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 29, 2013~~March 30, 2014

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 4, 2013,~~May 5, 2014, ~~6,481,070,845~~6,378,718,293 shares of the issuer’s voting common stock were outstanding.

~~Table of Contents~~

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,~~March 30, 2014 and March 31, 2013 ~~and September 30, 2012~~	3

Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2014 and March 31, 2013 ~~and September 30, 2012~~	4

Condensed Consolidated Balance Sheets as of ~~September 29, 2013~~March 30, 2014 and December 31, ~~2012~~2013	5

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 29,~~March 30, 2014 and March 31, 2013 ~~and September 30, 2012~~	6

Notes to Condensed Consolidated Financial Statements	7

Review Report of Independent Registered Public Accounting Firm	5036

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations	5137

Item 3.
Quantitative and Qualitative Disclosures About Market Risk	9880

Item 4.
Controls and Procedures	9880

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings	9981

Item 1A.
Risk Factors	9981

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	~~100~~82

Item 3.
Defaults Upon Senior Securities	~~100~~82

Item 4.
Mine Safety Disclosures	~~100~~82

Item 5.
Other Information	~~100~~82

Item 6.
Exhibits	~~101~~83

Signature	~~102~~84

~~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
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012		March 30, 2014		March 31, 2013
Revenues	$	12,643		$	12,953		$	38,026		$	40,766	$	11,353	$	12,410
Costs and expenses:
Cost of sales^(a)	2,287			2,309			6,792			7,068		2,045		2,263
Selling, informational and administrative expenses^(a)	3,395			3,491			10,203			10,834		3,040		3,217
Research and development expenses^(a)	1,627			1,887			4,867			5,461		1,623		1,710
Amortization of intangible assets	1,117			1,211			3,476			3,889		1,117		1,219
Restructuring charges and certain acquisition-related costs	233			312			547			1,085		58		131
Other (income)/deductions––net	411			937			(514		)	3,264
Other deductions––net												623		145
Income from continuing operations before provision for taxes on income	3,573			2,806			12,655			9,165		2,847		3,725
Provision/(benefit) for taxes on income	985			(183		)	3,876			1,622
Provision for taxes on income												582		1,109
Income from continuing operations	2,588			2,989			8,779			7,543		2,265		2,616
Discontinued operations:
Income from discontinued operations––net of tax	36			225			326			734
Gain on disposal of discontinued operations––net of tax	(25		)	—			10,393			—
Discontinued operations––net of tax	11			225			10,719			734		73		149
Net income before allocation to noncontrolling interests	2,599			3,214			19,498			8,277		2,338		2,765
Less: Net income attributable to noncontrolling interests	9			6			63			22		9		15
Net income attributable to Pfizer Inc.	$	2,590		$	3,208		$	19,435		$	8,255	$	2,329	$	2,750

Earnings per common share––basic^(b):
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.39		$	0.40		$	1.26		$	1.00	$	0.35	$	0.36
Discontinued operations––net of tax	—			0.03			1.54			0.10		0.01		0.02
Net income attributable to Pfizer Inc. common shareholders	$	0.39		$	0.43		$	2.80		$	1.10	$	0.36	$	0.38

Earnings per common share––diluted^(b):
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.39		$	0.40		$	1.25		$	1.00	$	0.35	$	0.36
Discontinued operations––net of tax	—			0.03			1.52			0.10		0.01		0.02
Net income attributable to Pfizer Inc. common shareholders	$	0.39		$	0.43		$	2.77		$	1.09	$	0.36	$	0.38

Weighted-average shares––basic	6,581			7,436			6,938			7,483		6,389		7,187
Weighted-average shares––diluted	6,656			7,508			7,016			7,550		6,476		7,269
Cash dividends paid per common share	$	0.24		$	0.22		$	0.72		$	0.66	$	0.26	$	0.24


^(a)	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						Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012			March 30, 2014			March 31, 2013
Net income before allocation to noncontrolling interests	$	2,599		$	3,214		$	19,498		$	8,277		$	2,338		$	2,765

Foreign currency translation adjustments	$	(21	)	$	153		$	(1,068	)	$	(1,565	)	$	(75	)	$	(292	)
Reclassification adjustments^(a)	—			—			171			—			(62		)	—
	(21		)	153			(897		)	(1,565		)	(137		)	(292		)
Unrealized holding gains on derivative financial instruments	490			455			336			242
Unrealized holding losses on derivative financial instruments													(58		)	(396		)
Reclassification adjustments for realized losses^(b)													12			526
													(46		)	130
Unrealized holding gains/(losses) on available-for-sale securities													108			(10		)
Reclassification adjustments for realized gains^(b)	(313		)	(221		)	(64		)	(94		)	(99		)	(158		)
	177			234			272			148			9			(168		)
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		)
Benefit plans: actuarial gains, net													6			22
Reclassification adjustments related to amortization^(c)	137			122			438			351			49			151
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		)
Reclassification adjustments related to settlements, net^(c)													21			55
Other	2			5			(4		)	1			(17		)	97
	(14		)	(22		)	(55		)	(116		)	59			325
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	)
Benefit plans: prior service credits and other													—			3
Reclassification adjustments related to amortization^(c)													(18		)	(16		)
Reclassification adjustments related to curtailments, net^(c)													(4		)	(9		)
Other													(1		)	(2		)
													(23		)	(24		)
Other comprehensive loss, before tax													(138		)	(29		)
Tax provision/(benefit) on other comprehensive loss^(d)													(17		)	176
Other comprehensive loss before allocation to noncontrolling interests													$	(121	)	$	(205	)

Comprehensive income before allocation to noncontrolling interests	$	2,640		$	3,568		$	19,003		$	6,734		$	2,217		$	2,560
Less: Comprehensive income/(loss) attributable to noncontrolling interests	(32		)	5			(2		)	3
Less: Comprehensive income attributable to noncontrolling interests													7			12
Comprehensive income attributable to Pfizer Inc.	$	2,672		$	3,563		$	19,005		$	6,731		$	2,210		$	2,548


^(a)	~~Primarily reclassified~~Reclassified into ~~Gain on disposal of discontinued~~Discontinued operations—net of taxin the condensed consolidated statements of ~~income~~.income.


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


^(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.


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

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(MILLIONS OF DOLLARS)	September 29, 2013			December 31, 2012			March 30, 2014			December 31, 2013
	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	2,052		$	10,081		$	2,862		$	2,183
Short-term investments	31,627			22,318			31,019			30,225
Accounts receivable, less allowance for doubtful accounts	11,371			11,456			9,399			9,357
Inventories	6,482			6,076			6,066			6,166
Taxes and other current assets	7,835			8,956
Assets of discontinued operations and other assets held for sale	133			5,944
Current deferred tax assets and other current tax assets							4,974			4,624
Other current assets							3,473			3,689
Total current assets	59,500			64,831			57,793			56,244
Long-term investments	15,731			14,149			15,822			16,406
Property, plant and equipment, less accumulated depreciation	12,359			13,213			12,347			12,397
Goodwill	42,400			43,661			42,467			42,519
Identifiable intangible assets, less accumulated amortization	40,549			45,146			38,122			39,385
Taxes and other noncurrent assets	4,982			4,798
Noncurrent deferred tax assets and other noncurrent tax assets							1,498			1,554
Other noncurrent assets							3,759			3,596
Total assets	$	175,521		$	185,798		$	171,808		$	172,101

Liabilities and Equity
Short-term borrowings, including current portion of long-term debt	$	4,738		$	6,424		$	9,319		$	6,027
Accounts payable	2,287			2,921			2,546			3,234
Dividends payable	1			1,733			1			1,663
Income taxes payable	802			979			851			678
Accrued compensation and related items	1,750			1,875			1,758			1,792
Other current liabilities	10,774			13,812			10,315			9,972
Liabilities of discontinued operations	21			1,442
Total current liabilities	20,373			29,186			24,790			23,366

Long-term debt	31,812			31,036			27,649			30,462
Pension benefit obligations	7,588			7,782
Postretirement benefit obligations	3,423			3,491
Pension benefit obligations, net							4,533			4,635
Postretirement benefit obligations, net							2,645			2,668
Noncurrent deferred tax liabilities	22,432			21,193			25,923			25,590
Other taxes payable	7,024			6,581			3,784			3,993
Other noncurrent liabilities	4,515			4,851			4,416			4,767
Total liabilities	97,167			104,120			93,740			95,481

Commitments and Contingencies

Preferred stock	35			39			32			33
Common stock	452			448			454			453
Additional paid-in capital	76,756			72,608			77,849			77,283
Treasury stock	(63,272		)	(40,122		)	(69,204		)	(67,923		)
Retained earnings	70,381			54,240			72,028			69,732
Accumulated other comprehensive loss	(6,383		)	(5,953		)	(3,390		)	(3,271		)
Total Pfizer Inc. shareholders’ equity	77,969			81,260			77,769			76,307
Equity attributable to noncontrolling interests	385			418			299			313
Total equity	78,354			81,678			78,068			76,620
Total liabilities and equity	$	175,521		$	185,798		$	171,808		$	172,101

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						Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			March 30, 2014			March 31, 2013
Operating Activities
Net income before allocation to noncontrolling interests	$	19,498		$	8,277		$	2,338		$	2,765
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	4,818			5,548			1,456			1,774
Share-based compensation expense	418			362
Asset write-offs, impairments and related charges							137			513
Gain associated with the transfer of certain product rights to an equity-method investment	(459		)	—			—			(490		)
Asset write-offs and impairment charges	926			865
Gain on disposal of discontinued operations	(10,501		)	—
Deferred taxes from continuing operations	1,667			130			345			920
Deferred taxes from discontinued operations	(23		)	(10		)	—			7
Benefit plan expense in excess of contributions	258			86
Share-based compensation expense							143			189
Benefit plan contributions (in excess of)/less than expense							(99		)	71
Other non-cash adjustments, net	(311		)	(118		)	(294		)	(119		)
Other changes in assets and liabilities, net of acquisitions and divestitures	(4,312		)	(3,342		)	(1,091		)	(3,327		)
Net cash provided by operating activities	11,979			11,798			2,935			2,303

Investing Activities
Purchases of property, plant and equipment	(789		)	(833		)	(292		)	(202		)
Purchases of short-term investments	(33,927		)	(14,587		)	(8,721		)	(10,742		)
Proceeds from redemptions and sales of short-term investments	29,008			19,377			7,569			6,386
Net (purchases of)/proceeds from redemptions and sales of short-term investments with original maturities of 90 days or less	(2,177		)	1,483
Net (purchases of)/proceeds from redemptions/sales of investments with original maturities of 90 days or less							1,500			(5,596		)
Purchases of long-term investments	(8,746		)	(8,694		)	(1,808		)	(2,246		)
Proceeds from redemptions and sales of long-term investments	5,943			3,357			1,454			1,444
Acquisitions, net of cash acquired	(15		)	(782		)
Acquisitions of intangible assets							(6		)	(126		)
Other investing activities	(2		)	(4		)	206			156
Net cash used in investing activities	(10,705		)	(683		)	(98		)	(10,926		)

Financing Activities
Proceeds from short-term borrowings	3,723			5,700			—			1,031
Principal payments on short-term borrowings	(3,776		)	(5,882		)	(3		)	(1,031		)
Net proceeds from/(payments on) short-term borrowings with original maturities of 90 days or less	1,831			(176		)
Net proceeds from short-term borrowings with original maturities of 90 days or less							1,031			3,485
Proceeds from issuance of long-term debt^(a)	6,618			—			—			2,624
Principal payments on long-term debt	(2,396		)	(14		)	(752		)	(2		)
Purchases of common stock	(11,643		)	(4,834		)	(1,197		)	(4,626		)
Cash dividends paid	(5,026		)	(4,915		)	(1,662		)	(1,735		)
Proceeds from exercise of stock options and other financing activities	1,438			355
Net cash used in financing activities	(9,231		)	(9,766		)
Proceeds from exercise of stock options							425			642
Other financing activities							25			46
Net cash provided by/(used in) financing activities							(2,133		)	434
Effect of exchange-rate changes on cash and cash equivalents	(72		)	(25		)	(25		)	—
Net increase/(decrease) in cash and cash equivalents	(8,029		)	1,324			679			(8,189		)
Cash and cash equivalents, beginning	10,081			3,182			2,183			10,081
Cash and cash equivalents, end	$	2,052		$	4,506		$	2,862		$	1,892

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			—
Exchange of subsidiary common stock (Zoetis) for the retirement of Pfizer commercial paper issued in 2013^(b)							$	—		$	2,479
Exchange of subsidiary senior notes (Zoetis) 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			—			—			1,233
Cash paid during the period for:
Income taxes	$	1,799		$	1,895		$	536		$	548
Interest	1,512			1,675			361			433

^(a)

Includes $2.6 billion from the issuance of senior notes by Zoetis ~~our~~(our former Animal Health ~~subsidiary,~~subsidiary), net of the $1.0 billion non-cash exchange of Zoetis senior notes for the retirement of Pfizer commercial paper issued in 2012. See Note ~~2B. Acquisitions, Divestitures, Collaborative Arrangement~~2A. Divestiture and Equity-Method ~~Investments: Divestitures~~Investments: Divestiture.


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


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

See Notes to Condensed Consolidated Financial 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 25, 2013~~February 23, 2014 and ~~August 26, 2012.~~February 24, 2013.

In the condensed consolidated statements of comprehensive income, we have revised the presentation of other comprehensive income/(loss) shown in prior periods for derivative financial instruments and available-for-sale securities, as certain items had been reported net.

On June 24, 2013, we completed the full disposition of our Animal Health business, Zoetis Inc. (Zoetis)~~, and recognized a gain~~. On February 6, 2013, an initial public offering (IPO) of the Class A common stock of Zoetis was completed, pursuant to which we sold 99.015 million shares of Class A common stock of Zoetis, which represented approximately ~~$10.4 billion~~19.8%~~, net~~ of ~~tax, related to~~ the ~~disposal of this business in~~ ~~Gain on disposal of discontinued operations––net of tax~~ ~~in the condensed consolidated statements of income for the nine months ended September 29, 2013.~~total outstanding Zoetis shares. The operating results of this business are reported as ~~Income from discontinued~~Discontinued operations––net of tax in the condensed consolidated ~~statements~~statement of income for the ~~nine~~three 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~~March 31, ~~2012, the assets and liabilities associated with this business are classified as~~ ~~Assets of discontinued operations and other assets held for sale~~ ~~and~~ ~~Liabilities of discontinued operations, as appropriate.~~2013. Prior ~~period financial statements~~periods have been restated. For additional information, see Note ~~2B. Acquisitions, Divestitures, Collaborative Arrangement~~2A. Divestiture and Equity-Method ~~Investments: Divestitures~~Investments.

~~On November 30, 2012, we completed the sale of our Nutrition business to Nestlé. The operating results of this business are reported as~~ ~~Income from discontinued operations––net of tax~~ ~~in the condensed consolidated statements of income for the three and nine months ended~~ ~~September 30, 2012. For additional information, see~~ ~~Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures~~: Divestiture.

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 condensed consolidated balance sheets and condensed consolidated statements of 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 ~~2012~~2013 Annual Report on Form ~~10-K/A.~~10-K.

B. Adoption of New Accounting Standards

~~There were no~~We adopted the following new accounting and disclosure standards ~~adopted in~~as of January 1, 2014 and there were no impacts to our condensed consolidated financial statements:

A new standard that clarified the ~~nine months ended September 29, 2013.~~accounting for cumulative translation adjustment (CTA) upon derecognition of a group of assets that is a business or an equity-method investment within a foreign entity.

A new standard 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.

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.

~~Table of Contents~~

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

A. ~~Acquisitions~~

~~NextWave Pharmaceuticals, Inc.~~

In the first quarter of 2013, we 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 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~~ ~~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 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~~ ~~Other (income)/deductions––net~~.

~~Alacer Corp.~~

On February 26, 2012, we completed our acquisition of Alacer Corp., a 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 acquisition, we recorded ~~$181 million~~ in ~~Identifiable intangible assets, consisting primarily of the Emergen-C indefinite-lived brand;$69 million~~ ~~in net deferred tax liabilities; and~~ ~~$192 million~~ in ~~Goodwill~~.

~~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. This acquisition is reflected in our condensed consolidated financial statements beginning in the first fiscal quarter of 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 ~~$362 million~~ in ~~Identifiable intangible assets,~~ ~~consisting of indefinite-lived and finite-lived brands;~~ ~~$94 million~~ ~~in net deferred tax liabilities; and~~ ~~$322 million~~ in ~~Goodwill~~.

~~B. Divestitures~~Divestiture

Animal Health Business—~~Zoetis Inc.~~(Zoetis)

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

In the first quarter of 2013:

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 Zoetis, $1.0 billion of the $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 $2.65 billion 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 2012, and the cash proceeds received by Pfizer of approximately $2.6 billion were used for dividends and stock buybacks.

Initial Public Offering (19.8% Interest)—On February 6, 2013, an IPO of the 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 Class A common stock, including shares sold pursuant to the underwriters' ~~overallotment~~over-allotment option to purchase additional shares, which was exercised in

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full) in exchange for the retirement of approximately $2.5 billion of Pfizer commercial paper issued in 2013. The Class A common stock sold in the IPO represented approximately 19.8% of the total outstanding Zoetis shares. The excess of the consideration received over the net book value of our divested interest was approximately $2.3 billion and was recorded in Additional paid-in capital. ~~For additional information, see~~ ~~Note 6. Certain Changes in Total Equity.~~

In the second quarter of 2013:

Exchange Offer (80.2% Interest)—On June 24, 2013, we exchanged all of our remaining interest in Zoetis ~~400.985 million~~ ~~shares of Class A~~for Pfizer common ~~stock of Zoetis (after converting all of our Class B common stock into Class A common stock, representing approximately~~ stock.

~~80.2%~~The operating results of the ~~total outstanding Zoetis shares), for approximately~~Animal Health business are reported as ~~405.117 million~~ ~~outstanding shares of Pfizer common stock on a tax-free basis pursuant to an exchange offer made to Pfizer shareholders. The~~ ~~$11.4 billion~~ ~~of Pfizer common stock received in the exchange transaction was recorded in~~ ~~Treasury stock~~ ~~and was valued using the 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 remaining interest in Zoetis was approximately~~ ~~$10.4 billion, net of income taxes resulting from certain legal entity reorganizations, and was recorded in~~ ~~Gain on disposal of discontinued~~Discontinued operations––net of tax in the condensed consolidated ~~statements of income for the nine months ended September 29, 2013.~~

~~In summary, as a result of the above transactions, we received approximately~~ ~~$6.1 billion~~ ~~of cash and Treasury stock valued at~~ ~~$11.4 billion~~.

~~The operating results of the animal health business are reported as~~ ~~Income from discontinued operations––net of tax~~ in the condensed consolidated statements of income for 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 this business are classified as ~~Assets of discontinued operations and other assets held for sale~~ ~~and~~ ~~Liabilities of discontinued operations, as appropriate. Prior period financial statements have been restated.~~

In connection with the 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 November 30, 2012, we completed the sale of our Nutrition business to Nestlé for~~ ~~$11.85 billion~~ ~~in cash, and recognized a gain of approximately~~ ~~$4.8 billion, 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 of this business are classified as~~ ~~Income from discontinued operations––net of tax~~ ~~in the condensed consolidated statements~~statement of income for the three ~~and nine~~ months ended ~~September 30, 2012.~~March 31, 2013.

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~~Total Discontinued Operations~~

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


The following table provides the components of Discontinued operations—net of tax:										The following table provides the components of Discontinued operations—net of tax:
	Three Months Ended^(a)					Nine Months Ended^(a)					Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012		September 29, 2013		September 30, 2012			March 30, 2014			March 31, 2013
Revenues	$	—		$	1,587	$	2,201	$	4,817		$	—		$	1,089
Pre-tax income from discontinued operations^(a)	$	32		$	314	$	421	$	1,110
Provision for taxes on income^(b)	(4		)	89		95		376
Pre-tax income from discontinued operations											5			200
Provision for taxes on income^(a)											—			51
Income from discontinued operations––net of tax	36			225		326		734			5			149
Pre-tax gain on disposal of discontinued operations	(38		)	—		10,501		—			64			—
Provision for taxes on income^(c)	(13		)	—		108		—
Gain on disposal of discontinued operations––net of tax	(25		)	—		10,393		—
Benefit for taxes on income											(4		)	—
Gain on disposal of discontinued operations––net of tax^(b)											68			—
Discontinued operations––net of tax	$	11		$	225	$	10,719	$	734		$	73		$	149

^(a)

Includes ~~the Animal Health (Zoetis) business~~a deferred tax expense of $7 million 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 the three and nine months ended September 30, 2012. For the three months ended ~~September 29, 2013, includes certain post-close adjustments.~~March 31, 2013.

^(b)

~~Includes a deferred tax benefit of~~ ~~$4 million~~ ~~and~~ ~~$30 million~~ ~~for~~For the three months ended ~~September 29, 2013 and September~~March 30, ~~2012, respectively, and a deferred tax benefit of~~ ~~$23 million~~ ~~and~~ ~~$10 million~~ for the nine months ended September 29, 2013 and September 30, 2012, respectively. These deferred tax provisions include deferred taxes related to investments in certain foreign subsidiaries resulting from our intention not to hold these subsidiaries indefinitely.

2014, represents post-close adjustments.


^(c)	~~For the nine months ended September 29, 2013, primarily reflects income taxes resulting from certain legal entity reorganizations.~~

~~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 29,
2013
December 31,
2012
Accounts receivable, less allowance for doubtful accounts $ —
$ 922
Inventories —
1,137
Other current assets —
550
Property, plant and equipment, less accumulated depreciation 133
1,318
Goodwill —
1,011
Identifiable intangible assets, less accumulated amortization —
867
Other noncurrent assets —
139
Assets of discontinued operations and other assets held for sale $ 133
$ 5,944
Current liabilities $ 21
$ 874
Other liabilities —
568
Liabilities of discontinued operations $ 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 the ~~nine~~three months ended ~~September 29,~~March 31, 2013, ~~and September 30, 2012.~~except that financing activities include the cash proceeds from the issuance of senior notes by Zoetis.

~~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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B. Equity-Method Investments

Investment in Hisun Pfizer Pharmaceuticals Company Limited (Hisun Pfizer)

On September 6, 2012, we and ~~ertugliflozin-containing fixed-dose combinations with metformin~~Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun), a leading pharmaceutical company in China, formed a new company, Hisun Pfizer, 49% owned by Pfizer and ~~Januvia(sitagliptin) tablets. Merck will continue~~51% owned by Hisun, to ~~retain~~develop, manufacture, market and sell pharmaceutical products, primarily branded generic products, predominately in China. In the ~~rights to its existing portfolio~~first quarter of ~~sitagliptin-containing products. Through September 29,~~ 2013, we ~~received payments totaling~~and Hisun contributed certain assets to Hisun Pfizer. Our contributions constituted a business, as defined by U.S. GAAP, and in the first quarter of 2013, we recognized a pre-tax gain of approximately $60490 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~~reflecting 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~~transfer of the ~~termination.~~business to Hisun Pfizer (including an allocation of goodwill from our former Emerging Markets reporting unit as part of the carrying amount of the business transferred). Since we hold a 49% interest in Hisun Pfizer, we had an indirect retained interest in the contributed assets; as such, 49% of the gain, or $240 million, represented the portion of the gain associated with that indirect retained interest.

~~D. Equity-Method Investments~~

Investment in ViiV Healthcare Limited

On ~~August 12, 2013,~~January 21, 2014, the ~~U.S. Food and Drug Administration (FDA)~~European Commission approved Tivicay (dolutegravir), a product for the treatment of HIV-1 infection, developed by ViiV Healthcare Limited (ViiV), an ~~equity-method~~equity method investee. This approval, in accordance with the agreement between GlaxoSmithKline plc and Pfizer, triggered a reduction in our equity interest in ViiV from ~~13.5%~~12.6% to ~~12.6%~~11.7% and an increase in GlaxoSmithKline ~~plc's~~plc’s equity interest in ViiV from ~~76.5%~~77.4% to ~~77.4%~~78.3%, effective ~~October~~April 1, ~~2013.~~2014. As a result, in the ~~third~~first quarter of ~~2013,~~2014, we recognized a loss of approximately ~~$31~~$36 million in Other ~~(income)/deductions~~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.~~net.

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

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 and optimization actions, workforce reductions and the expansion of shared services, including the development of global systems.

All of our businesses and functions may be impacted by these actions, including sales and marketing, manufacturing and research and development (R&D), as well as groups such as information technology, shared services and corporate operations. ~~Since~~However, in 2014-2016, our primary activities are expected to be associated with our manufacturing plant network rationalization and optimization activities, and commercial property rationalization and consolidation.

At the end of 2013, we had substantially completed many of the initiatives launched in prior periods. In early 2014, we announced that we would be incurring costs in 2014-2016 related to new programs: our new global commercial structure reorganization and additional cost-reduction/productivity initiatives.

In 2014, we have the following initiatives underway:

Manufacturing plant network rationalization and optimization, where execution timelines are necessarily long. Our plant network strategy is expected to result in the exit of nine sites over the next several years. In connection with these activities, during 2014-2016, we expect to incur costs of approximately $450 million associated with prior acquisition activity and costs of ~~Wyeth on October 15, 2009, our~~approximately $1.5 billion associated with new non-acquisition-related cost-reduction ~~initiatives announced on January 26, 2009, but not completed~~initiatives.

New global commercial structure reorganization, which primarily includes the streamlining of certain functions, the realignment of regional locations and colleagues to support the businesses, as well as implementing the necessary system changes to support future reporting requirements. In connection with this reorganization, during 2014-2016, we expect to incur costs 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 ongoingapproximately $350 million.

Other new cost-reduction/productivity initiatives, ~~on February 1, 2011,~~primarily related to commercial property rationalization and consolidation. In connection with these cost-reduction activities, during 2014-2016, we ~~announced a new productivity initiative~~expect to accelerate our strategies to improve innovation and productivity in R&D by prioritizing areas 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.

incur costs of approximately $900 million.

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The ~~following table provides~~costs expected to be incurred during 2014-2016, of approximately $3.2 billion in total, include restructuring charges, integration costs, implementation costs and additional depreciation––asset restructuring. Of this amount, we expect that about a quarter of the ~~components~~charges will be non-cash.

Current-Period Key Activities

In the first quarter of 2014, we incurred approximately $164 million in cost-reduction and acquisition-related costs (excluding transaction costs) in connection with the aforementioned programs, primarily associated with ~~acquisitions~~our manufacturing and ~~cost-reduction/productivity initiatives:~~sales operations.


The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:									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
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012			March 30, 2014		March 31, 2013
Restructuring charges^(a):
Employee terminations	$	174	$	132	$	289	$	439		$	30	$	(21	)
Asset impairments	—		33		115		279			6		103
Exit costs	21		68		36		88			4		13
Total restructuring charges	195		233		440		806			40		95
Integration costs^(b)	38		79		107		279			18		36
Restructuring charges and certain acquisition-related costs	233		312		547		1,085			58		131
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows^(c):
Cost of sales	43		75		134		205			74		33
Selling, informational and administrative expenses	—		1		19		7			—		11
Research and development expenses	—		—		94		259			—		91
Total additional depreciation––asset restructuring	43		76		247		471			74		135
Implementation costs recorded in our condensed consolidated statements of income as follows^(d):
Cost of sales	16		18		27		22			6		6
Selling, informational and administrative expenses	30		47		95		77			15		31
Research and development expenses	1		47		10		132			11		2
Total implementation costs	47		112		132		231			32		39
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	323	$	500	$	926	$	1,787		$	164	$	305

^(a)

~~From~~In the ~~beginning of our cost-reduction/productivity initiatives in~~ ~~2005~~ ~~through~~ ~~September 29, 2013~~,three months ended March 30, 2014, Employee terminations represent the expected reduction of the workforce by approximately ~~63,500~~200 employees, mainly in manufacturing ~~sales~~ and ~~research, of which approximately~~ ~~57,000~~ ~~employees have been terminated as of~~ ~~September 29, 2013. For the~~ ~~nine~~ ~~months ended~~ ~~September 29, 2013, substantially all employee termination costs represent additional costs with respect to approximately~~ ~~1,300~~ ~~employees.~~sales.

The restructuring charges in 2014 are associated with the following:

For the three months ended March 30, 2014, the Global Innovative Pharmaceutical segment (GIP) ($2 million), the Global Established Pharmaceutical segment (GEP) ($7 million), Worldwide Research and Development and Medical ($1 million), manufacturing operations ($26 million) and Corporate ($4 million).

The restructuring charges in 2013 are associated with the following:

For the three months ended ~~September 29,~~March 31, 2013, ~~Primary Care~~total operating ~~segment~~segments ($1213 million), ~~Specialty Care~~Worldwide Research and ~~Oncology operating segment~~Development and Medical ($~~18 million), Established Products and Emerging Markets operating segment ($4 million), Consumer Healthcare operating segment (~~$52 million), manufacturing operations ($~~112~~3 million) and Corporate ($4477 million).

~~For the nine months ended September 29, 2013, Primary Care~~ In 2014, we revised our operating ~~segment ($29 million), Specialty Care~~segments 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~~are unable to identify these prior-period restructuring charges ~~in 2012 are associated with~~to 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), Consumer Healthcare operating segment ($5 million), research and development operations ($39 million~~ ~~income), manufacturing operations ($48 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), Consumer Healthcare operating segment ($18 million), research and development operations ($14 million~~ ~~income), manufacturing operations ($214 million) and Corporate ($438 million~~).new individual segments.


^(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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~~(UNAUDITED)~~


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

~~The following table provides the components of and changes in our restructuring accruals:~~PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


The following table provides the components of and changes in our restructuring accruals:													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, 2012^(a)	$	1,734		$	—		$	152		$	1,886
Balance, December 31, 2013^(a)														$	1,685		$	—		$	94		$	1,779
Provision	289			115			36			440				30			6			4			40
Utilization and other^(b)	(741		)	(115		)	(109		)	(965		)		(115		)	(6		)	(25		)	(146		)
Balance, September 29, 2013^(c)	$	1,282		$	—		$	79		$	1,361
Balance, March 30, 2014^(c)														$	1,600		$	—		$	73		$	1,673


^(a)	Included in Other current liabilities (~~$1.2 billion~~)($1.0 billion) and Other noncurrent liabilities (~~$720 million~~)($767 million).


^(b)	Includes adjustments for foreign currency translation.


^(c)	Included in Other current liabilities (~~$717 million~~)($968 million) and Other noncurrent liabilities (~~$644 million~~)($705 million).

~~Total restructuring charges incurred from the beginning of our cost-reduction/productivity initiatives in 2005 through September 29, 2013 were~~ ~~$16.1 billion~~.Note 4. Other Deductions—Net



The following table provides components of Other deductions––net:
	Three Months Ended
(MILLIONS OF DOLLARS)	March 30, 2014			March 31, 2013
Interest income^(a)	$	(92	)	$	(95	)
Interest expense^(a)	321			371
Net interest expense	229			276
Royalty-related income^(b)	(248		)	(63		)
Certain legal matters, net^(c)	694			(83		)
Gain associated with the transfer of certain product rights^(d)	—			(490		)
Net gains on asset disposals^(e)	(181		)	(26		)
Certain asset impairments and related charges^(f)	115			398
Costs associated with the Zoetis IPO^(g)	—			18
Other, net	14			115
Other deductions––net	$	623		$	145


^(a)	Interest income decreased in the first three months of 2014 due to lower cash equivalents and investment balances and lower investment returns. Interest expense decreased in the first three months of 2014 primarily due to the benefit of the conversion of some fixed-rate liabilities to floating-rate liabilities.


^(b)	Royalty-related income increased in 2014 due to royalties earned on sales of Enbrel in the U.S. and Canada after October 31, 2013. On that date, the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada expired, and we became entitled to royalties for a 36-month period.

^(c)

In the first quarter of 2014, includes approximately $620 million for Neurontin-related matters (including off-label promotion actions and antitrust actions) and approximately $50 million for an Effexor-related matter. In the first quarter of 2013, primarily includes an $80 million insurance recovery related to a certain litigation matter. For additional information, see Note 12A. Commitments and Contingencies: Legal Proceedings.


^(d)	Represents the gain associated with the transfer of certain product rights to Hisun Pfizer, our 49%-owned equity-method investment in China. For additional information, see Note 2B. Divestiture and Equity-Method Investments: Equity-Method Investments.


^(e)	In the first quarter of 2014, primarily includes gains on sales of product rights (approximately $70 million) and gains on sales of investments in equity securities (approximately $95 million).

^(f)

In the first quarter of 2014, includes an intangible asset impairment charge of $114 million, virtually all of which relates to an in-process research and development (IPR&D) compound for the treatment of skin fibrosis. The intangible asset impairment charge for the first quarter of 2014 is associated with Worldwide Research and Development and reflects, among other things, the impact of changes to the development program. In the first quarter of 2013, includes an intangible asset impairment charge of $394 million, all of which relates to developed technology rights for use in the development of bone and cartilage. The intangible asset impairment charge for 2013 is associated with the Global Innovative Pharmaceutical segment and reflects, among other things, updated commercial forecasts.


^(g)	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 2A. Divestiture and Equity-Method Investments: Divestiture.

The asset impairment charges included in ~~restructuring charges~~Other deductions––net for the ~~nine~~first three months ~~ended~~ ~~September 29, 2013~~ ~~primarily~~of 2014 virtually all relate to identifiable intangible assets ~~held for sale~~ and are based on ~~an estimate~~estimates of fair ~~value, which was determined to be lower than the carrying value of the assets prior to the impairment charge.~~value.

~~The following table provides additional information about the long-lived assets that were impaired during the first nine months of 2013 in~~ ~~Restructuring charges and certain acquisition-related costs~~:PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Fair Value^(a)

Nine Months Ended September 29,
2013

(MILLIONS OF DOLLARS) Amount
Level 1 Level 2 Level 3 Impairment
Assets held for sale^(b)
$ 84
$ —
$ 84
$ —
$ 64
Assets abandoned/demolished —
—
—
—
51
Long-lived assets $ 84
$ —
$ 84
$ —
$ 115



The following table provides additional information about the intangible assets that were impaired during the first three months of 2014 in Other deductions––net:
	Fair Value^(a)								Three Months Ended March 30, 2014
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––IPR&D^(b)	$	79	$	—	$	—	$	79	$	114
Total	$	79	$	—	$	—	$	79	$	114


^(a)	The fair value amount is presented as of the date of impairment, as ~~these assets are~~this asset is 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, less costs to sell of $~~2 ~~million (a net of $82 million), in the first~~ ~~nine~~ ~~months of~~ ~~2013. Fair value was determined primarily using a market approach, with various inputs, such as recent sales transactions.~~

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~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
(MILLIONS OF DOLLARS) September 29,
2013
September 30,
2012
September 29,
2013
September 30,
2012
Interest income^(a)
$ (94 ) $ (109 ) $ (291 ) $ (275 )
Interest expense^(a)
340
381
1,067
1,149
Net interest expense 246
272
776
874
Royalty-related income (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 (46 ) (21 ) (100 ) (45 )
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 in the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~as portfolio maturities were invested at lower rates; however, during the first nine months of~~ ~~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 outstanding debt, refinancings and lower rates, and the 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 ~~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 relating to the resolution of an investigation by the U.S. Department of Justice (DOJ) 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 for hormone-replacement therapy litigation. For additional information, see~~ ~~Note 12. Commitments and Contingencies.~~


^(d)	~~In the first nine months of 2013, represents the gain associated with the transfer of certain product rights to Hisun Pfizer, our equity-method investment in China. For additional information, see~~ ~~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~~ 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 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 aforementioned equity-method investment in Brazil.~~

~~In the first nine months of~~ ~~2013, includes intangible asset impairment charges of $674 million, primarily reflecting (i)~~ ~~$394 million~~ of developed technology rights (for use in 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 ~~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, includes intangible asset impairment charges of $457 million~~ ~~reflecting (i) $314 million~~ ~~of IPR&D, substantially all related to assets that targeted autoimmune and 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~~

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~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~~ ~~2013~~ in ~~Other (income)/deductions––net:~~

Fair Value^(a)

Nine Months Ended September 29,
2013

(MILLIONS OF DOLLARS) 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)
220
—
—
220
171
Total $ 2,283
$ —
$ —
$ 2,283
$ 674


^(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 intangible assets written down to ~~their~~ fair value in the first ~~nine~~three months of ~~2013~~.2014. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then we 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 product and the impact of technological risk associated with IPR&D 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

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%~~20.4% for the first ~~nine months~~quarter of ~~2013~~,2014, compared to ~~17.7%~~29.8% for the first ~~nine months~~quarter of ~~2012.~~

2013. The ~~unfavorable change in the~~lower effective tax rate for ~~both periods reflects~~the first quarter of 2014 in comparison with the same period in 2013 was primarily due to the favorable ~~audit settlements~~impact of the resolution in the ~~third~~first quarter ~~and first nine months~~ of ~~2012; specifically, (i) a~~2014 of certain 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) related to audits for multiple tax years (2006-2008), as well as (ii) a tax benefit recorded for the resolution of foreign auditspositions, pertaining to ~~multiple~~prior years, primarily with various foreign tax ~~years.~~

~~In addition,~~authorities, and from the expiration of certain statutes of limitations, the non-recurrence of 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~~impact 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 49%-owned 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)as well as the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of ~~business. For additional information about~~business, partially offset by the ~~patent litigation settlement income, see~~ ~~Note 12A5. Commitments~~expiration of the U.S. research and ~~Contingencies: Legal Proceedings––Certain Matters Resolved~~

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~During the First Nine Months of~~development (R&D) tax credit on December 31, 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~~2B. Divestiture and Equity-Method ~~Investments:~~Investments: Equity-Method Investments.

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~~expire, as we treat these events as discrete items in the period of resolution.

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

With respect to Pfizer Inc., tax years 2009 and 2010 are currently under audit. Tax years ~~2011-2013~~2011-2014 are open, but not under audit. All other tax years are closed.

~~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 years 2009 and 2010 has been effectively settled in the third quarter of 2013. The tax year January 1, 2011 through the date of acquisition (January 31, 2011) is open, but not under audit. All other tax years are closed. The open tax year for King and its subsidiaries is not material to 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 ~~(2001-2013)~~(2004-2014), Japan ~~(2013)~~(2013-2014), Europe ~~(2007-2013,~~(2007-2014, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America ~~(1998-2013,~~(1998-2014, primarily reflecting Brazil and Mexico) and Puerto Rico ~~(2007-2013)~~(2009-2014).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

C. Taxes on Items of Other Comprehensive Loss

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


The following table provides the components of the tax provision/(benefit) on Other comprehensive loss:													The following table provides the components of the tax provision/(benefit) on Other comprehensive loss:
	Three Months Ended						Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012				March 30, 2014			March 31, 2013

Foreign currency translation adjustments^(a)	$	(2	)	$	(23	)	$	88		$	14			$	(7	)	$	71
Unrealized holding gains on derivative financial instruments	205			137			152			80
Unrealized holding losses on derivative financial instruments														(17		)	(155		)
Reclassification adjustments for realized (gains)/losses														(1		)	167
														(18		)	12
Unrealized holding gains on available-for-sale securities														27			11
Reclassification adjustments for realized gains	(132		)	(52		)	(43		)	(34		)		(29		)	(25		)
	73			85			109			46				(2		)	(14		)
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		)
Benefit plans: actuarial gains, net														1			6
Reclassification adjustments related to amortization	49			44			155			129				16			54
Reclassification adjustments related to curtailments/settlements, net	18			20			54			59
Reclassification adjustments related to settlements, net														8			20
Foreign currency translation adjustments and other	(23		)	(12		)	35			5				(12		)	37
	43			13			254			36				13			117
Benefit plans: prior service (costs)/credits and other	—			(2		)	1			6
Benefit plans: prior service costs and other														—			(1		)
Reclassification adjustments related to amortization	(5		)	(7		)	(17		)	(21		)		(7		)	(6		)
Reclassification adjustments related to curtailments/settlements, net	—			(2		)	(4		)	(34		)
Reclassification adjustments related to curtailments, net														(1		)	(3		)
Other	1			2			(1		)	—				5			—
	(4		)	(9		)	(21		)	(49		)		(3		)	(10		)
Tax provision on other comprehensive income/(loss)	$	80		$	73		$	443		$	72
Tax provision/(benefit) on other comprehensive loss														$	(17	)	$	176


^(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~~.

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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


The following table provides the changes, net of tax, in Accumulated other comprehensive loss:																			The following table provides the changes, net of tax, in Accumulated other comprehensive loss:
	Net Unrealized Gains/(Losses)									Benefit Plans										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				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	)
Balance, December 31, 2013																				$	(590	)	$	79		$	150	$	(3,223	)	$	313		$	(3,271	)
Other comprehensive income/(loss)^(a)	(920		)	163			(116		)	477			(34		)	(430		)		(128		)	(28		)	11		46			(20		)	(119		)
Balance, September 29, 2013	$	(1,097	)	$	75		$	47		$	(5,633	)	$	225		$	(6,383	)
Balance, March 30, 2014																				$	(718	)	$	51		$	161	$	(3,177	)	$	293		$	(3,390	)


^(a)	Amounts do not include foreign currency translation loss of $652 million attributable to noncontrolling interests for the first ~~nine~~three months of ~~2013~~2014.

As of March 30, 2014, with respect to derivative financial instruments, we estimate that we will reclassify into income within the next 12 months approximately $77.5 million of unrealized pre-tax losses (which is expected to be offset by gains resulting from reclassification adjustments related to available-for-sale securities).

1913

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PFIZER INC. AND SUBSIDIARY COMPANIES

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:~~


The following table provides additional information about certain of our financial assets and liabilities:					The following table provides additional information about certain of our financial assets and liabilities:
(MILLIONS OF DOLLARS)	September 29, 2013		December 31, 2012			March 30, 2014		December 31, 2013
Selected financial assets measured at fair value on a recurring basis^(a)
Trading securities^(b)	$	122	$	142		$	103	$	126
Available-for-sale debt securities^(c)	42,534		32,584			35,693		34,899
Available-for-sale money market funds^(d)	1,533		1,727
Available-for-sale money market funds						977		945
Available-for-sale equity securities, excluding money market funds^(c)	379		263			462		356
Derivative financial instruments in receivable positions^(e):
Derivative financial instruments in receivable positions^(d):
Interest rate swaps	495		1,036			438		468
Foreign currency swaps	524		194			953		871
Foreign currency forward-exchange contracts	143		152			49		172
	45,730		36,098			38,675		37,837
Other selected financial assets
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
Held-to-maturity debt securities, carried at amortized cost^{(c), (e)}						8,501		9,139
Private equity securities, carried at equity-method or at cost^(e), ^(f)						2,276		2,270
	3,715		2,698			10,777		11,409
Total selected financial assets	$	49,445	$	38,796		$	49,452	$	49,246
Financial liabilities measured at fair value on a recurring basis^(a)
Derivative financial instruments in a liability position^(h):
Derivative financial instruments in a liability position^(g):
Interest rate swaps	$	200	$	33		$	187	$	301
Foreign currency swaps	188		428			116		110
Foreign currency forward-exchange contracts	208		243			184		219
	596		704			487		630
Other financial liabilities⁽ⁱ⁾
Short-term borrowings, carried at historical proceeds, as adjusted^(f)	4,738		6,424
Long-term debt, carried at historical proceeds, as adjusted^{(j), (k)}	31,812		31,036
Other financial liabilities^(h)
Short-term borrowings, carried at historical proceeds, as adjusted^(e)						9,319		6,027
Long-term debt, carried at historical proceeds, as adjusted^(i),^(j)						27,649		30,462
	36,550		37,460			36,968		36,489
Total selected financial liabilities	$	37,146	$	38,164		$	37,455	$	37,119


^(a)	We use a market approach in valuing financial instruments on a recurring basis. 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~~ ~~$447 million~~ ~~as of~~ ~~September 29, 2013~~ ~~and~~ ~~$408 million~~ ~~as of~~ ~~December 31, 2012~~ ~~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 contracts used as offsets; namely, foreign currency swaps with fair values of $14$26 million and foreign currency forward-exchange contracts with fair values of ~~$65~~$30 million as of ~~September 29, 2013~~;March 30, 2014; and, interest rate swaps with fair values of $38 million, foreign currency swaps with fair values of $30 million and foreign currency forward-exchange contracts with fair values of ~~$102~~$66 million as of December 31, ~~2012~~.

2013.

^(f)(e)

The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities at cost and short-term borrowings not measured at fair value on a recurring basis were not significant as of ~~September 29, 2013~~March 30, 2014 or December 31, ~~2012~~.2013. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities at cost are based on Level 3 ~~inputs, using a market approach.~~inputs.


^(f)	Our private equity securities represent investments in the life sciences sector.


^(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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~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

^(h)

Designated as hedging instruments, except for certain foreign currency contracts used as offsets; namely, foreign currency swaps with fair values of ~~$97 million~~ ~~and foreign currency forward-exchange contracts with fair values of~~ ~~$83 million~~ asof ~~September 29, 2013~~; ~~and, foreign currency swaps with fair values of $129~~$78 million and foreign currency forward-exchange contracts with fair values of ~~$141~~$55 million as of March 30, 2014; and, foreign currency swaps with fair values of $76 million and foreign currency forward-exchange contracts with fair values of $77 million as of December 31, ~~2012~~.

2013.


^(i)(h)	Some carrying amounts may include adjustments for discount or premium amortization or for the effect of hedging the interest rate ~~swaps designated~~fair value risk associated with certain financial liabilities by interest rate swaps.


⁽ⁱ⁾	Includes foreign currency debt with fair values of $659 million as ~~hedges.~~of March 30, 2014 and $651 million as of December 31, 2013, which are used as hedging instruments.


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


^(k)	The fair value of our long-term debt (not including the current portion of long-term debt) is ~~$36.4~~$32.6 billion as of ~~September 29, 2013~~March 30, 2014 and ~~$37.5~~$35.1 billion as of December 31, ~~2012~~.2013. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach.

~~The following table provides~~PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Generally, the ~~classification~~difference between the fair value of ~~these selected financial assets~~our long-term debt and ~~liabilities in~~ the ~~condensed~~amount reported on the consolidated balance ~~sheets:~~sheet is due to a decline in relative market interest rates since the debt issuance.


The following table provides the classification of these selected financial assets and liabilities in the condensed consolidated balance sheets:					The following table provides the classification of these selected financial assets and liabilities in the condensed consolidated balance sheets:
(MILLIONS OF DOLLARS)	September 29, 2013		December 31, 2012			March 30, 2014		December 31, 2013
Assets
Cash and cash equivalents	$	925	$	947		$	1,171	$	1,104
Short-term investments	31,627		22,318			31,019		30,225
Long-term investments	15,731		14,149			15,822		16,406
Taxes and other current assets^(a)	200		296
Taxes and other noncurrent assets^(b)	962		1,086
Other current assets^(a)						132		286
Other noncurrent assets^(b)						1,308		1,225
	$	49,445	$	38,796		$	49,452	$	49,246
Liabilities
Short-term borrowings, including current portion of long-term debt	$	4,738	$	6,424		$	9,319	$	6,027
Other current liabilities^(c)	222		330			275		303
Long-term debt	31,812		31,036			27,649		30,462
Other noncurrent liabilities^(d)	374		374			212		327
	$	37,146	$	38,164		$	37,455	37,119

^(a)

As of ~~September 29, 2013~~,March 30, 2014, derivative instruments at fair value include interest rate swaps (~~$35 million~~)($68 million), foreign currency swaps (~~$22 million~~)($15 million) and foreign currency forward-exchange contracts (~~$143 million~~)($49 million) and, as of December 31, ~~2012~~2013, includeinterest rate swaps ($90 million), ~~include~~ foreign currency swaps (~~$144 million~~)($24 million) and foreign currency forward-exchange contracts (~~$152 million~~)($172 million).


^(b)	As of ~~September 29, 2013~~,March 30, 2014, derivative instruments at fair value include interest rate swaps (~~$460 million~~)($370 million) and foreign currency swaps (~~$502 million~~)($938 million) and, as of December 31, ~~2012~~,2013, include interest rate swaps (~~$1.0 billion~~)($378 million) and foreign currency swaps (~~$50 million~~)($847 million).

^(c)

As of ~~September 29, 2013~~,March 30, 2014, derivative instruments at fair value include interest rate swaps ($1 million), foreign currency swaps ($1490 million) and foreign currency forward-exchange contracts (~~$208 million~~)($184 million) and, as of December 31, ~~2012~~,2013, include foreign currency swaps ($8784 million) and foreign currency forward-exchange contracts (~~$243 million~~)($219 million).


^(d)	As of ~~September 29, 2013~~,March 30, 2014, derivative instruments at fair value include interest rate swaps ($~~200~~186 million) and foreign currency swaps (~~$174 million~~)($26 million) and, as of December 31, ~~2012~~,2013, include interest rate swaps ($33301 million) and foreign currency swaps (~~$341 million~~)($26 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Investments in Debt Securities

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


	Years
The following table provides the contractual maturities of the available-for-sale and held-to-maturity debt securities:											The following table provides the contractual maturities of the available-for-sale and held-to-maturity debt securities:
			Over 1		Over 5				September 29, 2013			Years								March 30, 2014
(MILLIONS OF DOLLARS)	Within 1		to 5		to 10		Over 10		Total			Within 1		Over 1 to 5		Over 5 to 10		Over 10		Total
Available-for-sale debt securities
Western European, Scandinavian and other government debt^(a)	$	20,409	$	2,225	$	—	$	—	$	22,634		$	11,530	$	2,141	$	—	$	—	$	13,671
Corporate debt^(b)	2,152		4,479		1,097		348		8,076			2,701		4,696		1,260		290		8,947
U.S. government debt												3,483		166		—		—		3,649
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities												—		2,576		10		299		2,885
Supranational debt^(a)												990		940		—		—		1,930
Western European, Scandinavian and other government agency debt^(a)	2,955		440		—		—		3,395			1,568		356		—		—		1,924
Reverse repurchase agreements^(c)	2,270		—		—		—		2,270			1,433		—		—		—		1,433
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities	663		873		11		524		2,071			1,076		139		—		39		1,254
Supranational debt^(a)	1,086		919		—		—		2,005
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities	—		1,668		—		16		1,684
U.S. government debt	77		273		49		—		399
Held-to-maturity debt securities
Certificates of deposit and other	1,398		67		—		—		1,465
Western European, Scandinavian and other government debt^(a)												5,336		—		—		—		5,336
Western European, Scandinavian and other government agency debt, certificates of deposit and other^(a)												2,995		169		1		—		3,165
Total debt securities	$	31,010	$	10,944	$	1,157	$	888	$	43,999		$	31,112	$	11,183	$	1,271	$	628	$	44,194


^(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~~$3.7 billion and ~~$2.7~~$3.0 billion as of ~~September 29, 2013~~March 30, 2014 and December 31, ~~2012~~,2013, 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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~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(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 29, 2013~~,March 30, 2014, the aggregate notional amount of foreign exchange derivative financial instruments hedging or offsetting foreign currency exposures is ~~$41.7 billion~~.$38.0 billion. The derivative financial instruments primarily hedge or offset exposures in the euro, Japanese yen, U.K. pound and Swiss franc. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our ~~$2.4~~$2.5 billion U.K. pound debt maturing in 2038.

Interest Rate Risk

As of ~~September 29, 2013~~,March 30, 2014, the aggregate notional amount of interest rate derivative financial instruments is ~~$16.5 billion~~.$14.1 billion. The derivative financial instruments primarily hedge U.S. dollar and euro fixed-rate debt.

2316

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PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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


The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:																	The following table provides information about the gains/(losses) incurred 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 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013		Sep 30, 2012			March 30, 2014			March 31, 2013			March 30, 2014			March 31, 2013			March 30, 2014			March 31, 2013
Three Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign currency swaps	$	—		$	—		$	489		$	455		$	313	$	221		$	—		$	—		$	(15	)	$	(449	)	$	9		$	(382	)
Foreign currency forward-exchange contracts																		—			—			(43		)	53			(21		)	(144		)

Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency swaps	—			—			(2		)	(40		)	—		—			—			(3		)	(8		)	123			—			—
Foreign currency forward-exchange contracts	(4		)	—			(1		)	—			—		—

Derivative Financial Instruments Not Designated as Hedges:
Foreign currency forward-exchange contracts	(81		)	(201		)	—			—			—		—			(12		)	149			—			—			—			—
Foreign currency swaps	(15		)	10			—			—			—		—			(3		)	(4		)	—			—			—			—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency long-term debt	—			—			(4		)	(20		)	—		—			—			—			(14		)	63			—			—
All other net	—			—			1			—			—		—			(3		)	—			—			—			—			—
	$	(100	)	$	(191	)	$	483		$	395		$	313	$	221		$	(18	)	$	142		$	(80	)	$	(210	)	$	(12	)	$	(526	)
Nine Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign currency swaps	$	—		$	—		$	334		$	237		$	64	$	89

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

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

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency long-term debt	—			—			93			3			—		—
All other net	—			2			2			5			—		5
	$	26		$	(145	)	$	565		$	277		$	64	$	94

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


^(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 derivative instruments designated and qualifying as fair value hedges, as well as the offsetting gains and losses attributable to the hedged ~~risk~~items in ~~fair value hedge~~such hedging 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)–~~loss––Unrealized holding ~~gains~~gains/(losses) 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)–~~loss––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 29, 2013~~,March 30, 2014, the aggregate fair value of these derivative instruments that are in a net liability position is ~~$250~~$192 million,, for which we have posted collateral of ~~$221~~$225 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. IfAt March 30, 2014, if there had been a downgrade to below an A rating by ~~S&P~~Standard & Poor's (S&P) or the equivalent rating by Moody’s Investors Service, on ~~September 29, 2013~~, we would not have been required to post anany additional~~$46 million~~ of collateral to our counterparties. The collateral advanced receivables are reported in ~~Cash and cash equivalents.~~Short-term investments.

F.E. 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 29, 2013~~,March 30, 2014, we had ~~$2.5~~$2.2 billion due from a well-diversified, highly rated group (S&P ratings of mostly A+ or better) of bank counterparties around the world. For details about our investments, see Note 7B. Financial Instruments: Investments in Debt Securities.above.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In general, there is no requirement for collateral from customers. However, derivative financial instruments are executed under master netting agreements with financial institutions and these agreements contain provisions that provide 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.~~7D. Financial Instruments: Derivative Financial Instruments and Hedging Activities above. As of ~~September 29, 2013~~,March 30, 2014, we received cash collateral of ~~$526 million~~$1.2 billion 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~~:


The following table provides the components of Inventories:					The following table provides the components of Inventories:
(MILLIONS OF DOLLARS)	September 29, 2013		December 31, 2012			March 30, 2014		December 31, 2013
Finished goods	$	2,471	$	2,254		$	2,526	$	2,216
Work-in-process	3,601		3,374			3,013		3,445
Raw materials and supplies	410		448			527		505
Inventories	$	6,482	$	6,076		$	6,066	$	6,166
Noncurrent inventories not included above^(a)	$	573	$	612		$	468	$	463


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

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Note 9. Goodwill and Other Intangible Assets

A. Goodwill

Our businesses were previously managed through four operating segments (Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets and Consumer Healthcare) and are now managed through three different operating segments: the Global Innovative Pharmaceutical segment (GIP); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC); and the Global Established Pharmaceutical segment (GEP). For additional information, see Note 13. Segment, Geographic and Other Revenue Information.

As a result of this change, our goodwill is required to be reallocated to the new reporting units. The ~~following table provides~~allocation of goodwill is a complex process that requires, among other things, that we determine the ~~components~~fair value of ~~and changes~~each reporting unit. Therefore, we have not yet completed the allocation, but we expect that it will be completed in the ~~carrying amount of~~ ~~Goodwill~~:current year.

(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



The following table provides the components of and changes in the carrying amount of Goodwill:
(MILLIONS OF DOLLARS)	GIP	VOC	GEP	To be Allocated^(a)			Total
Balance, December 31, 2013	$	$	$	$	42,519		$	42,519
Additions				—			—
Other^(b)				(52		)	(52		)
Balance, March 30, 2014	$	$	$	$	42,467		$	42,467

^(a)

~~Reflects~~The amount to be allocated includes the goodwill ~~derecognized as part of~~associated with our former biopharmaceutical operating segments (see above), for which the ~~transfer of certain product rights, which constituted a business,~~allocation to our ~~equity-method investment in China. For additional information, see~~ ~~Note 2D. Acquisitions, Divestitures, Collaborative Arrangement~~new reporting units, and, ~~Equity-Method Investments: Equity-Method Investments~~.

as a result, to the new operating segments, is pending.


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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Other Intangible Assets

Balance Sheet Information

~~The following table provides the components of~~ ~~Identifiable intangible assets~~:


The following table provides the components of Identifiable intangible assets:															The following table provides the components of Identifiable intangible assets:
	September 29, 2013							December 31, 2012								March 30, 2014							December 31, 2013
(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	$	72,025	$	(40,432	)	$	31,593	$	72,349	$	(36,895	)	$	35,454		$	72,064	$	(42,676	)	$	29,388	$	72,038	$	(41,541	)	$	30,497
Brands	1,657		(752		)	905		1,657		(693		)	964			1,742		(793		)	949		1,743		(773		)	970
License agreements and other	897		(722		)	175		914		(642		)	272
Licensing agreements and other																903		(810		)	93		896		(805		)	91
	74,579		(41,906		)	32,673		74,920		(38,230		)	36,690			74,709		(44,279		)	30,430		74,677		(43,119		)	31,558
Indefinite-lived intangible assets
Brands	7,373		—			7,373		7,786		—			7,786
Brands and other																7,363					7,363		7,384					7,384
In-process research and development	500		—			500		669		—			669			329					329		443					443
Trademarks/tradenames	3		—			3		1		—			1
	7,876		—			7,876		8,456		—			8,456			7,692					7,692		7,827					7,827
Identifiable intangible assets^(a)	$	82,455	$	(41,906	)	$	40,549	$	83,376	$	(38,230	)	$	45,146		$	82,401	$	(44,279	)	$	38,122	$	82,504	$	(43,119	)	$	39,385

^(a)

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

~~As of~~ ~~September 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 (68%); Established Products (19%); Primary Care (12%); and Oncology (~~1%);

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



Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization:
	March 30, 2014
	GIP		VOC		GEP		WRD^(a)
Developed technology rights	34	%	32	%	34	%	—	%
Brands, finite-lived	—	%	75	%	25	%	—	%
Brands, indefinite-lived	—	%	69	%	31	%	—	%
In-process research and development	9	%	58	%	9	%	24	%

~~Brands, indefinite-lived: Consumer Healthcare (~~

^(a)~~69%); and Established Products (31%); and~~

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~IPR&D: Worldwide Research and Development (43%); Specialty Care (38%); Established Products (10%); and Primary Care (~~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.

Worldwide Research and Development.

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 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 ~~$1.1~~$1.1 billion ~~for the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and~~ ~~$1.2 billion~~ ~~for the~~ ~~third~~ ~~quarter of~~ ~~2012, and~~ ~~$3.6 billion~~ for the first ~~nine months~~quarter of ~~2013~~2014 and ~~$4.0~~$1.3 billion for the first ~~nine months~~quarter of ~~2012~~.2013.

Impairment Charges

For information about impairments of intangible assets, see Note 4. Other ~~(Income)/Deductions––Net.~~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 at some time in the future.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10. Pension and Postretirement Benefit Plans

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


The following table provides the components of net periodic benefit cost (including, in 2013, costs reported as part of discontinued operations):																									The following table provides the components of net periodic benefit cost (including, in 2013, costs reported as part of discontinued operations):
	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 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012			Sep 29, 2013			Sep 30, 2012				March 30, 2014			March 31, 2013			March 30, 2014		March 31, 2013			March 30, 2014			March 31, 2013			March 30, 2014			March 31, 2013
Three Months Ended
Net periodic benefit cost:
Service cost	$	75		$	86		$	7		$	8		$	50		$	50		$	15		$	16			$	64		$	77		$	5	$	7		$	52		$	56		$	14		$	16
Interest cost	166			170			26			15			92			97			42			46				175			168			15		14			100			97			42			42
Expected return on plan assets	(248		)	(247		)	—			—			(99		)	(103		)	(14		)	(12		)		(263		)	(253		)	—		—			(114		)	(104		)	(16		)	(14		)
Amortization of:
Actuarial losses	88			75			11			10			27			29			11			8				16			90			7		13			25			37			1			11
Prior service credits	(2		)	(2		)	(1		)	(2		)	(2		)	(3		)	(11		)	(13		)		(2		)	(2		)	—		(1		)	(2		)	(2		)	(14		)	(11		)
Curtailments	—			—			—			—			(6		)	—			—			(3		)		2			(1		)	—		—			(1		)	(1		)	(3		)	(7		)
Settlements	29			31			7			3			9			2			—			—				9			30			11		22			1			4			—			—
Special termination benefits	—			1			—			8			1			—			—			1				—			—			—		—			2			—			—			—
	$	108		$	114		$	50		$	42		$	72		$	72		$	43		$	43			$	1		$	109		$	38	$	55		$	63		$	87		$	24		$	37
Nine Months Ended
Net periodic benefit cost:
Service cost	$	227		$	272		$	20		$	27		$	155		$	151		$	46		$	51
Interest cost	501			528			53			47			279			297			125			137
Expected return on plan assets	(752		)	(738		)	—			—			(301		)	(314		)	(41		)	(35		)
Amortization of:
Actuarial losses	267			232			38			31			99			63			34			25
Prior service credits	(5		)	(8		)	(2		)	(3		)	(5		)	(6		)	(33		)	(37		)
Curtailments	(1		)	(56		)	—			(8		)	(6		)	(9		)	(9		)	(26		)
Settlements	92			113			35			21			14			4			—			—
Special termination benefits	—			8			—			23			3			3			—			5
	$	329		$	351		$	144		$	138		$	238		$	189		$	122		$	120

^(a)

The decrease in net periodic benefit costs for the ~~nine~~three months ended ~~September 29, 2013~~,March 30, 2014, compared to the ~~nine~~three months ended ~~September 30, 2012~~,March 31, 2013, for our U.S. qualified pension plans was primarily driven by the decrease in the amounts amortized for actuarial losses resulting from the increase, in 2013, in the discount rate used to determine the benefit obligation (which reduced the amount of deferred actuarial losses), lower service cost resulting from ~~the decision in 2012 to freeze the defined benefit plans in the U.S. and Puerto Rico,~~cost-reduction initiatives, lower settlement activity and greater expected return on plan assets resulting from ~~a higher~~an increased plan asset base, partially offset by ~~the curtailment gain in the second quarter of 2012~~higher interest costs resulting from the ~~decision to freeze the defined benefit plans~~increase, in ~~the U.S. and Puerto Rico. Also, the decrease~~2013, in the discount rate ~~resulted in lower interest costs, as well as an increase in~~used to determine the ~~amounts amortized for actuarial losses.~~

benefit obligation.

^(b)

The ~~increase~~decrease in net periodic benefit costs for the ~~nine~~three months ended ~~September 29, 2013~~,March 30, 2014, compared to the ~~nine~~three months ended ~~September 30, 2012~~,March 31, 2013, for our U.S. supplemental (non-qualified) pension plans was primarily driven by ~~higher~~lower settlement activity ~~an increase~~and the decrease in the amounts amortized for actuarial losses resulting from the ~~decrease~~increase, in 2013, in the discount rate ~~and~~used to determine 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.~~

obligation.

^(c)

The ~~increase~~decrease in net periodic benefit costs for the ~~nine~~three months ended ~~September 29, 2013~~,March 30, 2014, compared to the ~~nine~~three months ended ~~September 30, 2012~~,March 31, 2013, for our international pension plans was primarily driven by ~~an increase~~the decrease in the amounts amortized for actuarial losses resulting from ~~decreases~~increases, in 2013, in the discount rates used to determine the benefit obligations and ~~higher settlement activity.~~greater expected return on plan assets resulting from an increased plan asset base.

As of and for the three months ended March 30, 2014, we contributed and expect to contribute from our general assets as follows:



	Pension Plans
(MILLIONS OF DOLLARS)	U.S. Qualified		U.S. Supplemental (Non-Qualified)		International		Postretirement Plans
Contributions from our general assets for the three months ended March 30, 2014	$	—	$	83	$	87	$	55
Expected contributions from our general assets during 2014^(a)	$	6	$	176	$	310	$	239


^(a)	Contributions expected to be made for 2014 are inclusive of amounts contributed during the three months ended March 30, 2014. The U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments.

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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~~ ~~2013, we expect to contribute from our general assets a total of~~ ~~$5 million~~ ~~to our U.S. qualified pension plans,~~

~~$177 million~~ ~~to our U.S. supplemental (non-qualified) pension plans,~~ ~~$346 million~~ ~~to our international pension plans and~~ ~~$238 million~~ ~~to our postretirement plans. Contributions expected to be made for~~ ~~2013~~ ~~are inclusive of amounts contributed during the~~ ~~nine~~ ~~months ended~~ ~~September 29, 2013. The 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 common share (EPS):~~


The following table provides the detailed calculation of Earnings per common share (EPS):									The following table provides the detailed calculation of Earnings per common share (EPS):
	Three Months Ended				Nine Months Ended					Three Months Ended
(IN MILLIONS)	September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012			March 30, 2014		March 31, 2013
EPS Numerator––Basic
Income from continuing operations	$	2,588	$	2,989	$	8,779	$	7,543		$	2,265	$	2,616
Less: Net income attributable to noncontrolling interests	6		6		25		22			9		9
Income from continuing operations attributable to Pfizer Inc.	2,582		2,983		8,754		7,521			2,256		2,607
Less: Preferred stock dividends––net of tax	—		1		1		1			—		—
Income from continuing operations attributable to Pfizer Inc. common shareholders	2,582		2,982		8,753		7,520			2,256		2,607
Discontinued operations––net of tax	11		225		10,719		734			73		149
Less: Discontinued operations––net of tax, attributable to noncontrolling interests	—		—		39		—			—		6
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders	11		225		10,680		734			73		143
Net income attributable to Pfizer Inc. common shareholders	$	2,593	$	3,207	$	19,433	$	8,254		$	2,329	$	2,750
EPS Numerator––Diluted
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions	$	2,582	$	2,983	$	8,754	$	7,521		$	2,256	$	2,607
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions	11		225		10,680		734			73		143
Net income attributable to Pfizer Inc. common shareholders and assumed conversions	$	2,593	$	3,208	$	19,434	$	8,255		$	2,329	$	2,750
EPS Denominator
Weighted-average number of common shares outstanding––Basic	6,581		7,436		6,938		7,483			6,389		7,187
Common-share equivalents: stock options, stock issuable under employee compensation plans and convertible preferred stock	75		72		78		67			87		82
Weighted-average number of common shares outstanding––Diluted	6,656		7,508		7,016		7,550			6,476		7,269
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans^(a)	43		180		43		180			43		97


^(a)	These common stock equivalents were outstanding for the three ~~and~~ ~~nine~~months ended ~~September 29,~~March 30, 2014 and March 31, 2013, ~~and~~ ~~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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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 5B. Tax Matters: Tax Contingencies.

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 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.

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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.

We have accrued for losses that are both probable and reasonably estimable. Substantially all of 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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~~(UNAUDITED)~~

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 drug 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

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 FDA seeking approval to market a generic version of Viagra. Teva Pharmaceutical Industries subsequently was dismissed from this action. Teva USA asserts the invalidity and non-infringement of the Viagra use patent, which (including the ~~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 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 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 drug 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.~~patent, which expires in 2020 (including the 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). In April 2014, we settled our claim against Amneal Pharmaceuticals LLC on terms that are not material to us.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

against Watson and Hetero in the U.S. District Court for the Southern District of New York asserting the validity and infringement of the Viagra use patent.

In February 2014, Torrent Pharmaceuticals Ltd. (Torrent) notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market its generic version of Viagra. Torrent asserts the invalidity and non-infringement of the Viagra use patent. In March 2014, we filed actions against Torrent in the U.S. District Courts for the Southern District of New York and the District of New Jersey asserting the validity and infringement of the Viagra 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.

Lyrica (pregabalin)

Beginning in March 2009, several generic drug 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 drug manufacturer, Lyrica oral solution. Each of the generic drug 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 expired in October 2013 and the other of which expires in 2018. Each of the generic drug 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 drug 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.infringed. In August 2012, the generic drug manufacturers appealed the decision to the U.S. Court of Appeals for the Federal Circuit. In February 2014, the Federal Circuit affirmed the decision of the District Court with respect to the validity and enforcement of one claim of the basic patent and determined, on the ground of mootness, that it did not have to render a decision on any other issues raised on appeal, including with respect to the other patent that expires in 2018. As a result, the generic drug manufacturers cannot obtain FDA approval for their generic versions of Lyrica or market those products in the U.S. prior to the expiration of the basic patent in 2018, subject to the possible filing by any of the generic drug manufacturers of a petition for certiorari requesting a review by the U.S. Supreme Court.

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 expired in October 2013. In July 2011, we filed an action

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~~(UNAUDITED)~~

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 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.

Each of Novel, Alembic and Wockhardt has agreed to a stay of the respective actions described above and to be bound by ~~the decision~~any final judgment of infringement and validity of the ~~U.S. Court of Appeals for the Federal District in the appeal of the judgment of the District of Delaware~~patents at issue in the consolidated action discussed above in the first paragraph of this section.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

EpiPen

King Pharmaceuticals, Inc. (King), which we acquired in 2011 and is a wholly owned subsidiary, 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 drug 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 drug manufacturers asserts the invalidity, unenforceability and/or non-infringement of two patents for Pristiq that expire in 2022 and in 2027. Beginning in June 2012, we filed actions against these generic drug manufacturers in the U.S. District Court for the District of Delaware asserting the validity, enforceability and infringement of those patents. All of these actions have been consolidated in the District of Delaware.

~~Zyvox (linezolid)~~

In February 2013, Apotex Inc. and Apotex Corp. notified us that they had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Zyvox. They assert invalidity of the basic Zyvox patent, which (including the six-month pediatric exclusivity period) expires in 2015. In March 2013, we filed an action against Apotex Inc. and Apotex Corp. in the U.S. District Court for the Northern District of Illinois for infringement of the basic patent.

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~~(UNAUDITED)~~

~~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 FDA seeking approval to market a generic version of Detrol LA. They asserted the invalidity and 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 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 Pharmaceuticals USA, Inc. (Teva USA), Mylan Pharmaceuticals Inc., Watson, Lupin Pharmaceuticals USA, Inc., Apotex Corp. and Apotex Inc. Each of those generic drug 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 expiration of the basic patent (including the six-month pediatric exclusivity period) for celecoxib. In March 2014, the court granted the defendants’ motion for summary judgment, invalidating the reissue patent. In April 2014, we entered into settlement agreements with two of the defendants, Teva USA and Watson, pursuant to which we granted licenses to the reissue patent permitting Teva USA and Watson to launch their generic versions of celecoxib in the U.S. beginning in December 2014. We will appeal the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit.

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 drug 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 drug 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.

Actions In Which We Are The Defendant

Lipitor (atorvastatin)

In an action initially brought against us by a generic drug company, the Beijing High Court upheld the validity of our patent in China covering the crystalline form of atorvastatin in Lipitor. The crystalline patent expires in July 2016 and is the only patent

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covering Lipitor in China. In January 2014, the China Supreme People’s Court (SPC) notified us that it will conduct a retrial regarding certain issues related to the validity of the crystalline patent. If there were an adverse decision by the SPC, we would expect additional generic competition for Lipitor in China, and the price for Lipitor in China may be subject to a government-imposed price reduction larger than might otherwise occur.

Effexor XR (venlafaxine HCI)

In 2006, Wyeth and Wyeth Canada Limited (the Wyeth companies) filed an action in the Federal Court in Canada against Ratiopharm Inc. (Ratiopharm) seeking to prevent Ratiopharm from obtaining approval in Canada for its generic version of Effexor XR prior to the expiration of one the Wyeth companies’ patents. As a result of that action, Ratiopharm was enjoined from obtaining regulatory approval for its generic product. However, in August 2007, the Federal Court of Appeal in Canada ruled that the patent at issue could not be asserted against Ratiopharm under the applicable Canadian regulations governing approvals, and it dismissed the Wyeth companies’ action.

Following the dismissal, in 2007, Ratiopharm filed an action in the Federal Court in Canada seeking damages from the Wyeth companies for preventing it from marketing its generic version of Effexor XR in Canada from January 2006 through August 2007. The Federal Court dismissed Ratiopharm’s action in 2011, but the Federal Court of Appeal reinstated it in 2012. In 2011 and 2012, Pfizer Inc. made payments to Teva Canada Limited, which had acquired Ratiopharm, totaling Canadian dollars 52.5 million in partial settlement of this action.

The trial in this action was held in January 2014, and the court issued various findings in March 2014. A judgment has not yet been rendered. However, based on the court’s March 2014 findings, we expect that Teva Canada Limited will be awarded damages of approximately Canadian dollars 120 million, consisting of compensatory damages, pre-judgment interest and legal costs, which, by virtue of the Canadian dollars 52.5 million previously paid to Teva Canada Limited, is expected to result in a net liability of approximately Canadian dollars 67.5 million. Pfizer Canada Inc., as successor to the Wyeth companies, will appeal the expected judgment after it has been issued. As of March 30, 2014, 1 Canadian dollar was equivalent to approximately 0.9 U.S. dollars.

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 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 charges previously recorded with respect to Quigley, the principal provisions of the settlement agreement 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 million~~ ~~in the aggregate of claims (Pfizer began paying this first installment in June 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 million~~ ~~in the aggregate of claims (Pfizer began paying this second installment in April 2013 and 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 and all amounts have been paid); and~~

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 amended plan of reorganization for acceptance by claimants. 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.

In June 2013, the Bankruptcy Court held a hearing to consider confirmation of the amended reorganization plan and, in July 2013, it entered an order confirming the plan. Subsequently, in July 2013, the District Court entered an order issuing an injunction directing pending 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 decision of the Second Circuit discussed below. 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 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 the 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. In June 2013, the U.S. Supreme Court denied our petition for certiorari seeking a reversal of the Second Circuit’s decision. 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's decision 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~~. 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 of the November 4, 2013 effective date of the Quigley amended reorganization plan. In addition, certain other insurance companies that issued policies covering Pfizer and Quigley 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 29, 2013,~~March 30, 2014, approximately ~~66,400~~64,000 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

Beginning in late 2004, several purported class actions were filed in federal and state courts alleging that Pfizer and certain current and former officers of Pfizer violated federal securities laws by misrepresenting the safety of Celebrex and Bextra. In June 2005, the federal 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 court in the Multi-District Litigation certified a class consisting of all persons who purchased or acquired Pfizer stock between October 31, 2000 and October 19, 2005. ~~In November 2012, several institutional investors that had opted out of the certified class filed~~ ~~three~~, separate, multi-plaintiff actions in the Southern District of New York against the same defendants named in the consolidated class action, asserting allegations substantially similar to those asserted in the consolidated class action. In September 2013, the Southern District dismissed the three, multi-plaintiff actions without prejudice, and the plaintiffs in those actions rejoined the certified class in the Multi-District Litigation.

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Various Drugs: Off-Label Promotion ~~Actions~~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.

Various Drugs: Foreign Corrupt Practices Act Compliance

In 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 former officers and directors of Pfizer. Pfizer is named as a nominal defendant. The complaint alleges that the individual defendants breached their fiduciary duties to the Company as the result of, among other things, inadequate oversight of compliance by Pfizer subsidiaries in various countries outside the U.S. with the U.S. Foreign Corrupt Practices Act. The plaintiff seeks damages in unspecified amounts and other unspecified relief on behalf of Pfizer.

~~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 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 were transferred for consolidated pre-trial proceedings to a 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; a few purported statewide class actions; a purported nationwide class action in Canada; a purported province-wide class action in Quebec, Canada; a statewide class action in 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 scheduled in 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.

~~As of September 29, 2013, Pfizer and its affiliated companies had settled, or entered into definitive agreements or agreements-in-principle to settle, approximately~~ ~~98%~~ of the hormone-replacement therapy actions pending against us and our affiliated companies. Since the inception of this litigation, we recorded aggregate charges in previous years with respect to those actions, as well as with respect to the actions that have resulted in verdicts against us or our affiliated companies, of approximately ~~$1.7 billion. These charges also include approximately~~ ~~$25 million~~ 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 ~~$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 statute of limitations 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 drug 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.

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

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 nationwide and certain statewide classes consisting of persons, including individuals, health insurers, employee benefit plans

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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, the District Court (i) denied the plaintiffs’ 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, and (ii) dismissed ~~an individual action by a third-party payer, Aetna, as well as~~ actions by certain proposed class representatives for third-party payers and for individual consumers. In April 2013, the U.S. Court of Appeals for the First Circuit reversed the ~~decisions~~decision 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~~representatives and remanded ~~those actions~~that action 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 other courts.~~certification.

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 April~~December 2013, the U.S. Supreme Court ~~of Appeals for the First Circuit affirmed the District Court's decisions.~~

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~~In August 2013, we filed a~~denied our petition for certiorari seeking review ~~by the U.S. Supreme Court~~ of the First Circuit's ~~decisions, described above,~~decision reversing the ~~dismissals~~dismissal of the third-party payer purported class action. In April 2014, we and the attorneys for the proposed class representatives and for the plaintiffs in various individual ~~action by Aetna and~~actions entered into an agreement-in-principle to settle the third-party payer purported class action, ~~and affirming~~subject to court approval, as well as the ~~verdict against us~~pending individual actions by third-party payers, for an aggregate of $325 million. As part of that settlement, we also are in the ~~individual action by Kaiser. Our petition asks~~process of seeking to resolve the ~~Supreme Court~~pending consumer actions related to ~~review certain issues regarding causation and damages.~~

~~Plaintiffs are seeking certification of~~Neurontin, including the purported statewide ~~classes of Neurontin purchasers in~~consumer class 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.~~Illinois.

Personal Injury Actions

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 Neurontin. Certain of the federal actions have been transferred for consolidated pre-trial proceedings to the same Multi-District Litigation referred to in the first paragraph of the “Neurontin––Off-Label Promotion ~~Actions”~~Actions” section above.

Antitrust Action

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-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. In April 2014, the parties entered into an agreement to settle this action for $190 million, subject to court approval. In addition, Pfizer and Warner-Lambert are defendants in two actions pending in the District of New Jersey, which were brought by certain direct purchasers who had opted out of the certified class, that assert allegations substantially similar to those in the class action.

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 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.

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Antitrust Actions

Beginning in November 2011, purported class actions relating to Lipitor were filed in various federal courts against Pfizer, certain affiliates of Pfizer, and, in most of the actions, Ranbaxy, among 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.

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~~In October 2013, all of the ~~defendants'~~direct and indirect purchaser plaintiffs, except for certain individual plaintiffs, filed amended complaints. In November 2013, the defendants filed 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.~~amended complaints.

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 purported class actions described above.

Personal Injury Actions

A number of individual and multi-plaintiff lawsuits have been filed against us in various federal and state courts alleging that the plaintiffs developed type 2 diabetes as the result of the purported ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages. In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Lipitor (Atorvastatin Calcium) Marketing, Sales Practices and Products Liability Litigation (No. II) MDL-2502) in the U.S. District Court for the District of South Carolina.

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 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

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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 December 2012, the court granted the plaintiff's motion to file an amended complaint. In April 2013, the court granted the defendants' motion to dismiss the amended complaint. In May 2013, the plaintiff appealed the District Court's decision to the U.S. Court of Appeals for the Third Circuit.

~~Thimerosal~~

Wyeth was 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. 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. 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. 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.

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.~~

Various Drugs: Co-Pay Programs

In July 2012, a purported class action was filed against Pfizer in the U.S. District Court for the Southern District of Illinois. In December 2013, the plaintiffs filed an amended complaint. The plaintiffs ~~seek~~sought 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~~alleged that these programs ~~violate~~violated the federal Racketeer Influenced and Corrupt ~~Organization~~Organizations (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~~also alleged that these programs constituted tortuous interference with contract. In April 2014, this action was settled on ~~behalf of the putative class for their excess reimbursement costs allegedly attributable~~terms that are not material to ~~the co-pay programs, as well as an injunction prohibiting us from offering such programs. Similar purported class actions have been filed against several other pharmaceutical companies.~~Pfizer.

A3. Legal Proceedings––Commercial and Other Matters

Average Wholesale Price Litigation

Pfizer, certain of its subsidiaries and other pharmaceutical manufacturers ~~are defendants in actions~~were sued in various state courts by a number of states 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. All but two of those actions have been resolved through settlement, dismissal or final judgment. The ~~plaintiffs~~plaintiff states in the two remaining actions 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~~two 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

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$38.7 ~~million~~.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 February 2013, the trial court's decision was 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 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, Wyeth Holdings Corporation finalized an Administrative Settlement Agreement and Order on Consent for Removal Action with the EPA with regard to the Bound Brook 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 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 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~~$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 Barceloneta facility. We are in discussions with the EPA seeking to resolve these matters.

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. It is possible that criminal charges and substantial fines and/or civil penalties could result from government investigations. Among the investigations by government agencies is the matter discussed below.

In 2009, the 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.~~

~~A5. Legal Proceedings––Certain Matters Resolved During the First Nine Months of 2013~~

As previously reported, during the first nine months of 2013, certain matters, including those discussed below, were resolved or were the subject of definitive settlement agreements or settlement agreements-in-principle.

~~Protonix (pantoprazole sodium)~~

Wyeth has a license to market Protonix in 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 procurement and enforcement of 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.

~~Rebif~~

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 right to extend the agreement to the end of 2015. In October 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 extend the Rebif co-promotion agreement to the end of 2015. In May 2013, the Superior Court of Pennsylvania denied Serono’s petition seeking reconsideration of the decision.

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 29, 2013~~,March 30, 2014, recorded amounts for the estimated fair value of these indemnifications are not significant.

Pfizer Inc. has also guaranteed the long-term debt of certain companies that it acquired and that now are subsidiaries of Pfizer.

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Note 13. Segment, Geographic and Other Revenue Information

A. Segment Information

We manage our commercial operations through ~~four~~a global commercial structure consisting of three operating ~~segments–~~segments, each of which is led by a single manager––~~Primary Care, Specialty Care and~~the Global Innovative Pharmaceutical segment (GIP); the Global Vaccines, Oncology ~~Established Products and Emerging Markets,~~ and Consumer ~~Healthcare.~~Healthcare segment (VOC); and the Global Established Pharmaceutical segment (GEP). Each operating segment has responsibility for its commercial

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

We have restated prior-period information (Revenues and Earnings, as defined by management) to conform to the current management structure. As our operations were not managed under the new structure until the beginning of the first quarter of 2014, certain costs and expenses could not be directly attributed to one of the new operating segments. As a result, our operating segment results for 2013 include allocations. The amounts subjected to allocation methods in 2013 were approximately $500 million of Selling, informational and administrative expenses (SI&A) and approximately $260 million of Research and development expenses (R&D):

The SI&A expenses were allocated using proportional allocation methods based on associated selling costs, revenues or product-specific costs, as applicable.

The R&D expenses were allocated based on product-specific R&D costs or revenue metrics, as applicable.

Management believes that the allocations are reasonable.

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~~Some additional information about each ~~of our~~ segment follows:

Global Innovative Pharmaceutical segment~~four~~ ~~operating segments follows:~~

~~Primary Care operating segment–~~–~~includes revenues and earnings, as defined by management, from prescription pharmaceutical products primarily prescribed by primary-care physicians, and may include products in the following~~–GIP comprises medicines within several 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, Eliquis, Lyrica, Premarin, Pristiq and 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 thoseareas that are ~~managed by the Established Products unit.~~generally expected to have market exclusivity beyond 2015. These therapeutic areas include immunology and inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women's/men's health.

~~Specialty Care~~

Global Vaccines, Oncology 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 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 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 the U.S., Xalatan (outside the U.S., Canada, South Korea, developed Europe, Australia and 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.

◦

Oncology––includes revenues and earnings, as defined by management, from prescription pharmaceutical products addressing oncology and oncology-related illnesses. The products in this unit in 2013 include Inlyta, Sutent, Torisel, Xalkori, Mylotarg (in Japan), Bosulif (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––includes revenues and earnings, as defined by management, from 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. However, 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, Geodon (in the U.S.), 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).


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

Consumer Healthcare ~~operating segment–~~segment––VOC focuses on the development and commercialization of vaccines and products for oncology and consumer healthcare. Each of the three businesses that comprise this segment operates with distinct specialization in terms of the science, talent and market approach necessary to deliver value to consumers and patients.

Global Established Pharmaceutical segment––GEP includes ~~worldwide revenues~~the brands that have lost market exclusivity and, ~~earnings, as defined by management, from non-prescription~~generally, the mature, patent-protected products that are expected to lose exclusivity through 2015 in ~~the following therapeutic categories: dietary supplements, pain management, respiratory~~most major markets and, ~~personal care. Products marketed by Consumer Healthcare include Advil, Caltrate, Centrum, ChapStick, Emergen-C, Preparation H~~to a much smaller extent, generic pharmaceuticals. Additionally, GEP includes our sterile injectable products and ~~Robitussin.~~

44biosimilar development portfolio.

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Our chief operating decision maker uses the revenues and earnings of the ~~four~~three 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, which is generally responsible for research projects until proof-of-concept is achieved and then for transitioning those projects to the appropriate ~~business unit~~operating segment 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 facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.

Pfizer Medical, which is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, partnerships with global public health and medical associations, regulatory

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inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes.

Corporate, ~~which is responsible for~~representing platform functions ~~such~~(such as ~~finance,~~worldwide technology, global real estate operations, legal, finance, human resources, ~~legal, compliance, science and technology, worldwide procurement,~~ worldwide public affairs, ~~and policy~~compliance and worldwide ~~technology. These costs also include~~procurement) and certain compensation ~~costs~~ and other ~~miscellaneous operating expenses not charged to our operating segments, as well~~corporate costs, such as interest income and ~~expense.~~expense, and gains and losses on investments.

Other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations not directly attributable to an operating segment.

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,~~costs, where we incur costs for ~~restructuring, integration, implementation and~~ executing the ~~transaction;~~transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, which include non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or 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 ~~$176~~$172 billion as of ~~September 29, 2013~~March 30, 2014 and approximately ~~$186~~$172 billion as of December 31, ~~2012~~.2013.

Selected ~~income statement information~~

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

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



The following table provides selected income statement information by reportable segment:
	Revenues				Earnings^(a)
(MILLIONS OF DOLLARS)	March 30, 2014		March 31, 2013		March 30, 2014			March 31, 2013
Three Months Ended
Reportable Segments:
Global Innovative Pharmaceutical (GIP)	$	3,076	$	3,306	$	1,767		$	1,895
Global Vaccines, Oncology and Consumer Healthcare (VOC)	2,174		2,190		1,057			995
Global Established Pharmaceutical (GEP)	5,990		6,861		4,049			4,452
Total reportable segments	11,240		12,357		6,873			7,342
Other business activities^(b)	56		53		(667		)	(660		)
Reconciling Items:
Corporate^(c)	—		—		(1,200		)	(1,334		)
Purchase accounting adjustments^(c)	—		—		(1,008		)	(1,219		)
Acquisition-related costs^(c)	—		—		(30		)	(90		)
Certain significant items^(d)	57		—		(1,016		)	(88		)
Other unallocated	—		—		(105		)	(226		)
	$	11,353	$	12,410	$	2,847		$	3,725


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

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

^(b)

~~Revenues and Earnings from the Primary Care segment decreased in the three and nine months ended~~ ~~September 29, 2013~~ as compared to the prior year, and Earnings as a percentage of revenues for the nine months ended September 29, 2013 also declined, primarily due to the loss of exclusivity for Lipitor in developed Europe and Australia; the subsequent shift in the reporting of Lipitor in those markets to the Established Products business 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 termination of the co-promotion agreement for Aricept in Japan in December 2012. Earnings as a percentage of revenues increased for the three months ended ~~September 29, 2013~~ ~~primarily due to market growth of 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 decreased in the nine months ended~~ ~~September 29, 2013~~, as compared to the prior year, primarily due to the continued erosion of branded Lipitor in the U.S. and Japan, partially offset by the addition of products 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 in the three months ended ~~September 29, 2013~~ ~~as compared to the prior year due to Lipitor and Norvasc growth in China. Earnings 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.~~


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

^(e)(c)

~~Corporate for R&D expenses includes, among other things, administration expenses~~As described above in the "Other Costs 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.Business Activities" section.


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

^(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. For additional information, see ~~Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives~~.


^(h)(d)	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.

For Revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2013,~~2014, 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~~2A. Divestiture and Equity-Method ~~Investments: Divestitures.~~Investments: Divestiture.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For Earnings in the ~~third~~first quarter of ~~2013~~,2014, certain significant items includes: (i) income related to our transitional manufacturing and supply agreements with Zoetis of ~~$10~~$8 million,, (ii) charges for certain legal matters of $694 million, (iii) certain asset impairments and related charges of ~~$440~~$114 million,~~, (iii)~~ (iv) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of ~~$262 million, (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~~ ~~$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 $17~~$134 million and (v) other charges of ~~$17 million~~.$82 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––~~Deductions—Net.

For Earnings in the first ~~nine~~ ~~months~~quarter of 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 ~~$662~~$215 million,~~, (vii) other~~ (ii) net credits for certain legal matters of $87 million, (iii) certain asset impairment charges of $~~121~~$394 million, ~~and (viii)~~ (iv) the gain associated with the transfer of certain product rights to our 49%-owned equity-method investment in China of $490 million, (v) costs associated with the separation of Zoetis of $18$18 million. and (vi) other charges of $38 million. For additional information, see Note ~~2D. Acquisitions, Divestitures, Collaborative Arrangement~~2B. Divestiture and Equity-Method ~~Investments:~~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––~~Deductions—Net.

~~For Earnings~~

Equity in the ~~first~~ ~~nine~~ ~~months~~net income of ~~2012, certain~~investees accounted for by the equity method is not significant ~~items includes: (i) charges~~ for ~~certain legal matters~~any of $~~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 $506 million, (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~~.operating segments.

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


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

~~Table of Contents~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

B. Geographic Information

~~The following table provides revenues by geographic area:~~


The following table provides revenues by geographic area:													The following table provides revenues by geographic area:
	Three Months Ended						Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change			March 30, 2014		March 31, 2013		% Change
United States	$	5,186	$	5,174	—		$	15,190	$	16,011	(5	)		$	4,275	$	4,914	(13	)
Developed Europe^(a)	2,785		2,804		(1	)	8,502		9,433		(10	)		2,795		2,804		—
Developed Rest of World^(b)	1,992		2,386		(17	)	6,139		7,383		(17	)		1,728		2,032		(15	)
Emerging Markets^(c)	2,680		2,589		4		8,195		7,939		3			2,555		2,660		(4	)
Revenues	$	12,643	$	12,953	(2	)	$	38,026	$	40,766	(7	)		$	11,353	$	12,410	(9	)

^(a)

Developed Europe region includes the following markets: Western Europe, Finland and the Scandinavian countries. Revenues denominated in euros were ~~$2.1~~$2.2 billion ~~and~~ ~~$2.1 billion~~ ~~in both the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and~~ ~~2012, and~~ ~~$6.4 billion~~ ~~and~~ ~~$7.1 billion~~ in the first ~~nine~~ ~~months~~quarter of ~~2013~~2014 and ~~2012, respectively.~~

$2.1 billion in the first quarter of 2013.


^(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, Eastern Europe, Africa, Turkey and Central Europe.

4833

~~Table of Contents~~

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

C. Other Revenue Information

~~Significant Product Revenues~~


The following table provides revenues by product:
The following table provides detailed revenue information:									The following table provides detailed revenue information:
	Three Months Ended				Nine Months Ended					Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012		Business^(a)	March 30, 2014		March 31, 2013
Revenues from biopharmaceutical products:
Biopharmaceutical revenues:
Lyrica(b)	$	1,135	$	1,036	$	3,335	$	3,026	GIP/GEP	$	1,150	$	1,066
Prevnar family	959		949		2,855		3,028		V	927		927
Enbrel (Outside the U.S. and Canada)	932		893		2,769		2,780
Enbrel (Outside the U.S. & Canada)									GIP	914		877
Celebrex	752		676		2,120		1,969		GEP	624		653
Lipitor	533		749		1,704		3,364		GEP	457		626
Viagra(c)	460		517		1,405		1,498		GEP/GIP	374		461
Zyvox	319		328		1,007		996		GEP	321		342
Norvasc	303		319		917		1,001		GEP	278		301
Sutent	278		294		892		913		O	268		302
Premarin family	276		262		793		797		GEP	248		244
BeneFIX	213		201		619		577		GIP	201		189
Genotropin	183		212		570		619
Vfend	193		187		557		543		GEP	177		187
Pristiq	173		152		516		461		GEP	172		166
Genotropin									GIP	166		189
Chantix/Champix	154		146		486		496		GIP	147		166
Detrol/Detrol LA	131		176		437		576
Refacto AF/Xyntha									GIP	145		139
Xalatan/Xalacom	140		181		434		617		GEP	119		147
ReFacto AF/Xyntha	148		150		433		420
Medrol	107		113		343		388		GEP	106		113
Zoloft	116		129		341		398		GEP	101		116
Zithromax/Zmax									GEP	92		116
Sulperazon									GEP	88		71
Inlyta									O	88		63
Xalkori									O	88		53
Rapamune									GIP	88		84
Relpax									GEP	87		86
Effexor	96		107		326		342		GEP	82		105
Fragmin									GEP	81		86
Revatio									GEP	76		72
Zosyn/Tazocin	104		109		293		378		GEP	74		87
Zithromax/Zmax	84		89		283		318
Tygacil	92		82		271		249		GEP	74		87
Relpax	83		92		263		266
Fragmin	83		91		263		283
Rapamune	91		92		261		259
Cardura									GEP	66		76
Toviaz									GIP	63		52
EpiPen	85		67		230		217		GEP	63		72
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
Inspra									GEP	61		52
Xanax/Xanax XR									GEP	59		70
Depo-Provera									GEP	53		37
Diflucan									GEP	52		45
Xeljanz									GIP	52		11
Caduet	52		68		164		191		GEP	50		56
Inspra	53		51		164		156
Diflucan	59		61		164		185
Somavert	56		49		159		143		GIP	50		48
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
Alliance revenues^(d)									GEP/GIP	213		747
All other GIP									GIP	145		166
All other GEP									GEP	1,697		1,959
All other V/O									V/O	42		34
Total biopharmaceutical revenues										10,479		11,546
Other revenues:
Consumer Healthcare	788		780		2,399		2,276		C	761		811
Other^(c)	113		56		229		169
	$	12,643	$	12,953	$	38,026	$	40,766
Other^(e)										113		53
Revenues										$	11,353	$	12,410


^(a)	Indicates the business to which the revenues relate. GIP = the Global Innovative Pharmaceutical segment; V= the Global Vaccines

business; O= the Global Oncology business; C = the Consumer Healthcare business; and GEP = the Global Established Pharmaceutical segment.


^(b)	Lyrica revenues from all of Europe are included in GEP. All other Lyrica revenues are included in GIP.


^(c)	Viagra revenues from the U.S. and Canada are included in GIP. All other Viagra revenues are included in GEP.


^(d)	Includes Enbrel (GIP, in the U.S. and Canada through October 31, 2013), Spiriva (GEP), Rebif (GIP), Aricept (GEP) and Eliquis (GIP).


^(e)	Other includes revenues generated from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and also includes, in 2014, the revenues related to our transitional manufacturing and supply agreements with Zoetis.

^{PFIZER INC. AND SUBSIDIARY COMPANIES}

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 14. Subsequent Event

On April 28, 2014, Pfizer issued an announcement pursuant to Rule 2.4 of the U.K. City Code on Takeovers and Mergers disclosing that (a)~~Represents direct sales under license agreement~~ in January 2014, Pfizer submitted a preliminary, non-binding indication of interest to the Board of Directors of AstraZeneca PLC (AstraZeneca) regarding a possible merger transaction with ~~Eisai Co., Ltd.~~AstraZeneca; (b) after limited high-level discussions, AstraZeneca declined to pursue negotiations, the discussions were discontinued on January 14, 2014 and Pfizer then ceased to consider a possible transaction; and (c) in light of recent market developments, Pfizer contacted AstraZeneca on April 26, 2014 seeking to renew discussions, but AstraZeneca again declined to engage. On May 2, 2014, Pfizer issued an announcement pursuant to Rule 2.4 of the U.K. City Code on Takeovers and Mergers disclosing, among other things, that, having consulted with major shareholders, it submitted a revised written proposal to AstraZeneca to make an offer to combine the two companies pursuant to which AstraZeneca shareholders would receive, for each AstraZeneca share, 1.845 shares in the combined entity and 1,598 pence in cash. The revised proposal was rejected by AstraZeneca. Pfizer is considering its options with respect to AstraZeneca.

^(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 bulk pharmaceutical chemical sales~~ ~~organization, and~~ ~~includes, in 2013, the revenues related to our transitional manufacturing and supply agreements with Zoetis.~~

4935

~~Table of Contents~~

REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have reviewed the condensed consolidated balance sheet of Pfizer Inc. and Subsidiary Companies as of ~~September 29, 2013,~~March 30, 2014, and the related condensed consolidated statements of income, comprehensive income and cash flows for the three-month ~~and nine-month~~ periods ended ~~September 29, 2013,~~March 30, 2014 and ~~September 30, 2012.~~March 31, 2013. 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, ~~2012,~~2013, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February 28, ~~2013,~~2014, 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, ~~2012,~~2013, 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~~May 8, ~~2013~~2014

5036

~~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 5339, provides information about the following: our business; the proposed combination with AstraZeneca PLC (AstraZeneca); our performance during the ~~third~~first quarter of 2014 and ~~first nine months of 2013 and 2012;~~2013; our operating environment; our strategy; our business development initiatives, such as acquisitions, dispositions, licensing and collaborations; and our financial guidance for ~~2013.~~2014.

Analysis of the Condensed Consolidated Statements of Income. This section begins on page 6447, and consists of the following sub-sections:


◦	Revenuesand Product Developments. This sub-section, beginning on page ~~64,~~47, provides an analysis of our revenues and products for the ~~third~~first quarter of 2014 and ~~first nine months of~~ 2013, ~~and 2012, as well as~~including an overview of ~~research and development (R&D) expenses and~~ important biopharmaceutical product developments.


◦	Costs and Expenses. This sub-section, beginning on page ~~78,~~57, provides a discussion about our costs and expenses.


◦	Provision for Taxes on Income. This sub-section, on page ~~82,~~61, provides a discussion of items impacting our tax provisions.


◦	Discontinued Operations. This sub-section, ~~beginning~~ on page ~~83,~~61, provides an analysis of the financial statement impact of our discontinued operations.


◦	Adjusted Income. This sub-section, beginning on page ~~83,~~61, provides a discussion of an alternative view of performance used by management.


◦	Analysis of Operating Segment Information. This sub-section, beginning on page 67, provides a discussion of the performance of each of our operating segments.

Analysis of the Condensed Consolidated Statements of Comprehensive Income. This section, on page ~~88,~~71, provides a discussion of changes in certain components of other comprehensive income.

Analysis of the Condensed Consolidated Balance Sheets. This section, beginning on page ~~89,~~71, provides a discussion of changes in certain balance sheet accounts.

Analysis of the Condensed Consolidated Statements of Cash Flows. This section, beginning on page ~~90,~~72, provides an analysis of our cash flows for the first ~~nine~~three months of ~~2013~~2014 and ~~2012.~~2013.

Analysis of Financial Condition, Liquidity and Capital Resources. This section, beginning on page ~~91,~~73, provides an analysis of selected measures of our liquidity and of our capital resources as of ~~September 29, 2013~~March 30, 2014 and December 31, ~~2012,~~2013, as well as a discussion of our outstanding debt and other commitments that existed as of ~~September 29, 2013~~March 30, 2014 and December 31, ~~2012.~~2013. 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 ~~94,~~77, discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted.

Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page ~~95,~~77, provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements presented in this MD&A relating to, among other things, our anticipated ~~financial~~operating and ~~operating~~financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, ~~business-development plans, and~~ plans relating to share repurchases and ~~dividends.~~dividends and business-development plans, including with respect to a possible combination with AstraZeneca. Such forward-looking statements are based on management’s current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances.

5137

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																									The following table provides the components of the condensed consolidated statements of income:
	Three Months Ended								Nine Months Ended								Three Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)	September 29, 2013			September 30, 2012			% Change		September 29, 2013			September 30, 2012			% Change		March 30, 2014			March 31, 2013			% Change
Revenues	$	12,643		$	12,953		(2	)	$	38,026		$	40,766		(7	)	$	11,353		$	12,410		(9	)

Cost of sales	2,287			2,309			(1	)	6,792			7,068			(4	)	2,045			2,263			(10	)
% of revenues	18.1		%	17.8		%			17.9		%	17.3		%			18.0		%	18.2		%

Selling, informational and administrative expenses	3,395			3,491			(3	)	10,203			10,834			(6	)	3,040			3,217			(6	)
% of revenues	26.9		%	27.0		%			26.8		%	26.6		%			26.8		%	25.9		%

Research and development expenses	1,627			1,887			(14	)	4,867			5,461			(11	)	1,623			1,710			(5	)
% of revenues	12.9		%	14.6		%			12.8		%	13.4		%			14.3		%	13.8		%

Amortization of intangible assets	1,117			1,211			(8	)	3,476			3,889			(11	)	1,117			1,219			(8	)
% of revenues	8.8		%	9.3		%			9.1		%	9.5		%			9.8		%	9.8		%

Restructuring charges and certain acquisition-related costs	233			312			(25	)	547			1,085			(50	)	58			131			(56	)
% of revenues	1.8		%	2.4		%			1.4		%	2.7		%			0.5		%	1.1		%

Other (income)/deductions––net	411			937			(56	)	(514		)	3,264			*
Other deductions––net																	623			145			*
Income from continuing operations before provision for taxes on income	3,573			2,806			27		12,655			9,165			38		2,847			3,725			(24	)
% of revenues	28.3		%	21.7		%			33.3		%	22.5		%			25.1		%	30.0		%

Provision/(benefit) for taxes on income	985			(183		)	*		3,876			1,622			*
Provision for taxes on income																	582			1,109			(48	)
Effective tax rate	27.6		%	(6.5		)%			30.6		%	17.7		%			20.4		%	29.8		%

Income from continuing operations	2,588			2,989			(13	)	8,779			7,543			16		2,265			2,616			(13	)
% of revenues	20.5		%	23.1		%			23.1		%	18.5		%			20.0		%	21.1		%

Discontinued operations––net of tax	11			225			(95	)	10,719			734			*		73			149			(51	)

Net income before allocation to noncontrolling interests	2,599			3,214			(19	)	19,498			8,277			*		2,338			2,765			(15	)
% of revenues	20.6		%	24.8		%			51.3		%	20.3		%			20.6		%	22.3		%

Less: Net income attributable to noncontrolling interests	9			6			50		63			22			*		9			15			(40	)
Net income attributable to Pfizer Inc.	$	2,590		$	3,208		(19	)	$	19,435		$	8,255		*		$	2,329		$	2,750		(15	)
% of revenues	20.5		%	24.8		%			51.1		%	20.2		%			20.5		%	22.2		%
	��
Earnings per common share––basic^(a):
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.39		$	0.40		(3	)	$	1.26		$	1.00		26		$	0.35		$	0.36		(3	)
Discontinued operations––net of tax	—			0.03			*		1.54			0.10			*		0.01			0.02			(50	)
Net income attributable to Pfizer Inc. common shareholders	$	0.39		$	0.43		(9	)	$	2.80		$	1.10		*		$	0.36		$	0.38		(5	)

Earnings per common share––diluted^(a):
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.39		$	0.40		(3	)	$	1.25		$	1.00		25		$	0.35		$	0.36		(3	)
Discontinued operations––net of tax	—			0.03			*		1.52			0.10			*		0.01			0.02			(50	)
Net income attributable to Pfizer Inc. common shareholders	$	0.39		$	0.43		(9	)	$	2.77		$	1.09		*		$	0.36		$	0.38		(5	)

Cash dividends paid per common share	$	0.24		$	0.22		9		$	0.72		$	0.66		9		$	0.26		$	0.24		8

* Calculation not meaningful.


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

Certain amounts and percentages may reflect rounding adjustments.

5238

~~Table of Contents~~

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business

We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development and manufacture of healthcare products. Our global portfolio includes medicines and vaccines, as well as many of the world’s best-known consumer healthcare products. We work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We 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~~and, to a much lesser extent, from alliance agreements, under which we co-promote products discovered by other companies (Alliance revenues).

~~On June 24, 2013, we completed~~ We manage our commercial operations through a global commercial structure consisting of three operating segments, each of which is led by a single manager––the ~~full disposition of our Animal Health business (Zoetis)~~Global Innovative Pharmaceutical segment (GIP); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC); and the Global Established Pharmaceutical segment (GEP). ~~The~~Each operating ~~results of this business are reported as~~ ~~Income from discontinued operations––net of tax~~ ~~in the condensed consolidated statements of income~~segment has responsibility for ~~the nine months ended September 29, 2013~~its commercial activities and for ~~the three~~certain in-process research and ~~nine months ended September 30, 2012. In addition, in the condensed consolidated balance sheet as~~development (IPR&D) projects for new investigational products and additional indications for in-line products that generally have achieved proof of ~~December 31, 2012, the assets and liabilities associated with this business are classified as~~ ~~Assets of discontinued operations and other assets held for sale~~ ~~and~~ ~~Liabilities of discontinued operations, as appropriate.~~concept. For additional information, see Notes to Condensed Consolidated Financial ~~Statements––~~Statements––Note ~~2B. Acquisitions, Divestitures, Collaborative Arrangement~~13. Segment, Geographic and ~~Equity-Method Investments: Divestitures~~Other Revenue Information and ~~see~~ the “Our ~~Business Development Initiatives”, “Discontinued Operations” and “Analysis of Financial Condition, Liquidity and Capital Resources” sections~~Strategy” section of this MD~~&A.~~&A below.

~~On November 30, 2012, we completed the sale of~~The financial information included in our ~~Nutrition business. The operating results of this business are reported as~~ ~~Income from discontinued operations––net of tax~~ ~~in the~~ condensed consolidated financial statements for our subsidiaries operating outside the United States (U.S.) is as of ~~income~~and for the three ~~and nine~~ months ended ~~September 30, 2012. For additional information, see Notes~~February 23, 2014 and February 24, 2013.

Proposed Combination with AstraZeneca PLC (AstraZeneca)

On April 28, 2014, Pfizer issued an announcement pursuant to ~~Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangement~~Rule 2.4 of the U.K. City Code on Takeovers and ~~Equity-Method Investments: Divestitures~~ Mergers disclosing that (a) in January 2014, Pfizer submitted a preliminary, non-binding indication of interest to the Board of Directors of AstraZeneca regarding a possible merger transaction with AstraZeneca; (b) after limited high-level discussions, AstraZeneca declined to pursue negotiations, the discussions were discontinued on January 14, 2014 and ~~see~~Pfizer then ceased to consider a possible transaction; and (c) in light of recent market developments, Pfizer contacted AstraZeneca on April 26, 2014 seeking to renew discussions, but AstraZeneca again declined to engage. On May 2, 2014, Pfizer issued an announcement pursuant to Rule 2.4 of the ~~“Our Business Development Initiatives”~~U.K. City Code on Takeovers and ~~“Discontinued Operations” sections of this MD&A.~~Mergers disclosing, among other things, that, having consulted with major shareholders, it submitted a revised written proposal to AstraZeneca to make an offer to combine the two companies pursuant to which AstraZeneca shareholders would receive, for each AstraZeneca share, 1.845 shares in the combined entity and 1,598 pence in cash. The revised proposal was rejected by AstraZeneca. Pfizer is considering its options with respect to AstraZeneca.

Our ~~2013~~First Quarter 2014 Performance

Revenues in the ~~third~~first quarter of ~~2013~~2014 were ~~$12.6~~$11.4 billion,, a decrease of 2%9% compared to the same period in ~~2012,~~2013, which reflects an operational ~~decline~~decrease of ~~$38~~$693 million, or ~~less than 1%~~6%. The operational decrease was primarily the result of:

the ~~continued erosion~~expiration of the co-promotion term of the collaboration agreement for ~~branded Lipitor~~Enbrel in the U.S.~~, developed Europe~~ and ~~certain other markets~~Canada (approximately ~~$239 million);~~

~~other product losses of exclusivity (approximately $276~~$375 million);

the ongoing expiration of the Spiriva collaboration in certain countries (approximately ~~$163~~$181 million);

the continued erosion of branded Lipitor in the U.S. and most other developed markets due to generic competition (approximately $158 million);

the loss of exclusivity and subsequent multi-source generic competition for Detrol LA in the U.S. and Viagra, primarily due to the loss of exclusivity in most major European markets, (aggregate decline of approximately $191 million); and

~~decreased government purchases~~the loss of ~~the Prevnar family of~~exclusivity for certain other products ~~and Enbrel in certain emerging markets~~ (approximately ~~$48~~$128 million),

partially offset by:

the operational growth of ~~certain products, including~~ Lyrica, Xalkori and Inlyta globally, Enbrel ~~Inlyta, Xalkori, Celebrex~~outside of the U.S. and Canada, and Eliquis and Xeljanz, ~~(approximately $361 million)~~primarily in the U.S., as well as ~~various other biopharmaceutical products~~the contribution from the collaboration with Mylan Inc. to market generic drugs in Japan (approximately ~~$162 million) in developed markets;~~

the 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 overall growth in the Consumer Healthcare business unit (approximately $8~~$350 million); and

revenues from the transitional manufacturing and supply agreements with Zoetis Inc. (Zoetis), our former Animal Health business (approximately ~~$67~~$57 million).

In addition, Revenues were unfavorably impacted by foreign exchange by approximately ~~$272~~$364 million, or 2%3%, in the ~~third~~first quarter of ~~2013~~2014 compared to the same period in ~~2012.~~

~~Revenues~~ ~~in the first nine months of 2013 were~~ ~~$38.0 billion, a decrease of~~ 7% ~~compared to the same period in 2012, which reflects an operational decline of $1.9 billion, or 5%. The operational decrease was primarily the result of:~~

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~~the 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 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,~~ ~~Revenues~~ ~~were unfavorably impacted by foreign exchange of approximately $793 million, or 2%, in the first nine months of 2013 compared to the same period in 2012.~~2013.

Income from continuing operations for the ~~third~~first quarter of ~~2013~~2014 was ~~$2.6~~$2.3 billion,, compared to ~~$3.0~~$2.6 billion in the ~~third~~first quarter of ~~2012~~,2013, primarily reflecting, among other ~~items:~~items, in addition to the lower revenues described above:

~~lower revenues,~~

higher legal charges (up $777 million), primarily due to Neurontin- and Effexor-related matters. See 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~~"Costs and Expenses––Other ~~(Income)/~~Deductions––~~Net”~~Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4. 4. Other ~~(Income)/Deductions––Net~~Deductions);––Net; and

the non-recurrence of the gain associated with the transfer of certain product rights to our joint venture with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China in the first quarter of 2013 ($490 million),

partially offset by:

a ~~higher~~lower effective tax rate, (down 9.4 percentage points to 20.4%) primarily due to ~~(i) a~~the favorable ~~settlement~~impact of the resolution in ~~2012~~the first quarter of 2014 of certain tax positions, pertaining to prior years, primarily with various foreign tax authorities, and from the expiration of certain statutes of limitations, the non-recurrence of the unfavorable tax impact associated with the ~~U.S. Internal Revenue Service (IRS) related~~aforementioned transfer of certain product rights to ~~audits for multiple tax years; specifically, we recorded a tax benefit of approximately $1.1 billion (representing tax and interest),~~our 49%-owned equity-method investment in China, as well as ~~(ii)~~the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, partially offset by the expiration of the U.S. research and development (R&D) tax ~~benefit recorded for the resolution of foreign audits pertaining to multiple tax years~~credit on December 31, 2013 (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 Mattersand Notes to Condensed Consolidated Financial Statements––Note 2B. Divestiture and Equity-Method Investments: Equity-Method Investments),;

~~partially offset by:~~

lower ~~net~~asset impairment and related charges ~~for legal matters~~ (down ~~approximately $726 million, pre-tax)~~$380 million) (see also the “Costs and Expenses––Other ~~(Income)/~~Deductions––~~Net”~~Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4.3. Restructuring Charges and Other ~~(Income)/Deductions–~~Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives) and Note 4. Other Deductions––Net); and

~~additional~~lower operational expenses due to the benefits ~~generated from our global cost-reduction/~~of cost-reduction and productivity initiatives ~~partially offset~~

higher net gains on asset disposals (up 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.~~

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~~Income from continuing operations~~ ~~for the first nine months of 2013 was~~ ~~$8.8 billion~~ ~~compared to~~ ~~$7.5 billion~~ ~~in the first nine months of~~ ~~2012~~$155 million), primarily ~~reflecting, among other items:~~

~~patent litigation settlement income recorded~~due to gains on sales of product rights and gains on sales of investments in ~~2013 (approximately $1.3 billion, pre-tax) (see also~~equity securities. See the ~~“Costs~~"Costs and Expenses––Other ~~(Income)/~~Deductions––~~Net”~~Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 4. 4. Other ~~(Income)/Deductions–~~Deductions––Net);

lower net charges for other legal matters (down approximately $2.1 billion, 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;~~

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~~).

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

Our Operating Environment

Industry-Specific Challenges

The majority of our revenues come from the manufacture and sale of biopharmaceutical products. As explained more fully in our ~~2012~~2013 Annual Report on Form ~~10-K/A,~~10-K, the biopharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific factors and 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, healthcare legislation, pipeline productivity and the regulatory environment, pricing and access pressures and competition among branded products.

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~~ ~~2013~~ ~~financial guidance reflects the anticipated impact in~~ ~~2013~~ ~~of the loss of such rights as described below (see the “Our Financial Guidance for~~ ~~2013” section of this MD&A for additional information).~~

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

~~Lipitor in the U.S.––We~~ lost exclusivity for ~~Lipitor~~a number of our products in ~~the U.S.~~certain markets and we have lost collaboration rights with respect to a number of our alliance products in ~~November 2011. The entry~~certain markets, and certain of ~~multi-source~~our products and alliance products are expected to face significantly increased generic competition inover the ~~U.S. began in May 2012, with attendant increased competitive pressures.~~

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Lipitor in international markets––Lipitor lost exclusivity in Australia in April 2012 and most of developed Europe in March 2012 and May 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 Geodon in March 2012 and Revatio tablet in 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 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. Viagra lost exclusivity in most major EU markets in June 2013. We lost exclusivity for Lyrica in Canada in February 2013.

Spiriva—Our collaboration with Boehringer Ingelheim (BI) for Spiriva expires on a country-by-country basis between 2012 and 2016, including the expiration in certain 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.~~next few years.

~~For additional information, including with regard to~~See the ~~expiration of the patents~~“Intellectual Property Rights and ~~of co-promotion and licensing rights for various products in the U.S., EU and Japan in~~ ~~2013~~ ~~and subsequent years, see the “Patents and Intellectual Property Rights”~~Collaboration/Licensing Rights" section of our ~~2012~~ ~~Annual Report on Form 10-K/A and the “The Loss or Expiration of Intellectual Property Rights” section of our~~ ~~2012~~2013 Financial Report, which was filed as Exhibit 13 to our ~~2012~~2013 Annual Report on Form ~~10-K/A.~~10-K, for information about (i) recent losses of product exclusivity impacting product revenues, (ii) recent and expected losses of collaboration rights impacting Alliance Revenues and (iii) losses and expected losses of product exclusivity in 2014.

On April 29, 2014, the 10-year alliance between Boehringer Ingelheim and Pfizer for the promotion and marketing of Spiriva in the U.S. came to an end. Boehringer Ingelheim now exclusively markets and supplies Spiriva in the U.S.

In addition, we expect to lose exclusivity for various other products in various markets over the next few years. For additional information, see the “Patents and Other Intellectual Property Rights” section in Part I, Item 1, "Business", of our 2013 Annual Report on Form 10-K.

Our 2014 adjusted financial guidance reflects the projected impact of the loss of exclusivity of various products and the expiration of certain alliance product contract rights discussed above. Our 2014 adjusted financial guidance continues to reflect a full-year contribution from Celebrex in the U.S. If necessary, we will update our guidance when we are in a better position to make an informed judgment about the market exclusivity of Celebrex in the U.S. from May 30 through the end of this year. For additional information about our 2014 financial guidance, see the “Our Financial Guidance for 2014” section of this MD&A.

We will continue to aggressively defend our patent rights whenever we deem appropriate. For more detailed information about our significant products, see the discussion in the “Revenues––~~Selected Revenues from Biopharmaceutical~~Major Products” section of this MD&A. See Notes to Condensed Consolidated Financial Statements––Note 12A1. Commitments and Contingencies: Legal Proceedings––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~~2013 Annual Report on Form ~~10-K/A,~~10-K, 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~~176 million in the first ~~nine months~~quarter of ~~2013~~2014 and ~~$413~~$128 million in the first ~~nine months~~quarter of ~~2012~~,2013, recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and

$7829 million ~~in the~~ ~~third~~ ~~quarter~~ of ~~2013~~ ~~and $75 million in the~~ ~~third~~ ~~quarter of~~ ~~2012, and $209 million~~income in the first ~~nine months~~quarter of ~~2013~~2014 and ~~$256~~$55 million of expense in the first ~~nine months~~quarter of ~~2012~~,2013, 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. The income in the first quarter of 2014 is driven by a true-up associated with the final 2013 invoice received from the federal government, which reflected a lower share than the initial 2013 invoice.

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Regulatory Environment/Pricing and Access––~~Certain~~U.S. Government and Other ~~U.S. Federal Government Matters~~Payer Group Pressures

Budget Control Act of 2011—In August 2011, the federal Budget Control Act of 2011 (the Budget Control Act) was enacted in the U.S. ~~The~~In December 2013, Congress enacted minor amendments to the Budget Control Act, includes provisions to raise the U.S. Treasury Department's borrowing limit, known as the debt ceiling, and provisions to reduce the federal deficit by $2.4 trillion between 2012 and 2021. Initial deficit-reduction targets included $900 billion ofproviding for greater discretionary spending ~~reductions associated with~~in 2014 and 2015 than originally budgeted. The amendments also provide for U.S. Food and Drug Administration (FDA) user fee sequester relief for two years, allowing the Department of Health and Human Services and various agencies charged with national security, but those discretionary spending reductions did not include programs such as Medicare and Medicaid or direct changesFDA to ~~pharmaceutical pricing, rebates or discounts.~~continue to review new products. The Office of Management and Budget (OMB) was responsible for identifying the remaining $1.5 trillion of deficit reductions, which were divided evenly between defense and non-defense spending. Under this OMB review process, Social Security, Medicaid, Veteran Benefits and certain other spending categories were excluded from consideration, butnew legislation continues to prohibit reductions in payments to Medicare providers ~~were made, although these reductions were prohibited by law~~ from exceeding a 2% reduction of the originally budgeted ~~amount. Additionally, certain payments~~amount, and extends this prohibition for two years (until 2023). The implications to Medicare Part D plans, such as low-income subsidy payments, were exempt from reduction as was all patient cost-sharing under Medicare. As a result, we do not expect that the Budget Control Act will have a material adverse impact on our resultsPfizer of ~~operations.~~these changes are expected to be nominal. 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.

Sustainable Growth Rate Replacement—The Medicare physician payment formula known as the Sustainable Growth Rate (SGR) is routinely overridden by Congressional action because it would lead to dramatic decreases in physician payment. On April 1, 2014, the President signed into law another extension that will maintain physician payment through March 2015. Prior to expiration of the extension, it is likely that Congress will consider legislation to permanently repeal the SGR and replace it with a new payment model. The Congressional Budget Office has estimated that the cost to the federal government of repealing and replacing the SGR would be approximately $130 billion over 10 years. The source of those funds could include additional taxes on and/or rebate requirements applicable to the pharmaceutical industry, including Pfizer.

Federal Debt Ceiling—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, Congress enacted legislation on October 16, 2013 ~~legislation was enacted~~ that ~~(i) ended~~suspended 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~~short period of time thereafter. ~~If, after~~In February 2014, Congress enacted legislation that further suspends the ~~expiration of those respective periods,~~debt ceiling until March 15, 2015, effectively ensuring the U.S. federal ~~government fails~~government’s ability 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 until that date, including under Medicare, Medicaid and other publicly funded or subsidized health programs that have a direct impact on our results of ~~operations could be adversely affected.~~

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

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~~2013 Annual Report on Form ~~10-K/A,~~10-K, we, like other businesses, continue to face the effects of the challenging economic environment, which have impacted our biopharmaceutical operations in the U.S., Europe and ~~Europe, including the countries that use the euro,~~Japan, and in a number of emerging markets.

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We believe that patients, experiencing the effects of the challenging economic environment, including relatively high unemployment levels, and increases in co-pays, sometimes switch to generic products, delay treatments, skip doses or 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 (and the number will continue to grow as a result of the Medicaid coverage expansion in the Affordable Care Act effective in some states in 2014), 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 in various markets around the world, including in 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,~~Furthermore, some government agencies and third-party payers use health technology assessments in ways that, at times, lead to restricted access to and 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 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~~information 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, as well as our substantial international assets, 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, Australian dollar, the U.K. pound, ~~the Chinese renminbi,~~ 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~~were to weaken against ~~a specific foreign~~another currency, assuming all other variables remained constant, our revenues ~~will~~would increase, having a positive impact on earnings, and our overall expenses ~~will~~would increase, having a negative impact on ~~net income. Likewise,~~earnings. Conversely, if the U.S. dollar ~~strengthens~~were to strengthen against ~~a specific foreign~~another currency, assuming all other variables remained constant, our revenues ~~will~~would decrease, having a negative impact on earnings, and our overall expenses ~~will~~would decrease, having a positive impact on ~~net income.~~earnings. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.

~~On February 13, 2013, the Venezuelan government devalued its~~The impact of possible currency ~~from a rate of 4.3~~devaluations in countries experiencing high inflation rates or significant exchange fluctuations, including Venezuela, can impact our results and financial guidance. For further information about our exposure to ~~6.3 of Venezuelan currency to the U.S. dollar. We incurred a~~ foreign currency ~~loss~~risk, see the “Analysis of ~~$80 million immediately on the devaluation as a result~~Financial Condition, Liquidity and Capital Resources” section 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.this MD&A.

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, and will maintain, 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 “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.,~~1A, “Risk Factors”, of this Quarterly Report on Form 10-Q; and in Part I, Item 1A, “Risk Factors,” of our ~~2012~~2013 Annual Report on Form ~~10-K/A.~~10-K.

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 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 any adverse impact on our revenues. 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 expect to create value for the patients we serve and for our shareholders.

Commercial Operations

~~We currently manage~~

At the beginning of our fiscal year 2014, we began managing our commercial operations through four operating segments––Primary Care, Specialty Care and 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~~structure consisting of three ~~businesses–~~operating segments, each of which is led by a single manager––the Global Innovative Pharmaceutical ~~Business~~segment (GIP); the Global Vaccines, Oncology and Consumer Healthcare ~~Business~~segment (VOC); and the Global Established Pharmaceutical ~~Business~~segment (GEP).

A significant change effected by ~~this~~our 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:~~grouping follows:

Global Innovative Pharmaceutical ~~Business–~~segment––GIP ~~will generally comprise~~comprises medicines within several therapeutic areas that are generally expected to have market exclusivity beyond ~~2015, as well as Enbrel.~~2015. 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–~~segment––VOC ~~will focus~~focuses on the development and commercialization of vaccines and products for oncology and consumer healthcare. Each of the three businesses ~~comprising~~that comprise this ~~group will operate as a separate, global business, requiring~~segment operates with distinct specialization in terms of the science, talent and market approach necessary to deliver value to consumers and patients.

Global Established Pharmaceutical ~~Business–~~segment––GEP ~~will include~~includes 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.~~markets and, to a much smaller extent, generic pharmaceuticals. Additionally, GEP ~~will include~~includes our ~~biosimilars portfolio~~sterile injectable products and ~~current and future established products initiatives, such as our existing agreements with Mylan in Japan, Hisun in China and Teuto in Brazil.~~biosimilar development portfolio.

~~The~~We expect that the GIP and VOC biopharmaceutical portfolios of innovative, largely patent-protected, in-line products will be sustained by ongoing internal investments and targeted business development designed to maximize the value of our in-line products and ensure a robust pipeline of highly-differentiated product candidates in areas of unmet medical need. ~~In addition, VOC will include our Consumer Healthcare business, which manufactures and markets several well-known brands.~~ The assets ~~to be~~ managed by these groups are science-driven, highly differentiated and generally require a high-level of engagement with healthcare providers and consumers. In addition, VOC includes our Consumer Healthcare business, which manufactures and markets several well-known over-the-counter (OTC) products.

GEP ~~will be~~is expected to generate strong consistent cash flow by providing patients around the world with access to effective, lower-cost, high-value treatments. GEP ~~will leverage~~leverages our ~~experience in~~ biologic development, regulatory and manufacturing expertise to advance its

biosimilar development portfolio. GEP may also engage in targeted business development to further enable its commercial strategies.

For additional information about our operating structure, see Notes to Condensed Consolidated Financial Statements––Note 13A. Segment, Geographic and ~~commercialization.~~Other Revenue Information: Segment Information.

~~These changes will not be implemented until~~For additional information about the first quarter 2014 ~~to allow for~~performance of each of our operating segments, see the ~~necessary internal transition process. Beginning with our first-quarter 2014 financial results, we will provide greater financial transparency into our new businesses.~~"Analysis of Operating Segment Information" section of this MD&A.

Research Operations

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. ~~As such,~~To that end, our research primarily focuses on five high-priority areas that have a mix of small molecules 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.

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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”~~"Analysis of Operating Segment Information" section of this MD&A.

For additional information about our pending new drug applications and supplemental filings, see the ~~“Research and Development–~~“Analysis of the Condensed Consolidated Statements of Income––Product ~~Developments––Biopharmaceutical”~~Developments” 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.

For additional information about recent transactions and strategic investments that we believe have the potential to advance our pipeline and maximize the value of our in-line products, see the “Our Business Development Initiatives” section of this MD&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 about recent transactions and strategic investments that we believe have the potential to advance our pipeline, enhance our product portfolio and maximize the value of our in-line products, see the “Our Business Development Initiatives” section of this MD&A.

See also the "Proposed Combination with AstraZeneca PLC (AstraZeneca)" section of this MD&A above.

Intellectual Property Rights

We continue to aggressively defend our patent rights against increasingly aggressive infringement whenever appropriate, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to 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 Allocation 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 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.

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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 generate ~~profitable revenue~~earnings 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 and 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~~See also the "Proposed Combination with AstraZeneca PLC (AstraZeneca)" section of this MD&A above.

For a description of the more significant recent transactions ~~and events~~through February 28, 2014, the filing date of our 2013 Annual Report on Form 10-K, see the "Our Business Development Initiatives" section of our 2013 Financial Report, which was filed as Exhibit 13 to our 2013 Annual Report on Form 10-K. Certain of those transactions are described 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,~~January 21, 2014, the ~~FDA~~European Commission approved Tivicay (dolutegravir), a product for the treatment of HIV-1 infection, developed by ViiV, an ~~equity-method~~equity method investee. This approval, in accordance with the agreement between GlaxoSmithKline plc and Pfizer, triggered a reduction in our equity interest in ViiV from ~~13.5%~~12.6% to ~~12.6%~~11.7% and an increase in GlaxoSmithKline ~~plc's~~plc’s equity interest in ViiV from ~~76.5%~~77.4% to ~~77.4%~~78.3%, effective ~~October~~April 1, ~~2013.~~2014. As a result, in the ~~third~~first quarter of ~~2013,~~2014, we recognized a loss of approximately ~~$31~~$36 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 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–~~Zoetis––On June 24, 2013, we completed the full disposition of ~~our Animal Health business~~Zoetis Inc. (Zoetis). The full disposition was completed through a series of steps, including, in the first quarter of 2013, the formation of Zoetis and an initial public offering (IPO) of an approximate 19.8% interest in Zoetis and, in the second quarter of 2013, 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~~2A. Divestiture 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––Investments~~Note 2C. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Collaborative Arrangement.~~: Divestiture.

Hisun Pfizer Pharmaceuticals Company Limited (Hisun Pfizer)––On September 6, 2012, we and Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun), a leading pharmaceutical company in China, formed a new company, Hisun Pfizer,49% owned by Pfizer and 51% owned by Hisun, to develop, manufacture, market and sell pharmaceutical products, primarily branded generic products, predominately in China. ~~On January 1,~~In the first quarter of 2013, we and Hisun contributed certain assets ~~constituting~~to Hisun Pfizer. Our contributions constituted a business, ~~to this 49%-owned equity-method investment~~as defined by U.S. GAAP, 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 Incorporated (Next Wave)––On November 27, 2012, we completed our acquisition of NextWave, a privately held, specialty pharmaceutical company. As a result of the acquisition, we now hold exclusive North American rights to Quillivant XR™ (methylphenidate hydrochloride), the first ~~once-daily liquid medication approved in the U.S. for the treatment~~quarter of attention deficit hyperactivity disorder. The total 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 nine months of 2013, ~~as a result of lowered commercial forecasts, the fair value of the contingent consideration decreased and~~ we recognized a pre-tax gain of approximately ~~$128~~$490 million ~~and $109 million, respectively,~~ in Other ~~(income)/~~deductions––net. For additional information, see Notes to Condensed Consolidated Financial ~~Statements—~~Statements––Note ~~2A. Acquisitions, Divestitures, Collaborative Arrangement~~2B. Divestiture and Equity-Method ~~Investments: Acquisitions~~Investments.: Equity-Method Investments.

Nexium ~~Over-the Counter Rights–~~OTC Rights–On–In August ~~13,~~ 2012, ~~we announced that~~ we entered into an agreement with AstraZeneca for the exclusive, global, ~~over-the-counter (OTC)~~OTC rights for Nexium, a leading prescription drug currently approved to treat the symptoms of gastroesophageal reflux disease. WeAt that time, we made an upfront payment of $250 million to AstraZeneca. On March 28, 2014, the FDA approved Nexium 24HR (esomeprazole 20 mg) for OTC use. Pfizer expects to launch the product in the U.S. on May 27, 2014. Upon the U.S. launch of the product, Pfizer will pay AstraZeneca a $200 million product launch milestone. The payment for this Consumer Healthcare asset acquisition will be recorded as an intangible asset on Pfizer’s balance sheet and will be amortized to expense over the estimated commercial life of the product. AstraZeneca iswill be eligible to receive future milestone payments of up to ~~$550~~$350 million based on product launches outside the U.S and level of worldwide sales, as well as royalty payments based on worldwide sales. In June 2013, the Committee for 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 adults). A new drug application submission for Nexium OTC in the U.S. in a 20mg delayed-release capsule 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, each company would move forward independently.

Alacer Corp. (Alacer)––On February 26, 2012, we completed our acquisition of Alacer, a 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 Equity-Method Investments: Acquisitions~~.

Ferrosan Holding A/S (Ferrosan)––On December 1, 2011, we completed our acquisition of the consumer healthcare business of 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 Equity-Method Investments: Acquisitions~~.45

Our Financial Guidance for ~~2013~~2014

We confirm that all components of our adjusted financial guidance issued on January 28, 2014 remain valid.



The following table provides our ~~current~~adjusted financial guidance for ~~2013:~~2014^(a)^,^{(b), (c)}:
Adjusted revenues	$~~50.8~~49.2 to ~~$51.8~~$51.2 billion
Adjusted cost of sales as a percentage of adjusted revenues	~~18.0%~~19.0% to ~~18.5%~~20.0%
Adjusted selling, informational and administrative expenses	$~~14.2~~13.5 to ~~$14.7~~$14.5 billion
Adjusted research and development expenses	$~~6.3~~6.4 to ~~$6.6~~$6.9 billion
Adjusted other (income)/deductions	Approximately ~~$400~~$100 million
Effective tax rate on adjusted income	Approximately ~~28.0%~~
~~Reported diluted EPS~~	~~$3.05 to $3.15~~27.0%
Adjusted diluted EPS	$~~2.15~~2.20 to ~~$2.20~~$2.30

~~For an understanding of Adjusted income and its components and Adjusted diluted EPS (all non-GAAP financial measures), see the “Adjusted Income” section of this MD&A.~~

The current exchange rates assumed in connection with the 2013 financial guidance are a blend of the actual exchange rates in effect through September 29, 2013 and the mid-October 2013 exchange rates for the remainder of the year. 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 and Reported diluted EPS 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:
Full-Year 2013 Guidance
(BILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
Net Income^(a)

Diluted EPS^(a)
Adjusted income/diluted EPS^(b) guidance
$14.8 - $15.2 $2.15 - $2.20
Purchase accounting impacts of transactions completed as of September 29, 2013 (3.3) (0.49)
Acquisition-related costs (0.4 - 0.5) (0.06 - 0.07)
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 $21.2 - $21.9 $3.05 - $3.15


^(a)	Does not assume the completion of any business-development transactions not completed as of ~~September 29, 2013~~,March 30, 2014, 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 29, 2013~~.


^(b)	For an understanding of Adjusted income and its components and Adjusted diluted EPS (all of which are non-GAAP financial measures), see the ~~“Adjusted Income”~~"Adjusted Income" section of this MD&A.


^(c)	Includes 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.

^(d)

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 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~~^(c) The adjusted financial guidance continues to ~~February 6, 2013: 100%~~reflect a full-year contribution from Celebrex in the U.S. If necessary, we will update our guidance when we are in a better position to make an informed judgment about the market exclusivity of ~~Zoetis financial results are included;~~

~~February 7, 2013 to June 24, 2013: 80.2%~~Celebrex in the U.S. from May 30 through the end 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.~~year.

~~In addition, revenues~~The exchange rates assumed in connection with the 2014 financial guidance are a blend of the actual exchange rates in effect through March 30, 2014 and the mid-April 2014 exchange rates for the remainder of the year.

Adjusted diluted EPS guidance assumes diluted weighted-average shares outstanding of approximately 6.4 billion shares.

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.

Due to the applicability of the U.K. City Code on Takeovers and Mergers to our proposed combination with AstraZeneca, pending reports from our reporting accountants and financial advisers in accordance with the U.K. City Code on Takeovers and Mergers, Pfizer is not currently permitted to confirm or update its 2014 reported diluted EPS guidance in accordance with its customary quarterly practice. Preparation of these reports is underway. Because Pfizer has recorded a number of charges during the first quarter of 2014 relating to the resolution of litigation-related matters, Pfizer's previously issued 2014 reported diluted EPS guidance is no longer valid. Updated reported diluted EPS guidance will be provided as soon as practicable.

~~For a description~~As required by the U.K. City Code on Takeovers and Mergers, the Pfizer Responsible Officers (Ian Read, Chairman and Chief Executive Officer; Frank D'Amelio, Executive Vice President, Business Operations and Chief Financial Officer; and Douglas Lankler, Executive Vice President, General Counsel) confirm that the adjusted financial guidance provided above (i) has been properly compiled based on the same assumptions set out in the adjusted financial guidance issued on January 28, 2014; and (ii) has been prepared in accordance with the accounting policies 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.Pfizer.

Our ~~2013~~2014 adjusted 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.,~~1A, “Risk Factors,” of this Quarterly Report on Form 10-Q; the “Our Operating Environment” and “Our Strategy” sections of our ~~2012~~2013 Financial Report, which was filed as Exhibit 13 to our ~~2012~~2013 Annual Report on Form ~~10-K/A;~~10-K; and Part I, Item 1A, “Risk Factors,” of our ~~2012~~2013 Annual Report on Form ~~10-K/A.~~10-K.

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~~Table of Contents~~

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

REVENUES AND PRODUCT DEVELOPMENTS

Revenues - Overview

The following table provides worldwide revenues by operating segment, business unit and geographic area:
Worldwide U.S. International
World-
wide
U.S.
Inter-
national
(MILLIONS OF DOLLARS) 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 $ 3,259
$ 3,610
$ 2,101
$ 2,021
$ 1,158
$ 1,589
(10 ) 4
(27 )
Specialty Care 3,349
3,406
1,513
1,528
1,836
1,878
(2 ) (1 ) (2 )
Oncology 407
329
185
151
222
178
24
23
25
SC&O Operating Segment 3,756
3,735
1,698
1,679
2,058
2,056
1
1
—
Emerging Markets 2,431
2,389
—
—
2,431
2,389
2
—
2
Established Products 2,296
2,383
948
1,069
1,348
1,314
(4 ) (11 ) 3
EP&EM Operating Segment 4,727
4,772
948
1,069
3,779
3,703
(1 ) (11 ) 2
11,742
12,117
4,747
4,769
6,995
7,348
(3 ) —
(5 )

Consumer Healthcare 788
780
396
388
392
392
1
2
—
Other^(a)
113
56
43
17
70
39
*
*
79
Total revenues $ 12,643
$ 12,953
$ 5,186
$ 5,174
$ 7,457
$ 7,779
(2 ) —
(4 )
Nine Months Ended

Biopharmaceutical revenues:

Primary Care Operating Segment $ 9,830
$ 11,725
$ 6,213
$ 6,065
$ 3,617
$ 5,660
(16 ) 2
(36 )
Specialty Care 9,891
10,483
4,365
4,639
5,526
5,844
(6 ) (6 ) (5 )
Oncology 1,178
940
534
415
644
525
25
29
23
SC&O Operating Segment 11,069
11,423
4,899
5,054
6,170
6,369
(3 ) (3 ) (3 )
Emerging Markets 7,466
7,308
—
—
7,466
7,308
2
—
2
Established Products 7,033
7,865
2,890
3,780
4,143
4,085
(11 ) (24 ) 1
EP&EM Operating Segment 14,499
15,173
2,890
3,780
11,609
11,393
(4 ) (24 ) 2
35,398
38,321
14,002
14,899
21,396
23,422
(8 ) (6 ) (9 )

Consumer Healthcare 2,399
2,276
1,111
1,054
1,288
1,222
5
5
5
Other^(a)
229
169
77
58
152
111
36
33
37
Total revenues $ 38,026
$ 40,766
$ 15,190
$ 16,011
$ 22,836
$ 24,755
(7 ) (5 ) (8 )



The following table provides worldwide revenues by operating segment and geographic area:
	Worldwide				U.S.				International				World- wide		U.S.		Inter- national
(MILLIONS OF DOLLARS)	Mar 30, 2014		Mar 31, 2013		Mar 30, 2014		Mar 31, 2013		Mar 30, 2014		Mar 31, 2013		% Change in Revenues
Three Months Ended
Operating Segments^(a):
GIP	$	3,076	$	3,306	$	1,327	$	1,544	$	1,749	$	1,762	(7	)	(14	)	(1	)
VOC	2,174		2,190		1,001		994		1,173		1,196		(1	)	1		(2	)
GEP	5,990		6,861		1,904		2,357		4,086		4,504		(13	)	(19	)	(9	)
	11,240		12,357		4,232		4,895		7,008		7,462		(9	)	(14	)	(6	)
Other^(b)	113		53		43		19		70		34		113		126		106
Total revenues	$	11,353	$	12,410	$	4,275	$	4,914	$	7,078	$	7,496	(9	)	(13	)	(6	)

Biopharmaceutical revenues	$	10,479	$	11,546	$	3,887	$	4,517	$	6,592	$	7,029	(9	)	(14	)	(6	)


^(a)	~~Represents~~GIP = the Global Innovative Pharmaceutical segment; VOC = the Global Vaccines, Oncology and Consumer Healthcare segment; and GEP = the Global Established Pharmaceutical segment.


^(b)	Includes revenues generated from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and includes, in ~~2013,~~2014, the revenues related to our transitional manufacturing and supply agreements with Zoetis.

~~Table of Contents~~

Biopharmaceutical ~~Revenues~~revenues

Worldwide ~~revenues from~~ biopharmaceutical ~~products were~~ ~~$11.7 billion~~ ~~for the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and~~ ~~$35.4 billion~~ ~~for the first nine months of~~ ~~2013, reflecting decreases of~~ 3% ~~and~~ 8%~~, respectively, compared to the same periods in~~ ~~2012, reflecting, among other things:~~

~~a decrease in operational~~ revenues ~~of approximately $481 million in the third quarter and $2.5 billion~~ in the first ~~nine months~~quarter of ~~2013, compared to the same periods in 2012, due to the loss of exclusivity of various products in certain markets, including~~2014 were $10.5 billion, a decrease ~~in operational revenues from branded Lipitor~~ of ~~$239 million in the third quarter and $1.7~~$1.1 billion ~~in the first nine months of 2013;~~

lower operational Alliance revenues of approximately $250 million in the third quarter and $631 million in the first nine months of 2013, compared to the same periods in 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 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~~2013. In addition to ~~multi-source generic competition~~the operational factors noted in the ~~U.S. for atorvastatin beginning in late-May 2012; and~~Our First Quarter 2014 Performance section of this MD&A, foreign exchange unfavorably impacted biopharmaceutical revenues by $343 million, or 3%.

~~a decrease in operational revenues of approximately $48 million~~

Geographically,

in the ~~third quarter and $130~~U.S., biopharmaceutical revenues decreased $630 million, or 14%, in the first ~~nine months~~quarter of ~~2013,~~2014 compared to the same ~~periods~~period 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 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 revenues of $271 million in the third quarter and $782 million in 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 were relatively flat in the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and decreased~~ 6% ~~in the first nine months of 2013, compared to the same periods in~~ ~~2012~~, reflecting, among other things:


◦	lower Alliance revenues, ~~from Lipitor, Revatio and Geodon, all~~primarily due to ~~loss~~Enbrel, reflecting the expiration of ~~exclusivity~~the co-promotion term of the collaboration agreement in October 2013 (down approximately ~~$188 million in the third quarter of 2013~~$351 million), and ~~$918 million in the first nine months of 2013);~~


◦	~~lower revenues from~~ Spiriva, reflecting the final-year terms of the co-promotion collaboration, which, per the terms of the collaboration agreement, resulted in a decline of our share of Spiriva ~~co-promotion agreement in the U.S.~~revenue (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)~~$149 million); and


◦	lower revenues from ~~Zosyn~~Lipitor and Detrol LA due to loss of exclusivity (down approximately ~~$48 million in the first nine months of 2013)~~$224 million),

partially offset by:


◦	the strong performance of ~~certain other biopharmaceutical products, including~~ Lyrica ~~Celebrex, Xeljanz, Inlyta and Xalkori~~ (up approximately ~~$209 million in~~$76 million) as well as the ~~third quarter~~performance of ~~2013~~recently launched products Eliquis and ~~$521 million in the first nine months of 2013)~~Xeljanz (up a combined $66 million).

in our international markets, biopharmaceutical revenues ~~from biopharmaceutical products~~ decreased 5% ~~in the~~ ~~third~~ ~~quarter and decreased 9%~~$437 million, or 6%, in the first ~~nine months~~quarter of ~~2013~~,2014 compared to the same ~~periods~~period in ~~2012~~.2013. Operationally, revenues decreased $94 million, or 1% ~~in the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and 5%~~, in the first ~~nine months~~quarter of ~~2013, compared to the same periods in~~ ~~2012~~,2014, reflecting, among other things:

◦

lower revenues ~~for~~from Viagra and 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)~~a combined $114 million), due to ~~the~~ loss of exclusivity of Lipitor in most developed ~~Europe, Japan and Australia, and Xalatan/Xalacom in the majority of European~~ markets and Viagra 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)~~most European markets;

~~Table of Contents~~

primarily due to loss of exclusivity in most major markets in Europe; and lower revenues for Aricept (direct sales) (down approximately $18 million in the third quarter of 2013 and $75 million in the first nine months of 2013) due to the loss of exclusivity in certain markets;

◦

lower Alliance revenues (down approximately ~~$110 million in the third quarter of 2013 and $372 million in the first nine months of 2013)~~$80 million), primarily due to Spiriva (in Japan and certain European markets) and for Enbrel (in Canada) for the ~~loss~~reasons described above, as well as for Aricept due to the termination of ~~exclusivity of Aricept in many major European markets,~~ the ~~return of our rights to Aricept~~co-promotion agreement in Japan ~~to Eisai Co., Ltd., and lower revenues for Spiriva~~ in ~~certain European countries, Canada and Australia (where the Spiriva collaboration has terminated);~~2012; and

◦

lower revenues for ~~the Prevnar family of products and Enbrel, (down approximately $48 million~~Sutent, primarily in ~~the third quarter of 2013 and $130 million in the first nine months of 2013)~~emerging markets due to ~~decreased government~~the timing of purchases, Chantix/Champix in ~~certain emerging~~developed markets, Xalabrands and Aricept (a combined decline of approximately $71 million),

partially offset by:


◦	higher revenues for Enbrel outside of Canada, Lyrica in developed markets, and ~~new product growth from~~the performance of recently launched products Xalkori, Inlyta and ~~Xalkori,~~Eliquis (collectively, up approximately ~~$104 million in the third quarter of 2013 and $346 million in the first nine months of 2013)~~$152 million).

The unfavorable impact of foreign exchange on international biopharmaceutical revenues of ~~4% in both the third quarter and~~5%, or approximately $343 million, in the first ~~nine months~~quarter of ~~2013~~2014 also contributed to ~~the~~a decrease in biopharmaceutical revenues from ~~biopharmaceutical products in~~ our international markets.

During the ~~third~~first quarter ~~and first nine months~~ of ~~2013~~,2014, international biopharmaceutical revenues ~~from biopharmaceutical products~~ represented ~~59.6% and 60.4%~~62.9% of total ~~revenues from~~ biopharmaceutical ~~products,~~revenues, compared to ~~60.6% and 61.1% in the~~ ~~third~~ ~~quarter and first nine months of 2012, respectively.~~

~~Primary Care Operating Segment~~

~~Primary Care unit revenues decreased~~ ~~10%~~ ~~in the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and~~ ~~16%~~60.9% in the first ~~nine months of 2013, compared to the same periods in~~ ~~2012, reflecting lower operational revenues of 8% and 14% in the third~~ quarter ~~and the first nine months of 2013, respectively, primarily due to:~~

the loss of exclusivity of Lipitor and the resulting shift in the reporting of Lipitor revenues in developed Europe and Australia to the Established Products unit beginning January 1, 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 2013 and the first nine months of 2013, also contributed to the decrease in Primary Care unit revenues.~~

Collectively, the decline in revenues in developed markets for Lipitor and for certain other Primary Care unit products that lost exclusivity in various markets in 2012, as well as the resulting shift in the reporting of certain product revenues to the Established Products unit, reduced Primary Care unit revenues by 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 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.~~

~~Table of Contents~~

~~The unfavorable impact of foreign exchange of 1% in the third quarter of 2013 and 2% in the first nine months of 2013 also contributed to the decrease in Specialty Care unit revenues.~~

Collectively, products that lost exclusivity, as well as the resulting shift in the reporting of certain product revenues to the Established Products unit, reduced Specialty Care unit revenues by $185 million, or 5%, in comparison with the ~~third~~ ~~quarter of~~ ~~2012, and reduced Specialty Care unit revenues by approximately $762 million, or 7%, in comparison with the first nine months of~~ ~~2012~~.

~~Oncology unit revenues increased~~ ~~24%~~ ~~in the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and~~ ~~25%~~ ~~in the first nine months of 2013, compared to the same periods in~~ ~~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 2% and 3% in the third quarter and the first nine months of 2013, respectively.

~~Established Products and Emerging Markets Operating Segment~~

~~Established Products unit revenues 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 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 periods in~~ ~~2012, due to higher operational revenues of 5% in both the third quarter and 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 of 3% in both the third quarter and in the first nine months~~ of 2013.

~~Total~~For additional information about operating segment revenues, ~~from established products in both~~see the ~~Established Products and Emerging Markets units were $3.3 billion, with $1.0 billion generated in emerging markets, in the~~ ~~third~~ ~~quarter~~"Analysis of ~~2013, and were $10.1 billion, with $3.1 billion generated in emerging markets, in the first nine months~~Operating Segment Information" section of ~~2013.~~

~~Table of Contents~~

~~Consumer Healthcare Operating Segment~~

~~Consumer Healthcare unit revenues increased~~ 1% ~~in the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and~~ 5% ~~in the first nine months of 2013, compared to the same periods in~~ ~~2012, reflecting higher operational revenues of 1% and 5% in the third quarter and the first nine months of 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 periods in 2012.~~this MD&A.

Rebates and Chargebacks

As is typical in the 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 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:
	Three Months Ended				Nine Months Ended				Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012		March 30, 2014		March 31, 2013
Medicaid and related state program rebates^(a)	$	149	$	141	$	442	$	580	$	172	$	152
Medicare rebates^(a)	251		159		584		572		240		156
Performance-based contract rebates^{(a), (b)}	570		425		1,532		1,368		513		477
Chargebacks^(c)	876		969		2,699		2,732		833		993
Sales allowances^(d)	1,072		1,056		3,101		3,366		941		1,027
Total(e)	$	2,918	$	2,750	$	8,358	$	8,618	$	2,699	$	2,805


^(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.


^(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.

^(e)

For the three months ended March 30, 2014, associated with the following: the Global Innovative Pharmaceutical segment ($0.7 billion); the Global Vaccines, Oncology and Consumer Healthcare segment ($0.2 billion); and the Global Established Pharmaceutical segment ($1.8 billion). For the three months ended March 31, 2013, associated with the following: the Global Innovative Pharmaceutical segment ($0.6 billion); the Global Vaccines, Oncology and Consumer Healthcare segment ($0.2 billion); and the Global Established Pharmaceutical segment ($2.0 billion).

The total rebates and chargebacks for the ~~third~~first quarter of ~~2013~~ ~~increased~~2014 decreased compared to the same period in ~~2012,~~2013, primarily as a result of:

~~an increase in performance-based contract rebates in the U.K. and China as a result of competitive factors and contract arrangements;~~

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

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

~~partially offset by:~~

a decrease in sales chargebacks for certain products in the U.S. that have lost ~~exclusivity.~~

~~Table of Contents~~

~~The total rebates~~exclusivity 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;~~of our generic products; and

a decrease in sales ~~chargebacks for certain products that have lost exclusivity,~~allowances representing various rebates and discounts driven by emerging markets such as China, Africa, the Middle East and Eastern Europe,

partially offset by:

an increase in ~~chargebacks for our branded products as a result of increasing competitive pressures;~~Medicare rebates due to higher volume in the Medicare patient population; and

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

~~changes in product mix.~~

China.

Our accruals for Medicaid rebates, Medicare rebates, performance-based contract rebates, sales allowances and chargebacks were $3.0 billion as of March 30, 2014, and $3.3 billion as of ~~September 29, 2013, and $3.8 billion as of~~ December 31, ~~2012~~,2013, and ~~substantially all~~primarily are included in Other current liabilities in our condensed consolidated balance sheets.

6949

~~Table of Contents~~

Revenues—Major Biopharmaceutical Products


The following table provides revenue information for several of our major biopharmaceutical products:
The following table provides detailed revenue information:														The following table provides detailed revenue information:
			Three Months Ended					Nine Months Ended										Three Months Ended
(MILLIONS OF DOLLARS)	(MILLIONS OF DOLLARS)		September 29, 2013			% Change^(a)		September 29, 2013				% Change^(a)		(MILLIONS OF DOLLARS)				March 30, 2014			% Change^(b)
PRODUCT		PRIMARY INDICATIONS	September 29, 2013			% Change^(a)					PRIMARY INDICATIONS	% Change^(a)			Business^(a)			March 30, 2014			% Change^(b)
Lyrica(c)		Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	$	1,135		10		September 29, 2013	$	3,335			10		Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury		GIP/GEP		$	1,150		8
Prevnar family		Vaccines for prevention of pneumococcal disease	959			1		2,855				(6	)	Vaccines for prevention of pneumococcal disease		V		927			-
Enbrel (Outside the U.S. and Canada)		Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis	932			4		2,769				-
Enbrel (Outside the U.S. & Canada)														Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis		GIP		914			4
Celebrex		Arthritis pain and inflammation, acute pain	752			11		2,120				8		Arthritis pain and inflammation, acute pain		GEP		624			(4	)
Lipitor		Reduction of LDL cholesterol	533			(29	)	1,704				(49	)	Reduction of LDL cholesterol		GEP		457			(27	)
Viagra(d)		Erectile dysfunction	460			(11	)	1,405				(6	)	Erectile dysfunction		GEP/GIP		374			(19	)
Zyvox		Bacterial infections	319			(3	)	1,007				1		Bacterial infections		GEP		321			(6	)
Norvasc		Hypertension	303			(5	)	917				(8	)	Hypertension		GEP		278			(8	)
Sutent		Advanced and/or metastatic renal cell carcinoma (mRCC) and refractory gastrointestinal stromal tumors (GIST) and advanced pancreatic neuroendocrine tumor	278			(5	)	892				(2	)	Advanced and/or metastatic renal cell carcinoma (mRCC), refractory gastrointestinal stromal tumors (GIST) and advanced pancreatic neuroendocrine tumor		O		268			(11	)
Premarin family		Menopause	276			5		793				(1	)	Symptoms of menopause		GEP		248			2
BeneFIX		Hemophilia	213			6		619				7		Hemophilia		GIP		201			6
Genotropin		Replacement of human growth hormone	183			(14	)	570				(8	)
Vfend		Fungal infections	193			3		557				3		Fungal infections		GEP		177			(5	)
Pristiq		Depression	173			14		516				12		Depression		GEP		172			4
Genotropin														Replacement of human growth hormone		GIP		166			(12	)
Chantix/Champix		An aid to smoking cessation treatment	154			5		486				(2	)	An aid to smoking cessation treatment		GIP		147			(11	)
Detrol/Detrol LA		Overactive bladder	131			(26	)	437				(24	)
Refacto AF/Xyntha														Hemophilia		GIP		145			4
Xalatan/Xalacom		Glaucoma and ocular hypertension	140			(23	)	434				(30	)	Glaucoma and ocular hypertension		GEP		119			(19	)
ReFacto AF/Xyntha		Hemophilia	148			(1	)	433				3
Medrol		Inflammation	107			(5	)	343				(12	)	Inflammation		GEP		106			(6	)
Zoloft		Depression and certain anxiety disorders	116			(10	)	341				(14	)	Depression and certain anxiety disorders		GEP		101			(13	)
Zithromax/Zmax														Bacterial infections		GEP		92			(21	)
Sulperazon														Antibiotic		GEP		88			24
Inlyta														Advanced renal cell carcinoma (RCC)		O		88			40
Xalkori														Anaplastic lymphoma kinase positive non-small cell lung cancer		O		88			66
Rapamune														Prevention of organ rejection in kidney transplantation		GIP		88			5
Relpax														Treats the symptoms of migraine headache		GEP		87			1
Effexor		Depression and certain anxiety disorders	96			(10	)	326				(5	)	Depression and certain anxiety disorders		GEP		82			(22	)
Fragmin														Anticoagulant		GEP		81			(6	)
Revatio														Pulmonary arterial hypertension (PAH)		GEP		76			6
Zosyn/Tazocin		Antibiotic	104			(5	)	293				(22	)	Antibiotic		GEP		74			(15	)
Zithromax/Zmax		Bacterial infections	84			(6	)	283				(11	)
Tygacil		Antibiotic	92			12		271				9		Antibiotic		GEP		74			(15	)
Relpax		Treats the symptoms of migraine headaches	83			(10	)	263				(1	)
Fragmin		Anticoagulant	83			(9	)	263				(7	)
Rapamune		Immunosuppressant	91			(1	)	261				1
Cardura														Hypertension/Benign prostatic hyperplasia		GEP		66			(13	)
Toviaz														Overactive bladder		GIP		63			21
EpiPen		Epinephrine injection used in treatment of life-threatening allergic reactions	85		27	27		230				6		Epinephrine injection used in treatment of life-threatening allergic reactions		GEP		63			(13	)
Revatio		Pulmonary arterial hypertension (PAH)	75			(44	)	225				(46	)
Sulperazon		Antibiotic	78			26		222				16
Cardura		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	52			(27	)	173				(31	)
Inspra														High blood pressure		GEP		61			17
Xanax/Xanax XR														Anxiety disorders		GEP		59			(16	)
Depo-Provera														Contraceptive		GEP		53			43
Diflucan														Fungal infections		GEP		52			16
Xeljanz														Rheumatoid arthritis		GIP		52			*
Caduet		Reduction of LDL cholesterol and hypertension	52			(24	)	164				(14	)	Reduction of LDL cholesterol and hypertension		GEP		50			(11	)
Inspra		Hypertension	53			4		164				5
Diflucan		Fungal infections	59			(3	)	164				(11	)
Somavert		Acromegaly	56			14		159				11		Acromegaly		GIP		50			4
Neurontin		Seizures	50			(4	)	158				(8	)
Dalacin/Cleocin		Respiratory tract infections	50			(32	)	149				(15	)
Xeljanz		Rheumatoid arthritis	35			*		68				*
Alliance revenues^(c)		Various	684			(22	)	2,187				(15	)
All other		Various	1,923			(1	)	5,833				(8	)
Alliance revenues^(e)														Various		GEP/GIP		213			(71	)
All other biopharmaceutical^(f)														Various		GIP/GEP/V/O		1,884			(13	)
All other GIP^(f)																GIP		145			(13	)
All other GEP^(f)																GEP		1,697			(13	)
All other V/O^(f)																V/O		42			24


^(a)	~~As compared~~Indicates the business to which the ~~three~~revenues relate. GIP = the Global Innovative Pharmaceutical segment; V = the Global Vaccines business; O = the Global Oncology business; and ~~nine~~ ~~months ended~~ ~~September 30, 2012, respectively.~~ GEP = the Global Established Pharmaceutical segment.


^(b)	~~Represents direct sales under license agreement with Eisai Co., Ltd.~~As compared to the three months ended March 31, 2013.


^(c)	~~Includes Enbrel (in~~Lyrica revenues from all of Europe are included in GEP. All other Lyrica revenues are included in GIP.


^(d)	Viagra revenues from the U.S. and ~~Canada)~~Canada are included in GIP. All other Viagra revenues are included in GEP.


^(e)	Includes Enbrel (GIP, in the U.S. and Canada through October 31, 2013), Spiriva (GEP), Rebif (GIP), Aricept (GEP) and ~~Eliquis.~~Eliquis (GIP).


^(f)	All other GIP, All other GEP and All other V/O are subsets of All other biopharmaceutical revenues.

* Calculation not meaningful.

Certain amounts and percentages may reflect rounding adjustments.

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~~Biopharmaceutical–~~Revenues––Selected Product Descriptions

Lyrica (GIP/GEP) is indicated in the U.S. for three neuropathic pain conditions, fibromyalgia and adjunctive therapy for adult patients with partial onset seizures. In certain countries outside the U.S., indications include neuropathic pain (peripheral and central), fibromyalgia, adjunctive treatment of epilepsy and generalized anxiety disorder. Worldwide revenues for Lyrica increased ~~10% in both the third quarter of 2013 and~~8% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012, primarily due to volume growth, including increased demand for the neuropathic pain indication in Japan.~~2013.

In the U.S., revenues increased ~~18% in the third quarter of 2013 and~~ 17% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012. Notwithstanding these increases, U.S. revenues continue to be affected~~2013, driven by increased investment in effective direct-to-consumer advertising and despite continued competition from generic versions of competitive ~~medicines, as well as managed care pricing and formulary pressures.~~medicines.

Internationally, Lyrica revenues increased ~~3% in the third quarter of 2013 and 6%~~1% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, 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 and~~4% in the first ~~nine months of 2013,~~quarter 2014, compared to the same ~~periods~~period in ~~2012.~~2013.

Prevnar family of products (V) consists of Prevnar 13/Prevenar 13 and Prevnar/Prevenar (7-valent), our pneumococcal conjugate vaccines for the prevention of various syndromes of pneumococcal disease. Overall, worldwide revenues for the Prevnar family of products ~~increased 1% for~~remained the ~~third quarter of 2013 and decreased 6%~~same in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013.

In the U.S., revenues for the Prevnar family of products increased 7%5% in the ~~third~~first quarter of ~~2013,~~2014, compared to the same period in ~~2012,~~2013, mainly due to price increases and 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.government purchasing patterns.

Internationally, revenues for the Prevnar family of products decreased 4% in the ~~third~~first quarter of ~~2013, and decreased 5% in the first nine months of 2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, primarily due to ~~lower purchases in Turkey, the end of the catch-up program in Australia/New Zealand~~foreign exchange and the ~~unfavorable impact~~timing of ~~foreign exchange.~~shipments in our international markets.

~~We currently are conducting~~On February 24, 2014, we announced the top-line results of the Community-Acquired Pneumonia Immunization Trial in Adults (CAPiTA), which was conducted in order to fulfill requirements in connection with the FDA’s approval of the Prevnar 13 adult indication under its accelerated approval program. ~~CAPiTA is an~~This study of approximately 85,000 subjects evaluated the efficacy ~~trial involving subjects 65 years~~ of ~~age and older that is designed to evaluate whether~~ Prevnar 13 ~~is effective~~ in ~~preventing the~~adults age 65 and older. CAPiTA met its primary clinical objective, which was efficacy against a first episode of vaccine-type, community-acquired pneumonia ~~caused by the serotypes contained~~(CAP). It also met both of its secondary clinical objectives, which were efficacy against (i) a first episode of non-bacteremic/non-invasive, vaccine-type CAP and (ii) a first episode of vaccine-type, invasive pneumococcal disease. We are in the ~~vaccine. Case accrual for this event-driven trial was completed in late August 2013. In view~~process of sharing the ~~size of the study, it will take several months~~CAPiTA data with U.S. and worldwide regulatory authorities and vaccine technical committees to ~~complete the necessary database validation~~help inform any decisions regarding potential Prevnar 13 label and ~~related activities prior to unblinding the study and reporting the topline results.~~recommendation updates. We expect ~~to report~~that the ~~topline results~~CAPiTA data will be an important component in ~~early 2014.~~ any consideration of potential updated or new recommendations for adults and that other key factors, such as the current burden of pneumococcal disease in adults, also will be taken into consideration.

At its regular meeting held on February 22, 2012, the ~~U.S. Centers for Disease Control and Prevention’s~~CDC'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(GIP, outside of the U.S. and Canada), 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~~first quarter of ~~2013, while revenues remained relatively unchanged for the first nine months of 2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013. Results were favorably impacted by ~~the overall growth~~continued market leadership in ~~the anti-tumor necrosis factor (TNF) biologic market and~~rheumatoid arthritis but unfavorably impacted by foreign exchange ~~and by decreased government purchases in Brazil.~~of 4%.

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~~Under our~~The co-promotion term of the collaboration agreement with Amgen Inc. (Amgen), under which we ~~co-promote~~co-promoted Enbrel in the U.S. and Canada and ~~share~~shared in the profits from Enbrel sales in those countries, and which we ~~have~~ included in Alliance ~~revenues. Our co-promotion agreement with Amgen~~revenues through October 31, 2013, expired ~~in October 2013,~~on that date and, subject to the terms of the agreement, we are entitled to a royalty stream for 36 months thereafter, which ~~we expect will~~has been and is expected to continue to 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 are and will be included in Other ~~(income)/~~deductions––net rather than in Revenues in our consolidated statements of ~~income.~~income from November 1, 2013. Following the end of the royalty period, we ~~will~~are 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(GEP), 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, recorded ~~an increase~~a decrease in worldwide revenues of ~~11% in the third quarter of 2013 and 8%~~4% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, primarily due to ~~strong performance~~share erosion in the U.S. and the developed markets in Europe.

In the U.S., revenues ~~increased 16% in the third quarter of 2013 and 11%~~decreased 5% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, primarily driven by ~~price increases~~retailer inventory reductions, continued share erosion and ~~overall market growth, partially offset by volume erosion due to ongoing generic pressure, as well as~~ higher rebates ~~and sales allowances.~~in the first quarter of 2014, compared to the same period in 2013.

Internationally, Celebrex revenues ~~increased~~decreased 3% in the ~~third~~first quarter of ~~2013 and 1% in the first nine months of 2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013. 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~~(maintaining share in ~~the rheumatology and orthopedic sectors)~~spite of competition), and in emerging markets, ~~primarily driven by Latin America and China,~~ partially offset by lower revenues in the developed markets in Europe in the ~~third~~first quarter ~~and first nine months~~ of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013. Foreign exchange had an unfavorable impact on international revenues of ~~5% in both the third quarter and~~7% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013.

Lipitor (GEP) is for the treatment of elevated LDL-cholesterol levels in the blood. Lipitor has lost exclusivity and faces generic competition in all major markets. Branded Lipitor recorded worldwide revenues of ~~$533~~$457 million, or a decrease of ~~29%, in the third quarter of 2013, and $1.7 billion, or a decrease of 49%~~27%, in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, 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%~~71% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012;~~2013; and

◦

in our international markets, revenues decreased ~~18% in the third quarter of 2013, and 45%~~11% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013. Foreign exchange had an unfavorable impact on international revenues of ~~$11 million in the third quarter and $33 million~~4% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013.

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

Viagra (GEP/GIP) is indicated for the treatment for erectile dysfunction. Viagra worldwide revenues decreased ~~11% in the third quarter of 2013, and decreased 6%~~19% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, primarily due to a decrease in international revenues. International revenues decreased ~~28% in the third quarter and 13%~~38% in the first ~~nine months of 2013,~~quarter, compared to the same ~~periods~~period in ~~2012,~~2013, primarily due to the entry of generics in developed ~~Europe and other key developed markets.~~Europe. In emerging markets, the decrease was primarily due to the impact of both herbal and generic competition. Loss of exclusivity for Viagra in ~~four~~ major European markets occurred in late-June ~~2013 and 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.~~2013. Revenues in the U.S. ~~increased~~decreased 2% in the ~~third~~first quarter ~~and were essentially flat in the first nine months~~ of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013.

Zyvox(GEP) 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%~~6% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012.~~2013. The decrease in the ~~third~~first quarter of

~~Table of Contents~~

~~2013~~ 2014 was primarily due to a prolonged supply interruption of Zyvox IV in China that is expected to continue through ~~early~~ 2014, and also reflects the unfavorable impact of foreign ~~exchange.~~exchange of 2%.

Norvasc,(GEP) is indicated for the treatment of ~~hypertension, lost exclusivity in the U.S. and other major markets in 2007 and in Canada in 2009.~~hypertension. Norvasc worldwide revenues decreased ~~5% in the third quarter and~~ 8% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, and reflects, among other factors, the unfavorable impact of foreign ~~exchange.~~exchange of 5%.

Sutent (O) is indicated for the treatment of advanced renal cell carcinoma, including metastatic renal cell carcinoma (mRCC); gastrointestinal stromal tumors after disease progression on, or intolerance to, imatinib mesylate; and advanced

pancreatic neuroendocrine tumor. Sutent worldwide revenues decreased ~~5% in the third quarter of 2013 and 2%~~11% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012, due to decreases in developed Europe and Japan~~2013, as a result of ~~increased competition~~competitive pressure, timing of sales in the U.S. and ~~cost-containment measures in those~~emerging markets, ~~as well as some conversion from Sutent to Inlyta in Japan due to broader label for Inlyta in Japan, which overlaps with~~and the ~~Sutent indication,~~unfavorable impact of foreign exchange of 2%, partially offset by price increases in the U.S. and ~~increases~~increased market share in ~~uptake in key emerging markets, most notably Russia.~~

Japan and South Korea.

Our Premarin family of products (GEP) helps women address moderate-to-severe menopausal symptoms. Premarin worldwide revenues increased 5%2% in the ~~third~~first quarter of ~~2013,~~2014, compared to the same period in ~~2012, and decreased 1% in the first nine months of 2013, compared to the same period in 2012.~~2013. Revenues in the U.S. were favorably impacted by ~~two~~the launch of a new Women's Health-focused sales force, increased marketing support, a cross-franchise price ~~increases~~increase and growth in Premarin Vaginal Cream prescription volume, and unfavorably impacted by prescription volume declines for Premarin Family Oral brands.

BeneFIX and ReFacto AF/Xyntha (GIP) are hemophilia products using state-of-the-art manufacturing that assist patients with their lifelong bleeding disorders. BeneFIX recorded an increase in worldwide revenues of 6% in the ~~third~~first quarter of ~~2013 and 7% in the first nine months of 2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, primarily ~~as a result of~~due to greater consumption and price increases in the U.S. ~~due to~~, as well as the ~~continued adoption~~launch of the 3000 International Unit vial ~~as well as price increases,~~in Europe and increased revenues in Japan due to continued product adoption.

ReFacto AF/Xyntha recorded a 3%4% increase in worldwide revenues in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same period in ~~2012, primarily due to the final transition~~2013, as a result of ~~patients to Xyntha in Australia due to the national tender secured in 2011,~~ continued ~~strong U.S. performance with~~ competitive patient conversions and ~~with~~increased hospital utilization in the U.S. and the successful ~~launch in Germany~~completion of ~~the ReFacto AF~~ dual chamber syringe ("FuseNGo"). across developed EU.

Pristiq (GEP) 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 an increase in worldwide revenues of ~~14% in the third quarter of 2013 and 12%~~4% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, primarily due to prescription growth in the emerging markets, Canada and Australia, as well as ~~more favorable contract rebates and~~ a price increase in the U.S.

Chantix/Champix (GIP) is an aid to smoking-cessation treatment in adults 18 years of age and older. Worldwide revenues increased 5% in the third quarter of 2013 and decreased 2% in the first nine months of 2013, compared to the same periods in 2012. Revenues in the U.S. increased 32% in the third quarter of 2013 and 8% in the first nine months of 2013, compared to the same periods in 2012, primarily due to price increases in January and July 2013 and lower rebates. International revenues decreased 14% in the third quarter and decreased 11% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013. Revenues in the U.S. were relatively flat in the first quarter of 2014, compared to the same period in 2013, and reflected competition from over-the-counter (OTC) competitors, mainly Nicorette and e-cigarettes. International revenues decreased 23% in the first quarter, compared to the same period in 2013, primarily due to ~~lower~~ overall market ~~growth~~decline 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.~~exchange of 5%.

Inlyta(O), for the treatment of patients with advanced renal cell carcinoma (RCC) after failure of a prior systemic treatment, is now approved in 5563 countries, including the U.S., EU, Switzerland, Japan, Canada, Australia, South Korea and some emerging markets, including Russia, Mexico and Turkey (exact indications vary by region). Inlyta recorded worldwide revenues of ~~$83 million in the third quarter of 2013 and $217~~$88 million in the first ~~nine months~~quarter of ~~2013.~~2014, an increase of 40%, compared to the same period in 2013, due to recent launches and additional share uptake. International revenues increased 71% in the first quarter, compared to the same period in 2013, primarily due to strong growth in developed markets in Europe, where 85% of oncologists are prescribing Inlyta. Foreign exchange had a 12% unfavorable impact on international revenues.

Xalkori(O), for the treatment of patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) that is anaplastic lymphoma kinase (ALK)-positive, is now approved in more than 6070 countries, including the U.S., EU (conditional), Japan, South Korea, Canada, Australia and Switzerland, as well as in many emerging markets, including China, Russia, Mexico, India and Turkey. Xalkori recorded worldwide revenues of ~~$73 million in the third quarter of 2013 and $193~~$88 million in the first ~~nine months~~quarter of 2014, an increase of 66%, compared to the same period in 2013.

Xeljanz(GIP) was approved in the U.S. in November 2012 and in various other countries in 2013 for the treatment of adult patients with moderately to severely active rheumatoid arthritis. It has experienced consistent month-to-month growth in the U.S., where total prescription volume grew 16% in the first quarter of 2014, compared to the last quarter in 2013. Xeljanz recorded worldwide revenues of ~~$35 million in the third quarter of 2013 and $68~~$52 million in the first ~~nine months~~quarter of 2014, compared to $11 million in the same period in 2013, virtually all in the U.S. Xeljanz also has been approved in Colombia, Uruguay, Chile, Taiwan, Bolivia, Guatemala, Philippines, and Ecuador in the first quarter of 2014.

~~Table of Contents~~

Alliance revenues (GEP/GIP) worldwide decreased ~~22% in the third quarter of 2013 and 15%~~71% in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, mainly due to:

◦

the near-term expiration of the co-promotion collaboration for Spiriva (GEP) in Japan, the U.S. (where the collaboration expired in April 2014), and certain European countries ~~and~~combined with the expiration of the collaboration in Australia, Canada and ~~certain other European countries,~~South Korea, which resulted in declines of ~~$170 million in the third quarter and $373~~$181 million in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013, in Pfizer's share of Spiriva's ~~revenues pursuant to the terms of the collaboration agreement; and~~revenues;

◦

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 (GEP) 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~~$33 million in the first ~~nine months~~quarter of ~~2013,~~2014, compared to the same ~~periods~~period in ~~2012,~~2013; and

~~partially offset by:~~

◦

the ~~strong performance~~expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada in October 2013, which resulted in a decrease of $375 million in the first quarter of 2014, compared to the same period in 2013. (While Alliance revenues declined $375 million, we received $137 million in royalty income from Enbrel in the U.S. and Canada in the first quarter of 2014, which is recorded in Other deductions—net in the condensed consolidated statements on income for the three months ended March 30, 2014. See Notes to Condensed Consolidated Financial Statements—Note 4. Other Deductions—Net.)

~~The Aricept 23mg tablet lost exclusivity in the U.S. in July 2013.~~ See the ~~“Industry-Specific Challenges”~~“Our Operating Environment—Intellectual Property Rights and Collaboration/Licensing Rights" section of ~~this MD&A~~our 2013 Financial Report, which was filed as Exhibit 13 to our 2013 Annual Report on Form 10-K, for ~~a discussion~~information regarding the expiration of various contract rights relating to Aricept, Spiriva, Enbrel and Rebif.

Eliquis (apixaban) (GIP) 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,~~U.K., Germany, Denmark, Japan, Netherlands and Sweden. The two companies share commercialization expenses and profit/losses equally on a global basis. While we are the third entrant in this market, we believe we have a differentiated product profile and 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(GIP)—AIn November 2013, we announced that the FDA had approved a prior approval supplement for ~~a manufacturing change was submitted~~an update to the ~~FDA~~Embeda manufacturing process. This update addressed the pre-specified stability requirement that led to the voluntary recall of Embeda from the market in ~~early July 2013. In early November 2013, the FDA approved that change, and we~~March 2011. We anticipate returning Embeda to the market inby the ~~second quarter~~end of 2014.

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

~~Table of Contents~~

~~Research and Development––Operations and Product Development~~PRODUCT DEVELOPMENTS

~~Research and Development Operations~~

~~Innovation is critical to the success of our company and drug discovery and development is time-consuming, expensive and unpredictable.~~

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 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)	The decrease relates to the 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 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 regulatory submissions and interactions with regulatory agencies, including all safety event activities. Pfizer Medical is responsible forthe provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, partnerships with global public health and medical associations, regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes.

^(d)

~~Corporate 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 months~~of ~~2013~~ ~~primarily reflect lower charges relating to implementing our cost-reduction and productivity initiatives as well as efficiencies gained from these efforts(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 transform our global ~~research and development~~R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D ~~with the goal of building~~to achieve 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—immunology and inflammation; oncology; cardiovascular and metabolic diseases; neuroscience and pain; and vaccines. Other areas of focus include rare diseases and biosimilars.

~~Table of Contents~~

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~~May 8, ~~2013.~~2014.

Among our new drug candidates in late-stage development is palbociclib (PD-0332991), an oral and selective reversible inhibitor of the CDK 4 and 6 kinases under investigation for the treatment of patients with estrogen receptor-positive (ER+), human epidermal growth factor receptor 2- negative (HER2-) advanced breast cancer, recurrent advanced breast cancer and high-risk early breast cancer. On February 3, 2014, we announced that the randomized Phase 2 trial of palbociclib achieved its primary endpoint by demonstrating a statistically significant and clinically meaningful improvement in progression-free survival for the combination of palbociclib and letrozole compared with letrozole alone in post-menopausal women with ER+, HER2- locally advanced or newly diagnosed metastatic breast cancer. Adverse events observed for the palbociclib arm were consistent with the known adverse event profile for this combination.

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
Eliquis (Apixaban)^(a)	Prevention of deep vein thrombosis (DVT), which may lead to pulmonary embolism (PE), in adult patients who have undergone hip or knee replacement surgery	March 2014
Duavee (Conjugated Estrogens/Bazedoxifene)^(a)(b)	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~~


^(a)	This indication for Eliquis (apixaban) was developed and is being commercialized in collaboration with BMS.


^(b)	The FDA approved the ~~0.45mg/20mg~~0.45 mg/20 mg dose of Duavee for these indications. We received a "complete response" letter from the FDA with regard to the ~~0.625mg/20mg~~0.625 mg/20 mg dose for these indications, and for an indication for the treatment of 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 FILEDFILED^
Eliquis (Apixaban)^(a)	~~Prevention~~Treatment of ~~venous thromboembolism following hip or knee replacement surgery~~DVT and PE, and for the reduction in the risk of recurrent DVT and PE	~~July~~December 2013
Tafamidis meglumine^(b)	Treatment of transthyretin familial amyloid polyneuropathy (TTR-FAP)	February 2012
Genotropin Mark VII Multidose Disposable Device (Somatropin rDNA Origin)^(c)	Replacement of human growth hormone deficiency	December 2009
Celebrex (Celecoxib)^(d)	Chronic pain	October 2009
Remoxy (Oxycodone Hydrochloride)^(e)	Management of ~~moderate-to-severe~~ pain ~~when a continuous,~~severe enough to require daily, around-the-clock, long-term opioid ~~analgesic is needed~~treatment and for ~~an extended period of time~~which alternative treatment options are inadequate	August 2008
Viviant (Bazedoxifene)^(f)	Osteoporosis treatment and prevention	August 2006

* The dates set forth in this column are the dates on which the FDA accepted our submissions.


*	The dates set forth in this column are the dates on which the FDA accepted our submissions.


^(a)	This indication for Eliquis (apixaban) was developed in collaboration with BMS.

^(b)

In May 2012, the 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 has requested the completion of a second efficacy study, and also has asked for additional information on the data within the current tafamidis NDA. We continue to work with the FDA to define a path forward.

^(c)

After receiving a “complete response” letter from the FDA for the Genotropin Mark VII multidose disposable device submission, we submitted our response in August 2010. In April 2011, we received a second “complete response” letter from the FDA, and we submitted our response in July 2013. In February 2014, we received a third "complete response" letter from the FDA, and we are working with the FDA to determine next steps.

^(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~~the PRECISION trial, anticipated in 2015, which will inform our next steps. The PRECISION trial is designed to ~~determine next steps.~~assess the relative long-term cardiovascular safety of Celebrex compared to prescription doses of ibuprofen and naproxen in the treatment of arthritis pain.

^(e)

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 had been received from the FDA with regard to the resubmission of the NDA. Having achieved technical milestones related to manufacturing and following guidance received from the FDA earlier in ~~the year,~~2013, we announced in October 2013 that we will proceed with the additional clinical studies and other actions required to address the "complete response" letter received in June 2011. These new clinical studies will include, in part, a pivotal bioequivalence study with the modified Remoxy formulation to bridge to the clinical data related to the original Remoxy formulation, and an abuse-potential study with the modified formulation. As previously disclosed, the "complete response" submission is not expected to occur prior to mid-2015.

^(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. 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

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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 FILEDFILED^
Bosulif (Bosutinib)	Application filed in Japan for treatment of previously treated chronic myelogenous leukemia	—	December 2013
Eliquis (Apixaban)^(a)	Application filed in the EU for treatment of DVT and PE, and for the reduction in the risk of recurrent DVT and PE	—	November 2013
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 chronic myelogenous leukemia~~	~~March 2013~~	—
~~Xeljanz (Tofacitinib)~~	~~Approval in Japan for treatment of rheumatoid arthritis with inadequate response to existing therapies~~	~~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~~	—
~~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


^*	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)	This indication for Eliquis (apixaban) was developed ~~and is being commercialized~~ in collaboration with BMS.



LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS
PRODUCT	INDICATION
~~Eliquis (Apixaban)~~	~~For the treatment of venous thromboembolism, which is being developed in collaboration with BMS~~
Inlyta (Axitinib)	Oral and selective inhibitor of vascular endothelial growth factor (VEGF) receptor 1, 2 & 3 for the adjuvant treatment of ~~adjuvant~~ renal cell carcinoma, ~~(Asia only)~~which is being developed in collaboration with SFJ Pharmaceuticals Group
Lyrica (Pregabalin)	Peripheral neuropathic pain; CR (once-a-day) dosing
Sutent (Sunitinib)	Adjuvant treatment of renal cell carcinoma
Tofacitinib	A JAK kinase inhibitor for the treatment of psoriasis, ulcerative colitis and psoriatic arthritis
Vyndagael (Tafamidis meglumine)	Adult symptomatic transthyretin cardiomyopathy
Xalkori (Crizotinib)	An oral ALK and c-Met inhibitor for the first-line treatment of ALK-positive ~~1st and 2nd line (supports potential full approval in the U.S.)~~ non-small cell lung cancer
~~Zithromax/chloroquine~~	~~Malaria~~

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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,~~severe enough to require daily, around-the-clock, long-term opioid ~~analgesic is needed~~treatment and for ~~an extended period of time~~which alternative treatment options are inadequate
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 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, which is being developed in collaboration with SFJ Pharmaceuticals Group
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 acute lymphoblastic leukemia
MnB rLP2086^(a) (PF-05212366)	A prophylactic vaccine for prevention of Neisseria meningitidis serogroup B invasive disease in adolescents and young adults (ages ~~11-25)~~10-25)
Palbociclib (PD-0332991)^(b)	An oral and selective reversible inhibitor of the CDK 4 and 6 kinases for the first-line treatment of patients with estrogen receptor-positive (ER+), human epidermal growth factor receptor ~~2- negative~~2-negative (HER2-) advanced breast ~~cancer;~~cancer, as well as for the treatment of recurrent advanced breast cancer and, in collaboration with the German Breast Group, high-risk early breast cancer
PF-05280014	A potential biosimilar to Trastuzumab. Trastuzumab is a monoclonal antibody that binds and inhibits HER2 for the treatment of HER2-positive breast cancer and gastric cancer
Tanezumab^(a)(c)	An anti-nerve growth factor monoclonal antibody for the treatment of pain (on clinical hold)


^(a)	In March 2014, we announced that the FDA granted Breakthrough Therapy designation to MnB rLP2086 and that we intend to submit a Biologics License Application to the FDA for this vaccine candidate by mid-2014.

^(b)

On February 3, 2014, we announced that the randomized Phase 2 trial of palbociclib achieved its primary endpoint by demonstrating a statistically significant and clinically meaningful improvement in progression-free survival for the combination of palbociclib and letrozole compared with letrozole alone in post-menopausal women with ER+, HER2- locally advanced or newly diagnosed metastatic breast cancer. Adverse events observed for the palbociclib arm were consistent with the known adverse event profile for this combination.

^(c)

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 induring the first half of ~~2014.~~2015. Subject to the removal of the partial clinical hold, we are planning to continue development of tanezumab for the treatment of osteoarthritis, chronic low back pain and cancer pain. In October 2013, we entered into a collaboration agreement with Eli Lilly and Company to jointly develop and globally commercialize tanezumab for those indications.

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

Cost of Sales


	Three Months Ended								Nine Months Ended								Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			% Change		September 29, 2013			September 30, 2012			% Change		March 30, 2014			March 31, 2013			% Change
Cost of sales	$	2,287		$	2,309		(1	)	$	6,792		$	7,068		(4	)	$	2,045		$	2,263		(10	)
As a percentage of Revenues	18.1		%	17.8		%			17.9		%	17.3		%			18.0		%	18.2		%

Cost of sales decreased 110% in the ~~third~~first quarter of ~~2013~~ ~~and~~ 4% ~~in the first nine months of~~ ~~2013~~,2014, compared to the same ~~periods~~period in ~~2012, primarily due to~~2013, which reflects, among other things, cost-reduction initiatives, lower revenues, and the favorable impact of foreign exchange of ~~4% for both periods, which more than offset the unfavorable impact of a shift in product mix due to the loss of exclusivity of certain products in various markets.~~5%.

Selling, Informational and Administrative (SI&A) Expenses


	Three Months Ended						Nine Months Ended						Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change		March 30, 2014			March 31, 2013			% Change
Selling, informational and administrative expenses	$	3,395	$	3,491	(3	)	$	10,203	$	10,834	(6	)	$	3,040		$	3,217		(6	)
As a percentage of Revenues													26.8		%	25.9		%

SI&A expenses decreased 36% in the ~~third~~first quarter of ~~2013~~ ~~and~~ 6% ~~in the first nine months of~~ ~~2013~~,2014, compared to the same ~~periods~~period in ~~2012~~,2013, primarily due to:

~~savings generated from a reduction in~~lower expenses for field force and administration, reflecting the ~~field force,~~benefits of cost-reduction and productivity initiatives, partly in response to product losses of ~~exclusivity and more streamlined corporate support functions;~~exclusivity;

a reduction of $84 million related to a true-up of the 2013 fee payable to the federal government under the U.S. Healthcare Legislation based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs; and

the favorable impact of foreign exchange of 2% ~~for both periods,~~,

~~Table of Contents~~

partially offset by:

~~spending~~increased investments in support of several new product launches.

Research and Development (R&D) Expenses


	Three Months Ended						Nine Months Ended						Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change		March 30, 2014			March 31, 2013			% Change
Research and development expenses	$	1,627	$	1,887	(14	)	$	4,867	$	5,461	(11	)	$	1,623		$	1,710		(5	)
As a percentage of Revenues													14.3		%	13.8		%

R&D expenses decreased 145% in the ~~third~~first quarter of ~~2013~~ ~~and~~ ~~11%~~ ~~in the first nine months of~~ ~~2013~~,2014, compared to the same ~~periods~~period in ~~2012~~,2013, primarily due ~~to:~~to lower charges related to implementing our cost-reduction and productivity initiatives.

See also the ~~non-recurrence~~“Analysis of Operating Segment Information” section of this MD&A.

Our R&D spending is conducted through a ~~$250 million payment~~number of matrix organizations––Research Units, within our Worldwide Research and Development organization, are generally responsible for research assets (assets that have not yet achieved proof-of-concept); Business Units are generally responsible for development assets (assets that have achieved proof-of-concept); and science-based and other platform-services organizations.

We take a holistic approach to ~~AstraZeneca~~our R&D operations and manage the operations on a total-company basis through our matrix organizations described above. Specifically, a single committee, co-chaired by members of our R&D and commercial organizations, is accountable for aligning resources among all of our R&D projects and for seeking to ensure that our company is focusing its R&D resources in the ~~third quarter~~areas where we believe that we can be most successful and maximize our return on investment. We believe that this approach also serves to maximize accountability and flexibility.

Our Research Units are organized in a variety of ~~2012 to obtain the exclusive, global, over-the-counter rights to Nexium; and~~

~~continued savings generated by the discontinuation~~ways (by therapeutic area or combinations of ~~certain~~ therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources, within a Research Unit, between various projects as necessary because the workforce shares similar skills, expertise and/or focus.

Our platform-services organizations, where a significant portion of our R&D ~~programs~~spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based functions such as Pharmaceutical Sciences, Chemistry, Drug Safety, and Development Operations, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in ~~connection with our previously announced global cost-reduction/productivity initiatives.~~any therapeutic area and in most phases of development, allowing us to react quickly in response to evolving needs.

Generally, we do not disaggregate total R&D expense by development phase or by therapeutic area since, as described above, we do not manage a significant portion of our R&D operations by development phase or by therapeutic area. Further, as we are able to adjust a significant portion of our spending quickly, as conditions change, we believe that any prior-period information about R&D expense by development phase or by therapeutic area would not necessarily be representative of future spending.

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


	Three Months Ended						Nine Months Ended						Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		% Change		September 29, 2013		September 30, 2012		% Change		March 30, 2014		March 31, 2013		% Change
Costs associated with acquisitions and cost-reduction/productivity initiatives^(a)	$	323	$	500	(35	)	$	926	$	1,787	(48	)	$	164	$	305	(46	)


^(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.

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

Costs associated with acquisitions and cost-reduction/productivity initiatives decreased ~~35% in the~~ ~~third~~ ~~quarter of~~ ~~2013~~ ~~and 48%~~46% in the first ~~nine months~~quarter of ~~2013~~,2014, compared to the same ~~periods~~period in ~~2012~~,2013, due to lower costs incurred in all categories: restructuring charges (down ~~$38 million and $366 million, respectively)~~$55 million), integration costs (down ~~$41 million and $172 million, respectively)~~$18 million), additional depreciation––asset restructuring (down ~~$33 million and $224 million, respectively)~~$61 million) and lower implementation costs (down ~~$65 million and $99 million, respectively)~~$7 million). The overall lower costs primarily reflect the fact that we ~~are~~had substantially completed many of the initiatives launched in ~~the later stages of these activities~~prior periods.

In early 2014, we announced that we would be incurring costs in ~~connection with~~2014-2016 related to new programs: our ~~recent acquisitions~~new global commercial structure reorganization and ~~recent~~additional cost-reduction/productivity initiatives. See below for a description of our current programs, expected total costs and expected cost savings. For additional information about the charges, 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,~~R&D, as well as groups such as information technology, shared services and corporate operations. ~~Since~~However, in 2014-2016, our primary activities are expected to be associated with our manufacturing plant network rationalization and optimization activities, and commercial property rationalization and consolidation.

Programs, Expected Total Costs and Expected Cost Savings

In 2014, we have the following initiatives underway:

Other new cost-reduction/productivity initiatives, ~~announced on January 26, 2009, but not completed as~~primarily related to commercial property rationalization and consolidation. In connection with these cost-reduction activities, during 2014-2016, we expect to incur costs of ~~December 31, 2009, were incorporated into~~approximately $900 million.

The costs expected to be incurred during 2014-2016, of approximately $3.2 billion in total, include restructuring charges, integration costs, implementation costs and additional depreciation––asset restructuring. Of this amount, we expect that about a ~~comprehensive plan to integrate Wyeth’s operations to generate~~quarter of the charges will be non-cash.

The expected ongoing annual 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 productivity initiative to accelerate our strategies to improve innovation and

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~~productivity in R&D by prioritizing areas that we believe have the greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas~~associated with the ~~highest potential to deliver value~~programs described above, in the ~~near term and over time.~~aggregate, are estimated to be approximately $2.9 billion by the end of 2016.

~~Cost-Reduction Goals~~The expected costs and costs savings in 2014 associated with these activities are reflected in our financial guidance for 2014. See also the “Our Financial Guidance for 2014” section of this MD&A.

~~As explained more fully in our 2012 Annual Report on Form 10-K/A, we achieved the global cost-reduction goals that had been established in 2009 and updated in 2011 for these major initiatives.~~ In addition to these major initiatives, we continuously monitor our operations for ~~cost-reduction~~cost reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of ~~collaborations~~collaborative arrangements for various products.

~~Total Costs~~Current-Period Key Activities

~~Through September 29, 2013,~~In the first quarter of 2014, we incurred approximately ~~$15.3 billion (pre-tax)~~$164 million 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~~programs, primarily associated with our ~~cost-reduction/productivity initiatives in 2005 through September 29, 2013. See~~manufacturing and sales operations. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiativesfor 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~~

As explained more fully in our 2012 Annual Report on Form 10-K/A, the targeted cost reductions 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 59. Other acquisitions added 8 manufacturing sites, and we have subsequently exited 11 sites, resulting in 56 sites supporting continuing operations as of September 29, 2013. Our plant network strategy is expected to result in the exit of a further seven sites over the next several years. These site counts exclude five Nutrition business-related manufacturing sites as the Nutrition business was sold in 2012, and exclude 24 Zoetis sites as 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 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 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. From 2009, when the workforce was approximately 130,000, through the end of 2012, we achieved a reduction of 38,500, and by the end of the third quarter of 2013, we achieved a reduction of 51,600. In the first nine months of 2013, the workforce declined by 13,100, from 91,500 to 78,400, primarily due to the full disposition of our Animal Health business (Zoetis), which resulted in a workforce reduction of approximately 9,300. The aforementioned workforce reductions include the impact of acquisitions and divestitures subsequent to the Wyeth acquisition.

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~~The increased use of shared services and centers of excellence.~~

~~Procurement savings.~~

Other ~~(Income)/Deductions––~~Deductions—Net


	Three Months Ended						Nine Months Ended						Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013		September 30, 2012		% Change		September 29, 2013			September 30, 2012		% Change	March 30, 2014		March 31, 2013		% Change
Other (income)/deductions—net	$	411	$	937	(56	)	$	(514	)	$	3,264	*
Other deductions––net													$	623	$	145	*

* Calculation not meaningful.

Other ~~(income)/~~deductions––net changed ~~favorably~~unfavorably by ~~$526~~$478 million in the ~~third~~first quarter of ~~2013~~,2014, compared to the same period in ~~2012~~,2013, primarily due to:

~~lower net~~higher legal charges ~~for legal~~(up $777 million), primarily due to Neurontin- and Effexor-related matters ~~in 2013 (down approximately $726 million)~~ (for additional information, see Notes to Condensed Consolidated Financial ~~Statements—~~Statements––Note 4. 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:~~

~~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~~).

~~Other (income)/deductions––net~~ ~~changed favorably by $3.8 billion in the first nine months of~~ ~~2013, compared to the same period in~~ ~~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

the non-recurrence of a gain of ~~approximately $459~~$490 million recorded in the first quarter of 2013 associated with the transfer of certain product rights to our 49%-owned equity-method investment in China (for additional information, see Notes to Condensed Consolidated Financial Statements—Note ~~2D. Acquisitions, Divestitures, Collaborative Arrangement~~2B. Divestiture and Equity-Method ~~Investments:~~Investments: Equity-Method Investments),

partially offset by:

~~higher~~lower asset impairments and related charges ~~(up approximately $444~~(down $283 million) (for additional information, see Notes to Condensed Consolidated Financial Statements—Note 4. Other ~~(Income)/~~Deductions—Net);

higher royalty-related income (up by $185 million) primarily due to royalties earned on sales of Enbrel in the U.S. and Canada after October 31, 2013 (for additional information, see Notes to Condensed Consolidated Financial Statements––Note 4. Other Deductions—Net); and

higher net gains on asset disposals (up by $155 million), primarily due to gains on sales of product rights and gains on sales of investments in equity securities (for additional information, see Notes to Condensed Consolidated Financial Statements––Note 4. Other Deductions—Net).

Certain Asset Impairment Charges

When necessary, we record charges for impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets. For additional information, see the “Significant Accounting Policies and Application of Critical Accounting Estimates—Asset Impairment Reviews” section of our ~~2012~~2013 Financial Report, which was filed as Exhibit 13 to our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended December 31, ~~2012.~~2013.

See also Notes to Condensed Consolidated Financial Statements—Note 4. Other ~~(Income)/Deductions––~~Deductions—Net.

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~~Provision for Taxes on Income~~PROVISION FOR TAXES ON INCOME


	Three Months Ended							Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			% Change	September 29, 2013			September 30, 2012			% Change	March 30, 2014			March 31, 2013			% Change
Provision/(benefit) for taxes on income	$	985		$	(183	)	*	$	3,876		$	1,622		*
Provision for taxes on income															$	582		$	1,109		(48	)
Effective tax rate	27.6		%	(6.5		)%		30.6		%	17.7		%		20.4		%	29.8		%

* Calculation not meaningful.

2013. The ~~unfavorable change in the~~lower effective tax rate for ~~both periods reflects~~the first quarter of 2014 in comparison with the same period in 2013 was primarily due to the favorable ~~audit settlements~~impact of the resolution in the ~~third~~first quarter ~~and first nine months~~ of ~~2012; specifically, (i) a~~2014 of certain 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) related to audits for multiple tax years (2006 - 2008), as well as (ii) a tax benefit recorded for the resolution of foreign auditspositions, pertaining to ~~multiple~~prior years, primarily with various foreign tax ~~years.~~

~~To a lesser extent,~~authorities, and from the expiration of certain statutes of limitations, the non-recurrence of the unfavorable ~~comparison of the first nine months of 2013 to the first nine months of 2012 reflects (i) the~~ tax ~~rate~~impact 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 49%-owned 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)as well as the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of ~~business. For additional information about~~business, partially offset by the ~~patent litigation settlement income, see Notes to Condensed Consolidated Financial Statements—Note 12A5. Commitments~~expiration of the U.S. research and ~~Contingencies: Legal Proceedings~~—~~Certain Matters Resolved During the First Nine Months of~~development (R&D) tax credit on December 31, 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~~2B. Divestiture and Equity-Method ~~Investments:~~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 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 Act No. 2-2013 is being recorded in ~~Cost of sales~~ ~~and~~ ~~Provision for taxes on income~~.

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~~Discontinued Operations~~DISCONTINUED OPERATIONS

For additional information about our discontinued operations, see Notes to Condensed Consolidated Financial Statements––Note ~~2B. Acquisitions, Divestitures, Collaborative Arrangement~~2A. Divestiture and Equity-Method ~~Investments: Divestitures.~~Investments: Divestiture.


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:
The following table provides the components of Discontinued operations—net of tax:										The following table provides the components of Discontinued operations—net of tax:
	Three Months Ended^(a)					Nine Months Ended^(a)					Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012		September 29, 2013		September 30, 2012			March 30, 2014			March 31, 2013
Revenues	$	—		$	1,587	$	2,201	$	4,817		$	—		$	1,089
Pre-tax income from discontinued operations^(a)	$	32		$	314	$	421	$	1,110		5			200
Provision for taxes on income^(b)(a)	(4		)	89		95		376			—			51
Income from discontinued operations––net of tax	36			225		326		734			5			149
Pre-tax gain on disposal of discontinued operations	(38		)	—		10,501		—			64			—
Provision for taxes on income^(c)	(13		)	—		108		—
Benefit for taxes on income											(4		)	—
Gain on disposal of discontinued operations––net of tax(b)	(25		)	—		10,393		—			68			—
Discontinued operations––net of tax	$	11		$	225	$	10,719	$	734		$	73		$	149

^(a)

^(b)

~~Includes a deferred tax benefit of $4 million and $30 million for~~For the three months ended ~~September 29, 2013 and September~~March 30, 2012, respectively, and a deferred tax benefit of $23 million and $10 million for the nine months ended September 29, 2013 and September 30, 2012, respectively. These deferred tax provisions include deferred taxes related to investments in certain foreign subsidiaries resulting from our intention not to hold these subsidiaries indefinitely.2014, represents post-close adjustments.


^(c)	~~For the nine months ended September 29, 2013, primarily reflects income taxes resulting from certain legal entity reorganizations.~~

ADJUSTED INCOME

General Description of Adjusted Income ~~Measure~~Measures

Adjusted Income

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, 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~~metric 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~~performance measured by three financial metrics, including adjusted diluted earnings per share, which is derived from Adjusted income. This metric accounts for 40% of the bonus pool. The pool ~~made available~~applies to the bonus plans for virtually all bonus-eligible, non-sales-force employees worldwide, including the ELT members and other members of senior ~~management and will constitute a factor in determining each of these individual’s bonus.~~management.

Despite the importance of this measure to management in goal setting and performance measurement, 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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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, total shareholder return, both on an absolute basis and relative to a group of pharmaceutical industry peers, plays a significant role in determining payouts under certain of Pfizer’s long-term incentive compensation plans.

Adjusted Income Components

“Adjusted Income” components are defined as the ~~earn-out~~corresponding reported U.S. GAAP components, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. Adjusted Revenues, Adjusted Cost of ~~Performance Share Award grants is determined based~~Sales, Adjusted Selling, Informational and Administrative expenses, Adjusted Research and Development expenses, Adjusted Amortization of Intangible Assets and Adjusted Other (Income)/Deductions––Net are income statement line items prepared on ~~a formula~~the same basis as, and therefore components of, the overall adjusted income measure. As described above. management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We believe that ~~measures~~investors’ understanding of our performance ~~using relative total shareholder return.~~is enhanced by disclosing this measure.See the accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the first quarter of 2014 and 2013 below. The adjusted income component measures are not, and should not be viewed as, substitutes for the U.S. GAAP component measures.

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 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 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 former Nutrition business in November ~~2012.~~2012 and the sale of our former Capsugel business in August 2011. 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~~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 ~~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 new global commercial structure reorganization and our other non-acquisition-related cost-reduction and productivity initiatives; amounts related to certain disposals of businesses, products or facilities that do not qualify as discontinued operations under U.S. GAAP; amounts associated with ~~transition~~transitional service, manufacturing and supply 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 12A. Commitments and ~~Contingencies~~Contingencies: Legal Proceedings, 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 of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items

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
(MILLIONS OF DOLLARS) September 29,
2013
September 30,
2012
%
Change
September 29,
2013
September 30,
2012
%
Change
GAAP Reported net income attributable to Pfizer Inc. $ 2,590
$ 3,208
(19 ) $ 19,435
$ 8,255
*
Purchase accounting adjustments––net of tax 651
803
(19 ) 2,346
2,699
(13 )
Acquisition-related costs––net of tax 54
194
(72 ) 306
482
(37 )
Discontinued operations––net of tax (8 ) (225 ) (96 ) (10,681 ) (734 ) *
Certain significant items––net of tax 572
(226 ) *
196
1,656
(88 )
Non-GAAP Adjusted income^(a)
$ 3,859
$ 3,754
3
$ 11,602
$ 12,358
(6 )



	Quarter Ended March 30, 2014
IN MILLIONS, EXCEPT FOR COMMON SHARE DATA	GAAP Reported		Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)			Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	11,353	$	—		$	—		$	—		$	(57	)	$	11,296
Cost of sales	2,045		69			(6		)	—			(122		)	1,986
Selling, informational and administrative expenses	3,040		—			—			—			(20		)	3,020
Research and development expenses	1,623		—			—			—			(11		)	1,612
Amortization of intangible assets	1,117		(1,076		)	—			—			—			41
Restructuring charges and certain acquisition-related costs	58		—			(24		)	—			(34		)	—
Other (income)/deductions––net	623		(1		)	—			—			(886		)	(264		)
Income from continuing operations before provision for taxes on income	2,847		1,008			30			—			1,016			4,901
Provision for taxes on income^(b)	582		288			9			—			348			1,227
Income from continuing operations	2,265		720			21			—			668			3,674
Discontinued operations––net of tax	73		—			—			(73		)	—			—
Net income attributable to noncontrolling interests	9		—			—			—			—			9
Net income attributable to Pfizer Inc.	2,329		720			21			(73		)	668			3,665
Earnings per common share attributable to Pfizer Inc.––diluted	0.36		0.11			—			(0.01		)	0.10			0.57



	Quarter Ended March 31, 2013
IN MILLIONS, EXCEPT FOR COMMON SHARE DATA	GAAP Reported		Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)			Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	12,410	$	—		$	—		$	—		$	—		$	12,410
Cost of sales	2,263		5			(33		)	—			(6		)	2,229
Selling, informational and administrative expenses	3,217		5			(2		)	—			(42		)	3,178
Research and development expenses	1,710		1			—			—			(93		)	1,618
Amortization of intangible assets	1,219		(1,180		)	—			—			—			39
Restructuring charges and certain acquisition-related costs	131		—			(55		)	—			(76		)	—
Other (income)/deductions––net	145		(50		)	—			—			129			224
Income from continuing operations before provision for taxes on income	3,725		1,219			90			—			88			5,122
Provision for taxes on income^(b)	1,109		334			26			—			(96		)	1,373
Income from continuing operations	2,616		885			64			—			184			3,749
Discontinued operations––net of tax	149		—			—			(149		)	—			—
Net income attributable to noncontrolling interests	15		—			—			(6		)	—			9
Net income attributable to Pfizer Inc.	2,750		885			64			(143		)	184			3,740
Earnings per common share attributable to Pfizer Inc.––diluted	0.38		0.12			0.01			(0.02		)	0.03			0.51


^(a)	For details of adjustments, see "Details of Income Statement Items Excluded from Adjusted Income" below.

^(b)

The effective tax rate on Non-GAAP Adjusted income was ~~27.6%~~25.0% in the ~~third~~first quarter of 2014, compared with 26.8% in the first quarter of 2013~~, compared with 28.0%~~. This decline was primarily due to the favorable impact of the resolution in the ~~third~~first quarter of ~~2012. For~~2014 of certain tax positions, pertaining to prior years, primarily with various foreign tax authorities, and from the ~~first nine months~~expiration of ~~2013, the effective tax rate on Non-GAAP Adjusted income was 27.4%, compared to 28.4% in the same period last year. The tax rates in the third quarter and first nine months~~certain statutes of ~~2013~~ ~~compared to the same periods in~~ ~~2012~~ ~~were favorably impacted~~limitations, partially offset by the ~~jurisdictional mix of earnings and the extension~~expiration of the U.S. R&D tax credit ~~that was signed into law in January 2013, partially offset by the non-recurrence of favorable audit settlements with foreign jurisdictions for multiple years.~~on December 31, 2013.

* Calculation not meaningful.

Certain amounts ~~and percentages~~ may reflect rounding adjustments.

EPS amounts may not add due to rounding.

8565

~~Table~~Details of ~~Contents~~

Income Statement Items Excluded from Adjusted Income

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:													Adjusted income, as shown above, excludes the following items:
		Three Months Ended						Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)		September 29, 2013			September 30, 2012			September 29, 2013			September 30, 2012				March 30, 2014			March 31, 2013
Purchase accounting adjustments
Amortization, depreciation and other^(a)		$	956		$	1,130		$	3,303		$	3,707			$	1,077		$	1,224
Cost of sales		4			(3		)	(16		)	6				(69		)	(5		)
Total purchase accounting adjustments––pre-tax		960			1,127			3,287			3,713				1,008			1,219
Income taxes^(b)		(309		)	(324		)	(941		)	(1,014		)		(288		)	(334		)
Total purchase accounting adjustments––net of tax		651			803			2,346			2,699				720			885
Acquisition-related costs
Restructuring charges^(c)															6			19
Integration costs^(c)		38			79			107			279				18			36
Restructuring charges^(c)		5			81			48			142
Additional depreciation––asset restructuring^(d)		18			77			109			217				6			35
Total acquisition-related costs––pre-tax		61			237			264			638				30			90
Income taxes^(e)		(7		)	(43		)	42			(156		)
Income taxes^(b)															(9		)	(26		)
Total acquisition-related costs––net of tax		54			194			306			482				21			64
Discontinued operations
Discontinued operations––net of tax^(f)(e)		(11		)	(225		)	(10,719		)	(734		)		(73		)	(149		)
Discontinued operations––net of tax, attributable to noncontrolling interests		3			—			38			—				—			6
Total discontinued operations––net of tax, attributable to Pfizer Inc.		(8		)	(225		)	(10,681		)	(734		)		(73		)	(143		)
Certain significant items
Restructuring charges^(g)(f)		190			152			392			664				34			76
Implementation costs and additional depreciation––asset restructuring^(h)(g)		72			111			270			485				100			139
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
Gain associated with the transfer of certain product rights^(h)															—			(490		)
Certain legal matters, net^(h)															694			(87		)
Certain asset impairments and related charges^(h)															114			394
Costs associated with the Zoetis IPO⁽ⁱ⁾															—			18
Income associated with the transitional manufacturing and supply agreements with Zoetis^(j)															(8		)	—
Other^(k)															82			38
Total certain significant items––pre-tax		744			1,052			(180		)	3,784				1,016			88
Income taxes^(m)		(172		)	(1,278		)	376			(2,128		)
Income taxes^(l)															(348		)	96
Total certain significant items––net of tax		572			(226		)	196			1,656				668			184
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			$	1,336		$	990


^(a)	Included primarily in Amortization of intangible assets.

^(b)

Included in ~~Provision/(benefit)~~Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax ~~rate (see Notes to Condensed Consolidated Financial Statements—Note 5A. Tax Matters: Taxes on Income from Continuing Operations~~).rate.


^(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). For the three months ended March 30, 2014, included in Cost of sales ($6 million). For the three months ended March 31, 2013, included in Cost of sales ($33 million) and Selling, informational and administrative expenses ($2 million).

~~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 first nine months of 2012, included in~~ ~~Cost of sales~~ ~~($205 million),~~ ~~Selling, informational and administrative expenses~~ ~~($7 million) and~~ ~~Research and development expenses~~ ~~($5 million).~~

~~Table of Contents~~

^(e)

Included in ~~Provision/(benefit) for taxes on income.~~Discontinued operations––net of tax. ~~Income taxes includes~~For the ~~tax effect of~~three months ended March 30, 2014, represents post-close adjustments. For the ~~associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts~~three months ended March 31, 2013, virtually all relates to our former Animal Health business (see Notes to Condensed Consolidated Financial Statements—Note2A. Divestiture and applying that jurisdiction’s applicable tax rate. The first nine months of 2013 also includes the unfavorable impact of the remeasurement of certain deferred tax liabilities resulting from plant network restructuring activities.Equity-Method Investments: Divestiture).

^(f)

~~Included in~~ ~~Discontinued operations––net of tax~~ and relates to Zoetis, our former Animal Health business, for the nine months ended September 29, 2013 (through the date of disposal) and for the three and nine months ended September 30, 2012, and, to a lesser extent, to our former Nutrition business, in 2012 only (see Notes to Condensed Consolidated Financial Statements—~~Note2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Divestitures~~).


^(g)	~~Primarily represents~~Represents restructuring charges incurred for our 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).

^(h)(g)

Amounts ~~primarily~~ relate to our 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 three months ended March 30, 2014, included in Cost of sales ($74 million), Selling, informational and administrative expenses ($15 million) and

Research and development expenses ($11 million). For the three months ended ~~September 29,~~March 31, 2013, included in Cost of sales ($416 million), Selling, informational and administrative expenses ($3040 million) and Research and development expenses ($~~1 million). For the three months ended September 30, 2012, included in~~ ~~Research and development expenses~~ ~~($47 million),~~ ~~Selling, informational and administrative expenses~~ ~~($46 million) and~~ ~~Cost of sales~~ ~~($18 million).~~

~~For the first nine months of 2013, included in~~ ~~Selling, informational and administrative expenses~~ ~~($106 million),~~ ~~Research and development expenses~~ ~~($104 million) and~~ ~~Cost of sales~~ ~~($60 million). For the first nine months of 2012, included in~~ ~~Research and development expenses~~ ~~($386 million),~~ ~~Selling, informational and administrative expenses~~ ~~($77 million) and~~ ~~Cost of sales~~ ~~($22~~93 million).

^(i)(h)

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~~—Deductions—Net).


^(j)	~~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~~).

^(k)(i)

Costs incurred in connection with the initial public offering of an approximate 19.8% ownership interest in Zoetis. Includes expenditures for banking, legal, accounting and similar services. ~~Included~~For the three months ended March 31, 2013 included in Other ~~(income)/deductions~~—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~~—Deductions—Net).


^(j)	Primarily included in Revenues ($57 million) and Cost of sales ($50 million) for the three months ended March 30, 2014.


^(k)	Primarily included in Other 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)~~Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts and is calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The ~~first nine~~three months ofended March 31, 2013 ~~were~~was unfavorably impacted by the ~~tax rate associated with the patent litigation settlement income, by 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 Pfizer's 49%-owned ~~equity~~equity-method 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 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~~).China.

ANALYSIS OF OPERATING SEGMENT INFORMATION

The following table and associated notes provide additional information about the performance of our three operating segments—the Global Innovative Pharmaceutical segment (GIP); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC); and the Global Established Pharmaceutical segment (GEP). For additional information about each operating segment, see the “Our Strategy––Commercial Operations” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 13. Segment, Geographic and Other Revenue Information.



The following table provides revenue and cost information by reportable operating segment and a reconciliation of that information to our condensed consolidated statements of income:
	GIP^(a)			VOC^(a)			GEP^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
(MILLIONS OF DOLLARS)
First Quarter of 2014
Revenues	$	3,076		$	2,174		$	5,990		$	56		$	11,296		$	57		$	11,353
Cost of sales	415			409			1,025			137			1,986			59			2,045
Selling, informational and administrative expenses	765			531			837			887			3,020			20			3,040
Research and development expenses	394			184			138			896			1,612			11			1,623
Amortization of intangible assets	11			4			25			1			41			1,076			1,117
Restructuring charges and certain acquisition-related costs	—			—			—			—			—			58			58
Other (income)/deductions––net	(276		)	(11		)	(84		)	107			(264		)	887			623
Income from continuing operations before provision for taxes on income	$	1,767		$	1,057		$	4,049		$	(1,972	)	$	4,901		$	(2,054	)	$	2,847

First Quarter of 2013^(e)
Revenues	$	3,306		$	2,190		$	6,861		$	53		$	12,410		$	—		$	12,410
Cost of sales	443			430			1,143			213			2,229			34			2,263
Selling, informational and administrative expenses	699			534			1,080			865			3,178			39			3,217
Research and development expenses	307			225			181			905			1,618			92			1,710
Amortization of intangible assets	13			3			21			2			39			1,180			1,219
Restructuring charges and certain acquisition-related costs	—			1			—			(1		)	—			131			131
Other (income)/deductions––net	(51		)	2			(16		)	289			224			(79		)	145
Income from continuing operations before provision for taxes on income	$	1,895		995			$	4,452		$	(2,220	)	$	5,122		$	(1,397	)	$	3,725


^(a)	Amounts represent the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment.


^(b)	Other comprises the revenues and costs included in our Adjusted income components^(c)that are managed outside of our three operating segments and includes the following:



	Quarter Ended March 30, 2014
	Other Business Activities
(MILLIONS OF DOLLARS)	PCS⁽ⁱ⁾		WRD⁽ⁱⁱ⁾			Medical⁽ⁱⁱⁱ⁾			Corporate^(iv)			Other Unallocated^(v)			Total
Revenues	$	56	$	—		$	—		$	—		$	—		$	56
Cost of sales	36		—			—			11			90			137
Selling, informational and administrative expenses	3		—			24			851			9			887
Research and development expenses	1		663			6			220			6			896
Amortization of intangible assets	1		—			—			—			—			1
Restructuring charges and certain acquisition-related costs	—		—			—			—			—			—
Other (income)/deductions––net	—		(11		)	—			118			—			107
Income from continuing operations before provision for taxes on income	$	15	$	(652	)	$	(30	)	$	(1,200	)	$	(105	)	$	(1,972	)



	Quarter Ended March 31, 2013
	Other Business Activities
(MILLIONS OF DOLLARS)	PCS⁽ⁱ⁾		WRD⁽ⁱⁱ⁾			Medical⁽ⁱⁱⁱ⁾			Corporate^(iv)			Other Unallocated^(v)			Total
Revenues	$	53	$	—		$	—		$	—		$	—		$	53
Cost of sales	33		—			—			39			141			213
Selling, informational and administrative expenses	3		—			25			829			8			865
Research and development expenses	—		650			4			240			11			905
Amortization of intangible assets	—		—			—			1			1			2
Restructuring charges and certain acquisition-related costs	—		—			—			—			(1		)	(1		)
Other (income)/deductions––net	—		(2		)	—			225			66			289
Income from continuing operations before provision for taxes on income	$	17	$	(648	)	$	(29	)	$	(1,334	)	$	(226	)	$	(2,220	)


⁽ⁱ⁾	PCS—the revenues and costs of Pfizer CentreSource (PCS), our contract manufacturing and bulk pharmaceutical chemical sales operation.

⁽ⁱⁱ⁾

WRD—the research and development expenses managed by our Worldwide Research and Development organization (WRD), which is generally responsible for research projects until proof-of-concept is achieved and then for transitioning those projects to the appropriate operating segment for possible clinical and commercial development. This organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.

⁽ⁱⁱⁱ⁾

Medical—the costs associated with our Pfizer Medical organization (Medical), which is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, partnerships with global public health and medical associations, regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes.


^(iv)	Corporate—the costs associated with Corporate, representing platform functions (worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance, and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments.


^(v)	Other Unallocated—other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations not directly attributable to an operating segment.

For information purposes only, for the three months ended March 30, 2014, we estimate that Other costs, in the aggregate and as described above, but excluding (i) the costs associated with PCS; (ii) net interest expense included in Corporate (approximately $245 million in Other (income)/deductions––net); and (iii) net gains on investments not attributable to an operating segment and included in Corporate (approximately $119 million in Other (income)/deductions––net), are generally associated with our operating segments, as follows:



(PERCENTAGES)	GIP	VOC	GEP
WRD/Medical Costs
Selling, informational and administrative expenses	36% - 38%	21% - 23%	40% - 42%
Research and development expenses	51% - 55%	30% - 33%	14% - 16%
Other (income)/deductions––net	*	*	*
Total WRD/Medical Costs	50% - 54%	31% - 34%	15% - 17%

Corporate/Other Unallocated Costs
Cost of sales	9% - 11%	19% - 21%	67% - 69%
Selling, informational and administrative expenses	26% - 28%	20% - 22%	50% - 54%
Research and development expenses	49% - 53%	34% - 37%	13% - 15%
Other (income)/deductions––net	*	*	*
Total Corporate/Other Unallocated Costs	29% - 32%	22% - 25%	44% - 47%

Total WRD/Medical and Corporate/Other Unallocated Costs
Cost of sales	9% - 11%	19% - 21%	67% - 69%
Selling, informational and administrative expenses	27% - 29%	20% - 22%	49% - 53%
Research and development expenses	50% - 54%	31% - 34%	14% - 16%
Other (income)/deductions––net	*	*	*
Total WRD/Medical/Corporate/Other Unallocated Costs	37% - 40%	25% - 28%	33% - 36%

* Amounts not material.

The percentages provided in the table above do not purport to reflect the additional amounts that each of our operating segments would have incurred had each segment operated as a standalone company during the period presented.

WRD/Medical––The information provided in the table above for WRD and Medical was substantially all derived from our estimates of the costs incurred in connection with the research and development projects associated with each operating segment.

Corporate/Other Unallocated––The information provided in the table above for Corporate and Other Unallocated was virtually all derived using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from research and development and manufacturing costs. Management believes that the allocations of Corporate and Other Unallocated costs are reasonable.


^(c)	See the "Adjusted Income" section of this MD&A for a definition of these “Adjusted Income” components.


^(d)	Includes costs associated with (i) purchase accounting adjustments; (ii) acquisition-related costs; and (iii) certain significant items, which are substantive, unusual items that are evaluated on an individual basis by management. For additional information about these reconciling items and/or our Non-GAAP Adjusted measure of performance, see the "Adjusted Income" section of this MD&A.

^(e)

As our operations were not managed under the new structure until the beginning of the first quarter of 2014, certain costs and expenses could not be directly attributed to one of the new operating segments. As a result, our operating segment results for the first quarter of 2013 include allocations. The amounts subject to allocation methods in the first quarter of 2013 were approximately $500 million of SI&A expenses and approximately $260 million of R&D expenses.

The SI&A expenses were allocated using proportional allocation methods based on associated selling costs, revenues or product-specific costs, as applicable.

The R&D expenses were allocated based on product-specific R&D costs or revenue metrics, as applicable.

Management believes that the allocations are reasonable.

Global Innovative Pharmaceutical Operating Segment

Revenues decreased 7% in the first quarter of 2014, compared to the same period in 2013, which includes a decrease in operational revenues of 4%, primarily due to:

◦

the expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada on October 31, 2013; for a 36-month period thereafter, we are entitled to royalty payments that have been and are expected to continue to be significantly less than the share of Enbrel profits prior to the expiration of the co-promotion term of the collaboration agreement, and those royalty payments are and will be included in Other (income)/deductions––net rather than in Revenues (approximately $375 million); and


◦	the loss of exclusivity for Lyrica in Canada in February 2013 and a decrease in revenues of Champix internationally and of Genotropin, primarily in the U.S. (a combined decline of approximately $71 million),

partially offset by:


◦	strong operational growth from Lyrica, primarily in the U.S. and Japan, and Enbrel outside the U.S. and Canada, as well as the performance of recently launched products, Eliquis and Xeljanz, primarily in the U.S. (a combined increase of approximately $276 million).

The unfavorable impact of foreign exchange of 3% in the first quarter of 2014 also contributed to the decrease in GIP revenues.

Total GIP revenues from emerging markets were $357 million in the first quarter of 2014.

Selling, informational and administrativeexpenses increased 9% in the first quarter of 2014, compared to the same period in 2013, reflecting increased investment in recently launched brands as well as certain other in-line products, partially offset by the benefits of cost-reduction and productivity initiatives.

Research and developmentexpenses increased 28% in the first quarter of 2014, compared to the same period in 2013, reflecting costs associated with recently initiated Phase 3 programs for certain new drug candidates as well as for studies of certain products in potential new indications.

The favorable change in Other (income)/deductions––net in the first quarter of 2014, compared to the same period in 2013, primarily reflects an increase in royalty-related income, primarily due to royalties earned on sales of Enbrel in the U.S. and Canada after October 31, 2013. As noted above, on that date, the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada expired, and we became entitled to royalties for a 36-month period.

Global Vaccines, Oncology and Consumer Healthcare Operating Segment

Revenues decreased 1% in the first quarter of 2014, compared to the same period in 2013, which includes an increase in operational revenues of 1%.

◦

Global Vaccines Revenues of $925 million were relatively flat in the first quarter of 2014, compared to $923 million in the same period in 2013, reflecting an increase in operational revenues of 2%, due to the performance of Prevnar 13 in the U.S., primarily reflecting government purchasing patterns, partially offset by lower demand due to adverse weather conditions in the first quarter of 2014. Sales of the Prevenar family were flat internationally on an operational basis, which primarily reflects the timing of purchases by various governments in the first quarter of 2014, compared to the same period in 2013. Foreign exchange had an unfavorable impact of 2% on Vaccines revenues in the first quarter of 2014 compared to the first quarter of 2013. Total Vaccines revenues from emerging markets were $184 million in the first quarter of 2014.

◦

Global Oncology Revenues of $488 million increased 7% in the first quarter of 2014, compared to $456 million in the same period in 2013, reflecting an increase in operational revenues of 10%, due to the recent launches of new products, most notably Xalkori and Inlyta globally, partially offset by the decline in Sutent revenues in the U.S. and certain emerging markets primarily due to the timing of purchases. The operational increase in Global Oncology revenues was partially offset by the unfavorable impact of foreign exchange of 3% in the first quarter of 2014 compared to the first quarter of 2013. Total Oncology revenues from emerging markets were $75 million in the first quarter of 2014.

◦

Consumer Healthcare Revenues of $761 million declined 6% in the first quarter of 2014, compared to $811 million in the same period in 2013, reflecting a decrease in operational revenues of 3%, due to a decrease in revenues for respiratory products in the U.S. and Canada due to a less severe cold and flu incidence, and for pain management products in the U.S., primarily due to increased competition resulting from the return to the market of certain competing analgesic brands. These declines were partially offset by operational growth in certain emerging markets. The unfavorable impact of foreign exchange of 3% in the first quarter of 2014 also contributed to the decrease in Consumer Healthcare revenues. Total Consumer Healthcare revenues from emerging markets were $222 million in the first quarter of 2014.

Research and development expenses decreased 18% in the first quarter of 2014, compared to the same period in 2013, primarily reflecting the completion of certain Phase 3 clinical trials.

Global Established Pharmaceutical Operating Segment

Revenues decreased 13% in the first quarter of 2014, compared to the same period in 2013, including a decrease in operational revenues of 10%, primarily due to:


◦	the loss of exclusivity and subsequent launch of multi-source generic competition for Detrol LA in the U.S. in January 2014 and for Viagra in most major European markets in June 2013 (aggregate decline of approximately $170 million);


◦	a decline in branded Lipitor revenues in the U.S. and most other developed markets as a result of continued generic competition (approximately $158 million);


◦	a decline in Aricept revenues primarily due to the termination of the co-promotion agreement in Japan in December 2012 (approximately $33 million); and


◦	the near-term expiration of the co-promotion collaboration for Spiriva in Japan, the U.S. (where the collaboration expired in April 2014) and certain European countries, which, per the terms of the collaboration agreement, has resulted in a decline in Pfizer’s share of Spiriva revenues; the agreement has terminated in certain other countries (approximately $181 million),

partially offset by:


◦	the strong operational performance of Lyrica in Europe (approximately $27 million); and


◦	the contribution from the collaboration with Mylan Inc. to market generic drugs in Japan (approximately $35 million).

The unfavorable impact of foreign exchange of 3% in the first quarter of 2014 also contributed to the decrease in GEP revenues.

Total GEP revenues from emerging markets were $1.7 billion in the first quarter of 2014.

Selling, informational and administrativeexpenses decreased 23% in the first quarter of 2014, compared to the same period in 2013, due to lower expenses for field force and administration, reflecting the benefits of cost-reduction and productivity initiatives.

Research and developmentexpenses decreased 24% in the first quarter of 2014, compared to the same period in 2013, due to lower operating expenses, reflecting the benefits of cost-reduction and productivity initiatives, partially offset by increased spending on biosimilar R&D.

The favorable change in Other (income)/deductions––net in the first quarter of 2014primarily reflects gains on sales of product rights.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Changes in the components of Accumulated other comprehensive loss for the ~~third~~first quarter ~~and first nine months~~ of ~~2013~~2014 reflect the following:

For Foreign currency translation adjustments, ~~for~~includes the ~~first nine months~~reclassification of 2013, reflects the weakening of several foreign currencies against the U.S. dollar, primarily the Japanese yen, the Brazil real, the Australian dollar and the British pound, partially offset by the strengthening of several foreign currencies against the U.S. dollar, primarily the euro.amounts associated with legal entity dispositions into income.

For Unrealized holding ~~gains~~losses on derivative financial instruments, reflects the impact of fair value ~~adjustments~~remeasurements (losses) and the reclassification of realized losses into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.

For Unrealized holding gains/(losses) on available-for-sale securities, reflects the impact of fair value remeasurements (gains) and the reclassification of realized gains into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.

For Benefit plans: actuarial ~~gains/(losses)~~gains, net, reflects the ~~impact of actuarial gains and losses and the~~ reclassification of certain amounts related to amortization and ~~curtailments/~~settlements into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit ~~Plans.~~Plans.

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ANALYSIS OF THE CONDENSED CONSOLIDATED BALANCE SHEETS

For information about certain of our financial assets and liabilities, including Cash and cash equivalents, Short-term investments, Long-term investments, Short-term borrowings, including current portion of long-term debt, and Long-term debt, see the "Analysis of the Condensed Consolidated Statements of Cash Flows" section of this MD&A, the “Analysis of Financial Condition, Liquidity and Capital Resources: Selected Measures of Liquidity and Capital Resources” ~~below.~~section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.

For information about certain balances in Accounts receivable, less allowance for doubtful accounts, seesee also ~~“Selected~~the “Analysis of Financial Condition, Liquidity and Capital Resources: Selected Measures of Liquidity and Capital Resources: Accounts Receivable” ~~below.~~section of this MD&A.

~~All~~

Virtually all of the changes in our asset and liability accounts as of ~~September 29, 2013~~,March 30, 2014, compared to December 31, ~~2012~~,2013, reflect, among other things, decreases due to ~~the impact of~~changes in foreign ~~exchange.~~currency exchange rates. The following explanations exclude the impact of foreign exchange.

For ~~Inventories,~~Accounts receivable, less allowance for doubtful accounts, the change also reflects ~~inventory builds~~reduced revenues of certain products more than offset by the timing of collections in the normal course of ~~business~~business.

For Inventories, the change also reflects decreases in pharmaceutical inventory in the normal course of business.

For Other current assets, the change also reflects the receipt of a portion of the Protonix patent litigation settlement income recognized in 2013 and to a ~~lesser extent, related to new product launches and seasonal impacts.~~reduction in receivables in respect of derivative financial instruments. For additional information about the fair value of our financial instruments, see Notes to Condensed Consolidated Financial Statements—Note ~~8. Inventories~~.7. Financial Instruments.

~~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 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 and, to a much lesser extent, asset impairment ~~charges and the transfer of certain product rights to our equity-method investment in China.~~charges. 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 ~~(Income)/Deductions~~Deductions—Net—.

For ~~Net.~~Other noncurrent assets, the change also reflects increased receivables in respect of derivative financial instruments. For additional information about the ~~transfer~~fair value of ~~certain product rights,~~our financial instruments, see Notes to Condensed Consolidated Financial Statements—Note ~~2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments~~.7. Financial Instruments.

For Accounts payable, the change also reflects the ~~impact of lower expense levels and the~~ timing of ~~receipts and~~ payments in the normal course of business.

For Other current liabilities, the change also reflects ~~a decrease~~an increase in our legal accruals, ~~reflecting~~not yet paid, primarily for Neurontin-related matters, partially offset by the timing of payments ~~made, as well as a decrease~~and accruals in ~~our VAT payables, restructuring~~the normal course of business. For additional information about the legal accruals, ~~and accrued interest.~~see Notes to Condensed Consolidated Financial Statements—Note 4. Other Deductions—Net.

For ~~Additional paid-in capital~~ Pension benefit obligations, netand ~~Treasury stock,~~ Postretirement benefit obligations, net, the change also reflects, among other things, ~~the impact of the full disposition of our Animal Health business (Zoetis). In addition, the change in~~ ~~Treasury stock~~ ~~also reflects common stock acquired for cash.~~pension contributions and benefit payments, partially offset by net periodic benefit cost. For additional information, see Notes to Condensed Consolidated Financial Statements—Note ~~2B. Acquisitions, Divestitures, Collaborative Arrangement~~10. Pension and ~~Equity-Method Investments: Divestitures~~Postretirement Benefit Plans.

For Other noncurrent liabilities, the change also reflects decrease in liabilities in respect of derivative financial instruments and a decrease in the deferred compensation liability, as well as the movement of certain amounts to a current classification. For additional information about the fair value of our financial instruments, see Notes to Condensed Consolidated Financial Statements—Note ~~6. Certain Changes in Total Equity.~~7. Financial Instruments.

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ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended								Three Months Ended
(MILLIONS OF DOLLARS)	September 29, 2013			September 30, 2012			% Change		March 30, 2014			March 31, 2013			% Change
Cash provided by/(used in):
Operating activities	$	11,979		$	11,798		2		$	2,935		$	2,303		27
Investing activities	(10,705		)	(683		)	*		(98		)	(10,926		)	(99	)
Financing activities	(9,231		)	(9,766		)	(5	)	(2,133		)	434			*
Effect of exchange-rate changes on cash and cash equivalents	(72		)	(25		)	*		(25		)	—			*
Net increase/(decrease) in Cash and cash equivalents	$	(8,029	)	$	1,324		*		$	679		$	(8,189	)	*


*	Calculation not meaningful.

In the condensed consolidated statements of cash flows, the Other changes in assets and liabilities, net of acquisitions and divestitures, are presented excluding the effects of changes in foreign currency exchange rates, as these changes do not reflect actual cash inflows or outflows, and excluding any other significant non-cash movements. Accordingly, the amounts shown will

not necessarily agree with the changes in the assets and liabilities that are presented in our condensed consolidated balance sheets.

Operating Activities

Our net cash provided by operating activities was ~~$12.0~~$2.9 billion in the first ~~nine~~three months of ~~2013~~,2014, compared to ~~$11.8~~$2.3 billion in the same period of ~~2012~~.2013. The increase in net cash provided by operating activities ~~reflects:~~

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 and other products and the ongoing expiration of the Spiriva collaboration in certain countries, resulting in lower revenues and associated expenses (see also the “Industry-Specific Challenges” section of this MD&A).business.

In the first ~~nine~~three months of 2014 and 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.~~liabilities and, for the first three months of 2014, includes the adjustment necessary to reflect the increase in our legal accruals that have not yet been paid, primarily for Neurontin-related matters. For additional information about accounts receivable, see also the “Selected Measures of Liquidity and Capital Resources: Accounts Receivable” section of this MD&A. For additional information about our legal accruals, see Notes to Condensed Consolidated Financial Statements—Note 4. Other Deductions—Net

Investing Activities

Our net cash used in investing activities was ~~$10.7~~$0.1 billion in the first ~~nine~~three months of ~~2013~~,2014, compared to net cash used in investing activities of ~~$683 million~~$10.9 billion in the same period in ~~2012~~.2013. The ~~increase~~decrease in net cash used in investing activities was primarily attributable ~~to:~~

to net purchases of investments of ~~$9.9~~$10.8 billion in the first ~~nine~~three months of ~~2013, compared to net proceeds from redemptions and sales of investments of $936 million in the first nine months of 2012,~~

~~partially offset by:~~

~~net cash paid, in the first nine months of 2012, of $782 million, for our acquisitions of Alacer and Ferrosan.~~2013.

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Financing Activities

Our net cash used in financing activities was ~~$9.2~~$2.1 billion in the first ~~nine~~three months of ~~2013~~,2014, compared to net cash ~~used in~~provided by financing activities of ~~$9.8~~$0.4 billion in the same period in ~~2012~~.2013. The ~~decrease~~increase in net cash used in financing activities was primarily attributable to:

net proceeds from borrowings of ~~$6.0~~$0.3 billion in the first ~~nine~~three months of ~~2013,~~2014, compared to net ~~repayments of~~proceeds from borrowings of ~~$372 million~~$6.1 billion in the first ~~nine~~three months of ~~2012;~~2013; and

~~increased~~ proceeds from the exercise of stock options of $425 million in the first three months of 2014, compared to $642 million in the first three months of 2013,

partially offset by:

purchases of common stock of ~~$11.6~~$1.2 billion in the first ~~nine~~three months of ~~2013,~~2014, compared to ~~$4.8~~$4.6 billion in the first ~~nine~~three months of ~~2012; and~~

~~higher cash dividends paid.~~2013.

Supplemental Schedule of Non-Cash Investing and Financing Information

In the first ~~nine~~three 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.~~investment (Hisun Pfizer).

Zoetis is our former Animal Health business. For further details on Zoetis-related transactions, see Notes to Condensed Consolidated Financial Statements—Note ~~2B. Acquisitions, Divestitures, Collaborative Arrangement~~2A. Divestiture and Equity-Method ~~Investments: Divestitures,~~Investments: Divestiture, and for further details on the transfer of certain product rights, see Notes to Condensed Consolidated Financial Statements—Note ~~2D. Acquisitions, Divestitures, Collaborative Arrangement~~2B. Divestiture and Equity-Method ~~Investments:~~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, and will maintain, 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.

See also the "Proposed Combination with AstraZeneca PLC (AstraZeneca)" section of this MD&A above.

Our long-term debt is rated high quality by both Standard & Poor’s (S&P) and Moody’s Investors 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 and available-for-sale debt securities.

~~Table of Contents~~

Selected Measures of 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 29, 2013			December 31, 2012			March 30, 2014			December 31, 2013
Selected financial assets:
Cash and cash equivalents^(a)	$	2,052		$	10,081		$	2,862		$	2,183
Short-term investments^(a)	31,627			22,318			31,019			30,225
Long-term investments^(a)	15,731			14,149			15,822			16,406
	49,410			46,548			49,703			48,814
Debt:
Short-term borrowings, including current portion of long-term debt	4,738			6,424			9,319			6,027
Long-term debt	31,812			31,036			27,649			30,462
	36,550			37,460			36,968			36,489
Net financial assets^(b)	$	12,860		$	9,088		$	12,735		$	12,325

Working capital^(c)	$	39,127		$	35,645		$	33,003		$	32,878
Ratio of current assets to current liabilities	2.92		:1	2.22		:1	2.33		:1	2.41		:1
Total Pfizer Inc. shareholders' equity per common share^(d)(c)	$	11.93		$	11.17		$	12.17		$	11.93


^(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 assets increased as net cash provided by operating activities ~~the net impact of the Zoetis transactions~~ and the proceeds from the exercise of stock options, among other things, more than offset share purchases and 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 $112 million as of September 29, 2013 and $4.5 billion (Zoetis) as of December 31, 2012.~~


^(d)	Represents total Pfizer Inc. shareholders’ equity divided by the actual number of common shares outstanding (which excludes treasury shares).

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.

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.

~~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% ~~to 30%~~-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 indefinitely reinvested outside the U.S., no accrual for U.S. taxes is provided.

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, with no significant changes~~sale. There have been some improvements, especially in Spain, in the ~~year-over-year trend.~~amount of outstanding accounts receivable balances in excess of one year.

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 29, 2013~~,March 30, 2014, we had about ~~$1.3 billion~~$900 million in aggregate gross accounts receivable from governments and/or government agencies in Italy, Spain, Greece, Portugal and Ireland where economic conditions remain challenging and uncertain. Such receivables in excess of one year from the invoice date, totaling ~~$321~~$100 million, were as follows: ~~$121~~$51 million in Italy; ~~$115~~$27 million in Spain; ~~$47~~$11 million in Greece; ~~$32~~and $11 million in ~~Portugal; and $6 million in Ireland.~~Portugal.

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 ~~2012~~2013 Financial Report, which was filed as Exhibit 13 to our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended December 31, ~~2012~~.2013.

Credit Ratings

Two major corporate debt-rating organizations, Moody’s and 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~~	~~Commercial Paper~~NAME OF RATING AGENCY		Pfizer Commercial Paper		Pfizer 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 2013
S&P	~~A1+~~	A-1+		AA	Stable	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 commercial paper and other short-term borrowings. As of ~~September 29, 2013~~,March 30, 2014, we had access to ~~$9.2~~$8.5 billion of lines of credit, of which ~~$1.4 billion~~$928 million expire within one year. Of these lines of credit, ~~$8.5~~$8.2 billion are unused, of which our lenders have committed to loan us $7.1 billion at our request. Also, $7.0 billion of the unused lines of credit, all of which expire in ~~2016,~~2018, may be used to support commercial paper borrowings.

Global Economic ~~Conditions~~Conditions––General

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 credit agreements, we continue to believe that we have, and will maintain, 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. See also "Global Economic Conditions––Venezuela Operations" below.

Global Economic Conditions––Venezuela Operations

Our Venezuela operations continue to operate with the U.S. dollar as the functional currency due to the hyperinflationary status of the Venezuelan economy.

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 have experienced and expect to continue to experience adverse impacts to our earnings as our revenues and expenses in Venezuela continue to be translated into U.S. dollars at the lower 6.3 rate.

In the first quarter of 2014, the Venezuelan government expanded the number of exchange mechanisms, such that there are now three official rates of exchange, which, as of March 30, 2014, were the CENCOEX rate of 6.3; the SICAD I rate of 10.7; and the SICAD II rate of 50.85.

We continue to use the CENCOEX rate of 6.3 to report our Venezuela financial position, results of operations and cash flows, since we believe that the nature of our business operations in Venezuela (the importation, manufacture and distribution of pharmaceutical products and, to a lesser extent, consumer healthcare goods) would qualify for the most preferential rates permitted by law.

We cannot predict whether there will be further devaluations of the Venezuelan currency or whether our use of the 6.3 rate will continue to be supported by evolving facts and circumstances. Further, other potential actions by the Venezuelan government in response to economic uncertainties could impact the recoverability of our investment in Venezuela, which could result in an impairment charge and, under extreme circumstances, our ability to continue to operate in the country in the same manner as we have historically.

As of March 30, 2014, our net monetary assets in Venezuela that are subject to revaluation totaled approximately $360 million (remeasured at the 6.3 rate) and, during the first quarter of 2014, our Revenues from Venezuela totaled approximately $150 million (converted using the 6.3 rate).

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 29, 2013~~,March 30, 2014, 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~~Plan

On ~~November 1, 2012,~~June 27, 2013, 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.~~and share purchases commenced thereunder in October 2013.

In the first ~~nine months~~quarter of ~~2013,~~2014, we purchased approximately ~~411~~38 million shares of our common stock for approximately ~~$11.6~~$1.2 billion under our publicly announced share-purchase ~~plans.~~plan. In the first ~~nine months~~quarter of ~~2012,~~2013, we purchased approximately ~~213~~170 million shares of our common stock for approximately ~~$4.8~~$4.6 billion under our publicly announced share-purchase plans. After giving effect to share purchases through ~~September 29, 2013,~~March 30, 2014, our remaining share-repurchase authorization was approximately ~~$10.2~~$4.3 billion.

Dividends on Common Stock

In ~~October 2013,~~April 2014, our Board of Directors declared a dividend of ~~$0.24~~$0.26 per share, payable ~~December~~June 3, ~~2013,~~2014, to shareholders of record at the close of business on ~~November 8, 2013.~~May 9, 2014.

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 29, 2013~~March 30, 2014

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 taxesNone 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 thatimpacted 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.

FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This report and other written or oral statements that we make from time to time contain 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" 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 or financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, ~~business-development plans and~~ plans related to share repurchases and ~~dividends.~~dividends and business-development plans, including with respect to a possible combination with AstraZeneca. 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, plans relating to share repurchases and dividends, government regulation and financial results, including, in particular, the financial guidance set forth in the “Our Financial Guidance for ~~2013~~”2014” 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” section of this MD&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~~2014 set forth 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, 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;

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;~~countries and Japan;

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, 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 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;

uncertainties related to a possible combination between Pfizer and AstraZeneca, including, without limitation, whether AstraZeneca will engage in discussions with us regarding a possible combination; whether and on what terms we will pursue or consummate any combination with AstraZeneca, including whether the conditions to consummating any such combination will be satisfied or waived; and our ability to realize the anticipated benefits, including operational and financial synergies, potential growth opportunities and other benefits, from any such combination; and

the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls and withdrawals and other unusual items, including our ability to realize the projected benefits of our cost-reduction and productivity initiatives, including those related to our research and development organization, and of ~~our plan to internally separate~~the internal separation of 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 ~~2012~~2013 Annual Report on Form ~~10-K/A~~10-K 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/A~~10-K 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.

The operating segment information provided in this report does not purport to represent the revenues, costs and income from continuing operations before provision for taxes on income that each of our operating segments would have recorded had each segment operated as a standalone company during the periods presented.

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.~~12A. Commitments and ~~Contingencies~~Contingencies: Legal Proceedings 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 ~~2012~~2013 Financial Report, which was filed as Exhibit 13 to our ~~2012~~2013 Annual Report on Form ~~10-K/A.~~10-K.

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.

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~~We previously have ~~a favorable impact on~~disclosed our ~~controls over a~~ multi-year ~~period. We continue to pursue a multi-year initiative~~initiatives to outsource some transaction-processing activities within certain accounting processes and ~~are migrating~~to migrate to a consistent enterprise resource planning system across the organization. These ~~are enhancements of ongoing activities to support~~initiatives have supported the growth of our financial shared service capabilities and ~~standardize~~the standardization of our financial ~~systems.~~systems, enhancing our internal control over financial reporting. None of these initiatives iswas in response to any identified deficiency or weakness in our internal control over financial reporting.

Wehave now successfully completed these initiatives in almost all of our major markets.

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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.~~12A. Commitments and ~~Contingencies~~Contingencies: Legal Proceedings 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 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, 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 ~~2012~~2013 Annual Report on Form ~~10-K/A~~10-K 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 ~~2012~~2013 Annual Report on Form ~~10-K/A. Set forth below is~~10-K, except as follows:

On April 28, 2014, Pfizer issued an ~~expansion~~announcement pursuant to Rule 2.4 of the ~~disclosure~~U.K. City Code on Takeovers and Mergers disclosing that ~~was included~~(a) in ~~our 2012 Annual Report on Form 10K/A concerning counterfeit products as~~January 2014, Pfizer submitted a ~~risk factor.~~

~~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 prevalencepreliminary, non-binding indication of ~~counterfeit medicines is a significant and growing industry-wide issue due to a variety of factors, including, but not limited~~interest to the ~~following:~~Board of Directors of AstraZeneca regarding a possible merger transaction with AstraZeneca; (b) after limited high-level discussions, AstraZeneca declined to pursue negotiations, the ~~widespread use~~discussions were discontinued on January 14, 2014 and Pfizer then ceased to consider a possible transaction; and (c) in light of recent market developments, Pfizer contacted AstraZeneca on April 26, 2014 seeking to renew discussions, but AstraZeneca again declined to engage. On May 2, 2014, Pfizer issued an announcement pursuant to Rule 2.4 of the ~~internet, which has greatly facilitated the ease by which counterfeit medicines can be advertised, purchased~~U.K. City Code on Takeovers and delivered to individual patients; the availability of sophisticated technology that makes it easier for counterfeiters to make counterfeit medicines; the 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 a crime; in others, it may result in only minimal sanctions. In addition, those involved in the 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 lack of regulation of their contents. Failure to mitigate the threat of counterfeit medicines, which is exacerbated by the complexity of the supply chain, could adversely impact

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~~our business, by,~~Mergers disclosing, among other things, ~~causing~~that, having consulted with major shareholders, it submitted a revised written proposal to AstraZeneca to make an offer to combine the ~~loss of patient confidence~~two companies pursuant to which AstraZeneca shareholders would receive, for each AstraZeneca share, 1.845 shares in the combined entity and 1,598 pence in cash. The revised proposal was rejected by AstraZeneca. Pfizer ~~name and in the integrity of our medicines, potentially resulting in lost sales, product recalls, and an increased threat of litigation.~~is considering its options with respect to AstraZeneca.

~~We undertake significant efforts~~There are substantial risks and uncertainties related to ~~counteract~~a possible combination between Pfizer and AstraZeneca, including, without limitation, whether AstraZeneca will engage in discussions with us regarding a possible combination; whether and on what terms we will pursue or consummate any combination with AstraZeneca, including whether the ~~threats associated with counterfeit medicines,~~conditions to consummating any such combination will be satisfied or waived; and our ability to realize the anticipated benefits, including ~~among other things, working with the FDA~~operational and financial synergies, potential growth opportunities 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 and easier for patients and healthcare providers to distinguish authenticbenefits, 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 efforts and the efforts of others will be successful, and the presence of counterfeit medicines may continue to increase.any such combination.

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

The following table provides certain information with respect to our purchases of shares of the Company's common stock during the ~~third~~first fiscal quarter of ~~2013~~:2014:

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)

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



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)
January 1, 2014 through January 26, 2014	8,877,569	$	30.88	8,842,100	$	5,242,645,734
January 27, 2014 through February 23, 2014	13,117,545	$	31.04	12,850,568	$	4,843,685,502
February 24, 2014 through March 30, 2014	21,776,063	$	31.98	16,414,496	$	4,318,713,536
Total	43,771,177	$	31.48	38,107,164

^(a)

On ~~November 1, 2012,~~June 27, 2013, we announced that the Board of Directors had authorized a $10 billion share-purchase plan ~~which became effective on November 30, 2012~~ (the ~~November 2012~~June 2013 Stock Purchase Plan)~~. On June 27, 2013, we announced that the Board of Directors had authorized an additional $10 billion share-purchase plan.~~, and share purchases commenced thereunder in October 2013.

^(b)

In addition to amounts purchased under the ~~November 2012~~June 2013 Stock Purchase Plan, these columns reflect the following transactions during the ~~third~~first fiscal quarter of ~~2013~~:2014: (i) the surrender to Pfizer of ~~154,080~~3,845,249 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 ~~520~~25,366 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) ~~an adjustment~~the surrender to ~~restore 20~~Pfizer of 1,793,398 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.

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 10.1	-	Pfizer Inc. 2014 Stock Plan is incorporated by reference from our Proxy Statement for the 2014 Annual Meeting of Shareholders (File No. 001-03619)
2) Exhibit 10.2	-	Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors, as amended.
3) Exhibit 12	-	Computation of Ratio of Earnings to Fixed ~~Charges~~Charges.
2)4) Exhibit 15	-	Accountants’ ~~Acknowledgement~~Acknowledgment
3)5) Exhibit 31.1	-	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
4)6) Exhibit 31.2	-	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
5)7) 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)8) 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)9) 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

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Pfizer Inc.
		(Registrant)


Dated:	~~November~~May 8, ~~2013~~2014	/s/ Loretta V. Cangialosi
		Loretta V. Cangialosi, Senior Vice President and Controller (Principal Accounting Officer and Duly Authorized Officer)

~~102~~84



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



		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



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



(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



	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



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 2013 Guidance
(BILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)	Net Income^(a)	Diluted EPS^(a)
Adjusted income/diluted EPS^(b) guidance	$14.8 - $15.2	$2.15 - $2.20
Purchase accounting impacts of transactions completed as of September 29, 2013	(3.3)	(0.49)
Acquisition-related costs	(0.4 - 0.5)	(0.06 - 0.07)
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	$21.2 - $21.9	$3.05 - $3.15