminate the agreement at certain times under certain circumstances, with various resulting rights and obligations depending on the nature of the termination.

D. Equity-Method Investments

Investment in ViiV Healthcare Limited

On August 12, 2013, the U.S. Food and Drug Administration (FDA) approved Tivicay (dolutegravir), a product for the treatment of HIV-1 infection, developed by ViiV Healthcare Limited (ViiV), an equity-method investee. This approval, in accordance with the agreement between GlaxoSmithKline plc and Pfizer, triggered a reduction in our interest in ViiV from 13.5% to 12.6% and an increase in GlaxoSmithKline plc's equity interest in ViiV from 76.5% to 77.4% effective October 1, 2013. As a result, in the third quarter of 2013, we recognized a loss of approximately $31 million in Other (income)/deductions––net. We continue to account for our investment in ViiV under the equity method due to the significant influence that we continue to have through our board representation and minority veto rights.

Investment in Hisun Pfizer Pharmaceuticals Company Limited

On September 6, 2012, we and Zhejiang Hisun Pharmaceuticals Co., Ltd., a leading pharmaceutical company in China, formed a new company, Hisun Pfizer Pharmaceuticals Company Limited (Hisun Pfizer), to develop, manufacture, market and sell pharmaceutical products, primarily branded generic products, predominately in China. Hisun Pfizer was established with registered capital of $250 million, of which our portion was $122.5 million. On January 1, 2013, both parties transferred selected employees to Hisun Pfizer and contributed, among other things, certain rights to commercialized products and products in development, intellectual property rights, and facilities, equipment and distribution/customer contracts. Our contributions in 2013 constituted a business, as defined by U.S. GAAP, and included, among other things, the China rights to certain commercialized products and other products not yet commercialized and all associated intellectual property rights. As a result of the contributions from both parties, Hisun Pfizer holds a broad portfolio of branded generics covering cardiovascular disease, infectious disease, oncology, mental health, and other therapeutic areas. We hold a 49% equity interest in Hisun Pfizer.

We also entered into certain transition agreements designed to ensure and facilitate the orderly transfer of the business operations to Hisun Pfizer, primarily the Pfizer Products Transition Period Agreement and a related supply and promotional services agreement. These agreements provide for a profit margin on the manufacturing services provided by Pfizer to Hisun Pfizer and govern the supply, promotion and distribution of Pfizer products until Hisun Pfizer begins its own manufacturing and distribution. While intended to be transitional, these agreements may be extended by mutual agreement of the parties for several years and, possibly, indefinitely. These agreements are not material to Pfizer, and none confers upon us any additional ability to influence the operating and/or financial policies of Hisun Pfizer.

In connection with our contributions in the first quarter of 2013, we recognized a pre-tax gain of approximately $459 million in Other (income)/deductions––net, reflecting the transfer of the business to Hisun Pfizer (including an allocation of goodwill from our Emerging Markets reporting unit as part of the carrying amount of the business transferred). Since we hold a 49% interest in Hisun Pfizer, we have an indirect retained interest in the contributed assets; as such, 49% of the gain, or $225 million, represents the portion of the gain associated with that indirect retained interest.

In valuing our investment in Hisun Pfizer (which includes the indirect retained interest in the contributed assets), we used discounted cash flow techniques, utilizing a 11.5% discount rate, reflecting our best estimate of the various risks inherent in the projected cash flows, and a nominal terminal year growth factor. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which include the expected impact of competitive, legal and/or regulatory forces on the products; the long-term growth rate, which seeks to project the sustainable growth rate over the long-term; and the discount rate, which seeks to reflect the various risks inherent in the projected cash flows, including country risk.

We are accounting for our interest in Hisun Pfizer as an equity-method investment, due to the significant influence we have over the operations of Hisun Pfizer through our board representation, minority veto rights and 49% voting interest. Our

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investment in Hisun Pfizer is reported as a private equity investment in Long-term investments, and our share of Hisun Pfizer's net income is recorded in Other (income)/deductions––net. As of September 29, 2013, the carrying value of our investment in Hisun Pfizer is approximately $1.4 billion, and the amount of our underlying equity in the net assets of Hisun Pfizer is approximately $750 million. The excess of the carrying value of our investment over our underlying equity in the net assets of Hisun Pfizer has been allocated, within the investment account, to goodwill and other intangible assets. The amount allocated to other intangible assets is being amortized into Other (income)/deductions––net over an average estimated useful life of 25 years.

Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

We incur significant costs in connection with acquiring, integrating and restructuring businesses and in connection with our global ~~cost-reduction and~~ cost-reduction/productivity initiatives. For example:

In connection with our cost-reduction and productivity initiatives, significant programs of which began in 2005, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems; and

In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company).; and

In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems.

Since the acquisition of Wyeth on October 15, 2009, our cost-reduction initiatives announced on January 26, 2009, but not completed as of December 31, 2009, were incorporated into a comprehensive plan to integrate Wyeth’s operations to generate cost savings and to capture synergies across the combined company. In addition, among our ongoing cost-reduction/productivity initiatives, on February 1, 2011, we announced a new productivity initiative to accelerate our strategies to improve innovation and productivity in R&D by prioritizing areas ~~with~~that we believe have the greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas with the highest potential to deliver value in the near term and over time.

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The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		September 30, 2012		October 2, 2011		September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012
Transaction costs^(a)	$	—	$	5	$	1	$	28
Integration costs^(b)	87		184		295		562
Restructuring charges^(c):
Employee termination costs	113		762		424		1,615
Restructuring charges^(a):
Employee terminations									$	174	$	132	$	289	$	439
Asset impairments	35		99		282		157		—		33		115		279
Exit costs	67		40		87		96		21		68		36		88
Total restructuring charges									195		233		440		806
Integration costs^(b)									38		79		107		279
Restructuring charges and certain acquisition-related costs	302		1,090		1,089		2,458		233		312		547		1,085
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows^(d):
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows^(c):
Cost of sales	78		68		214		410		43		75		134		205
Selling, informational and administrative expenses	3		39		8		68		—		1		19		7
Research and development expenses	—		146		259		379		—		—		94		259
Total additional depreciation––asset restructuring	81		253		481		857		43		76		247		471
Implementation costs recorded in our condensed consolidated statements of income as follows^(e):
Implementation costs recorded in our condensed consolidated statements of income as follows^(d):
Cost of sales	19		—		23		—		16		18		27		22
Selling, informational and administrative expenses	45		12		77		12		30		47		95		77
Research and development expenses	47		10		132		28		1		47		10		132
Total implementation costs	111		22		232		40		47		112		132		231
Total costs associated with acquisitions and cost-reduction/ productivity initiatives	$	494	$	1,365	$	1,802	$	3,355
Total costs associated with acquisitions and cost-reduction/productivity initiatives									$	323	$	500	$	926	$	1,787


^(a)	~~Transaction costs represent external costs directly related to acquired businesses and primarily include expenditures for banking, legal, accounting and other similar services.~~


^(b)	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.

^(c)

From the beginning of our ~~cost-reduction and transformation~~cost-reduction/productivity initiatives in 2005 through September ~~30, 2012~~29, 2013, Employee ~~termination costs~~terminations represent the expected reduction of the workforce by approximately ~~59,700~~63,500 employees, mainly in manufacturing, ~~and~~ sales and research, of which approximately ~~49,300~~57,000 employees have been terminated as of September ~~30, 2012~~29, 2013. For the nine months ended September ~~30, 2012~~29, 2013, ~~the amount of~~substantially all employee termination costs ~~represents~~represent additional ~~accruals~~costs with respect to ~~reserves for~~ approximately ~~2,300~~1,300 employees.

The restructuring charges in 2013 are associated with the following:

For the three months ended September 29, 2013, Primary Care operating segment ($12 million), Specialty Care and Oncology operating segment ($18 million), Established Products and Emerging Markets operating segment ($4 million), Consumer Healthcare operating segment ($5 million), manufacturing operations ($112 million) and Corporate ($44 million).

For the nine months ended September 29, 2013, Primary Care operating segment ($29 million), Specialty Care and Oncology operating segment ($37 million), Established Products and Emerging Markets operating segment ($34 million), Consumer Healthcare operating segment ($6 million), research and development operations ($15 million), manufacturing operations ($194 million) and Corporate ($125 million).

The restructuring charges in 2012 are associated with the following:

For the three months ended September 30, 2012, Primary Care operating segment ($83 million), Specialty Care and Oncology operating segment ($60 million), Established Products and Emerging Markets operating segment ($16 million), ~~other~~Consumer Healthcare operating ~~segments~~segment ($85 million), research and development operations ($39 million income), manufacturing operations ($2748 million) and Corporate ($60 million).

For the nine months ended September 30, 2012, Primary Care operating segment ($51 million), Specialty Care and Oncology operating segment ($79 million), Established Products and Emerging Markets operating segment ($20 million), ~~other~~Consumer Healthcare operating ~~segments~~segment ($2618 million), research and development operations ($14 million income), manufacturing operations ($~~193~~214 million) and Corporate ($438 million).

~~The restructuring charges in 2011 are associated with the following:~~

~~For the~~ ~~three~~ ~~months ended October 2, 2011, Primary Care operating segment ($473 million), Specialty Care and Oncology operating segment ($186 million), Established Products and Emerging Markets operating segment ($64 million), other operating segments ($30 million), research and development operations ($46 million~~ ~~income), manufacturing operations ($41 million) and Corporate ($153 million~~).

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~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~For the~~ ~~nine~~ ~~months ended October 2, 2011, Primary Care operating segment ($606 million), Specialty Care and Oncology operating segment ($228 million), Established Products and Emerging Markets operating segment ($80 million), other operating segments ($44 million), research and development operations ($426 million), manufacturing operations ($196 million) and Corporate ($288 million~~).


^(d)(b)	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.


^(c)	Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


^(e)(d)	Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related ~~cost-reduction and~~ cost-reduction/productivity initiatives.

The following table provides the components of and changes in our restructuring accruals:


(MILLIONS OF DOLLARS)	Employee Termination Costs			Asset Impairment Charges			Exit Costs			Accrual			Employee Termination Costs			Asset Impairment Charges			Exit Costs			Accrual
Balance, December 31, 2011	$	2,425		$	—		$	92		$	2,517
Balance, December 31, 2012^(a)													$	1,734		$	—		$	152		$	1,886
Provision^(a)	424			282			87			793			289			115			36			440
Utilization and other^(b)	(1,270		)	(282		)	(69		)	(1,621		)	(741		)	(115		)	(109		)	(965		)
Balance, September, 2012^(c)	$	1,579		$	—		$	110		$	1,689
Balance, September 29, 2013^(c)													$	1,282		$	—		$	79		$	1,361


^(a)	~~For the~~Included in ~~nine~~Other current liabilities ~~months ended~~ (~~September 30, 2012~~$1.2 billion,) and ~~Provision~~Other noncurrent liabilities ~~includes additional accruals with respect to reserves for approximately~~ (~~2,300~~$720 million ~~employees.~~).


^(b)	Includes adjustments for foreign currency translation.


^(c)	Included in Other current liabilities ($~~949~~717 million) and Other noncurrent liabilities ($~~740~~644 million).

Total restructuring charges incurred from the beginning of our cost-reduction/productivity initiatives in 2005 through September 29, 2013 were $16.1 billion.

The asset impairment charges included in restructuring charges for the nine months ended September ~~30, 2012~~29, 2013 primarily relate to assets held for sale and are based on an estimate of fair value, which was determined to be lower than the carrying value of the assets prior to the impairment charge.

The following table provides additional information about the long-lived assets ~~held-for-sale~~ that were impaired during the first nine months of 2013 in ~~2012:~~Restructuring charges and certain acquisition-related costs:


	Fair Value^(a)								Nine Months Ended September 30, 2012		Fair Value^(a)								Nine Months Ended September 29, 2013
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment		Amount		Level 1		Level 2		Level 3		Impairment
Long-lived assets held-for-sale^(b)	$	96	$	—	$	96	$	—	$	220
Assets held for sale^(b)											$	84	$	—	$	84	$	—	$	64
Assets abandoned/demolished											—		—		—		—		51
Long-lived assets											$	84	$	—	$	84	$	—	$	115


^(a)	The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis. See also Note 1C. Basis of Presentation and Significant Accounting Policies: Fair Value.

^(b)

Reflects property, plant and equipment and other long-lived held-for-sale assets written down to their fair value, of ~~$96 million~~, less costs to sell of $$2 ~~million~~ million (a net of $~~$94~~82 million), in the first nine months of ~~2012. The impairment charges of~~ ~~$220 million~~ ~~are included in~~ ~~Restructuring charges and certain acquisition-related costs~~2013. Fair value iswas determined primarily using a market approach, with various inputs, such as recent sales transactions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4. Other (Income)/Deductions—Net

The following table provides components of Other (income)/deductions––net:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012			October 2, 2011			September 30, 2012			October 2, 2011			September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012
Interest income^(a)	$	(108	)	$	(109	)	$	(275	)	$	(331	)	$	(94	)	$	(109	)	$	(291	)	$	(275	)
Interest expense^(a)	382			423			1,151			1,285			340			381			1,067			1,149
Net interest expense	274			314			876			954			246			272			776			874
Royalty-related income	(132		)	(136		)	(353		)	(447		)	(122		)	(149		)	(305		)	(343		)
Patent litigation settlement income^(b)													9			—			(1,342		)	—
Other legal matters, net^(c)													1			727			(94		)	2,014
Gain associated with the transfer of certain product rights to an equity-method investment^(d)													—			—			(459		)	—
Net gain on asset disposals	(19		)	(21		)	(45		)	(47		)	(46		)	(21		)	(100		)	(45		)
Certain legal matters, net^(b)	726			132			2,014			619
Certain asset impairment charges^(c)	49			145			561			625
Costs associated with the potential separation of the Animal Health business^(d)	32			—			93			—
Other, net	32			113			137			98
Other deductions––net	$	962		$	547		$	3,283		$	1,802
Certain asset impairments and related charges^(e)													443			14			968			524
Costs associated with the Zoetis IPO^(f)													—			32			18			93
Other, net^(g)													(120		)	62			24			147
Other (income)/deductions––net													$	411		$	937		$	(514	)	$	3,264

^(a)

Interest income decreased ~~slightly~~ in the third quarter of ~~2012~~2013 ~~due to~~as portfolio maturities were invested at lower ~~investment balances mostly offset by higher interest rates earned on investments. Interest income decreased in~~rates; however, during the first nine months of ~~2012~~2013, interest income increased due to higher cash and investment balances. Interest expense decreased in the third quarter and first nine months of 2013 due to lower ~~interest~~outstanding debt, refinancings and lower rates, ~~earned on investments. Interest expense decreased in both periods in~~ ~~2012~~ ~~due to lower debt balances~~ and the ~~effective~~benefit of the conversion of some fixed-rate liabilities to floating-rate liabilities.

^(b)

In the first nine months of 2013, reflects income from a litigation settlement with Teva Pharmaceutical Industries Ltd. (Teva) and Sun Pharmaceutical Industries Ltd. (Sun) for patent-infringement damages resulting from their "at-risk" launches of generic Protonix in the United States. As of September 29, 2013, the remaining receivables from Teva are included in ~~third~~Taxes and other current assets ($474 million) and Taxes and other noncurrent assets ($128 million).For additional information, see Note 12A5. Commitments and Contingencies: Legal Proceedings––Certain Matters Resolved During the First Nine Months of 2013.

^(c)

In the first nine months of 2013, primarily includes an $80 million insurance recovery related to a certain litigation matter. In the third quarter of 2012,, primarily includes a $491 million charge ~~not deductible for income tax purposes, resulting from~~relating to the resolution of an ~~agreement-in-principle with~~investigation by the U.S. Department of Justice (DOJ) ~~to resolve an investigation~~ into Wyeth's historical promotional practices in connection with Rapamune. In the first nine months of 2012, primarily includes the aforementioned $491 million charge related to Rapamune, a $450 million settlement of a lawsuit by Brigham Young University related to Celebrex, and charges ~~related to~~for hormone-replacement therapy litigation. In ~~2011, primarily includes charges related to hormone-replacement therapy litigation. (See~~For additional information, see Note 12. Commitments and Contingencies.)

^(c)

~~In the first~~ ~~nine~~ ~~months of~~ ~~2012, includes intangible asset impairment charges of~~ ~~$494 million~~ ~~reflecting (i)~~ ~~$314 million~~ ~~of in-process research and development (IPR&D), substantially all related to compounds that targeted autoimmune and inflammatory diseases (full write-off), (ii)~~ ~~$45 million~~ ~~related to our Consumer Healthcare indefinite-lived brand, Robitussin, and (iii)~~ ~~$135 million~~ ~~related to three developed technology rights. The intangible asset impairment charges for~~ ~~2012~~ ~~reflect, among other things, the impact of new scientific findings, updated commercial forecasts, an increased competitive environment and declining gross margins. The impairment charges for the~~ ~~nine~~ ~~months of~~ ~~2012~~ ~~are associated with the following: Worldwide Research and Development ($297 million); Consumer Healthcare ($45 million); Established Products ($45 million); Primary Care ($52 million); Animal Health ($36 million) and Specialty Care ($19 million). In addition, the first~~ ~~nine~~ ~~months of~~ ~~2012~~ ~~include charges of approximately~~ ~~$67 million~~ ~~for certain investments. These investment impairment charges reflect the difficult global economic environment.~~

~~In the first nine months of~~ ~~2011, includes intangible asset impairment charges of approximately~~ ~~$585 million, reflecting approximately~~ ~~$440 million~~ ~~impairment of IPR&D assets, primarily related to two compounds for the treatment of certain autoimmune and inflammatory diseases, and approximately~~ ~~$145 million~~ impairment of developed technology rights. Substantially all of these impairment charges relate to intangible assets that were acquired as part of our acquisition of Wyeth. The intangible asset impairment charges for ~~2011~~ ~~reflect, among other things, the impact of new scientific findings and updated commercial forecasts. The impairment charges for the~~ ~~nine~~ ~~months of~~ ~~2011~~ ~~are associated with the following: Worldwide Research and Development ($394 million); Specialty Care ($126 million); Oncology ($56 million) and Animal Health ($9 million~~).


^(d)	~~Costs incurred in connection~~In the first nine months of 2013, represents the gain associated with the ~~potential initial public offering~~transfer of upcertain product rights to aHisun Pfizer, our equity-method investment in China. For additional information, see ~~20%~~Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

^(e)

In the third quarter of 2013, includes intangible asset impairment charges of $185 million, primarily reflecting (i) $95 million ~~ownership stake~~of indefinite lived brands, primarily related to our biopharmaceutical indefinite-lived brand, Xanax, and (ii) $90 million related to one IPR&D compound (full write-off), as well as a loss of $223 million related to an option to acquire the remaining interest in ~~our Animal Health business, Zoetis. Includes expenditures for banking, legal, accounting and similar services~~Laboratório Teuto Brasileiro S.A. (Teuto), a 40%-owned generics company in Brazil (an equity-method investment). In addition, the third quarter of 2013 includes an impairment charge of approximately $32 million related to the ~~potential transaction.~~aforementioned equity-method investment in Brazil.

~~The~~In the first nine months of 2013, includes intangible asset impairment charges ~~included~~of $674 million, primarily reflecting (i) $394 million of developed technology rights (for use in ~~Other deductions––net~~the development of bone and cartilage) acquired in connection with our acquisition of Wyeth, (ii) $171 million related to three IPR&D compounds, and (iii) $109 million of indefinite lived brands, primarily related to our biopharmaceutical indefinite-lived brand, Xanax. The intangible asset impairment charges for 2013 reflect, among other things, updated commercial forecasts and, with regard to IPR&D, the impact of new scientific findings. The intangible asset impairment charges for the first nine months of ~~nine~~2013 are associated with the following: Specialty Care ($394 million), Established Products ($185 million), Worldwide Research and Development ($43 million), Primary Care ($38 million), and Consumer Healthcare ($14 million). In addition, the first nine months of 2013 include a loss of $223 million related to an option to acquire the remaining interest Teuto, a 40%-owned generics company in Brazil (an equity-method investment), an impairment charge of approximately $39 million for certain private company investments and an impairment charge of $32 million related to the aforementioned equity-method investment in Brazil, Teuto.

In the first nine months of 2012 ~~primarily relate~~, includes intangible asset impairment charges of $457 million reflecting (i) $314 million of IPR&D, substantially all related to ~~identifiable intangible~~ assets that targeted autoimmune and ~~are based on estimates of fair value.~~inflammatory diseases (full write-off), (ii)

$45 million related to our Consumer Healthcare indefinite-lived brand, Robitussin, a cough suppressant, and (iii) $98 million related to three developed technology

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

rights. The intangible asset impairment charges for 2012 reflect, among other things, the impact of new scientific findings, updated commercial forecasts and an increased competitive environment. The impairment charges for the first nine months of 2012 are associated with the following: Worldwide Research and Development ($297 million); Consumer Healthcare ($45 million); Established Products ($44 million); Primary Care ($52 million) and Specialty Care ($19 million). In addition, the first nine months of 2012 includes charges of approximately $67 million for certain investments. These investment impairment charges reflect the difficult global economic environment.


^(f)	Costs incurred in connection with the IPO of an approximate 19.8% ownership interest in Zoetis. Includes expenditures for banking, legal, accounting and similar services. For additional information, see Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

^(g)In the third quarter and first nine months of 2013, includes the gain of approximately $128 million and $109 million, respectively, reflecting the change in the fair value of the contingent consideration associated with our acquisition of NextWave. For additional information, see Note 2A. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Acquisitions.

The asset impairment charges included in Other (income)/deductions––net for the first nine months of 2013 primarily relate to identifiable intangible assets and are based on estimates of fair value.

The following table provides additional information about the intangible assets that were impaired during the first nine months of 2013in ~~2012~~:Other (income)/deductions––net:


	Fair Value^(a)								Nine Months Ended September 30, 2012		Fair Value^(a)								Nine Months Ended September 29, 2013
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment		Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––Developed technology rights^(b)											$	564	$	—	$	—	$	564	$	394
Intangible assets––Brands^(b)											1,499		—		—		1,499		109
Intangible assets––IPR&D^(b)	$	44	$	—	$	—	$	44	$	314	220		—		—		220		171
Intangible assets––Other^(b)	573		—		—		573		180
Total	$	617	$	—	$	—	$	617	$	494	$	2,283	$	—	$	—	$	2,283	$	674


^(a)	~~Fair~~The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis. See also Note 1C. Basis of Presentation and Significant Accounting Policies: Fair Value.

^(b)

Reflects intangible assets written down to their fair value of ~~$617 million~~in the first nine months of ~~2012~~2013. ~~The impairment charges of~~ ~~$494 million~~ ~~are included in~~ ~~Other deductions––net.~~ ~~When we are required to determine~~Fair value was determined using the ~~fair value of intangible assets other than goodwill, we use an~~ income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We ~~start~~started with a forecast of all the expected net cash flows associated with the asset ~~which includes the application of a terminal value for indefinite-lived assets,~~ and then we ~~apply~~applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the ~~projections~~product and the impact of technological risk associated with IPR&D ~~assets, as well as the selection of a long-term growth rate;~~assets; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

~~During~~Our effective tax rate for continuing operations was 27.6% for the third quarter of 2013, compared to (6.5)% for the third quarter of 2012, and was 30.6% for the first nine months of 2013, compared to 17.7% for the first nine months of 2012.

The unfavorable change in the effective tax rate for both periods reflects favorable audit settlements in the third quarter and first nine months of ~~2012, we reached~~2012; specifically, (i) a tax benefit of approximately $1.1 billion (representing tax and interest) recorded in connection with a settlement with the U.S. Internal Revenue Service (IRS) ~~with respect~~related to ~~the~~ audits ~~of the Pfizer Inc. tax returns~~ for ~~the years 2006 through 2008. The IRS concluded the examination of the aforementioned~~multiple tax years and issued a final Revenue Agent's Report (RAR). We agreed with all the adjustments and computations contained in the RAR. As a result of settling these audit years, in the third quarter of 2012 we recorded(2006-2008), as well as (ii) a tax benefit ~~of approximately~~ ~~$1.1 billion~~ ~~representing tax and interest.~~

~~Our effective tax rate~~recorded for ~~continuing operations was~~ ~~(4.0)%~~ ~~for the~~ ~~third~~ ~~quarter of~~ ~~2012, compared to~~ ~~34.3%~~ ~~for the~~ ~~third~~ ~~quarter of~~ ~~2011, and in the first~~ ~~nine~~ ~~months of~~ ~~2012~~ ~~was~~ ~~19.0%, compared to~~ ~~31.2%~~ ~~in the first~~ ~~nine~~ ~~months of~~ ~~2011~~. The effective tax rates for the third quarter and first nine months of 2012 were favorably impacted by the aforementioned settlement with the IRS. The tax rates in both periods in 2012 compared to the same periods in 2011 were also favorably impacted by the resolution of foreign audits pertaining to multiple tax ~~years~~years.

In addition, the unfavorable comparison of the first nine months of 2013 to the first nine months of 2012 reflects, to a lesser extent, (i) the tax rate associated with the patent litigation settlement income, (ii) the non-deductibility of the goodwill derecognized and the jurisdictional mix of the other intangible assets divested as part of the transfer of certain product rights to our equity-method investment in China and (iii) the non-deductibility of the loss on an option to acquire the remaining interest in Teuto, a 40%-owned generics company in Brazil, since we expect to retain the investment indefinitely, partially offset by (i) the extension of the U.S. R&D tax credit (resulting in the full-year benefit of the 2012 R&D tax credit and the year-to-date 2013 R&D tax credit being recorded in the first nine months of 2013) and (ii) the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of ~~business, partially offset by~~business. For additional information about the ~~unfavorable impact of the non-deductibility of a~~patent litigation settlement income, see ~~$491 million~~ charge resulting from an agreement-in-principle with the DOJ to resolve an investigation into Wyeth's historical promotional practices in connection with Rapamune, as well as the expiration of the U.S. researchNote 12A5. Commitments and ~~development tax credit.~~Contingencies: Legal Proceedings––Certain Matters Resolved

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~B. Taxes on Items~~During the First Nine Months of ~~Other Comprehensive Income/(Loss)~~2013. For additional information about the transfer of certain product rights to our equity-method investment in China, see Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

~~The following table provides the components of tax benefit on~~ ~~Other comprehensive income/(loss)~~:

Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2012
October 2,
2011
September 30,
2012
October 2,
2011
Tax Expense/(Benefit) on Other Comprehensive Income/(Loss)
Foreign currency translation adjustments^(a)
$ (23 ) $ (60 ) $ 14
$ (70 )
Unrealized holding gains/(losses) on derivative financial instruments 137
(419 ) 80
(212 )
Reclassification adjustments for realized (gains)/losses (52 ) 250
(34 ) (31 )
85
(169 ) 46
(243 )
Unrealized gains/(losses) on available-for-sale securities 4
(18 ) 17
(18 )
Reclassification adjustments for realized losses 3
3
8
4
7
(15 ) 25
(14 )
Benefit plans: Actuarial gains/(losses) (39 ) 1
(157 ) 1
Reclassification adjustments related to amortization 44
24
129
74
Reclassification adjustments related to curtailments and settlements, net 20
28
59
89
Other (12 ) (12 ) 5
(71 )
13
41
36
93
Benefit plan: Prior service (costs)/credits and other (2 ) —
6
—
Reclassification adjustments related to amortization (7 ) (7 ) (21 ) (21 )
Reclassification adjustments related to curtailments and settlements, net (2 ) (7 ) (34 ) (20 )
Other 2
1
—
(1 )
(9 ) (13 ) (49 ) (42 )
Tax provision/(benefit) on other comprehensive income/(loss) $ 73
$ (216 ) $ 72
$ (276 )


^(a)	~~Taxes are not provided for foreign currency translation relating to permanent investments in international subsidiaries.~~

C.B. Tax Contingencies

We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire. We treat these events as discrete items in the period of resolution.

The United States is one of our ~~primary~~major tax ~~jurisdiction~~jurisdictions, and we are regularly audited by the U.S. ~~Internal Revenue Service (IRS):~~

During the third quarter of 2012, we reached a settlement with the IRS with respect to the audits of the Pfizer Inc. tax returns for the years 2006 through 2008. The IRS concluded the examination of the aforementioned tax years and issued a final Revenue Agent's Report (RAR). We agreed with all the adjustments and computations contained in the RAR. As a result of settling these audit years, in the third quarter of 2012 we recorded a tax benefit of approximately ~~$1.1 billion~~ ~~representing tax and interest.~~

IRS:

With respect to Pfizer Inc., tax years ~~2009-2010~~2009 and 2010 are currently under audit. Tax years ~~2011-2012~~2011-2013 are open, but not under audit. All other tax years are closed.

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

With respect to Wyeth, tax years 2006 through the Wyeth acquisition date (October 15, 2009) are currently under audit. All other tax years are closed.

With respect to King Pharmaceuticals, Inc. (King), the audit for tax ~~year 2008~~years 2009 and 2010 has been effectively settled ~~and for Alpharma Inc. (a subsidiary~~in the third quarter of ~~King),~~2013. The tax ~~years 2005-2007 are currently under audit. For King, tax years 2009~~year January 1, 2011 through the date of acquisition (January 31, 2011) ~~are~~is open, but not under audit. All other tax years are closed. The open tax ~~years and audits~~year for King and its subsidiaries ~~are~~is not ~~considered~~ material to ~~Pfizer.~~Pfizer Inc.

In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada ~~(2001-2012)~~(2001-2013), Japan ~~(2007-2012)~~(2013), Europe ~~(2007-2012,~~(2007-2013, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America (1998-2013, primarily reflecting Brazil and Mexico) and Puerto Rico ~~(2007-2012)~~(2007-2013).

~~Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests~~

~~The following table provides the changes, net of tax, in~~ ~~Accumulated other comprehensive loss~~:

Net Unrealized Gain/(Losses) Benefit Plans
(MILLIONS OF DOLLARS) Currency Translation Adjustment And Other
Derivative Financial Instruments
Available-For-Sale Securities
Actuarial Gains/(Losses)
Prior Service (Costs)/ Credits And Other
Accumulated Other Comprehensive Loss
Balance, December 31, 2011 $ 944
$ (361 ) $ 46
$ (5,120 ) $ 362
$ (4,129 )
Other comprehensive income/(loss)^(a)
(1,560 ) 76
126
(99 ) (67 ) (1,524 )
Balance, September 30, 2012 $ (616 ) $ (285 ) $ 172
$ (5,219 ) $ 295
$ (5,653 )


^(a)	~~Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of~~ ~~$19 million~~ ~~loss for the first~~ ~~nine~~ ~~months of~~ ~~2012~~.

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(UNAUDITED)

C. Taxes on Items of Other Comprehensive Loss

The following table provides the components of tax provision on Other comprehensive income/(loss):



	Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012

Foreign currency translation adjustments^(a)	$	(2	)	$	(23	)	$	88		$	14
Unrealized holding gains on derivative financial instruments	205			137			152			80
Reclassification adjustments for realized gains	(132		)	(52		)	(43		)	(34		)
	73			85			109			46
Unrealized holding gains/(losses) on available-for-sale securities	(16		)	4			32			17
Reclassification adjustments for realized (gains)/losses	(14		)	3			(19		)	8
	(30		)	7			13			25
Benefit plans: actuarial gains/(losses), net	(1		)	(39		)	10			(157		)
Reclassification adjustments related to amortization	49			44			155			129
Reclassification adjustments related to curtailments/settlements, net	18			20			54			59
Foreign currency translation adjustments and other	(23		)	(12		)	35			5
	43			13			254			36
Benefit plans: prior service (costs)/credits and other	—			(2		)	1			6
Reclassification adjustments related to amortization	(5		)	(7		)	(17		)	(21		)
Reclassification adjustments related to curtailments/settlements, net	—			(2		)	(4		)	(34		)
Other	1			2			(1		)	—
	(4		)	(9		)	(21		)	(49		)
Tax provision on other comprehensive income/(loss)	$	80		$	73		$	443		$	72


^(a)	Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.

Note 6. Certain Changes in Total Equity

The change in Additional paid-in capital in the first nine months of 2013 reflects, among other things, the impact of share-based payment transactions and an increase of approximately $2.3 billion related to the completion of an IPO for a 19.8% interest in Zoetis, our former Animal Health subsidiary, in the first quarter of 2013. The Zoetis-related increase represents the excess of the consideration received over the book value of our divested interest, which was recorded in Additional paid-in capital as we retained control over Zoetis immediately after the IPO transaction. For additional information, see Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

The change in Treasury stock in the first nine months of 2013 reflects, among other things, an increase of approximately $11.6 billion related to common stock acquired for cash and an increase of approximately $11.4 billion related to the divestment of the remaining 80.2% interest in Zoetis in the second quarter of 2013 through an exchange offer. For additional information, see Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

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(UNAUDITED)

The following table provides the changes, net of tax, in Accumulated other comprehensive loss, excluding noncontrolling interests:



	Net Unrealized Gains/(Losses)									Benefit Plans
(MILLIONS OF DOLLARS)	Foreign Currency Translation Adjustments			Derivative Financial Instruments			Available-For-Sale Securities			Actuarial Gains/(Losses)			Prior Service (Costs)/ Credits and Other			Accumulated Other Comprehensive Loss
Balance, December 31, 2012	$	(177	)	$	(88	)	$	163		$	(6,110	)	$	259		$	(5,953	)
Other comprehensive income/(loss)^(a)	(920		)	163			(116		)	477			(34		)	(430		)
Balance, September 29, 2013	$	(1,097	)	$	75		$	47		$	(5,633	)	$	225		$	(6,383	)


^(a)	Amounts do not include foreign currency translation loss of $65 million attributable to noncontrolling interests for the first nine months of 2013.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. Financial Instruments

A. Selected Financial Assets and Liabilities

The following table provides additional information about certain of our financial assets and liabilities:


(MILLIONS OF DOLLARS)	September 30, 2012		December 31, 2011		September 29, 2013		December 31, 2012
Selected financial assets measured at fair value on a recurring basis^(a)
Trading securities^(b)	$	141	$	154	$	122	$	142
Available-for-sale debt securities^(c)	28,187		29,179		42,534		32,584
Available-for-sale money market funds^(d)	1,429		1,727		1,533		1,727
Available-for-sale equity securities, excluding money market funds^(c)	299		317		379		263
Derivative financial instruments in receivable positions^(e):
Interest rate swaps	1,029		1,033		495		1,036
Foreign currency swaps					524		194
Foreign currency forward-exchange contracts	178		349		143		152
Foreign currency swaps	76		17
	31,339		32,776		45,730		36,098
Other selected financial assets^(f)
Held-to-maturity debt securities, carried at amortized cost^(c)	3,029		1,587
Private equity securities, carried at equity method or at cost^(g)	1,118		1,020
Held-to-maturity debt securities, carried at amortized cost^{(c), (f)}					1,465		1,459
Private equity securities, carried at equity-method or at cost^(f), ^(g)					2,250		1,239
	4,147		2,607		3,715		2,698
Total selected financial assets	$	35,486	$	35,383	$	49,445	$	38,796
Financial liabilities measured at fair value on a recurring basis^(a)
Derivative financial instruments in a liability position^(h):
Interest rate swaps					$	200	$	33
Foreign currency swaps	$	1,172	$	1,396	188		428
Foreign currency forward-exchange contracts	165		355		208		243
Interest rate swaps	29		14
	1,366		1,765		596		704
Other financial liabilities⁽ⁱ⁾
Short-term borrowings, carried at historical proceeds, as adjusted^(f)	7,774		4,016		4,738		6,424
Long-term debt, carried at historical proceeds, as adjusted^{(j), (k)}	31,083		34,926		31,812		31,036
	38,857		38,942		36,550		37,460
Total selected financial liabilities	$	40,223	$	40,707	$	37,146	$	38,164

^(a)

We use a market approach in valuing financial instruments on a recurring basis. ~~See also~~For additional information, see Note 1C. Basis of Presentation and Significant Accounting Policies: Fair Value. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than 1% that use Level 1 or Level 3 inputs.


^(b)	Trading securities are held in trust for legacy business acquisition severance benefits.


^(c)	Gross unrealized gains and losses are not significant.

^(d)

Includes ~~approximately~~ $~~625~~447 million as of September 29, 2013 and $408 million as of December 31, ~~2011~~ ~~of money market funds that were released from restriction in the~~ ~~second~~ ~~quarter of~~ 2012 ~~and classified as part of~~ ~~Short-term investments~~. Such money market funds were held in escrow to secure certain of Wyeth’s payment obligations under its 1999 Nationwide Class Action Settlement Agreement, which relates to litigation against Wyeth concerning its former weight-loss products, Redux and Pondimin. The amount also includes ~~$397 million~~ ~~as of~~ ~~September 30, 2012~~ ~~and~~ ~~$357 million~~ ~~as of~~ ~~December 31, 2011~~ of money market funds held in trust in connection with the asbestos litigation involving Quigley Company, Inc., a wholly owned subsidiary.

^(e)

Designated as hedging instruments, except for certain ~~foreign currency~~ contracts used as offsets; namely, foreign currency swaps with fair values of $14 million and foreign currency forward-exchange contracts with fair values of $2565 million as of September ~~30, 2012~~29, 2013; and, foreign currency forward-exchange contracts with fair values of $~~169 million~~ ~~and interest rate swaps with fair values of~~ $8102 million as of December 31, ~~2011~~2012.

^(f)

The differences between the estimated fair values and carrying values of ~~these financial assets~~held-to-maturity debt securities, private equity securities at cost and ~~liabilities~~short-term borrowings not measured at fair value on a recurring basis were not significant as of September ~~30, 2012~~29, 2013 or December 31, ~~2011~~2012. ~~Held-to-maturity~~The fair value measurements of our held-to-maturity debt securities and our short-term ~~and long-term debt fair value~~borrowings are based on Level 2 ~~valuations~~inputs, using a market approach. ~~Fair~~The fair value measurements fof our or private equity securities ~~carried~~ at cost are based on Level 3 ~~valuations~~inputs, using a market approach.


^(g)	Our private equity securities represent investments in the life sciences sector. The increase in 2013 primarily reflects an increased investment in our equity-method investment in China. For additional information, see Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

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^(h)

Designated as hedging instruments, except for certain foreign currency contracts used as offsets; namely, foreign currency swaps with fair values of $~~179~~97 million and foreign currency forward-exchange contracts with fair values of $~~129~~83 million as of September ~~30, 2012~~29, 2013; and, foreign currency swaps with fair values of $129 million and foreign currency forward-exchange contracts with fair values of $141 million ~~and foreign currency swaps with fair values of~~ ~~$123 million~~as of December 31, ~~2011~~2012.


⁽ⁱ⁾	Some carrying amounts ~~may~~ include adjustments for discount or premium amortization or for the effect of interest rate swaps designated as hedges.


^(j)	Includes foreign currency debt with fair values of $~~898~~697 million as of September ~~30, 2012~~29, 2013 and $~~919~~809 million as of December 31, ~~2011~~2012, which are used as hedging instruments.


^(k)	The fair value of our long-term debt (not including the current portion of ~~long term~~long-term debt) is $~~36.5~~36.4 billion as of September ~~30, 2012~~29, 2013 and $~~40.1~~37.5 billion as of December 31, ~~2011~~2012. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach.

The following table provides the classification of these selected financial assets and liabilities in the condensed consolidated balance sheets:


(MILLIONS OF DOLLARS)	September 30, 2012		December 31, 2011		September 29, 2013		December 31, 2012
Assets
Cash and cash equivalents	$	2,312	$	900	$	925	$	947
Short-term investments	18,462		23,270		31,627		22,318
Long-term investments	13,429		9,814		15,731		14,149
Taxes and other current assets^(a)	210		357		200		296
Taxes and other noncurrent assets^(b)	1,073		1,042		962		1,086
	$	35,486	$	35,383	$	49,445	$	38,796
Liabilities
Short-term borrowings, including current portion of long-term debt	$	7,774	$	4,016	$	4,738	$	6,424
Other current liabilities^(c)	395		459		222		330
Long-term debt	31,083		34,926		31,812		31,036
Other noncurrent liabilities^(d)	971		1,306		374		374
	$	40,223	$	40,707	$	37,146	$	38,164

^(a)

As of September ~~30, 2012~~29, 2013, derivative instruments at fair value include ~~foreign currency forward-exchange contracts~~interest rate swaps ($~~178~~35 million), foreign currency swaps ($2022 million) and ~~interest rate swaps~~foreign currency forward-exchange contracts ($12143 million) and, as of December 31, ~~2011~~2012, include foreign currency swaps ($144 million) and foreign currency forward-exchange contracts ($~~349 million) and interest rate swaps (~~$8152 million).


^(b)	As of September ~~30, 2012~~29, 2013, derivative instruments at fair value include interest rate swaps ($460 million) and foreign currency swaps ($502 million) and, as of December 31, 2012, include interest rate swaps ($1.0 billion) and foreign currency swaps ($~~56 million) and, as of~~ ~~December 31, 2011, include interest rate swaps ($1 billion) and foreign currency swaps ($17~~50 million).

^(c)

AtAs of September ~~30, 2012~~29, 2013, derivative instruments at fair value include foreign currency swaps (~~$230 million~~)($14 million) and foreign currency forward-exchange contracts ($~~165~~208 million) and, as of December 31, ~~2011~~2012, include foreign currency swaps ($87 million) and foreign currency forward-exchange contracts ($~~355 million) and foreign currency swaps ($104~~243 million).


^(d)	AtAs of September ~~30, 2012~~29, 2013, derivative instruments at fair value include interest rate swaps ($200 million) and foreign currency swaps ($~~942 million) and interest rate swaps ($29~~174 million) and, as of December 31, ~~2011~~2012, include interest rate swaps ($33 million) and foreign currency swaps ($~~1.3 billion) and interest rate swaps ($14~~341 million).

In addition, we have long-term receivables where the determination of fair value employs discounted future cash flows, using current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The differences between the estimated fair values and carrying values of these receivables were not significant as of September 29, 2013 or December 31, 2012.

There were no significant impairments of financial assets recognized in any period presented.

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B. Investments in Debt Securities

The following table provides the contractual maturities of the available-for-sale and held-to-maturity debt securities:


	Years								Years
			Over 1		Over 5		September 30, 2012				Over 1		Over 5				September 29, 2013
(MILLIONS OF DOLLARS)	Within 1		to 5		to 10		Total		Within 1		to 5		to 10		Over 10		Total
Available-for-sale debt securities
Western European, Asian and other government debt^(a)	$	11,079	$	1,810	$	6	$	12,895
Western European, Scandinavian and other government debt^(a)									$	20,409	$	2,225	$	—	$	—	$	22,634
Corporate debt^(b)	1,368		4,302		1,799		7,469		2,152		4,479		1,097		348		8,076
Western European, Scandinavian and other government agency debt^(a)	1,927		415		—		2,342		2,955		440		—		—		3,395
Reverse repurchase agreements^(c)									2,270		—		—		—		2,270
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities									663		873		11		524		2,071
Supranational debt^(a)									1,086		919		—		—		2,005
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities	—		2,308		25		2,333		—		1,668		—		16		1,684
U.S. government debt	1,912		171		—		2,083		77		273		49		—		399
Supranational debt^(a)	310		345		—		655
Reverse repurchase agreements^(c)	410		—		—		410
Held-to-maturity debt securities
Certificates of deposit and other	2,734		287		8		3,029		1,398		67		—		—		1,465
Total debt securities	$	19,740	$	9,638	$	1,838	$	31,216	$	31,010	$	10,944	$	1,157	$	888	$	43,999


^(a)	All issued by above-investment-grade governments, government agencies or supranational entities, as applicable.


^(b)	Largely issued by above-investment-grade institutions in the financial services sector.


^(c)	Involving U.S. and U.K. government securities.

C. Short-Term Borrowings

Short-term borrowings include amounts for commercial paper of $1.3 billion and $2.7 billion as of September ~~30, 2012~~29, 2013 and December 31, ~~2011~~2012, respectively.

D. Long-Term Debt

On June 3, 2013, we completed a public offering of $4.0 billion aggregate principal amount of senior unsecured notes. In addition, we repaid at maturity our 3.625% senior unsecured notes that were due June 2013, which had a balance of $2.4 billion at December 31, 2012.

The following table provides the components of the senior unsecured long-term debt issued in the second quarter of 2013:



		As of September 29,
(MILLIONS OF DOLLARS)	Maturity Date	2013
1.50%^(a)	June 2018	$	1,000
3.00%^(b)	June 2023	1,000
0.90%^(a)	January 2017	750
4.30%^(b)	June 2043	750
Three-month London Interbank Offering Rate (LIBOR) plus 0.30%	June 2018	500
Total long-term debt issued in the second quarter of 2013		$	4,000

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(UNAUDITED)


^(a)	Instrument is callable by us at any time at the greater of 100% of the principal amount or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate, plus 0.10% plus, in each case, accrued and unpaid interest.


^(b)	Instrument is callable by us at any time at the greater of 100% of the principal amount or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate, plus 0.15% plus, in each case, accrued and unpaid interest.

The following table provides the maturity schedule of our Long-term debt outstanding as of September 29, 2013:



(MILLIONS OF DOLLARS)	2014		2015		2016		2017		After 2017		Total
Maturities	$	1,259	$	3,026	$	4,439	$	2,653	$	20,435	$	31,812

E. Derivative Financial Instruments and Hedging Activities

Foreign Exchange Risk

As of September ~~30, 2012~~29, 2013, the aggregate notional amount of foreign exchange derivative financial instruments hedging or offsetting foreign currency exposures is $~~43.9~~41.7 billion. The derivative financial instruments primarily hedge or offset exposures in the euro, Japanese yen, U.K. pound and ~~U.K. pound.~~Swiss franc. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $2.4 billion U.K. pound debt maturing in 2038.

Interest Rate Risk

As of September ~~30, 2012~~29, 2013, the aggregate notional amount of interest rate derivative financial instruments is $~~13.0~~16.5 billion. The derivative financial instruments primarily hedge U.S. dollar and euro fixed-rate debt.

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(UNAUDITED)

The following table provides information about the gains/(losses) ~~incurred~~recognized to hedge or offset operational foreign exchange or interest rate risk:


	Amount of Gains/(Losses) Recognized in OID^{(a), (b), (c)}						Amount of Gains/(Losses) Recognized in OCI (Effective Portion)^{(a), (d)}						Amount of Gains/(Losses) Reclassified from OCI into OID (Effective Portion)^{(a), (d)}					Amount of Gains/(Losses) Recognized in OID^{(a), (b), (c)}						Amount of Gains/(Losses) Recognized in OCI (Effective Portion)^{(a), (d)}						Amount of Gains/(Losses) Reclassified from OCI into OID (Effective Portion)^{(a), (d)}
(MILLIONS OF DOLLARS)	Sep 30, 2012			Oct 2, 2011			Sep 30, 2012			Oct 2, 2011			Sep 30, 2012		Oct 2, 2011			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013		Sep 30, 2012
Three Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign currency swaps	$	—		$	—		$	455		$	(1,047	)	$	221	$	(654	)	$	—		$	—		$	489		$	455		$	313	$	221

Derivative Financial Instruments in Net Investment Hedge Relationships
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency swaps	—			(1		)	(40		)	(118		)	—		—			—			—			(2		)	(40		)	—		—
Foreign currency forward-exchange contracts																		(4		)	—			(1		)	—			—		—

Derivative Financial Instruments Not Designated as Hedges
Derivative Financial Instruments Not Designated as Hedges:
Foreign currency forward-exchange contracts	(201		)	(75		)	—			—			—		—			(81		)	(201		)	—			—			—		—
Foreign currency swaps	10			29			—			—			—		—			(15		)	10			—			—			—		—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships
Foreign currency short-term borrowings	—			—			—			—			—		—
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency long-term debt	—			—			(20		)	(42		)	—		—			—			—			(4		)	(20		)	—		—
All other net	—			(1		)	—			1			—		1			—			—			1			—			—		—
	$	(191	)	$	(48	)	$	395		$	(1,206	)	$	221	$	(653	)	$	(100	)	$	(191	)	$	483		$	395		$	313	$	221
Nine Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign currency swaps	$	—		$	—		$	238		$	(516	)	$	89	$	76		$	—		$	—		$	334		$	237		$	64	$	89

Derivative Financial Instruments in Net Investment Hedge Relationships
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency swaps	(3		)	14			33			(1,076		)	—		—			(3		)	(2		)	137			32			—		—
Foreign currency forward-exchange contracts																		(4		)	—			(1		)	—			—		—

Derivative Financial Instruments Not Designated as Hedges
Derivative Financial Instruments Not Designated as Hedges:
Foreign currency forward-exchange contracts	(137		)	(392		)	—			—			—		—			47			(138		)	—			—			—		—
Foreign currency swaps	(7		)	72			—			—			—		—			(14		)	(7		)	—			—			—		—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships
Foreign currency short-term borrowings	—			—			—			940			—		—
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency long-term debt	—			—			3			(47		)	—		—			—			—			93			3			—		—
All other net	1			(1		)	5			4			6		5			—			2			2			5			—		5
	$	(146	)	$	(307	)	$	279		$	(695	)	$	95	$	81		$	26		$	(145	)	$	565		$	277		$	64	$	94

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^(a)	OID = Other (income)/deductions—net,included in Other (income)/deductions—net in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income.


^(b)	Also includes gains and losses attributable to the hedged risk in fair value hedge relationships.


^(c)	There was no significant ineffectiveness for any period presented.

^(d)

Amounts presented represent the effective portion of the gain or loss. For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income/(loss)––Unrealized holding ~~gains/(losses)~~gains on derivative financial instruments. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income/(loss)––~~foreign~~Foreign currency translation adjustments.

For information about the fair value of our derivative financial instruments, and the impact on our condensed consolidated balance sheets, see Note 7A. Financial Instruments: Selected Financial Assets and Liabilities above. Certain of our derivative instruments are covered by associated credit-support agreements that have credit-risk-related contingent features designed to reduce our counterparties’ exposure to our risk of defaulting on amounts owed. As of September ~~30, 2012~~29, 2013, the aggregate fair value of these derivative instruments that are in a net liability position is $~~819~~250 million, for which we have posted collateral of $~~782~~221 million in the normal course of business. These features include the requirement to pay additional collateral in the event of a downgrade in our debt ratings. If there had been a downgrade to below an A rating by S&P or the equivalent rating by Moody’s Investors Service, on September ~~30, 2012~~29, 2013, we would have been required to post an additional $6746 million of collateral to our counterparties. The collateral advanced receivables are reported in Cash and cash equivalents.

E.F. Credit Risk

On an ongoing basis, we review the creditworthiness of counterparties to our foreign exchange and interest rate agreements and do not expect to incur a significant loss from failure of any counterparties to perform under the agreements.

There are no significant concentrations of credit risk related to our financial instruments with any individual counterparty. As of September ~~30, 2012~~29, 2013, we had $2.5 billion due from a well-diversified, highly rated group (S&P ratings of mostly A+ or better) of bank counterparties around the world. ~~See~~For details about our investments, see Note 7B. Financial Instruments: Investments in Debt Securities ~~above for details about our investments.~~.

In general, there is no requirement for collateral from customers. However, derivative financial instruments are executed under master netting agreements with financial ~~institutions. These~~institutions and these agreements contain provisions that provide ~~for the ability~~ for collateral payments, depending on levels of exposure, our credit rating and the credit rating of the counterparty. For information about our financial instruments (excluding the impact of collateral), see Note 7A. Financial Instruments: Selected Financial Assets and Liabilities and Note 7B. Financial Instruments: Investments in Debt Securities above. For information about the collateral posted on our derivative instruments, see Note 7E. Financial Instruments: Derivative Financial Instruments and Hedging Activities above. As of September ~~30, 2012~~29, 2013, we received cash collateral of $~~452~~526 million ~~against~~from various counterparties. The collateral primarily supports the approximate fair value of our derivative contracts. With respect to the collateral received, which is included in Cash and cash equivalents, the obligations are reported in Short-term borrowings, including current portion of long-term debt.

Note 8. Inventories

The following table provides the components of Inventories:


(MILLIONS OF DOLLARS)	September 30, 2012		December 31, 2011		September 29, 2013		December 31, 2012
Finished goods	$	2,634	$	2,311	$	2,471	$	2,254
Work-in-process	3,994		3,514		3,601		3,374
Raw materials and supplies	888		785		410		448
Total inventories^(a)	$	7,516	$	6,610
Noncurrent portion not included above^(b)	$	702	$	800
Inventories					$	6,482	$	6,076
Noncurrent inventories not included above^(a)					$	573	$	612


^(a)	~~The increase reflects, in part, a build-up in anticipation of plant rationalizations.~~


^(b)	Included in Taxes and other noncurrent assets. There are no recoverability issues associated with these amounts.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 9. Goodwill and Other Intangible Assets

A. Goodwill

The following table provides the components of and changes in the carrying amount of Goodwill:

(MILLIONS OF DOLLARS)
Primary
Care

Specialty
Care and
Oncology

Established
Products and
Emerging
Markets

Other Operating Segments^(a)

Total
Balance, December 31, 2011 $ 6,229
$ 17,097
$ 18,746
$ 2,497
$ 44,569
Additions^(b)
—
—
—
397
397
Other^(c)
(90 ) (247 ) (266 ) 7
(596 )
Balance, September 30, 2012 $ 6,139
$ 16,850
$ 18,480
$ 2,901
$ 44,370



(MILLIONS OF DOLLARS)	Primary Care			Specialty Care and Oncology			Established Products and Emerging Markets			Consumer Healthcare			Total
Balance, December 31, 2012	$	6,152		$	16,885		$	18,603		$	2,021		$	43,661
Derecognition^(a)	—			—			(292		)	—			(292		)
Other^(b)	(140		)	(390		)	(429		)	(10		)	(969		)
Balance, September 29, 2013	$	6,012		$	16,495		$	17,882		$	2,011		$	42,400


^(a)	Reflects ~~amounts associated with Animal Health and Consumer Healthcare.~~


^(b)	~~Related~~the goodwill derecognized as part of the transfer of certain product rights, which constituted a business, to our ~~acquisitions of Alacer and Ferrosan (see~~equity-method investment in China. For additional information, see Note ~~2A.~~2D. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures: Acquisitions)~~Equity-Method Investments: Equity-Method Investments.


^(c)(b)	Primarily reflects the impact of foreign exchange.

B. Other Intangible Assets

Balance Sheet Information

The following table provides the components of Identifiable intangible assets:


	September 30, 2012							December 31, 2011							September 29, 2013							December 31, 2012
(MILLIONS OF DOLLARS)	Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization
Finite-lived intangible assets
Developed technology rights	$	72,439	$	(35,695	)	$	36,744	$	72,678	$	(31,922	)	$	40,756	$	72,025	$	(40,432	)	$	31,593	$	72,349	$	(36,895	)	$	35,454
Brands	1,889		(747		)	1,142		1,678		(687		)	991		1,657		(752		)	905		1,657		(693		)	964
License agreements	483		(337		)	146		425		(215		)	210
Other	649		(444		)	205		623		(362		)	261
License agreements and other															897		(722		)	175		914		(642		)	272
	75,460		(37,223		)	38,237		75,404		(33,186		)	42,218		74,579		(41,906		)	32,673		74,920		(38,230		)	36,690
Indefinite-lived intangible assets
Brands	8,085		—			8,085		7,694		—			7,694		7,373		—			7,373		7,786		—			7,786
In-process research and development	814		—			814		1,200		—			1,200		500		—			500		669		—			669
Trademarks	73		—			73		72		—			72
Trademarks/tradenames															3		—			3		1		—			1
	8,972		—			8,972		8,966		—			8,966		7,876		—			7,876		8,456		—			8,456
Total identifiable intangible assets^(a)	$	84,432	$	(37,223	)	$	47,209	$	84,370	$	(33,186	)	$	51,184
Identifiable intangible assets^(a)															$	82,455	$	(41,906	)	$	40,549	$	83,376	$	(38,230	)	$	45,146

^(a)

The decrease is primarily related to amortization, ~~as well as~~asset impairment charges ~~(see~~and the transfer of certain product rights to our equity-method investment in China. For additional information about the asset impairment charges, see Note 4. Other (Income)/Deductions—~~Net~~Net.~~), partially offset by~~ For additional information about the ~~assets acquired as part~~transfer of ~~the acquisitions of Ferrosan and Alacer (see~~certain product rights, see Note ~~2A.~~2D. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures: Acquisitions~~).Equity-Method Investments: Equity-Method Investments.

As of September ~~30, 2012~~29, 2013, our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization:

Developed Technology Rights: Specialty Care (~~65%~~68%); Established Products (~~18%~~19%); Primary Care (~~14%); Animal Health (~~2%12%); and Oncology (1%);

Brands, finite-lived: Consumer Healthcare (~~65%~~73%); and Established Products (~~23%~~27%);

Brands, indefinite-lived: Consumer Healthcare (69%); and ~~Animal Health~~Established Products (~~12%~~31%); and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~Brands, indefinite-lived: Consumer Healthcare (67%); and Established Products (33%); and~~

IPR&D: Worldwide Research and Development (~~47%~~43%); Specialty Care (~~21%); Primary Care (19%~~38%); Established Products (~~11%~~10%); and ~~Animal Health~~Primary Care (2%9%).

There are no percentages for our Emerging Markets business unit as it is a geographic-area unit, not a product-based unit. The carrying value of the assets associated with our Emerging Markets business unit is included within the assets associated with the other four biopharmaceutical business units.

Amortization

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 ~~acquired~~ 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. Total amortization expense for finite-lived intangible assets was $~~1.3~~1.1 billion for the third quarter of 2013 and $1.2 billion for the third quarter of 2012 ~~and~~ ~~$1.4 billion~~ ~~for the~~ ~~third~~ ~~quarter of~~ ~~2011~~, and $~~4.1~~3.6 billion for the first nine months of ~~2012~~2013 and $~~4.3~~4.0 billion for the first nine months of ~~2011~~2012.

Impairment Charges

For information about impairments of intangible assets, see Note 4. Other (Income)/Deductions––Net.

For IPR&D assets, the risk of failure is significant and there can be no certainty that these assets ultimately will yield a successful product. The nature of the biopharmaceutical business is high-risk and, as such, we expect that many of these IPR&D assets will become impaired and be written ~~off.~~off at some time in the future.

Table of Contents

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10. Pension and Postretirement Benefit Plans

On May 8, 2012, we announced to employees that as of January 1, 2018, Pfizer will transition its U.S. and Puerto Rico employees from its defined benefit plans to an enhanced defined contribution savings plan. As a result of this decision to freeze the U.S. defined benefit plans, a curtailment was triggered and we performed a re-measurement of the pension obligations and plan assets in the ~~second~~ ~~quarter of~~ ~~2012, which had an immaterial impact to the funded status of the plans. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012, we recorded, among other impacts, a curtailment gain of approximately~~ ~~$59 million~~ ~~in the condensed consolidated statements of income.~~

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The following table provides the components of net periodic benefit cost:


	Pension Plans																								Pension Plans
	U.S. Qualified^(a)						U.S. Supplemental (Non-Qualified)^(b)						International^(c)						Postretirement Plans						U.S. Qualified^(a)						U.S. Supplemental (Non-Qualified)^(b)						International^(c)						Postretirement Plans
(MILLIONS OF DOLLARS)	Sep 30, 2012			Oct 2, 2011			Sep 30, 2012			Oct 2, 2011			Sep 30, 2012			Oct 2, 2011			Sep 30, 2012			Oct 2, 2011			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012
Three Months Ended
Net periodic benefit cost:
Service cost	$	86		$	87		$	8		$	9		$	52		$	61		$	16		$	17		$	75		$	86		$	7		$	8		$	50		$	50		$	15		$	16
Interest cost	170			181			15			17			99			113			46			49			166			170			26			15			92			97			42			46
Expected return on plan assets	(247		)	(216		)	—			—			(104		)	(111		)	(12		)	(9		)	(248		)	(247		)	—			—			(99		)	(103		)	(14		)	(12		)
Amortization of:
Actuarial losses	75			33			10			9			28			21			8			4			88			75			11			10			27			29			11			8
Prior service credits	(2		)	(2		)	(2		)	(1		)	(2		)	(2		)	(13		)	(13		)	(2		)	(2		)	(1		)	(2		)	(2		)	(3		)	(11		)	(13		)
Curtailments and settlements––net	31			20			3			3			—			3			(3		)	(14		)
Curtailments																									—			—			—			—			(6		)	—			—			(3		)
Settlements																									29			31			7			3			9			2			—			—
Special termination benefits	1			7			8			5			—			1			1			1			—			1			—			8			1			—			—			1
	$	114		$	110		$	42		$	42		$	73		$	86		$	43		$	35		$	108		$	114		$	50		$	42		$	72		$	72		$	43		$	43
Nine Months Ended
Net periodic benefit cost:
Service cost	$	272		$	266		$	27		$	28		$	156		$	185		$	51		$	52		$	227		$	272		$	20		$	27		$	155		$	151		$	46		$	51
Interest cost	528			550			47			54			302			333			137			146			501			528			53			47			279			297			125			137
Expected return on plan assets	(738		)	(657		)	—			—			(317		)	(326		)	(35		)	(26		)	(752		)	(738		)	—			—			(301		)	(314		)	(41		)	(35		)
Amortization of:
Actuarial losses	232			103			31			27			63			64			25			12			267			232			38			31			99			63			34			25
Prior service credits	(8		)	(6		)	(3		)	(2		)	(5		)	(4		)	(37		)	(40		)	(5		)	(8		)	(2		)	(3		)	(5		)	(6		)	(33		)	(37		)
Curtailments and settlements––net	57			71			13			21			(7		)	7			(26		)	(40		)
Curtailments																									(1		)	(56		)	—			(8		)	(6		)	(9		)	(9		)	(26		)
Settlements																									92			113			35			21			14			4			—			—
Special termination benefits	8			17			23			18			3			4			5			2			—			8			—			23			3			3			—			5
	$	351		$	344		$	138		$	146		$	195		$	263		$	120		$	106		$	329		$	351		$	144		$	138		$	238		$	189		$	122		$	120

^(a)

~~The net periodic benefit cost for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012, compared to the~~ ~~nine~~ ~~months ended~~ ~~October 2, 2011~~, for our U.S. qualified plans was largely unchanged, as (i) an increase in the amounts amortized for actuarial losses (resulting from a decrease in the discount rate and lower than expected actual returns in 2011) was largely offset by a higher expected return on plan assets (resulting from contributions made to the plan in 2011) as well as the fact that (ii) within curtailments and settlements, net, the curtailment gain resulting from the decision to freeze the defined benefit plans in the U.S. and Puerto Rico was more than offset by higher settlement activity.


^(b)	~~The decrease in net periodic benefit cost for the nine months ended~~ ~~September 30, 2012, compared to the nine months ended~~ ~~October 2, 2011, for our U.S. supplemental (non-qualified) pension plans reflects the curtailment gain resulting from the decision to freeze the defined benefit plans in the U.S. and Puerto Rico.~~

^(c)

The decrease in net periodic benefit costs for the nine months ended September ~~30, 2012~~29, 2013, compared to the nine months ended ~~October 2, 2011~~September 30, 2012, for our U.S. qualified plans was primarily driven by lower service cost resulting from the decision in 2012 to freeze the defined benefit plans in the U.S. and Puerto Rico, lower settlement activity and greater expected return on plan assets resulting from a higher plan asset base, partially offset by the curtailment gain in the second quarter of 2012 resulting from the decision to freeze the defined benefit plans in the U.S. and Puerto Rico. Also, the decrease in the discount rate resulted in lower interest costs, as well as an increase in the amounts amortized for actuarial losses.

^(b)

The increase in net periodic benefit costs for the nine months ended September 29, 2013, compared to the nine months ended September 30, 2012, for our U.S. supplemental (non-qualified) pension plans was primarily driven by higher settlement activity, an increase in the amounts amortized for actuarial losses resulting from the decrease in the discount rate and the curtailment gain in the second quarter of 2012 resulting from the decision to freeze the defined benefit plans in the U.S. and Puerto Rico, partially offset by special termination benefits in 2012.

^(c)

The increase in net periodic benefit costs for the nine months ended September 29, 2013, compared to the nine months ended September 30, 2012, for our international pension plans was primarily driven by ~~changes~~an increase in ~~assumptions~~the amounts amortized for actuarial losses resulting from decreases in ~~our U.K. plans in 2011~~discount rates and higher ~~curtailment gains associated with ongoing restructuring initiatives.~~settlement activity.

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012, we contributed from our general assets:~~ ~~$20 million~~ ~~to our U.S. qualified pension plans,~~ ~~$139 million~~ ~~to our U.S. supplemental (non-qualified) pension plans,~~ ~~$272 million~~ ~~to our international pension plans and~~ ~~$287 million~~ ~~to our postretirement plans.~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the nine months ended September 29, 2013, we contributed from our general assets: $5 million to our U.S. qualified pension plans, $146 million to our U.S. supplemental (non-qualified) pension plans, $246 million to our international pension plans and $178 million to our postretirement plans.

During ~~2012,~~2013, we expect to contribute from our general assets a total of $205 million to our U.S. qualified pension plans,

$~~175~~177 million to our U.S. supplemental (non-qualified) pension plans, $~~435~~346 million to our international pension plans and $~~353~~238 million to our postretirement plans. Contributions expected to be made for ~~2012~~2013 are inclusive of amounts contributed during the nine months ended September ~~30, 2012~~29, 2013. The ~~international pension plan, postretirement plan and~~ U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments.

Note 11. Earnings Per Common Share Attributable to Common Shareholders

The following table provides the detailed calculation of Earnings per ~~share:~~common share (EPS):


		Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(IN MILLIONS)		September 30, 2012		October 2, 2011		September 30, 2012		October 2, 2011		September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012
EPS Numerator––Basic
Income from continuing operations		$	3,110	$	2,325	$	8,028	$	6,982	$	2,588	$	2,989	$	8,779	$	7,543
Less: Net income attributable to noncontrolling interests		6		11		22		31		6		6		25		22
Income from continuing operations attributable to Pfizer Inc.		3,104		2,314		8,006		6,951		2,582		2,983		8,754		7,521
Less: Preferred stock dividends––net of tax		1		—		1		1		—		1		1		1
Income from continuing operations attributable to Pfizer Inc. common shareholders		3,103		2,314		8,005		6,950		2,582		2,982		8,753		7,520
Discontinued operations––net of tax		104		1,424		249		1,619		11		225		10,719		734
Less: Discontinued operations––net of tax, attributable to noncontrolling interests										—		—		39		—
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders										11		225		10,680		734
Net income attributable to Pfizer Inc. common shareholders		$	3,207	$	3,738	$	8,254	$	8,569	$	2,593	$	3,207	$	19,433	$	8,254
EPS Numerator––Diluted
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions		$	3,104	$	2,314	$	8,006	$	6,951	$	2,582	$	2,983	$	8,754	$	7,521
Discontinued operations––net of tax		104		1,424		249		1,619
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions										11		225		10,680		734
Net income attributable to Pfizer Inc. common shareholders and assumed conversions		$	3,208	$	3,738	$	8,255	$	8,570	$	2,593	$	3,208	$	19,434	$	8,255
EPS Denominator
Weighted-average number of common shares outstanding––Basic		7,436		7,770		7,483		7,877		6,581		7,436		6,938		7,483
Common-share equivalents: stock options, stock issuable under employee compensation plans and convertible preferred stock		72		40		67		48		75		72		78		67
Weighted-average number of common shares outstanding––Diluted		7,508		7,810		7,550		7,925		6,656		7,508		7,016		7,550
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans^(a)	—	180		342		180		279		43		180		43		180


^(a)	These common stock equivalents were outstanding for the three and nine months ended September ~~30, 2012~~29, 2013 and ~~October 2, 2011~~September 30, 2012, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 12. Commitments and Contingencies

We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our tax contingencies, see Notes to Condensed Consolidated Financial Statements––Note ~~5C.~~5B. Tax Matters: Tax Contingencies.

~~LEGAL PROCEEDINGS~~A. Legal Proceedings

Our non-tax contingencies include, among others, the following:

Patent litigation, which typically involves challenges to the coverage and/or validity of our patents on various products, processes or dosage forms. We are the plaintiff in the vast majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in a loss of patent protection for the drug at issue, a significant loss of revenues from that drug and impairments of any associated assets.

Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities-law, antitrust and breach of contract claims, among others, often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.

Commercial and other ~~litigation,~~matters, which can include merger-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter.

Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other countries.

Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial.

We believe that our claims and defenses in these matters are substantial, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations in the period in which the amounts are accrued and/or our cash flows in the period in which the amounts are ~~paid and/or accrued.~~paid.

We have accrued for losses that are both probable and reasonably estimable. Substantially all of ~~these~~our contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies heavily on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.

Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.

The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the Company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent. As a result of considering qualitative factors in our determination of principal matters, there are some matters discussed below with respect to which management believes that the likelihood of possible loss in excess of amounts accrued is remote.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A. A1. Legal Proceedings––Patent Litigation

Like other pharmaceutical companies, we are involved in numerous suits relating to our patents, including but not limited to those discussed below. Most of the suits involve claims by generic drug manufacturers that patents covering our products, processes or dosage forms are invalid and/or do not cover the product of the generic manufacturer. Also, counterclaims, as well as various independent actions, have been filed claiming that our assertions of, or attempts to enforce, our patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents on a number of our products that are discussed below, we note that the patent rights to certain of our products are being challenged in various other countries.

~~ACTIONS IN WHICH WE ARE THE PLAINTIFF AND CERTAIN RELATED ACTIONS~~

Viagra (sildenafil)

In March 2010, we brought a patent-infringement action in the U.S. District Court for the Eastern District of Virginia against Teva Pharmaceuticals USA, Inc. (Teva USA) and Teva Pharmaceutical Industries Ltd. (Teva Pharmaceutical Industries), which had filed an abbreviated new drug application with the ~~U.S. Food and Drug Administration (FDA)~~FDA seeking approval to market a generic version of Viagra. Teva ~~USA and Teva~~ Pharmaceutical Industries ~~assert~~subsequently was dismissed from this action. Teva USA asserts the invalidity and non-infringement of the Viagra use patent, which (including the ~~six-month~~six-month pediatric exclusivity period resulting from the Company’s conduct of clinical studies to evaluate Revatio in the treatment of pediatric patients with pulmonary arterial hypertension; Viagra and Revatio have the same active ingredient, sildenafil) expires in 2020. In August 2011, the court ruled that our Viagra use patent is valid and infringed, thereby preventing Teva USA ~~and Teva Pharmaceutical Industries~~ from receiving FDA approval for a generic version of Viagra and from marketing its generic product in the U.S. before 2020. In September 2011, Teva USA ~~and Teva Pharmaceutical Industries~~ appealed the decision to the U.S. Court of Appeals for the Federal Circuit. We and Teva USA have entered into an agreement to settle this litigation that will become effective upon the satisfaction of certain conditions, including court approval.

In October 2010, we filed a patent-infringement action with respect to Viagra in the U.S. District Court for the Southern District of New York against Apotex Inc. and Apotex Corp., Mylan Pharmaceuticals Inc. and Mylan Inc., Actavis, Inc. and Amneal Pharmaceuticals LLC. These generic manufacturers have filed abbreviated new drug applications with the FDA seeking approval to market their generic versions of Viagra. They assert the invalidity and non-infringement of the Viagra use patent.

In May and June 2011, respectively, Watson Laboratories Inc. (Watson) and Hetero Labs Limited (Hetero) notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market their generic versions of Viagra. Each asserts the invalidity and non-infringement of the Viagra use patent. In June and July 2011, respectively, we filed actions against Watson and Hetero in the U.S. District Court for the Southern District of New York asserting the validity and infringement of the use patent.

Sutent (sunitinib malate)

In May 2010, Mylan Pharmaceuticals Inc. notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Sutent and challenging on various grounds the Sutent basic patent, which expires in 2021, and two other patents, which expire in 2020 and 2021. In June 2010, we filed suit against Mylan Pharmaceuticals Inc. in the U.S. District Court for the District of Delaware asserting the infringement of those three patents.

~~Detrol and Detrol LA (tolterodine)~~

We filed actions asserting the infringement of various patents for Detrol LA (i) against Impax Laboratories, Inc. (Impax) in March 2008 in the U.S. District Court for the Southern District of New York, which action subsequently was transferred to the U.S. District Court for the District of New Jersey, and (ii) against Mylan Pharmaceuticals, Inc. in June 2010 in the U.S. District Court for the District of New Jersey. In August 2012, both of those actions were settled. As a result of those settlements and previous settlements relating to various patents for Detrol LA, we expect generic competition for Detrol LA in the U.S. to commence no earlier than January 1, 2014, except in certain limited circumstances, and no later than March 1, 2014.

In addition, our action against Impax in the U.S. District Court for the District of New Jersey asserting the infringement of the basic patent for Detrol IR has been dismissed by consent of the parties. The basic patent, including the six-month pediatric exclusivity period, expired in September 2012.

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Lyrica (pregabalin)

Beginning in March 2009, several generic manufacturers notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Lyrica capsules and, in the case of one generic manufacturer, Lyrica oral solution. Each of the generic manufacturers is challenging one or more of three patents for Lyrica: the basic patent, which expires in 2018, and two other patents, one of which ~~expire~~expired in October 2013 and the other of which expires in 2018. Each of the generic manufacturers asserts the invalidity and/or the non-infringement of the patents subject to challenge. Beginning in April 2009, we filed actions against these generic manufacturers in the U.S. District Court for the District of Delaware asserting the infringement and validity of our patents for Lyrica. All of these cases were consolidated in the District of Delaware. In July 2012, the court held that all three patents are valid and infringed, thereby preventing the generic manufacturers from obtaining final FDA approval for their generic versions of Lyrica and from marketing those products in the U.S. prior to the expiration of the three patents. In August 2012, the generic manufacturers appealed the decision to the U.S. Court of Appeals for the Federal Circuit.

In November 2010, Novel Laboratories, Inc. (Novel) notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Lyrica oral solution and asserting the invalidity and/or infringement of our three patents for Lyrica referred to above. In January 2011, we filed an action against Novel in the U.S. District Court for the District of Delaware asserting the validity and infringement of all three patents.

Apotex Inc. notified us, in May and June 2011, respectively, that it had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Lyrica oral solution and Lyrica capsules. Apotex Inc. asserts the invalidity and non-infringement of the basic patent, as well as the seizure patent that ~~expires~~expired in October 2013. In July 2011, we filed an action

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against Apotex Inc. in the U.S. District Court for the District of Delaware asserting the validity and infringement of the challenged patents in connection with both of the abbreviated new drug applications.

In November 2010, Novel Laboratories, Inc. (Novel) notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Lyrica oral solution and asserting the invalidity and/or non-infringement of our three patents for Lyrica referred to above in the first paragraph of this section. In January 2011, we filed an action against Novel in the U.S. District Court for the District of Delaware asserting the validity and infringement of all three patents.

In October 2011, Alembic Pharmaceuticals Limited (Alembic) notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Lyrica capsules and asserting the invalidity of the basic patent. In addition, in December 2012, Wockhardt Limited (Wockhardt) notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Lyrica oral solution and asserting the invalidity and non-infringement of the basic patent. In December 2011 and January 2013, we filed ~~an action~~actions against Alembic and Wockhardt, respectively, in the U.S. District Court for the District of Delaware asserting the validity and infringement of the basic patent.

~~We also have filed patent-infringement actions in Canada against certain generic manufacturers who are seeking approval to market generic versions of Lyrica capsules in that country.~~

~~Protonix (pantoprazole sodium)~~

~~Wyeth~~Each of Novel, Alembic and Wockhardt has agreed to a license to market Protonix in the U.S. from Nycomed GmbH (Nycomed), which owns the patents relating to Protonix. The basic patent (including the six-month pediatric exclusivity period) for Protonix expired in January 2011.

Following their respective filings of abbreviated new drug applications with the FDA, Teva USA and Teva Pharmaceutical Industries, Sun Pharmaceutical Advanced Research Centre Ltd. and Sun Pharmaceutical Industries Ltd. (collectively, Sun) and KUDCO Ireland, Ltd. (KUDCO Ireland) received final FDA approval to market their generic versions of Protonix 20mg and 40mg delayed-release tablets. Wyeth and Nycomed filed actions against those generic manufacturers in the U.S. District Court for the District of New Jersey, which subsequently were consolidated into a single proceeding, alleging infringement of the basic patent and seeking declaratory and injunctive relief. Following the court's denial of a preliminary injunction sought by Wyeth and Nycomed, Teva USA and Teva Pharmaceutical Industries and Sun launched their generic versions of Protonix tablets at risk in December 2007 and January 2008, respectively. Wyeth launched its own generic version of Protonix tablets in January 2008, and Wyeth and Nycomed filed amended complaints in the pending patent-infringement action seeking compensation for damages resulting from Teva USA’s, Teva Pharmaceutical Industries’ and Sun's at-risk launches.

In April 2010, the jury in the pending patent-infringement action upheld the validity of the basic patent for Protonix. In July 2010, the court upheld the jury verdict, but it did not issue a judgment against Teva USA, Teva Pharmaceutical Industries or Sun because of their other claims relating to the patent that still are pending. Wyeth and Nycomed will continue to pursue all available legal remedies against those generic manufacturers, including compensation for damages resulting from their at-risk launches.

Separately, Wyeth and Nycomed are defendants in purported class actions brought by direct and indirect purchasers of Protonix in the U.S. District Court for the District of New Jersey. Plaintiffs seek damages, on behalfstay of the respective ~~putative classes,~~actions described above and to be bound by the decision of the U.S. Court of Appeals for the ~~alleged violation of antitrust laws~~Federal District in ~~connection with~~ the ~~procurement and enforcement~~appeal of the ~~patents for Protonix. These~~

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~~purported class actions have been stayed pending resolution of the underlying patent litigation in the U.S. District Court for the District of New Jersey.~~

~~Rapamune (sirolimus)~~

In March 2010, Watson Laboratories Inc. - Florida (Watson Florida) and Ranbaxy Laboratories Limited (Ranbaxy) notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Rapamune. Watson Florida asserts and Ranbaxy asserted the invalidity and non-infringement of a method-of-use patent which (including the six-month pediatric exclusivity period) expires in 2014 and a solid-dosage formulation patent which (including the six-month pediatric exclusivity period) expires in 2018. In April 2010, we filed actions against Watson Florida and Ranbaxy in the U.S. District Court for the District of Delaware ~~and against Watson Florida~~ in the ~~U.S. District Court for the Southern District of Florida asserting the infringement of the method-of-use patent. In June 2010, our~~consolidated action discussed above in the ~~Southern District~~first paragraph of ~~Florida was transferred to the District of Delaware and consolidated with our pending action there. Earlier~~ this ~~year, Ranbaxy was dismissed from the lawsuit and cannot sell a generic sirolimus product prior to the expiration of our method-of-use patent.~~

~~Tygacil (tigecycline)~~

In October 2009, Sandoz, Inc., a division of Novartis AG (Sandoz), notified Wyeth that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Tygacil. Sandoz asserts the invalidity and non-infringement of two of Wyeth’s patents relating to Tygacil, including the basic patent, which expires in 2016. In December 2009, Wyeth filed suit against Sandoz in the U.S. District Court for the District of Delaware asserting infringement of the basic patent.section.

EpiPen

King Pharmaceuticals, Inc. (King) brought a patent-infringement action against Sandoz, Inc., a division of Novartis AG (Sandoz), in the U.S. District Court for the District of New Jersey in July 2010 as the result of its abbreviated new drug application with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name.

Embeda (morphine sulfate/naltrexone hydrochloride extended-release capsules)

In August 2011, Watson Laboratories Inc. - Florida (Watson Florida) notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Embeda extended-release capsules. Watson Florida asserts the invalidity and non-infringement of three formulation patents that expire in 2027. In October 2011, we filed an action against Watson Florida in the U.S. District Court for the District of Delaware asserting the infringement of, and defending against the allegations of the invalidity of, the three formulation patents.

Torisel (temsirolimus)

In December 2011, we brought patent-infringement actions in the U.S. District Court for the District of Delaware against Sandoz and Accord Healthcare, Inc. USA and certain of its affiliates (collectively, Accord) as a result of their abbreviated new drug applications with the FDA seeking approval to market generic versions of Torisel before the expiration of the basic patent in 2014. In May 2012, we brought an action in the same court against Sandoz for infringement of a formulation patent that expires in 2026. In September 2012, our actions against Sandoz and Accord were consolidated in the District of Delaware. In October 2013, we and Accord entered into an agreement-in-principle to settle our action against Accord on terms that are not material to Pfizer.

Pristiq (desvenlafaxine)

Beginning in May 2012, several generic manufacturers notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Pristiq. Each of the generic manufacturers asserts the invalidity, unenforceability and/or non-infringement of ~~one or both of~~ two patents for Pristiq that expire in 2022 and in 2027. Beginning in June 2012, we filed actions against these generic manufacturers in the U.S. District Court for the District of Delaware ~~and, in certain instances, also in other jurisdictions~~ asserting the validity, enforceability and infringement of those patents. All of these actions have been consolidated in the District of Delaware.

~~ACTION IN WHICH WE ARE THE DEFENDANT~~

~~Lipitor (atorvastatin)~~Zyvox (linezolid)

In February 2013, Apotex Inc. and Apotex Corp. notified us that they had filed an abbreviated new drug application with the ~~U.K., while the patent protection for Lipitor expired in November 2011, the exclusivity period was extended by six months~~FDA seeking approval to ~~May 6, 2012 by virtue~~market a generic version of Zyvox. They assert invalidity of the basic Zyvox patent, which (including the six-month pediatric ~~extension to the supplementary protection certificate.~~exclusivity period) expires in 2015. In ~~September 2011, Dr. Reddy’s Laboratories (U.K.) Limited~~March 2013, we filed an action against Apotex Inc. and Apotex Corp. in the ~~High~~U.S. District Court for the Northern District of ~~Justice seeking revocation~~Illinois for infringement of the ~~six-month pediatric extension and damages resulting from the inability to launch its generic Lipitor product during the pediatric extension period in~~basic patent.

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Detrol LA (tolterodine)

In February 2013, Lupin Ltd. and Lupin Pharmaceuticals, Inc. notified us that they had filed an abbreviated new drug application with the ~~U.K.~~FDA seeking approval to market a generic version of Detrol LA. They asserted the invalidity and ~~certain~~non-infringement of three Detrol LA formulation patents, which (including the six-month pediatric exclusivity period) expire in 2020. In March 2013, we filed an action against Lupin Ltd. and Lupin Pharmaceuticals, Inc. in the U.S. District Court for the District of New Jersey for infringement of two of the formulation patents.

In March 2013, Inventia Healthcare Private Limited (Inventia) notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Detrol LA. Inventia asserted the invalidity and non-infringement of the three Detrol LA formulation patents referred to above. In April 2013, we filed an action against Inventia in the U.S. District Court for the Northern District of Illinois for infringement of two of the formulation patents.

In October 2013, both of the actions described above were settled on terms that are not material to Pfizer.

Celebrex (celecoxib)

In March 2013, the U.S. Patent and Trademark Office granted us a reissue patent covering methods of treating osteoarthritis and other ~~European Union (EU) markets. We are defending this action, which is based~~approved conditions with celecoxib, the active ingredient in Celebrex. The reissue patent, including the six-month pediatric exclusivity period, expires in December 2015. On the date that the reissue patent was granted, we filed suit in the U.S. District Court for the Eastern District of Virginia, asserting the infringement of the reissue patent, against Teva USA, Mylan Pharmaceuticals Inc., Watson, Lupin Pharmaceuticals USA, Inc., Apotex Corp. and Apotex Inc. Each of those generic companies had previously filed an abbreviated new drug application with the FDA seeking approval to market a generic version of celecoxib beginning in May 2014, upon the ~~interpretation~~expiration of the ~~EU Pediatric Medicines Regulation.~~basic patent (including the six-month pediatric exclusivity period) for celecoxib.

B. Toviaz (fesoterodine)

We have an exclusive, worldwide license to market Toviaz from UCB Pharma GmbH, which owns the patents relating to Toviaz.

Beginning in May 2013, several generic manufacturers notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Toviaz and asserting the invalidity, unenforceability and/or non-infringement of all of our patents for Toviaz that are listed in the Orange Book. Beginning in June 2013, we filed actions against all of those generic manufacturers in the U.S. District Court for the District of Delaware asserting the infringement of five of our patents for Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019, and a patent covering salts of fesoterodine that expires in 2022.

Tygacil (tigecycline)

In September 2013, Apotex Inc. notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Tygacil. Apotex Inc. asserts the non-infringement of a polymorph patent for Tygacil that expires in 2030, but has not challenged the basic patent, which expires in 2016. In September 2013, we filed suit against Apotex Inc. in the U.S. District Court for the District of Delaware asserting the infringement of the polymorph patent.

A2. Legal Proceedings––Product Litigation

Like other pharmaceutical companies, we are defendants in numerous cases, including but not limited to those discussed below, related to our pharmaceutical and other products. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.

Asbestos

Quigley

Quigley Company, Inc. ~~(Quigley)~~(Quigley or, subsequent to the effectiveness of the amended reorganization plan on November 4, 2013, Reorganized Quigley), a wholly owned subsidiary, was acquired by Pfizer in 1968 and sold products containing small amounts of asbestos until the early 1970s. In September 2004, Pfizer and Quigley took steps that were intended to resolve all pending and future claims against Pfizer and Quigley in which the claimants allege personal injury from exposure to Quigley products containing asbestos, silica or mixed dust. We recorded a charge of $369 million pre-tax ($229 million after-tax) in the third quarter of 2004 in connection with these matters.

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In September 2004, Quigley filed a petition in the U.S. Bankruptcy Court for the Southern District of New York seeking reorganization under Chapter 11 of the U.S. Bankruptcy Code. In March 2005, Quigley filed a reorganization plan in the Bankruptcy Court that needed the approval of 75% of the voting claimants, as well as the Bankruptcy Court and the U.S. District Court for the Southern District of New York. In connection with that filing, Pfizer entered into settlement agreements with lawyers representing more than 80% of the individuals with claims related to Quigley products against Quigley and Pfizer. The agreements provide for a total of $430 million in payments, of which $215 million became due in December 2005 and has been and is being paid to claimants upon receipt by Pfizer of certain required documentation from each of the claimants. The reorganization plan provided for the establishment of a trust (the Asbestos Personal Injury Trust) for the evaluation and, as appropriate, payment of all unsettled pending claims, as well as any future claims alleging injury from exposure to Quigley products.

In February 2008, the Bankruptcy Court authorized Quigley to solicit an amended reorganization plan for acceptance by claimants. According to the official report filed with the court by the balloting agent in July 2008, the requisite votes were cast in favor of the amended plan of reorganization.

The Bankruptcy Court held a confirmation hearing with respect to Quigley’s amended plan of reorganization that concluded in December 2009. In September 2010, the Bankruptcy Court declined to confirm the amended reorganization plan. As a result of the foregoing, Pfizer recorded additional charges for this matter of approximately $1.3 billion pre-tax (approximately $800 million after-tax) in 2010. Further, in order to preserve its right to address certain legal issues raised in the court’s opinion, in October 2010, Pfizer filed a notice of appeal and motion for leave to appeal the Bankruptcy Court’s decision denying confirmation.

In March 2011, Pfizer entered into a settlement agreement with a committee (the Ad Hoc Committee) representing approximately 40,000 claimants in the Quigley bankruptcy proceeding (the Ad Hoc Committee claimants). Consistent with the ~~additional~~ charges previously recorded ~~in 2010 referred~~with respect to ~~above,~~Quigley, the principal provisions of the settlement agreement ~~provide~~provided for a settlement payment in two installments and other consideration, as follows:

the payment to the Ad Hoc Committee, for the benefit of the Ad Hoc Committee claimants, of a first installment of $500 million upon receipt by Pfizer of releases of asbestos-related claims against Pfizer Inc. from Ad Hoc Committee claimants holding ~~$500~~$500 million in the aggregate of claims (Pfizer began paying this first installment in June ~~2011)~~2011 and all amounts have been paid);

the payment to the Ad Hoc Committee, for the benefit of the Ad Hoc Committee claimants, of a second installment of $300 million upon Pfizer’s receipt of releases of asbestos-related claims against Pfizer Inc. from Ad Hoc Committee claimants holding an additional ~~$300~~$300 million in the aggregate of claims ~~following the earlier of the effective date of a revised plan of reorganization~~(Pfizer began paying this second installment in April 2013 and ~~April 6, 2013;~~all amounts have been paid);

the payment of the Ad Hoc Committee’s legal fees and expenses incurred in this matter up to a maximum of $19 million (Pfizer began paying these legal fees and expenses in May ~~2011)~~2011 and all amounts have been paid); and

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the procurement by Pfizer of insurance for the benefit of certain Ad Hoc Committee claimants to the extent such claimants with non-malignant diseases have a future disease progression to a malignant disease (Pfizer procured this insurance in August 2011).

Following the execution of the settlement agreement with the Ad Hoc Committee, Quigley filed a revised plan of reorganization and accompanying disclosure statement with the Bankruptcy Court in April 2011, which it amended in June 2012. In August 2012, the Bankruptcy Court authorized Quigley to solicit the ~~revised~~amended plan of reorganization for acceptance by claimants. ~~Under~~The balloting agent's tabulation report filed with the court reflects that the requisite number of asbestos-related claimants cast votes in favor of the revised ~~plan, and consistent with the additional charges recorded in 2010 referred to above, we expect to contribute an additional amount to the Trust, if and when~~plan.

In June 2013, the Bankruptcy Court ~~confirms the plan, of cash and non-cash assets (including insurance proceeds) with~~held a ~~value in excess of~~ ~~$550 million. The Bankruptcy Court must find that the revised plan meets the requisite standards~~hearing to consider confirmation of the ~~U.S. Bankruptcy Code before~~amended reorganization plan and, in July 2013, it ~~confirms~~entered an order confirming the plan. ~~We expect that, if approved by claimants, confirmed by the Bankruptcy Court and~~Subsequently, in July 2013, the District Court ~~and upheld on any subsequent appeal, the revised reorganization plan will result in the District Court entering a permanent~~entered an order issuing an injunction directing pending ~~claims, as well as~~and future claims alleging asbestos-related personal injury from exposure to Quigley products to the Asbestos Personal Injury Trust, subject to any appeal and to the ~~recent~~ decision of the Second Circuit discussed below. ~~There is no assurance that~~The District Court's judgment on its order became final and non-appealable on October 17, 2013. The amended reorganization plan became effective on November 4, 2013, at which time, consistent with the ~~plan will be~~charges previously recorded with respect to Quigley, we contributed an additional amount of cash and non-cash items (including insurance proceeds and the value of certain debt forgiveness) to Reorganized Quigley and the Asbestos Personal Injury Trust with a value of approximately $1.08 billion; the value of the non-cash items was finalized and approved by ~~claimants or confirmed by~~ the ~~courts.~~Bankruptcy Court.

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In April 2012, the U.S. Court of Appeals for the Second Circuit affirmed a ruling by the U.S. District Court for the Southern District of New York that the Bankruptcy Court’s preliminary injunction in the Quigley bankruptcy proceeding does not prohibit actions directly against Pfizer Inc. for alleged asbestos-related personal injury from exposure to Quigley products based on the “apparent manufacturer” theory of liability under Pennsylvania law. The Second Circuit’s decision is procedural and does not address the merits of the plaintiffs’ claims under Pennsylvania law. ~~After~~In June 2013, the ~~Second Circuit~~U.S. Supreme Court denied our petition for ~~a rehearing, in September 2012, we filed a petition for~~ certiorari ~~with the U.S. Supreme Court~~ seeking a reversal of the Second Circuit’s decision. ~~In July 2012,~~As a result, actions against Pfizer Inc. for alleged asbestos-related personal injury from exposure to Quigley products alleging an “apparent manufacturer” theory of liability are no longer stayed and additional actions might be filed to the extent allowed by the Second ~~Circuit had granted a stay of its~~Circuit's decision ~~while the U.S. Supreme Court considers our petition for certiorari.~~and applicable law.

In a separately negotiated transaction with an insurance company in August 2004, we agreed to a settlement related to certain insurance coverage which provides for payments to an insurance proceeds trust established by Pfizer and Quigley over a ten-year period of amounts totaling $405 million. ~~Most of these~~All amounts paid by this insurance company to date were paid into the insurance proceeds trust and subsequently deposited in the Asbestos Personal Injury Trust as ~~well as~~of the November 4, 2013 effective date of the Quigley amended reorganization plan. In addition, certain other ~~payments from insurers~~insurance companies that issued policies covering Pfizer and Quigley ~~would be paid, following confirmation,~~entered into settlement agreements during the Quigley bankruptcy proceeding pursuant to which they have made, or will make in accordance with the schedules provided for in the respective settlement agreements, settlement payments to the Asbestos Personal Injury Trust for the benefit of present unsettled and future claimants with claims arising from exposure to Quigley products.

Other Matters

Between 1967 and 1982, Warner-Lambert owned American Optical Corporation, which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. As of September ~~30, 2012~~,29, 2013, approximately 66,400 claims naming American Optical and numerous other defendants were pending in various federal and state courts seeking damages for alleged personal injury from exposure to asbestos and other allegedly hazardous materials. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means to resolve, these claims.

Warner-Lambert and American Optical brought suit in state court in New Jersey against the insurance carriers that provided coverage for the asbestos and other allegedly hazardous materials claims related to American Optical. A majority of the carriers subsequently agreed to pay for a portion of the costs of defending and resolving those claims. The litigation continues against the carriers who have disputed coverage or how costs should be allocated to their policies, and the court held that Warner-Lambert and American Optical are entitled to payment from each of those carriers of a proportionate share of the costs associated with those claims. Under New Jersey law, a special allocation master was appointed to implement certain aspects of the court’s rulings. By late-May 2013, Warner-Lambert and American Optical had agreed to principal settlement terms with all of those remaining carriers regarding their payment of a portion of the past costs and their coverages for a portion of the future costs of defending and resolving the aforementioned claims against American Optical. Final settlement agreements have been negotiated, and it is expected that final payment will be made and that Warner-Lambert's and American Optical's action against the insurance carriers will be dismissed in the fourth quarter of 2013.

Numerous lawsuits are pending against Pfizer in various federal and state courts seeking damages for alleged personal injury from exposure to products containing asbestos and other allegedly hazardous materials sold by Gibsonburg Lime Products Company (Gibsonburg). Gibsonburg was acquired by Pfizer in the 1960s and sold products containing small amounts of asbestos until the early 1970s.

There also are a small number of lawsuits pending in various federal and state courts seeking damages for alleged exposure to asbestos in facilities owned or formerly owned by Pfizer or its subsidiaries.

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Celebrex and Bextra

~~Securities and ERISA Actions~~

Beginning in late 2004, ~~actions, including~~several purported class actions were filed in ~~various~~ federal and state courts ~~against Pfizer, Pharmacia Corporation (Pharmacia) and certain current and former officers, directors and employees of Pfizer and Pharmacia. These actions include (i) purported class actions~~ alleging that Pfizer and certain current and former officers of Pfizer violated federal securities laws by misrepresenting the safety of Celebrex and Bextra, and (ii) purported class actions filed by persons who claim to be participants in the Pfizer or Pharmacia Savings Plan alleging that Pfizer and certain current and former officers, directors and employees of Pfizer or, where applicable, Pharmacia and certain former officers, directors and employees of Pharmacia, violated certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA) by selecting and maintaining Pfizer stock or Pharmacia stock as an investment alternative when it allegedly no longer was a suitable or prudent investment option.Bextra. In June 2005, the federal ~~securities and ERISA~~ actions were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Pfizer Inc. Securities, Derivative and "ERISA" Litigation MDL-1688) in the U.S. District Court for the Southern District of New York. In March 2012, the ~~federal securities actions~~court in the Multi-District Litigation ~~the court in March 2012~~ certified a class consisting of all persons who purchased or acquired Pfizer stock between October 31, 2000 and October 19, 2005.

~~Securities Action in New Jersey~~

In ~~2003,~~November 2012, several institutional investors that had opted out of the certified class ~~action complaints were~~ filedthree, separate, multi-plaintiff actions in the ~~U.S. District Court for the~~Southern District of New ~~Jersey~~York against ~~Pharmacia, Pfizer and certain former officers of Pharmacia. The plaintiffs sought damages, alleging that~~ the same defendants ~~violated federal securities laws by misrepresenting the data from a study concerning the gastrointestinal effects of Celebrex. These cases were consolidated for pre-trial proceedings~~named in the consolidated class action, asserting allegations substantially similar to those asserted in the consolidated class action. In September 2013, the Southern District ~~of New Jersey (Alaska Electrical Pension Fund et al. v. Pharmacia Corporation et al.). In October 2012,~~dismissed the ~~parties entered into a settlement agreement, which is subject to court approval, providing for~~three, multi-plaintiff actions without prejudice, and the ~~payment by Pfizer of $164 million~~.plaintiffs in those actions rejoined the certified class in the Multi-District Litigation.

Various Drugs: Off-Label Promotion Actions

~~Securities Action~~

In May 2010, a purported class action was filed in the U.S. District Court for the Southern District of New York against Pfizer and several of our current and former officers. The complaint alleges that the defendants violated federal securities laws by making or causing Pfizer to make false statements, and by failing to disclose or causing Pfizer to fail to disclose material information, concerning the alleged off-label promotion of certain pharmaceutical products, alleged payments to physicians to promote the sale of those products and government investigations related thereto. Plaintiffs seek damages in an unspecified amount. In March 2012, the court certified a class consisting of all persons who purchased Pfizer common stock in the U.S. or on U.S. stock exchanges between January 19, 2006 and January 23, 2009 and were damaged as a result of the decline in the price of Pfizer common stock allegedly attributable to the claimed violations.

~~Actions by Health Care Service Corporation~~

Various Drugs: Foreign Corrupt Practices Act Compliance

In ~~2010, Health Care Service Corporation (HCSC), for itself~~February 2013, a shareholder derivative action was filed in the Supreme Court of the State of New York, County of New York, against certain current and ~~its affiliates, Blue Cross~~former officers and ~~Blue Shield plans in Illinois, New Mexico, Oklahoma and Texas, filed two actions against us: (i) an action, which was transferred~~directors of Pfizer. Pfizer is named as a nominal defendant. The complaint alleges that the individual defendants breached their fiduciary duties to the ~~U.S. District Court for~~Company as the ~~Northern District~~result of, ~~California, alleging that we engaged~~among other things, inadequate oversight of compliance by Pfizer subsidiaries in ~~deceptive marketing activities, including off-label promotion, and the payment of improper remuneration to healthcare professionals with respect to Bextra, and (ii) an action in~~various countries outside the U.S. ~~District Court for~~with the ~~Eastern District of Texas that included substantially similar allegations regarding Geodon~~U.S. Foreign Corrupt Practices Act. The plaintiff seeks damages in unspecified amounts and ~~Zyvox. In both actions, HCSC sought to recover the amounts that it paid for the specified drugs~~other unspecified relief on behalf of its members in Illinois, New Mexico, Oklahoma, and Texas, as well as treble damages and punitive damages. As previously reported, in June 2012, the U.S. District Court for the Eastern District of Texas entered judgment dismissing with prejudice the action relating to Geodon and Zyvox, and the appeal period has expired. In August 2012, the U.S. District Court for the Northern District of California dismissed with prejudice the action relating to Bextra, and the appeal period has expired.Pfizer.

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Hormone-Replacement Therapy

Personal Injury and Economic Loss Actions

Pfizer and certain wholly owned subsidiaries and limited liability companies, including Wyeth and King, along with several other pharmaceutical manufacturers, have been named as defendants in approximately 10,000 actions in various federal and state courts alleging personal injury or economic loss related to the use or purchase of certain estrogen and progestin medications prescribed for women to treat the symptoms of menopause. Although new actions are occasionally filed, the number of new actions was not significant in the third quarter of ~~2012,~~2013, and we do not expect a substantial change in the rate of new actions being filed. Plaintiffs in these suits allege a variety of personal injuries, including breast cancer, ovarian cancer, stroke and heart disease. Certain co-defendants in some of these actions have asserted indemnification rights against Pfizer and its affiliated companies. The cases against Pfizer and its affiliated companies involve one or more of the following products, all of which remain approved by the FDA: femhrt (which Pfizer divested in 2003); Activella and Vagifem (which are Novo Nordisk products that were marketed by a Pfizer affiliate from 2000 to 2004); Premarin, Prempro, Aygestin, Cycrin and Premphase (which are legacy Wyeth products); and Provera, Ogen, Depo-Estradiol, Estring and generic MPA (which are legacy Pharmacia & Upjohn products). The federal cases ~~have been~~were transferred for consolidated pre-trial proceedings to a ~~Multi-District~~Multi-District Litigation (In re Prempro Products Liability Litigation MDL-1507) in the U.S. District Court for the Eastern District of Arkansas. Certain of the federal cases have been remanded to their respective District Courts for further proceedings including, if necessary, trial.

This litigation consists of individual ~~actions,~~actions; a few purported statewide class ~~actions and~~actions; a purported ~~provincewide~~nationwide class action in Canada; a purported province-wide class action in Quebec, ~~Canada,~~Canada; a statewide class action in ~~California~~California; and a nationwide class action in Canada. In March 2011, in an action against Wyeth seeking the refund of the purchase price paid for Wyeth’s hormone-replacement therapy products by individuals in the State of California during the period from January 1995 to January 2003, the U.S. District Court for the Southern District of California certified a class consisting of all individual purchasers of such products in California who actually heard or read Wyeth’s alleged misrepresentations regarding such products. This is the only hormone-replacement therapy action to date against Pfizer and its affiliated companies in the U.S. in which a class has been certified. In addition, in August 2011, in an action against Wyeth seeking damages for personal injury and consumer fraud,

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the Supreme Court of British Columbia certified a class consisting of all women who were prescribed Premplus and/or Premarin in combination with progestin in Canada between January 1, 1997 and December 1, 2003 and who thereafter were diagnosed with breast cancer.

Pfizer and its affiliated companies have prevailed in many of the hormone-replacement therapy actions that have been resolved to date, whether by voluntary dismissal by the plaintiffs, summary judgment, defense verdict or judgment notwithstanding the verdict; a number of these cases have been appealed by the plaintiffs. Certain other hormone-replacement therapy actions have resulted in verdicts for the plaintiffs and have included the award of compensatory and, in some instances, punitive damages; each of these cases has been appealed by Pfizer and/or its affiliated companies. The decisions in a few of the cases that had been appealed by Pfizer and/or its affiliated companies or by the plaintiffs have been upheld by the appellate courts, while several other cases that had been appealed by Pfizer and/or its affiliated companies or by the plaintiffs have been remanded by the appellate courts to their respective trial courts for further proceedings. Trials of additional hormone-replacement therapy actions are ~~underway or~~ scheduled in ~~2012.~~2014.

Most of the unresolved actions against Pfizer and/or its affiliated companies have been outstanding for more than five years and could take many more years to resolve. However, opportunistic settlements could occur at any time. The litigation process is time-consuming, as every hormone-replacement action being litigated involves contested issues of medical causation and knowledge of risk. Even though the vast majority of hormone-replacement therapy actions concern breast cancer, the underlying facts (e.g., medical causation, family history, reliance on warnings, physician/patient interaction, analysis of labels, actual, provable injury and other critical factors) can differ significantly from action to action, and the process of discovery has not yet begun for a majority of the unresolved actions. In addition, the hormone-replacement therapy litigation involves fundamental issues of science and medicine that often are uncertain and continue to evolve. Key scientific court rulings may have a significant impact on the litigation as a whole. An integral part of the litigation process involves understanding the evolving science, as well as seeking key scientific rulings. We do not know how the science may evolve, how the courts will rule on key motions or which unresolved actions will be impacted by these scientific matters.

As of September ~~30, 2012~~,29, 2013, Pfizer and its affiliated companies had settled, or entered into definitive agreements or agreements-in-principle to settle, approximately ~~83%~~98% of the hormone-replacement therapy actions pending against us and our affiliated companies. Since the inception of this litigation, we ~~have~~ recorded aggregate charges in previous years with respect to those actions, as well as

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with respect to the actions that have resulted in verdicts against us or our affiliated companies, of approximately $~~1.1~~1.7 billion. ~~In addition, we have recorded aggregate~~These charges ofalso include approximately $~~535~~25 million ~~that provide~~ for the expected costs to resolve all remaining hormone-replacement therapy actions against Pfizer and its affiliated companies, excluding the class actions and purported class actions referred to above. The approximately $~~535~~25 million charges are an estimate and, while we cannot reasonably estimate the range of reasonably possible loss in excess of the amounts accrued for these contingencies given the uncertainties inherent in this product liability litigation, as described above, additional charges may be required in the future.

Government Inquiries; Action by the State of Nevada

Pfizer and/or its affiliated companies also have received inquiries from various federal and state agencies and officials relating to the marketing of their hormone-replacement products. In November 2008, the State of Nevada filed an action against Pfizer, Pharmacia & Upjohn Company and Wyeth in state court in Nevada alleging that they had engaged in deceptive marketing of their respective hormone-replacement therapy medications in Nevada in violation of the Nevada Deceptive Trade Practices Act. The action seeks monetary relief, including civil penalties and treble damages. In February 2010, the action was dismissed by the court on ~~the grounds that the~~ statute of limitations ~~had expired.~~grounds. In July 2011, the Nevada Supreme Court reversed the dismissal and remanded the case to the district court for further proceedings.

Effexor

Personal Injury Actions

A number of individual lawsuits and multi-plaintiff lawsuits have been filed against us and/or our subsidiaries in various federal and state courts alleging personal injury as a result of the purported ingestion of Effexor. Among other types of actions, the Effexor personal injury litigation includes actions alleging a variety of birth defects as a result of the purported ingestion of Effexor by women during pregnancy. Plaintiffs in these birth-defect actions seek compensatory and punitive damages. In August 2013, the federal birth-defect cases were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Effexor (Venlafaxine Hydrochloride) Products Liability Litigation MDL-2458) in the U.S. District Court for the Eastern District of Pennsylvania.

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Antitrust Actions

Beginning in May 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR, enforcing certain patents for Effexor XR, and entering into a litigation settlement agreement with a generic manufacturer with respect to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey. ~~In October 2012, the court stayed these actions pending the review by the U.S. Supreme Court of an action, to which the Company is not a party, involving a similar legal issue.~~

Zoloft

A number of individual lawsuits and multi-plaintiff lawsuits have been filed against us and/or our subsidiaries in various federal and state courts alleging personal injury as a result of the purported ingestion of Zoloft. Among other types of actions, the Zoloft personal injury litigation includes actions alleging a variety of birth defects as a result of the purported ingestion of Zoloft by women during pregnancy. Plaintiffs in these birth-defect actions seek compensatory and punitive damages and the disgorgement of profits resulting from the sale of Zoloft. In April 2012, the federal birth-defect cases were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Zoloft Products Liability Litigation MDL-2342) in the U.S. District Court for the Eastern District of Pennsylvania.

Neurontin

Off-Label Promotion Actions ~~in the U.S.~~

A number of lawsuits, including purported class actions, have been filed against us in various federal and state courts alleging claims arising from the promotion and sale of Neurontin. The plaintiffs in the purported class actions seek to represent

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nationwide and certain statewide classes consisting of persons, including individuals, health insurers, employee benefit plans and other third-party payers, who purchased or reimbursed patients for the purchase of Neurontin that allegedly was used for indications other than those included in the product labeling approved by the FDA. In 2004, many of the suits pending in federal courts, including individual actions as well as purported class actions, were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Neurontin Marketing, Sales Practices and Product Liability Litigation MDL-1629) in the U.S. District Court for the District of Massachusetts.

In the Multi-District Litigation, ~~in 2009,~~ the ~~court~~District Court (i) denied the plaintiffs’ ~~renewed~~ motion for certification of a nationwide class of all individual consumers and third-party payers who allegedly purchased or reimbursed patients for the purchase of Neurontin for off-label uses from 1994 through ~~2004. In May 2011, the court denied~~2004, and (ii) dismissed an individual action by a ~~motion to reconsider its class certification ruling.~~

~~In 2010, the Multi-District Litigation court partially granted our motion for summary judgment, dismissing the claims of all of the~~third-party payer, Aetna, as well as actions by certain proposed class representatives for third-party payers and ~~four of the six proposed class representatives~~ for individual consumers. In ~~June 2011, three third-party payer proposed class representatives appealed both the dismissal and the denial of class certification to~~April 2013, the U.S. Court of Appeals for the First ~~Circuit.~~

~~Also~~Circuit reversed the decisions of the District Court dismissing the individual action by Aetna as well as the action by the third-party payer proposed class representatives. The First Circuit remanded those actions to the District Court for further consideration, including reconsideration of class certification in the third-party payer action. In addition, a number of individual actions by other third-party payers remain pending in the Multi-District Litigation and in ~~February 2011, a third-party payer who was not included in the proposed class action appealed a dismissal order to the U.S. Court of Appeals for the First Circuit.~~

Plaintiffs are seeking certification of statewide classes of Neurontin purchasers in actions pending in California and Illinois State courts in New York, Pennsylvania, Missouri and New Mexico have declined to certify statewide classes of Neurontin purchasers. An appeal of the denial of class certification filed in November 2011 by the plaintiff in the Missouri action and a proposed intervenor has been dismissed.other courts.

In January 2011, the U.S. District Court for the District of Massachusetts entered an order trebling a jury verdict against us in an individual action by a third-party payer, the Kaiser Foundation Health Plan Inc., seeking damages for the alleged off-label promotion of Neurontin in violation of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. The verdict was for approximately $47.4 million, which was subject to automatic trebling to $142.1 million under the RICO Act. In November 2010, the court had entered a separate verdict against us in the amount of $65.4 million, together with prejudgment interest, under California’s Unfair Trade Practices law relating to the same alleged conduct, which amount is included within and is not additional to the $142.1 million trebled amount of the jury verdict. In ~~August 2011, we appealed the District Court’s judgment to~~April 2013, the U.S. Court of Appeals for the First ~~Circuit.~~Circuit affirmed the District Court's decisions.

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In August 2013, we filed a petition for certiorari seeking review by the U.S. Supreme Court of the First Circuit's decisions, described above, reversing the dismissals of the individual action by Aetna and the third-party payer purported class action and affirming the verdict against us in the individual action by Kaiser. Our petition asks the Supreme Court to review certain issues regarding causation and damages.

Plaintiffs are seeking certification of statewide classes of Neurontin purchasers in actions pending in California and Illinois that allege off-label promotion of Neurontin. State courts in New York, Pennsylvania, Missouri and New Mexico have declined to certify statewide classes of Neurontin purchasers.

Personal Injury Actions ~~in the U.S. and Certain Other Countries~~

A number of individual lawsuits have been filed against us in various ~~U.S.~~ federal and state courts ~~and in certain other countries~~ alleging suicide, attempted suicide and other personal injuries as a result of the purported ingestion of Neurontin. Certain of the ~~U.S.~~ federal actions have been transferred for consolidated pre-trial proceedings to the same Multi-District Litigation referred to in the first paragraph of ~~this section.~~

~~In addition, purported class actions were filed against us in various Canadian provincial courts alleging claims arising from~~ the promotion, sale and labeling of Neurontin and generic Neurontin. In February 2010, in a proceeding pending in Ontario, Canada, the court certified a class consisting of all persons in Canada, except in Quebec, who purchased and ingested Neurontin prior to August 2004. The plaintiffs claimed that Pfizer failed to provide adequate warning of the alleged risks of personal injury associated with Neurontin. Two purported provincewide class actions filed in Quebec that raise substantially the same allegations were included in the class action pending in Ontario by agreement of the parties and orders of both the Quebec and Ontario courts. In November 2012, the parties entered into an agreement-in-principle to resolve this matter that provides for the payment by Pfizer of (Can.) $~~4.8 million. The resolution is subject to the execution of a final settlement agreement by the parties and to court approval.~~“Neurontin––Off-Label Promotion Actions” section above.

Antitrust Action ~~in the U.S.~~

In January 2011, in a Multi-District Litigation (In re Neurontin Antitrust Litigation MDL-1479) that consolidates four actions, the U.S. District Court for the District of New Jersey certified a nationwide class consisting of wholesalers and other entities who purchased Neurontin directly from Pfizer and Warner-Lambert during the period from December 11, 2002 to August 31, 2008 and who also purchased generic gabapentin after it became available. The complaints allege that Pfizer and ~~Warner-~~

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~~Lambert~~Warner-Lambert engaged in anticompetitive conduct in violation of the Sherman Act that included, among other things, submitting patents for listing in the Orange Book and prosecuting and enforcing certain patents relating to Neurontin, as well as engaging in off-label marketing of Neurontin. Plaintiffs seek compensatory damages on behalf of the class, which may be subject to trebling.

Lipitor

Whistleblower Action

In 2004, a former employee filed a “whistleblower” action against us in the U.S. District Court for the Eastern District of New York. The complaint remained under seal until September 2007, at which time the U.S. Attorney for the Eastern District of New York declined to intervene in the case. We were served with the complaint in December 2007. Plaintiff alleges off-label promotion of Lipitor in violation of the Federal Civil False Claims Act and the false claims acts of certain states, and he seeks treble damages and civil penalties on behalf of the federal government and the specified states as the result of their purchase, or reimbursement of patients for the purchase, of Lipitor allegedly for such off-label uses. Plaintiff also seeks compensation as a whistleblower under those federal and state statutes. In addition, plaintiff alleges that he was wrongfully terminated, in violation of the anti-retaliation provisions of applicable federal and New York law, and he seeks damages and the reinstatement of his employment. In 2009, the ~~court~~District Court dismissed without prejudice the off-label promotion claims and, in 2010, plaintiff filed an amended complaint containing off-label promotion allegations that are substantially similar to the allegations in the original complaint. In November 2012, the District Court dismissed the amended complaint. In December 2012, the plaintiff appealed the District Court's decision to the U.S. Court of Appeals for the Second Circuit.

Antitrust Actions

Beginning in November 2011, purported class actions relating to Lipitor were filed in various federal ~~and state~~ courts against Pfizer, certain affiliates of Pfizer, and, in most of the actions, Ranbaxy, among ~~others; the state court action subsequently was removed to federal court.~~others. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor, and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially

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similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation (In re Lipitor Antitrust Litigation MDL-2332) in the U.S. District Court for the District of New Jersey.

~~Chantix/Champix~~In November 2012, the defendants moved to dismiss all of the foregoing actions. In September 2013, the court dismissed the claims by direct purchasers that relate to the procurement and/or enforcement of certain patents for Lipitor. In addition, the court limited the timeframe for which direct purchasers may pursue their remaining damage claims to the period from June 2011 to November 2011. The court deferred its ruling on the defendants' motions to dismiss the claims by direct purchasers that relate to the 2008 litigation settlement agreement with Ranbaxy and granted the plaintiffs leave to amend their complaints as to those claims. Defendants' motions to dismiss the actions by the other plaintiffs in the Multi-District Litigation—the indirect purchaser, third-party payer and individual plaintiffs—remain pending.

~~Actions~~Also, in January 2013, the State of West Virginia filed an action in West Virginia state court against Pfizer and Ranbaxy, among others, that asserts claims and seeks relief on behalf of the State of West Virginia and residents of that state that are substantially similar to the claims asserted and the relief sought in the ~~U.S.~~purported class actions described above.

A number of individual lawsuits have been filed against us in various federal and state courts alleging suicide, attempted suicide and other personal injuries as a result of the purported ingestion of Chantix, as well as economic loss. Plaintiffs in these actions seek compensatory and punitive damages and the disgorgement of profits resulting from the sale of Chantix. In October 2009, the federal cases were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Chantix (Varenicline) Products Liability Litigation MDL-2092) in the U.S. District Court for the Northern District of Alabama.

~~Actions in Canada~~

Chantix/Champix

Beginning in December 2008, purported class actions were filed against us in the Ontario Superior Court of Justice (Toronto Region), the Superior Court of Quebec (District of Montreal), the Court of Queen’s Bench of Alberta, Judicial District of Calgary, and the Superior Court of British Columbia (Vancouver Registry) on behalf of all individuals and third-party payers in Canada who have purchased and ingested Champix or reimbursed patients for the purchase of Champix. Each of these actions asserts claims under Canadian product liability law, including with respect to the safety and efficacy of Champix, and, on behalf

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of the putative class, seeks monetary relief, including punitive damages. In June 2012, the Ontario Superior Court of Justice certified the Ontario proceeding as a class action, defining the class as consisting of the following: (i) all persons in Canada who ingested Champix during the period from April 2, 2007 to May 31, 2010 and who experienced at least one of a number of specified neuropsychiatric adverse events; (ii) all persons who are entitled to assert claims in respect of Champix pursuant to Canadian legislation as the result of their relationship with a class member; and (iii) all health insurers who are entitled to assert claims in respect of Champix pursuant to Canadian legislation. The Ontario Superior Court of Justice certified the class against Pfizer Canada Inc. only and ruled that the action against Pfizer Inc. should be stayed until after the trial of the issues that are common to the class members. The actions in Quebec, Alberta and British Columbia have been stayed in favor of the Ontario action, which is proceeding on a national basis.

Bapineuzumab

In June 2010, a purported class action was filed in the U.S. District Court for the District of New Jersey against Pfizer, as successor to Wyeth, and several former officers of Wyeth. The complaint alleges that Wyeth and the individual defendants violated federal securities laws by making or causing Wyeth to make false and misleading statements, and by failing to disclose or causing Wyeth to fail to disclose material information, concerning the results of a clinical trial involving bapineuzumab, a product in development for the treatment of Alzheimer’s disease. The plaintiff seeks to represent a class consisting of all persons who purchased Wyeth securities from May 21, 2007 through July 2008 and seeks damages in an unspecified amount on behalf of the putative class. In February 2012, the court granted the defendants’ motion to dismiss the complaint. In ~~March~~December 2012, the ~~plaintiff filed a~~court granted the plaintiff's motion ~~seeking the court’s permission~~ to file an amended complaint.

In July 2010, a related action was filed in the U.S. District Court for the Southern District of New York against Elan Corporation (Elan), certain directors and officers of Elan, and Pfizer, as successor to Wyeth. Elan participated in the development of bapineuzumab until September 2009. The complaint alleges that Elan, Wyeth and the individual defendants violated federal securities laws by making or causing Elan to make false and misleading statements, and by failing to disclose or causing Elan to fail to disclose material information, concerning the results of a clinical trial involving bapineuzumab. The plaintiff seeks to represent a class consisting of all persons who purchased Elan call options from June 17, 2008 through July 29, 2008 and seeks damages in an unspecified amount on behalf of the putative class. In June 2011,April 2013, the court granted ~~Pfizer’s and Elan’s motions~~the defendants' motion to dismiss the amended complaint. In July 2011, the plaintiff filed a supplemental memorandum setting forth the bases that the plaintiff believed supported amendment of the complaint. In August 2011, the court dismissed the complaint with prejudice. In September 2011,May 2013, the plaintiff appealed the District ~~Court’s~~Court's decision to the U.S. Court of Appeals for the ~~Second~~Third Circuit.

Thimerosal

Wyeth iswas a defendant in a number of individual suits and purported class actions by or on behalf of vaccine recipients alleging that exposure through vaccines to cumulative doses of thimerosal, a preservative used in certain childhood vaccines formerly manufactured and distributed by Wyeth and other vaccine manufacturers, caused severe neurological damage and/or autism in children. ~~While several suits were filed as purported nationwide or statewide class actions, all of the purported class actions have been dismissed, either by the courts or voluntarily by the plaintiffs.~~ In addition to the suits alleging injury from exposure to thimerosal, certain of the cases were brought by parents in their individual capacities for, among other things, loss of services and loss of consortium of the injured child. All of the actions against Wyeth have been dismissed, either by the courts or voluntarily by the plaintiffs.

The National Childhood Vaccine Injury Act (the Vaccine Act) requires that persons alleging injury from childhood vaccines first file a petition in the U.S. Court of Federal Claims asserting a vaccine-related injury. At the conclusion of that proceeding, petitioners may bring a lawsuit against the manufacturer in federal or state court, provided that they have satisfied certain procedural requirements. Also under the terms of the Vaccine Act, if a petition has not been adjudicated by the U.S. Court of Federal Claims within a specified time period after filing, the petitioner may opt out of the proceeding and pursue a lawsuit

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against the manufacturer by following certain procedures. ~~Some of the vaccine recipients who have sued Wyeth to date may not have satisfied the conditions to filing a lawsuit that are mandated by the Vaccine Act. The claims~~Claims brought by parents for, among other things, loss of services and loss of consortium of the injured child are not covered by the Vaccine Act.

In 2002, the Office of Special Masters of the U.S. Court of Federal Claims established an Omnibus Autism Proceeding with jurisdiction over petitions in which vaccine recipients claim to suffer from autism or autism spectrum disorder as a result of receiving thimerosal-containing childhood vaccines and/or the measles, mumps and rubella (MMR) vaccine. ~~There currently are several thousand petitions pending in the Omnibus Autism Proceeding.~~ Special masters of the court have heard six test cases on petitioners’ theories that either thimerosal-containing vaccines in combination with the MMR vaccine or thimerosal-containing vaccines alone can cause autism or autism spectrum disorder.

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In February 2009, special masters of the U.S. Court of Federal Claims rejected the three cases brought on the theory that a combination of MMR and thimerosal-containing vaccines caused petitioners’ conditions. After these rulings were affirmed by the U.S. Court of Federal Claims, two of them were appealed by petitioners to the U.S. Court of Appeals for the Federal Circuit. In 2010, the Federal Circuit affirmed the decisions of the special masters in both of these cases.

In March 2010, special masters of the U.S. Court of Federal Claims rejected the three additional test cases brought on the theory that thimerosal-containing vaccines alone caused petitioners’ conditions. Petitioners did not seek review by the U.S. Court of Federal Claims of the decisions of the special masters in these latter three test cases, and judgments were entered dismissing the cases in April 2010.

Petitioners in each of the six test cases have filed an election to bring a civil action.

~~Pristiq~~Various Drugs: Co-Pay Programs

In ~~November 2007,~~July 2012, a purported class action was filed against Pfizer in the U.S. District Court for the Southern District of New York against Wyeth and certain former officers of Wyeth. An amended complaint was filed in April 2008 naming certain additional former officers and certain employees of Wyeth as defendants. The amended complaint alleged that the defendants violated federal securities laws by misrepresenting the safety of Pristiq during the period before the FDA’s issuance in July 2007 of an “approvable letter” for Pristiq for the treatment of vasomotor symptoms. The plaintiff sought unspecified damages on behalf of the class. In September 2012, the court certified a class consisting of all persons who purchased Wyeth common stock from June 26, 2006 to July 24, 2007. In November 2012, the parties entered into a settlement agreement, which is subject to court approval, providing for the payment by Wyeth of ~~$67.5 million~~.

~~Rebif~~

~~Various Drugs: Co-Pay Programs~~

~~In March 2012, a purported class action was filed against Pfizer and Amgen Inc. in the U.S. District Court for the Southern District of New York.~~Illinois. The plaintiffs seek to represent a class consisting of all entities in the U.S. and its territories that have reimbursed patients for the purchase of certain Pfizer drugs for which co-pay programs exist or have existed. The plaintiffs allege that these programs violate the federal ~~RICO~~Racketeer Influenced and Corrupt Organization (RICO) Act and federal antitrust law by, among other things, providing an incentive for patients to use certain Pfizer drugs rather than less-expensive competitor products, thereby increasing the payers’ reimbursement costs. The plaintiffs seek treble damages on behalf of the putative class for their excess reimbursement costs allegedly attributable to the co-pay programs, as well as an injunction prohibiting us from offering such programs. In May and July 2012, respectively, substantially similar purported class actions were filed against Pfizer in the U.S. District Courts for the Eastern District of New York and the Southern District of Illinois. In August 2012, the action in the Eastern District of New York was voluntarily dismissed by the plaintiff. In October 2012, the action in the Southern District of Illinois was stayed pending the outcome of the action in the Southern District of New York. In October 2012, the plaintiffs in the action in the Southern District of New York voluntarily dismissed Amgen as a defendant. Similar purported class actions have been filed against several other pharmaceutical companies.

C. A3. Legal Proceedings––Commercial and Other Matters

~~Acquisition of King Pharmaceuticals, Inc.~~

In October 2010, several purported class action complaints were filed in state court in Tennessee by shareholders of King Pharmaceuticals, Inc. (King) challenging Pfizer’s acquisition of King. King and the individuals who served as the members of King’s Board of Directors at the time of the execution of the merger agreement are named as defendants in all of these actions. Pfizer and Parker Tennessee Corp., a subsidiary of Pfizer, also are named as defendants in most of these actions.

In November 2010, all of these actions were consolidated in the Chancery Court for Sullivan County, Tennessee Second Judicial District, at Bristol. The parties to the consolidated action have reached an agreement-in-principle to resolve that action

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as a result of certain disclosures regarding the transaction made by King in its amended Schedule 14D-9 recommendation statement for the tender offer dated January 21, 2011. The proposed settlement is subject to, among other things, court approval.

Average Wholesale Price Litigation

Pfizer, certain of its subsidiaries and other pharmaceutical manufacturers are defendants in actions in various state courts by a number of states ~~as well as one purported class action by certain employee benefit plans and other third-party payers,~~ alleging that the defendants provided average wholesale price (AWP) information for certain of their products that was higher than the actual average prices at which those products were sold. The AWP is used to determine reimbursement levels under Medicare Part B and Medicaid and in many private-sector insurance policies and medical plans. The plaintiffs claim that the alleged spread between the AWPs at which purchasers were reimbursed and the actual sale prices was promoted by the defendants as an incentive to purchase certain of their products. In addition to suing on their own behalf, some of the plaintiff states seek to recover on behalf of individuals, private-sector insurance companies and medical plans in their states. These various actions allege, among other things, fraud, unfair competition, unfair trade practices and the violation of consumer protection statutes, and seek monetary and other relief, including civil penalties and treble damages.

Monsanto-Related Matters

In 1997, Monsanto Company (Former Monsanto) contributed certain chemical manufacturing operations and facilities to a newly formed corporation, Solutia Inc. (Solutia), and spun off the shares of Solutia. In 2000, Former Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia Corporation (Pharmacia). Pharmacia then transferred its agricultural operations to a newly created subsidiary, named Monsanto Company (New Monsanto), which it spun off in a two-stage process that was completed in 2002. Pharmacia was acquired by Pfizer in 2003 and is now a wholly owned subsidiary of Pfizer.

In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto is defending and indemnifying Pharmacia in connection with various claims and litigation arising out of, or related to, the agricultural business.

In connection with its spin-off in 1997, Solutia assumed, and agreed to indemnify Pharmacia for, liabilities related to Former Monsanto's chemical businesses. As the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s indemnification obligations related to Former Monsanto’s chemical businesses are limited to sites that Solutia has owned or

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operated. In addition, in connection with its spinoff that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities primarily related to Former Monsanto's chemical businesses, including, but not limited to, any such liabilities that Solutia assumed. Solutia's and New Monsanto's assumption of and agreement to indemnify Pharmacia for these liabilities apply to pending actions and any future actions related to Former Monsanto's chemical businesses in which Pharmacia is named as a defendant, including, without limitation, actions asserting environmental claims, including alleged exposure to polychlorinated biphenyls. Solutia and New Monsanto are defending and indemnifying Pharmacia in connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses.

Trade Secrets Action in California

In 2004, Ischemia Research and Education Foundation (IREF) and its chief executive officer brought an action in California Superior Court, Santa Clara County, against a former IREF employee and Pfizer. Plaintiffs allege that defendants conspired to misappropriate certain information from IREF’s allegedly proprietary database in order to assist Pfizer in designing and executing a clinical study of a Pfizer drug. In 2008, the jury returned a verdict for compensatory damages of approximately $38.7 million. In March 2009, the court awarded prejudgment interest, but declined to award punitive damages. In July 2009, the court granted our motion for a new trial and vacated the jury verdict. In ~~August 2009, IREF appealed~~February 2013, the trial ~~court’s~~court's decision towas affirmed by the California Court of Appeal, Sixth Appellate District. In May 2013, the action was remanded for further proceedings to the California Superior Court, Santa Clara County.

Environmental Matters

In 2009, we submitted to the U.S. Environmental Protection Agency (EPA) a corrective measures study report with regard to Pharmacia Corporation's discontinued industrial chemical facility in North Haven, Connecticut and a revised site-wide feasibility study with regard to ~~Wyeth’s~~Wyeth Holdings Corporation's discontinued industrial chemical facility in Bound Brook, New Jersey. In September 2010, our corrective measures study report with regard to the North Haven facility was approved by the EPA, and we commenced construction of the site remedy in late 2011 under an Updated Administrative Order on Consent with the EPA. In July 2011, weWyeth Holdings Corporation finalized an Administrative Settlement Agreement and Order on Consent for Removal Action with the EPA with regard to the Bound Brook ~~facility and commenced~~facility. In May 2012, we completed construction of an interim remedy to address the discharge of impacted groundwater from that facility to the Raritan River. In September 2012, the EPA issued a final remediation plan for the Bound

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Brook facility's main plant area, which is generally in accordance with one of the remedies evaluated in our revised site-wide feasibility study. In March 2013, Wyeth Holdings Corporation entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for two adjacent lagoons. The estimated costs of the site remedy for the North Haven facility and the site remediation for the Bound Brook facility are covered by accruals previously taken by us.

We are a party to a number of other proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (CERCLA or Superfund), and other state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.

In February 2011, King received notice from theDOJ advising that the EPA has requested that DOJ initiate enforcement action seeking injunctive relief and penalties against King for alleged non-compliance with certain provisions of the federal Clean Air Act at its Bristol, Tennessee manufacturing facility. King has executed a tolling agreement with the DOJ in order to facilitate the possible resolution of this matter. We do not expect that any injunctive relief or penalties that may result from this matter will be material to Pfizer.

In October 2011, we voluntarily disclosed to the EPA potential non-compliance with certain provisions of the federal Clean Air Act at our Barceloneta, Puerto Rico manufacturing facility. We do not expect that any injunctive relief or penalties that may result from our voluntary disclosure will be material to Pfizer. Separately, in October 2012, the EPA issued an administrative complaint and penalty demand of $216,000 to resolve alleged non-compliance with similar provisions of the federal Clean Air Act that the EPA identified as part of its March 2010 inspection of the ~~Baceloneta~~Barceloneta facility. We are ~~reviewing the complaint and expect to engage~~ in ~~settlement~~ discussions with the EPA ~~in the near future.~~seeking to resolve these matters.

D. A4. Legal Proceedings––Government Investigations

Like other pharmaceutical companies, we are subject to extensive regulation by national, state and local government agencies in the U.S. and in the other countries in which we operate. As a result, we have interactions with government agencies on an ongoing basis. ~~Among the investigations by government agencies are those discussed below.~~ It is possible that criminal charges and substantial fines and/or civil penalties could result from government investigations. Among the investigations ~~in addition to~~by government agencies is the ~~criminal charges, fines and civil penalties~~matter discussed below.

In mid-August 2012, Wyeth entered into an agreement-in-principle with the DOJ to resolve the previously reported criminal investigation regarding Wyeth's promotional practices with respect to Protonix prior to Wyeth's acquisition by Pfizer in October 2009. Under the agreement-in-principle, Wyeth will pay $~~55 million~~ in civil disgorgement under the U.S. Federal Food, Drug and Cosmetic Act, plus interest, to resolve the DOJ's allegations, which relate to the time period from February 2000 through June 2001. Wyeth will not admit to any wrongdoing. The resolution is subject to the execution of a final settlement agreement by the parties, which is expected to occur in the coming months.

~~The DOJ is conducting a civil investigation regarding Wyeth’s practices relating to the pricing for Protonix for Medicaid rebate purposes prior to Wyeth's acquisition by Pfizer.~~ In 2009, the ~~DOJ~~U.S. Department of Justice (DOJ) filed a civil complaint in intervention in two qui tam actions that had been filed under seal in the U.S. District Court for the District of Massachusetts. The complaint alleges that Wyeth’s practices relating to the pricing for Protonix for Medicaid rebate purposes between 2001 and 2006, prior to Wyeth's acquisition by Pfizer, violated the Federal Civil False Claims Act and federal common law. The two qui tam actions have been unsealed and the complaints

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include substantially similar allegations. In addition, in 2009, several states and the District of Columbia filed a complaint under the same docket number asserting violations of various state laws based on allegations substantially similar to those set forth in the civil complaint filed by the DOJ. We are exploring with the DOJ various ways to resolve this matter.

~~In October 2012, Wyeth entered into an agreement-in-principle with~~A5. Legal Proceedings––Certain Matters Resolved During the ~~DOJ to resolve the~~First Nine Months of 2013

As previously reported, ~~civil and criminal investigation with respect to Wyeth's promotional practices relating to Rapamune prior to Wyeth's acquisition by Pfizer. Under~~during the ~~agreement-in-principle, we will pay approximately~~ ~~$257 million~~ ~~to resolve the civil allegations and approximately~~ ~~$234 million~~ ~~to resolve the criminal allegations, and Wyeth will plead guilty to a misdemeanor misbranding offense under the U.S. Federal Food, Drug and Cosmetic Act. The resolution is subject to the execution~~first nine months of ~~final settlement agreements by the parties, which is expected to occur in the coming months. In connection with the agreement-in-principle, we recorded a charge of~~ ~~$491 million, which is not deductible for income tax purposes, in the third quarter of 2012.~~

We received civil investigative demands and informal inquiries from the consumer protection divisions of several states seeking information and documents concerning the promotion of Lyrica and Zyvox. These requests relate to the same past promotional practices concerning these products that2013, certain matters, including those discussed below, were resolved or were the subject of ~~previously reported settlements~~definitive settlement agreements or settlement agreements-in-principle.

Protonix (pantoprazole sodium)

Wyeth has a license to market Protonix in ~~September 2009~~the U.S. from Nycomed GmbH (Nycomed), which owns the patents relating to Protonix. Nycomed was acquired by Takeda Pharmaceutical Company Limited (Takeda) in 2011. The basic patent (including the six-month pediatric exclusivity period) for Protonix expired in January 2011.

In June 2013, Pfizer announced a settlement of Pfizer’s and Takeda’s patent-infringement action against Teva Pharmaceutical Industries and Sun Pharmaceutical Industries Ltd. (Sun) in the U.S. District Court for the District of New Jersey that provides for the payment of a total of $2.15 billion by the two generic companies. In that action, Pfizer and Takeda sought compensation for damages resulting from Teva Pharmaceutical Industries’ and Sun’s “at-risk” launches of Protonix in the U.S. prior to the expiration of the basic patent. Pursuant to the settlement agreement: (i) Teva Pharmaceutical Industries agreed to pay Pfizer and Takeda a total of $800 million in 2013, of which $660 million has been paid to date, and an additional $800 million by October 2014, and (ii) Sun agreed to pay Pfizer and Takeda a total of $550 million, all of which has been paid. Pfizer is entitled to 64% and Takeda is entitled to 36% of the settlement proceeds.

Separately, Wyeth and Nycomed were defendants in purported class actions in the U.S. District Court for the District of New Jersey that alleged violation of antitrust laws in connection with the ~~DOJ~~

~~Table~~procurement and enforcement of ~~Contents~~the patents for Protonix. These actions had been stayed pending resolution of the underlying patent litigation discussed above. In July 2013, after the settlement and dismissal of the underlying patent litigation, these purported class actions were dismissed with the consent of the parties.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Rebif

~~(UNAUDITED)~~

We have an exclusive collaboration agreement with EMD Serono, Inc. (Serono) to co-promote Rebif, a treatment for multiple sclerosis, in the U.S. In August 2011, Serono filed a complaint in the Philadelphia Court of Common Pleas seeking a declaratory judgment that we are not entitled to a 24-month extension of the Rebif co-promotion agreement, which otherwise would terminate at the end of 2013. We disagreed with Serono's interpretation of the agreement and believed that we have the ~~Medicaid fraud control units~~right to extend the agreement to the end of ~~various states.~~2015. In October ~~2012, we entered into an agreement-in-principle~~2011, the court sustained our preliminary objections and dismissed Serono’s complaint. In March 2013, the Superior Court of Pennsylvania affirmed the decision of the Philadelphia Court of Common Pleas dismissing Serono’s complaint, thereby upholding our right to ~~resolve this matter, pursuant to which we will pay approximately~~ ~~$43 million~~ ~~and not admit to any wrongdoing. The resolution is subject~~extend the Rebif co-promotion agreement to the ~~execution~~end of ~~final settlement agreements by~~2015. In May 2013, the ~~parties, which is expected to occur in~~Superior Court of Pennsylvania denied Serono’s petition seeking reconsideration of the ~~coming months.~~decision.

~~GUARANTEES AND INDEMNIFICATIONS~~B. Guarantees and Indemnifications

In the ordinary course of business and in connection with the sale of assets and businesses, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of September ~~30, 2012~~29, 2013, recorded amounts for the estimated fair value of these indemnifications are not significant. ~~See~~

Pfizer Inc. has also ~~Note 1C.Basis~~guaranteed the long-term debt of ~~Presentation~~certain companies that it acquired and ~~Significant Policies: Fair Value.~~that now are subsidiaries of Pfizer.

Note 13. Segment, Geographic and Other Revenue Information

A. Segment Information

We manage our operations through ~~five~~four operating segments––Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets, ~~Animal Health,~~ and Consumer Healthcare. ~~(As of the third quarter of 2012, the Animal Health and Consumer Healthcare business units are no longer managed as a single operating segment.)~~ Each operating segment has responsibility for its commercial

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activities and for certain research and development activities related to in-line products and IPR&D projects that generally have achieved proof-of-concept.

On April 23, 2012, we announced that we entered into an agreement to sell our Nutrition business to Nestlé. As a result, beginning in the second quarter of 2012, we report the operating results of the Nutrition business as ~~Discontinued operations––net of tax~~ in the condensed consolidated statements of income for all periods presented. The transaction also includes the sale of certain prenatal multivitamins currently commercialized by the Pfizer Consumer Healthcare business unit. The operating results of this product line are also included in ~~Discontinued operations––net of tax~~ ~~for all periods presented. See~~ ~~Note 2B. Acquisitions and Divestitures: Divestitures.~~

We regularly review our segments and the approach used by management to evaluate performance and allocate resources. Generally, products are transferred to the Established Products unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity.

Operating Segments

A description of each of our ~~five~~four operating segments follows:

Primary Care operating segment––includes revenues and earnings, as defined by management, from ~~human~~prescription pharmaceutical products primarily prescribed by primary-care physicians, and may include products in the following therapeutic and disease areas: Alzheimer’s disease, cardiovascular (excluding pulmonary arterial hypertension), erectile dysfunction, genitourinary, major depressive disorder, pain, respiratory and smoking cessation. Examples of products in this unit in 2013 include Celebrex, Chantix/Champix, ~~Lipitor (in certain EU countries and in Australia and New Zealand),~~Eliquis, Lyrica, Premarin, Pristiq and ~~Viagra.~~Viagra (outside Canada and South Korea). All revenues and earnings for such products are allocated to the Primary Care unit, except those generated in Emerging Markets and those that are managed by the Established Products unit.

Specialty Care and Oncology operating segment––comprises the Specialty Care business unit and the Oncology business unit.

◦

Specialty Care––includes revenues and earnings, as defined by management, from ~~human~~prescription pharmaceutical products primarily prescribed by physicians who are specialists, and may include products in the following therapeutic and disease areas: anti-infectives, endocrine disorders, hemophilia, inflammation, ophthalmology, pulmonary arterial hypertension, specialty neuroscience and vaccines. Examples of products in this unit in 2013 include BeneFIX, Enbrel, Genotropin, Geodon (outside the ~~Prevnar/Prevenar franchise,~~U.S.), the Prevnar family of products, ReFacto AF, Revatio (outside the U.S.), Tygacil, Vfend (outside the U.S. and South Korea), Vyndaqel ~~(outside~~outside the U.S.), Xalatan (outside the U.S., Canada, South Korea, developed Europe, Australia and ~~South Korea)~~New Zealand), Xeljanz, Xyntha and Zyvox. All revenues and earnings for such products are allocated to the Specialty Care unit, except those generated in Emerging Markets and those that are managed by the Established Products unit.

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~~the Specialty Care unit, except those generated in Emerging Markets and those that are managed by the Established Products unit.~~

◦

Oncology––includes revenues and earnings, as defined by management, from ~~human~~ prescription pharmaceutical products addressing oncology and oncology-related illnesses. The products in this unit in 2013 include Inlyta, Sutent, Torisel, Xalkori, ~~and, as of September 4, 2012,~~Mylotarg (in Japan), Bosulif in(in the U.S. and European Union (EU)) and Aromasin (in Japan and South Korea). All revenues and earnings for such products are allocated to the Oncology unit, except those generated in Emerging Markets and those that are managed by the Established Products unit.

Established Products and Emerging Markets operating segment––comprises the Established Products business unit and the Emerging Markets business unit.

◦

Established Products––~~generally~~ includes revenues and earnings, as defined by management, from ~~human~~ prescription pharmaceutical products that have lost patent protection or marketing exclusivity in certain countries and/or regions. Typically, products are transferred to this unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity. InHowever, in certain situations, products may be transferred to this unit at a different point than the beginning of the fiscal year following loss of patent protection or marketing exclusivity in order to maximize their value. This unit also excludes revenues and earnings generated in Emerging Markets. Examples of products in this unit in 2013 include Arthrotec, Effexor, ~~Lipitor~~Geodon (in the U.S.), ~~Canada, South Korea and Japan),~~Lipitor, Medrol, Norvasc, Protonix, Relpax, Vfend (in the U.S. and South Korea), Xalatan (in the U.S., Canada, South Korea, developed Europe, Australia and New Zealand), Zosyn/Tazocin and Viagra (in Canada and South Korea) ~~and Zosyn/Tazocin.~~.


◦	Emerging Markets––includes revenues and earnings, as defined by management, from all ~~human~~ prescription pharmaceutical products sold in Emerging Markets, including Asia (excluding Japan and South Korea), Latin America, the Middle East, ~~Africa, Central and~~ Eastern Europe, Africa, Turkey and ~~Turkey.~~Central Europe.

Animal Health operating segment––includes worldwide revenues and earnings, as defined by management, from products and services to prevent and treat disease in livestock and companion animals, including anti-infectives, vaccines, parasiticides, medicinal feed additives, other pharmaceutical products and other non-pharmaceutical products.

Consumer Healthcare operating segment––~~generally~~ includes worldwide revenues and earnings, as defined by management, from non-prescription products in the following therapeutic categories: dietary supplements, pain management, respiratory and personal care. Products marketed by Consumer Healthcare include Advil, Caltrate, Centrum, ChapStick, Emergen-C, Preparation H and Robitussin.

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Our chief operating decision maker uses the revenues and earnings of the ~~five~~four operating segments, among other factors, for performance evaluation and resource allocation. For the operating segments that comprise more than one business unit, a single segment manager has responsibility for those business units.

Other Costs and Business Activities

Certain costs are not allocated to our operating segment results, such as costs associated with the following:

Worldwide Research and Development, ~~(WRD),~~ which is generally responsible for ~~human health~~ research projects until proof-of-concept is achieved and then for transitioning those projects to the appropriate business unit for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. 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~~Worldwide Research and Development is also responsible for facilitating all ~~human-health-related~~ regulatory submissions and interactions with regulatory agencies, including all safety-event activities.

Pfizer Medical, which is responsible for ~~external affairs relating to all therapeutic areas, providing Pfizer-related~~the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality ~~assurance~~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 ~~activities, which include conducting clinical trial audits and readiness reviews.~~processes.

Corporate, which is responsible for platform functions such as finance, global real estate operations, human resources, legal, compliance, science and technology, worldwide procurement, worldwide public affairs and policy and

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worldwide technology. These costs also include compensation costs and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense.

Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) acquisition-related activities, where we incur costs for restructuring, integration, implementation and executing the transaction; and (iii) certain significant items, which include non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and ~~sales~~disposals of assets or ~~businesses.~~businesses, including, as applicable, any associated transition activities.

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Segment Assets

We manage our assets on a total company basis, not by operating segment, as many of our operating assets are shared (such as our plant network assets) or commingled (such as accounts receivable, as many of our customers are served by multiple operating segments). Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were approximately $~~183~~176 billion as of September ~~30, 2012~~29, 2013 and approximately $~~188~~186 billion as of December 31, ~~2011~~2012.

Selected income statement information

The following table provides selected income statement information by reportable segment:



	Revenues				R&D Expenses						Earnings^(a)
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012
Three Months Ended
Reportable Segments:
Primary Care^(b)	$	3,259	$	3,610	$	245		$	247		$	1,917		$	2,112
Specialty Care and Oncology	3,756		3,735		326			345			2,660			2,630
Established Products and Emerging Markets^(c)	4,727		4,772		95			84			2,680			2,673
Total reportable segments	11,742		12,117		666			676			7,257			7,415
Consumer Healthcare and other business activities^(d)	834		836		734			933			(491		)	(693		)
Reconciling Items:
Corporate^(e)	—		—		220			217			(1,369		)	(1,359		)
Purchase accounting adjustments^(f)	—		—		1			(1		)	(960		)	(1,127		)
Acquisition-related costs^(g)	—		—		—			—			(61		)	(237		)
Certain significant items^(h)	67		—		1			47			(744		)	(1,052		)
Other unallocated⁽ⁱ⁾	—		—		5			15			(59		)	(141		)
	$	12,643	$	12,953	$	1,627		$	1,887		$	3,573		$	2,806
Nine Months Ended
Reportable Segments:
Primary Care^(b)	$	9,830	$	11,725	$	682		$	739		$	6,002		$	7,399
Specialty Care and Oncology	11,069		11,423		1,047			1,044			7,670			7,883
Established Products and Emerging Markets^(c)	14,499		15,173		264			223			8,303			8,926
Total reportable segments	35,398		38,321		1,993			2,006			21,975			24,208
Consumer Healthcare and other business activities^(d)	2,561		2,445		2,113			2,322			(1,410		)	(1,721		)
Reconciling Items:
Corporate^(e)	—		—		639			705			(4,194		)	(4,700		)
Purchase accounting adjustments^(f)	—		—		(1		)	(4		)	(3,287		)	(3,713		)
Acquisition-related costs^(g)	—		—		—			5			(264		)	(638		)
Certain significant items^(h)	67		—		104			386			180			(3,784		)
Other unallocated⁽ⁱ⁾	—		—		19			41			(345		)	(487		)
	$	38,026	$	40,766	$	4,867		$	5,461		$	12,655		$	9,165


^(a)	Income from continuing operations before provision for taxes on income.

4446

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~~Selected income statement information~~

~~The following table provides selected income statement information by reportable segment:~~

Revenues R&D Expenses
Earnings^(a)
(MILLIONS OF DOLLARS) September 30,
2012
October 2,
2011
September 30,
2012
October 2,
2011
September 30,
2012
October 2,
2011
Three Months Ended
Reportable Segments:
Primary Care^(b)
$ 3,610
$ 5,948
$ 247
$ 286
$ 2,112
$ 4,156
Specialty Care and Oncology 3,735
4,131
345
400
2,630
2,678
Established Products and Emerging Markets^(c)
4,772
4,668
84
71
2,673
2,432
Total reportable segments 12,117
14,747
676
757
7,415
9,266
Other operating segments^(d)
1,797
1,808
357
98
328
595
Other business activities^(e)
62
54
656
834
�� (673 ) (856 )
Reconciling Items:

Corporate^(f)
—
—
230
308
(1,382 ) (1,847 )
Purchase accounting adjustments^(g)
—
—
(1 ) (3 ) (1,141 ) (1,698 )
Acquisition-related costs^(h)
—
—
—
6
(229 ) (293 )
Certain significant items⁽ⁱ⁾
—
—
47
149
(1,158 ) (1,309 )
Other unallocated^(j)
—
—
16
27
(169 ) (317 )
$ 13,976
$ 16,609
$ 1,981
$ 2,176
$ 2,991
$ 3,541
Nine Months Ended

Reportable Segments:
Primary Care^(b)
$ 11,725
$ 17,259
$ 739
$ 912
$ 7,399
$ 11,513
Specialty Care and Oncology 11,423
12,407
1,044
1,122
7,883
8,137
Established Products and Emerging Markets^(c)
15,173
13,945
223
206
8,926
7,397
Total reportable segments 38,321
43,611
2,006
2,240
24,208
27,047
Other operating segments^(d)
5,404
5,296
551
304
1,423
1,593
Other business activities^(e)
193
211
2,001
2,538
(2,028 ) (2,558 )
Reconciling Items:

Corporate^(f)
—
—
746
945
(4,805 ) (5,526 )
Purchase accounting adjustments^(g)
—
—
(3 ) —
(3,752 ) (5,197 )
Acquisition-related costs^(h)
—
—
5
9
(650 ) (1,455 )
Certain significant items⁽ⁱ⁾
—
—
386
397
(3,921 ) (3,175 )
Other unallocated^(j)
—
—
42
54
(565 ) (580 )
$ 43,918
$ 49,118
$ 5,734
$ 6,487
$ 9,910
$ 10,149


^(a)	~~Income from continuing operations before provision for taxes on income.~~

^(b)

Revenues and Earnings from the Primary Care segment decreased in the three and nine months ended September ~~30, 2012~~29, 2013 as compared to the prior year, and ~~earnings~~Earnings as a percentage of revenues for the nine months ended September 29, 2013 also declined, ~~mainly~~primarily due to the loss of exclusivity for Lipitor in ~~the U.S.~~developed Europe and ~~Japan and~~Australia; the subsequent shift in the reporting of Lipitor ~~U.S. and Japan results~~in those markets to the Established Products business ~~unit~~unit; the losses of exclusivity of certain other products in various markets; lower Alliance revenues from Spiriva due to the ongoing expiration of the Spiriva collaboration in certain countries; and the ~~loss~~termination of ~~exclusivity~~the co-promotion agreement for ~~Lipitor~~Aricept in Japan in December 2012. Earnings as a percentage of revenues increased for the ~~majority~~three months ended September 29, 2013 primarily due to market growth of ~~developed European markets in March and May 2012.~~Lyrica as well as mid-year price increases.

^(c)

Revenues from the Established Products and Emerging Markets segment decreased in the three and nine months ended September 29, 2013, and Earnings from the Established Products and Emerging Markets segment ~~increased~~decreased in the ~~three and~~ nine months ended September ~~30, 2012~~29, 2013, as compared to the prior year, primarily due to ~~additional~~the continued erosion of branded Lipitor in the U.S. and Japan, partially offset by the addition of products ~~losing exclusivity and moving~~in certain markets that shifted to the Established Products unit from other business units beginning January 1, 2013 and strong volume growth in China. Earnings as a percentage of revenue increased ~~operational sales~~ in ~~emerging markets partially offset by unfavorable foreign exchange.~~the three months ended September 29, 2013 as compared to the prior year due to Lipitor and Norvasc growth in China. Earnings ~~also increased~~as a percentage of revenue decreased in the nine months ended September 29, 2013 as compared to the prior year due to the change in the mix of products.

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


^(d)	Includes the Animal Health operating segment and the Consumer Healthcare operating segment. Higher R&D expenses and lower Earnings reflects the Consumer Healthcare acquisition of the over-the-counter (OTC) rights for Nexium (see ~~Note 2A. Acquisitions and Divestitures: Acquisitions~~).


^(e)	Other business activities includes the revenues and operating results of Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales operation, and the ~~research and development~~R&D costs managed by our Worldwide Research and Development organization and our Pfizer Medical organization.


^(f)(e)	Corporate for R&D expenses includes, among other things, administration expenses and compensation expenses associated with our research and development activities, and for Earnings includes, among other things, administration expenses, interest income/(expense), and certain compensation and other costs not charged to our operating segments.


^(g)(f)	Purchase accounting adjustments include certain charges related to the fair value adjustments to inventory, intangible assets and property, plant and equipment.

^(h)(g)

Acquisition-related costs can include costs associated with acquiring, integrating and restructuring newly acquired businesses, such as transaction costs, integration costs, restructuring charges and additional depreciation associated with asset ~~restructuring (see~~restructuring. For additional information, see Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives ~~for additional information)~~.

^(i)(h)

Certain significant items are substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items primarily include restructuring charges and implementation costs associated with our cost-reduction and productivity initiatives that are not associated with an acquisition, the impact of certain tax and/or legal settlements and certain asset impairments.

For Revenues in the third quarter and first nine months of 2013, certain significant items represent revenues related to our transitional manufacturing and supply agreements with Zoetis. For additional information, see Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

For Earnings in the third quarter of ~~2012~~2013, certain significant items includes: (i) income related to our transitional manufacturing and supply agreements with Zoetis of $10 million, (ii) certain asset impairments and related charges of $440 million, (iii) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $~~264~~262 million, ~~(ii)~~(iv) other charges of $43 million and (v) costs associated with a patent litigation settlement of $9 million. For additional information, see Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments, Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives and Note 4. Other (Income)/Deductions––Net.

For Earnings in the third quarter of 2012, certain significant items includes: (i) charges for certain legal matters of $~~725~~723 million, (ii) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $263 million, (iii) costs associated with the separation of Zoetis of $32 million, (iv) certain asset impairment charges of ~~$54~~$17 million and ~~(iv)~~(v) other charges of $~~115~~17 million ~~(see~~. For additional information, see Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives and Note 4. Other (Income)/Deductions––Net ~~for additional information)~~.

For Earnings in the first ~~third~~nine ~~quarter~~months of ~~2011~~2013, certain significant items includes: (i) patent litigation settlement income of $1.3 billion, (ii) the gain associated with the transfer of certain product rights to our equity-method investment in China of $459 million, (iii) net credits for certain legal matters of $99 million, (iv) income related to our transitional manufacturing and supply agreements with Zoetis of $10 million, (v) certain asset impairments and related charges of $929 million, (vi) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $~~1.1 billion~~662 million, ~~(ii)~~(vii) other charges of $121 million and (viii) costs associated with the separation of Zoetis of $18 million. For additional information, see Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments, Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives and Note 4. Other (Income)/Deductions––Net.

For Earnings in the first nine months of 2012, certain significant items includes: (i) charges for certain legal matters of $~~$132 million~~2.0 billion, (ii) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $1.1 billion, (iii) certain asset impairment charges of $~~$106~~506 million ~~(see~~, (iv) costs associated with the separation of Zoetis of $93 million and (v) other charges of $55 million. For additional information, see Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives and Note 4. Other (Income)/Deductions––Net ~~for additional information)~~.

~~For Earnings in the first~~ ~~nine~~ ~~months of~~ ~~2012, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of~~ ~~$1.2 billion, (ii) charges for certain legal matters of~~ ~~$2.0 billion, (iii) certain asset impairment charges of~~ ~~$543 million~~ ~~and (iv) other charges of~~ ~~$243 million~~ ~~(see~~ ~~Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives~~ ~~and~~ ~~Note 4. Other Deductions––Net~~ ~~for additional information).~~

~~For Earnings in the first~~ ~~nine~~ ~~months of~~ ~~2011, certain significant items include: (i) restructuring charges and implementation costs associated with our cost-reduction and productivity initiatives that are not associated with an acquisition of~~ ~~$1.9 billion, (ii) charges for certain legal matters of~~ ~~$657 million, (iii) certain asset impairment charges of~~ ~~$595 million~~ ~~and (iv) other charges of~~ ~~$24 million~~ ~~(see~~ ~~Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives~~ ~~and~~ ~~Note 4. Other Deductions––Net~~ ~~for additional information).~~

For R&D in all periods presented, certain significant items primarily reflect additional depreciation––asset restructuring and implementation costs.


^(j)(i)	Includes overhead expenses associated with our manufacturing and commercial operations not directly attributable to an operating segment.

4647

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PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Geographic Information

The following table provides revenues by geographic area:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		% Change		September 30, 2012		October 2, 2011		% Change		September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change
Revenues
United States	$	5,627	$	6,879	(18	)	$	17,303	$	20,603	(16	)	$	5,186	$	5,174	—		$	15,190	$	16,011	(5	)
Developed Europe^(a)	2,976		4,027		(26	)	10,025		12,078		(17	)	2,785		2,804		(1	)	8,502		9,433		(10	)
Developed Rest of World^(b)	2,529		2,807		(10	)	7,830		7,974		(2	)	1,992		2,386		(17	)	6,139		7,383		(17	)
Emerging Markets^(c)	2,844		2,896		(2	)	8,760		8,463		4		2,680		2,589		4		8,195		7,939		3
Total Revenues	$	13,976	$	16,609	(16	)	$	43,918	$	49,118	(11	)
Revenues													$	12,643	$	12,953	(2	)	$	38,026	$	40,766	(7	)


^(a)	Developed Europe region includes the following markets: Western Europe, Finland and the Scandinavian countries. Revenues denominated in euros were $~~2.2~~2.1 billion and $~~3.0~~2.1 billion in both the third quarter of ~~2012~~2013 and ~~2011~~2012, ~~respectively,~~ and $~~7.5~~6.4 billion and $~~9.1~~7.1 billion in the first nine months of ~~2012~~2013 and ~~2011~~2012, respectively.


^(b)	Developed Rest of World region includes the following markets: Australia, Canada, Japan, New Zealand and South Korea.


^(c)	Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, the Middle East, ~~Africa, Central and~~ Eastern Europe, Africa, Turkey and ~~Turkey.~~Central Europe.

~~C. Other Revenue Information~~

~~Significant Product Revenues~~

~~The following table provides revenues by product:~~

Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30, 2012
October 2, 2011
September 30, 2012
October 2, 2011
Revenues from biopharmaceutical products:
Lipitor^(a)
$ 749
$ 2,602
$ 3,364
$ 7,578
Lyrica 1,036
961
3,026
2,695
Enbrel (Outside the U.S. and Canada) 893
957
2,780
2,741
Prevnar 13/Prevenar 13 868
1,006
2,725
2,823
Celebrex 676
643
1,969
1,856
Viagra 517
493
1,498
1,458
Norvasc 319
350
1,001
1,081
Zyvox 328
321
996
965
Sutent 294
298
913
870
Premarin family 262
267
797
757
Genotropin 212
215
619
654
Xalatan/Xalacom 181
277
617
960
BeneFIX 201
178
577
518
Detrol/Detrol LA 176
213
576
668
Vfend 187
171
543
558
Chantix/Champix 146
156
496
545
Pristiq 152
146
461
422
Refacto AF/Xyntha 150
140
420
380
Revatio 135
140
414
393
Zoloft 129
139
398
420
Medrol 113
127
388
383
Zosyn/Tazocin 109
149
378
490

4748

Table of Contents

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Effexor 107
165
342
537
Geodon/Zeldox 57
263
322
753
Zithromax/Zmax 89
93
318
335
Prevnar/Prevenar (7-valent) 81
98
303
406
Fragmin 91
95
283
283
     Relpax 92
86
266
250
     Rapamune 92
96
259
285
     Cardura 79
92
254
289
Aricept^(b)
71
117
249
335
Tygacil 82
76
249
224
EpiPen^(c)
67
59
217
160
Xanax XR 66
77
203
232
BMP2 58
83
192
277
Caduet 68
150
191
435
Sulperazon 62
51
191
155
Diflucan 61
72
185
201
Dalacin/Cleocin 74
51
176
139
Neurontin 52
67
172
222
Unasyn 54
58
165
172
Aromasin 51
85
162
294
Arthrotec 50
61
159
182
Inspra 51
51
156
142
Toviaz 52
49
150
137
Metaxalone/Skelaxin^(c)
55
57
149
145
     Methotrexate 50
51
148
133
     Protonix 50
65
140
168
Alliance revenues^(d)
879
919
2,577
2,678
All other biopharmaceutical products^(e)
1,643
1,611
5,187
4,827
12,117
14,747
38,321
43,611
Revenues from other products:

Animal Health 1,017
1,041
3,128
3,078
Consumer Healthcare 780
767
2,276
2,218
Other^(f)
62
54
193
211
$ 13,976
$ 16,609
$ 43,918
$ 49,118

^(a)

~~Lipitor lost exclusivity in the U.S. in~~ ~~November 2011~~ ~~and various other markets in~~ ~~2011~~ ~~and~~ ~~2012. This loss of exclusivity reduced branded worldwide revenues by~~ ~~$1.9 billion~~ ~~in the~~ ~~third~~ ~~quarter of~~ ~~2012, in comparison with the~~ ~~third~~ ~~quarter of~~ ~~2011, and by~~ ~~$4.2 billion~~ ~~in the first~~ ~~nine~~ ~~months of~~ ~~2012, in comparison with the first~~ ~~nine~~ ~~months of 2011.~~


^(b)	~~Represents direct sales under license agreement with Eisai Co., Ltd.~~


^(c)	~~Legacy King product. King’s operations are included in our financial statements commencing from the acquisition date of January 31, 2011.~~


^(d)	~~Includes Enbrel (in the U.S. and Canada), Aricept, Exforge, Rebif and Spiriva.~~


^(e)	~~Includes sales of generic atorvastatin.~~


^(f)	~~Includes revenues generated primarily from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization.~~

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Note 14. Subsequent Events~~C. Other Revenue Information

~~A. Equity-Method Investment in Hisun-Pfizer Pharmaceuticals~~Significant Product Revenues



The following table provides revenues by product:
	Three Months Ended				Nine Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012
Revenues from biopharmaceutical products:
Lyrica	$	1,135	$	1,036	$	3,335	$	3,026
Prevnar family	959		949		2,855		3,028
Enbrel (Outside the U.S. and Canada)	932		893		2,769		2,780
Celebrex	752		676		2,120		1,969
Lipitor	533		749		1,704		3,364
Viagra	460		517		1,405		1,498
Zyvox	319		328		1,007		996
Norvasc	303		319		917		1,001
Sutent	278		294		892		913
Premarin family	276		262		793		797
BeneFIX	213		201		619		577
Genotropin	183		212		570		619
Vfend	193		187		557		543
Pristiq	173		152		516		461
Chantix/Champix	154		146		486		496
Detrol/Detrol LA	131		176		437		576
Xalatan/Xalacom	140		181		434		617
ReFacto AF/Xyntha	148		150		433		420
Medrol	107		113		343		388
Zoloft	116		129		341		398
Effexor	96		107		326		342
Zosyn/Tazocin	104		109		293		378
Zithromax/Zmax	84		89		283		318
Tygacil	92		82		271		249
Relpax	83		92		263		266
Fragmin	83		91		263		283
Rapamune	91		92		261		259
EpiPen	85		67		230		217
Revatio	75		135		225		414
Sulperazon	78		62		222		191
Cardura	70		79		221		254
Inlyta	83		29		217		53
Xanax XR	69		66		204		203
Xalkori	73		38		193		78
Toviaz	57		52		174		150
Aricept^(a)	52		71		173		249
Caduet	52		68		164		191
Inspra	53		51		164		156
Diflucan	59		61		164		185
Somavert	56		49		159		143
Neurontin	50		52		158		172
Dalacin/Cleocin	50		74		149		176
Xeljanz	35		—		68		—
Alliance revenues^(b)	684		879		2,187		2,577
All other biopharmaceutical products	1,923		1,952		5,833		6,350
	11,742		12,117		35,398		38,321
Other revenues:
Consumer Healthcare	788		780		2,399		2,276
Other^(c)	113		56		229		169
	$	12,643	$	12,953	$	38,026	$	40,766

^(a)Represents direct sales under license agreement with Eisai Co., Ltd.

~~On September 6, 2012,~~^(b)Includes Enbrel (in the U.S. and Canada), Spiriva, Rebif, Aricept and Eliquis.

^(c)Other represents revenues generated from Pfizer CentreSource, our contract manufacturing and ~~Zhejiang Hisun Pharmaceuticals, a leading Chinese~~bulk pharmaceutical company, created a new company, Hisun-Pfizer Pharmaceuticals Co., Ltd. (HPP), to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets. In accordance with our international reporting periods, this transaction will be accounted for in the fourth quarter of 2012. HPP was established with registered capital of ~~$250 million. Zhejiang Hisun Pharmaceuticals holds a~~ ~~51%~~chemical sales ~~equity interest~~organization, and ~~Pfizer holds a~~ ~~49%~~ ~~equity interest~~includes, in ~~HPP. The parties will contribute select existing products~~2013, the revenues related to ~~HPP, which will have a broad portfolio covering cardiovascular disease, infectious disease, oncology, mental health,~~our transitional manufacturing and ~~other therapeutic areas. The parties will also contribute manufacturing sites, cash and other relevant assets. Our investment in HPP will be accounted for under the equity method.~~supply agreements with Zoetis.

~~B. Announcement of Intention to Acquire NextWave Pharmaceuticals, Inc.~~

On October 22, 2012, Pfizer announced its intention to acquire NextWave Pharmaceuticals, Inc. (NextWave), a privately held, specialty pharmaceutical company focused on the development and commercialization of products for the treatment of attention deficit/hyperactivity disorder (ADHD) and related central nervous system (CNS) disorders. Pfizer will make a payment of ~~$255 million~~ ~~to NextWave's shareholders at the closing of the transaction and additional payments of up to~~ ~~$425 million~~ ~~based on certain sales milestones. Pfizer had previously entered into an option and merger agreement with NextWave during the second quarter of 2012 and made an option payment of~~ ~~$20 million~~. The transaction is expected to close during the fourth quarter of 2012, subject to regulatory approval in the United States, and other customary closing conditions. NextWave is the developer of Quillivant XR™ (methylphenidate hydrochloride) for extended-release oral suspension, CII, the first once-daily liquid medication approved for the treatment of ADHD, and holds the exclusive North American commercialization rights to Quillivant XR. Quillivant XR received approval from the FDA on September 27, 2012.

~~C. New Share Repurchase Plan~~

~~On November 1, 2012, we announced that the Board of Directors authorized, effective upon the consummation of the sale of the Nutrition business to Nestlé, a new~~ ~~$10 billion~~ ~~share repurchase plan to be utilized over time. We expect the sale of the Nutrition business to Nestlé to close in the next few months.~~

Table of Contents

REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Pfizer Inc.:

We have reviewed the condensed consolidated balance sheet of Pfizer Inc. and Subsidiary Companies as of September ~~30, 2012,~~29, 2013, and the related condensed consolidated statements of income, ~~and condensed consolidated statements of~~ comprehensive income and cash flows for the three-month and nine-month periods ended September ~~30, 2012,~~29, 2013, and ~~October 2, 2011, and the related condensed consolidated statements of cash flows for the nine-month periods ended~~ September 30, ~~2012, and October 2, 2011.~~2012. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Pfizer Inc. and Subsidiary Companies as of December 31, ~~2011,~~2012, and the related consolidated statements of income, ~~shareholders’~~comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February 28, ~~2012,~~2013, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2011,~~2012, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

KPMG LLP

New York, New York

November 8, ~~2012~~2013

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

Introduction

Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and footnotes to assist readers in understanding Pfizer’s results of operations, financial condition and cash flows. The MD&A is organized as follows:

Overview of Our Performance, Operating Environment, Strategy and Outlook. This section, beginning on page 53 provides information about the following: our business; our performance during the third quarter and first nine months of ~~2012~~2013 and ~~2011;~~2012; our operating environment; our strategy; our business development ~~initiatives;~~initiatives, such as acquisitions, dispositions, licensing and collaborations; and our financial guidance for ~~2012.~~2013.

Analysis of the Condensed Consolidated Statements of Income. This section begins on page ~~61,~~64 and consists of the following sub-sections:


◦	Revenues. This sub-section, beginning on page ~~61,~~64, provides an analysis of our ~~products~~revenues and ~~revenues~~products for the third quarter and first nine months of ~~2012~~2013 and ~~2011,~~2012, as well as an overview of research and development (R&D) expenses and important biopharmaceutical product developments.


◦	Costs and Expenses. This sub-section, beginning on page ~~77,~~78, provides a discussion about our costs and expenses.


◦	Provision for Taxes on Income. This sub-section, on page 82, provides a discussion of items impacting our tax provisions.


◦	Discontinued Operations. This sub-section, beginning on page 83, provides an analysis of the financial statement impact of our discontinued operations.


◦	Adjusted Income. This sub-section, beginning on page 83, provides a discussion of an alternative view of performance used by management.

Analysis of the Condensed Consolidated Statements of Comprehensive Income. This section, on page 88, provides a discussion of changes in certain components of other comprehensive income.

Analysis of the Condensed Consolidated Balance Sheets. This section, on page ~~88,~~89, provides a discussion of changes in certain balance sheet accounts.

Analysis of the Condensed Consolidated Statements of Cash Flows. This section, beginning on page ~~89,~~90, provides an analysis of our cash flows for the first nine months of ~~2012~~2013 and ~~2011.~~2012.

Analysis of Financial Condition, Liquidity and Capital Resources. This section, beginning on page ~~90,~~91, provides an analysis of selected measures of our liquidity and of our capital resources as of September ~~30, 2012~~29, 2013 and December 31, ~~2011 and~~2012, as well as a discussion of our outstanding debt and other commitments that existed as of September ~~30, 2012~~29, 2013 and December 31, ~~2011.~~2012. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer's future activities.

New Accounting Standards. This section, beginning on page ~~93,~~94, discusses accounting standards that we have recently adopted, ~~and~~as well as those that recently have been issued, ~~accounting standards.~~but not yet adopted.

Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 9495, provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements ~~set forth~~presented in this MD&A relating to, among other things, our anticipated financial and operating performance, business plans and prospects, in-line products and product candidates, strategic ~~review,~~reviews, capital allocation, business-development plans, and ~~share-repurchase~~plans relating to share repurchases and ~~dividend-rate plans.~~dividends. Such forward-looking statements are based on management’s current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances.

Table of Contents

~~The following table provides the components of the condensed consolidated statements of income:~~


The following table provides the components of the condensed consolidated statements of income:																	The following table provides the components of the condensed consolidated statements of income:
	Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)	September 30, 2012			October 2, 2011			% Change		September 30, 2012			October 2, 2011			% Change			September 29, 2013			September 30, 2012			% Change		September 29, 2013			September 30, 2012			% Change
Revenues	$	13,976		$	16,609		(16	)	$	43,918		$	49,118		(11	)		$	12,643		$	12,953		(2	)	$	38,026		$	40,766		(7	)

Cost of sales	2,665			3,409			(22	)	8,162			10,449			(22	)		2,287			2,309			(1	)	6,792			7,068			(4	)
% of revenues	19.1		%	20.5		%			18.6		%	21.3		%				18.1		%	17.8		%			17.9		%	17.3		%

Selling, informational and administrative expenses	3,847			4,457			(14	)	11,801			13,635			(13	)		3,395			3,491			(3	)	10,203			10,834			(6	)
% of revenues	27.5		%	26.8		%			26.9		%	27.8		%				26.9		%	27.0		%			26.8		%	26.6		%

Research and development expenses	1,981			2,176			(9	)	5,734			6,487			(12	)		1,627			1,887			(14	)	4,867			5,461			(11	)
% of revenues	14.2		%	13.1		%			13.1		%	13.2		%				12.9		%	14.6		%			12.8		%	13.4		%

Amortization of intangible assets	1,228			1,389			(12	)	3,939			4,138			(5	)		1,117			1,211			(8	)	3,476			3,889			(11	)
% of revenues	8.8		%	8.4		%			9.0		%	8.4		%				8.8		%	9.3		%			9.1		%	9.5		%

Restructuring charges and certain acquisition-related costs	302			1,090			(72	)	1,089			2,458			(56	)		233			312			(25	)	547			1,085			(50	)
% of revenues	2.2		%	6.6		%			2.5		%	5.0		%				1.8		%	2.4		%			1.4		%	2.7		%

Other deductions––net	962			547			76		3,283			1,802			82
Other (income)/deductions––net																		411			937			(56	)	(514		)	3,264			*
Income from continuing operations before provision for taxes on income	2,991			3,541			(16	)	9,910			10,149			(2	)		3,573			2,806			27		12,655			9,165			38
% of revenues	21.4		%	21.3		%			22.6		%	20.7		%				28.3		%	21.7		%			33.3		%	22.5		%

Provision/(benefit) for taxes on income	(119		)	1,216			(110	)	1,882			3,167			(41	)		985			(183		)	*		3,876			1,622			*
Effective tax rate	(4.0		)%	34.3		%			19.0		%	31.2		%				27.6		%	(6.5		)%			30.6		%	17.7		%

Income from continuing operations	3,110			2,325			34		8,028			6,982			15			2,588			2,989			(13	)	8,779			7,543			16
% of revenues	22.3		%	14.0		%			18.3		%	14.2		%				20.5		%	23.1		%			23.1		%	18.5		%

Discontinued operations––net of tax	104			1,424			(93	)	249			1,619			(85	)		11			225			(95	)	10,719			734			*

Net income before allocation to noncontrolling interests	3,214			3,749			(14	)	8,277			8,601			(4	)		2,599			3,214			(19	)	19,498			8,277			*
% of revenues	23.0		%	22.6		%			18.8		%	17.5		%				20.6		%	24.8		%			51.3		%	20.3		%

Less: Net income attributable to noncontrolling interests	6			11			(45	)	22			31			(29	)		9			6			50		63			22			*
Net income attributable to Pfizer Inc.	$	3,208		$	3,738		(14	)	$	8,255		$	8,570		(4	)		$	2,590		$	3,208		(19	)	$	19,435		$	8,255		*
% of revenues	23.0		%	22.5		%			18.8		%	17.4		%				20.5		%	24.8		%			51.1		%	20.2		%
																		��
Earnings per common share––basic:^(a)
Earnings per common share––basic^(a):
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.42		$	0.30		40		$	1.07		$	0.88		22			$	0.39		$	0.40		(3	)	$	1.26		$	1.00		26
Discontinued operations––net of tax	0.01			0.18			(94	)	0.03			0.21			(86	)		—			0.03			*		1.54			0.10			*
Net income attributable to Pfizer Inc. common shareholders	$	0.43		$	0.48		(10	)	$	1.10		$	1.09		1			$	0.39		$	0.43		(9	)	$	2.80		$	1.10		*

Earnings per common share––diluted:^(a)
Earnings per common share––diluted^(a):
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.41		$	0.30		37		1.06			0.88			20			$	0.39		$	0.40		(3	)	$	1.25		$	1.00		25
Discontinued operations––net of tax	0.01			0.18			(94	)	0.03			0.20			(85	)		—			0.03			*		1.52			0.10			*
Net income attributable to Pfizer Inc. common shareholders	$	0.43		$	0.48		(10	)	$	1.09		$	1.08		1			$	0.39		$	0.43		(9	)	$	2.77		$	1.09		*

Cash dividends paid per common share	$	0.22		$	0.20		10		$	0.66		$	0.60		10			$	0.24		$	0.22		9		$	0.72		$	0.66		9

* Calculation not meaningful.


^(a)	EPS amounts may not add due to rounding.

Certain amounts and percentages may reflect rounding adjustments.

Table of Contents

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business

~~Our mission is to~~We apply science and our global resources to bring therapies to people that extend and significantly improve ~~health and well-being at every stage of life. We strive to set the standard for quality, safety and value in~~their lives through the discovery, development and ~~manufacturing~~manufacture of ~~medicines for people and animals.~~healthcare products. Our ~~diversified~~ global ~~healthcare~~ portfolio includes ~~human and animal biologic and small molecule~~ medicines and vaccines, as well as ~~nutritional products and~~ many of the world’s best-known consumer healthcare products. ~~Every day, we~~We work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We ~~also~~ collaborate with healthcare providers, governments and local communities to support and expand access to reliable, affordable healthcare around the world. Our revenues are derived from the sale of our products, as well as through alliance agreements, under which we co-promote products discovered by other ~~companies.~~companies (Alliance revenues).

On ~~August 13, 2012,~~June 24, 2013, we ~~filed a registration statement with~~completed the ~~U.S. Securities and Exchange Commission (SEC) for a potential initial public offering (IPO)~~full disposition of ~~up to a 20% ownership stake in~~ our Animal Health business ~~Zoetis Inc.~~ (Zoetis). If the IPO is successfully completed, which we are targeting for the first half of 2013, we will have a variety of options to achieve a potential full separation of Zoetis. As we continue to work toward a potential IPO and a potential full separation of Zoetis, we remain open to all alternatives to maximize the after-tax return for our shareholders. The ~~Animal Health business continues to be presented as a continuing operation in the condensed consolidated financial statements.~~

On April 23, 2012, we announced that we entered into an agreement to sell our Nutrition business to Nestlé for $11.85 billion in cash. The transaction is expected to close in the next few months, assuming the receipt of the required regulatory clearances and satisfaction of other closing conditions. Beginning in the second quarter of 2012, we report the operating results of ~~the Nutrition~~this business are reported as ~~Discontinued~~Income from discontinued operations––net of tax in the condensed consolidated statements of income for ~~all periods presented. The transaction also includes~~ the ~~sale of certain prenatal multivitamins currently commercialized by~~nine months ended September 29, 2013 and for the ~~Pfizer Consumer Healthcare business unit. The operating results of this product line are also included in~~ ~~Discontinued operations––net of tax~~ ~~for all periods presented.~~three and nine months ended September 30, 2012. In addition, in the condensed consolidated balance sheet as of December 31, 2012, the assets and liabilities associated with this ~~discontinued operation~~business are classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as ~~appropriate, in~~appropriate. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures and see the ~~condensed consolidated balance sheets.~~“Our Business Development Initiatives”, “Discontinued Operations” and “Analysis of Financial Condition, Liquidity and Capital Resources” sections of this MD&A.

On ~~August 1, 2011,~~November 30, 2012, we completed the sale of our ~~Capsugel business for approximately $2.4 billion in cash.~~Nutrition business. The operating results ~~associated with~~of this business ~~and the gain on the sale of Capsugel~~ are reported as ~~Discontinued~~Income from discontinued operations––net of tax in ~~our~~the condensed consolidated statements of income for the three and nine months ended ~~October 2, 2011.~~September 30, 2012. For additional information, see Notes to Condensed Consolidated Financial Statements––

~~On January 31, 2011, we completed a tender offer for~~Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures and see the ~~outstanding shares~~“Our Business Development Initiatives” and “Discontinued Operations” sections of common stock of King Pharmaceuticals, Inc. (King) and acquired approximately 92.5% of the outstanding shares for approximately $3.3 billion in cash. On February 28, 2011, we acquired the remaining outstanding shares of King for approximately $300 million in cash. Commencing from January 31, 2011, our financial statements include the assets, liabilities, operating results and cash flows of King. As a result, in accordance with our domestic and international reporting periods, our condensed consolidated financial statements for the nine months ended October 2, 2011 reflect approximately eight months of King's U.S. operations and approximately seven months of King's international operations.this MD&A.

Our ~~2012~~2013 Performance

Revenues in the third quarter of ~~2012~~2013 were $~~14.0~~12.6 billion, a decrease of 162%% compared to the same period in ~~2011, due to~~2012, which reflects an operational decline of ~~$1.9 billion,~~$38 million, or ~~12%,~~less than 1%. The operational decrease was primarily as the result of:

the continued erosion for branded Lipitor in the U.S., developed Europe and certain other markets (approximately $239 million);

other product losses of exclusivity (approximately $276 million);

the ongoing expiration of the ~~impact~~Spiriva collaboration in certain countries (approximately $163 million); and

decreased government purchases of the ~~loss~~Prevnar family of ~~exclusivity~~products and Enbrel in certain emerging markets (approximately $48 million),

partially offset by:

the growth of ~~Lipitor~~certain products, including Lyrica, Enbrel, Inlyta, Xalkori, Celebrex and Xeljanz (approximately $361 million) as well as various other biopharmaceutical products (approximately $162 million) in ~~all major markets, including~~ developed markets;

the ~~U.S. on November 30, 2011~~overall growth in the rest of the Emerging Markets business unit (approximately $166 million), excluding the aforementioned decrease in the government purchases of the Prevnar family of products and Enbrel;

the ~~majority of developed European markets~~overall growth in ~~March~~the Consumer Healthcare business unit (approximately $8 million); and ~~May 2012,~~

revenues from the transitional manufacturing and ~~the unfavorable impact of~~supply agreements with Zoetis (approximately $67 million).

In addition, Revenues were unfavorably impacted by foreign exchange ~~of $699~~by approximately $272 million, or ~~4%.~~2%, in the third quarter of 2013 compared to the same period in 2012.

Revenues in the first nine months of ~~2012~~2013 were $~~43.9~~38.0 billion, a decrease of 117%% compared to the same period in ~~2011, due to~~2012, which reflects an operational decline of ~~$4.0~~$1.9 billion, or ~~9%,~~5%. The operational decrease was primarily as the result ~~of the aforementioned loss of exclusivity of Lipitor, and the unfavorable impact of foreign exchange of $1.2 billion, or 2%.~~of:

Table of Contents

~~The following table provides~~ the ~~significant impacts on~~continued erosion for branded Lipitor in the U.S., developed Europe and certain other markets (approximately $1.7 billion);

the loss of exclusivity for Geodon in March 2012 in the U.S (approximately $184 million);

other product losses of exclusivity (approximately $900 million);

the ongoing expiration of the Spiriva collaboration in certain countries (approximately $341 million);

lower revenues ~~for~~from atorvastatin (approximately $162 million); and

decreased government purchases of the Prevnar family of products and Enbrel in certain emerging markets (approximately $130 million),

partially offset by:

the growth of certain products, including Lyrica, Enbrel, Inlyta, Celebrex, Xalkori and Xeljanz (approximately $1.0 billion) in developed markets;

the overall growth in the rest of the Emerging Markets business unit (approximately $493 million), excluding the aforementioned decrease in the government purchases of the Prevnar family of products and Enbrel;

the overall growth in the Consumer Healthcare business unit (approximately $127 million); and

revenues from the transitional manufacturing and supply agreements with Zoetis (approximately $67 million).

In addition, ~~three and nine~~Revenues were unfavorably impacted by foreign exchange of approximately $793 million, or 2%, in the first nine months ~~ended~~ ~~September 30, 2012~~of 2013 compared to the same ~~periods ended~~ ~~October 2, 2011~~:period in 2012.

Income from continuing operations for the third quarter of 2013 was $2.6 billion, compared to $3.0 billion in the third quarter of 2012, primarily reflecting, among other items:

lower revenues, primarily due to the continued erosion of branded Lipitor in the U.S., developed Europe and certain other markets, other product losses of exclusivity, the ongoing expiration of the Spiriva collaboration in certain countries, decreased government purchases of the Prevnar family of products in certain emerging markets and the unfavorable impact of foreign exchange;

higher asset impairments and related charges (up approximately $429 million, pre-tax) (see also the “Costs and Expenses––Other (Income)/Deductions––Net” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net); and

(MILLIONS OF DOLLARS)
September 30, 2012
vs.
October 2, 2011
Worldwide
Change

% Change
Worldwide

% Change
U.S.

% Change
International

Three Months Ended
Lipitor^(a)
$ (1,853 ) (71 ) (87 ) (51 )
Geodon/Zeldox^(a)
(206 ) (78 ) (88 ) (33 )
Prevnar 13/Prevenar 13 (138 ) (14 ) (3 ) (22 )
Xalatan/Xalacom^(a)
(96 ) (35 ) —
(36 )
Caduet^(a)
(82 ) (55 ) (84 ) (21 )
Effexor (58 ) (35 ) (29 ) (38 )
Zosyn/Tazocin (40 ) (27 ) (48 ) (5 )
Aromasin^(a)
(34 ) (40 ) (63 ) (38 )
Prevnar/Prevenar (7-valent) (17 ) (17 ) —
(17 )
Celebrex 33
5
8
—
Lyrica 75
8
13
4
Alliance Revenue^(a)
(40 ) (4 ) 20
(45 )
All other biopharmaceutical products^(b)
32
2
18
(5 )
Animal Health products (24 ) (2 ) 4
(7 )
Consumer Healthcare products 13
2
(5 ) 9

Nine Months Ended

Lipitor^(a)
$ (4,214 ) (56 ) (79 ) (26 )
Geodon/Zeldox^(a)
(431 ) (57 ) (65 ) (17 )
Xalatan/Xalacom^(a)
(343 ) (36 ) (81 ) (27 )
Caduet^(a)
(244 ) (56 ) (89 ) (18 )
Effexor (195 ) (36 ) (51 ) (27 )
Aromasin^(a)
(132 ) (45 ) (81 ) (37 )
Zosyn/Tazocin (112 ) (23 ) (34 ) (9 )
Prevnar/Prevenar (7-valent) (103 ) (25 ) —
(25 )
Prevnar 13/Prevenar 13 (98 ) (3 ) (7 ) 1
Celebrex 113
6
7
4
Lyrica 331
12
10
14
Alliance revenue^(a)
(101 ) (4 ) 17
(36 )
All other biopharmaceutical products^(b)
360
7
25
(1 )
Animal Health products 50
2
7
(2 )
Consumer Healthcare products 58
3
(3 ) 8

a higher effective tax rate, primarily due to (i) a favorable settlement in 2012 with the U.S. Internal Revenue Service (IRS) related to audits for multiple tax years; specifically, we recorded a tax benefit of approximately $1.1 billion (representing tax and interest), as well as (ii) a tax benefit recorded for the resolution of foreign audits pertaining to multiple tax years (see also the “Costs and Expenses––Provision for Taxes on Income” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 5. Tax Matters),

^(a)

partially offset by:

lower net charges for legal matters (down approximately $726 million, pre-tax) (see also the “Costs and Expenses––Other (Income)/Deductions––Net” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

additional benefits generated from our global cost-reduction/productivity initiatives, partially offset by spending to support new product launches; and

the non-recurrence of a $250 million (pre-tax) payment to AstraZeneca in the third quarter of 2012 to obtain the exclusive over-the-counter rights to Nexium.

See also the “Discontinued Operations” section of this MD&A.

Lipitor and Caduet lost exclusivity in the U.S. in November 2011 and various other major markets in 2011 and 2012. Xalatan lost exclusivity in the U.S. in March 2011 and in the majority of European markets in January 2012. Aromasin lost exclusivity in the U.S. in April 2011, in the majority of European markets in July 2011 and in Japan in November 2011. Geodon lost exclusivity in the U. S. in March 2012. We lost exclusivity for Aricept 5mg and 10mg tablets, which are included in Alliance revenues, in the U.S. in November 2010 and in the majority of European markets in February and April 2012.


^(b)	~~Includes the “All other” category included in the Revenues—Major Biopharmaceutical Products table presented in this MD&A, which includes sales of generic atorvastatin.~~

Table of Contents

Income from continuing operations for the ~~third~~ ~~quarter~~first nine months of ~~2012~~2013 was $~~3.1~~8.8 billion, compared to $~~2.3 billion~~ ~~in the~~ ~~third~~ ~~quarter of 2011, and~~ ~~$8.0~~7.5 billion in the first nine months of ~~2012, compared to~~ ~~$7.0 billion~~2012 ~~in the first~~ ~~nine~~ ~~months of 2011,~~, primarily reflecting, among other items:

~~the favorable impacts of a~~

patent litigation settlement ~~with the U.S. Internal Revenue Service and the resolution of certain foreign tax audits,~~income recorded in ~~the third quarter of 2012, all of which related to multiple tax years;~~

~~purchase accounting charges that were approximately $439 million lower in the third quarter and $1.1~~2013 (approximately $1.3 billion, ~~lower in first nine months of 2012 than in the same periods in 2011;~~

~~acquisition-related costs that were approximately $50 million lower in the third quarter and $647 million lower in first nine months of 2012 than in the same periods in 2011;~~

~~asset impairment charges that were approximately $96 million lower in the third quarter of 2012 and $64 million lower in the first nine months of 2012 than in the same periods in 2011~~pre-tax) (see ~~further discussion in~~also the “Costs and Expenses––Other (Income)/Deductions––Net” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––~~net~~Net); ~~and~~

lower net charges ~~related to our non-acquisition related cost-reduction and productivity initiatives that were~~for other legal matters (down approximately ~~$807 million lower in the third quarter of 2012 and $747 million lower in the first nine months of 2012 than in the same periods in 2011;~~

~~partially offset by:~~

~~the loss of exclusivity of Lipitor, as well as certain other products, resulting in lower revenues and associated expenses~~$2.1 billion, pre-tax) (see also ~~the “Industry-Specific Challenges” section of this MD&A); and~~

charges for certain legal matters that were approximately $594 million higher in the third quarter and $1.4 billion higher in the first nine months of 2012 than in the same periods in 2011 (see further discussion in the “Costs and Expenses––Other (Income)/Deductions––Net” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––~~net~~Net);

additional benefits generated from our global cost-reduction/productivity initiatives, partially offset by spending to support new product launches;

a gain recorded in 2013 (approximately $459 million, pre-tax) associated with the transfer of certain product rights to our equity-method investment in China, Hisun Pfizer Pharmaceuticals Company Limited (Hisun Pfizer) (see also the “Our Business Development Initiatives” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments); and

lower amortization of intangible assets (down approximately $413 million, pre-tax),

partially offset by:

lower revenues, primarily due to the continued erosion for branded Lipitor in the U.S., developed Europe and certain other markets, other product losses of exclusivity, the ongoing expiration of the Spiriva collaboration in certain countries, the loss of exclusivity for Geodon in the U.S, decreased government purchases of the Prevnar family of products in certain emerging markets and the unfavorable impact of foreign exchange;

higher asset impairments and related charges (up approximately $444 million, pre-tax) (see also the “Costs and Expenses––Other (Income)/Deductions––Net” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net); and

a higher effective tax rate, primarily due to (i) a favorable settlement in 2012 with the IRS related to audits for multiple tax years; specifically, we recorded a tax benefit of approximately $1.1 billion (representing tax and interest), as well as (ii) a tax benefit recorded for the resolution of foreign audits pertaining to multiple tax years (see also the “Costs and Expenses––Provision for Taxes on Income” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 5. Tax Matters).

~~Also, see~~See also the “Discontinued Operations” section of this MD&A.

Our Operating Environment

~~U.S. Healthcare Legislation~~

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the U.S. Healthcare Legislation), was enacted in the U.S. As explained more fully in our 2011 Annual Report on Form 10-K, this legislation has resulted in both current and longer-term impacts on us. Our 2012 financial guidance (see the “Our Financial Guidance for 2012” section of this MD&A for additional information) reflects the expected full-year impact of the U.S. Healthcare Legislation.

~~In each of 2012 and 2011, we recorded the following amounts as a result of the U.S. Healthcare Legislation:~~

approximately $179 million in the third quarter of 2012 and $215 million in the third quarter of 2011, and approximately $413 million in the first nine months of 2012 and $539 million in the first nine months of 2011 recorded as a reduction to ~~Revenues, related to the extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and~~

approximately $75 million in the third quarter of 2012 and $45 million in the third quarter of 2011, and approximately $256 million in the first nine months of 2012 and $183 million in the first nine months of 2011 related to the annual fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs.

In June 2012, the U.S. Supreme Court upheld the constitutionality of the requirement in the U.S. Healthcare Legislation for Americans to have insurance (called the individual mandate). Separately, it is possible that Congress may withhold all or a portion of the funding necessary to implement the U.S. Healthcare Legislation or may attempt to amend or repeal it. Given the extent of the possible changes and the uncertainties concerning the interpretation, implementation and timing of any such

~~Table of Contents~~

changes, the U.S. Healthcare Legislation and any amendments thereto or repeal of all or portions thereof could impact our business and results of operations in the near term and over the next several years.

Industry-Specific Challenges

The majority of our revenues come from the manufacture and sale of biopharmaceutical products. As explained more fully in our ~~2011~~2012 Annual Report on Form ~~10-K,~~10-K/A, the biopharmaceutical industry is highly competitive and we face a number of industry-specific challenges, which can significantly impact our results. These factors include, among others: the loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights, pipeline productivity and the regulatory environment, pricing and access pressures and competition among branded products.

~~As more fully explained in our 2011 Annual Report on Form 10-K, the~~Intellectual Property Rights and Collaboration/Licensing Rights

The loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights can have a significant adverse effect on our revenues. Our ~~2012~~2013 financial guidance reflects the anticipated impact in ~~2012~~2013 of the loss of such rights as described below (see the “Our Financial Guidance for ~~2012”~~2013” section of this MD&A for additional information).

Our ~~2012~~financial results have been and/or will be adversely impacted by the following:

Lipitor in the U.S.––~~Lipitor~~We lost exclusivity for Lipitor in the U.S. in November 2011. The entry of multi-source generic competition in the U.S. began in May 2012, with attendant increased competitive pressures. ~~Beginning in 2012, sales~~

Table of ~~Lipitor in the U.S. are reported in our Established Products business unit.~~Contents

Lipitor in international markets––Lipitor lost exclusivity in ~~Japan in June 2011 (with generic competition occurring in November 2011),~~ Australia in April 2012 and ~~the majority~~most of developed ~~European markets~~Europe in March 2012 and May ~~2012.~~2012, and now faces multi-source generic competition in those markets. Lipitor has lost exclusivity in all major markets.

Other recent loss of exclusivity impacts––In the U.S., we lost exclusivity for ~~Vfend tablets in February 2011, for Xalatan in March 2011 and for~~ Geodon in March ~~2012. The basic U.S. patent (including the six-month pediatric exclusivity period) for Protonix expired~~2012 and Revatio tablet in January 2011. The basic patent for Vfend tablets in Brazil expired in January 2011. We lost exclusivity for Aromasin in the U.S. in April 2011, in the majority of European markets in July 2011 and in Japan in November 2011.September 2012. We lost exclusivity for Xalatan and Xalacom in the majority of European markets in January 2012 and Australia in July 2012. We lost exclusivity for Aricept in the majority of European markets in February 2012 and April 2012. Caduet lost exclusivity in the ~~U.S. in November 2011 and in the~~ majority of European markets in March and May 2012. We lost exclusivity in the U.S. for Detrol IR in June 2012. Detrol IR and Detrol LA lost exclusivity in most European markets in September ~~2012~~2012. Viagra lost exclusivity in most major EU markets in June 2013. We lost exclusivity for ~~Revatio tablet and for Detrol IR.~~Lyrica in Canada in February 2013.

~~Aricept––Our rights to Aricept in Japan will return to Eisai Co., Ltd. in December 2012.~~

~~Spiriva––~~Spiriva—Our collaboration with Boehringer Ingelheim (BI) for Spiriva ~~will expire~~expires on a country-by-country basis between 2012 and 2016, including the expiration in certain ~~European Union (EU)~~EU markets, Canada and Australia in early 2013 and in the U.S. and certain other EU markets in early 2014, which is adversely impacting our 2013 results. We expect to experience a graduated decline in revenues from Spiriva through 2016.

Aricept—Our rights to Aricept in Japan returned to Eisai Co., Ltd. in December 2012. The Aricept 23mg tablet lost exclusivity in the U.S. in July 2013.

Enbrel—Our U.S. and Canada collaboration agreement with Amgen Inc. for Enbrel expired on October 31, 2013. While we are entitled to royalties for 36 months thereafter, we expect that those royalties will be significantly less than our previous share of Enbrel profits from U.S. and Canada sales. In addition, while our share of the profits from this collaboration previously was included in Revenues, our royalties after October 31, 2013 will be included in Other (income)/deductions––net, in our consolidated statements of income. Outside the U.S. and Canada, our exclusive rights to Enbrel continue in perpetuity.

Rebif—Our collaboration agreement with EMD Serono Inc. to co-promote Rebif in the U.S. will expire at the end of 2015.

For additional information, including with regard to the expiration of the patents and of co-promotion and licensing rights for various products in the U.S., EU and Japan in ~~2012~~2013 and subsequent years, see the “Patents and Intellectual Property Rights” section of our ~~2011~~2012 Annual Report on Form ~~10-K~~10-K/A and the “The Loss or Expiration of Intellectual Property Rights” section of our ~~2011~~2012 Financial Report, which iswas filed as Exhibit 13 to our ~~2011~~2012 Annual Report on Form ~~10-K.~~10-K/A.

We will continue to aggressively defend our patent rights ~~against increasing incidents of infringement~~ whenever we deem appropriate. For more detailed information about our significant products, see the discussion in the “Revenues––Selected Revenues from Biopharmaceutical Products” section of this MD&A. See ~~Part II–~~Notes to Condensed Consolidated Financial Statements––~~Other Information; Item 1.~~ Note 12A1. Commitments and Contingencies: Legal Proceedings~~, of this Form 10-Q~~ ––Patent Litigation for a discussion of certain recent developments with respect to patent litigation.

Regulatory Environment/Pricing and Access––U.S. Healthcare Legislation

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the U.S. Healthcare Legislation, and also known as the Affordable Care Act or ACA), was enacted in the U.S. As explained more fully in our 2012 Annual Report on Form 10-K/A, this legislation has resulted in both current and longer-term impacts on us.

We recorded the following amounts as a result of the U.S. Healthcare Legislation:

$133 million in the third quarter of 2013 and $179 million in the third quarter of 2012, and $364 million in the first nine months of 2013 and $413 million in the first nine months of 2012, recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and

$78 million in the third quarter of 2013 and $75 million in the third quarter of 2012, and $209 million in the first nine months of 2013 and $256 million in the first nine months of 2012, recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs.

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Regulatory Environment/Pricing and Access––Certain Other U.S. Federal Government Matters

In August 2011, the federal Budget Control Act of 2011 (the Budget Control Act) was enacted in the U.S. The Budget Control Act includes provisions to raise the U.S. Treasury ~~Department’s~~Department's borrowing limit, known as the debt ceiling, and provisions to reduce the federal deficit by $2.4 trillion between 2012 and 2021. ~~Deficit-reduction~~Initial deficit-reduction targets ~~include~~included $900 billion of discretionary spending reductions associated with the Department of Health and Human Services and various agencies charged with national security, but those discretionary spending reductions dodid not include programs such as Medicare and Medicaid or direct changes to pharmaceutical pricing, rebates or discounts. The Office of Management and Budget (OMB) iswas responsible for identifying the remaining $1.5 trillion of deficit reductions, which ~~will be~~were divided evenly between defense and non-defense spending. Under this OMB review process, Social Security, Medicaid, Veteran Benefits and certain other spending categories ~~are~~were excluded from consideration, but reductions in payments to Medicare providers ~~may be~~were made, although ~~any such~~these reductions ~~are~~were prohibited by law from exceeding 2%. of the originally budgeted amount. Additionally, certain payments to Medicare Part D plans, such as low-income subsidy payments, ~~are~~were exempt

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from ~~reduction. While we do not know the specific nature of the spending reductions~~reduction as was all patient cost-sharing under ~~the Act that will affect Medicare,~~Medicare. As a result, we do not expect that ~~those reductions~~the Budget Control Act will have a material adverse impact on our results of operations. However, any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, and/or any significant additional taxes or fees that may be imposed on us, as part of any broader deficit-reduction effort or legislative replacement for the Budget Control Act could have an adverse impact on our results of operations.

After the U.S. federal debt ceiling was reached on May 19, 2013 and after measures taken by the U.S. Treasury Department to enable the U.S. federal government to continue meeting its financial obligations were nearly exhausted, on October 16, 2013, legislation was enacted that (i) ended the partial shutdown of the U.S. federal government and provided funding for U.S. federal government operations through January 15, 2014, and (ii) increased the U.S. federal debt ceiling through February 7, 2014 and preserved the ability of the U.S. Treasury Department to use “extraordinary measures” to avoid a default on U.S. federal government debt for a few months thereafter. If, after the expiration of those respective periods, the U.S. federal government fails to provide funding to avoid a partial or total shutdown of its operations and/or fails to suspend enforcement of or to increase the debt ceiling, and if, as a result, the U.S. federal government is unable to conduct drug review and approval activities or satisfy its financial obligations, including under Medicare, Medicaid and other publicly funded or subsidized health programs, our results of operations could be adversely affected.

Pricing and Access––Increasing Pressures to Reduce Healthcare Cost Growth Rates in the U.S.

As the healthcare cost growth rate in the U.S. continues to outpace inflation, cost-reduction and access pressures are increasing in intensity. Containing entitlement spending, including Medicare and Medicaid, is a major focus of deficit-reduction efforts. The ACA, which expanded the role of the U.S. government as a healthcare payer, is accelerating changes in the U.S. healthcare marketplace, and the potential for additional pricing and access pressures continues to be significant. Some employers, seeking to avoid the tax on high-cost health insurance in the ACA imposed in 2018, are already scaling back healthcare benefits.

Overall, there is increasing pressure on U.S. providers to deliver healthcare at a lower cost and to ensure that those expenditures deliver demonstrated value in terms of health outcomes. Longer term, we are seeing a shift in focus away from fee-for-service payments towards outcomes-based payments and risk-sharing arrangements that reward providers for cost reductions. These new payment models can, at times, lead to lower prices for, and restricted access to, new medicines. At the same time, these models can also expand utilization by encouraging physicians to screen, diagnose and treat-to-goal.

In response to the evolving U.S. and global healthcare spending landscape, we are continuing to work with health authorities, health technology assessment and quality measurement bodies and major U.S. payers throughout the product-development process to better understand how these entities value our compounds and products. Further, we are seeking to develop stronger internal capabilities focused on demonstrating the value of the medicines that we discover or develop, register and manufacture, by recognizing patterns of usage of our medicines and competitor medicines along with patterns of healthcare costs.

The Global Economic Environment

In addition to the industry-specific factors discussed above, and as explained more fully in our 2012 Annual Report on Form 10-K/A, we, like other businesses, continue to face the effects of the challenging economic environment, which have impacted our biopharmaceutical operations in the U.S. and Europe, including the countries that use the euro, ~~currency (Eurozone), affecting the performance of products such as Lipitor, Celebrex and Lyrica,~~ and in a number of emerging markets.

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We believe that patients, experiencing the effects of the challenging economic environment, including high unemployment levels, and increases in co-pays, sometimes ~~are switching~~switch to ~~generics, delaying~~generic products, delay treatments, ~~skipping~~skip doses or ~~using~~use less effective treatments to reduce their costs. Challenging economic conditions in the U.S. also have increased the number of patients in the Medicaid program, under which sales of pharmaceuticals are subject to substantial rebates and, in many states, to formulary restrictions limiting access to brand-name drugs, including ours. In addition, we continue to experience pricing pressure ~~as a result of~~in various markets around the ~~economic environment~~world, including in ~~Europe~~developed European markets, Japan and in a number of emerging markets, with government-mandated reductions in prices for certain biopharmaceutical products and government-imposed access restrictions in certain countries. In addition, some government agencies and third-party payers use health technology assessments in ways that, at times, lead to lower prices for and restricted access to new medicines.

We continue to monitor developments regarding government and government agency receivables in several European markets where economic conditions remain challenging and ~~emerging market countries.~~uncertain. Historically, payments from a number of these European governments and government agencies extend beyond the contractual terms of sale, with no significant changes in the year-over-year trend. For further discussion about our Accounts Receivable, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.

Significant portions of our revenues and earnings are exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk in part through operational means, including managing same-currency revenues in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk also is managed through the use of derivative financial instruments and foreign currency debt. As we operate in multiple foreign currencies, including the euro, the Japanese yen, the U.K. pound, the ~~China~~Chinese renminbi, ~~and~~ the Canadian dollar and approximately 100 other currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. If the U.S. dollar weakens against a specific foreign currency, our revenues will increase, having a positive impact, and our overall expenses will increase, having a negative impact, on net income. Likewise, if the U.S. dollar strengthens against a specific foreign currency, our revenues will decrease, having a negative impact, and our overall expenses will decrease, having a positive impact on net income. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.

On February 13, 2013, the Venezuelan government devalued its currency from a rate of 4.3 to 6.3 of Venezuelan currency to the U.S. dollar. We incurred a foreign currency loss of $80 million immediately on the devaluation as a result of remeasuring the local balance sheets, and we have experienced and will continue to experience ongoing adverse impacts to earnings as our revenues and expenses will be translated into U.S. dollars at lower rates. We cannot predict whether there will be further devaluations of the Venezuelan currency or devaluations of any other currencies.

Despite the challenging financial markets, Pfizer maintains a strong financial position. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have the ability to meet our liquidity needs for the foreseeable future. Our long-term debt is rated high quality by both Standard & Poor’s (S&P) and Moody’s Investors Service. As market conditions change, we continue to monitor our liquidity position. We have taken and will continue to take a conservative approach to our financial investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, well-diversified, available-for-sale debt securities. For further discussion of our financial condition, see the ~~"Financial~~“Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.

These and other industry-wide factors that may affect our businesses should be considered along with information presented in the “Forward-Looking Information and Factors That May Affect Future Results” section of this MD&A; in Part II, Item 1A., “Risk Factors”, of this Quarterly Report on Form 10-Q; and in Part I, Item 1A, “Risk Factors,” of our ~~2011~~2012 Annual Report on Form ~~10-K.~~10-K/A.

Our Strategy

We believe that our medicines provide significant value for both healthcare providers and patients, not only from the improved treatment of diseases but also from a reduction in other healthcare costs, such as emergency room or hospitalization costs, as well as improvements in health, wellness and productivity. We continue to actively engage in dialogues about the value of our products and how we can best work with patients, physicians and payers to prevent and treat disease and improve outcomes. We ~~will~~continue to work within the current legal and pricing structures, as well as continue to review our pricing arrangements and contracting methods with payers, to maximize access to patients and minimize ~~the~~any adverse impact on our revenues.

~~On April 23, 2012,~~ We remain firmly committed to fulfilling our company's purpose of innovating to bring therapies to patients that significantly improve their lives. By doing so, we ~~announced that we entered into an agreement~~expect to sell our Nutrition business to Nestlé. In addition, on August 13, 2012 we filed a registration statement with the SEC for a potential IPO of up to a 20% ownership stake in our Animal Health business, Zoetis. If the IPO is successfully completed, which we are targetingcreate value for the ~~first half of 2013,~~patients we ~~will have a variety of options to achieve a potential full separation of Zoetis. As we continue to work toward a potential IPO~~serve and ~~a potential full separation of Zoetis, we remain open to all alternatives to maximize the after-tax return~~ for our shareholders. If

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~~Nutrition~~Commercial Operations

We currently manage our commercial operations through four operating segments––Primary Care, Specialty Care and ~~Animal Health are fully separated from~~ Oncology, Established Products and Emerging Markets, and Consumer Healthcare. For additional information about our current operating structure, see Notes to Condensed Consolidated Financial Statements––Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.

On July 29, 2013, we announced plans to internally create a new global commercial organization structure. Beginning in fiscal 2014, we will manage our commercial operations through three businesses––the ~~Company, then, following these separations, Pfizer will be a global biopharmaceutical company with an innovative core~~Global Innovative Pharmaceutical Business (GIP); the Global Vaccines, Oncology and ~~a value core, with different cost structures and operating drivers, and a complementary~~ Consumer Healthcare Business (VOC); and the Global Established Pharmaceutical Business (GEP).

A significant change effected by this new structure is the full integration of emerging markets into each business. Emerging markets are an important component of our strategy for global leadership, and our new structure recognizes that the demographics and rising economic power of the fastest-growing emerging markets are becoming more closely aligned with the profile found within developed markets.

Some additional information about each product grouping:

Global Innovative Pharmaceutical Business––GIP will generally comprise medicines within several therapeutic areas that are expected to have market exclusivity beyond 2015, as well as Enbrel. These therapeutic areas include immunology and inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women's/men's health.

Global Vaccines, Oncology and Consumer Healthcare Business––VOC will focus on the development of vaccines and products for oncology and consumer healthcare. Each of the three businesses comprising this group will operate as a separate, global business, requiring distinct specialization in terms of the science, talent and market approach necessary to deliver value to consumers and patients.

Global Established Pharmaceutical Business––GEP will include the brands that have lost market exclusivity and, generally, the mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets. Additionally, GEP will include our biosimilars portfolio and current and future established products initiatives, such as our existing agreements with ~~several well-known brands.~~ Mylan in Japan, Hisun in China and Teuto in Brazil.

The ~~innovative core includes a portfolio~~GIP and VOC biopharmaceutical portfolios of innovative, largely patent-protected, in-line products will be sustained by ongoing internal investments and ~~an R&D organization focused on continuing~~targeted business development designed to ~~build~~maximize the value of our in-line products and ensure a robust pipeline of ~~highly differentiated~~highly-differentiated product candidates in areas of unmet medical ~~needs.~~need. In addition, VOC will include our Consumer Healthcare business, which manufactures and markets several well-known brands. The ~~value core includes~~assets to be managed by these groups are science-driven, highly differentiated and generally require a ~~portfolio~~high-level of ~~products that have lost exclusivity or are approaching~~engagement with healthcare providers and consumers.

GEP will be expected to generate strong consistent cash flow by providing patients around the ~~loss of exclusivity that help meet the global need for less expensive, quality medicines.~~world with access to effective, lower-cost, high-value treatments. GEP will leverage our experience in biologic development, manufacturing and commercialization.

~~In response~~These changes will not be implemented until 2014 to ~~the challenging operating environment, we have taken and continue to take many steps to strengthen our Company and better position ourselves~~allow for the ~~future. We believe in a comprehensive approach to~~necessary internal transition process. Beginning with our ~~challenges––organizing~~first-quarter 2014 financial results, we will provide greater financial transparency into our business to maximize research, development and commercial opportunities, improving the performance of our innovative core and our value core, making the right capital allocation decisions, and protecting our intellectual property.new businesses.

Research Operations

Our R&D priorities include delivering a pipeline of differentiated therapies with the greatest scientific and commercial promise, innovating new capabilities that ~~end,~~can position Pfizer for long-term leadership and creating new models for biomedical collaboration that will expedite the pace of innovation and the system's overall productivity. As such, our research primarily focuses on five high-priority areas that have a mix of small molecules and large molecules––immunology and inflammation; oncology; cardiovascular ~~metabolic~~ and ~~endocrine~~metabolic diseases; neuroscience and pain; and vaccines. ~~In addition to reducing the number of disease~~Other areas of focus include rare diseases and ~~the number~~biosimilars.

Table of R&D programs, we have realigned and reduced our research and development footprint, and outsourced certain functions that do not drive competitive advantage for Pfizer. As a result of these actions, we are experiencing significant reductions in our annual research and development expenses, which are reflected in our 2012 financial guidance, and we are incurring significant costs in order to achieve these reductions, which are also reflected in our 2012 financial guidance. For additional information, see the “Our Financial Guidance for 2012” and “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” sections of this MD&A.Contents

While a significant portion of R&D is done internally, we continue to seek to expand our pipeline by entering into agreements with other companies to develop, license or acquire promising compounds, technologies or capabilities. Collaboration, alliance and license agreements and acquisitions allow us to capitalize on these compounds to expand our pipeline of potential future products. In addition, collaborations and alliances allow us to share risk and to access external scientific and technological expertise.

For additional information about R&D by operating segment, see the “Research and Development––Operations and Product Development” section of this MD&A.

For additional information about our pending new drug applications ~~(NDA)~~ and supplemental filings, see the ~~“Revenues—~~“Research and Development––Product Developments––Biopharmaceutical” section of this MD&A.

For additional information about current and recent restructuring activities, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A.

~~We continue to build on~~For additional information about recent transactions and strategic investments that we believe advance our ~~portfolio~~pipeline and maximize the value of ~~businesses through various business development transactions. See~~our in-line products, see the “Our Business Development Initiatives” section of this MD~~&A for~~&A.

Business Development

We continue to build on our broad portfolio of businesses and to expand our R&D pipeline through various business development transactions. For additional information ~~on our~~about recent transactions and strategic investments that we believe ~~complement~~advance our ~~businesses.~~pipeline and maximize the value of our in-line products, see the “Our Business Development Initiatives” section of this MD&A.

Intellectual Property Rights

We continue to aggressively defend our patent rights against increasingly aggressive infringement whenever appropriate, ~~(see Notes to Condensed Consolidated Financial Statements—Note 12. Commitments and Contingencies~~), and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to ~~help~~ ensure appropriate patient access.

In addition, we will continue to employ innovative approaches designed to prevent counterfeit pharmaceuticals from entering the supply chain and to achieve greater control over the distribution of our products, and we will continue to participate in the generics market for our products, whenever appropriate, once they lose exclusivity.

For additional information about our current efforts to enforce our intellectual property rights, see Notes to Condensed Consolidated Financial Statements––Note 12A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation.

Capital and Expense Management

We seek to maintain a strong balance sheet and robust liquidity so that we continue to have the financial resources necessary to take advantage of prudent commercial, research and business development opportunities and to directly enhance shareholder value through dividends and share repurchases. For additional information about our financial condition, liquidity, capital resources, share purchases and dividends, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.

We remain focused on achieving an appropriate cost structure for the Company. For additional information ~~regarding~~about our cost-reduction and productivity initiatives, see the “Costs and ~~Expenses—Restructuring~~Expenses-Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A.

~~Our strategy also includes directly enhancing shareholder value through dividends and share repurchases. See the “Analysis~~

Table of ~~Financial Condition, Liquidity and Capital Resources—Share Purchase Plans and Dividends on Common Stock” sections of this MD&A for more information.~~Contents

Our Business Development Initiatives

We are committed to capitalizing on growth opportunities by advancing our own pipeline and maximizing the value of our in-line products, as well as through various forms of business development, which can include alliances, licenses, joint ventures, dispositions and acquisitions. We view our business development activity as an enabler of our strategies, and we seek to

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generate profitable revenue growth and enhance shareholder value by pursuing a disciplined, strategic and financial approach to evaluating business development opportunities. We are especially interested in opportunities in our high-priority therapeutic areas––immunology and inflammation; oncology; cardiovascular ~~metabolic~~ and ~~endocrine~~metabolic diseases; neuroscience and pain; and vaccines––and in emerging markets and established products. Other areas of focus include rare diseases and biosimilars. We assess our businesses and assets as part of our regular, ongoing portfolio review process and also continue to consider business development activities for our businesses.

The ~~most~~more significant recent transactions and events are described ~~below.~~below:

Collaboration with Eli Lilly & Company (Lilly)––In October 2013, we entered into a collaboration agreement with Lilly to jointly develop and globally commercialize tanezumab, which provides that Pfizer and Lilly will equally share product-development expenses as well as potential revenues and certain product-related costs. The tanezumab program currently is subject to a partial clinical hold by the FDA pending submission of nonclinical data to the FDA. We anticipate submitting that data in the first half of 2014. Under the agreement with Lilly, we are eligible to receive certain payments from Lilly upon the achievement of specified clinical, regulatory and commercial milestones, including an upfront payment of $200 million that is contingent upon the parties continuing in the collaboration after receipt of the FDA’s response to the submission of the nonclinical data. Both Pfizer and Lilly have the right to terminate the agreement under certain conditions.

ViiV Healthcare Limited (ViiV)––On August 12, 2013, the FDA approved Tivicay (dolutegravir), a product for the treatment of HIV-1 infection developed by ViiV, an equity-method investee. This approval triggered a reduction in our interest in ViiV from 13.5% to 12.6% and an increase in GlaxoSmithKline plc's equity interest in ViiV from 76.5% to 77.4% effective October 1, 2013. As a result, in the third quarter of 2013, we recognized a loss of approximately $31 million in Other (income)/deductions––net. We continue to account for our investment in ViiV under the equity method due to the significant influence that we continue to have through our board representation and minority veto rights. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity Method Investments.

On October ~~22,~~31, 2012, ViiV acquired the remaining 50% of Shionogi-ViiV Healthcare LLC, its equity-method investee, from Shionogi & Co., Ltd. (Shionogi) in consideration for a 10% interest in ViiV (newly issued shares) and contingent consideration in the form of future royalties.

Zoetis––On June 24, 2013, we completed the full disposition of our Animal Health business (Zoetis). The full disposition was completed through a series of steps, including the formation of Zoetis, an initial public offering (IPO) of an approximate 19.8% interest in Zoetis and an exchange offer for the remaining 80.2% interest. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

Collaboration with Merck & Co., Inc. (Merck)––On April 29, 2013, we announced that we entered into a worldwide, except Japan, collaboration agreement with Merck for the development and commercialization of Pfizer's ertugliflozin (PF-04971729), an investigational oral sodium glucose cotransporter (SGLT2) inhibitor currently in Phase 3 development for the treatment of type 2 diabetes. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2C. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Collaborative Arrangement.

Hisun Pfizer ~~announced its intention~~Pharmaceuticals Company Limited (Hisun Pfizer)––On September 6, 2012, we and Zhejiang Hisun Pharmaceuticals Co., Ltd. formed a new company, Hisun Pfizer, to ~~acquire~~ develop, manufacture, market and sell pharmaceutical products, primarily branded generic products, predominately in China. On January 1, 2013, we contributed assets constituting a business to this 49%-owned equity-method investment and recognized a pre-tax gain of approximately $459 million in Other (income)/deductions––net. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

Nutrition Business––On November 30, 2012, we completed the sale of our Nutrition business to Nestlé for $11.85 billion in cash. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

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NextWave Pharmaceuticals ~~Inc. (NextWave),~~Incorporated (Next Wave)––On November 27, 2012, we completed our acquisition of NextWave, a privately held, specialty pharmaceutical company focused on the development and commercialization of products for the treatment of attention deficit/hyperactivity disorder (ADHD) and related central nervous system (CNS) disorders. Pfizer will makecompany. As a ~~payment of $255 million to NextWave's shareholders at the closing~~result of the ~~transaction and additional payments of up~~acquisition, we now hold exclusive North American rights to $425 million based on certain sales milestones. Pfizer had previously entered into an option and merger agreement with NextWave during the second quarter of 2012 and made an option payment of $20 million. The transaction is expected to close during the fourth quarter of 2012, subject to regulatory approval in the United States, and other customary closing conditions. NextWave is the developer of Quillivant XR™ (methylphenidate hydrochloride) ~~for extended-release oral suspension, CII,~~, the first once-daily liquid medication approved in the U.S. for the treatment of ~~ADHD, and holds the exclusive North American commercialization rights to Quillivant XR. Quillivant XR received approval from the U.S. Food and Drug Administration (FDA) on September 27, 2012.~~

On September 6, 2012, Pfizer and Zhejiang Hisun Pharmaceuticals, a leading Chinese pharmaceutical company, created a new company, Hisun-Pfizer Pharmaceuticals Co., Ltd. (HPP), to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets. In accordance with our international reporting periods, this transaction will be accounted for in the fourth quarter of 2012. HPP was established with registered capital of $250 million. Zhejiang Hisun Pharmaceuticals holds a 51% equity interest and Pfizer holds a 49% equity interest in HPP.attention deficit hyperactivity disorder. The parties will contribute select existing products to HPP, which will have a broad portfolio covering cardiovascular disease, infectious disease, oncology, mental health, and other therapeutic areas. The parties will also contribute manufacturing sites, cash and other relevant assets. Our investment in HPP will be accounted for under the equity method.

On August 13, 2012, we filed a registration statement with the SEC for a potential IPO of up to a 20% ownership stake in our Animal Health business, Zoetis. If the IPO is successfully completed, which we are targetingtotal consideration for the acquisition was approximately $442 million, which consisted of upfront payments to NextWave's shareholders of approximately $278 million and contingent consideration with an estimated acquisition-date fair value of approximately $164 million. In the third quarter and the first ~~half~~nine months of 2013, we will have a variety of options to achieve a potential full separation of Zoetis. As we continue to work toward a potential IPO and a potential full separation of Zoetis, we remain open to all alternatives to maximize the after-tax return for our shareholders. The Animal Health business continues to be presented as a ~~continuing operation~~result of lowered commercial forecasts, the fair value of the contingent consideration decreased and we recognized a pre-tax gain of approximately $128 million and $109 million, respectively, in ~~the condensed consolidated financial statements.~~Other (income)/deductions––net. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Acquisitions.

Nexium Over-the Counter Rights––On August 13, 2012, we announced that we entered into an agreement with AstraZeneca for the exclusive, global, over-the-counter (OTC) rights for Nexium, a leading prescription drug currently approved to treat the symptoms of gastroesophageal reflux disease. ~~Under the terms of the agreement, we acquired the exclusive global rights to market Nexium for the approved OTC indications.~~ We made an upfront payment of $250 million to AstraZeneca, and AstraZeneca is eligible to receive milestone payments of up to $550 million based on product launches and level of sales as well as royalty payments based on sales. ~~A marketing authorization application~~In June 2013, the Committee for ~~OTC Nexium in a 20 mg tablet form was filed with~~Medicinal Products for Human Use of the European Medicines Agency issued a positive opinion recommending that the European Commission approve 'Nexium Control' OTC for the short-term treatment of reflux symptoms (including heartburn and acid regurgitation in ~~June 2012.~~adults). A new drug application ~~filing~~submission for Nexium OTC ~~Nexium~~ in the U.S. in a ~~20 mg~~20mg delayed-release capsule ~~is targeted~~was accepted for review by the FDA in the first half of 2013.

Biocon Alliance––On March 12, 2012, Biocon and Pfizer announced the conclusion of their October 18, 2010 alliance to commercialize Biocon’s biosimilar versions of insulin and insulin analog products. The companies agreed that, due to the individual priorities for their respective biosimilars businesses, ~~it was in their best interest to~~each company would move forward independently.

Alacer Corp. (Alacer)––On February 26, 2012, we completed our acquisition of Alacer, ~~Corp. (Alacer),~~ a ~~privately owned~~ company that manufactures, markets and distributes Emergen-C, a line of effervescent, powdered drink mix vitamin supplements that is the largest-selling branded vitamin C line in the U.S. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures:~~Equity-Method Investments: Acquisitions.

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Ferrosan Holding A/S (Ferrosan)––On December 1, 2011, we completed our acquisition of the consumer healthcare business of Ferrosan, ~~Holding A/S (Ferrosan),~~ a Danish company engaged in the sale of science-based consumer healthcare products, including dietary supplements and lifestyle products, primarily in the Nordic region and the emerging markets of Russia and Central and Eastern Europe. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures: Acquisitions~~.

~~On August 1, 2011, we sold our Capsugel business for approximately $2.4 billion in cash. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2B. Acquisitions and Divestitures: Divestitures~~.

On January 31, 2011, we completed a tender offer for the outstanding shares of common stock of King and acquired approximately 92.5% of the outstanding shares for approximately $3.3 billion in cash. On February 28, 2011, we acquired the remaining outstanding shares of King for approximately $300 million in cash. For additional information, see Notes to Condensed Consolidated Financial Statements—~~Note 2A. Acquisition and Divestitures:~~Equity-Method Investments: Acquisitions.

Our Financial Guidance for ~~2012~~2013

~~We forecast 2012~~



The following table provides our current financial guidance for 2013:
Adjusted revenues	$50.8 to $51.8 billion
Adjusted cost of sales as a percentage of adjusted revenues	18.0% to 18.5%
Adjusted selling, informational and administrative expenses	$14.2 to $14.7 billion
Adjusted research and development expenses	$6.3 to $6.6 billion
Adjusted other (income)/deductions	Approximately $400 million
Effective tax rate on adjusted income	Approximately 28.0%
Reported diluted EPS	$3.05 to $3.15
Adjusted diluted EPS	$2.15 to $2.20

For an understanding of ~~$58.0 billion to $59.0 billion, Reported diluted earnings per common share (EPS) of $1.30 to $1.38~~Adjusted income and its components and Adjusted diluted EPS (all non-GAAP financial measures), see the “Adjusted Income” section of ~~$2.14 to $2.17.~~ this MD&A.

The current exchange rates assumed in connection with the ~~2012~~2013 financial guidance are a blend of the actual exchange rates in effect ~~during the first nine months of 2012~~through September 29, 2013 and the mid-October ~~2012~~2013 exchange rates for the remainder of the year. ~~For an understanding~~The weighted average shares outstanding assumed reflects, among other things, the reduction in our common stock outstanding as a result of

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the Zoetis exchange offer. Since this reduction occurred on June 24, 2013, Adjusted ~~income and Adjusted diluted EPS, see the “Adjusted Income” section of this MD&A.~~

~~The following table provides a reconciliation of 2012 Adjusted income and Adjusted diluted EPS guidance to 2012 Reported net income attributable to Pfizer Inc.~~ and Reported diluted EPS ~~attributable to Pfizer Inc. common shareholders guidance:~~guidance reflects only a partial-year benefit.


The following table provides a reconciliation of 2013 Adjusted income and Adjusted diluted EPS guidance to the 2013 Reported net income attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:			The following table provides a reconciliation of 2013 Adjusted income and Adjusted diluted EPS guidance to the 2013 Reported net income attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:
	Full-Year 2012 Guidance			Full-Year 2013 Guidance
(BILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)	Net Income^(a)	Diluted EPS^(a)		Net Income^(a)	Diluted EPS^(a)
Adjusted income/diluted EPS^(b) guidance	~$16.1 - $16.4	~$2.14 - $2.17		$14.8 - $15.2	$2.15 - $2.20
Purchase accounting impacts of transactions completed as of 9/30/12	(3.6)	(0.48)
Purchase accounting impacts of transactions completed as of September 29, 2013				(3.3)	(0.49)
Acquisition-related costs	(0.5 - 0.7)	(0.07 - 0.09)		(0.4 - 0.5)	(0.06 - 0.07)
Non-acquisition-related restructuring costs^(c)	(1.4 - 1.6)	(0.18 - 0.21)
Other certain significant items incurred as of 9/30/12	(0.9)	(0.12)
Income from discontinued operations^(d)	0.4	0.06
Non-acquisition-related restructuring costs				(0.6 - 0.8)	(0.09 - 0.13)
Certain other items incurred through September 29, 2013^(c)				0.3	0.04
Discontinued operations^(d)				10.7	1.55
Reported net income attributable to Pfizer Inc./diluted EPS guidance	~$9.7 - $10.4	~$1.30 - $1.38		$21.2 - $21.9	$3.05 - $3.15

^(a)

~~Includes the revenues and expenses related to the Nutrition business, which is reflected as a discontinued operation, but does not include the gain on the pending sale of the Nutrition business.~~ Does not assume the completion of any business-development transactions not completed as of September ~~30, 2012~~29, 2013, including any one-time upfront payments associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of September ~~30, 2012~~29, 2013~~, except for charges for such matters that have been recorded during the first nine months of 2012.~~.


^(b)	For an understanding of Adjusted income and Adjusted diluted EPS, see the “Adjusted Income” section of this MD&A.

^(c)

Includes ~~amounts related to our initiatives to reduce R&D spending, including our realigned R&D footprint,~~income from a litigation settlement with Teva Pharmaceutical Industries Ltd. and ~~amounts related to other cost-reduction and productivity initiatives. In the reconciliation between Net income attributable to Pfizer Inc., as reported under principles generally accepted~~Sun Pharmaceutical Industries Ltd. for patent-infringement damages resulting from their "at-risk" launches of generic Protonix in the United States of America (U.S. GAAP), and Adjusted income, and in the reconciliation between diluted EPS, as reported under U.S. GAAP, and Adjusted diluted EPS, these amounts are categorized as Certain Significant Items (see the “Adjusted Income––Reconciliation” section of this MD&A).States.

^(d)

~~Income~~The financial results of the Animal Health business from January 1, 2013 to June 24, 2013, as well as the gain on disposal of Zoetis, are presented as a discontinued operation. As a result, they have been excluded from all components of the financial guidance, except Reported diluted EPS and Reported net income attributable to ~~Pfizer’s Nutrition business.~~Pfizer Inc. Reported diluted EPS and Reported net income guidance includes the gain on disposal of Zoetis, as well as the financial results of the Animal Health business as follows:

January 1, 2013 to February 6, 2013: 100% of Zoetis financial results are included;

February 7, 2013 to June 24, 2013: 80.2% of Zoetis financial results are included; 19.8% of Zoetis financial results are excluded, as this interest in Zoetis was no longer owned by Pfizer; and

June 24, 2013 through December 31, 2013: no actual or projected financial results of Zoetis are included.

In addition, revenues and cost of sales from the transitional manufacturing and supply agreements with Zoetis have been excluded from the applicable Adjusted components of the financial guidance.

For a description of our actual and anticipated costs and savings associated with our cost-reduction initiatives, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A.

Our ~~2012~~2013 financial guidance is subject to a number of factors and uncertainties—as described in the “Our Operating Environment”, “Our Strategy” and “Forward-Looking Information and Factors That May Affect Future Results” sections of this MD&A; Part II, Item 1A., “Risk Factors,” of this Quarterly Report on Form 10-Q; the “Our Operating Environment” and “Our Strategy” sections of our ~~2011~~2012 Financial Report, which iswas filed as Exhibit 13 to our ~~2011~~2012 Annual Report on Form ~~10-K;~~10-K/A; and Part I, Item 1A, “Risk Factors,” of our ~~2011~~2012 Annual Report on Form ~~10-K.~~

10-K/A.

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ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Revenues

~~The following table provides worldwide revenues by operating segment, business unit and geographic area:~~


The following table provides worldwide revenues by operating segment, business unit and geographic area:																			The following table provides worldwide revenues by operating segment, business unit and geographic area:
	Worldwide				U.S.				International				World- wide		U.S.		Inter- national			Worldwide				U.S.				International				World- wide		U.S.		Inter- national
(MILLIONS OF DOLLARS)	Sep 30, 2012		Oct 2, 2011		Sep 30, 2012		Oct 2, 2011		Sep 30, 2012		Oct 2, 2011		% Change in Revenues							Sep 29, 2013		Sep 30, 2012		Sep 29, 2013		Sep 30, 2012		Sep 29, 2013		Sep 30, 2012		% Change in Revenues
Three Months Ended
Biopharmaceutical revenues:
Primary Care Operating Segment	$	3,610	$	5,948	$	2,021	$	3,451	$	1,589	$	2,497	(39	)	(41	)	(36	)		$	3,259	$	3,610	$	2,101	$	2,021	$	1,158	$	1,589	(10	)	4		(27	)
Specialty Care	3,406		3,799		1,528		1,636		1,878		2,163		(10	)	(7	)	(13	)		3,349		3,406		1,513		1,528		1,836		1,878		(2	)	(1	)	(2	)
Oncology	329		332		151		97		178		235		(1	)	56		(24	)		407		329		185		151		222		178		24		23		25
SC&O Operating Segment	3,735		4,131		1,679		1,733		2,056		2,398		(10	)	(3	)	(14	)		3,756		3,735		1,698		1,679		2,058		2,056		1		1		—
Emerging Markets	2,389		2,438		—		—		2,389		2,438		(2	)	—		(2	)		2,431		2,389		—		—		2,431		2,389		2		—		2
Established Products	2,383		2,230		1,069		835		1,314		1,395		7		28		(6	)		2,296		2,383		948		1,069		1,348		1,314		(4	)	(11	)	3
EP&EM Operating Segment	4,772		4,668		1,069		835		3,703		3,833		2		28		(3	)		4,727		4,772		948		1,069		3,779		3,703		(1	)	(11	)	2
	12,117		14,747		4,769		6,019		7,348		8,728		(18	)	(21	)	(16	)		11,742		12,117		4,747		4,769		6,995		7,348		(3	)	—		(5	)
Other product revenues:
Animal Health	1,017		1,041		451		433		566		608		(2	)	4		(7	)

Consumer Healthcare	780		767		388		408		392		359		2		(5	)	9			788		780		396		388		392		392		1		2		—
Other Operating Segments	1,797		1,808		839		841		958		967		(1	)	—		(1	)
Other ^(a)	62		54		19		19		43		35		15		—		23			113		56		43		17		70		39		*		*		79
Total revenues	$	13,976	$	16,609	$	5,627	$	6,879	$	8,349	$	9,730	(16	)	(18	)	(14	)		$	12,643	$	12,953	$	5,186	$	5,174	$	7,457	$	7,779	(2	)	—		(4	)
Nine Months Ended
Biopharmaceutical revenues:
Primary Care Operating Segment	$	11,725	$	17,259	$	6,065	$	10,007	$	5,660	$	7,252	(32	)	(39	)	(22	)		$	9,830	$	11,725	$	6,213	$	6,065	$	3,617	$	5,660	(16	)	2		(36	)
Specialty Care	10,483		11,425		4,639		5,226		5,844		6,199		(8	)	(11	)	(6	)		9,891		10,483		4,365		4,639		5,526		5,844		(6	)	(6	)	(5	)
Oncology	940		982		415		274		525		708		(4	)	51		(26	)		1,178		940		534		415		644		525		25		29		23
SC&O Operating Segment	11,423		12,407		5,054		5,500		6,369		6,907		(8	)	(8	)	(8	)		11,069		11,423		4,899		5,054		6,170		6,369		(3	)	(3	)	(3	)
Emerging Markets	7,308		7,031		—		—		7,308		7,031		4		—		4			7,466		7,308		—		—		7,466		7,308		2		—		2
Established Products	7,865		6,914		3,780		2,739		4,085		4,175		14		38		(2	)		7,033		7,865		2,890		3,780		4,143		4,085		(11	)	(24	)	1
EP&EM Operating Segment	15,173		13,945		3,780		2,739		11,393		11,206		9		38		2			14,499		15,173		2,890		3,780		11,609		11,393		(4	)	(24	)	2
	38,321		43,611		14,899		18,246		23,422		25,365		(12	)	(18	)	(8	)		35,398		38,321		14,002		14,899		21,396		23,422		(8	)	(6	)	(9	)
Other product revenues:
Animal Health	3,128		3,078		1,289		1,205		1,839		1,873		2		7		(2	)

Consumer Healthcare	2,276		2,218		1,054		1,087		1,222		1,131		3		(3	)	8			2,399		2,276		1,111		1,054		1,288		1,222		5		5		5
Other Operating Segments	5,404		5,296		2,343		2,292		3,061		3,004		2		2		2
Other ^(a)	193		211		61		65		132		146		(9	)	(6	)	(10	)		229		169		77		58		152		111		36		33		37
Total revenues	$	43,918	$	49,118	$	17,303	$	20,603	$	26,615	$	28,515	(11	)	(16	)	(7	)		$	38,026	$	40,766	$	15,190	$	16,011	$	22,836	$	24,755	(7	)	(5	)	(8	)


^(a)	~~Includes~~Represents revenues generated ~~primarily~~ from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales ~~organization.~~organization, and includes, in 2013, the revenues related to our transitional manufacturing and supply agreements with Zoetis.

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Biopharmaceutical Revenues

Worldwide revenues from biopharmaceutical products were ~~$12.1~~$11.7 billion for the third quarter of 2013and ~~$38.3~~$35.4 billion for the first nine months of ~~2012,~~2013, reflecting decreases of 183%% and 128%%, respectively, compared to the same periods in ~~2011 primarily due to:~~2012, reflecting, among other things:

~~the~~a decrease in operational revenues of approximately ~~$2.0 billion~~$481 million in the third quarter and ~~$4.3~~$2.5 billion in the first nine months of 2013, compared to the same periods in 2012, due to the loss of exclusivity of various products in certain markets, including a decrease in operational revenues from branded Lipitor of ~~$1.9 billion~~$239 million in the third quarter and ~~$4.2~~$1.7 billion in the first nine months of ~~2012 in~~2013;

lower operational Alliance revenues ~~from branded Lipitor; and~~

~~the unfavorable impact of foreign exchange, which resulted in revenue decreases~~ of approximately ~~$605~~$250 million in the third quarter and ~~approximately $1.0 billion in the first nine months of 2012;~~

~~partially offset by:~~

~~a lower reduction in revenues related to the U.S. Healthcare Legislation of $36 million in the third quarter and $126~~$631 million in the first nine months of ~~2012~~2013, compared to the same periods in ~~2011, primarily~~2012, from Spiriva due to the ongoing expiration of the Spiriva collaboration in certain countries, and from Aricept due to the loss of exclusivity in the majority of ~~Lipitor;~~European markets and the return of our rights to Aricept in Japan to Eisai Co., Ltd., partially offset by an increase of approximately $40 million in the third quarter and $164 million in the first nine months of 2013 in operational Alliance revenues from Enbrel;

a decrease in operational revenues of approximately $162 million in the first nine months of 2013, compared to the same period in 2012, due to multi-source generic competition in the U.S. for atorvastatin beginning in late-May 2012; and

a decrease in operational revenues of approximately $48 million in the third quarter and $130 million in the first nine months of 2013, compared to the same periods in 2012, due to decreased government purchases of the Prevnar family of products and Enbrel in certain emerging markets,

partially offset by:

an increase in operational revenues of approximately $186 million in the third quarter and $595 million in the first nine months of 2013, compared to the same periods in 2012, due to continued growth in developed markets of certain biopharmaceutical products, particularly Lyrica, Inlyta and Xalkori; and

an increase in operational revenues ~~for certain~~of approximately $166 million in the third quarter and $493 million in the first nine months of 2013, compared to the same periods in 2012, due to continued growth in the Emerging Markets unit related to various products.

The unfavorable impact of foreign exchange on biopharmaceutical ~~products, particularly Enbrel, Celebrex~~revenues of $271 million in the third quarter and ~~Lyrica and~~$782 million in ~~revenues from emerging markets.~~the first nine months of 2013, or 2% in both periods, also contributed to a decrease in biopharmaceutical revenues.

Geographically,

in the U.S., revenues from biopharmaceutical products ~~decreased 21%~~were relatively flat in the third quarter of ~~2012~~2013 and ~~18%~~decreased 6% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011, primarily~~2012, reflecting, lower revenues from Lipitor, Geodon, Caduet, Effexor, Zosyn, Aromasin and (in the first nine months of 2012 only) Xalatan/Xalacom, all due to loss of exclusivity, and from BMP2 and Detrol/Detrol LA. The impact of these adverse factors was among other things:


◦	lower revenues from Lipitor, Revatio and Geodon, all due to loss of exclusivity (down approximately $188 million in the third quarter of 2013 and $918 million in the first nine months of 2013);


◦	lower revenues from Spiriva, reflecting the final-year terms of our Spiriva co-promotion agreement in the U.S. (down approximately $124 million in the third quarter of 2013 and $211 million in the first nine months of 2013);


◦	lower revenues from atorvastatin (down approximately $162 million in the first nine months of 2013);


◦	lower revenues from Prevnar 13, due to decreased government purchases (down approximately $86 million in the first nine months of 2013); and


◦	lower revenues from Zosyn (down approximately $48 million in the first nine months of 2013),

partially offset ~~by the strong performance of certain other biopharmaceutical products and the lower reduction in revenues related to U.S. Healthcare Legislation.~~by:


◦	the strong performance of certain other biopharmaceutical products, including Lyrica, Celebrex, Xeljanz, Inlyta and Xalkori (up approximately $209 million in the third quarter of 2013 and $521 million in the first nine months of 2013).

in our international markets, revenues from biopharmaceutical products decreased ~~16%~~5% in the third quarter ~~of 2012~~ and 8%decreased 9% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011, primarily due to the losses of exclusivity of Lipitor~~2012. Operationally, revenues decreased 1% in the ~~majority of developed European markets during the second~~third quarter of ~~2012~~2013 and ~~the unfavorable impact of foreign exchange of 7% in the third quarter of 2012 and 4%~~5% in the first nine months of ~~2012. Operationally,~~2013, compared to the same periods in 2012, reflecting, among other things:

◦

lower revenues for Lipitor and Xalatan/Xalacom (down approximately $152 million in the third quarter of 2013 and $1.3 billion in the first nine months of 2013) due to the loss of exclusivity of Lipitor in developed Europe, Japan and Australia, and Xalatan/Xalacom in the majority of European markets and in Australia; lower revenues for Viagra, (down approximately $48 million in the third quarter of 2013 and $72 million in the first nine months of 2013)

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primarily due to loss of exclusivity in most major markets in Europe; and lower revenues ~~decreased 9%~~for Aricept (direct sales) (down approximately $18 million in the third quarter of ~~2012~~2013 and 4%$75 million in the first nine months of 2012, compared to the same periods in 2011. In addition to Lipitor, the decrease in operational revenues was driven by Xalatan/Xalacom, Norvasc, Effexor and Aromasin, all due to loss of exclusivity in certain markets, and lower Alliance revenues, primarily2013) due to the loss of exclusivity ~~of Aricept in many major European markets, as well as lower revenues for Spiriva~~ in certain ~~European countries reflecting the final-year terms of our Spiriva collaboration agreements relating to those countries.~~ markets;

◦

lower Alliance revenues (down approximately $110 million in the third quarter of 2013 and $372 million in the first nine months of 2013), primarily due to the loss of exclusivity of Aricept in many major European markets, the return of our rights to Aricept in Japan to Eisai Co., Ltd., and lower revenues for Spiriva in certain European countries, Canada and Australia (where the Spiriva collaboration has terminated); and


◦	lower revenues for the Prevnar family of products and Enbrel, (down approximately $48 million in the third quarter of 2013 and $130 million in the first nine months of 2013) due to decreased government purchases in certain emerging markets,

partially offset by:


◦	higher revenues for Lyrica, and new product growth from Inlyta and Xalkori, (collectively, approximately $104 million in the third quarter of 2013 and $346 million in the first nine months of 2013).

The unfavorable impact of ~~these adverse factors was partially offset by~~foreign exchange on international biopharmaceutical revenues of 4% in both the ~~strong operational growth~~third quarter and in the first nine months of ~~Lyrica and Enbrel.~~

2013 also contributed to the decrease in revenues from biopharmaceutical products in our international markets.

During ~~both~~ the third quarter and first nine months of ~~2012,~~2013, international revenues from biopharmaceutical products represented ~~61%~~59.6% and 60.4% of total revenues from biopharmaceutical products, compared to ~~59%~~60.6% and ~~58%~~61.1% in the third quarter and first nine months of ~~2011,~~2012, respectively.

Primary Care Operating Segment

Primary Care unit revenues decreased ~~39%~~10% in the third quarter of 2013and ~~32%~~16% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011,~~2012, reflecting lower operational revenues of ~~37%~~8% and ~~31%,~~14% in the third quarter and the first nine months of 2013, respectively, primarily due to to:

the ~~losses~~loss of exclusivity of Lipitor ~~in the U.S. in November 2011, the majority of developed European markets during the second quarter of 2012~~ and ~~Japan in June 2011, as well as~~ the resulting shift in the reporting of ~~U.S.~~Lipitor revenues in developed Europe and ~~Japan Lipitor revenues~~Australia to the Established Products unit beginning January 1, ~~2012. These factors impacted Primary Care operational revenues by approximately $2.0 billion, or 34%~~2013, as well as the loss of exclusivity of certain other products in various markets, including Viagra in most major markets in Europe in June 2013 and Lyrica in Canada in February 2013;

the termination of the co-promotion agreement for Aricept in Japan in December 2012; and

in the U.S. and certain European countries, the co-promotion collaboration for Spiriva is in its final year, which per the terms of the collaboration agreement, has resulted in a decline in Pfizer's share of Spiriva revenues; and in Australia, Canada and certain other European countries, the Spiriva collaboration has terminated,

partially offset by:

the strong performance of Celebrex, Chantix and Pristiq in the U.S., as well as Lyrica.

The unfavorable impact of foreign exchange of 2% in both the third quarter of ~~2012~~2013 and ~~by approximately $5.3 billion, or 31%, in~~ the first nine months of ~~2012.~~2013, also contributed to the decrease in Primary Care unit revenues.

Collectively, the decline in ~~worldwide~~ revenues in developed markets for Lipitor and for certain other Primary Care unit products that lost exclusivity in various markets in 2012, ~~and 2011,~~ as well as the resulting shift in the reporting of certain product revenues to the Established Products unit, reduced Primary Care unit revenues by ~~$2.4~~approximately $584 million, or 16%, in comparison with the third quarter of 2012, and reduced Primary Care unit revenues by approximately $2.3 billion, or ~~41%~~20%, in comparison with the first nine months of 2012.

Specialty Care and Oncology Operating Segment

Specialty Care unit revenues decreased 2% in the third quarter of 2013 and 6% in the first nine months of 2013, compared to the same periods in 2012, reflecting a decrease in operational revenues of 1% and 4% in the third quarter of 2013 and in the first nine months of 2013, primarily due to:


◦	the loss of exclusivity and the resulting shift in the reporting of Geodon and Revatio revenues in the U.S. and Xalabrands revenues in developed Europe and Australia to the Established Product unit beginning January 1, 2013,

largely offset by:


◦	the growth of Enbrel and Xeljanz in the third quarter and the first nine months of 2013.

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~~with~~The unfavorable impact of foreign exchange of 1% in the third quarter of ~~2011,~~2013 and ~~reduced Primary Care unit revenues by $6.1 billion, or 35%, in comparison with the first nine months of 2011.~~

~~The impact of these declines was slightly offset by the strong operational growth of Lyrica and Celebrex in developed markets and Viagra in the U.S.~~

~~Specialty Care and Oncology Operating Segment~~

~~Specialty Care unit revenues decreased 10% in the third quarter and 8%~~2% in the first nine months of ~~2012, compared~~2013 also contributed to the ~~same periods~~decrease in 2011, due to lower operational revenues of 5% and 6%, respectively, as well as the adverse impact of foreign exchange. Operational revenues were negatively impacted in both periods by the decline in the Prevnar/Prevenar franchise, primarily in the U.S. and developed Europe, as the pediatric catch-up dose opportunity in the third quarter of 2011 was no longer available in the third quarter of 2012 since all patients have already been vaccinated. Additionally, utilization of Prevnar/Prevenar in adults remains minimal at this time.

Specialty Care unit ~~revenues were also unfavorably impacted by the losses of~~revenues.

Collectively, products that lost exclusivity, ~~of Vfend and Xalatan in the U.S. in February and March 2011, respectively, and~~as well as the resulting shift in the reporting of ~~Vfend and Xalatan U.S.~~certain product revenues to the Established Products unit, beginning January 1, 2012, as well as the loss of exclusivity of Xalatan in developed Europe in January 2012, and Geodon in the U.S. in March 2012. Collectively, these developments relating to Vfend, Xalatan and Geodon reduced Specialty Care unit revenues by ~~$259~~$185 million, or 7%5%, in comparison with the third quarter of ~~2011,~~2012, and reduced Specialty Care unit revenues by ~~$779~~approximately $762 million, or 7%, in comparison with the first nine months of ~~2011.~~2012.

~~Operational revenues in both periods were favorably impacted by the growth of Enbrel, Rebif and Benefix.~~

Oncology unit revenues ~~decreased 1%~~increased 24% in the third quarter of 2013and 4%25% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011, primarily~~2012, reflecting higher operational revenues of 26% and 28% in the third quarter and the first nine months of 2013, respectively, due to:


◦	the recent launches of new products, most notably Inlyta and Xalkori in several major markets,

partially offset by:


◦	the decline in Sutent revenues in the EU and Japan, due to increased competition and cost-containment measures in those markets, as well as some conversion from Sutent to Inlyta in Japan due to a broader label for Inlyta in Japan, which overlaps with the Sutent indication.

Inlyta’s market share continues to increase as patient feedback has been positive both in terms of efficacy and tolerability, and as pricing and reimbursement are being granted in developed Europe. Xalkori prescriptions and new patient starts also continue to increase, driven by initiatives established to improve molecular testing and identify the appropriate patients for this medicine.

The operational increases in Oncology unit revenues were partially offset by the unfavorable impact of foreign exchange of 5%2% and 3%~~, respectively. Operational revenues were unfavorably impacted~~ in both periods by the loss of exclusivity of Aromasin in the majority of European markets in the second half of 2011 and the resulting shift in the reporting of such revenues to the Established Products unit beginning January 1, 2012. This loss of exclusivity reduced Oncology unit revenues by $56 million, or 17%, in comparison with the third quarter ~~of 2011,~~ and ~~reduced Oncology unit revenues by $184 million, or 19%, in comparison with~~ the first nine months of ~~2011.~~

~~Operational revenues in both periods were favorably impacted by the growth of Sutent, as well as the launches of Inlyta and Xalkori.~~2013, respectively.

Established Products and Emerging Markets Operating Segment

Established Products unit revenues ~~increased 7%~~decreased 4% in the third quarter of 2013 and 11% in the first nine months of 2013, compared to the same periods in 2012, reflecting a decrease in operational revenues of 1% and 8% in the third quarter and the first nine months of ~~2012~~2013, respectively, primarily due to:


◦	the continued erosion of branded Lipitor in the U.S, and Japan,

partially offset by:


◦	revenues from products in certain markets that were shifted to the Established Products unit from other business units beginning January 1, 2013, including Lipitor in developed Europe and Australia; and


◦	the contribution from the collaboration with Mylan Inc. to market generic drugs in Japan.

The unfavorable impact of foreign exchange of 3% in both the third quarter of 2013 and in the first nine months of 2013 also contributed to the decrease in Established Products unit revenues.

Emerging Markets unit revenues increased 2% in both the third quarter and in the first nine months of 2013, compared to the same ~~period~~periods in ~~2011~~2012, due to higher operational revenues of ~~11%~~5% in both the third quarter and ~~a 4%~~the first nine months of 2013, due to:


◦	volume growth in China, most notably Lipitor, Norvasc and Sulperazon,

partially offset by:


◦	the impact of the transfer of certain product rights to our equity-method investment in China in the first quarter of 2013; and


◦	decreased government purchases of Prevenar and Enbrel, as well as government cost-containment measures, in certain emerging markets.

The operational increases in Emerging Markets unit revenues were partially offset by the unfavorable impact of foreign ~~exchange. Established Products unit revenues increased 14%~~exchange of 3% in both the third quarter and in the first nine months of 2012 compared to the same period in 2011 due to higher operational revenues of 16% and a 2% unfavorable impact of foreign exchange. The increases in Established Products unit operational revenues in the third quarter and first nine months of 2012 were mainly due to the shift in the reporting of branded Lipitor revenues in the U.S. and Japan from the Primary Care unit totaling $320 million and $1.2 billion, respectively, to the Established Products unit beginning January 1, 2012, as well as recent launches of generic versions of certain Pfizer branded primary care and specialty care products, and by contributions from the sales of the authorized generic version of Lipitor in the U.S. by Watson Pharmaceuticals, Inc.

Operational revenues in both periods were unfavorably impacted by the entry of multi-source generic competition in the U.S. for donepezil (Aricept) in May 2011, as well as the continuing decline of revenues of certain products that previously lost exclusivity and the impact of ongoing pricing pressures, primarily in South Korea and developed Europe.

Emerging Markets unit revenues decreased 2%, in the third quarter of 2012 compared to the same period in 2011, due to an 8% unfavorable impact of foreign exchange, partially offset by higher operational revenues of 6%. Emerging Markets unit revenues increased 4%, in the first nine months of 2012 compared to the same period in 2011, due to higher operational revenues of 10%, partially offset by a 6% unfavorable impact of foreign exchange. The increases in Emerging Markets unit operational revenues in the third quarter and first nine months of 2012 were primarily due to volume growth in China, Mexico and Russia, as a result of more targeted promotional efforts for key innovative and established products, including Lipitor, Norvasc and Lyrica.

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~~Operational revenue growth in the third quarter of 2012 was partially offset by the timing of government purchases of Prevenar 13 in Turkey in comparison with the year-ago period.~~

2013.

Total revenues from established products in both the Established Products and Emerging Markets units were ~~$3.4~~$3.3 billion, with $1.0 billion generated in emerging markets, in the third quarter of ~~2012,~~2013, and were ~~$10.9~~$10.1 billion, with ~~$3.0~~$3.1 billion generated in emerging markets, in the first nine months of ~~2012.~~2013.

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~~Other Product Revenues~~

~~Animal Health~~Consumer Healthcare Operating Segment

Animal Health unit revenues decreased 2% in the third quarter of 2012, compared to the same period in 2011, reflecting higher operational revenues of 4%, more than offset by the unfavorable impact of foreign exchange of 6%. Operational revenues from Animal Health products were favorably impacted in the third quarter of 2012 compared to the same period in 2011 primarily by increased demand across the companion animal and global livestock portfolios in key geographies.

~~Animal Health~~Consumer Healthcare unit revenues increased 2%1% in the third quarter of 2013 and 5% in the first nine months of ~~2012,~~2013, compared to the same ~~period~~periods in ~~2011,~~2012, reflecting higher operational revenues of ~~6%, partially offset by~~1% and 5% in the ~~unfavorable impact of foreign exchange of 4%. Operational revenues from Animal Health products were favorably impacted in~~third quarter and the first nine months of ~~2012~~2013, respectively, due to:

strong international growth for Centrum as a result of several recent product launches;

increased promotional activities in key markets; and

the growth of Emergen-C in the U.S. due to expanded distribution and promotional activities,

partially offset by:

declines in sales of respiratory and other products in certain international markets due to unfavorable seasonal conditions compared to the same ~~period~~periods in 2011 primarily by the full nine-month impact of legacy King product revenues in the first nine months of 2012 compared to the partial-period impact in the first nine months of 2011, as well as solid performances in both the global livestock and the companion animal portfolios.

~~Consumer Healthcare Operating Segment~~

Consumer Healthcare unit revenues increased 2% in the third quarter of 2012, compared to the same period in 2011, reflecting higher operational revenues of 6%, and the unfavorable impact of foreign exchange of 4%. Consumer Healthcare unit revenues increased 3% in the first nine months of 2012, compared to the same period in 2011, reflecting higher operational revenues of 5% and the unfavorable impact of foreign exchange of 2%. The operational revenue increases were primarily due to the addition of products from the acquisitions of Ferrosan Consumer Health in December 2011 and Alacer Corp. in February 2012.

Rebates and Chargebacks

As is typical in the ~~pharmaceutical~~biopharmaceutical industry, our gross product sales are subject to a variety of deductions, that generally are estimated and recorded in the same period that the revenues are recognized and primarily represent rebates and discounts to government agencies, wholesalers, distributors and managed care organizations with respect to our pharmaceutical products. These deductions represent estimates of the related obligations and, as such, judgment and knowledge of market conditions and practice are required when estimating the impact of these sales deductions on gross sales for a reporting period. Historically, our adjustments to actual results have not been material to our overall business. On a quarterly basis, our adjustments to actual results generally have been less than 1% of biopharmaceutical ~~product~~ net sales and can result in either a net increase or a net decrease in income. Product-specific rebate charges, however, can have a significant impact on year-over-year individual product growth trends.

~~The following table provides information about certain deductions from revenues:~~


The following table provides information about certain deductions from revenues:									The following table provides information about certain deductions from revenues:
	Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		September 30, 2012		October 2, 2011			September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012
Medicaid and related state program rebates^(a)	$	132	$	249	$	558	$	925		$	149	$	141	$	442	$	580
Medicare rebates^(a)	159		372		572		1,099			251		159		584		572
Performance-based contract rebates^{(a), (b)}	507		1,570		1,624		2,687			570		425		1,532		1,368
Chargebacks^(c)	969		813		2,732		2,416			876		969		2,699		2,732
Sales allowances^(d)										1,072		1,056		3,101		3,366
Total	$	1,767	$	3,004	$	5,486	$	7,127		$	2,918	$	2,750	$	8,358	$	8,618


^(a)	Rebates are product-specific and, therefore, for any given year are impacted by the mix of products sold.

^(b)

Performance-based contract rebates include contract rebates with managed care customers within the U.S., including health maintenance organizations and pharmacy benefit managers, who receive rebates based on the achievement of contracted performance terms and claims under these contracts. Outside of the U.S., performance-based contract rebates include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or sales milestones.

~~Table of Contents~~

claims under these contracts. Performance-based contract rebates also include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or sales milestones.


^(c)	Chargebacks primarily represent reimbursements to wholesalers for honoring contracted prices to third parties.


^(d)	Sales allowances primarily represent pharmaceutical rebates, discounts and price reductions that are contractual or legislatively mandated outside of the U.S.

The total rebates and chargebacks for the third quarter ~~and first~~of ~~nine~~2013 ~~months of 2012 were lower~~increased compared to the same ~~periods~~period in ~~2011,~~2012, primarily as a result of:

~~the impact of decreased Medicare, Medicaid and~~an increase in performance-based contract rebates ~~contracted for Lipitor~~in the U.K. and ~~certain other products that have lost exclusivity;~~China as a result of competitive factors and contract arrangements;

~~changes~~an increase in ~~product mix;~~Medicare rebates driven by increased volume; and

the impact on chargebacks of decreased sales for certain products that have lost exclusivity and decreased sales for certain generic products sold by our Greenstone unit that are subject to chargebacks;

~~partially offset by, among other factors:~~

an increase in chargebacks for our branded products as a result of increasing competitive ~~pressures.~~pressures,

partially offset by:

a decrease in sales chargebacks for certain products that have lost exclusivity.

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The total rebates and chargebacks for the first nine months of 2013 decreased compared to the same period in 2012, primarily as a result of:

the impact of decreased Medicaid rebates for certain products that have lost exclusivity; and

a decrease in sales chargebacks for certain products that have lost exclusivity,

partially offset by:

an increase in chargebacks for our branded products as a result of increasing competitive pressures;

an increase in performance-based contract rebates in a number of European markets and China as a result of competitive factors and contract arrangements; and

changes in product mix.

Our accruals for Medicaid rebates, Medicare rebates, performance-based contract rebates, sales allowances and chargebacks ~~totaled $2.5~~were $3.3 billion as of September ~~30, 2012~~29, 2013, ~~a decrease from $3.3~~and $3.8 billion as of December 31, ~~2011~~2012, and ~~primarily~~substantially all are ~~all~~ included in Other current liabilities in our condensed consolidated balance sheets.

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Revenues—Major Biopharmaceutical Products

~~The following table provides revenue information for several of our major biopharmaceutical products:~~


The following table provides revenue information for several of our major biopharmaceutical products:																The following table provides revenue information for several of our major biopharmaceutical products:
			Three Months Ended							Nine Months Ended									Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	(MILLIONS OF DOLLARS)		Sep 30, 2012							Sep 30, 2012						(MILLIONS OF DOLLARS)			September 29, 2013			% Change^(a)			September 29, 2013			% Change^(a)
Product		Primary Indications				% Change^(a)				Sep 30, 2012			% Change^(a)									% Change^(a)			September 29, 2013			% Change^(a)
PRODUCT																	PRIMARY INDICATIONS		September 29, 2013		September 29, 2013				% Change^(a)		September 29, 2013				% Change^(a)
Lyrica																	Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury								% Change^(a)		September 29, 2013				% Change^(a)
Prevnar family																	Vaccines for prevention of pneumococcal disease		959		September 29, 2013		1			2,855			(6	)
Enbrel (Outside the U.S. and Canada)																	Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis		932			4			2,769			-
Celebrex																	Arthritis pain and inflammation, acute pain		752			11			2,120			8
Lipitor		Reduction of LDL cholesterol	Sep 30, 2012	$	749			(71	)		$	3,364			(56	)		Reduction of LDL cholesterol		533			(29	)		1,704			(49	)
Lyrica		Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	1,036				8			3,026				12
Enbrel (Outside the U.S. and Canada)		Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis	893				(7	)		2,780				1
Prevnar13/Prevenar 13		Vaccine for prevention of pneumococcal disease	868				(14	)		2,725				(3	)
Celebrex		Arthritis pain and inflammation, acute pain	676				5			1,969				6
Viagra		Erectile dysfunction	517				5			1,498				3			Erectile dysfunction		460			(11	)		1,405			(6	)
Zyvox																	Bacterial infections		319			(3	)		1,007			1
Norvasc		Hypertension	319				(9	)		1,001				(7	)		Hypertension		303			(5	)		917			(8	)
Zyvox		Bacterial infections	328				2			996				3
Sutent		Advanced and/or metastatic renal cell carcinoma (mRCC) and refractory gastrointestinal stromal tumors (GIST) and advanced pancreatic neuroendocrine tumor	294				(1	)		913				5			Advanced and/or metastatic renal cell carcinoma (mRCC) and refractory gastrointestinal stromal tumors (GIST) and advanced pancreatic neuroendocrine tumor		278			(5	)		892			(2	)
Premarin family		Menopause	262				(2	)		797				5			Menopause		276			5			793			(1	)
BeneFIX																	Hemophilia		213			6			619			7
Genotropin		Replacement of human growth hormone	212				(1	)		619				(5	)		Replacement of human growth hormone		183			(14	)		570			(8	)
Vfend																	Fungal infections		193			3			557			3
Pristiq																	Depression		173			14			516			12
Chantix/Champix																	An aid to smoking cessation treatment		154			5			486			(2	)
Detrol/Detrol LA																	Overactive bladder		131			(26	)		437			(24	)
Xalatan/Xalacom		Glaucoma and ocular hypertension	181				(35	)		617				(36	)		Glaucoma and ocular hypertension		140			(23	)		434			(30	)
BeneFIX		Hemophilia	201				13			577				11
Detrol/Detrol LA		Overactive bladder	176				(17	)		576				(14	)
Vfend		Fungal infections	187				9			543				(3	)
Chantix/Champix		An aid to smoking cessation treatment	146				(6	)		496				(9	)
Pristiq		Depression	152				4			461				9
ReFacto AF/Xyntha		Hemophilia	150				7			420				11			Hemophilia		148			(1	)		433			3
Medrol																	Inflammation		107			(5	)		343			(12	)
Zoloft																	Depression and certain anxiety disorders		116			(10	)		341			(14	)
Effexor																	Depression and certain anxiety disorders		96			(10	)		326			(5	)
Zosyn/Tazocin																	Antibiotic		104			(5	)		293			(22	)
Zithromax/Zmax																	Bacterial infections		84			(6	)		283			(11	)
Tygacil																	Antibiotic		92			12			271			9
Relpax																	Treats the symptoms of migraine headaches		83			(10	)		263			(1	)
Fragmin																	Anticoagulant		83			(9	)		263			(7	)
Rapamune																	Immunosuppressant		91			(1	)		261			1
EpiPen																	Epinephrine injection used in treatment of life-threatening allergic reactions		85		27	27			230			6
Revatio		Pulmonary arterial hypertension (PAH)	135				(4	)		414				5			Pulmonary arterial hypertension (PAH)		75			(44	)		225			(46	)
Zoloft		Depression and certain anxiety disorders	129				(7	)		398				(5	)
Medrol		Inflammation	113				(11	)		388				1
Zosyn/Tazocin		Antibiotic	109				(27	)		378				(23	)
Effexor		Depression and certain anxiety disorders	107				(35	)		342				(36	)
Geodon/Zeldox		Schizophrenia; acute manic or mixed episodes associated with bipolar disorder; maintenance treatment of bipolar mania	57				(78	)		322				(57	)
Zithromax/Zmax		Bacterial infections	89				(4	)		318				(5	)
Prevnar/Prevenar (7-valent)		Vaccine for prevention of pneumococcal disease	81				(17	)		303				(25	)
Fragmin		Anticoagulant	91				(4	)		283				—
Relpax		Treats the symptoms of migraine headaches	92				7			266				6
Rapamune		Immunosuppressant	92				(4	)		259				(9	)
Sulperazon																	Antibiotic		78			26			222			16
Cardura		Hypertension/Benign prostatic hyperplasia	79				(14	)		254				(12	)		Hypertension/Benign prostatic hyperplasia		70			(11	)		221			(13	)
Inlyta																	Advanced renal cell carcinoma (RCC)		83			186			217			*
Xanax XR																	Anxiety disorders		69			5			204			—
Xalkori																	Advanced non-small cell lung cancer (NSCLC)		73			92			193			147
Toviaz																	Overactive bladder		57			10			174			16
Aricept^(b)		Alzheimer’s disease	71				(39	)		249				(26	)		Alzheimer’s disease		52			(27	)		173			(31	)
Tygacil		Antibiotic	82				8			249				11
EpiPen^(c)		Epinephrine injection used in treatment of life-threatening allergic reactions	67				14			217				36
Xanax XR		Anxiety disorders	66				(14	)		203				(13	)
BMP2		Development of bone and cartilage	58				(30	)		192				(31	)
Caduet		Reduction of LDL cholesterol and hypertension	68				(55	)		191				(56	)		Reduction of LDL cholesterol and hypertension		52			(24	)		164			(14	)
Sulperazon		Antibiotic	62				22			191				23
Inspra																	Hypertension		53			4			164			5
Diflucan		Fungal Infections	61				(15	)		185				(8	)		Fungal infections		59			(3	)		164			(11	)
Somavert																	Acromegaly		56			14			159			11
Neurontin																	Seizures		50			(4	)		158			(8	)
Dalacin/Cleocin		Antibiotic	74				45			176				27			Respiratory tract infections		50			(32	)		149			(15	)
Neurontin		Seizures	52				(22	)		172				(23	)
Unasyn		Injectable antibacterial	54				(7	)		165				(4	)
Aromasin		Breast cancer	51				(40	)		162				(45	)
Arthrotec		Osteoarthritis and rheumatoid arthritis	50				(18	)		159				(13	)
Inspra		Hypertension	51				—			156				10
Toviaz		Overactive bladder	52				6			150				9
Metaxalone/Skelaxin^(c)		Muscle relaxer	55				(4	)		149				3
Methotrexate		Rheumatoid arthritis	50				(2	)		148				11
Protonix		Gastroesophageal reflux disease	50				(23	)		140				(17	)
Alliance revenues^(d)		Various	879				(4	)		2,577				(4	)
All other^(e)		Various	1,643				2			5,187				7
Xeljanz																	Rheumatoid arthritis		35			*			68			*
Alliance revenues^(c)																	Various		684			(22	)		2,187			(15	)
All other																	Various		1,923			(1	)		5,833			(8	)


^(a)	As compared to the three and nine months ended ~~October 2, 2011~~September 30, 2012, respectively.


^(b)	Represents direct sales under license agreement with Eisai Co., Ltd.


^(c)	~~Legacy King product. King’s operations are included in our financial statements commencing from the acquisition date of January 31, 2011.~~


^(d)	Includes Enbrel (in the U.S. and Canada), Spiriva, Rebif, Aricept ~~Exforge, Rebif~~ and ~~Spiriva.~~


^(e)	~~Includes sales of generic atorvastatin.~~Eliquis.

* Calculation not meaningful.

Certain amounts and percentages may reflect rounding adjustments.

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Biopharmaceutical––Selected Product Descriptions

~~Lipitor~~, for the treatment of elevated LDL-cholesterol levels in the blood, recorded worldwide revenues of $749 million, or a decrease of 71%, in the third quarter of 2012, and $3.4 billion, or a decrease of 56%, in the first nine months of 2012, compared to the same periods in 2011, due to:

◦

the impact of loss of exclusivity in Japan in June 2011 (with generic entry occurring in November 2011), the U.S. (with generic entry occurring in November 2011 and multi-source generic entry occurring in May 2012), Australia in April 2012 and twelve European markets in March and May 2012, including Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Sweden, Switzerland, and the UK;


◦	~~the continuing impact of an intensely competitive lipid-lowering market with competition from generics and branded products worldwide; and~~


◦	~~increased payer pressure worldwide, including the need for flexible rebate policies.~~

~~Geographically,~~


◦	in the U.S., branded Lipitor revenues were $192 million, a decrease of 87% in the third quarter of 2012, and $871 million, a decrease of 79% in the first nine months of 2012, compared to the same periods in 2011; and

◦

in our international markets, branded Lipitor revenues were $557 million, a decrease of 51%, in the third quarter of 2012, and $2.5 billion, a decrease of 26%, in the first nine months of 2012, compared to the same periods in 2011. Foreign exchange had an unfavorable impact on international revenues of $31 million in the third quarter and $59 million in the first nine months of 2012, compared to the same periods in 2011.

~~See the “Our Operating Environment” section of this MD&A for a discussion concerning losses of exclusivity for Lipitor in various markets that have impacted our results in 2012.~~

Lyrica is indicated in the U.S. for ~~the management of post-herpetic neuralgia,~~three neuropathic pain ~~associated with diabetic peripheral neuropathy, the management of~~conditions, fibromyalgia ~~neuropathic pain due to spinal cord injury,~~ and as adjunctive therapy for adult patients with partial onset ~~seizures in the U.S. For~~seizures. In certain countries outside the U.S., ~~Lyrica is indicated for~~indications include neuropathic pain (peripheral and central), ~~the management of~~ fibromyalgia, adjunctive treatment of epilepsy and ~~general~~generalized anxiety disorder. Worldwide revenues for Lyrica ~~recorded increases~~increased 10% in ~~worldwide revenues of 8% in~~both the third quarter of ~~2012~~2013 and ~~12%~~ in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011. There was strong operational performance~~2012, primarily due to volume growth, including increased demand for the neuropathic pain indication in ~~international markets~~Japan.

In the U.S., revenues increased 18% in the third quarter of 2012, including Japan, where Lyrica was launched in 2010 as the first product approved for the peripheral neuropathic pain (NeP) indication. Internationally, Lyrica revenues increased 4% in the third quarter of 20122013 and ~~14%~~17% in the first nine months of ~~2012,~~2013, compared to the same periods in 2011, with the growth due to a focus on enhancing the neuropathic pain diagnosis and treatment rates, the successful re-launch of the general anxiety disorder indication in the EU and physician education regarding neuropathic pain in Japan. Foreign exchange had an unfavorable impact on international revenues of 10% in the third quarter and 6% in the first nine months of 2012, compared to the same periods in 2011. In the U.S., revenues increased 13% in the third quarter of 2012 and 10% in the first nine months of 2012, compared to the same periods in 2011.2012. Notwithstanding these increases, U.S. revenues continue to be affected by increased competition from generic versions of competitive medicines, as well as managed care pricing and formulary pressures.

~~Enbrel~~, for the treatment of moderate-to-severe rheumatoid arthritis, polyarticular juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis and ankylosing spondylitis, recorded a decrease in worldwideInternationally, Lyrica revenues ~~excluding the U.S. and Canada, of 7%~~increased 3% in the third quarter of ~~2012~~2013 and ~~recorded an increase in worldwide revenues of 1%~~6% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011,~~2012, with the growth due to a focus on enhancing diagnosis and treatment rates of neuropathic back pain and expediting the identification and appropriate treatment of generalized anxiety disorder in the EU, and physician education regarding neuropathic pain and fibromyalgia in Japan. Foreign exchange had an unfavorable impact on international revenues of 3% in both the third quarter ~~decline attributable~~and in the first nine months of 2013, compared to the ~~unfavorable impact~~same periods in 2012.

Prevnar family of ~~foreign exchange, partially offset by overall growth in the anti-TNF biologic market. Enbrel revenues from the U.S. and Canada are included in Alliance revenues.~~

Under our co-promotion agreement with Amgen Inc. (Amgen), we co-promote Enbrel in the U.S. and Canada and share in the profits from Enbrel sales in those countries, which we include in Alliance revenues. Our co-promotion agreement with Amgen will expire in October 2013, and, subject to the termsproducts consists of the agreement, we are entitled to a royalty stream for 36 months thereafter, which we expect will be significantly less than our current share of Enbrel profits from U.S. and Canadian sales. Following the end of the royalty period, we will not be entitled to any further revenues from Enbrel sales in the U.S. and Canada. Our exclusive rights to Enbrel outside the U.S. and Canada will not be affected by the expiration of the co-promotion agreement with Amgen.

~~Table of Contents~~

Prevnar 13/Prevenar 13and is Prevnar/Prevenar (7-valent),our ~~13-valent~~ pneumococcal conjugate ~~vaccine~~vaccines for the prevention of various syndromes of pneumococcal ~~disease in infants and young children and in adults 50 years of age and older. Prevnar 13/Prevenar 13 for use in infants and young children has been launched in the U.S.~~disease. Overall, worldwide revenues for the ~~prevention~~Prevnar family of ~~invasive pneumococcal disease caused by the 13 serotypes in Prevnar 13 and otitis media caused by the seven serotypes in Prevnar, and in the EU and many other international markets~~products increased 1% for the prevention of invasive pneumococcal disease, otitis media and pneumococcal pneumonia caused by the vaccine serotypes. In 2011, we received approval of Prevnar 13/Prevenar 13 for use in adults 50 years of age and older in the U.S. for the prevention of pneumococcal pneumonia and invasive pneumococcal disease caused by the 13 serotypes in Prevnar 13, and in the EU for the prevention of invasive pneumococcal disease caused by the vaccine serotypes. To date, Prevenar 13 for use in adults 50 years of age and older has been approved in over 55 countries. Worldwide revenues for Prevnar 13/Prevenar 13 decreased 14% in the third quarter of ~~2012~~2013 and 3%decreased 6% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011.~~ 2012.

In the U.S., revenues for the Prevnar ~~13 decreased 3%~~family of products increased 7% in the third quarter of 2013, compared to the same period in 2012, mainly due to price increases and 7%an inventory build by the Centers for Disease Control and Prevention(CDC) in the third quarter of 2013, partially offset by lower demand related to lower birth rates, lower rates of children receiving the final dose of the approved dosing schedule, and stronger CDC inventory management procedures. Revenues in the U.S. for the Prevnar family of products decreased 6% in the first nine months of 2013, compared to the same period in 2012, due to inventory sell-through in the public and private markets and lower demand, as described above.

Internationally, revenues for the Prevnar family of products decreased 4% in the third quarter of 2013, and decreased 5% in the first nine months of 2013, compared to the same periods in ~~2011. Developed Europe Prevenar 13 revenues also were~~2012, primarily due to lower purchases in Turkey, the ~~third quarter~~end of the catch-up program in Australia/New Zealand and the ~~first nine months~~unfavorable impact of 2012, compared to the same period of 2011. Revenues in the U.S. and developed Europe declined as the pediatric catch-up dose opportunity in third-quarter 2011 was no longer available in third-quarter 2012 since all eligible patients have been vaccinated. In addition, utilization in adults is minimal at this time. Prevenar 13 revenues in emerging markets were lower in the third quarter of 2012, compared to the same period last year, due to the timing of government purchases in Turkey.

foreign exchange.

We currently are conducting the Community-Acquired Pneumonia Immunization Trial in Adults (CAPiTA) to fulfill requirements in connection with the FDA’s approval of the Prevnar 13 adult indication under its accelerated approval program. CAPiTA is an efficacy trial involving subjects 65 years of age and older that is designed to evaluate whether Prevnar 13 is effective in preventing the first episode of community-acquired pneumonia caused by the serotypes contained in the vaccine. ~~We estimate that~~Case accrual for this event-driven trial ~~will be~~was completed in late August 2013. In view of the size of the study, it will take several months to complete the necessary database validation and related activities prior to unblinding the study and reporting the topline results. We expect to report the topline results in early 2014. At its regular meeting held on February 22, 2012, the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) indicated that it will defer voting on a recommendation for the routine use of Prevnar 13 in adults 50 years of age and older until the results of CAPiTA, as well as data on the impact of pediatric use of Prevnar 13 on the disease burden and serotype distribution among adults, are available. The rate of uptake for the use of Prevnar 13 in adults 50 years of age and older has been impacted by ACIP’s decision to defer voting on a recommendation for the routine use of Prevnar 13 in that population. At its regular meeting held on June 20, 2012, ACIP voted to recommend the use of Prevnar 13 for adults 19 years of age and older with immuno-compromising conditions such as HIV infections, cancer, advanced kidney disease and other immuno-compromising conditions. This recommendation is based on the disproportionate burden of invasive pneumococcal disease in this patient population.

Enbrel, for the treatment of moderate-to-severe rheumatoid arthritis, polyarticular juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis and ankylosing spondylitis, a type of arthritis affecting the spine, recorded an increase in worldwide revenues, excluding the U.S. and Canada, of 4% in the third quarter of 2013, while revenues remained relatively unchanged for the first nine months of 2013, compared to the same periods in 2012. Results were favorably impacted by the overall growth in the anti-tumor necrosis factor (TNF) biologic market and unfavorably impacted by foreign exchange and by decreased government purchases in Brazil.

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Under our co-promotion agreement with Amgen Inc. (Amgen), we co-promote Enbrel in the U.S. and Canada and share in the profits from Enbrel sales in those countries, which we have included in Alliance revenues. Our co-promotion agreement with Amgen expired in October 2013, and, subject to the terms of the agreement, we are entitled to a royalty stream for 36 months thereafter, which we expect will be significantly less than our share of Enbrel profits from U.S. and Canadian sales prior to the expiration. The royalties that will be paid to us during the 36-month period will be included in Other (income)/deductions––net rather than in Revenues in our consolidated statements of income. Following the end of the royalty period, we will not be entitled to any further revenues from Enbrel sales in the U.S. and Canada. Our exclusive rights to Enbrel outside the U.S. and Canada will not be affected by the expiration of the co-promotion agreement with Amgen.

Celebrex, indicated for the treatment of the signs and symptoms of osteoarthritis and rheumatoid arthritis worldwide and for the management of acute pain in adults in the U.S., Japan and certain other markets, ~~in the EU,~~ recorded ~~increases~~an increase in worldwide revenues of 5%11% in the third quarter of ~~2012~~2013 and 6%8% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011.~~ 2012, primarily due to strong performance in the U.S.

In the U.S., revenues increased 16% in the third quarter of 2013 and 11% in the first nine months of 2013, compared to the same periods in 2012, ~~strong~~primarily driven by price increases and overall market growth, partially offset by volume erosion due to ongoing generic pressure, as well as higher rebates and sales allowances.

Internationally, Celebrex revenues increased 3% in the third quarter of 2013 and 1% in the first nine months of 2013, compared to the same periods in 2012. Strong operational performance in international markets was driven by growth in Japan (strong performance in the low back pain and osteoarthritis indications), South Korea (strong performance in the rheumatology and orthopedic sectors), and in emerging markets, primarily driven by ~~Japan volume growth~~Latin America and China, partially offset by lower revenues in the developed markets in Europe in the third quarter and first nine months of 2013, compared to the same periods in 2012. Foreign exchange had an unfavorable impact on international revenues of 5% in both the third quarter and in the first nine months of 2013, compared to the same periods in 2012.

Lipitor is for the ~~lower back pain indication. In~~treatment of elevated LDL-cholesterol levels in the ~~U.S.~~blood. Lipitor has lost exclusivity and faces generic competition in all major markets. Branded Lipitor recorded worldwide revenues of $533 million, or a decrease of 29%, ~~prescription volume continues~~in the third quarter of 2013, and $1.7 billion, or a decrease of 49%, in the first nine months of 2013, compared to ~~be challenged by increased competition from generic versions~~the same periods in 2012, due to:


◦	the impact of loss of exclusivity;


◦	the continuing impact of an intensely competitive lipid-lowering market with competition from generics and branded products worldwide; and


◦	the increased payer pressure worldwide, including the need for flexible rebate policies.

Geographically,


◦	in the U.S., revenues decreased 59% in the third quarter of 2013, and 62% in the first nine months of 2013, compared to the same periods in 2012; and


◦	in our international markets, revenues decreased 18% in the third quarter of 2013, and 45% in the first nine months of 2013, compared to the same periods in 2012. Foreign exchange had an unfavorable impact on international revenues of $11 million in the third quarter and $33 million in the first nine months of 2013, compared to the same periods in 2012.

See the “Our Operating Environment” section of ~~competitive medicines and managed care formulary pressures. Celebrex is supported by continued educational and promotional efforts highlighting its efficacy and safety profile~~this MD&A for ~~appropriate patients.~~

a discussion concerning losses of exclusivity for Lipitor in various markets.

Viagra, isindicated for the treatment for erectile dysfunction. Viagra worldwide revenues ~~increased 5%~~decreased 11% in the third quarter of ~~2012~~2013, and 3%decreased 6% in the first nine months of ~~2012,~~2013, compared to the same ~~period~~periods in ~~2011,~~2012, primarily due to a decrease in international revenues. International revenues decreased 28% in the third quarter and 13% in the first nine months of 2013, compared to the same periods in 2012, primarily due to entry of generics in developed Europe and other key developed markets. In emerging markets, the decrease was primarily due to the ~~increase in U.S. revenues partially offset by branded~~impact of both herbal and generic ~~competitive pressure~~competition. Loss of exclusivity for Viagra in ~~developed Europe, other developed~~four major European markets occurred in late-June 2013 and ~~emerging markets. The increase~~reduced revenues for the three months and nine months ended September 29, 2013 by approximately $48 million and $72 million, respectively, in comparison with the same periods in 2012. Revenues in the U.S. ~~more than offset~~increased 2% in the third quarter and were essentially flat in the first nine months of 2013, compared to the same periods in 2012.

Zyvox is the world’s best-selling branded agent among those used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide revenues decreased 3% in the third quarter of 2013 and increased 1% in the first nine months of 2013, compared to the same periods in 2012. The decrease in ~~international markets~~the third quarter of

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2013 was primarily due to ~~operational factors~~a prolonged supply interruption of Zyvox IV in China that is expected to continue through early 2014, and also reflects the ~~adverse~~unfavorable impact of foreign exchange.

Norvasc, for ~~treating~~the treatment of hypertension, lost exclusivity in the U.S. and other major markets in 2007 and in Canada in 2009. Norvasc worldwide revenues decreased 9%5% in the third quarter ~~of 2012~~ and 7%8% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011.~~

~~Zyvox~~ is2012, reflects, among other factors, the world's best-selling branded agent among those used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide revenues increased 2% in the third quarterunfavorable impact of ~~2012 and 3% in the first nine months of 2012, compared to the same periods in 2011, primarily due to growth in emerging markets.~~foreign exchange.

Sutent is indicated for the treatment of advanced renal cell carcinoma, including metastatic renal cell carcinoma (mRCC) ~~and~~; gastrointestinal stromal tumors after disease progression on, or intolerance to, imatinib ~~mesylate~~mesylate; and advanced

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pancreatic neuroendocrine tumor. Sutent worldwide revenues decreased 1%5% in the third quarter of ~~2012~~2013 and ~~increased 5%~~2% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011. The third quarter decline was attributable~~2012, due to decreases in developed Europe and Japan as a result of increased competition and cost-containment measures in those markets, as well as some conversion from Sutent to Inlyta in Japan due to broader label for Inlyta in Japan, which overlaps with the ~~unfavorable impact of foreign exchange,~~Sutent indication, partially offset by ~~strong operational performance driven~~price increases in the U.S. ~~by price~~and increases ~~and volume growth due to targeted marketing efforts, and~~ in uptake in key emerging markets, by increased market share. We continue to drive operational revenue and prescription growth, supported by cost-effectiveness, efficacy and therapy management data. As of September 30, 2012, Sutent was the most ~~prescribed oral mRCC therapy in the U.S.~~notably Russia.

Our Premarin family of products ~~remains the leading therapy to help~~helps women address moderate-to-severe menopausal symptoms. ~~It recorded a decrease in~~Premarin worldwide revenues ~~of 2%~~increased 5% in the third quarter of 2013, compared to the same period in 2012, and ~~an increase of 5%~~decreased 1% in the first nine months of ~~2012,~~2013, compared to the same ~~periods~~period in 2011. In the U.S., in the third quarter of 2012, the continued decline in market share was largely offset by favorable wholesaler inventory levels, price increases in January and July 2012 and favorable rebates. Internationally, the third-quarter decline was attributable to foreign exchange, as well as conversion of new packaging requirements in select markets and the continued decline in government sales.

~~Genotropin~~, one of the world’s leading human growth hormones, is used in children for the treatment of short stature with growth hormone deficiency, Prader-Willi Syndrome, Turner Syndrome, Small for Gestational Age Syndrome, Idiopathic Short Stature (in the U.S. only) and Chronic Renal Insufficiency (outside the U.S. only), as well as in adults with growth hormone deficiency. Genotropin is supported by a broad platform of innovative injection-delivery devices and patient-support programs. Genotropin worldwide revenues decreased 1% in the third quarter of 2012 and 5% in the first nine months of 2012, compared to the same periods in 2011.

~~Xalabrands~~ ~~consists of~~ ~~Xalatan, a prostaglandin, which is a branded agent used to reduce elevated eye pressure in patients with open-angle glaucoma or ocular hypertension, and~~ ~~Xalacom~~, a fixed combination prostaglandin (Xalatan) and beta blocker (timolol) available outside the U.S. Xalatan/Xalacom worldwide revenues decreased 35% in the third quarter of 2012 and 36% in the first nine months of 2012, compared to the same periods in 2011. Lower revenues were due primarily to the loss of exclusivity2012. Revenues in the U.S. were favorably impacted by two price increases and growth in ~~March 2011~~Premarin Vaginal Cream prescription volume, and ~~in the majority of European markets in January 2012.~~unfavorably impacted by prescription volume declines for Premarin Family Oral brands.

BeneFIX and ReFacto AF/Xyntha are hemophilia products using state-of-the-art manufacturing that assist patients with atheir lifelong bleeding disorder. BeneFIX is the only available recombinant factor IX product for the treatment of hemophilia B, while ReFacto AF/Xyntha are recombinant factor VIII products for the treatment of hemophilia A. Both products are indicated for the control and prevention of bleeding in patients with these disorders and in some countries also are indicated for prophylaxis in certain situations, such as surgery.disorders. BeneFIX recorded ~~increases~~an increase in worldwide revenues of ~~13%~~6% in the third quarter of ~~2012~~2013 and ~~11%~~7% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011,~~2012, primarily as a result of increases in the U.S. due to the ~~launch~~continued adoption of the ~~new larger 3000IU dosage pack~~3000 International Unit vial, as well as price increases, and ~~price increases.~~ increased revenues in Japan, due to continued product adoption.

ReFacto AF/Xyntha recorded ~~increases~~a 3% increase in worldwide revenues ~~of 7% in the third quarter of 2012 and 11%~~ in the first nine months of ~~2012,~~2013, compared to the same ~~periods~~period in ~~2011, driven by~~2012, primarily due to the ~~successful~~final transition of patients to Xyntha in Australia ~~after winning~~due to the national tender ~~there earlier~~secured in ~~2012,~~2011, continued strong U.S. performance with competitive patient conversions, and with the successful launch in Germany of ~~a new~~the ReFacto AF dual chamber syringe ~~as well as a price increase in the U.S.~~

~~Detrol/Detrol LA~~, a muscarinic receptor antagonist, is one of the most prescribed branded medicines worldwide for overactive bladder. Detrol LA is an extended-release formulation taken once a day. Detrol/Detrol LA worldwide revenues decreased 17% in the third quarter of 2012 and 14% in the first nine months of 2012, compared to the same periods in 2011, primarily due to increased competition from other branded medicines and a shift in promotional focus to our Toviaz product in most major markets. Detrol immediate release (Detrol IR) lost exclusivity in the U.S. in September 2012. We expect generic competition for Detrol LA in the U.S. to commence no earlier than January 1, 2014, except in certain limited circumstances, and no later than March 1, 2014.

~~Vfend~~ is a broad-spectrum agent for treating yeast and molds. Vfend worldwide revenues increased 9% in the third quarter of 2012 and decreased 3% in the first nine months of 2012, compared to the same periods in 2011. International revenues decreased 3% in both the third quarter of 2012 and the first nine months of 2012, compared to the same period in 2011, due to foreign exchange and supply constraints. Revenues in the U.S. in the third quarter of 2012 increased compared to the same period in 2011, primarily due to rebates accounted for in 2011, partially offset by the loss of exclusivity of Vfend tablets and the launch of generic voriconazole (generic Vfend) in February 2011.

~~Chantix/Champix~~ is an aid to smoking-cessation treatment in adults 18 years of age and older. Chantix/Champix worldwide revenues decreased 6% in the third quarter of 2012 and 9% in the first nine months of 2012, compared to the same periods in 2011, primarily due to the impact of changes to the product’s label, negative media exposure across several key markets and macro-economic decline, which decreased patient willingness to pay out of pocket. We

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are continuing our educational and promotional efforts, which are focused on addressing the significant health consequences of smoking, highlighting the Chantix/Champix benefit-risk proposition, emphasizing the importance of the physician-patient dialogue in helping patients quit smoking and identifying alternative treatment-funding models.("FuseNGo").

Pristiq is approved for the treatment of major depressive disorder in the U.S. and in various other countries. Pristiq has also been approved for treatment of moderate-to-severe vasomotor symptoms (VMS) associated with menopause in Thailand, Mexico, the Philippines and Ecuador. Pristiq recorded ~~increases~~an increase in worldwide revenues of 4%14% in the third quarter of ~~2012~~2013 and 9%12% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011,~~2012, primarily due to ~~price increases~~prescription growth in the emerging markets, Canada and Australia, as well as ~~market growth partially offset by lower prescription share~~more favorable contract rebates and a price increase in the U.S.~~, and internationally by further penetration in existing markets.~~

~~Revatio~~Chantix/Champix is ~~for the~~an aid to smoking-cessation treatment in adults 18 years of ~~pulmonary arterial hypertension (PAH).~~age and older. Worldwide revenues ~~decreased 4%~~increased 5% in the third quarter of ~~2012~~2013 and ~~increased 5%~~decreased 2% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011. The third quarter decline was primarily attributable to the unfavorable impact of foreign exchange, partially offset by an increased PAH awareness driving earlier diagnosis~~2012. Revenues in the U.S. ~~and EU. In the U.S., Revatio tablet lost exclusivity in September 2012, and Revatio intravenous injection will lose exclusivity in May 2013.~~

~~Zosyn/Tazocin, our broad-spectrum intravenous antibiotic, faces generic global competition. U.S. exclusivity was lost in September 2009. Zosyn/Tazocin recorded decreases in worldwide revenues of 27%~~increased 32% in the third quarter of ~~2012~~2013 and ~~23%~~8% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011.~~

~~Effexor, an antidepressant for treating adult patients with major depressive disorder, generalized anxiety disorder, social anxiety disorder~~2012, primarily due to price increases in January and ~~panic disorder, faces generic competition in most markets. It recorded decreases in worldwide~~July 2013 and lower rebates. International revenues ~~of 35%~~decreased 14% in the third quarter ~~of 2012~~ and ~~36%~~decreased 11% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011.~~2012, primarily due to lower overall market growth across several key markets as a result of a challenging macro-economic environment, as well as the lingering impact from previous negative media exposure and the unfavorable impact of foreign exchange.

~~Geodon/Zeldox~~Inlyta, ~~an atypical antipsychotic, is indicated~~ for the treatment of ~~schizophrenia, as monotherapy for~~patients with advanced renal cell carcinoma (RCC) after failure of a prior systemic treatment, is approved in 55 countries, including the ~~acute treatment of bipolar manic or mixed episodes,~~U.S., EU, Switzerland, Japan, Canada, Australia, South Korea and ~~as an adjunct to lithium or valproate for the maintenance treatment of bipolar disorder. Geodon~~some emerging markets, including Russia, Mexico and Turkey (exact indications vary by region). Inlyta recorded worldwide revenues ~~decreased 78%~~of $83 million in the third quarter of ~~2012~~2013 and ~~57%~~$217 million in the first nine months of ~~2012, compared to the same periods in 2011, primarily due to loss of exclusivity in the U.S. in March 2012.~~

~~Prevnar/Prevenar (7-valent)~~, our 7-valent pneumococcal conjugate vaccine for preventing invasive, and, in certain international markets, non-invasive pneumococcal disease in infants and young children, recorded decreases in worldwide revenues of 17% in the third quarter of 2012 and 25% in the first nine months of 2012, compared to the same periods in 2011. Many markets have transitioned from the use of Prevnar/Prevenar (7-valent) to Prevnar 13/Prevenar 13, resulting in lower revenues for Prevnar/Prevenar (7-valent). We expect this trend to continue.

~~Caduet~~ is a single-pill therapy combining Lipitor and Norvasc for the prevention of cardiovascular events. Caduet worldwide revenues decreased 55% in the third quarter of 2012 and 56% in the first nine months of 2012, compared to the same periods in 2011, primarily due to the loss of U.S. exclusivity in November 2011.2013.

Xalkori,, for the treatment of patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) that is anaplastic lymphoma kinase (ALK)-positive, ~~as detected by an FDA-approved test, was~~is now approved byin more than 60 countries, including the ~~FDA in August 2011. In developed markets, Xalkori has also been approved in~~U.S., EU, Japan, South Korea, Canada, Australia and Switzerland, as well as in many emerging markets, including China, Russia, Mexico, India and ~~it received conditional marketing authorization in the EU in October 2012. In addition, it has been filed or approved in more than 25 emerging markets.~~Turkey. Xalkori recorded worldwide revenues of ~~$38~~$73 million in the third quarter of ~~2012,~~2013 and ~~$78~~$193 million in the first nine months of ~~2012.~~2013.

~~Inlyta,~~Xeljanz was approved in the U.S. in November 2012 and in various countries in 2013 for the treatment of adult patients with advanced renal cell carcinoma after failure of a prior systemic treatment, has been approved in the U.S., Switzerland, Japan, Canada, Australia, South Korea and the EU (exact indications vary by region). Inlytamoderately to severely active rheumatoid arthritis. Xeljanz recorded worldwide revenues of ~~$28~~$35 million in the third quarter of ~~2012,~~2013 and ~~$53~~$68 million in the first nine months of ~~2012.~~2013, virtually all in the U.S.

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~~Worldwide~~ ~~alliance~~Alliance revenues worldwide decreased 4%22% in ~~both~~ the third quarter of ~~2012~~2013 and 15% in the first nine months of ~~2012,~~2013, compared to the same periods in ~~2011,~~2012, mainly due to:

◦

the near-term expiration of the co-promotion collaboration for Spiriva in the U.S. and certain European countries and the expiration of the collaboration in Australia, Canada and certain other European countries, which resulted in declines of $170 million in the third quarter and $373 million in the first nine months of 2013, compared to the same periods in 2012, in Pfizer's share of Spiriva's revenues pursuant to the terms of the collaboration agreement; and

◦

the loss of exclusivity for Aricept 5mg and 10mg tablets in the U.S. in November 2010 and the entry of multi-source generic competition in the U.S. in May 2011, as well as the loss of exclusivity in many major European markets in February 2012 and the termination of the co-promotion agreement for Aricept in Japan in December 2012, which resulted in a decrease in Pfizer's share of Aricept revenues of $69 million in the third quarter of 2013 and $221 million in the first nine months of 2013, compared to the same periods in 2012,

partially offset by:


◦	the strong performance of Enbrel in the U.S.

The Aricept 23mg tablet lost exclusivity in the U.S. in November 2010 and the entry of multi-source generic competition in the U.S. in May 2011, as well as the loss of exclusivity in many major European markets in February 2012, and lower revenues for Spiriva in certain European countries due to the expiration of our collaboration with BI in those countries, partially offset by the strong performance of Enbrel and Rebif in the U.S. We expect that the Aricept 23mg tablet will have exclusivity in the U.S. until July 2013. See the “Industry-Specific Challenges” section of this MD&A for a discussion regarding the

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expiration of various contract rights relating to Aricept, Spiriva, Enbrel and ~~Aricept in 2012. ELIQUIS~~Rebif.

Eliquis (apixaban) is being jointly developed and commercialized by Pfizer and Bristol-Myers Squibb (BMS). In 2012, Eliquis (apixaban) was approved to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation in the 27 countries of the EU, plus Iceland and Norway, Canada, Japan and the U.S. To date, we have launched that indication for Eliquis in the U.S., UK, Germany, Denmark, Japan, Netherlands and Sweden. The two companies share ~~with respect to the approved indication in the EU and, if and when indications for ELIQUIS are approved in various markets, will share on a global basis~~ commercialization expenses and profit/losses ~~equally. See~~equally on a global basis. While we are the ~~"Research~~third entrant in this market, we believe we have a differentiated product profile and ~~Development~~continue to invest in medical education and peer-to-peer programs to assist physicians in understanding the data, and we have begun direct-to consumer advertising in the U.S.

Embeda—A prior approval supplement for a manufacturing change was submitted to the FDA in early July 2013. In early November 2013, the FDA approved that change, and we anticipate returning Embeda to the market in the second quarter of 2014.

For additional information about our pending new drug applications and supplemental filings, see the “Research and Development––Product ~~Developments~~—~~Biopharmaceutical"~~Developments––Biopharmaceutical” section of this MD~~&A for additional information regarding ELIQUIS (apixaban).~~

&A.

See Notes to Condensed Consolidated Financial Statements—Note 12. Commitments and Contingencies for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above.

~~Embeda—On February 23, 2011, we stopped distribution~~

Table of our Embeda product due to failed specification tolerance related to naltrexone degradation identified in post-manufacturing testing. On March 10, 2011, we initiated a voluntary recall to wholesale and retail customers of all Embeda products. We have been actively pursuing several possible pathways to address the stability issues that would enable us to resume marketing this product. We met with the FDA in May 2012 to discuss our proposal for reintroduction of Embeda to the market. The required stability programs are underway, and we anticipate submission of a prior approval supplemental in the first quarter of 2013.Contents

Research and Development––Operations and Product Development

Research and Development Operations

Innovation is critical to the success of our company and drug discovery and development is time-consuming, expensive and unpredictable, particularly for human health products. As a result, and also because we are predominately a human health company, the vast majority of our R&D spending is associated with human health products, compounds and activities.

~~The following table provides information about our~~ ~~Research and development expenses~~:unpredictable.

Research and Development Expenses
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2012
October 2,
2011

%
Change

September 30,
2012
October 2,
2011

%
Change

Primary Care Operating Segment^(a)
$ 247
$ 286
(14 ) $ 739
$ 912
(19 )
Specialty Care and Oncology Operating Segment^(a)
345
400
(14 ) 1,044
1,122
(7 )
Established Products and Emerging Markets Operating Segment^(a)
84
71
18
223
206
8
Other operating segments^{(a), (b)}
357
98
264
551
304
81
Worldwide Research and Development/Pfizer Medical^(c)
655
833
(21 ) 1,999
2,536
(21 )
Corporate and other^(d)
293
488
(40 ) 1,178
1,407
(16 )
$ 1,981
$ 2,176
(9 ) $ 5,734
$ 6,487
(12 )



The following table provides information by operating segment about our R&D expenses (see also Notes to Condensed Consolidated Financial Statements—Note 13. Segment, Geographic and Other Revenue Information):
	R&D Expenses
	Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change
Primary Care^(a)	$	245	$	247	(1	)	$	682	$	739	(8	)
Specialty Care and Oncology^(a)	326		345		(6	)	1,047		1,044		—
Established Products and Emerging Markets^(a)	95		84		13		264		223		18
Consumer Healthcare^{(a), (b)}	25		278		(91	)	74		323		(77	)
Worldwide Research and Development/Pfizer Medical^(c)	709		655		8		2,039		1,999		2
Corporate and other^(d)	227		278		(18	)	761		1,133		(33	)
Total Research and Development Expenses	$	1,627	$	1,887	(14	)	$	4,867	$	5,461	(11	)

^(a)

Our operating segments, in addition to their sales and marketing responsibilities, are responsible for certain development activities. Generally, these responsibilities relate to additional indications for in-line products and ~~IPR&D~~in-process research and development (IPR&D) projects that have achieved proof-of-concept. R&D spending may include upfront and milestone payments for intellectual property rights.


^(b)	~~Includes~~The decrease relates to the ~~Animal Health operating segment and the Consumer Healthcare operating segment. The increase in 2012 relates to~~non-recurrence of a $250 million payment to AstraZeneca in the third quarter and first nine months of 2012 to obtain the exclusive, global, over-the-counter rights to Nexium.

^(c)

Worldwide Research and Development is generally responsible for ~~human health~~ research projects until proof-of-concept is achieved, and then for transitioning those projects to the appropriate business unit for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. 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. Worldwide Research and Development is also responsible for all ~~human-health-related~~ regulatory submissions and interactions with regulatory agencies, including all ~~safety-event~~safety event activities. Pfizer Medical is responsible for ~~external affairs relating to all therapeutic areas, providing Pfizer-related~~the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality ~~assurance~~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 activities, which include conducting clinical trial audits and readiness reviews. The decreases in both the third quarter and first nine months of 2012 compared to the same periods in 2011 result from cost savings associated with the R&D productivity initiative announced on February 1, 2011 (see the “Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A).processes.

^(d)

Corporate and other includes unallocated costs, primarily facility costs, information technology, share-based compensation, and restructuring-related costs. The decreases in the third quarter and in the first nine monthsof ~~2012 results~~2013 primarily reflect lower charges relating to implementing our cost-reduction and productivity initiatives as well as efficiencies gained from ~~lower additional~~these efforts(see the “Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A).

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depreciation associated with the R&D productivity initiative announced on February 1, 2011 (see the “Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A).

Product Developments—Biopharmaceutical

We continue to invest in R&D to provide potential future sources of revenues through the development of new products, as well as through additional uses for in-line and alliance products. Notwithstanding our efforts, there are no assurances as to when, or if, we will receive regulatory approval for additional indications for existing products or any of our other products in development.

We continue to ~~closely evaluate~~transform our global research and development ~~function~~organization and pursue strategies intended to improve innovation and overall productivity ~~by prioritizing areas~~in R&D with the ~~greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas with the highest potential to~~goal of building a sustainable pipeline that will deliver value in the near term and over time. Our R&D priorities include: delivering a pipeline of differentiated therapies with the greatest scientific and commercial promise, innovating new capabilities that can position Pfizer for long-term leadership and creating new models for biomedical collaboration that will expedite the pace of innovation and the system's overall productivity. To that end, our research primarily focuses on five high-priority areas that have a mix of small molecules and large ~~molecules––~~molecules—immunology and inflammation; oncology; cardiovascular ~~metabolic~~ and ~~endocrine~~metabolic diseases; neuroscience and pain; and vaccines. Other areas of focus include rare diseases and biosimilars.

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Our development pipeline, which is updated quarterly, can be found at www.pfizer.com/pipeline. It includes an overview of our research and a list of compounds in development with targeted indication, phase of development and, for late-stage programs, mechanism of action. The information currently in our development pipeline is accurate as of November 8, ~~2012.~~2013.

The following series of tables provides information about significant regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan, as well as additional indications and new drug candidates in late-stage development.



RECENT FDA APPROVALS
PRODUCT	INDICATION	DATE APPROVED
~~XELJANZ~~ Duavee (Conjugated Estrogens/Bazedoxifene)^(a)	Treatment of moderate-to-severe vasomotor symptoms associated with menopause and prevention of postmenopausal osteoporosis in women with a uterus	October 2013
Eliquis (Apixaban)^(b)	Prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation	December 2012
Xeljanz (Tofacitinib)	Treatment of moderate-to-severe active rheumatoid arthritis	November 2012
~~BOSULIF (Bosutinib)~~	~~Treatment of previously treated chronic myelogenous leukemia~~	~~September 2012~~
~~Lyrica~~	~~Treatment of central neuropathic pain due to spinal cord injury~~	~~June 2012~~
~~ELELYSO (taliglucerase alfa)~~^(a)	~~Treatment of adults with a confirmed diagnosis of type 1 Gaucher disease~~	~~May 2012~~
~~INLYTA (Axitinib)~~	~~Treatment of advanced renal cell carcinoma after failure of one prior systemic therapy~~	~~January 2012~~
~~Prevnar 13 Adult~~	~~Prevention of pneumococcal pneumonia and invasive disease in adults 50 years of age and older~~	~~December 2011~~

^(a)

~~In November 2009, we entered into~~The FDA approved the 0.45mg/20mg dose of Duavee for these indications. We received a ~~license~~"complete response" letter from the FDA with regard to the 0.625mg/20mg dose for these indications and ~~supply agreement with Protalix BioTherapeutics, which provides us exclusive worldwide rights, except in Israel, to develop and commercialize ELELYSO (taliglucerase alpha)~~for an indication for the treatment of ~~Gaucher disease.~~vulvar and vaginal atrophy.


^(b)	This indication for Eliquis (apixaban) was developed and is being commercialized in collaboration with BMS.



PENDING U.S. NEW DRUG APPLICATIONS (NDA) AND SUPPLEMENTAL FILINGS
PRODUCT	INDICATION	DATE FILED*
Eliquis (Apixaban)^(a)	Prevention of venous thromboembolism following hip or knee replacement surgery	July 2013
Tafamidis meglumine^(a)(b)	Treatment of transthyretin familial amyloid polyneuropathy (TTR-FAP)	February 2012
~~Apixaban~~^(b)	~~Prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation~~	~~November 2011~~
Genotropin Mark VII Multidose Disposable Device (Somatropin rDNA Origin)^(c)	Replacement of human growth hormone deficiency ~~(Mark VII multidose disposable device)~~	December 2009
Celebrex (Celecoxib)^(d)	Chronic pain	October 2009
~~Geodon~~Remoxy (Oxycodone Hydrochloride)^(e)	~~Treatment of bipolar disorder––pediatric filing~~	~~December 2008~~
~~Remoxy~~^(g)f	Management of moderate-to-severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time	August 2008
~~Spiriva~~Viviant (Bazedoxifene)^(g)	~~Respimat device for chronic obstructive pulmonary disease~~	~~January 2008~~
~~Viviant~~^(h)(f)	Osteoporosis treatment and prevention	August 2006

*The dates set forth in this column are the dates on which the FDA accepted our submissions.

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^(a)	This indication for Eliquis (apixaban) was developed in collaboration with BMS.

^(b)

In May 2012, the ~~FDA’s~~FDA's Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to the tafamidis NDA. The FDA ~~is requesting~~has requested the completion of a second efficacy study ~~to establish substantial evidence of effectiveness~~ and also ~~is asking~~has asked for additional information on the data within the current tafamidis NDA. We ~~have requested a meeting~~continue to work with the FDA ~~in order~~ to ~~discuss the next steps regarding the tafamidis NDA.~~

^(b)

~~Apixaban is being developed in collaboration with our alliance partner, BMS. On June 22, 2012, the FDA issued~~define a “complete response” letter for apixaban for the prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation. The “complete response” letter requests additional information on data management and verification from the ARISTOTLE trial. The FDA has not requested that the companies complete any new studies. On September 26, 2012, the companies announced the FDA acknowledged receipt of the NDA resubmission for apixaban and deemed the resubmission a complete response to its “complete response” letter. The FDA assigned a new Prescription Drug User Fee Act (PDUFA) goal date of March 17, 2013.path forward.

^(c)

~~In April 2010, we received~~After receiving a “complete response” letter from the FDA for the Genotropin Mark VII multidose disposable device ~~submission. In August 2010,~~submission, we submitted our response ~~to address the requests and recommendations included~~ in ~~the FDA letter.~~August 2010. In April 2011, we received a second “complete response” letter from the FDA, ~~requesting additional information. We are working to address the FDA’s requests for additional information.~~and we submitted our response in July 2013.


^(d)	In June 2010, we received a “complete response” letter from the FDA for the Celebrex chronic pain supplemental NDA. The supplemental NDA remains pending while we await the completion of ongoing studies to determine next steps.

^(e)

In October 2009, we received a “complete response” letter from the FDA with respect to the supplemental NDA for Geodon for the treatment of acute bipolar mania in children and adolescents aged 10 to 17 years. In October 2010, we submitted our response. In April 2010, we received a “warning letter” from the FDA with respect to the clinical trial in support of this supplemental NDA. We developed corrective actions and procedures to address the issues raised in the “warning letter." In April 2011, we received a second “complete response" letter from the FDA in which the FDA indicated that, in its view, the reliability of the data supporting the filing had not yet been demonstrated, and that the fulfillment of the Pediatric Research Equity Act (PREA) commitment for the study had been rescinded. While we are working with the FDA to develop a plan for moving forward to fulfill the PREA commitment, such an action would not extend Geodon exclusivity for an additional six months because we lost exclusivity for Geodon in the U.S. in March 2012.

^(f)

In 2005, King Pharmaceuticals, Inc. (King) entered into an agreement with Pain Therapeutics, Inc. (PT) to develop and commercialize Remoxy. In August 2008, the FDA accepted the NDA for Remoxy that had been submitted by King and PT. In December 2008, the FDA issued a “complete response” letter. In March 2009, King exercised its right under the agreement with PT to assume sole control and responsibility for the development of Remoxy. In December 2010, King resubmitted the NDA for Remoxy with the FDA. In June 2011, we and PT announced that a “complete response” letter ~~was~~had been received from the FDA with regard to the resubmission of the NDA. ~~We have been working~~Having achieved technical milestones related to manufacturing and following guidance received from the FDA earlier in the year, we announced in October 2013 that we will proceed with the additional clinical studies and other actions required to address the ~~issues raised~~"complete response" letter received in ~~the letter, which primarily relate to manufacturing. We have analyzed the results from two, recently completed bioavailability~~June 2011. These new clinical studies ~~as well as data from other experiments that were conducted to optimize~~will include, in part, a pivotal bioequivalence study with the formulation composition and analytical methods for Remoxy. While we have gained important insights from this work, we have initiated a confirmatory bioavailability study to assess the pharmacokinetic profile of modified Remoxy formulation ~~compositions, which we expect~~ to ~~read out early in 2013. The results of this~~bridge to the clinical data related to the original Remoxy formulation, and an abuse-potential study will provide us with much greater clarity as to whether or not we will be able to adequately address the questions raised in the “complete response” letter received from the FDA. We are targeting a late-March meeting with the ~~FDA~~modified formulation. As previously disclosed, the "complete response" submission is not expected to ~~discuss our plan~~occur prior to ~~address the June 2011 “complete response" letter.~~mid-2015.

^(g)

Boehringer Ingelheim (BI), our alliance partner, holds the NDAs for Spiriva Handihaler and Spiriva Respimat. In September 2008, BI received a “complete response” letter from the FDA for the Spiriva Respimat submission. The FDA is seeking additional data, and we are coordinating with BI, which is working with the FDA to provide the additional information. A full response will be submitted to the FDA upon the completion of planned and ongoing studies.

^(h)(f)

Two “approvable” letters were received by Wyeth in April and December 2007 from the FDA for Viviant (bazedoxifene), for the prevention of post-menopausal osteoporosis, that set forth the additional requirements for approval. In May 2008, Wyeth received an “approvable” letter from the FDA for the treatment of post-menopausal osteoporosis. The FDA is seeking additional data, and we have been systematically working through these requirements and seeking to address the FDA’s concerns. A full response will be provided to the FDA. In February 2008, the FDA advised Wyeth that it expects to convene an advisory committee to review the pending NDAs for both the treatment and prevention indications after we submit our response to the “approvable” letters. In April 2009, Wyeth received approval in the EU for CONBRIZA (the EU trade name for Viviant) for the treatment of post-menopausal osteoporosis in women at increased risk of fracture. Viviant was also approved in Japan in July 2010 for the treatment of post-menopausal osteoporosis and in South Korea in November 2011 for the treatment and prevention of post-menopausal osteoporosis.

On August 30, 2012, we were informed by the FDA that the supplemental NDA for Revatio was not approved for pediatric patients due to safety concerns, particularly with regard to the chronic use of Revatio in children.

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letter from the FDA for the treatment of post-menopausal osteoporosis. The FDA is seeking additional data, and we have been systematically working through these requirements and seeking to address the FDA's concerns. In February 2008, the FDA advised Wyeth that it expects to convene an advisory committee to review the pending NDAs for both the treatment and prevention indications after we submit our response to the “approvable” letters. In view of the recent approval of Duavee by the FDA, we are reassessing the next steps regarding our NDAs for Viviant. In April 2009, Wyeth received approval in the EU for CONBRIZA (the EU trade name for Viviant) for the treatment of post-menopausal osteoporosis in women at increased risk of fracture.



REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
PRODUCT	DESCRIPTION OF EVENT	DATE APPROVED	DATE FILED*
~~Xalkori (Crizotinib)~~Vyndaqel (Tafamidis meglumine)	Approval in Japan as a treatment to delay the peripheral neurological impairment of transthyretin familial amyloid polyneuropathy (TTR-FAP)	September 2013	—
Prevenar 13 Adult	Application filed in Japan for prevention of pneumococcal pneumonia and invasive disease caused by Streptococcus pneumoniae serotypes (1, 3, 4, 5, 6A, 6B, 7F, 9V, 14, 18C, 19A, 19F and 23F) in adults 65 years of age and older	—	July 2013
Prevenar 13 Infant	Approval in Japan for prevention of invasive disease caused by Streptococcus pneumoniae serotypes (1, 3, 4, 5, 6A, 6B, 7F, 9V, 14, 18C, 19A, 19F and 23F) in infants and young children	June 2013	__
Bosulif (Bosutinib)	Conditional marketing authorization in the EU for treatment of previously treated ~~ALK-positive advanced non-small cell lung cancer~~chronic myelogenous leukemia	~~October 2012~~March 2013	—
~~INLYTA (Axitinib)~~	~~Approval in the EU for treatment of advanced renal cell carcinoma after failure of prior systemic treatment~~	~~September 2012~~	—
~~Sutent~~Xeljanz (Tofacitinib)	Approval in Japan for treatment of ~~pancreatic neuroendocrine tumor~~rheumatoid arthritis with inadequate response to existing therapies	~~August~~March 2013	—
Lyrica (Pregabalin)	Approval in Japan for treatment of neuropathic pain	February 2013	—
Eliquis (Apixaban)^(a)	Approval in Japan for prevention of ischemic stroke and systemic embolism in patients with nonvalvular atrial fibrillation	December 2012	—
~~Bazedoxifene-conjugated estrogens~~Toviaz (Fesoterodine)	Approval in Japan for treatment of urinary urgency, urinary frequency and urge incontinence due to overactive bladder	December 2012	—
Eliquis (Apixaban)^(a)	Approval in the EU for prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation	November 2012	—
Conjugated Estrogens/Bazedoxifene	Application filed in the EU for treatment of symptoms associated with menopause and osteoporosis	—	July 2012
~~Prevenar 13 Infant~~	~~Application filed in Japan for prevention of invasive pneumococcal disease in infants and young children~~	—	~~July 2012~~
~~Lyrica (Pregabalin)~~	~~Approval in Japan for treatment of fibromyalgia~~	~~June 2012~~	—
~~INLYTA (Axitinib)~~	~~Approval in Japan for treatment of renal cell carcinoma not indicated for curative resection, metastatic renal cell carcinoma~~	~~June 2012~~	—
~~Xalkori (Crizotinib)~~	~~Approval in Japan for treatment of ALK-positive advanced non-small cell lung cancer~~	~~March 2012~~	—
~~Lyrica (Pregabalin)~~	~~Application filed in Japan for treatment of neuropathic pain: peripheral neuropathic pain, central neuropathic pain~~	—	~~March 2012~~
~~Toviaz~~	~~Application filed in Japan for treatment of overactive bladder~~	—	~~March 2012~~
~~Tofacitinib~~	~~Application filed in Japan for treatment of rheumatoid arthritis~~	—	~~December 2011~~
~~Celecox (Celebrex)~~	~~Approval in Japan for treatment of acute pain: post-operative, post-trauma, post-tooth extraction~~	~~December 2011~~	—
~~Apixaban~~	~~Application filed in Japan for prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation~~	—	~~December 2011~~
~~Vyndaqel (Tafamidis meglumine)~~	~~Approval in the EU for treatment of TTR-FAP in adult patients with stage 1 symptomatic polyneuropathy~~	~~November 2011~~	—
~~Tofacitinib~~	~~Application filed in the EU for treatment of moderate-to-severe active rheumatoid arthritis~~	—	~~November 2011~~
~~ELIQUIS (Apixaban)~~^(a)	~~Application filed in the EU for prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation~~	—	~~October 2011~~
~~Bosutinib~~^(b)	~~Application filed in the EU for treatment of previously treated chronic myelogenous leukemia~~	—	~~August 2011~~



*	For applications in the EU, the dates set forth in this column are the dates on which the European Medicines Agency (EMA) validated our submissions.


^(a)	~~In September 2012, the EMA’s Committee~~This indication for ~~Medicinal Products for Human Use (CHMP) issued an opinion recommending that ELIQUIS~~Eliquis (apixaban) ~~be granted approval for the prevention of stroke~~was developed and ~~systemic embolism~~is being commercialized in ~~patients~~collaboration with ~~nonvalvular atrial fibrillation and one or more risk factors for stroke.~~BMS.


^(b)	~~The initial application was for the treatment of newly diagnosed chronic myelogenous leukemia.~~

In June 2012, the CHMP issued an opinion recommending against the approval of taliglucercase alfa for the treatment of Gaucher disease. As part of its opinion, the CHMP gave a positive risk-benefit assessment for taliglucerase alfa, concluding that the benefits of the medicine outweigh its risks in the treatment of type 1 Gaucher disease. Despite the positive risk-benefit assessment, the CHMP did not recommend approval due to Shire plc’s velaglucerase alfa, which received prior marketing authorization with orphan drug designation for the same condition and, as a result, has orphan market exclusivity in the EU for ten years from the time of its authorization in August 2010. We pursued a request for derogation from Shire’s orphan market exclusivity based on a number of factors. That request, however, was denied. In November 2012, the European Commission endorsed the CHMP's recommendation and declined to grant marketing authorization for taliglucerase alfa.

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LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS
PRODUCT	INDICATION
~~Bazedoxifene-conjugated estrogens~~	~~A tissue-selective estrogen complex for the treatment of symptoms associated with menopause and osteoporosis (U.S.)~~
~~ELIQUIS~~Eliquis (Apixaban)	For the ~~prevention and~~ treatment of venous thromboembolism, which is being developed in collaboration with BMS
~~INLYTA~~Inlyta (Axitinib)^(a)	Oral and selective inhibitor of vascular endothelial growth factor (VEGF) receptor 1, 2 & 3 for the treatment of adjuvant renal cell carcinoma (Asia only)
Lyrica (Pregabalin)	Peripheral neuropathic pain; CR (once-a-day) dosing
Sutent (Sunitinib)	Adjuvant renal cell carcinoma
Tofacitinib	A JAK kinase inhibitor for the treatment of psoriasis, ~~and~~ ulcerative colitis and psoriatic arthritis
Xalkori (Crizotinib)	An oral ALK and c-Met inhibitor for the treatment of ALK-positive 1st and 2nd line (supports potential full approval in the U.S.) non-small cell lung cancer
Zithromax/chloroquine	Malaria

^(a)

~~In October 2012, we announced that Phase 3 study AGILE 1051 of INLYTA~~^® (axitinib) did not meet its primary endpoint of demonstrating statistically significantly longer progression-free survival, versus sorafenib, in treatment-naïve patients with advanced renal cell carcinoma (RCC). We are analyzing the study findings to determine whether further evaluation of INLYTA in specific subpopulations of treatment-naïve patients with advanced RCC would be warranted.

~~In November 2012, we and our alliance partner, Auxilium Pharmaceuticals, Inc. (Auxilium), announced that we are amending our collaboration agreement for the development, commercialization and supply~~

Table of Xiapex in the EU and certain other European and Eurasian countries (the Collaboration Agreement). As a result of this amendment, the Collaboration Agreement will terminate no later than April 24, 2013. Prior to the mutual termination date, the parties will continue to perform all of their obligations as described in the Collaboration Agreement. After the termination date, rights to commercialize Xiapex in those markets and further development of the indication for Peyronie's disease will revert to Auxilium.Contents

In October 2011, we announced Phase 3 study results comparing the Eraxis/Vfend combination for the treatment of aspergillosis fungal infections to Vfend monotherapy. In the primary analysis, treatment with the combination of Vfend and Eraxis resulted in a lower all-cause mortality rate at six weeks compared to Vfend alone. However, this difference in mortality did not achieve the pre-specified threshold for statistical superiority. The safety and tolerability of the combination of Vfend and Eraxis in this study were similar to those of Vfend monotherapy. Based on these results, we have decided to discontinue further development of the Eraxis/Vfend combination.



NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT
CANDIDATE	INDICATION
ALO-02	A Mu-type opioid receptor agonist for the management of moderate-to-severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time
Bococizumab (RN316) (PF-04950615)	A monoclonal antibody that inhibits PCSK9 for the treatment of hyperlipidemia and prevention of cardiovascular events
Dacomitinib	A pan-HER tyrosine kinase inhibitor for the treatment of ~~previously treated~~patients with advanced non-small cell lung cancer after at least one chemotherapy regimen or resistant or refractory to prior therapy regimen, including EGFR TKI; also, first-line treatment of patients with advanced non-small cell lung cancer with EGFR activating mutations
Ertugliflozin (PF-04971729)	An oral SGLT2 inhibitor for the treatment of type 2 diabetes, which is being developed in collaboration with Merck & Co., Inc.
Inotuzumab ozogamicin	An antibody drug conjugate, consisting of an anti-CD22 monotherapy antibody linked to a cytotoxic agent, calicheamycin, for the treatment of ~~aggressive Non-Hodgkin’s Lymphoma and~~ acute lymphoblastic leukemia
MnB rLP2086 (PF-05212366)	A prophylactic vaccine for prevention of Neisseria meningitidis serogroup B invasive disease in adolescents and young adults (ages ~~11 - 25)~~11-25)
Palbociclib (PD-0332991)	An oral and selective reversible inhibitor of the CDK 4 and 6 kinases for the treatment of patients with estrogen receptor-positive, human epidermal growth factor receptor 2- negative advanced breast cancer; treatment of recurrent advanced breast cancer
Tanezumab^(a)	An anti-nerve growth factor monoclonal antibody for the treatment of pain (on clinical hold)

^(a)

~~Following requests~~The tanezumab program is under a partial clinical hold by the FDA pending our submission of additional nonclinical data. We anticipate submitting that data to the FDA in ~~2010,~~the first half of 2014. Subject to the removal of the partial clinical hold, we ~~suspended and subsequently terminated worldwide~~are planning to continue development of tanezumab for the treatment of osteoarthritis, chronic low back pain and ~~painful diabetic peripheral neuropathy studies of tanezumab. The FDA’s requests followed~~cancer pain. In October 2013, we entered into a ~~small number of reports of osteoarthritis patients treated~~collaboration agreement with Eli Lilly and Company to jointly develop and globally commercialize tanezumab ~~who experienced the worsening of osteoarthritis leading to total joint replacement and also reflected the FDA’s concerns regarding the potential~~ for such events in other patient populations. In December 2010, the FDA placed a clinical hold on all other anti-nerve growth factor therapies under clinical investigation in the U.S. Studies of tanezumab in cancer pain were allowed to continue. Extensive analyses were undertaken of all total joint replacements reported in studies of tanezumab. The results of these analyses and the conclusions drawn were provided to the FDA. On March 12, 2012, the FDA’s Arthritis Advisory Committee met to discuss the future development of nerve growth factor inhibitors, including tanezumab. The Committee voted that there is a role for the ongoing development of nerve growth factor inhibitors in conditions such as osteoarthritis and for the management of pain associated with conditions other than osteoarthritis for which there are no agents with demonstrated analgesic effect. We submitted a Clinical Hold Complete Response to the FDA on July 31, 2012. On August 28, 2012, the FDA removed the clinical holdthose indications.

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completely from the tanezumab program for all indications. We intend to continue work in chronic pain conditions where we already have substantial experience with tanezumab and are in the process of considering the appropriate path forward.

Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the “Our Business Development Initiatives” section of this MD&A.

~~Costs and Expenses~~COSTS AND EXPENSES

Cost of Sales


	Three Months Ended						Nine Months Ended						Three Months Ended								Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		% Change		September 30, 2012		October 2, 2011		% Change		September 29, 2013			September 30, 2012			% Change		September 29, 2013			September 30, 2012			% Change
Cost of sales	$	2,665	$	3,409	(22	)	$	8,162	$	10,449	(22	)	$	2,287		$	2,309		(1	)	$	6,792		$	7,068		(4	)
As a percentage of Revenues													18.1		%	17.8		%			17.9		%	17.3		%

Cost of sales decreased 221% in the third quarter of ~~2012~~2013 and 224%% in the first nine months of ~~2012~~2013, compared to the same periods in ~~2011~~2012, primarily due ~~to:~~

~~a decline in revenues related~~ to ~~products that lost exclusivity in various markets;~~

~~lower purchase accounting charges, primarily reflecting the fair value adjustments to acquired inventory from Wyeth and King that was subsequently sold;~~

lower costs related to our cost-reduction and productivity initiatives in the first nine months of 2012, as well as the higher benefits generated from the ongoing productivity initiatives to streamline the manufacturing network both in the first nine months and third quarter of 2012; and

the favorable impact of foreign exchange of 8%4% for both periods, which more than offset the ~~third quarter~~unfavorable impact of ~~2012 and 7% for the first nine months of 2012;~~

~~partially offset by:~~

~~an unfavorable~~a shift in ~~geographic and business~~product mix due to the loss of exclusivity of certain products ~~that lost exclusivity~~ in various markets.

Selling, Informational and Administrative (SI&A) Expenses


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		% Change		September 30, 2012		October 2, 2011		% Change		September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change
Selling, informational and administrative expenses	$	3,847	$	4,457	(14	)	$	11,801	$	13,635	(13	)	$	3,395	$	3,491	(3	)	$	10,203	$	10,834	(6	)

SI&A expenses decreased 143% in the third quarter of ~~2012~~2013 and 136%% in the first nine months of ~~2012~~2013, compared to the same periods in ~~2011~~2012, primarily due to:

savings generated from a reduction in the field force, ~~and a decrease in promotional spending, both~~ partly in response to product losses of ~~exclusivity;~~

exclusivity and more streamlined corporate support functions;

~~a decline in revenues related to products that lost exclusivity in various markets;~~ and

the favorable impact of foreign exchange of ~~4% for the third quarter of 2012 and~~ 2% for ~~the first nine months of 2012;~~

both periods,

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partially offset by:

~~costs associated with the potential separation~~spending in support of ~~Animal Health employees, net assets and activities from Pfizer.~~several new product launches.

Research and Development (R&D) Expenses


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		% Change		September 30, 2012		October 2, 2011		% Change		September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change
Research and development expenses	$	1,981	$	2,176	(9	)	$	5,734	$	6,487	(12	)	$	1,627	$	1,887	(14	)	$	4,867	$	5,461	(11	)

R&D expenses decreased 914% in the third quarter of ~~2012~~2013 and 1211%% in the first nine months of ~~2012~~2013, compared to the same periods in ~~2011~~2012, primarily due to:

the non-recurrence of a $250 million payment to AstraZeneca in the third quarter of 2012 to obtain the exclusive, global, over-the-counter rights to Nexium; and

continued savings generated by the discontinuation of certain therapeutic areas and R&D programs in connection with our previously announced ~~cost-reduction and~~ global cost-reduction/productivity ~~initiatives; and~~

~~lower charges related to those initiatives;~~

~~partially offset by:~~

~~a $250 million payment to AstraZeneca to obtain the exclusive global over-the-counter rights to Nexium.~~initiatives.

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


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		% Change		September 30, 2012		October 2, 2011		% Change		September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change
Costs associated with acquisitions and cost-reduction/productivity initiatives(a)	$	494	$	1,365	(64	)	$	1,802	$	3,355	(46	)	$	323	$	500	(35	)	$	926	$	1,787	(48	)


^(a)	Comprises Restructuring charges and certain acquisition-related costs as well as costs associated with our cost-reduction/productivity initiatives included in Cost of sales, Research and development expenses and/or Selling, informational and administrative expenses, as appropriate.

Costs associated with acquisitions and cost-reduction/productivity initiatives decreased 35% in the third quarter of 2013 and 48% in the first nine months of 2013, compared to the same periods in 2012, due to lower costs incurred in all categories: restructuring charges (down $38 million and $366 million, respectively), integration costs (down $41 million and $172 million, respectively), additional depreciation––asset restructuring (down $33 million and $224 million, respectively) and lower implementation costs (down $65 million and $99 million, respectively). The overall lower costs reflect the fact that we are in the later stages of these activities in connection with our recent acquisitions and recent cost-reduction/productivity initiatives. See Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives for more information.

All of our businesses and functions may be impacted by these actions, including sales and marketing, manufacturing and research and development, as well as groups such as information technology, shared services and corporate operations. Since the acquisition of Wyeth on October 15, 2009, our cost-reduction initiatives announced on January 26, 2009, but not completed as of December 31, 2009, were incorporated into a comprehensive plan to integrate Wyeth’s operations to generate cost savings and to capture synergies across the combined company. In addition, on February 1, 2011, among our ongoing cost-reduction/productivity initiatives, we announced a new ~~research and~~ productivity initiative to accelerate our strategies to improve innovation and

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productivity in R&D by prioritizing areas ~~with~~that we believe have the greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas with the highest potential to deliver value in the near term and over time.

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Cost-Reduction Goals

~~With respect to the January 26, 2009 announcements, and~~As explained more fully in our ~~acquisition of Wyeth~~2012 Annual Report on ~~October 15, 2009, in the aggregate,~~Form 10-K/A, we achieved ~~our~~the global cost-reduction ~~goal by the end of 2011, a year earlier than expected,~~goals that had been established in 2009 and ~~are continuing to generate cost reductions.~~

With respect to the R&D productivity initiative announced on February 1, 2011, we set a goal to achieve significant reductions in our annual research and development expenses by the end of 2012. Adjusted R&D expenses were $8.4 billionupdated in 2011 and were $1.9 billion in the third quarter of 2012 and $5.3 billion in the first nine months of 2012. We expect adjusted R&D expenses to be approximately $7.0 billion to $7.25 billion in 2012, which includes the $250 million payment to AstraZeneca to obtain the exclusive global over-the-counter rights to Nexium. (For an understanding of adjusted research and development expenses, see the “Adjusted Income” section of this MD&A.) We are on track to meet this 2012 goal.

for these major initiatives. In addition to these major initiatives, we continuously monitor our ~~organizations~~operations for ~~cost reduction~~cost-reduction and/or productivity ~~opportunities.~~opportunities, especially in light of the losses of exclusivity and the expiration of collaborations for various products.

~~Expected~~ Total Costs

We have incurred and will continue to incur costs in connection with these announced actions. We estimate that the total costs of both of the aforementioned initiatives could range up to $15.0 billion through 2012, of whichThrough September 29, 2013, we ~~have~~ incurred approximately ~~$14.2~~$15.3 billion (pre-tax) in cost-reduction and acquisition-related costs (excluding transaction costs) in connection with the aforementioned initiatives. This $15.3 billion is a component of the $16.1 billion (pre-tax) in total restructuring charges incurred from the beginning of our cost-reduction/productivity initiatives in 2005 through September 29, 2013. See Notes to Condensed Consolidated Financial Statements—~~September 30, 2012~~Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives .for more information. In 2013, we expect to incur approximately $600-$800 million (after tax) in costs in connection with our ongoing cost-reduction/productivity initiatives and have reflected those costs, as well as the related expected cost reductions of approximately $1.0 billion (pre-tax), in our 2013 financial guidance. See also the “Our Financial Guidance for 2013” section of this MD&A.

Key Activities

~~The~~As explained more fully in our 2012 Annual Report on Form 10-K/A, the targeted cost reductions ~~have been and are being~~were achieved through, among other things, the following actions, and we continue to generate cost reductions through similar actions:

The closing of duplicative facilities and other site rationalization actions Company-wide, including research and development facilities, manufacturing plants, sales offices and other corporate facilities. Among the more significant actions are the following:

◦

Manufacturing: After the acquisition of Wyeth, our manufacturing sites totaled ~~75.~~59. Other acquisitions ~~have~~ added 218 manufacturing sites, and we have subsequently exited 1011 sites, resulting in 8656 sites supporting continuing operations as of September ~~30, 2012.~~29, 2013. Our plant network strategy ~~will~~is expected to result in the exit of a further 9seven sites over the next several years. These site counts exclude ~~our 5~~five Nutrition business-related manufacturing sites as the Nutrition business ~~is treated~~was sold in 2012, and exclude 24 Zoetis sites as ~~a discontinued operation.~~the disposition of the remaining 80.2% interest in Zoetis common stock was completed on June 24, 2013. See Notes to Condensed Consolidated Financial Statements—Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures:~~Equity-Method Investments: Divestitures for more information.

◦

Research and Development: After the acquisition of Wyeth, we operated in 20 R&D sites and announced that we would close a number of sites. We have completed a number of site closures, including our Sandwich, U.K. research and development facility, except for a small presence. In addition, in 2011, we rationalized several other sites to reduce and optimize the overall R&D footprint. We disposed of our toxicology site in Catania, Italy; exited our R&D sites in Aberdeen and Gosport, U.K.; and disposed of a vacant site in St. Louis, MO. We still maintain laboratories in St. Louis, MO that focus on the areas of biologics and indications discovery. We are presently marketing for sale, lease or sale/lease-back, either a portion of or all of certain of our R&D campuses. Locations with R&D operations are in the U.S., Europe, Canada and China, with five major research sites in addition to a number of specialized units. We also re-prioritized our commitments to disease areas and have discontinued certain therapeutic areas and R&D ~~programs.~~programs as part of our R&D productivity initiative. Our research primarily focuses on five high-priority areas that have a mix of small and large molecules—immunology and inflammation; oncology; cardiovascular and metabolic diseases; neuroscience and pain; and vaccines. Other areas of focus include rare diseases and biosimilars.

Workforce reductions across all areas of our business and other organizational changes, primarily in the U.S. field force, manufacturing, R&D and corporate functions. We identified areas for a reduction in workforce across all of our businesses. ~~In January~~From 2009, when ~~Pfizer and Wyeth entered into the merger agreement,~~ the workforce ~~of the two companies totaled~~was approximately ~~130,000. We have exceeded our original target to reduce the combined Pfizer/Wyeth workforce 15%, or 19,500, within three years. By~~130,000, through the end of ~~2011,~~2012, we achieved a reduction of ~~26,300,~~38,500, and by the end of the third quarter of ~~2012,~~2013, we achieved a reduction of ~~31,200.~~51,600. In ~~2012, though September 30,~~the first nine months of 2013, the workforce declined by ~~4,900,~~13,100, from ~~103,700~~91,500 to ~~98,800,~~78,400, primarily due to the full disposition of our Animal Health business (Zoetis), which resulted in ~~the U.S. field force, manufacturing, R&D and corporate operations.~~a workforce reduction of approximately 9,300. The aforementioned workforce reductions include the impact of acquisitions and divestitures subsequent to the Wyeth acquisition.

~~The increased use of shared services.~~

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~~Procurement savings.~~

~~The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:~~

Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2012
October 2,
2011
September 30,
2012
October 2,
2011
Transaction costs^(a)
$ —
$ 5
$ 1
$ 28
Integration costs^(b)
87
184
295
562
Restructuring charges^(c):

Employee termination costs 113
762
424
1,615
Asset impairments 35
99
282
157
Exit costs 67
40
87
96
Restructuring charges and certain acquisition-related costs 302
1,090
1,089
2,458
Additional depreciation––asset restructuringrecorded in our
condensed consolidated statements of income as follows^(d):

Cost of sales 78
68
214
410
Selling, informational and administrative expenses 3
39
8
68
Research and development expenses —
146
259
379
Total additional depreciation––asset restructuring 81
253
481
857
Implementation costs recorded in our condensed consolidated statements of income as follows^(e):

Cost of sales 19
—
23
—
Selling, informational and administrative expenses 45
12
77
12
Research and development expenses 47
10
132
28
Total implementation costs 111
22
232
40
Total costs associated with acquisitions and cost-
reduction/productivity initiatives
$ 494
$ 1,365
$ 1,802
$ 3,355


^(a)	~~Transaction costs represent external costs directly related to acquired businesses and primarily include expenditures for banking, legal, accounting and other similar services.~~


^(b)	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.

^(c)

~~From the beginning of our cost-reduction and transformation initiatives in~~ ~~2005~~ ~~through~~ ~~September 30, 2012~~, ~~Employee termination costs~~ ~~represent the expected reduction of the workforce by approximately~~ ~~59,700~~ ~~employees, mainly in manufacturing and sales and research, of which approximately~~ ~~49,300~~ ~~employees have been terminated as of~~ ~~September 30, 2012. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012, the amount of employee termination costs represents additional accruals with respect to reserves for approximately~~ ~~2,300~~ ~~employees.~~

~~The restructuring charges in 2012 are associated with the following:~~

~~For the~~ ~~three~~ ~~months ended September 30, 2012, Primary Care operating segment ($83 million), Specialty Care and Oncology operating segment ($60 million), Established Products and Emerging Markets operating segment ($16 million), other operating segments ($8 million), research and development operations ($39 million~~ ~~income), manufacturing operations ($27 million) and Corporate ($60 million~~).

~~For the~~ ~~nine~~ ~~months ended September 30, 2012, Primary Care operating segment ($51 million), Specialty Care and Oncology operating segment ($79 million), Established Products and Emerging Markets operating segment ($20 million), other operating segments ($26 million), research and development operations ($14 million~~ ~~income), manufacturing operations ($193 million) and Corporate ($438 million~~).

~~The restructuring charges in 2011 are associated with the following:~~

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~~segments ($44 million), research and development operations ($426 million), manufacturing operations ($196 million) and Corporate ($288 million~~).


^(d)	~~Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.~~


^(e)	~~Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction and productivity initiatives.~~

~~The following table provides the components of and changes in our restructuring accruals:~~

(MILLIONS OF DOLLARS)
Employee
Termination
Costs

Asset
Impairment
Charges

Exit Costs
Accrual
Balance, December 31, 2011 $ 2,425
$ —
$ 92
$ 2,517
Provision^(a)
424
282
87
793
Utilization and other^(b)
(1,270 ) (282 ) (69 ) (1,621 )
Balance, September 30, 2012^(c)
$ 1,579
$ —
$ 110
$ 1,689


^(a)	~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~, ~~Provision~~ ~~includes additional accruals with respect to reserves for approximately~~ ~~2,300~~ ~~employees.~~


^(b)	~~Includes adjustments for foreign currency translation.~~


^(c)	~~Included in~~ ~~Other current liabilities~~ ($~~949 million) and~~ ~~Other noncurrent liabilities~~ ($~~740 million~~).

~~Other Deductions––Net~~

Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2012
October 2,
2011
%
Change September 30,
2012
October 2,
2011
%
Change
Other deductions—net $ 962
$ 547
76 $ 3,283
$ 1,802
82

~~Other deductions––net~~ ~~changed unfavorably by $415 million in the~~ ~~third~~ ~~quarter of~~ ~~2012, compared to the same period in~~ ~~2011, primarily due to:~~

charges for litigation-related matters that were approximately $594 million higher in the third quarter of 2012 than in the same period in 2011, primarily due to a $491 million charge resulting from an agreement-in-principle with the U.S. Department of Justice (DOJ) to resolve an investigation into Wyeth's historical promotional practices in connection with Rapamune;

~~partially offset by:~~

~~certain asset impairment charges that were approximately $96 million lower in the third quarter of 2012 than in the same period in 2011, (see below); and~~

~~net interest expense that was approximately $40 million lower in the third quarter of 2012 than in the same period in 2011.~~

~~Other deductions––net~~ ~~changed unfavorably by $1.5 billion in the first~~ ~~nine~~ ~~months of~~ ~~2012, compared to the same period in~~ ~~2011, primarily due to:~~

charges for litigation-related matters that were $1.4 billion higher in the first nine months of 2012 than in the same period in 2011, primarily due to a $491 million charge resulting from an agreement-in-principle with the DOJ to resolve an investigation into Wyeth's historical promotional practices in connection with Rapamune, a $450 million settlement of a lawsuit by Brigham Young University related to Celebrex and higher charges related to hormone-replacement therapy litigation;

~~lower royalty-related income of $94 million; and~~

~~increase in costs of approximately $90 million in connection with the potential initial public offering of up to a 20% ownership stake in our Animal Health business, Zoetis Inc. (Zoetis);~~

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The increased use of shared services and centers of excellence.

Procurement savings.

Other (Income)/Deductions––Net



	Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		% Change		September 29, 2013			September 30, 2012		% Change
Other (income)/deductions—net	$	411	$	937	(56	)	$	(514	)	$	3,264	*

* Calculation not meaningful.

Other (income)/deductions––net changed favorably by $526 million in the third quarter of 2013, compared to the same period in 2012, primarily due to:

lower net charges for legal matters in 2013 (down approximately $726 million) (for additional information, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net);

a gain of $128 million, reflecting the change in the fair value of the contingent consideration associated with our acquisition of NextWave (for additional information, see Notes to Condensed Consolidated Financial Statements— Note 4. Other (Income)/Deductions—Net),

partially offset by:

~~lower net interest expense of $78 million;~~

higher asset impairments and related charges in 2013 (up approximately $429 million) (for additional information, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).

~~certain asset impairment charges that were approximately $64 million lower~~

Other (income)/deductions––net changed favorably by $3.8 billion in the first nine months of ~~2012 than in~~2013, compared to the same period in ~~2011, (see below)~~2012, primarily due to:

patent litigation settlement income of $1.3 billion recorded in 2013 (for additional information, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net);

lower net charges for other legal matters in 2013 (down approximately $2.1 billion) (for additional information, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net); and

a gain of approximately $459 million recorded in 2013 associated with the transfer of certain product rights to our equity-method investment in China (for additional information, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments),

partially offset by:

higher asset impairments and related charges (up approximately $444 million) (for additional information, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).

Certain Asset Impairment Charges

When necessary, we record charges for impairments of long-lived assets infor the amount by which the fair value is less than the carrying value of ~~the~~these assets. For additional information, see the “Significant Accounting Policies and Application of Critical Accounting Estimates—Asset Impairment ~~Reviews~~––~~Long-Lived Assets”~~Reviews” section of our ~~2011~~2012 Financial Report, which iswas filed as Exhibit 13 to our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended December 31, ~~2011.~~2012.

See also Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions––Net.

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Provision for Taxes on Income


	Three Months Ended								Nine Months Ended								Three Months Ended							Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012			October 2, 2011			% Change		September 30, 2012			October 2, 2011			% Change		September 29, 2013			September 30, 2012			% Change	September 29, 2013			September 30, 2012			% Change
Provision/(benefit) for taxes on income	$	(119	)	$	1,216		(110	)	$	1,882		$	3,167		(41	)	$	985		$	(183	)	*	$	3,876		$	1,622		*
Effective tax rate on continuing operations	(4.0		)%	34.3		%			19.0		%	31.2		%
Effective tax rate																	27.6		%	(6.5		)%		30.6		%	17.7		%

~~During~~* Calculation not meaningful.

Our effective tax rate for continuing operations was 27.6% for the third quarter of 2013, compared to (6.5)% for the third quarter of 2012, and was 30.6% for the first nine months of 2013, compared to 17.7% for the first nine months of 2012.

The unfavorable change in the effective tax rate for both periods reflects favorable audit settlements in the third quarter and first nine months of ~~2012, we reached~~2012; specifically, (i) a tax benefit of approximately $1.1 billion (representing tax and interest) recorded in connection with a settlement with the U.S. Internal Revenue Service (IRS) ~~with respect~~related to ~~the~~ audits ~~of the Pfizer Inc. tax returns~~ for ~~the years 2006 through 2008. The IRS concluded the examination of the aforementioned~~multiple tax years and issued a final Revenue Agent's Report (RAR). We agreed with all the adjustments and computations contained in the RAR. As a result of settling these audit years, in the third quarter of 2012 we recorded(2006 - 2008), as well as (ii) a tax benefit ~~of approximately $1.1 billion representing tax and interest.~~

~~Our effective tax rate on continuing operations was~~ ~~(4.0)~~%recorded for ~~the~~ ~~third~~ ~~quarter of~~ ~~2012, compared to~~ ~~34.3% for the~~ ~~third~~ ~~quarter of~~ ~~2011, and was~~ ~~19.0% for the first~~ ~~nine~~ ~~months of~~ ~~2012, compared to~~ ~~31.2% for the first~~ ~~nine~~ ~~months of~~ ~~2011~~. The effective tax rates for the third quarter and first nine months of 2012 were favorably impacted by the aforementioned settlement with the IRS. The tax rates in both periods in 2012 compared to the same periods in 2011 were also favorably impacted by the resolution of foreign audits pertaining to multiple tax ~~years~~years.

To a lesser extent, the unfavorable comparison of the first nine months of 2013 to the first nine months of 2012 reflects (i) the tax rate associated with the patent litigation settlement income and (ii) the non-deductibility of the goodwill derecognized and the jurisdictional mix of the other intangible assets divested as part of the transfer of certain product rights to our equity-method investment in China and (iii) the non-deductibility of the loss on an option to acquire the remaining interest in Teuto, a 40%-owned generics company in Brazil, since we expect to retain the investment indefinitely, partially offset by (i) the extension of the U.S. R&D tax credit (resulting in the full-year benefit of the 2012 R&D tax credit and the year-to-date 2013 R&D tax credit being recorded in the first nine months of 2013) and (ii) the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of ~~business, partially offset~~business. For additional information about the patent litigation settlement income, see Notes to Condensed Consolidated Financial Statements—Note 12A5. Commitments and Contingencies: Legal Proceedings—Certain Matters Resolved During the First Nine Months of 2013. For additional information about the transfer of certain product rights to our equity-method investment in China, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

Change in Tax Law

On February 28, 2013, the Governor of Puerto Rico signed into law Act No. 2-2013, amending Sections 2101 and 2102 of the Puerto Rico Internal Revenue Code of 1994, which provided for an excise tax that was effective beginning in 2011 (Act 154). The excise tax is imposed on the purchase of products by multinational corporations and their affiliates from their Puerto Rico affiliates. As originally adopted, the ~~unfavorable~~excise tax was to be in effect from 2011 through 2016 and the tax rate was to decline over time from 4% in 2011 to 1% in 2016. Act No. 2-2013 extended the excise tax through 2017 and, effective July 1, 2013, increased the tax rate to 4% for all years through 2017. The impact of ~~the non-deductibility~~Act No. 2-2013 is being recorded in Cost of a $491 million charge resulting from an agreement-in-principle with the DOJ to resolve an investigation into Wyeth's historical promotional practices in connection with Rapamune, as well as the expiration of the U.S. research sales and ~~development tax credit.~~ Provision for taxes on income.

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Discontinued Operations

For additional information about our discontinued operations, see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and ~~Divestitures:~~Equity-Method Investments: Divestitures.

~~The following table provides the components of~~ ~~Discontinued operations—net of tax~~:

Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2012
October 2,
2011
September 30,
2012
October 2,
2011
Revenues^(a)
$ 564
$ 699
$ 1,665
$ 2,068
Pre-tax income from discontinued operations $ 129
$ 121
$ 365
$ 397
Provision for taxes on income^(b)
25
25
116
94
Income from discontinued operations––net of tax 104
96
249
303
Pre-tax gain on sale of discontinued operations —
1,695
—
1,683
Provision for taxes on income^(c)
—
367
—
367
Gain on sale of discontinued operations––net of tax —
1,328
—
1,316
Discontinued operations––net of tax^(a)
$ 104
$ 1,424
$ 249
$ 1,619



The following table provides the components of Discontinued operations—net of tax, virtually all of which relate to our former Animal Health (Zoetis) and Nutrition businesses:
	Three Months Ended^(a)					Nine Months Ended^(a)
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012		September 29, 2013		September 30, 2012
Revenues	$	—		$	1,587	$	2,201	$	4,817
Pre-tax income from discontinued operations^(a)	$	32		$	314	$	421	$	1,110
Provision for taxes on income^(b)	(4		)	89		95		376
Income from discontinued operations––net of tax	36			225		326		734
Pre-tax gain on disposal of discontinued operations	(38		)	—		10,501		—
Provision for taxes on income^(c)	(13		)	—		108		—
Gain on disposal of discontinued operations––net of tax	(25		)	—		10,393		—
Discontinued operations––net of tax	$	11		$	225	$	10,719	$	734

^(a)

Includes the Animal Health (Zoetis) business for the nine months ended September 29, 2013 (through the disposal date) and for the three and nine months ended September 30, 2012, and the Nutrition business for ~~all periods presented~~the three and nine months ended September 30, 2012. For the ~~Capsugel business for 2011 only.~~three months ended September 29, 2013, includes certain post-close adjustments.

^(b)

Includes a deferred tax ~~expense~~benefit of $9$4 million and $30 million for the three months ended September 29, 2013 and September 30, 2012, respectively, and a deferred tax benefit of ~~$10~~$23 million ~~for the three months ended~~ ~~September 30, 2012~~ and ~~October 2, 2011, respectively, and a deferred tax expense of~~ ~~$23~~$10 million ~~and a deferred tax benefit of~~ ~~$17 million~~ for the nine months ended September 29, 2013 and September 30, 2012, ~~and~~ ~~October 2, 2011~~, respectively. These deferred tax provisions include deferred taxes related to investments in certain foreign subsidiaries resulting from our intention not to hold these subsidiaries ~~permanently.~~

indefinitely.


^(c)	~~Includes deferred tax expense of~~ ~~$162 million~~ ~~for~~For the ~~three and~~ nine months ended ~~October 2, 2011. These deferred tax provisions include deferred~~September 29, 2013, primarily reflects income taxes onresulting from certain ~~current-year funds earned outside the U.S. that will not be permanently reinvested overseas.~~ legal entity reorganizations.

~~Adjusted Income~~

ADJUSTED INCOME

General Description of Adjusted Income Measure

Adjusted income is an alternative view of performance used by management, and we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. We report Adjusted income in order to portray the results of our major operations––the discovery, development, manufacture, marketing and sale of prescription medicines, ~~for humans and animals,~~ consumer healthcare (over-the-counter) products, and vaccines––prior to considering certain income statement elements. We have defined Adjusted income as Net income attributable to Pfizer Inc. before the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and certain significant items. The Adjusted income measure is not, and should not be viewed as, a substitute for U.S. GAAP net income.

The Adjusted income measure is an important internal measurement for Pfizer. We measure the performance of the overall Company on this basis in conjunction with other performance metrics. The following are examples of how the Adjusted income measure is utilized:

senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income basis;

our annual budgets are prepared on an Adjusted income basis; and

senior management’s annual compensation is derived, in part, using this Adjusted income measure. Adjusted income is one of the performance metrics utilized in the determination of bonuses under the Pfizer Inc. Executive Annual Incentive Plan that is designed to limit the bonuses payable to the Executive Leadership Team (ELT) for purposes of Internal Revenue Code Section 162(m). Subject to the Section 162(m) limitation, the bonuses are funded from a pool based on the achievement of three financial metrics, including ~~Adjusted~~adjusted diluted earnings per share, which is derived from Adjusted income. ~~Since 2011, this~~This metric accounts for 40% of the bonus pool made available to ELT members and other members of senior management and will constitute a factor in determining each of these individual’s bonus.

Despite the importance of this measure to management in goal setting and performance measurement, ~~we stress that~~ Adjusted income is a non-GAAP financial measure that has no standardized meaning prescribed by U.S. GAAP and, therefore, has limits in its usefulness to investors. Because of its non-standardized definition, Adjusted income (unlike U.S. GAAP net income) may not

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~~not~~ be comparable to the calculation of similar measures of other companies. Adjusted income is presented solely to permit investors to more fully understand how management assesses performance.

We also recognize that, as an internal measure of performance, the Adjusted income measure has limitations, and we do not restrict our performance-management process solely to this metric. A limitation of the Adjusted income measure is that it provides a view of our operations without including all events during a period, such as the effects of an acquisition or amortization of purchased intangibles, and does not provide a comparable view of our performance to other companies in the biopharmaceutical industry. We also use other specifically tailored tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, the earn-out of Performance Share Award grants is determined based on a formula that measures our performance using relative total shareholder return.

Purchase Accounting Adjustments

Adjusted income is calculated prior to considering certain significant purchase accounting impacts resulting from business combinations and net asset acquisitions. These impacts, primarily associated with Pharmacia (acquired in 2003), Wyeth (acquired in 2009) and King (acquired in 2011), can include the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, amortization related to the increase in fair value of the acquired finite-lived intangible assets, depreciation related to the increase/decrease in fair value of the acquired fixed assets, amortization related to the increase in fair value of acquired debt, and the fair value changes associated with contingent consideration. Therefore, the Adjusted income measure includes the revenues earned upon the sale of the acquired products without considering the acquisition cost of those products.

Certain of the purchase accounting adjustments can occur through 20 or more years, but this presentation provides an alternative view of our performance that is used by management to internally assess business performance. We believe the elimination of amortization attributable to acquired intangible assets provides management and investors an alternative view of our business results by trying to provide a degree of parity to internally developed intangible assets for which research and development costs previously have been expensed.

However, a completely accurate comparison of internally developed intangible assets and acquired intangible assets cannot be achieved through Adjusted income. This component of Adjusted income is derived solely from the impacts of the items listed in the first paragraph of this section. We have not factored in the impacts of any other differences in experience that might have occurred if we had discovered and developed those intangible assets on our own, and this approach does not intend to be representative of the results that would have occurred in those circumstances. For example, our research and development costs in total, and in the periods presented, may have been different; our speed to commercialization and resulting sales, if any, may have been different; or our costs to manufacture may have been different. In addition, our marketing efforts may have been received differently by our customers. As such, in total, there can be no assurance that our Adjusted income amounts would have been the same as presented had we discovered and developed the acquired intangible assets.

Acquisition-Related Costs

Adjusted income is calculated prior to considering transaction, integration, restructuring and additional depreciation costs associated with business combinations because these costs are unique to each transaction and represent costs that were incurred to restructure and integrate two businesses as a result of the acquisition decision. For additional clarity, only transaction costs, additional depreciation and restructuring and integration activities that are associated with a business combination or a net-asset acquisition are included in acquisition-related costs. We have made no adjustments for the resulting synergies.

We believe that viewing income prior to considering these charges provides investors with a useful additional perspective because the significant costs incurred in connection with a business combination result primarily from the need to eliminate duplicate assets, activities or employees––a natural result of acquiring a fully integrated set of activities. For this reason, we believe that the costs incurred to convert disparate systems, to close duplicative facilities or to eliminate duplicate positions (for example, in the context of a business combination) can be viewed differently from those costs incurred in other, more normal, business contexts.

The integration and restructuring costs associated with a business combination may occur over several years, with the more significant impacts ending within three years of the transaction. Because of the need for certain external approvals for some

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actions, the span of time needed to achieve certain restructuring and integration activities can be lengthy. For example, due to the highly regulated nature of the pharmaceutical business, the closure of excess facilities can take several years, as all

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manufacturing changes are subject to extensive validation and testing and must be approved by the FDA and/or other global regulatory authorities.

Discontinued Operations

Adjusted income is calculated prior to considering the results of operations included in discontinued operations, as well as any related gains or losses on the ~~sale~~disposal of such operations such as the gains on the full disposition of our former Animal Health business (Zoetis) in June 2013 and the sale of our ~~Capsugel~~former Nutrition business ~~which we sold~~ in ~~August 2011, and the pending sale of our Nutrition business.~~November 2012. We believe that this presentation is meaningful to investors because, while we review our businesses and product lines for strategic fit with our operations, we do not build or run our businesses with the intent to sell them. (Restatements due to discontinued operations do not impact compensation or change the Adjusted income measure for the compensation in respect of the restated periods, but are presented ~~here~~in this Quarterly Report on Form 10-Q on a restated basis for consistency across all periods.)

Certain Significant Items

Adjusted income is calculated prior to considering certain significant items. Certain significant items represent substantive, unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual nature. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be a major non-acquisition-related restructuring charge and associated implementation costs for a program that is specific in nature with a defined term, such as those related to our non-acquisition-related cost-reduction and productivity initiatives; ~~charges~~amounts related to certain ~~sales or~~ disposals of businesses, products or facilities that do not qualify as discontinued operations ~~as defined by~~under U.S. GAAP; amounts associated with transition service agreements in support of discontinued operations after sale; certain intangible asset impairments; adjustments related to the resolution of certain tax positions; the impact of adopting certain significant, event-driven tax legislation; or charges or income related to certain legal matters, such as certain of those discussed in Notes to Condensed Consolidated Financial Statements—Note ~~12.~~12A. Commitments and Contingencies included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Normal, ongoing defense costs of the Company or settlements of and accruals on legal matters made in the normal course of our business would not be considered certain significant items.

Reconciliation

~~The following table provides a reconciliation of~~ ~~Net income attributable to Pfizer Inc.,~~ ~~as reported under U.S. GAAP, and Non-GAAP Adjusted income:~~


The following table provides a reconciliation of Net income attributable to Pfizer Inc., as reported under U.S. GAAP, and Non-GAAP Adjusted income:																	The following table provides a reconciliation of Net income attributable to Pfizer Inc., as reported under U.S. GAAP, and Non-GAAP Adjusted income:
	Three Months Ended								Nine Months Ended									Three Months Ended								Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012			October 2, 2011			% Change		September 30, 2012			October 2, 2011			% Change			September 29, 2013			September 30, 2012			% Change		September 29, 2013			September 30, 2012			% Change
GAAP Reported net income attributable to Pfizer Inc.	$	3,208		$	3,738		(14	)	$	8,255		$	8,570		(4	)		$	2,590		$	3,208		(19	)	$	19,435		$	8,255		*
Purchase accounting adjustments––net of tax	813			1,252			(35	)	2,725			3,852			(29	)		651			803			(19	)	2,346			2,699			(13	)
Acquisition-related costs––net of tax	190			240			(21	)	489			1,136			(57	)		54			194			(72	)	306			482			(37	)
Discontinued operations––net of tax	(104		)	(1,424		)	(93	)	(249		)	(1,619		)	(85	)		(8		)	(225		)	(96	)	(10,681		)	(734		)	*
Certain significant items––net of tax	(158		)	890			(118	)	1,744			2,116			(18	)		572			(226		)	*		196			1,656			(88	)
Non-GAAP Adjusted income^(a)	$	3,949		$	4,696		(16	)	$	12,964		$	14,055		(8	)		$	3,859		$	3,754		3		$	11,602		$	12,358		(6	)

^(a)

The effective tax rate on Non-GAAP Adjusted income was ~~28.3%~~27.6% in the third quarter of ~~2012,~~2013, compared with ~~31.2%~~28.0% in the third quarter of ~~2011.~~2012. For the first nine months of ~~2012,~~2013, the effective tax rate on Non-GAAP Adjusted income was ~~28.8%~~27.4%, compared ~~with 29.5%~~to 28.4% in the same period last year. The tax rates in ~~both periods in 2012~~the third quarter and first nine months of 2013 compared to the same periods in ~~2011~~2012 were favorably impacted by the ~~resolution of various foreign audits pertaining to multiple tax years, as well as the change in the~~ jurisdictional mix of earnings ~~as a result~~and the extension of ~~operating fluctuations~~the U.S. R&D tax credit that was signed into law in ~~the normal course of business,~~January 2013, partially offset by the ~~unfavorable impact~~non-recurrence of ~~the expiration of the U.S. research and development tax credit.~~favorable audit settlements with foreign jurisdictions for multiple years.

* Calculation not meaningful.

Certain amounts and percentages may reflect rounding adjustments.

~~The following table provides the a reconciliation of Reported diluted EPS, as reported under U.S. GAAP, and Non-GAAP Adjusted diluted EPS:~~

~~Table of Contents~~

Three Months Ended Nine Months Ended
September 30,
2012
October 2,
2011
%
Change
September 30,
2012
October 2,
2011
%
Change
Earnings per common share––diluted^(a)

GAAP Reported income from continuing operations attributable to Pfizer Inc. common shareholders $ 0.41
$ 0.30
37
$ 1.06
$ 0.88
20
Income from discontinued operations––net of tax 0.01
0.18
(94 ) 0.03
0.20
(85 )
GAAP Reported net income attributable to Pfizer Inc. common shareholders 0.43
0.48
(10 ) 1.09
1.08
1
Purchase accounting adjustments––net of tax 0.11
0.16
(31 ) 0.36
0.49
(27 )
Acquisition-related costs––net of tax 0.03
0.03
—
0.06
0.14
(57 )
Discontinued operations––net of tax (0.01 ) (0.18 ) (94 ) (0.03 ) (0.20 ) (85 )
Certain significant items––net of tax (0.02 ) 0.11
(118 ) 0.23
0.27
(15 )
Non-GAAP Adjusted income attributable to Pfizer Inc. common shareholders $ 0.53
$ 0.60
(12 ) $ 1.72
$ 1.77
(3 )


^(a)	~~EPS amounts may not add due to rounding.~~

~~Certain amounts and percentages may reflect rounding adjustments.~~

Table of Contents

~~The following table provides the items excluded from our Non-GAAP Adjusted income measure:~~



The following table provides a reconciliation of Reported diluted EPS, as reported under U.S. GAAP, and Non-GAAP Adjusted diluted EPS:
	Three Months Ended							Nine Months Ended
	September 29, 2013		September 30, 2012			% Change		September 29, 2013			September 30, 2012			% Change
Earnings per common share––diluted
GAAP Reported income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.39	$	0.40		(3	)	$	1.25		$	1.00		25
Income from discontinued operations––net of tax	—		0.03			*		1.52			0.10			*
GAAP Reported net income attributable to Pfizer Inc. common shareholders	0.39		0.43			(9	)	2.77			1.09			*
Purchase accounting adjustments––net of tax	0.10		0.11			(9	)	0.33			0.36			(8	)
Acquisition-related costs––net of tax	0.01		0.03			(67	)	0.04			0.06			(33	)
Discontinued operations––net of tax	—		(0.03		)	*		(1.52		)	(0.10		)	*
Certain significant items––net of tax	0.09		(0.03		)	*		0.03			0.22			(86	)
Non-GAAP Adjusted income attributable to Pfizer Inc. common shareholders	$	0.58	$	0.50		16		$	1.65		$	1.64		1

* Calculation not meaningful.

Certain amounts and percentages may reflect rounding adjustments.

Table of Contents


Adjusted income, as shown above, excludes the following items:													Adjusted income, as shown above, excludes the following items:
	Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012			October 2, 2011			September 30, 2012			October 2, 2011				September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012
Purchase accounting adjustments
Amortization, depreciation and other^(a)	$	1,142		$	1,411		$	3,741		$	4,116			$	956		$	1,130		$	3,303		$	3,707
Cost of sales, primarily related to fair value adjustments of acquired inventory	(2		)	286			9			1,081
Cost of sales														4			(3		)	(16		)	6
Total purchase accounting adjustments––pre-tax	1,140			1,697			3,750			5,197				960			1,127			3,287			3,713
Income taxes^(d)	(327		)	(445		)	(1,025		)	(1,345		)
Income taxes^(b)														(309		)	(324		)	(941		)	(1,014		)
Total purchase accounting adjustments––net of tax	813			1,252			2,725			3,852				651			803			2,346			2,699
Acquisition-related costs
Transaction costs^(b)	—			5			1			28
Integration costs^(b)(c)	87			184			295			562				38			79			107			279
Restructuring charges^(b)(c)	62			13			127			406				5			81			48			142
Additional depreciation––asset restructuring^(c)(d)	81			92			227			460				18			77			109			217
Total acquisition-related costs––pre-tax	230			294			650			1,456				61			237			264			638
Income taxes^(d)	(40		)	(54		)	(161		)	(320		)
Income taxes^(e)														(7		)	(43		)	42			(156		)
Total acquisition-related costs––net of tax	190			240			489			1,136				54			194			306			482
Discontinued operations
Total discontinued operations––net of tax	(104		)	(1,424		)	(249		)	(1,619		)
Discontinued operations––net of tax^(f)														(11		)	(225		)	(10,719		)	(734		)
Discontinued operations––net of tax, attributable to noncontrolling interests														3			—			38			—
Total discontinued operations––net of tax, attributable to Pfizer Inc.														(8		)	(225		)	(10,681		)	(734		)
Certain significant items
Restructuring charges^(e)	153			888			666			1,462
Implementation costs and additional depreciation––asset restructuring^(f)	111			183			486			437
Certain legal matters^(g)	725			132			1,983			657
Certain asset impairment charges^(h)	54			106			543			595
Costs associated with the potential separation of the Animal Health business⁽ⁱ⁾	100			8			191			8
Other	15			(8		)	52			16
Restructuring charges^(g)														190			152			392			664
Implementation costs and additional depreciation––asset restructuring^(h)														72			111			270			485
Patent litigation settlement income⁽ⁱ⁾														9			—			(1,342		)	—
Other legal matters, net^(j)														1			723			(99		)	1,981
Gain associated with the transfer of certain product rights to an equity-method investment^(j)														—			—			(459		)	—
Certain asset impairments and related charges^(j)														440			17			929			506
Costs associated with the Zoetis IPO^(k)														—			32			18			93
Income associated with the transitional manufacturing and supply agreements with Zoetis^(l)														(10		)	—			(10		)	—
Other^(j)														42			17			121			55
Total certain significant items––pre-tax	1,158			1,309			3,921			3,175				744			1,052			(180		)	3,784
Income taxes^(d)	(1,316		)	(419		)	(2,177		)	(1,059		)
Income taxes^(m)														(172		)	(1,278		)	376			(2,128		)
Total certain significant items––net of tax	(158		)	890			1,744			2,116				572			(226		)	196			1,656
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items––net of tax	$	741		$	958		$	4,709		$	5,485
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc.														$	1,269		$	546		$	(7,833	)	$	4,103


^(a)	Included primarily in Amortization of intangible assets.


^(b)	Included in Provision/(benefit) 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 (see Notes to Condensed Consolidated Financial Statements—Note 5A. Tax Matters: Taxes on Income from Continuing Operations).


^(c)	Included in Restructuring charges and certain acquisition-related costs (see Notes to Condensed Consolidated Financial Statements— Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).


^(d)	Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).

^(c)

~~Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions. For the third quarter of 2012, included in~~ ~~Cost of sales~~ ~~($78 million), and~~ ~~Selling, informational and administrative expenses~~ ~~($3~~

For the three months ended September 29, 2013, included in Cost of sales. For the three months ended September 30, 2012, included in Cost of sales ($75 million) and Selling, informational and administrative expenses ($2 million).

For the first nine months of 2013, included in Cost of sales ($101 million) and Selling, informational and administrative expenses ($8 million). ~~For the third quarter of 2011, included in~~ ~~Cost of sales~~ ~~($68 million),~~ ~~Selling, informational and administrative expenses~~ ~~($18 million) and~~ ~~Research and development expenses~~ ~~($6 million).~~

For the first nine months of 2012, included in Cost of sales ($~~214~~205 million), Selling, informational and administrative expenses ($87 million) and in Research and development expenses ($5 million). ~~For the first nine months~~

Table of ~~2011, included in~~ ~~Cost of sales~~ ~~($410 million),~~ ~~Selling, informational and administrative expenses~~ ~~($41 million), and~~ ~~Research and development expenses~~ ~~($9 million).~~Contents

^(d)(e)

^(f)

Included in Discontinued operations––net of tax and relates to Zoetis, our former Animal Health business, for ~~Certain significant items in~~ the ~~third quarter~~nine months ended September 29, 2013 (through the date of disposal) and for the three and nine months ofended September 30, 2012, ~~includes~~and, to a ~~$1.1 billion tax benefit, representing tax and interest, as a result of a settlement with the U.S. Internal Revenue Service related~~lesser extent, to ~~audits for tax years 2006 through 2008. See~~our former Nutrition business, in 2012 only (see Notes to Condensed Consolidated Financial Statements—~~Note 5A. Tax Matters: Taxes on Income from Continuing Operations~~Note2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures).

~~Table of Contents~~


^(e)(g)	~~Represents~~Primarily represents restructuring charges incurred for our ~~cost-reduction and~~ cost-reduction/productivity initiatives. Included in Restructuring charges and certain acquisition-related costs (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).


^(f)(h)	Amounts primarily relate to our ~~cost-reduction and~~ cost-reduction/productivity initiatives (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).

For the ~~third quarter of 2012,~~three months ended September 29, 2013, included in Cost of sales ($1941 million), Selling, informational and administrative expenses ($4530 million) and Research and development expenses ($471 million). For the ~~third quarter~~three months ended September 30, 2012, included in Research and development expenses ($47 million), Selling, informational and administrative expenses ($46 million) and Cost of ~~2011,~~sales ($18 million).

For the first nine months of 2013, included in Selling, informational and administrative expenses ($33106 million) ~~and~~, Research and development expenses ($~~150~~104 million) and Cost of sales ($60 million).

For the first nine months of 2012, included in ~~Cost of sales~~Research and development expenses ~~($23~~($386 million), Selling, informational and administrative expenses ($77 million) and ~~Research and development expenses~~ ~~($386 million). For the first nine months~~Cost of ~~2011, included in~~ ~~Selling, informational and administrative expenses~~sales ($~~39 million) and~~ ~~Research and development expenses~~ ~~($398~~22 million).

^(g)(i)

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 United States. Included in Other (income)/deductions—net (see the "Other (Income)/Deductions—Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).In the third quarter of 2012, primarily includes a $491 million charge, not deductible for income tax purposes, resulting from an agreement-in-principle with the DOJ to resolve an investigation into Wyeth’s historical promotional practices in connection with Rapamune. In the first nine months of 2012, primarily includes the aforementioned $491 million charge related to Rapamune, a $450 million settlement of a lawsuit by Brigham Young University related to Celebrex, and charges related to hormone-replacement therapy litigation. In 2011, primarily includes charges related to hormone-replacement therapy litigation.


^(h)(j)	~~Primarily included~~Included in Other (income)/deductions—net (see the "Other (Income)/Deductions—Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).

^(i)(k)

Costs incurred in connection with the ~~potential~~ initial public offering of ~~up to a 20%~~an approximate 19.8% ownership ~~stake~~interest in ~~our Animal Health business, Zoetis Inc. (Zoetis).~~Zoetis. Includes expenditures for banking, legal, accounting and similar ~~services~~services. Included in Other (income)/deductions—net (see the "Other (Income)/Deductions—Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).


^(l)	Included in Revenues ($67 million) and in Cost of sales ($57 million) for the three and nine months ended September 29, 2013.

^(m)

Included in Provision/(benefit) 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. The first nine months of 2013 were unfavorably impacted by the tax rate associated with the patent litigation settlement income, by 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 investment in China, as well as the non-deductibility of the loss on an option to acquire the remaining interest in Laboratório Teuto Brasileiro S.A. (Teuto), a 40%-owned generics company in Brazil, since we expect to retain the investment indefinitely. In the third quarter and first nine months of 2012, includes a tax benefit of approximately $1.1 billion (representing tax and interest) recorded in connection with a settlement with the U.S. IRS related to ~~the potential transaction.~~audits for multiple tax years that favorably impacted GAAP Reported net income (see Notes to Condensed Consolidated Financial Statements—Note 5A. Tax Matters: Taxes on Income from Continuing Operations).

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Changes in the components of Accumulated other comprehensive loss for the third quarter and first nine months of ~~2012~~2013 reflect the following:

For Foreign currency translation adjustments, for the third quarter of 2012, reflects the strengthening of several foreign currencies against the U.S. dollar, primarily the Australian dollar, the Canadian dollar, the Mexican peso and the Japanese yen, offset by the weakening of the euro against the U.S. dollar; for the first nine months of ~~2012,~~2013, reflects the weakening of several foreign currencies against the U.S. dollar, primarily the ~~euro,~~Japanese yen, the ~~Japanese yen,~~Brazil real, the Australian dollar and the ~~Brazilian real.~~British pound, partially offset by the strengthening of several foreign currencies against the U.S. dollar, primarily the euro.

For Unrealized holding ~~gains/(losses)~~gains on derivative financial instruments, reflects the impact of fair value ~~adjustments. See also~~adjustments and the reclassification of realized gains into income. For additional information, see Notes to Condensed Consolidated Financial ~~Statements~~—Statements—Note 7. Financial Instruments.

For Benefit plans: actuarial gains/(losses), net, reflects the impact of ~~remeasurements on~~actuarial gains and losses and the ~~U.S., Puerto Rico~~reclassification of amortization and ~~U.K. plans. See also Notes to Condensed Consolidated Financial Statements~~—~~Note 10. Pension and Postretirement Benefit Plans~~.

~~ANALYSIS OF THE CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~Many changes in our asset and liability accounts as of~~ ~~September 30, 2012, compared to~~ ~~December 31, 2011, reflect, among other things, increases associated with our acquisitions of Alacer Corp. and Ferrosan Holding A/S (see~~curtailments/settlements into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note ~~2A. Acquisitions~~10. Pension and ~~Divestitures: Acquisitions~~).Postretirement Benefit Plans.

Table of Contents

ANALYSIS OF THE CONDENSED CONSOLIDATED BALANCE SHEETS

For information about certain of our financial assets and liabilities, including ~~cash~~Cash and cash equivalents, ~~short-term~~Short-term investments, ~~long-term~~Long-term investments, ~~short-term~~Short-term borrowings, including current portion of long-term debt, and ~~long-term~~Long-term debt, see “Analysis of Financial Condition, Liquidity and Capital Resources” below.

For information about certain balances in Accounts receivable, ~~net~~less allowance for doubtful accounts, s~~, see~~ee also “Selected Measures of Liquidity and Capital Resources: Accounts Receivable” below.

All changes in our asset and liability accounts as of September 29, 2013, compared to December 31, 2012, reflect, among other things, decreases due to the impact of foreign exchange. The following explanations exclude the impact of foreign exchange.

For Inventories,the change also reflects inventory builds in the normal course of business and, to a lesser extent, related to new product launches and seasonal impacts. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 8. Inventories.

For Taxes and other current assets the change also reflects lower VAT receivables and lower current deferred tax assets partially offset by the unpaid portion of the receivables recorded in connection with the patent litigation settlement income. For additional information about the patent litigation settlement income, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net and Note 12A5. Commitments and Contingencies:Legal Proceedings—Certain Matters Resolved During the First Nine Months of 2013.

For Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, the change reflects the impact of the full disposition of our Animal Health business (Zoetis). For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

For Long-term investments, the change also reflects an increase associated with the transfer of certain product rights to our equity-method investment in ~~part, a build-up in anticipation of plant rationalizations.~~China. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

For Property, plant and equipment, less accumulated depreciation, the change also reflects depreciation, asset impairments and disposals, partially offset by capital additions.

For Goodwill, the change also reflects goodwill derecognized as part of the transfer of certain product rights, which constituted a business, to our equity-method investment in China. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments and Note 9A. Goodwill and Other Intangible Assets: Goodwill.

For Identifiable intangible assets, less accumulated amortization, the change also reflects amortization, asset impairment charges and the ~~impact of impairments~~transfer of certain ~~assets (see~~product rights to our equity-method investment in China. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 9B. Goodwill and Other Intangible Assets: Other Intangible Assets. For additional information about the asset impairment charges, see Notes to Condensed Consolidated Financial Statements—Note 4. Other ~~Deductions—Net~~(Income)/Deductions)—Net. For additional information about the transfer of certain product rights, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

For Accounts payable ~~Accrued compensation and related items, Other current liabilities~~ ~~and~~ ~~Other noncurrent liabilities~~, ~~also reflects lower spending as a result of our cost-reduction and productivity initiatives and~~ the ~~impact of lower revenues on expense levels.~~ ~~Other noncurrent liabilities~~ change also reflects the impact of ~~fair value adjustments on derivative financial instruments.~~lower expense levels and the timing of receipts and payments in the normal course of business.

~~Table of Contents~~

For ~~Pension benefit obligations~~Other current liabilities, the change also reflects a decrease in our legal accruals, reflecting payments made, as well as a decrease in our VAT payables, restructuring accruals and accrued interest.

For Additional paid-in capital and ~~Postretirement benefit obligations~~Treasury stock, ~~, also~~the change reflects, among other things, the impact of ~~$718 million~~the full disposition of ~~company contributions and~~our Animal Health business (Zoetis). In addition, the ~~impact of a decision to freeze the U.S. defined benefit plans as of January 1, 2018 (see~~change in Treasury stock also reflects common stock acquired for cash. For additional information, see Notes to Condensed Consolidated Financial Statements—Note ~~10. Pension~~2B. Acquisitions, Divestitures, Collaborative Arrangement and ~~Postretirement Benefit Plans~~Equity-Method Investments: Divestitures). and Note 6. Certain Changes in Total Equity.

~~For~~ ~~Other taxes payable,~~ ~~also reflects the impact~~

Table of ~~a number of audit settlements (see Notes to Condensed Consolidated Financial Statements—Note 5A. Tax Matters: Taxes on Income from Continuing Operations~~).Contents

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended								Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012			October 2, 2011			% Change		September 29, 2013			September 30, 2012			% Change
Cash provided by/(used in):
Operating activities	$	11,798		$	14,979		(21	)	$	11,979		$	11,798		2
Investing activities	(683		)	1,301			(152	)	(10,705		)	(683		)	*
Financing activities	(9,766		)	(14,357		)	(32	)	(9,231		)	(9,766		)	(5	)
Effect of exchange-rate changes on cash and cash equivalents	(25		)	48			(152	)	(72		)	(25		)	*
Net increase in cash and cash equivalents	$	1,324		$	1,971		(33	)
Net increase/(decrease) in Cash and cash equivalents									$	(8,029	)	$	1,324		*


*	Calculation not meaningful.

Operating Activities

Our net cash provided by operating activities was $~~11.8~~12.0 billion in the first nine months of ~~2012~~2013, compared to $~~15.0~~11.8 billion in the same period of ~~2011~~2012. The ~~decrease in~~ net cash provided by operating activities ~~was primarily attributable to:~~reflects:

the timing of receipts and payments in the ordinary course of business (including the receipt of a portion of the Protonix patent litigation settlement income and payments against legal accruals); and

spending reductions resulting from our company-wide, cost reduction/productivity initiatives,

almost fully offset by:

the loss of exclusivity of Lipitor ~~as well as~~and other products and the ongoing expiration of the Spiriva collaboration in certain ~~other products,~~countries, resulting in lower revenues and associated expenses (see also the “Industry-Specific Challenges” section of this MD&A)~~, partially offset by spending reductions resulting from our company-wide cost-reduction initiatives;~~

~~payments made in connection with certain legal matters;~~

~~an increase in inventory, partly due to the build-up of inventory in anticipation of plant rationalizations;~~

~~an increase in payments for taxes; and~~

~~the timing of receipts and payments in the ordinary course of business.~~.

~~For additional information about the impact during the first~~ ~~nine~~ ~~months of~~ ~~2012~~ of the loss of exclusivity of Lipitor in all major markets, including in the United States and the majority of developed European markets, see also the “Industry-Specific Challenges” section of this MD&A.

In the first nine months of ~~2012~~2013, the change in the line item called Other changes in assets and liabilities, net of acquisitions and divestitures, reflects the $0.6 billion portion of the Protonix patent litigation settlement income that had not been received in cash as of September 29, 2013. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net and Note 12A5. Commitments and Contingencies—Legal Proceedings—Certain Matters Resolved During the First Nine Months of 2013. In addition, the components of this line item for both periods reflect changes in the ordinary course of business for accounts receivable, inventory, other current assets, accounts payable, accrued compensation and other current and non-current ~~liabilities, as well as the adjustment necessary to reflect the non-cash nature of the income tax settlements (see Notes to Condensed Consolidated Financial Statements––Note 5A. Tax Matters: Taxes on Income from Continuing Operations~~)liabilities. For additional information about accounts receivable, see also the “Selected Measures of Liquidity and Capital Resources: Accounts Receivable” ~~below.~~section of this MD&A.

Investing Activities

Our net cash used in investing activities was $~~683 million~~10.7 billion in the first nine months of ~~2012~~2013, compared to net cash ~~provided by~~used in investing activities of $~~1.3 billion~~683 million in the same period in ~~2011~~2012. The ~~decrease~~increase in net cash ~~provided by~~used in investing activities was primarily attributable to:

net purchases of investments of $9.9 billion in the first nine months of 2013, compared to net proceeds from ~~redemption~~redemptions and sales of investments of $936 million in the first nine months of 2012, which were primarily used to finance our acquisitions, compared to net proceeds from redemptions and sales of investments of $2.8 billion in the first nine months of 2011, which were primarily used to finance our acquisition of King; and

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~~net proceeds from the sale of our Capsugel business of $2.4 billion in the first nine months of 2011;~~

partially offset by:

net cash paid, ~~of $782 million, net of cash acquired, for our acquisitions of Alacer Corp. and Ferrosan~~ in the first nine months of 2012, ~~(see Notes to Condensed Consolidated Financial Statements~~––~~Note 2A. Acquisitions~~of $782 million, for our acquisitions of Alacer and ~~Divestitures: Acquisitions), compared to $3.2 billion cash paid, net of cash acquired, for the acquisition of King in the first nine months of 2011; and~~

~~lower purchases of property, plant and equipment.~~Ferrosan.

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Financing Activities

Our net cash used in financing activities was $~~9.8~~9.2 billion in the first nine months of ~~2012~~2013, compared to net cash used in financing activities of $~~14.4~~9.8 billion in the same period in ~~2011~~2012. The decrease in net cash used in financing activities was primarily attributable to:

net proceeds from borrowings of $6.0 billion in the first nine months of 2013, compared to net repayments of borrowings of $372 million in the first nine months of ~~2012, compared to net repayments~~2012; and

increased proceeds from the exercise of ~~borrowings~~stock options,

partially offset by:

purchases of ~~$3.9~~common stock of $11.6 billion in the first nine months of ~~2011;~~2013, compared to $4.8 billion in the first nine months of 2012; and

~~lower purchases of common stock;~~

~~slightly offset by:~~

higher cash dividends paid.

Supplemental Schedule of Non-Cash Investing and Financing Information

In the first nine months of 2013, we:

sold our Animal Health business (Zoetis) for Pfizer common stock valued at $11.4 billion;

exchanged Zoetis common stock for the retirement of Pfizer commercial paper issued in 2013 for $2.5 billion;

exchanged Zoetis senior notes for the retirement of Pfizer commercial paper issued in 2012 for $1.0 billion; and

transferred certain product rights, valued at $1.2 billion, to an equity-method investment.

For further details on Zoetis-related transactions, see Notes to Condensed Consolidated Financial Statements—Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures, and for further details on the transfer of certain product rights, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.

ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We rely largely on operating cash flows, short-term investments, short-term commercial paper borrowings and long-term debt to provide for our liquidity requirements. We believe that we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future. Due to our significant operating cash flows as well as our financial assets, access to capital markets and available lines of credit and revolving credit agreements, we further believe that we have the ability to meet our liquidity needs for the foreseeable future, which include:

the working capital requirements of our operations, including our research and development activities;

investments in our business;

dividend payments and potential increases in the dividend rate;

share repurchases;

the cash requirements associated with our cost-reduction/productivity initiatives;

paying down outstanding debt;

contributions to our pension and postretirement plans; and

business-development activities.

With regard to share repurchases, the Company's new $10 billion share repurchase plan is contingent on the consummation of the sale of the Nutrition business to Nestlé. (For additional information about the new share repurchase plan, see the “Share Repurchase Plans” section of this MD&A.)

Our long-term debt is rated high quality by both Standard & Poor’s (S&P) and Moody’s Investors ~~Service.~~Service (Moody's). See the “Credit Ratings” section below. As market conditions change, we continue to monitor our liquidity position. We have taken and will continue to take a conservative approach to our financial investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, well-diversified, available-for-sale debt securities.

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Selected Measures of Liquidity and Capital Resources

~~The following table provides certain relevant measures of our liquidity and capital resources:~~


The following table provides certain relevant measures of our liquidity and capital resources:							The following table provides certain relevant measures of our liquidity and capital resources:
(MILLIONS OF DOLLARS, EXCEPT RATIOS AND PER COMMON SHARE DATA)	September 30, 2012			December 31, 2011				September 29, 2013			December 31, 2012
Selected financial assets:
Cash and cash equivalents^(a)	$	4,506		$	3,182			$	2,052		$	10,081
Short-term investments^(a)	18,462			23,270				31,627			22,318
Long-term investments	13,429			9,814
Long-term investments^(a)								15,731			14,149
	36,397			36,266				49,410			46,548
Debt:
Short-term borrowings, including current portion of long-term debt	7,774			4,016				4,738			6,424
Long-term debt	31,083			34,926				31,812			31,036
	38,857			38,942				36,550			37,460
Net financial liabilities^(b)	$	(2,460	)	$	(2,676	)
Net financial assets^(b)								$	12,860		$	9,088

Working capital^(c)	$	27,996		$	31,908			$	39,127		$	35,645
Ratio of current assets to current liabilities	1.96:1			2.10:1				2.92		:1	2.22		:1
Shareholders’ equity per common share^(d)	$	11.04		$	10.85
Total Pfizer Inc. shareholders' equity per common share^(d)								$	11.93		$	11.17


^(a)	See Notes to Condensed Consolidated Financial Statements––Note 7. Financial Instruments for a description of certain assets held and for a description of credit risk related to our financial instruments held.

^(b)

Net financial ~~liabilities decreased during~~assets increased as net cash provided by operating activities, the ~~first nine months~~net impact of ~~2012 as operating cash flow generation was partially~~the Zoetis transactions and the proceeds from the exercise of stock options, among other things, more than offset by share ~~repurchases, dividends, capital expenditures,~~purchases and ~~business development activities.~~dividend payments. For additional information, see the “Analysis of the Condensed Consolidated Statements of Cash Flows” section of this MD&A.


^(c)	Working capital includes net assets held for sale of ~~$3.9 billion~~$112 million as of September ~~30, 2012~~29, 2013 and ~~$4.1~~$4.5 billion (Zoetis) as of December 31, ~~2011~~. 2012.


^(d)	Represents total Pfizer Inc. shareholders’ equity divided by the actual number of common shares outstanding (which excludes treasury ~~shares and shares held by our employee benefit trust)~~shares).

We funded our acquisition of Ferrosan’s consumer healthcare business, which closed on December 1, 2011 (which fell in the first fiscal quarter of 2012 for our international operations), and our acquisition of Alacer, which closed on February 26, 2012, with available cash and the proceeds from short-term investments. For additional information on our acquisitions of Ferrosan and Alacer, see Notes to Condensed Consolidated Financial Statements—~~Note 2A. Acquisitions and Divestitures: Acquisitions.~~

For additional information about the sources and uses of our funds, see the “Analysis of the Condensed Consolidated Balance Sheets” and “Analysis of the Condensed Consolidated Statements of Cash Flows” sections of this MD&A.

Subsequent Event––On November 4, 2013, the amended reorganization plan for our wholly owned subsidiary, Quigley Company, Inc. (Quigley or, subsequent to the effectiveness of the amended reorganization plan on November 4, 2013, Reorganized Quigley) became effective and, in compliance with the terms of that plan, among other actions, we transferred approximately $724 million in cash to Reorganized Quigley and the Asbestos Personal Injury Trust. In addition, in October 2013, in accordance with a group of pre-bankruptcy-proceeding settlements with counsel representing various plaintiffs in the Quigley bankruptcy proceeding, we paid approximately $176 million in cash to plaintiffs' counsel for the benefit of claimants. At the time of these cash payments, we also derecognized certain of our asbestos-related liabilities, reported in Other current liabilities as of September 29, 2013. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 12A2. Commitments and Contingencies: Legal Proceedings––Product Litigation.

Full Separation of Zoetis––Impacts on Liquidity

As a result of the Zoetis-related transactions, which were completed in the second quarter of 2013, among other impacts, we received approximately $6.1 billion of cash. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures.

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Domestic and International Short-Term Funds

Many of our operations are conducted outside the U.S., and significant portions of our cash, cash equivalents and short-term investments are held internationally. We generally hold approximately 10%~~-30%~~ to 30% of these short-term funds in U.S. tax jurisdictions. The amount of funds held in U.S. tax jurisdictions can fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons, such as business-development activities. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and international cash flows (both inflows and outflows). Repatriation of overseas funds can result in additional U.S. federal, state and local income tax payments. We record U.S. deferred tax liabilities for certain unremitted earnings, but when amounts earned overseas are expected to be ~~permanently~~indefinitely reinvested outside of the U.S., no accrual for U.S. taxes is provided.

Assuming the receipt of the required regulatory clearances, the satisfaction of other closing conditions and the completion of the sale of our Nutrition business to Nestlé, a substantial portion of the sale proceeds will be located outside the U.S. We are evaluating and will continue to evaluate potential domestic and international uses of those proceeds, including but not limited to the potential use for share repurchases, in the context of our overall capital requirements and capital-allocation strategies. (For additional information regarding our agreement to sell the Nutrition business to Nestlé, see the "Our Business Development Initiatives" section of this MD&A.)

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Accounts Receivable

We continue to monitor developments regarding government and government agency receivables in several European markets where economic conditions remain challenging and uncertain. Historically, payments from a number of these European governments and government agencies extend beyond the contractual terms of sale, ~~and~~with no significant changes in the year-over-year ~~trend is worsening.~~trend.

We believe that our allowance for doubtful accounts is appropriate. Our assessment is based on an analysis of the following: (i) payments received to date; (ii) the consistency of payments from customers; (iii) direct and observed interactions with the governments (including court petitions) and with market participants (for example, the factoring industry); and (iv) various third-party assessments of repayment risk (for example, rating agency publications and the movement of rates for credit default swap instruments).

As of September ~~30, 2012,~~29, 2013, we had about $1.3 billion in aggregate gross accounts receivable from governments and/or government agencies in Italy, Spain, Greece, Portugal ~~Spain~~ and Ireland where economic conditions remain challenging and uncertain. Such receivables in excess of one year from the invoice date, totaling ~~$315~~$321 million, were as follows: ~~$173~~$121 million in Italy; ~~$94~~$115 million in Spain; $47 million in Greece; ~~$30~~$32 million in Portugal; ~~$13~~and $6 million in ~~Spain; and $5 million in~~ Ireland.

Although certain European governments and government agencies sometimes delay payments beyond the contractual terms of sale, we seek to appropriately balance repayment risk with the desire to maintain good relationships with our customers and to ensure a humanitarian approach to local patient needs.

We will continue to closely monitor repayment risk and, when necessary, we will continue to adjust our allowance for doubtful accounts.

Our assessments about the recoverability of accounts receivables can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Notes to Consolidated Financial Statements––Note 1C. Basis of Presentation and Significant Accounting Policies: Estimates and Assumptions included in our ~~2011~~2012 Financial Report, which iswas filed as Exhibit 13 to our Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended December 31, ~~2011.~~2012.

Credit Ratings

Two major corporate debt-rating organizations, Moody’s ~~Investors Service (Moody’s)~~ and ~~Standard & Poor’s (S&P),~~S&P, assign ratings to our short-term and long-term debt. A security rating is not a recommendation to buy, sell or hold securities and the rating is subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.

~~The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured non-credit-enhanced long-term debt:~~



~~NAME OF RATING AGENCY~~The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured non-credit-enhanced long-term debt:
Name of Rating Agency	Commercial Paper	~~Long-term~~	Long-Term Debt		Date of Last Action
Name of Rating Agency	Rating		Rating	Outlook	Date of Last Action
Moody’s	P-1		A1	Stable	October ~~2009~~2013
S&P	A1+		AA	Stable	~~October 2009~~May 2013

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Debt Capacity

We have available lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We maintain cash and cash equivalent balances and short-term investments in excess of ~~our~~ commercial paper and other short-term borrowings. As of September ~~30, 2012,~~29, 2013, we had access to ~~$8.9~~$9.2 billion of lines of credit, of which ~~$1.8~~$1.4 billion expire within one year. Of these lines of credit, ~~$8.2~~$8.5 billion are unused, of which our lenders have committed to loan us $7.1 billion at our request. Also, $7.0 billion of ~~our~~the unused lines of credit, all of which expire in 2016, may be used to support ~~our~~ commercial paper borrowings.

Global Economic Conditions

The challenging economic environment has not had, nor do we anticipate it will have, a significant impact on our liquidity. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving

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credit agreements, we continue to believe that we have the ability to meet our liquidity needs for the foreseeable future. As markets change, we continue to monitor our liquidity position. There can be no assurance that the challenging economic environment or a further economic downturn would not impact our ability to obtain financing in the future.

~~Share Repurchase Plans~~

On December 12, 2011, we announced that the Board of Directors authorized a $10 billion share repurchase plan. In the first nine months of 2012, we purchased approximately 213 million shares of our common stock for approximately $4.8 billion. We purchased approximately 296 million shares of our common stock for approximately $5.8 billion in the first nine months of 2011. After giving effect to share purchases through October 31, 2012, our remaining share repurchase authorization was approximately $4.1 billion.

On November 1, 2012, we announced that the Board of Directors authorized, effective upon the consummation of the sale of the Nutrition business to Nestlé, a new $10 billion share repurchase plan to be utilized over time. At such time as the new plan becomes effective, it will be in addition to the authorization then-remaining, if any, under the current share repurchase plan.

Off-Balance Sheet Arrangements

In the ordinary course of business and in connection with the sale of assets and businesses, we often indemnify our counterparties against certain liabilities that may arise in connection with a transaction or that are related to activities prior to a transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters, and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of September ~~30, 2012~~29, 2013, recorded amounts for the estimated fair value of these indemnifications are not significant.

Certain of our co-promotion or license agreements give our licensors or partners the rights to negotiate for, or in some cases to obtain under certain financial conditions, co-promotion or other rights in specified countries with respect to certain of our products.

Share-Purchase Plans

On November 1, 2012, we announced that the Board of Directors had authorized a $10 billion share-purchase plan, which became effective on November 30, 2012. On June 27, 2013, we announced that the Board of Directors had authorized an additional $10 billion share-purchase plan.

In the first nine months of 2013, we purchased approximately 411 million shares of our common stock for approximately $11.6 billion under our publicly announced share-purchase plans. In the first nine months of 2012, we purchased approximately 213 million shares of our common stock for approximately $4.8 billion under our publicly announced share-purchase plans. After giving effect to share purchases through September 29, 2013, our remaining share-repurchase authorization was approximately $10.2 billion.

Dividends on Common Stock

In October ~~2012,~~2013, our Board of Directors declared a dividend of ~~$0.22~~$0.24 per share, payable December ~~4, 2012,~~3, 2013, to shareholders of record at the close of business on November ~~9, 2012.~~8, 2013.

NEW ACCOUNTING STANDARDS

Recently Adopted Accounting Standards

See Notes to Condensed Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards.

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Recently Issued Accounting Standards, Not Adopted as of September ~~30, 2012~~29, 2013

~~None~~In July 2013, the Financial Accounting Standards Board (FASB) issued a clarification regarding the presentation of an unrecognized tax benefit related to a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. Under this new standard, this unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset if available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. Otherwise, the unrecognized tax benefit should be presented in the financial statements as a separate liability. The assessment is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date. The provisions of the new standard are effective on a prospective basis beginning in 2014 for annual and interim reporting periods, but early adoption is permitted. We do not expect the provisions of this standard to have a significant impact on our consolidated financial statements, but certain amounts currently recorded in Other taxes payable will be recorded, upon adoption and thereafter, primarily in Noncurrent deferred tax liabilities.

In March 2013, the FASB issued a clarification regarding the accounting for cumulative translation adjustment (CTA) upon derecognition of assets or investment within a foreign entity. This new standard provides additional CTA accounting guidance on sales or transfers of foreign entity investments and assets as well as step acquisitions involving a foreign entity. The provisions of the new standard are effective on a prospective basis in 2014 for annual and interim reporting periods. We do not expect the provisions of this standard to have a significant impact on our consolidated financial statements.

In February 2013, the FASB issued guidance regarding the measurement of obligations resulting from joint and several liability arrangements that may include debt agreements, other contractual obligations and settled litigation or judicial rulings. The provisions of this standard require that these obligations are measured at the amount representing the agreed-upon obligation of the company as well as additional liability amounts it expects to assume on behalf of other parties in the arrangement. The provisions of the new standard are effective on a retrospective basis in 2014 for annual and interim reporting periods. We do not expect the provisions of this standard to have a significant impact on our consolidated financial statements.

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FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS

~~The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions.~~ This report and other written or oral statements that we make from time to time contain ~~such~~ forward-looking statements that set forth anticipated results based on management’s plans and assumptions. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” “goal,” “objective,” ~~“aim”~~"aim" and other words and terms of similar meaning or by using future dates in connection with any discussion of, among other things, our anticipated future operating ~~and~~or financial performance, business plans and prospects, in-line products and product candidates, strategic ~~review,~~reviews, capital allocation, business-development plans and ~~share-repurchase~~plans related to share repurchases and ~~dividend-rate plans.~~dividends. In particular, these include statements relating to future actions, business plans and prospects, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, ~~share-repurchase~~plans relating to share repurchases and ~~dividend-rate plans,~~dividends, government regulation and financial results, including, in particular, the financial guidance ~~and~~set forth in the “Our Financial Guidance for 2013” section of this MD&A, the anticipated costs and cost savings set forth in the “Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” ~~and “Our Financial Guidance for~~ ~~2012” sections~~section of this MD~~&A.~~&A and the contributions that we expect to make from our general assets to the Company's pension and postretirement plans during 2013 as described in Notes to Condensed Consolidated Financial Statements––Note 10. Pension and Postretirement Benefit Plans. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

the outcome of research and development activities including, without limitation, the ability to meet anticipated clinical trial commencement and completion dates, regulatory submission and approval dates, and launch dates for product ~~candidates;~~candidates, as well as the possibility of unfavorable clinical trial results, including unfavorable new clinical data and additional analyses of existing clinical data;

decisions by regulatory authorities regarding whether and when to approve our drug applications, as well as their decisions regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products;

the speed with which regulatory authorizations, pricing approvals and product launches may be achieved;

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the outcome of post-approval clinical trials, which could result in the loss of marketing approval for a product or changes in the labeling for, and/or increased or new concerns about the safety or efficacy of, a product that could affect its availability or commercial potential;

the success of external business-development activities;

competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;

the implementation by the FDA of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products in the U.S., with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;

the ability to meet generic and branded competition after the loss of patent protection for our products or competitor products;

the ability to successfully market both new and existing products domestically and internationally;

difficulties or delays in manufacturing;

trade buying patterns;

the impact of existing and future legislation and regulatory provisions on product exclusivity;

trends toward managed care and healthcare cost containment;

the impact of the U.S. Budget Control Act of 2011 (the Budget Control Act) and the deficit-reduction actions to be taken pursuant to the Budget Control Act in order to achieve the deficit-reduction targets provided for therein, and the impact of any broader deficit-reduction efforts;

the inability of the U.S. federal government to conduct drug review and approval activities or to satisfy its financial obligations, including under Medicare, Medicaid and other publicly funded or subsidized health programs, that may result from the possible failure of the U.S. federal government in early 2014 to provide funding to avoid a partial or total shutdown of its operations and/or to suspend enforcement of or to increase the federal debt ceiling;

the impact of U.S. healthcare legislation enacted in 2010—the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act––and of any modification or repeal of any of the provisions thereof;

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U.S. federal or state legislation or regulatory action affecting, among other things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; direct-to-consumer advertising and interactions with healthcare professionals; and the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines;

legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access, including, in particular, continued government-mandated price reductions for certain biopharmaceutical products in certain European and emerging market countries;

the exposure of our operations outside the U.S. to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest and unstable governments and legal systems;

contingencies related to actual or alleged environmental contamination;

claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates;

any significant breakdown, infiltration or interruption of our information technology systems and infrastructure;

legal defense costs, insurance expenses, settlement costs, the risk of an adverse decision or settlement and the adequacy of reserves related to product liability, patent protection, government investigations, consumer, commercial, securities, antitrust, environmental and tax issues, ongoing efforts to explore various means for resolving asbestos litigation, and other legal proceedings;

our ability to protect our patents and other intellectual property, both domestically and internationally;

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interest rate and foreign currency exchange rate ~~fluctuations;~~fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;

governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside of the U.S. that may result from pending and possible future proposals;

any significant issues involving our largest wholesaler customers, which account for a substantial portion of our revenues;

the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;

any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timeliness and compliance with applicable legal requirements and industry standards;

changes in U.S. generally accepted accounting principles;

uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets; and the related risk that our allowance for doubtful accounts may not be adequate;

any changes in business, political and economic conditions due to actual or threatened terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas;

growth in costs and expenses;

changes in our product, segment and geographic mix;

our ability and the ability of Nestlé to satisfy the conditions to closing the sale of our Nutrition business to Nestlé at all or within the anticipated time period; and whether and when the Company's new $10 billion share repurchase program will go into effect, which is contingent upon the closing of the sale of our Nutrition business to Nestlé;

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the possibility that the initial public offering (IPO) of up to a 20% ownership stake in our Animal Health business, for which a registration statement was filed with the Securities and Exchange Commission on August 13, 2012, will not be consummated at all or within the anticipated time period, including as the result of regulatory, market or other factors; and, if the IPO is consummated, the impact of the strategic alternative that we decide to pursue with regard to our remaining ownership stake in the Animal Health business;

~~our ability and the ability of NextWave Pharmaceuticals, Inc. (NextWave) to satisfy the conditions to closing our acquisition of NextWave at all or within the anticipated time period;~~ and

the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls and withdrawals and other unusual items, including ~~(i) our ability to realize the projected benefits of our acquisition of King Pharmaceuticals, Inc., and (ii)~~ our ability to realize the projected benefits of our cost-reduction and productivity initiatives, including those related to our research and development ~~organization.~~organization, and of our plan to internally separate our commercial operations into three, new, global businesses effective January 1, 2014.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form

10-Q, 8-K and 10-K reports and our other filings with the SEC.

Our ~~2011~~2012 Annual Report on Form ~~10-K~~10-K/A listed various important factors that could cause actual results to differ materially from past and projected future results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Risk Factors.” We incorporate that section of that Form ~~10-K~~10-K/A in this filing and investors should refer to it. Reference is also made to Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

This report includes discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data. In addition, clinical trial data are subject to differing interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.

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Legal Proceedings and Contingencies

Information with respect to legal proceedings and contingencies required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is incorporated by reference from the discussion under the heading Financial Risk Management in our ~~2011~~2012 Financial Report, which iswas filed as Exhibit 13 to our ~~2011~~2012 Annual Report on Form ~~10-K.~~10-K/A.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.

~~Table of Contents~~

During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, we do wish to highlight some changes which, taken together, are expected to have a favorable impact on our controls over a multi-year period. We continue to pursue a multi-year initiative to outsource some transaction-processing activities within certain accounting processes and are migrating to a consistent enterprise resource planning system across the organization. These are enhancements of ongoing activities to support the growth of our financial shared service capabilities and standardize our financial systems. None of these initiatives is in response to any identified deficiency or weakness in our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Tax Matters

Additional information with respect to tax matters required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note ~~5C.~~5B. Tax Matters: Tax Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.

We account for income tax contingencies using a benefit recognition model. If our initial assessment fails to result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit: (i) if there are changes in tax law, or analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to "more likely than not"; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. We regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase or decrease the technical merits of a position relative to the “more-likely-than-not” standard.

Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.

Item 1A. Risk Factors

The “Our Operating Environment” and “Forward-Looking Information and Factors That May Affect Future Results” sections of the MD&A and Part I, Item 1A, “Risk Factors”, of our ~~2011~~2012 Annual Report on Form ~~10-K~~10-K/A are incorporated by reference herein. There have been no material changes from the risk factors discussed in Part I, Item 1A, “Risk Factors”, of our ~~2011~~2012 Annual Report on Form ~~10-K, except as follows:~~

~~On April 23, 2012, we entered into~~10-K/A. Set forth below is an agreement to sell our Nutrition business to Nestlé. The transaction is subject to our ability and Nestlé’s ability to obtain the regulatory clearances required in certain jurisdictions and to satisfy the other conditions to closing the sale. (For further information, see the “Our Operating Environment––Our Business Development Initiatives” sectionexpansion of the ~~MD&A.)~~disclosure that was included in our 2012 Annual Report on Form 10K/A concerning counterfeit products as a risk factor.

~~On August 13, 2012, we filed~~

Counterfeit Products

A counterfeit medicine is one that has been deliberately and fraudulently mislabeled as to its identity and source. A counterfeit Pfizer medicine, therefore, is one manufactured by someone other than Pfizer, but which appears to be the same as an authentic Pfizer medicine. The prevalence of counterfeit medicines is a ~~registration statement with the U.S. Securities~~significant and ~~Exchange Commission for a potential initial public offering (IPO) of up~~growing industry-wide issue due to a ~~20% ownership stake in our Animal Health business. The transaction is subject~~variety of factors, including, but not limited to, the ~~possibility~~following: the widespread use of the internet, which has greatly facilitated the ease by which counterfeit medicines can be advertised, purchased and delivered to individual patients; the availability of sophisticated technology that makes it easier for counterfeiters to make counterfeit medicines; the ~~IPO will~~growing involvement in the medicine supply chain of under-regulated wholesalers and repackagers; the importation of medicines across borders; and the relatively modest risk of penalties faced by counterfeiters. Further, laws against pharmaceutical counterfeiting vary greatly from country to country, and the enforcement of existing law varies greatly from jurisdiction to jurisdiction. For example, in some countries, pharmaceutical counterfeiting is not ~~be consummated at all or within~~a crime; in others, it may result in only minimal sanctions. In addition, those involved in the ~~anticipated time period, including~~distribution of counterfeit medicines use complex transport routes in order to evade customs controls by disguising the true source of their products.

Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured—often in unregulated, unlicensed, uninspected and unsanitary sites—as well as the ~~result~~lack of ~~regulatory, market or other factors. (For further information, see~~regulation of their contents. Failure to mitigate the ~~“Our Operating Environment––Our Business Development Initiatives” section~~threat of counterfeit medicines, which is exacerbated by the complexity of the ~~MD&A.)~~

As discussed above in Part I, Item 4, “Controls and Procedures”, we continue to pursue a multi-year initiative to outsource some transaction-processing activities within certain accounting processes and are migrating to a consistent enterprise resource planning system across the organization. These are enhancements of ongoing activities to support the growth of our financial shared service capabilities and standardize our financial systems. If any difficulties in the migration to or in the operation of the new system were to occur, theysupply chain, could adversely ~~affect our operations, including,~~impact

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our business, by, among other ~~ways, through a failure~~things, causing the loss of patient confidence in the Pfizer name and in the integrity of our medicines, potentially resulting in lost sales, product recalls, and an increased threat of litigation.

We undertake significant efforts to ~~meet demand~~counteract the threats associated with counterfeit medicines, including, among other things, working with the FDA and other regulatory authorities and multinational coalitions to combat the counterfeiting of medicines and supporting efforts by law enforcement authorities to prosecute counterfeiters; assessing new and existing technologies to seek to make it more difficult for counterfeiters to copy our products ~~or adversely affect~~and easier for patients and healthcare providers to distinguish authentic from counterfeit medicines; implementing business practices designed to protect patient health; promoting public policies intended to hinder counterfeiting; and working collaboratively with wholesalers, pharmacies, customs offices, and law enforcement agencies to increase inspection coverage, monitor distribution channels, and improve surveillance of distributors and repackagers. No assurance can be given, however, that our ~~ability~~efforts and the efforts of others will be successful, and the presence of counterfeit medicines may continue to ~~meet our financial reporting obligations.~~increase.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~This~~The following table provides certain information with respect to our purchases of shares of ~~Pfizer’s~~the Company's common stock during the third fiscal quarter of ~~2012~~2013:

~~Issuer’s~~Issuer Purchases of Equity Securities^(a)

Period
Total Number of
Shares Purchased^(b)

Average Price
Paid per Share^(b)

Total Number of Shares Purchased as Part of Publicly Announced Plan^(a)

Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan^{(a), (c)}

July 2, 2012, through July 29,
2012
69,525
$ 22.50
—
$ 7,035,125,784
July 30, 2012, through August 26, 2012 29,489,991
$ 23.95
29,430,755
$ 6,330,215,429
August 27, 2012, through September 30, 2012 46,925,003
$ 24.13
46,840,276
$ 5,199,791,721
Total 76,484,519
$ 24.06
76,271,031



Period	Total Number of Shares Purchased^(b)	Average Price Paid per Share^(b)		Total Number of Shares Purchased as Part of Publicly Announced Plan^(a)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan^(a)
July 1, 2013, through July 28, 2013	26,418,022	$	28.82	26,354,823	$	13,157,611,952
July 29, 2013, through August 25, 2013	45,856,747	$	29.18	45,805,063	$	11,821,267,949
August 26, 2013, through September 29, 2013	58,262,933	$	28.47	58,223,236	$	10,163,384,108
Total	130,537,702	$	28.79	130,383,122

^(a)

~~On December 12, 2011, we announced that the Board of Directors had authorized a $10 billion share repurchase plan (the December 2011 Stock Purchase Plan).~~ On November 1, 2012, we announced that the Board of Directors had authorized ~~effective upon the consummation of the sale of the Nutrition business to Nestlé,~~ a ~~new~~ $10 billion ~~share repurchase~~share-purchase plan, ~~to be utilized over time~~which became effective on November 30, 2012 (the November 2012 Stock Purchase Plan). ~~At such time as~~On June 27, 2013, we announced that the ~~2012 Stock Purchase Plan becomes effective, it will be in addition to the authorization then-remaining, if any, under the December 2011 Stock Purchase Plan.~~Board of Directors had authorized an additional $10 billion share-purchase plan.

^(b)

In addition to amounts purchased under the ~~December 2011~~November 2012 Stock Purchase Plan, these columns reflect the following transactions during the third fiscal quarter of ~~2012~~2013: (i) the surrender to Pfizer of ~~171,595~~154,080 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock and restricted stock units issued to employees; (ii) the open market purchase by the trustee of ~~33,169~~520 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance share awards and who deferred receipt of such awards; and (iii) ~~the surrender~~an adjustment to ~~Pfizer of 8,724~~restore 20 shares of common stock that were previously withheld incorrectly to satisfy tax withholding obligations in connection with the vesting of performance share awards issued to employees.


^(c)	~~The amounts in this column do not reflect the 2012 Stock Purchase Plan.~~

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

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Item 6. Exhibits



1) Exhibit 12	-	Computation of Ratio of Earnings to Fixed Charges
2) Exhibit 15	-	Accountants’ Acknowledgement
3) Exhibit 31.1	-	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
4) Exhibit 31.2	-	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
5) Exhibit 32.1	-	Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
6) Exhibit 32.2	-	Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
7) Exhibit 101:
EX-101.INS EX-101.SCH EX-101.CAL EX-101.LAB EX-101.PRE EX-101.DEF		XBRL Instance Document XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Calculation Linkbase XBRL Taxonomy Extension Label Linkbase XBRL Taxonomy Extension Presentation Linkbase XBRL Taxonomy Extension Definition Document

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SIGNATURE

~~Under~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report ~~was~~to be signed on its behalf ~~of the Registrant~~ by the ~~authorized person named below.~~undersigned thereunto duly authorized.



		Pfizer Inc.
		(Registrant)


Dated:	November 8, ~~2012~~2013	/s/ Loretta V. Cangialosi
		Loretta V. Cangialosi, Senior Vice President and Controller (Principal Accounting Officer and Duly Authorized Officer)

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(MILLIONS OF DOLLARS)	Amounts Recognized as of Acquisition Date (Final)
Working capital, excluding inventories	$	155
Inventories	340
Property, plant and equipment	412
Identifiable intangible assets, excluding in-process research and development	1,806
In-process research and development	303
Net tax accounts	(328		)
All other long-term assets and liabilities, net	102
Total identifiable net assets	2,790
Goodwill^(a)	765
Net assets acquired/total consideration transferred	$	3,555



	Net Unrealized Gain/(Losses)								Benefit Plans
(MILLIONS OF DOLLARS)	Currency Translation Adjustment And Other			Derivative Financial Instruments			Available-For-Sale Securities		Actuarial Gains/(Losses)			Prior Service (Costs)/ Credits And Other			Accumulated Other Comprehensive Loss
Balance, December 31, 2011	$	944		$	(361	)	$	46	$	(5,120	)	$	362		$	(4,129	)
Other comprehensive income/(loss)^(a)	(1,560		)	76			126		(99		)	(67		)	(1,524		)
Balance, September 30, 2012	$	(616	)	$	(285	)	$	172	$	(5,219	)	$	295		$	(5,653	)



(MILLIONS OF DOLLARS)	September 30, 2012 vs. October 2, 2011 Worldwide Change			% Change Worldwide		% Change U.S.		% Change International
Three Months Ended
Lipitor^(a)	$	(1,853	)	(71	)	(87	)	(51	)
Geodon/Zeldox^(a)	(206		)	(78	)	(88	)	(33	)
Prevnar 13/Prevenar 13	(138		)	(14	)	(3	)	(22	)
Xalatan/Xalacom^(a)	(96		)	(35	)	—		(36	)
Caduet^(a)	(82		)	(55	)	(84	)	(21	)
Effexor	(58		)	(35	)	(29	)	(38	)
Zosyn/Tazocin	(40		)	(27	)	(48	)	(5	)
Aromasin^(a)	(34		)	(40	)	(63	)	(38	)
Prevnar/Prevenar (7-valent)	(17		)	(17	)	—		(17	)
Celebrex	33			5		8		—
Lyrica	75			8		13		4
Alliance Revenue^(a)	(40		)	(4	)	20		(45	)
All other biopharmaceutical products^(b)	32			2		18		(5	)
Animal Health products	(24		)	(2	)	4		(7	)
Consumer Healthcare products	13			2		(5	)	9

Nine Months Ended
Lipitor^(a)	$	(4,214	)	(56	)	(79	)	(26	)
Geodon/Zeldox^(a)	(431		)	(57	)	(65	)	(17	)
Xalatan/Xalacom^(a)	(343		)	(36	)	(81	)	(27	)
Caduet^(a)	(244		)	(56	)	(89	)	(18	)
Effexor	(195		)	(36	)	(51	)	(27	)
Aromasin^(a)	(132		)	(45	)	(81	)	(37	)
Zosyn/Tazocin	(112		)	(23	)	(34	)	(9	)
Prevnar/Prevenar (7-valent)	(103		)	(25	)	—		(25	)
Prevnar 13/Prevenar 13	(98		)	(3	)	(7	)	1
Celebrex	113			6		7		4
Lyrica	331			12		10		14
Alliance revenue^(a)	(101		)	(4	)	17		(36	)
All other biopharmaceutical products^(b)	360			7		25		(1	)
Animal Health products	50			2		7		(2	)
Consumer Healthcare products	58			3		(3	)	8