~~The increase in identifiable intangible assets, less accumulated amortization,~~ is primarily related to the assets acquired as part of the acquisition of Hospira and Baxter’s portfolio of marketed vaccines, partially offset by amortization, impairments and the impact of foreign exchange. For information about the assets acquired as part of the acquisition of Hospira and Baxter’s portfolio of marketed vaccines, see ~~Note 2A.~~


^(a)	Included in Other current liabilities ($776 million) and Other noncurrent liabilities ($381 million).

Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization:
September 27, 2015
GIP VOC GEP WRD
Developed technology rights 22 % 27 % 52 % — %
Brands, finite-lived — % 80 % 20 % — %
Brands, indefinite-lived — % 69 % 31 % — %
In-process research and development 2 % 9 % 86 % 3 %

~~Amortization~~


~~Amortization expense~~^(b)	Includes adjustments for foreign currency translation.


^(c)	Included in Other current liabilities ($638 million) and Other noncurrent liabilities ($373 million).

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
(MILLIONS OF DOLLARS)	April 3, 2016			March 29, 2015
Interest income^(a)	$	(113	)	$	(93	)
Interest expense	306			309
Net interest expense	193			216
Royalty-related income	(187		)	(222		)
Certain legal matters, net^(b)	274			—
Net gains on asset disposals^(c)	(9		)	(175		)
Certain asset impairments^(d)	131			—
Business and legal entity alignment costs^(e)	51			101
Other, net^(f)	(122		)	34
Other (income)/deductions––net	$	330		$	(46	)


^(a)	Interest income increased in the first quarter of 2016, primarily due to higher investment returns.


^(b)	In the first quarter of 2016, primarily includes an accrual for an unresolved legal matter and a settlement related to ~~finite-lived acquired intangible assets that contribute~~a patent matter.


^(c)	In the first quarter of 2016, primarily includes gains on sales/out-licensing of product and compound rights (approximately $16 million). In the first quarter of 2015, primarily includes gains on sales/out-licensing of product and compound rights (approximately $45 million) and gains on sales of investments in equity securities (approximately $120 million).


^(d)	In the first quarter of 2016, represents an impairment loss of $81 million related to Pfizer’s 49%-owned equity-method investment with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China, Hisun Pfizer, and an impairment loss of $50 million related to Pfizer's 40%-owned equity-method investment in Teuto. For additional information concerning Hisun Pfizer and Teuto, see Note 2C.


^(e)	In the first quarter of 2016 and 2015, represents expenses for changes to our ~~ability~~infrastructure to ~~sell, manufacture, research,~~align our commercial operations, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business.


^(f)	In the first quarter of 2016, primarily includes, among other things, income of $116 million from resolution of a contract disagreement.

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

Our effective tax rate for continuing operations was 15.0% for the first quarter of 2016, compared to 22.9% for the first quarter of 2015.

The lower effective tax rate for the first quarter of 2016 in comparison with the same period in 2015 was primarily due to:

benefits related to the final resolution (pending court approval) of an agreement in principle reached in February 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax position;

benefits associated with our Venezuela operations;

an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years with various foreign tax authorities, and the expiration of certain statutes of limitations; as well as

an increase in benefits associated with the U.S. R&D tax credit, which was not in effect in the prior year quarter but was permanently extended on December 18, 2015,

partially offset by:

an unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

With respect to Pfizer Inc., the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014-2016 are open, but not under audit. All other tax years are closed.

With respect to Hospira, Inc., the IRS is auditing 2010-2011 and 2012-2013. Tax years 2014-2015 (through date of acquisition) are open but not under audit. All other tax years are closed. The open tax years and audits for Hospira, Inc. and its subsidiaries are not considered material to Pfizer.

In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (2010-2016), Japan (2015-2016), Europe (2007-2016, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America (1998-2016, primarily reflecting Brazil) and Puerto Rico (2010-2016).

C. Tax Provision/(Benefit) on Other Comprehensive Loss



The following table provides the components of Tax provision/(benefit) on other comprehensive loss:
	Three Months Ended
(MILLIONS OF DOLLARS)	April 3, 2016			March 29, 2015
Foreign currency translation adjustments, net^(a)	$	(14	)	$	85
Unrealized holding losses on derivative financial instruments, net	(36		)	(224		)
Reclassification adjustments for realized (gains)/losses	(72		)	183
	(108		)	(41		)
Unrealized holding gains/(losses) on available-for-sale securities, net	17			(31		)
Reclassification adjustments for realized losses	26			(1		)
	43			(32		)
Benefit plans: actuarial gains, net	—			12
Reclassification adjustments related to amortization	47			46
Reclassification adjustments related to settlements, net	9			15
Other	(1		)	37
	55			109
Benefit plans: prior service costs and other, net	—			—
Reclassification adjustments related to amortization	(15		)	(13		)
Reclassification adjustments related to curtailments, net	(2		)	(4		)
Other	1			—
	(16		)	(17		)
Tax provision/(benefit) on other comprehensive loss	$	(41	)	$	105


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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests



The following table provides the changes, net of tax, in Accumulated other comprehensive loss:
	Net Unrealized Gains/(Losses)									Benefit Plans
(MILLIONS OF DOLLARS)	Foreign Currency Translation Adjustments			Derivative Financial Instruments			Available-For-Sale Securities			Actuarial Gains/(Losses)			Prior Service (Costs)/Credits and Other			Accumulated Other Comprehensive Loss
Balance, December 31, 2015	$	(5,863	)	$	421		$	(227	)	$	(4,733	)	$	880		$	(9,522	)
Other comprehensive income/(loss)^(a)	87			(504		)	296			148			(25		)	2
Balance, April 3, 2016	$	(5,776	)	$	(83	)	$	69		$	(4,585	)	$	855		$	(9,520	)


^(a)	Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $6 million loss for the first three months of 2016.

As of April 3, 2016, with respect to derivative financial instruments, the amount of unrealized pre-tax losses estimated to be reclassified into income within the next 12 months is $144 million (which is expected to be offset primarily by gains resulting from reclassification adjustments related to available-for-sale securities).

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:
(MILLIONS OF DOLLARS)	April 3, 2016		December 31, 2015
Selected financial assets measured at fair value on a recurring basis^(a)
Trading funds^(b)	$	260	$	287
Available-for-sale debt securities^(c)	27,819		32,078
Money market funds	947		934
Available-for-sale equity securities^(c)	497		603
Derivative financial instruments in a receivable position^(d):
Interest rate swaps	1,433		837
Foreign currency swaps	103		135
Foreign currency forward-exchange contracts	333		559
	31,391		35,433
Other selected financial assets
Held-to-maturity debt securities, carried at amortized cost^{(c), (e)}	1,065		1,388
Private equity securities, carried at equity-method or at cost^(e), ^(f)	1,250		1,336
	2,315		2,724
Total selected financial assets	$	33,705	$	38,157
Selected financial liabilities measured at fair value on a recurring basis^(a)
Derivative financial instruments in a liability position^(g):
Interest rate swaps	$	9	$	139
Foreign currency swaps	1,311		1,489
Foreign currency forward-exchange contracts	432		81
	1,752		1,709
Other selected financial liabilities^(h)
Short-term borrowings, carried at historical proceeds, as adjusted^{(e), (i)}	11,546		10,159
Long-term debt, carried at historical proceeds, as adjusted^{(i), (j)}	27,824		28,740
	39,370		38,899
Total selected financial liabilities	$	41,122	$	40,608

^(a)

We use a market approach in valuing financial instruments on a recurring basis. For additional information, see Note 1C. All of our financial assets and ~~distribute products, compounds~~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 inputs and ~~intellectual property~~money market funds measured at net asset value.

^(b)

As of April 3, 2016, trading funds are composed of $204 million of trading equity funds and $56 million of trading debt funds. As of December 31, 2015, trading funds are composed of $185 million of trading equity funds and $102 million of trading debt funds. As of April 3, 2016 and December 31, 2015, trading equity funds of $65 million and $85 million, respectively, are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.


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


^(d)	Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $144 million as of April 3, 2016; and foreign currency forward-exchange contracts with fair values of $136 million as of December 31, 2015.

^(e)

Short-term borrowings include foreign currency short-term borrowings with fair values of $547 million as of December 31, 2015, which are used as hedging instruments. 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 April 3, 2016 or December 31, 2015. 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 carried at cost are based on Level 3 inputs.


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

^(g)

Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency swaps with fair values of $188 million and foreign currency forward-exchange contracts with fair values of $117 million as of April 3, 2016; and foreign currency swaps with fair values of $234 million and foreign currency forward-exchange contracts with fair values of $59 million as of December 31, 2015.


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

⁽ⁱ⁾

We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. The update does not impact the measurement or recognition of debt issuance costs. As of April 3, 2016, debt issuance costs are $76 million and are presented as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-termdebt ($75 million). In the December 31, 2015 condensed consolidated balance sheet, we have reclassified debt issuance costs of $79 million ($1 million from Other current assets and $79

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

million from Other noncurrent assets) and have presented them as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-termdebt ($79 million) to conform to the current period presentation.

^(j)

The fair value of our long-term debt (not including the current portion of long-term debt) was $31.8 billion as of April 3, 2016 and $32.7 billion as of December 31, 2015. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. Generally, the difference between the fair value of our long-term debt and the amount reported on the condensed consolidated balance 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 our condensed consolidated balance sheets:
(MILLIONS OF DOLLARS)	April 3, 2016		December 31, 2015
Assets
Cash and cash equivalents	$	809	$	978
Short-term investments	16,882		19,649
Long-term investments	14,146		15,999
Other current assets^(a)	390		587
Other noncurrent assets^(b)	1,478		944
	$	33,705	$	38,157
Liabilities
Short-term borrowings, including current portion of long-term debt^(c)	$	11,546	$	10,159
Other current liabilities^(d)	862		645
Long-term debt^(c)	27,824		28,740
Other noncurrent liabilities^(e)	890		1,064
	$	41,122	$	40,608


^(a)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($5 million), foreign currency swaps ($62 million) and foreign currency forward-exchange contracts ($323 million) and, as of December 31, 2015, include interest rate swaps ($2 million), foreign currency swaps ($46 million) and foreign currency forward-exchange contracts ($538 million).


^(b)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($1,428 million), foreign currency swaps ($41 million) and foreign currency forward-exchange contracts ($9 million) and, as of December 31, 2015, include interest rate swaps ($835 million), foreign currency swaps ($89 million) and foreign currency forward-exchange contracts ($20 million).

^(c)


^(d)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($5 million), foreign currency swaps ($454 million) and foreign currency forward-exchange contracts ($403 million) and, as of December 31, 2015, include interest rate swaps ($5 million), foreign currency swaps ($560 million) and foreign currency forward-exchange contracts ($80 million).


^(e)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($4 million), foreign currency swaps ($857 million) and foreign currency forward-exchange contracts ($29 million) and, as of December 31, 2015, include interest rate swaps ($134 million), foreign currency swaps ($928 million) and foreign currency forward-exchange contracts ($1 million).

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Investments in Debt Securities



The following table provides the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	Years								April 3, 2016
(MILLIONS OF DOLLARS)	Within 1		Over 1 to 5		Over 5 to 10		Over 10		Total
Available-for-sale debt securities
Western European, Asian, Scandinavian and other government debt^(a)	$	7,056	$	1,033	$	8	$	—	$	8,097
Corporate debt^(b)	3,223		4,786		1,656		15		9,680
U.S. government debt	1,812		848		207		—		2,867
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities	34		2,110		71		11		2,227
Western European, Scandinavian and other government agency debt^(a)	1,587		210		—		—		1,797
Supranational debt^(a)	911		323		—		—		1,234
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities	599		112		18		—		729
Other asset-backed debt^(c)	461		682		40		4		1,188
Held-to-maturity debt securities
Time deposits and other	1,024		5		—		—		1,029
Western European government debt^(a)	36		—		—		—		36
Total debt securities	$	16,744	$	10,109	$	2,001	$	31	$	28,884


^(a)	Issued by governments, government agencies or supranational entities, as applicable, all of which are investment-grade.


^(b)	Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment-grade.

^(c)

Includes loan-backed, receivable-backed, and mortgage-backed securities, all of which are investment-grade and in senior positions in the capital structure of the security. Loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans, and receivable-backed securities are collateralized by credit cards receivables. Mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages. These securities are valued by third party models that use significant inputs derived from observable market data like prepayment rates, default rates, and recovery rates.

C. Short-Term Borrowings

Short-term borrowings include amounts for commercial paper of $6.5 billion as of April 3, 2016 and $4.9 billion as of December 31, 2015.

D. Derivative Financial Instruments and Hedging Activities

Foreign Exchange Risk

As of April 3, 2016, the aggregate notional amount of foreign exchange derivative financial instruments hedging or offsetting foreign currency exposures was $36.9 billion. The derivative financial instruments primarily hedge or offset exposures in the euro, Japanese yen and U.K. pound. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our 2.1 billion U.K. pound debt maturing in 2038.

Interest Rate Risk

As of April 3, 2016, the aggregate notional amount of interest rate derivative financial instruments was $20.1 billion. The derivative financial instruments primarily hedge U.S. dollar and euro fixed-rate debt.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
	Three Months Ended
	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)	April 3, 2016			March 29, 2015			April 3, 2016			March 29, 2015			April 3, 2016		March 29, 2015
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign currency swaps	$	—		$	—		$	55		$	(732	)	$	118	$	(607	)
Foreign currency forward-exchange contracts	1			—			(328		)	417			221		373
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency forward-exchange contracts	(2		)	2			(12		)	249			—		—

Derivative Financial Instruments Not Designated as Hedges:
Foreign currency forward-exchange contracts	(1		)	(41		)	—			—			—		—
Foreign currency swaps	(23		)	1			—			—			—		—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings	—			—			(26		)	—			—		—
Foreign currency long-term debt	—			—			—			(3		)	—		—
	$	(25	)	$	(38	)	$	(311	)	$	(68	)	$	339	$	(234	)


^(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 thecondensed 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 items in such hedging relationships.


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

^(d)

For derivative financial instruments in cash flow hedge relationships, the effective portion is included in ~~Amortization of intangible assets,~~Other comprehensive loss––Unrealized holding losses on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as ~~these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function~~hedging instruments, the effective portion is included in ~~Cost of sales, Selling, informational and administrative expenses~~Other comprehensive loss––Foreign currency translation adjustments, net. ~~and/or~~ ~~Research and development expenses~~, as appropriate. Total amortization expense for finite-lived intangible assets was $950 million for the third quarter of 2015 and $1.0 billion for the third quarter of 2014, and $2.8 billion for the first nine months of 2015 and $3.1 billion for the first nine months of 2014.

For information about the fair value of our derivative financial instruments, and the impact on our condensed consolidated balance sheets, see Note 7A 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 April 3, 2016, the aggregate fair value of these derivative instruments that are in a net liability position was $817 million, for which we have posted collateral of $897 million in the normal course of business. These features include the requirement to pay additional collateral in the event of a downgrade in our debt ratings. If there had been a downgrade to below an A rating by Standard and Poor’s (S&P) or the equivalent rating by Moody’s Investors Service, on April 3, 2016, we would have been required to post an additional $13 million of collateral to our counterparties. The collateral advanced receivables are reported in Short-term investments.

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 April 3, 2016, we had $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 above.

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 the ability for

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

collateral payments, depending on levels of exposure, our credit rating and the credit rating of the counterparty. As of April 3, 2016, we received cash collateral of $0.9 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:
(MILLIONS OF DOLLARS)	April 3, 2016		December 31, 2015
Finished goods	$	2,782	$	2,714
Work-in-process	3,957		3,932
Raw materials and supplies	840		867
Inventories	$	7,578	$	7,513
Noncurrent inventories not included above^(a)	$	644	$	594


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

Note 9. Identifiable Intangible Assets and Goodwill

A. Identifiable Intangible Assets

Impairment Charges

Exit Costs
Accrual

Balance, December 31, 2015^(a)

$1,109
$—
$48
$1,157
Provision24
1
4
30

Utilization and other^(b)

(165)(1)(9)(175)

Balance, April 3, 2016^(c)

$968
$—
$43
$1,011

The Global Economic Environment

In addition to the industry-specific factors discussed above, we, like other businesses, are exposed to the economic cycle, which impacts our biopharmaceutical operations globally.

We believe that patients, who are experiencing increases in co-pays and restrictions on access to medicines as payers seek to control costs, sometimes switch to generic products, delay treatments, skip doses or use less effective treatments. We are exposed to negative pricing pressure in various markets around the world. The U.S. has highly competitive insurance markets, and Europe, Japan, China, Canada, South Korea and a number of other international markets have government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs for the government-sponsored healthcare system, particularly under recent global economic pressures. 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 new medicines.

We continue to monitor developments regarding government and government agency receivables in several European markets, including Greece, where economic conditions remain challenging and uncertain. For further 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 net 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, the Chinese renminbi, the U.K. pound, 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 were to weaken against another currency, assuming all other variables remained constant, our revenues would increase, having a positive impact on earnings, and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.

The impact of possible currency 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 foreign currency risk, see the “Analysis of Financial Condition, Liquidity and Capital Resources” ~~section~~and the “Our Financial Guidance for 2016” sections of 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 (Moody’s). 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 and in Part I, Item 1A, “Risk Factors,” of our ~~2014~~2015 Annual Report on Form ~~10-K and Part II, Item 1A,~~ ~~“Risk Factors,” in this Quarterly Report on Form 10-Q~~.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 extend and significantly improve their lives. By doing so, we expect to create value for the patients we serve and for our shareholders.

Commercial Operations

We manage our commercial operations through two distinct businesses: an Innovative Products business and an Established Products business. The Innovative Products business is composed of two operating segments, each of which ishad been led by a single ~~manager–~~manager in 2015––the Global Innovative Pharmaceutical segment (GIP) and the Global Vaccines, Oncology and Consumer Healthcare segment (VOC). Effective February 8, 2016, the Innovative Products business is led by a single manager. The Established Products business consists of the Global Established Pharmaceutical segment (GEP), which is also led by a single manager. Each operating segment has responsibility for its commercial activities and for certain in-process research and development (IPR&D) projects for new investigational products and additional indications for in-line products that generally have achieved ~~proof of concept.~~proof-of-concept. Additionally, the new GEP Research and Development (R&D) organization is responsible for earlier stage research with support from our Worldwide Research and Development (WRD) organization. Each business has a geographic footprint across developed and emerging markets.

~~Some additional information about each product grouping follows:~~

~~GIP is focused~~



Some additional information about each product grouping follows:
Innovative Products Business		Established Products Business
Global Innovative Pharmaceutical segment: GIP focuses on developing and commercializing novel, value-creating medicines that significantly improve patients’ lives. Key therapeutic areas include inflammation/immunology, cardiovascular/metabolic, neuroscience/pain and rare diseases and include leading brands, such as Xeljanz, Eliquis, ~~and~~ Lyrica (U.S. and Japan), Enbrel (outside the U.S. and Canada) and Viagra (U.S. and Canada).	Global Vaccines, Oncology and Consumer Healthcare segment: VOC focuses on the development and commercialization of vaccines and products for oncology and consumer healthcare. Consumer Healthcare manufactures and markets several well known, over-the-counter (OTC) products. Each of the three businesses in VOC operates as a separate, global business, with distinct specialization in terms of the science and market approach necessary to deliver value to consumers and patients.	Global Established Pharmaceutical segment: GEP includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars and infusion systems. Beginning in 2016, GEP includes a new GEP R&D organization as well as our contract manufacturing business.

VOC focuses on the development and commercialization of vaccines and products for oncology and consumer health. Consumer Healthcare manufactures and markets several well known, over-the-counter (OTC) products. Each of the three businesses in VOC operates as a separate, global business with distinct specialization in terms of the science and market approach necessary to deliver value to consumers and patients.

GEP includes legacy brands that have lost or will soon lose exclusivity, branded generics, generic sterile injectable products, biosimilars and medical devices. Additionally, GEP has the knowledge and resources within R&D to develop small molecules, injectables and biosimilars. On September 3, 2015, we acquired Hospira, which is now part of GEP. Commencing from the acquisition date, and in accordance with our domestic and international reporting periods, our consolidated financial statements and GEP’s operating results for the three and nine months ended September 27, 2015 reflect one month of legacy Hospira U.S. operations but do not include any financial results from legacy Hospira international operations. See Notes to Condensed Consolidated Financial Statements––~~Note 2A.Acquisitions, Licensing Agreements, Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~ ~~for additional information.~~

We expect that the GIP and VOC biopharmaceutical portfolios of innovative, largely patent-protected, in-line and newly launched products will be sustained by ongoing investments to develop promising assets and targeted business development in areas of focus to ensure a pipeline of highly-differentiated product candidates in areas of unmet medical need. The assets managed by these groups are science-driven, highly differentiated and generally require a high-level of engagement with healthcare providers and consumers.

GEP is expected to generate strong consistent cash flow by providing patients around the world with access to effective, lower-cost, high-value treatments. GEP leverages our biologic development, regulatory and manufacturing expertise to seek to advance its biosimilar development portfolio. Additionally, GEP leverages capabilities in formulation development and manufacturing expertise to help advance its generic sterile injectables portfolio. WeIn addition, GEP may also engage in targeted business development to further enable ~~our~~its commercial strategies.

Effective as of the beginning of 2016, the following changes impact GEP:

Our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) the revenues and expenses of legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including the revenues and expenses related to our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in GEP since we acquired Hospira on September 3, 2015. Prior to 2016, PCS was managed outside our operating segments as part of Pfizer Global Supply and reported as "Other Business Activities". We have reclassified prior period PCS operating results ($111 million of PCS revenues and $21 million of PCS earnings in the first quarter of 2015) to conform to the current period presentation as part of GEP.

In connection with the formation of a new GEP R&D organization, certain functions transferred from Pfizer’s WRD organization into the new GEP R&D organization. The new R&D organization within GEP expects to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars. We have reclassified approximately $66 million of costs in the first quarter of 2015 from WRD to GEP to conform to the current period presentation as part of GEP.

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

For additional information about the first quarter of 2016 performance and selected balance sheet information as of December 31, 2015 ~~performance~~ for each of our operating segments, see the “Analysis of Operating Segment Information” section of this MD&A.

Research and Development Operations

We continue to strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D 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 productivity. To that end, our ~~research~~R&D primarily focuses on six high-priority areas that have a mix of small molecules and large molecules––immunology and inflammation; cardiovascular and metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases. Another area of focus is ~~biosimilars. With the acquisition of Hospira, we have expanded~~biosimilars, which are being developed by our ~~biosimilars pipeline and added~~newly formed GEP R&D ~~capabilities with sterile injectables and medical devices.~~organization.

While a significant portion of R&D is done internally, we continue to seek to enhance our pipeline of potential future products by entering into collaborations, alliance and license agreements with other companies, as well as leveraging acquisitions and

~~equity-based~~ equity- or debt-based investments. These agreements enable us to co-develop, license or acquire promising compounds, technologies or capabilities. We also enter into agreements pursuant to which a third party agrees to fund a portion of the development costs of one of our pipeline products in exchange for rights to receive potential milestone payments, revenue sharing payments, profit sharing payments and/or royalties. Collaboration, alliance, license and ~~license~~funding agreements ~~as well as equity-based~~and equity- or debt-based investments allow us to share risk and cost, to access external scientific and technological expertise, and enable us to advance our own products as well as in-licensed or acquired products.

In the first quarter of 2016, we announced a new, unified center for late-stage development for our innovative products called the Global Product Development group. The formation of the Global Product Development group is expected to enable more efficient and effective development and enhance our ability to accelerate and progress assets through our pipeline. This new organization will bring together the previously separate development groups in GIP, Oncology and WRD to achieve a development capability that is expected to deliver high-quality, efficient, and well-executed clinical programs by enabling greater speed, greater cost efficiencies, and reduced complexity across our development organizations.

For additional information about R&D by operating segment, see the “Analysis of Operating Segment Information” section of this MD&A. For additional information about our pending new drug applications and supplemental filings, see the “Analysis of the Condensed Consolidated Statements of Income––Product Developments––Biopharmaceutical” 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.

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.For information on risks related to patent protection and intellectual property claims by third parties, see "Risks Related to Intellectual Property" in Part I. Item 1A “Risk Factors” in our 2015 Annual Report on Form 10-K.

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~~share repurchases and ~~share repurchases.~~dividends. For additional information about our financial condition, liquidity, capital resources, share repurchases and dividends, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.

On ~~September 3, 2015, (the acquisition date),~~March 8, 2016, we ~~acquired Hospira for approximately $16.0~~entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. to repurchase $5 billion of our common stock. This agreement was entered into pursuant to our previously announced share repurchase authorization. For additional information, see the “Analysis of Financial Condition, Liquidity and Capital Resources––Share-Purchase Plans and Accelerated Share Repurchase Agreements” section of this MD&A, “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities" in ~~cash ($15.6 billion, net~~Part II, Item 2 of ~~cash acquired). See~~ this Quarterly Report on Form 10-Q and Notes to Condensed Consolidated Financial Statements––Note ~~2A.~~ ~~Acquisitions, Licensing Agreements, Collaborative Arrangements, Equity-Method Investments~~12. Commitments and ~~Cost-Method Investment: Acquisitions~~ ~~for additional information.~~Contingencies.

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 Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD~~&A.~~

On February 9, 2015, we entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. (GS&Co.) to repurchase shares of our common stock. This agreement was entered into under our previously announced share repurchase authorization. In July 2015, we completed the agreement. For additional information, see&A and Notes to Condensed Consolidated Financial Statements––Note ~~12. Commitments~~3. Restructuring Charges and ~~Contingencies.~~Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

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, collaborations, equity- or debt-based investments, dispositions, mergers and acquisitions. We view our business development activity as an enabler of our strategies, and we seek to generate 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; cardiovascular and metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases––and in emerging markets and established products, including biosimilars. We continue to evaluate business development transactions that have the potential to strengthen one or both of our businesses and their capabilities, such as our recent acquisition of Hospira, as well as collaborations, and alliance and license agreements with other companies, including our collaborations with Cellectis SA, OPKO Health, Inc. and Merck KGaA. We assess our businesses, assets and ~~assets~~scientific capabilities/portfolio as part of our regular, ongoing portfolio review process and also continue to consider business development activities ~~for~~that will advance our businesses. We are continuing to consider whether a further separation of our Innovative Products and Established Products businesses would be in the best interests of our stockholders. However, no decision has been made regarding any such ~~separation.~~potential separation; we anticipate making a decision regarding whether to pursue any such potential separation by no later than the end of 2016. For additional information on our business development activities, see Notes to Condensed Consolidated Financial Statements––Note 2. Acquisitions, ~~Licensing Agreements,~~Research and Development and Collaborative Arrangements, and Equity-Method InvestmentsandNotes to Condensed Consolidated Financial Statements––Note 1. Basis of Presentation and ~~Cost-Method Investment~~.Significant Accounting Policies.

Acquisition of Hospira

Description of Transaction

On September 3, 2015 (the acquisition date), we acquired Hospira, ~~the world’s~~a leading provider of sterile injectable drugs and infusion technologies as well as a provider of biosimilars, for approximately ~~$16.0~~$16.1 billion in cash ($~~15.6~~15.7 billion, net of cash acquired). Hospira is now a subsidiary of Pfizer. The combination of local Pfizer and Hospira entities may be pending in various jurisdictions and integration is subject to completion of various local legal and regulatory steps.

Recording of Assets Acquired and Liabilities Assumed

~~Our acquisition of Hospira has been accounted~~In 2015, we recorded provisional amounts for ~~using~~ the ~~acquisition method of accounting, which generally requires that most~~ assets acquired and liabilities assumed, which were adjusted in the first quarter of 2016 (measurement period adjustments).

Certain estimated values are not yet finalized and are subject to change (see below), which could be ~~recorded at fair value~~significant. We will finalize the amounts recognized as ofwe obtain the ~~acquisition date. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. Our judgments used~~information necessary to ~~determine~~complete the ~~estimated fair value assigned to each class~~analyses. We will finalize the amounts of assets acquired and liabilities assumed as ~~well~~soon as ~~asset lives, can materially impact our results of operations. For instance,~~possible but no later than one year from the determination of asset lives can impact our results of operations as different types of assets will have different useful lives and certain assets may even be considered to have indefinite useful lives.

acquisition date. For the provisional amounts recognized for the Hospira assets acquired and liabilities assumed as of the acquisition date, see Notes to Condensed Consolidated Financial Statements––Note 2.2A. Acquisitions, ~~Licensing Agreements,~~Research and Development and Collaborative Arrangements, and Equity-Method Investments ~~and Cost-Method Investment~~: Acquisitions. The estimated values are not yet finalized and are subject to change, which could be significant. We will finalize the amounts recognized as we obtain the information necessary to complete the analyses. We expect to finalize the amounts of assets acquired and liabilities assumed as soon as possible but no later than one year from the acquisition date.

~~Below is a summary of the methodologies and significant assumptions used in estimating the fair value of certain classes of assets and liabilities of Hospira.~~

For financial instruments acquired from Hospira, our valuation approach was consistent with our valuation methodologies used for our legacy Pfizer financial instruments. For additional information on the valuation of our financial instruments, see Notes to Condensed Consolidated Financial Statements—~~Note 7. Financial Instruments~~.

~~Inventories~~Measurement Period Adjustments

~~—The fair value~~In the first quarter of ~~acquired inventory was determined as follows:~~

~~Finished goods—Estimated selling price, less an estimate of costs to be incurred to sell the inventory, and an estimate of a reasonable profit allowance for~~2016, we recorded measurement period adjustments that ~~selling effort.~~

~~Work in process—~~Estimated selling price of an equivalent finished good, less an estimate of costs to be incurred to complete the work-in-process inventory, an estimate of costs to be incurred to sell the inventory and an estimate of a reasonable profit allowance for those manufacturing and selling efforts.

~~Raw materials and supplies—Estimated cost to replace the raw materials and supplies.~~

~~The fair value of inventory will be recognized in our results of operations as the inventory is sold.~~

Some of the more significant estimates and assumptions inherent in the estimate of the fair value of inventory include stage of completion, costs to complete, costs to dispose and selling price. All of these judgments and estimates can materially impact our results of operations.

~~Property, Plant and Equipment~~—The fair value of acquired property, plant and equipment is determined using a variety of valuation approaches, depending on the nature of the asset and the quality of available information. The fair value of acquired property, plant and equipment was primarily determined as follows:

~~Land––Market, a sales comparison approach that measures value of an asset through an analysis of sales and offerings of comparable property.~~

~~Buildings, Machinery and Equipment and Furniture and Fixtures—~~Replacement cost, an approach that measures the value of an asset by estimating the cost to acquire or construct comparable assets. For buildings that are not highly specialized or that could be income producing if leased to a third party, we also considered market and income factors.

~~Construction in Progress—Replacement cost, generally assumed to equal historical book value.~~

~~The fair value of property, plant and equipment will be recognized in our results of operations over the expected useful life of the individual depreciable assets.~~

Some of the more significant inputs, estimates and assumptions inherent in the estimate of the fair value of property, plant and equipment include the nature, age, condition or location of the land, buildings, machinery and equipment, furniture and fixtures, and construction in progress, as applicable, as well as the estimate of market and replacement cost and the determination of the appropriate valuation premise, in-use or in-exchange. The in-use valuation premise assesses the value of an asset when used in combination with other assets (for example, on an installed basis), while the in-exchange valuation assesses the value of an assetreduced, on a ~~stand alone basis.~~

~~Identifiable Intangible Assets~~—~~The fair value of acquired identifiable intangible assets generally is determined using an income approach. This method starts with a forecast of all of~~net basis, the expected future net cash flows associated with the asset and then adjusts the forecast to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.

~~The fair value of finite-lived identifiable intangible assets will be recognized in our results of operations over the expected useful life of the individual assets.~~

~~Some of the more significant estimates and assumptions inherent in the~~preliminary estimate of the fair value of identifiable ~~intangible~~net assets ~~include all assumptions associated~~acquired by $25 million with ~~forecasting product profitability~~a corresponding increase to goodwill. The measurement period adjustments did not result from intervening events subsequent to the ~~perspective~~acquisition date. The change in the provisional amounts had no material impact on our results of ~~a market participant.~~

~~Specifically:~~

~~Revenue—We estimate sales volume, selling prices, market penetration, market share~~operations. For the measurement period adjustments to the Hospira assets acquired and ~~year-over-year growth rates over the product’s life cycle.~~

~~Cost of sales, Sales and marketing expenses, General and administrative expenses—We estimate the costs associated with the identifiable intangible asset over the product’s life cycle.~~

R&D expenses—In the case of approved products, we estimate the appropriate level of ongoing R&D support, and for unapproved compounds, we estimate the amount and timing of costs to develop the R&D into viable products.

~~Estimated life~~liabilities assumed as of the ~~asset—We assess the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory or economic barriers to entry.~~

Inherent risk—We use a discount rate that is primarily based on the weighted-average cost of capital with an additional premium to reflect the risks associated with the specific intangible asset. In addition, for unapproved assets, an additional risk factor is added for the risk of technical and regulatory success, called the probability of technical and regulatory success.

~~For IPR&D assets, the risk of failure has been factored into the fair value measure and there can be no certainty that these assets ultimately will yield a successful product.~~

~~Contingencies—For~~ acquisition date ~~contingencies,~~that were recognized in the first quarter of 2016, see Notes to Condensed Consolidated Financial Statements––Note 2.2A. Acquisitions, ~~Licensing Agreements,~~Research and Development and Collaborative Arrangements, and Equity-Method Investments ~~and Cost-Method Investment~~: Acquisitions.

Provisional Amounts Subject to Change

The ~~more significant additional~~following items are subject to change:

Amounts for certain balances included in working capital (excluding inventories), certain investments and certain legal contingencies, pending receipt of certain information that could affect provisional amounts recorded. We do not believe any adjustments for legal contingencies will have a material impact on our consolidated financial statements.

Amounts for intangibles, inventory and property, plant and equipment, pending finalization of valuation efforts for acquired intangible assets as well as the completion of certain physical inventory counts and the confirmation of the physical existence and condition of certain property, plant and equipment assets.

Amounts for income tax assets, receivables and liabilities, pending the filing of Hospira pre-acquisition tax returns and the receipt of information including but not limited to that from taxing authorities, which may change certain estimates and assumptions used.

Additional Recent Transactions and Events

Additional recent transactions and events are described below:

~~Acquisition~~Research and Development Arrangement with NovaQuest Co-Investment Fund II, L.P. (NovaQuest)––In May 2016, our agreement with NovaQuest became effective, under which NovaQuest will fund up to $250 million in development costs related to certain Phase III clinical trials of ~~Nimenrix~~Pfizer’s bococizumab compound and ~~Mencevax Vaccines~~Pfizer will use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. Following potential regulatory approval, NovaQuest will be eligible to receive a combination of fixed milestone payments of up to $195 million in total based on achievement of first commercial sale and certain levels of cumulative net sales as well as royalties on bococizumab net sales over approximately nine years. NovaQuest’s development funding is expected to cover up to 40% of the development costs and will be received over six quarters during 2016 and 2017. As there is a substantive and genuine transfer of risk to NovaQuest, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. Fixed sales-based milestone payments will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the bococizumab product and royalties on net sales will be recorded as Cost of sales when incurred.

Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P. (NovaQuest)––In April 2016, Pfizer entered into an agreement with NovaQuest under which NovaQuest will fund up to $200 million in development costs related to certain Phase III clinical trials of Pfizer’s rivipansel compound and Pfizer will use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. Following potential regulatory approval, NovaQuest will be eligible to receive a combination of fixed milestone payments of up to approximately $267 million in total based on achievement of first commercial sale and certain levels of cumulative net sales as well as royalties on rivipansel net sales over approximately eight years. NovaQuest’s development funding is expected to cover up to 100% of the development costs and will be received over approximately twelve quarters from ~~GlaxoSmithKline~~2016 to 2019. As there is a substantive and genuine transfer of risk to NovaQuest, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. Fixed sales-based milestone payments will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the rivipansel product and royalties on net sales will be recorded as Cost of sales when incurred.

Terminated Agreement to Combine with Allergan plc ~~(GSK)~~––On ~~September 30,~~April 6, 2016, we announced that the merger agreement between Pfizer and Allergan plc entered into on November 22, 2015 ~~(which falls~~was terminated by mutual agreement of the companies. For additional information, see the “Our Business” section of this MD&A.

Research and Development Arrangement with RPI Finance Trust (RPI)––In January 2016, Pfizer entered into an agreement with RPI, a subsidiary of Royalty Pharma, under which RPI will fund up to $300 million in development costs related to certain Phase III clinical trials of Pfizer’s Ibrance (palbociclib) product primarily for adjuvant treatment of hormone receptor positive early breast cancer (the Indication). If successful and upon approval of Ibrance in the ~~fourth fiscal~~U.S. or certain major markets in the European Union (EU) for the Indication based on the applicable clinical trials, RPI will be eligible to receive a combination of approval-based fixed milestone payments of up to $250 million dependent upon results of the clinical trials and royalties on certain Ibrance sales over approximately seven years. RPI’s development funding is expected to cover up to 100% of the costs primarily for the applicable clinical trials through 2021. As there is a substantive and genuine transfer of risk to RPI, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for the first quarter of ~~2015), we acquired GSK’s quadrivalent meningococcal ACWY vaccines, Nimenrix~~2016 totaled $8.8 million. Fixed milestone payments due upon approval will be recorded as intangible assets and ~~Mencevax, for €75 million (approximately $85 million) paid on~~amortized to Amortization of intangible assets over the ~~closing date~~estimated commercial life of the Ibrance product and ~~two additional installments~~sales-based royalties will be recorded as Cost of €15 million and €25 million to be paid in November 2017 and November 2018, respectively. This transaction adds two high-quality and complementary vaccines to our portfolio, allowing us to reach a broader global population. We do not expect this transaction to have any significant impact on our 2015 financial performance.sales when incurred.

Acquisition of a Minority Interest in AM-Pharma B.V. (AM-Pharma)––OnIn April 9, 2015, we acquired a minority equity interest in AM-Pharma, a ~~privately held~~privately-held Dutch biopharmaceutical company focused on the development of recombinant human Alkaline Phosphatase (recAP) for inflammatory diseases, and secured an exclusive option to acquire the remaining equity in the company. The option becomes exercisable upon delivery of the clinical trial report after completion of a Phase II trial of recAP in the treatment of Acute Kidney Injury related to ~~sepsis. Results from the current Phase II trial for recAP are~~sepsis, which is expected to read out in ~~the second half of 2016.~~2017. Under the terms of the agreement, we paid $87.5 million for both the exclusive option and the minority equity interest, which was recorded as a cost-method investment in Long-term investments, and we may make additional payments of up to $512.5 million upon exercise of the option and potential launch of any product that may result from this investment.

Collaboration with OPKO Health, Inc. (OPKO)––~~On December 13, 2014, we~~We entered into a collaborative agreement with OPKO, which closed in January 2015, to develop and commercialize OPKO’s long-acting human growth hormone (hGH-CTP) for the treatment of growth hormone deficiency (GHD) in adults and children, as well as for the treatment of growth failure in children born small for gestational age (SGA) who fail to show catch-up growth by two years of age. hGH-CTP has the potential to reduce the required dosing frequency of human growth hormone to a single weekly injection from the current standard of one injection per day. We have received the exclusive license to commercialize hGH-CTP worldwide. OPKO will lead the clinical activities and will be responsible for funding the development programs for the key indications, which include Adult and Pediatric GHD and Pediatric SGA. We will be responsible for all development costs for additional indications, all postmarketing studies, manufacturing and commercialization activities for all indications, and we will lead the manufacturing activities related to product development. ~~The transaction closed on January 28, 2015, upon termination of the waiting period under the Hart-Scott-Rodino Act.~~ In February 2015, we made an upfront payment of $295 million to OPKO, which was recorded in Research and development expenses, and OPKO is eligible to receive up to an additional $275 million upon the achievement of certain regulatory milestones. OPKO is also eligible to receive royalty payments associated with the commercialization of hGH-CTP for Adult GHD, which is subject to regulatory approval. Upon the launch of hGH-CTP for Pediatric GHD, which is subject to regulatory approval, the royalties will transition to tiered gross profit sharing for both hGH-CTP and our product, Genotropin.

Acquisition of Marketed Vaccines Business of Baxter International Inc. (Baxter)––On December 1, 2014 (which falls in the first fiscal quarter of 2015 for our international operations), we acquired Baxter’s portfolio of marketed vaccines for a final purchase price of $648 million. The portfolio that was acquired consists of NeisVac-C and FSME-IMMUN/TicoVac. NeisVac-C is a vaccine that helps protect against meningitis caused by group C meningococcal meningitis and FSME-IMMUN/TicoVac is a vaccine that helps protect against tick-borne encephalitis.

~~Collaboration with Merck KGaA~~––On November 17, 2014, we entered into a collaborative agreement with Merck KGaA, to jointly develop and commercialize avelumab, an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer. We and Merck KGaA are exploring the therapeutic potential of this novel anti-PD-L1 antibody as a single agent as well as in various combinations with our and Merck KGaA’s broad portfolio of approved and investigational oncology therapies. The companies will collaborate on up to 20 high priority immuno-oncology clinical development programs, including combination trials, in 2015. These clinical development programs include up to six trials (Phase 1B/2 or Phase 3) that could be pivotal for potential product registrations. We and Merck KGaA are also combining resources and expertise to advance Pfizer’s anti-PD-1 antibody into Phase 1 trials. Under the terms of the agreement, in the fourth quarter of 2014, we made an upfront payment of $850 million to Merck KGaA and Merck KGaA is eligible to receive regulatory and commercial milestone payments of up to approximately $2.0 billion. Both companies will jointly fund all development and commercialization costs, and split equally any profits generated from selling any anti-PD-L1 or anti-PD-1 products from this collaboration. Also, as part of the agreement, we gave Merck KGaA certain co-promotion rights for Xalkori in the U.S. and several other key markets.

~~Acquisition of InnoPharma, Inc. (InnoPharma)~~––On September 24, 2014, we completed our acquisition of InnoPharma, a privately held pharmaceutical development company, for an upfront cash payment of $225 million and contingent milestone payments of up to $135 million.

~~License from Cellectis SA (Cellectis)~~––On June 18, 2014, we entered into a global arrangement with Cellectis to develop Chimeric Antigen Receptor T-cell immunotherapies in the field of oncology directed at select cellular surface antigen targets. In August 2014, in connection with this licensing agreement, we made an upfront payment of $80 million to Cellectis, which was recorded in ~~Research and development expenses~~. We will also fund R&D costs associated with 15 Pfizer-selected targets and, for the benefit of Cellectis, a portion of the R&D costs associated with four Cellectis-selected targets within the arrangement. Cellectis is eligible to receive development, regulatory and commercial milestone payments of up to $185 million per product that results from the Pfizer-selected targets. Cellectis is also eligible to receive tiered royalties on net sales of any products that are commercialized by Pfizer.

~~Collaboration with Eli Lilly & Company (Lilly)––In October 2013, we entered into a collaboration agreement with Lilly to jointly develop and globally commercialize Pfizer~~’s tanezumab, which provides that Pfizer and Lilly will equally share product-development expenses as well as potential revenues and certain product-related costs. Following the decision by the U.S. Food and Drug Administration (FDA) in March 2015 to lift the partial clinical hold on the tanezumab development program, we received a $200 million upfront payment from Lilly in accordance with the collaboration agreement between Pfizer and Lilly, which is recorded as deferred income in our condensed consolidated balance sheet and is being recognized into ~~Other (income)/deductions~~––~~net~~ over a multi-year period beginning in the second quarter of 2015. Pfizer and Lilly resumed the Phase 3 chronic pain program for tanezumab in July 2015, which will consist of 6 studies in approximately 7,000 patients across osteoarthritis, chronic low back pain and cancer pain. Under the collaboration agreement with Lilly, we

~~are eligible to receive additional payments from Lilly upon the achievement of specified regulatory and commercial milestones.~~

~~License of Nexium OTC Rights~~––In August 2012, we entered into an agreement with AstraZeneca PLC (AstraZeneca) for the exclusive, global, OTC rights for Nexium, a leading prescription drug approved to treat the symptoms of gastroesophageal reflux disease. In connection with this Consumer Healthcare licensing agreement, we made an upfront payment of $250 million to AstraZeneca, which was recorded in ~~Research and development expenses~~ when incurred. On May 27, 2014, we launched Nexium 24HR in the U.S., and on July 11, 2014, we paid AstraZeneca a related $200 million product launch milestone payment. On August 1, 2014, we launched Nexium Control in Europe, and on September 15, 2014, we paid AstraZeneca a related $50 million product launch milestone payment. These post-approval milestone payments were recorded in ~~Identifiable intangible assets, less accumulated amortization~~ in the consolidated balance sheet and are being amortized over the estimated useful life of the Nexium brand. AstraZeneca is eligible to receive additional milestone payments of up to $300 million, based on the level of worldwide sales as well as royalty payments, based on worldwide sales.

For a description of the more significant recent transactions through February ~~27, 2015,~~29, 2016, the filing date of our ~~2014~~2015 Annual Report on Form 10-K, see the “Our Business Development Initiatives” section of our ~~2014~~2015 Financial Report.

~~Announcement regarding Allergan plc (Allergan)~~

On October 29, 2015, we issued an announcement confirming that we are in preliminary friendly discussions with Allergan in relation to a potential transaction. We emphasize that no agreement has been reached and there can be no certainty that these discussions will be pursued or lead to a transaction, as to the terms on which a transaction, if any, might be agreed, or, if a transaction is agreed to, as to whether it will be completed or the timing thereof.

Our Financial Guidance for ~~2015~~2016

On ~~October 27, 2015,~~May 3, 2016, we announced updates to ranges for certain components of our ~~2015~~2016 financial guidance issued on ~~September 30, 2015 with respect to reported revenues and reported and adjusted diluted earnings per share (EPS) and issued on July 28, 2015 with respect to all other components of financial guidance,~~February 2, 2016 as set forth below, primarily ~~to reflect:~~reflecting the following:

~~operational factors impacting Pfizer-standalone (excluding legacy Hospira) operations, including strong~~Operational Factors: Strong performance to date coupled with an improved business outlook for 2016, which favorably impacted the ~~remainder~~midpoint of the ~~year;~~guidance range for reported revenue by approximately $1.0 billion and for reported and adjusted diluted EPS by $0.12; and


▪	~~the anticipated impact of legacy Hospira operations from September 3, 2015 through fiscal year-end 2015 on financial guidance components other than reported revenues and adjusted diluted EPS; and~~


▪	~~a minimal favorable impact from~~Foreign Exchange: Favorable changes in foreign exchange rates since ~~mid-July 2015.~~mid-January 2016, which favorably impacted the midpoint of the guidance range for reported revenue by approximately $1.0 billion and for reported and adjusted diluted EPS by $0.06.



~~The following table provides our~~Pfizer's complete 2016 financial guidance, ~~for full year 2015~~including updates announced on May 3, 2016, is summarized below^{(a), (b)}:
Reported revenues	$~~47.5~~51.0 to ~~$48.5~~$53.0 billion
Reported revenues	(previously ~~$46.5~~$49.0 to ~~$47.5~~$51.0 billion)
Adjusted cost of sales as a percentage of reported revenues	~~18.7%~~21.0% to ~~19.2%~~
~~(previously 18.0% to 18.5%)~~22.0%
Adjusted selling, informational and administrative expenses	$~~13.6~~13.7 to ~~$14.1~~$14.7 billion
Adjusted selling, informational and administrative expenses	(previously ~~$12.8~~$13.2 to ~~$13.8~~$14.2 billion)
Adjusted research and development expenses	$~~7.5~~7.4 to $7.8 billion
Adjusted research and development expenses	(previously $7.3 to ~~$7.6~~$7.8 billion)
Adjusted other (income)/deductions	Approximately ($500 million) of income
Adjusted other (income)/deductions	(previously approximately ($300 million) of income)
Effective tax rate on adjusted income	Approximately ~~25.0%~~24.0%
Reported diluted ~~EPS~~Earnings per Share (EPS)	$~~1.37~~1.72 to ~~$1.43~~$1.85
Reported diluted ~~EPS~~Earnings per Share (EPS)	(previously ~~$1.29~~$1.54 to ~~$1.38)~~$1.67)
Adjusted diluted EPS	$~~2.16~~2.38 to ~~$2.20~~$2.48
Adjusted diluted EPS	(previously ~~$2.04~~$2.20 to ~~$2.10)~~$2.30)


The following table provides a reconciliation of 2015 Adjusted income and Adjusted diluted EPS guidance to the 2015 Reported net income attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:
The following table provides a reconciliation of 2016 Adjusted income and Adjusted diluted EPS guidance to the 2016 Reported net income attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:			The following table provides a reconciliation of 2016 Adjusted income and Adjusted diluted EPS guidance to the 2016 Reported net income attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:
	Full-Year 2015 Guidance^{(a), (b)}			Full-Year 2016 Guidance^{(a), (b)}
(BILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)	Net Income	Diluted EPS		Net Income	Diluted EPS
Adjusted income/diluted EPS guidance^(b)	$13.5 - $13.8	$2.16 - $2.20		$14.7 - $15.3	$2.38 - $2.48
Purchase accounting impacts of transactions completed as of September 27, 2015	(2.9)	(0.47)
Purchase accounting impacts of transactions completed as of April 3, 2016				(2.9)	(0.47)
Restructuring, implementation and other acquisition-related costs	(1.0) - (1.2)	(0.16) - (0.18)		(0.7) - (0.9)	(0.11) - (0.14)
Certain other items incurred through September 27, 2015^(c)	(0.6)	(0.10)
Business and legal entity alignment costs	(0.3)	(0.04)		(0.3)	(0.05)
Reported net income attributable to Pfizer Inc./diluted EPS guidance	$8.5 - $9.0	$1.37 - $1.43		$10.6 - $11.4	$1.72 - $1.85


^(a)	The ~~2015~~2016 financial guidance reflects the following:

Does not assume the completion of any business development transactions not completed as of ~~September 27, 2015,~~April 3, 2016, including any one-time upfront payments associated with such transactions.

Excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of ~~September 27, 2015.~~April 3, 2016.

Exchange rates assumed are a blend of the actual exchange rates in effect through the ~~third~~first quarter of ~~2015~~2016 and the ~~mid-October 2015~~mid-April 2016 exchange rates for the remainder of the year. ~~Excludes the impact of a potential devaluation of the Venezuelan bolivar.~~

Guidance for 2016 reported revenues reflects the anticipated negative impact of ~~$3.3~~$2.3 billion due to recent and expected generic competition for certain ~~Pfizer-standalone (excluding legacy Hospira)~~ products that have recently lost or are anticipated to soon lose patent protection.

Guidance for ~~Pfizer-standalone (excluding legacy Hospira)~~2016 reported revenues also reflects the anticipated negative impact of ~~$3.1~~$1.3 billion as a result of unfavorable changes in ~~essentially all~~ foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from ~~2014.~~

~~Guidance for~~2015, including $0.8 billion due to the ~~effective tax rate on Adjusted income does not assume the renewal of the U.S. research and development (R&D) tax credit.~~estimated significant negative currency impact related to Venezuela. The ~~renewal of the U.S. R&D tax credit is not~~ anticipated ~~to have a material~~negative impact on reported and adjusted diluted EPS resulting from unfavorable changes in foreign exchange rates compared to foreign exchange rates from 2015 is approximately $0.10, including $0.07 due to the ~~effective tax rate on Adjusted income.~~estimated significant negative currency impact related to Venezuela.

Guidance for reported and adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately ~~6.25~~6.2 billion ~~shares, inclusive of share repurchases in 2015.~~shares.


^(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”~~“Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A.

^(c)~~Primarily reflects charges associated with certain asset impairments, legal matters, as well as other certain significant items.~~

For additional information about our actual and anticipated costs and cost savings associated with our cost-reduction initiatives announced in 2014, the Hospira acquisition, and our global commercial structure, which was established in 2014, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

Our ~~2015~~2016 financial guidance is subject to a number of factors and uncertainties—as described in the “Our Operating Environment”, “The Global Economic Environment”, “Our Strategy” and “Forward-Looking Information and Factors That May Affect Future Results” sections of this MD&A; the “Our Operating Environment”, “The Global Economic Environment” and “Our Strategy” sections of our ~~2014~~2015 Financial Report; and Part I, Item 1A, “Risk Factors,” ofin our ~~2014~~2015 Annual Report on Form ~~10-K~~10-K.

SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

For a description of our significant accounting policies, see Notes to Consolidated Financial Statements––Note 1. Basis of Presentation and Significant Accounting Policies ~~Part II, Item 1A,~~ ~~“Risk Factors,”~~ in ~~this Quarterly~~our 2015 Annual Report on Form ~~10-Q.~~10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: (i) Acquisitions (Note 1D); (ii) Fair Value (Note 1E); (iii) Revenues (Note 1G); (iv) Asset Impairments (Note 1K); (v) Income Tax Contingencies (Note 1O); (vi) Pension and Postretirement Benefit Plans (Note 1P); and Legal and Environmental Contingencies (Note 1Q).

For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the “Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions” section of our 2015 Financial Report. See also Notes to Consolidated Financial Statements––Note 1C. Basis of Presentation and Significant Accounting Policies: Estimates and Assumptions for a discussion about the risks associated with estimates and assumptions in our 2015 Annual Report on Form 10-K.

Benefit Plans

Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for U.S. and certain international pension and other postretirement benefits. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the bond model or yield curve used to measure the respective plan obligations. For fiscal 2016, we elected to measure service and interest costs by applying the spot rates along the yield curve, or a yield curve implied from the bond model, to the plans' liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve.This change does not affect the measurement of our plan obligations. We have accounted for this change as a change in accounting estimate and, accordingly, have accounted for it on a prospective basis. The expected reduction in expense for 2016 associated with this change in estimate is $191 million, which is expected to be recognized evenly over each quarter of the year.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

REVENUES AND PRODUCT DEVELOPMENTS

Revenues––Overview

																																			The following table provides worldwide revenues by operating segment and geographic area:
	Worldwide				U.S.				International				World- wide		U.S.		Inter- national		Three Months Ended
																			Worldwide				U.S.				International				Worldwide	U.S.	International
(MILLIONS OF DOLLARS)	Sep 27, 2015		Sep 28, 2014		Sep 27, 2015		Sep 28, 2014		Sep 27, 2015		Sep 28, 2014		% Change in Revenues						Apr 3, 2016		Mar 29, 2015		Apr 3, 2016		Mar 29, 2015		Apr 3, 2016		Mar 29, 2015		% Change in Revenues
Three Months Ended
Operating Segments^(a):
GIP	$	3,521	$	3,490	$	1,762	$	1,579	$	1,758	$	1,912	1		12		(8	)	$	3,640	$	3,075	$	1,937	$	1,490	$	1,702	$	1,585	18	30	7
VOC	3,231		2,511		1,960		1,217		1,272		1,294		29		61		(2	)	3,394		2,664		2,177		1,482		1,217		1,182		27	47	3
GEP	5,219		6,239		1,789		2,001		3,429		4,238		(16	)	(11	)	(19	)	5,972		5,125		2,512		1,462		3,460		3,664		17	72	(6	)
	11,971		12,240		5,511		4,796		6,460		7,444		(2	)	15		(13	)
Other^(b)	116		121		54		46		62		76		(4	)	18		(17	)
Total revenues	$	12,087	$	12,361	$	5,565	$	4,842	$	6,522	$	7,519	(2	)	15		(13	)	$	13,005	$	10,864	$	6,625	$	4,433	$	6,380	$	6,430	20	49	(1	)

Nine Months Ended
Operating Segments^(a):
GIP	$	10,093	$	10,114	$	5,018	$	4,520	$	5,075	$	5,594	—		11		(9	)
VOC	9,028		7,264		5,135		3,353		3,893		3,911		24		53		—
GEP	15,323		18,742		4,678		6,011		10,645		12,731		(18	)	(22	)	(16	)
	34,444		36,119		14,831		13,884		19,613		22,236		(5	)	7		(12	)
Other^(b)	360		368		162		139		198		229		(2	)	16		(13	)
Total revenues	$	34,804	$	36,487	$	14,993	$	14,023	$	19,811	$	22,464	(5	)	7		(12	)

^(a)

GIP = the Global Innovative Pharmaceutical segment; VOC = the Global Vaccines, Oncology and Consumer Healthcare segment; and GEP = the Global Established Pharmaceutical segment. On September 3, 2015, we acquired Hospira, and ~~its commercial operations are now included within GEP. Commencing~~commencing from the acquisition date, ~~and in accordance with~~ our ~~domestic and international reporting periods, our consolidated~~financial statements ~~of income, primarily GEP's~~reflect the operating results of Hospira. As a result, legacy Hospira operations are reflected in GEP’s operating results in our results of operations for the ~~three and nine months ended September 27, 2015 reflect one month~~first quarter of 2016, but not for the first quarter of 2015. Also, effective as of the beginning of 2016, our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) legacy ~~Hospira U.S. operations but do not include any financial results from legacy Hospira international operations.~~

^(b)

~~Includes revenues generated from Pfizer CentreSource, our~~Pfizer's contract manufacturing and ~~bulk~~active pharmaceutical ~~chemical~~ingredient sales ~~organization, and also includes the revenues related to~~operation, including our ~~transitional~~ manufacturing and supply agreements with Zoetis Inc. ~~(Zoetis).~~(previously known as Pfizer CentreSource or PCS); and (ii) legacy Hospira's One-2-One sterile injectables contract manufacturing operation. Prior to 2016, PCS was managed outside our operating segments and its revenues were reported as other business activities. We have reclassified prior period PCS revenues ($111 million in the first quarter of 2015) to conform to the current period presentation as part of GEP.

Revenues––First Quarter 2016

~~See~~Revenues in the ~~“Our~~first quarter of 2016 were $13.0 billion, an increase of 20% compared to the same period in 2015, ~~Performance”~~which reflects an operational increase of $2.9 billion, or 26%, partially offset by the unfavorable impact of foreign exchange of $729 million, or 7%, which includes the negative currency impact of Venezuela. Compared to the year ago period, revenues in the first quarter of 2016 were favorably impacted by approximately $900 million as a result of the first quarter of 2016 having five additional selling days in the U.S. and four additional selling days in international markets. This imbalance in selling days will be offset in the fourth quarter of 2016 resulting in essentially the same number of selling days in 2016 as 2015. The operational increase, ~~section~~which includes the impact of ~~this MD&A~~the additional selling days, was primarily the result of:, ~~for a discussion~~

inclusion of revenues from legacy Hospira operations of $1.2 billion;

the continued strong performance of ~~worldwide revenues.~~several key products in developed markets, including Ibrance, Prevnar/Prevenar 13, Eliquis, Lyrica (the Global Innovative Pharmaceutical segment (GIP)), Xeljanz and Chantix/Champix, all primarily in the U.S. (collectively, up approximately $1.2 billion); and

an 11% operational increase in revenues in emerging markets (excluding the contribution from legacy Hospira operations), reflecting continued strong performance primarily from Enbrel and Prevenar 13 and continued strong volume growth from certain other products (collectively, up approximately $280 million),

partially offset by:

the loss of exclusivity and associated generic competition for Zyvox, primarily in the U.S. and certain developed Europe markets, and Lyrica (Global Established Pharmaceutical segment (GEP)) in certain developed Europe markets (collectively, down approximately $230 million); and

the expiration at the end of 2015 of the collaboration agreement to co-promote Rebif in the U.S. (down approximately $50 million).

Geographically,

in the U.S., revenues increased ~~$723 million,~~$2.2 billion, or ~~15%, in the third quarter of 2015, and increased $970 million, or 7%~~49%, in the first ~~nine months~~quarter of ~~2015,~~2016, compared to the same ~~periods~~period in ~~2014,~~2015, reflecting, among other things:


◦	the continued strong performance of several key products including Ibrance, Prevnar 13, ~~primarily in adults, Ibrance (which was launched in the U.S. in February 2015),~~ Lyrica (GIP), Eliquis, ~~Viagra (GIP)~~Xeljanz and ~~Xeljanz~~Chantix (collectively, up approximately ~~$940 million in the third quarter of 2015 and $2.4 billion in the first nine months of 2015),~~$1.0 billion); and


◦	the inclusion of ~~one month of~~ legacy Hospira U.S. operations of ~~$330~~approximately $930 million, ~~in the third quarter of 2015,~~

partially offset by:


◦	losses of exclusivity and associated multi-source generic competition for Celebrex in the U.S. in December 2014 (down approximately $470 million in the third quarter of 2015 and $1.3 billion in the first nine months of 2015);


◦	the loss of exclusivity and associated generic competition for Zyvox ~~and Rapamune, as well as the termination of our Spiriva co-promotion collaboration (collectively, down~~(down approximately ~~$200 million in the third quarter of 2015 and $480 million in the first nine months of 2015)~~$100 million); and


◦	the ~~performance~~expiration at the end of ~~certain other products such as BeneFIX for~~2015 of the ~~three and nine months ended 2015 and Lipitor for the nine months ended 2015 (collectively, down approximately $10 million~~collaboration agreement to co-promote Rebif in the ~~third quarter of 2015 and $120 million in the first nine months of 2015)~~U.S. (down approximately $50 million).

in our international markets, revenues decreased ~~$1.0 billion,~~$51 million, or ~~13%, in the third quarter of 2015, and decreased $2.7 billion, or 12%~~1%, in the first ~~nine months~~quarter of ~~2015,~~2016, compared to the same ~~periods~~period in ~~2014.~~2015. Foreign exchange unfavorably impacted international revenues by approximately ~~$1.1 billion,~~$729 million, or ~~14%, in the third quarter of 2015 and unfavorably impacted international revenues by approximately $2.9 billion, or 13%~~11%, in the first ~~nine months~~quarter of ~~2015.~~2016. Operationally, revenues increased ~~$72~~$678 million, or ~~1%, in the third quarter of 2015, and increased $201 million, or 1%~~11%, in the first ~~nine months~~quarter of ~~2015,~~2016, compared to the same ~~periods~~period in ~~2014~~2015, reflecting, among other things:

◦

~~higher~~an 11% operational increase in revenues in ~~developed~~emerging markets ~~for Eliquis~~(excluding the contribution from legacy Hospira), reflecting continued strong performance primarily from Enbrel and ~~Lyrica (GIP), as well as~~Prevenar 13 and continued strong volume growth from ~~vaccines acquired in December 2014 from Baxter (in Europe)~~certain other products (collectively, up approximately ~~$150 million in~~ $280 million);


◦	the ~~third quarter~~inclusion of ~~2015 and $430 million in the first nine months~~legacy Hospira international operations of ~~2015);~~approximately $270 million; and

◦

the ~~operational increase in revenues in emerging markets, reflecting~~ continued strong ~~operational growth primarily from the Innovative Products business~~performance of Eliquis and higher revenues operationally for Enbrel and Prevenar 13 in ~~the third quarter of 2015 and primarily from the Innovative Products business and Lipitor in the first nine months of 2015 (up~~developed markets (collectively, up approximately ~~$140 million in the third quarter of 2015 and $620 million in the first nine months of 2015)~~$130 million),

partially offset by:


◦	lower revenues in developed markets for Lyrica (GEP), Celebrex ~~Inspra~~ and ~~Viagra (GEP)~~Zyvox as a result of the loss of exclusivity ~~as well as the performance of Lipitor and Norvasc~~ (collectively, down approximately ~~$260 million in the third quarter of 2015 and $640 million in the first nine months of 2015)~~$150 million).

During the ~~third~~first quarter of ~~2015,~~2016, international revenues ~~represented 54% of total revenues, compared to 61% in the third quarter of 2014. Excluding foreign exchange, international revenues in the third quarter of 2015~~ represented 49% of total revenues, compared to ~~61% in the third quarter of 2014. During the first nine months of 2015, international revenues represented 57% of total revenues, compared to 62%~~59% in the first ~~nine months~~quarter of ~~2014.~~2015. Excluding foreign exchange, international revenues in the first ~~nine months~~quarter of ~~2015~~2016 represented ~~53%~~52% of total ~~revenues, compared to 61% in the first nine months of 2014.~~revenues.

For additional information about operating segment revenues, see the “Analysis of Operating Segment Information” section of this MD&A.

Revenue Deductions

Our gross product revenues are subject to a variety of deductions that are generally estimated and recorded in the same period that the revenues are recognized, and primarily represent rebates, chargebacks and sales allowances to government agencies, wholesalers/distributors and managed care organizations with respect to our pharmaceutical products. Those deductions represent estimates of rebates and discounts related to gross sales for the reporting period, and, as such, knowledge and judgment of market conditions and practice are required when estimating the impact of these revenue deductions on gross sales for a reporting period.

Historically, our adjustments of estimates, to reflect actual results or updated expectations, have not been material to our overall business. On a quarterly basis, our adjustments of estimates to reflect actual results generally have been less than 1% of revenues, and have resulted in either a net increase or a net decrease in revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product growth trends.


The following table provides information about deductions from revenues:	The following table provides information about deductions from revenues:
		Three Months Ended				Nine Months Ended				Three Months Ended
(MILLIONS OF DOLLARS)		September 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014		April 3, 2016		March 29, 2015
Medicare rebates^(a)		$	264	$	292	$	713	$	797	$	276	$	221
Medicaid and related state program rebates^(a)		302		258		874		477		371		280
Performance-based contract rebates^{(a), (b)}		579		573		1,625		1,644		589		465
Chargebacks^(c)		1,285		907		3,537		2,700		1,439		1,044
Sales allowances^(d)		1,121		1,190		3,015		3,171		976		903
Sales returns and cash discounts		318		260		945		832		364		261
Total^(e)		$	3,869	$	3,480	$	10,708	$	9,620	$	4,015	$	3,174



PART I. FINANCIAL INFORMATION	Page

Item 1.
Financial Statements

Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 27,~~April 3, 2016 and March 29, 2015 ~~and September 28, 2014~~	3

Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 27,~~April 3, 2016 and March 29, 2015 ~~and September 28, 2014~~	4

Condensed Consolidated Balance Sheets as of ~~September 27, 2015~~April 3, 2016 and December 31, ~~2014~~2015	5

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 27,~~April 3, 2016 and March 29, 2015 ~~and September 28, 2014~~	6

Notes to Condensed Consolidated Financial Statements	7

Review Report of Independent Registered Public Accounting Firm	4538

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	4639

Item 3.
Quantitative and Qualitative Disclosures About Market Risk	9989

Item 4.
Controls and Procedures	9989

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings	~~100~~90

Item 1A.
Risk Factors	~~100~~90

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	~~102~~91

Item 3.
Defaults Upon Senior Securities	~~102~~91

Item 4.
Mine Safety Disclosures	~~102~~91

Item 5.
Other Information	~~102~~91

Item 6.
Exhibits	~~103~~92

Signature	~~104~~93


	Three Months Ended					Nine Months Ended				Three Months Ended
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	September 27, 2015		September 28, 2014			September 27, 2015		September 28, 2014		April 3, 2016		March 29, 2015
Revenues	$	12,087	$	12,361		$	34,804	$	36,487	$	13,005	$	10,864
Costs and expenses:
Cost of sales^(a)	2,219		2,368			6,238		6,875		2,851		1,838
Selling, informational and administrative expenses^(a)	3,270		3,556			9,761		10,116		3,385		3,104
Research and development expenses^(a)	1,722		1,802			5,342		5,184		1,731		1,885
Amortization of intangible assets	937		972			2,748		3,090		1,006		940
Restructuring charges and certain acquisition-related costs	581		(19		)	727		120		141		60
Other (income)/deductions––net	661		94			670		665		330		(46		)
Income from continuing operations before provision for taxes on income	2,697		3,587			9,319		10,437		3,561		3,082
Provision for taxes on income	567		911			2,178		2,575		535		706
Income from continuing operations	2,130		2,676			7,141		7,862		3,026		2,376
Discontinued operations––net of tax	8		(3		)	14		70		—		5
Net income before allocation to noncontrolling interests	2,139		2,672			7,155		7,932		3,026		2,381
Less: Net income attributable to noncontrolling interests	9		6			23		25		9		6
Net income attributable to Pfizer Inc.	$	2,130	$	2,666		$	7,132	$	7,907	$	3,016	$	2,376

Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.34	$	0.42		$	1.15	$	1.23	$	0.49	$	0.38
Discontinued operations––net of tax	—		—			—		0.01		—		—
Net income attributable to Pfizer Inc. common shareholders	$	0.35	$	0.42		$	1.15	$	1.24	$	0.49	$	0.38

Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.34	$	0.42		$	1.14	$	1.22	$	0.49	$	0.38
Discontinued operations––net of tax	—		—			—		0.01		—		—
Net income attributable to Pfizer Inc. common shareholders	$	0.34	$	0.42		$	1.14	$	1.23	$	0.49	$	0.38

Weighted-average shares––basic	6,168		6,330			6,176		6,363		6,150		6,203
Weighted-average shares––diluted	6,243		6,403			6,259		6,441		6,214		6,292
Cash dividends paid per common share	$	0.28	$	0.26		$	0.84	$	0.78	$	0.30	$	0.28


	Three Months Ended						Nine Months Ended						Three Months Ended
(MILLIONS OF DOLLARS)	September 27, 2015			September 28, 2014			September 27, 2015			September 28, 2014			April 3, 2016			March 29, 2015
Net income before allocation to noncontrolling interests	$	2,139		$	2,672		$	7,155		$	7,932		$	3,026		$	2,381

Foreign currency translation adjustments, net	$	(535	)	$	(431	)	$	(2,170	)	$	(273	)	67			(1,308		)
Reclassification adjustments^(a)	—			—			—			(62		)
	(535		)	(430		)	(2,170		)	(334		)	67			(1,308		)
Unrealized holding losses on derivative financial instruments, net	(217		)	(172		)	(80		)	(229		)	(273		)	(315		)
Reclassification adjustments for realized (gains)/losses^(b)	(35		)	441			(545		)	527
Reclassification adjustments for realized (gains)/losses^(a)													(339		)	234
	(251		)	269			(625		)	298			(612		)	(82		)
Unrealized holding gains/(losses) on available-for-sale securities, net	25			(200		)	(502		)	(107		)	129			(328		)
Reclassification adjustments for realized (gains)/losses^(b)	69			15			815			(163		)
Reclassification adjustments for realized losses^(a)													209			247
	94			(185		)	312			(270		)	339			(81		)
Benefit plans: actuarial gains/(losses), net	(144		)	18			(122		)	13
Reclassification adjustments related to amortization^(c)	140			48			409			146
Reclassification adjustments related to settlements, net^(c)	36			19			98			58
Benefit plans: actuarial gains, net													—			32
Reclassification adjustments related to amortization^(b)													139			136
Reclassification adjustments related to settlements, net^(b)													26			40
Other	(10		)	42			120			16			38			158
	23			127			506			233			203			365
Benefit plans: prior service credits and other, net	—			—			506			—
Reclassification adjustments related to amortization^(c)	(46		)	(19		)	(115		)	(55		)
Reclassification adjustments related to curtailments, net^(c)	(4		)	1			(21		)	12
Benefit plans: prior service costs and other, net													—			(1		)
Reclassification adjustments related to amortization^(b)													(41		)	(35		)
Reclassification adjustments related to curtailments, net^(b)													(6		)	(10		)
Other	(1		)	—			(3		)	(1		)	5			—
	(51		)	(18		)	366			(44		)	(42		)	(46		)
Other comprehensive loss, before tax	(721		)	(238		)	(1,611		)	(118		)	(44		)	(1,152		)
Tax provision/(benefit) on other comprehensive loss^(d)	(65		)	83			267			71
Tax provision/(benefit) on other comprehensive loss^(c)													(41		)	105
Other comprehensive loss before allocation to noncontrolling interests	$	(656	)	$	(320	)	$	(1,878	)	$	(189	)	$	(4	)	$	(1,257	)

Comprehensive income before allocation to noncontrolling interests	$	1,483		$	2,352		$	5,277		$	7,743		$	3,022		$	1,124
Less: Comprehensive income/(loss) attributable to noncontrolling interests	2			1			(1		)	32			4			(10		)
Comprehensive income attributable to Pfizer Inc.	$	1,481		$	2,351		$	5,278		$	7,711		$	3,019		$	1,134


(MILLIONS OF DOLLARS)	September 27, 2015			December 31, 2014			April 3, 2016			December 31, 2015
	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	3,099		$	3,343		$	2,561		$	3,641
Short-term investments	17,559			32,779			16,882			19,649
Trade accounts receivable, less allowance for doubtful accounts: 2015—$416; 2014—$412	9,535			8,401
Trade accounts receivable, less allowance for doubtful accounts: 2016—$649; 2015—$384							9,033			8,176
Inventories	7,678			5,663			7,578			7,513
Current deferred tax assets and other current tax assets	4,883			4,498
Current tax assets							2,888			2,662
Other current assets	2,248			3,019			2,355			2,163
Total current assets	45,001			57,702			41,298			43,804
Long-term investments	16,233			17,518			14,146			15,999
Property, plant and equipment, less accumulated depreciation	13,695			11,762
Property, plant and equipment, less accumulated depreciation: 2016—$14,002; 2015—$13,502							13,584			13,766
Identifiable intangible assets, less accumulated amortization	43,297			35,166			39,602			40,356
Goodwill	47,217			42,069			48,558			48,242
Noncurrent deferred tax assets and other noncurrent tax assets	1,512			1,544			1,738			1,794
Other noncurrent assets	3,911			3,513			4,003			3,420
Total assets	$	170,867		$	169,274		$	162,929		$	167,381

Liabilities and Equity
Short-term borrowings, including current portion of long-term debt	$	9,818		$	5,141		$	11,546		$	10,159
Trade accounts payable	3,294			3,210			3,125			3,620
Dividends payable	1,728			1,711			—			1,852
Income taxes payable	1,178			531			920			418
Accrued compensation and related items	2,155			1,841			1,725			2,359
Other current liabilities	9,672			9,197			11,419			10,990
Total current liabilities	27,845			21,631			28,735			29,399

Long-term debt	29,079			31,541			27,824			28,740
Pension benefit obligations, net	6,745			7,885			5,264			6,310
Postretirement benefit obligations, net	1,980			2,379			1,980			1,809
Noncurrent deferred tax liabilities	28,654			24,981			26,547			26,877
Other taxes payable	4,452			4,353			4,053			3,992
Other noncurrent liabilities	4,987			4,883			5,180			5,257
Total liabilities	103,743			97,652			99,582			102,384

Commitments and Contingencies

Preferred stock	27			29			26			26
Common stock	459			455			460			459
Additional paid-in capital	80,763			78,977			81,443			81,016
Treasury stock	(79,259		)	(73,021		)	(84,313		)	(79,252		)
Retained earnings	74,019			72,176			74,971			71,993
Accumulated other comprehensive loss	(9,170		)	(7,316		)	(9,520		)	(9,522		)
Total Pfizer Inc. shareholders’ equity	66,838			71,301			63,068			64,720
Equity attributable to noncontrolling interests	286			321			279			278
Total equity	67,124			71,622			63,347			64,998
Total liabilities and equity	$	170,867		$	169,274		$	162,929		$	167,381


	Nine Months Ended						Three Months Ended
(MILLIONS OF DOLLARS)	September 27, 2015			September 28, 2014			April 3, 2016			March 29, 2015
Operating Activities
Net income before allocation to noncontrolling interests	$	7,155		$	7,932		$	3,026		$	2,381
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	3,733			4,206			1,425			1,260
Asset write-offs and impairments	864			414			146			11
Adjustment to gain on disposal of discontinued operations	—			(65		)
Deferred taxes from continuing operations	(165		)	766			(204		)	(41		)
Share-based compensation expense	488			424			143			162
Benefit plan contributions (in excess of)/less than expense	(804		)	(208		)
Benefit plan contributions in excess of expense							(853		)	(874		)
Other adjustments, net	(184		)	(464		)	229			(336		)
Other changes in assets and liabilities, net of acquisitions and divestitures	(1,288		)	(1,519		)	(2,261		)	(1,883		)
Net cash provided by operating activities	9,799			11,485			1,651			680

Investing Activities
Purchases of property, plant and equipment	(786		)	(845		)	(301		)	(239		)
Purchases of short-term investments	(21,068		)	(36,294		)	(3,489		)	(7,546		)
Proceeds from redemptions/sales of short-term investments	33,609			32,883			7,922			10,702
Net proceeds from redemptions/sales of short-term investments with original maturities of 90 days or less	5,557			4,945
Net proceeds from redemptions/sales of short-term investments with original maturities of three months or less							493			5,243
Purchases of long-term investments	(6,578		)	(9,254		)	(1,308		)	(3,150		)
Proceeds from redemptions/sales of long-term investments	4,535			4,637			1,142			1,937
Acquisitions of businesses, net of cash acquired	(16,322		)	(195		)	(110		)	(678		)
Acquisitions of intangible assets	(48		)	(342		)	—			(7		)
Other investing activities, net	346			325			6			330
Net cash used in investing activities	(756		)	(4,140		)
Net cash provided by investing activities							4,355			6,592

Financing Activities
Proceeds from short-term borrowings	2,022			8			682			1,999
Principal payments on short-term borrowings	(15		)	(3		)	(1,350		)	—
Net proceeds from/(payments on) short-term borrowings with original maturities of 90 days or less	1,907			(2,758		)
Proceeds from issuance of long-term debt	—			4,491
Net proceeds from short-term borrowings with original maturities of three months or less							1,724			863
Principal payments on long-term debt	(3,003		)	(786		)	(1,536		)	(2,998		)
Purchases of common stock	(6,160		)	(3,801		)	(5,000		)	(6,000		)
Cash dividends paid	(5,211		)	(4,970		)	(1,854		)	(1,758		)
Proceeds from exercise of stock options	1,165			704			296			794
Other financing activities, net	171			56			25			122
Net cash used in financing activities	(9,124		)	(7,060		)	(7,014		)	(6,978		)
Effect of exchange-rate changes on cash and cash equivalents	(162		)	(30		)	(73		)	(74		)
Net increase/(decrease) in cash and cash equivalents	(244		)	255			(1,080		)	220
Cash and cash equivalents, beginning	3,343			2,183			3,641			3,343
Cash and cash equivalents, end	$	3,099		$	2,437		$	2,561		$	3,563

Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes	$	1,414		$	1,484		$	518		$	372
Interest	1,162			1,329			382			332



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


^(a)	Excludes amortization of intangible assets, except as disclosed in Note 9A. Identifiable Intangible Assets and Goodwill:Identifiable Intangible Assets.


^(a)	~~Reclassified into~~ ~~Discontinued operations—net of tax~~ ~~in the condensed consolidated statements of income.~~


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


^(c)(b)	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)(c)	See Note 5C. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Loss.



(MILLIONS OF DOLLARS)	Amounts Recognized as of Acquisition Date (Provisional)
Working capital, excluding inventories^(a)	$	271
Inventories	1,894
Property, plant and equipment	2,338
Identifiable intangible assets, excluding in-process research and development^(b)	10,030
In-process research and development	1,120
Other noncurrent assets	311
Long-term debt	(1,928		)
Benefit obligations	(117		)
Net income tax accounts^(c)	(3,645		)
Other noncurrent liabilities	(37		)
Total identifiable net assets	10,237
Goodwill	5,790
Net assets acquired/total consideration transferred	$	16,027


^(a)	~~Includes cash and cash equivalents, short-term investments, accounts receivable, other current assets, assets held for sale, accounts payable and other current liabilities.~~


^(b)	Comprised of finite-lived developed technology rights with a weighted-average life of approximately 13 years ($9.4 billion) and other finite-lived identifiable intangible assets with a weighted-average life of approximately 18 years ($590 million).


^(c)	~~As of the acquisition date, included in~~ ~~Current deferred tax assets and other current tax assets~~ ~~($218 million),~~ ~~Noncurrent deferred tax liabilities~~ ~~($3.8 billion) and~~ ~~Other taxes payable~~ ~~($114 million, including accrued interest of $5 million).~~



YES X	NO ___



YES X	NO ___



YES ____	NO X


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



(MILLIONS OF DOLLARS)	Amounts Recognized as of Acquisition Date (as previously reported as of December 31, 2015)			Measurement Period Adjustments			Amounts Recognized as of Acquisition Date (as adjusted)
Working capital, excluding inventories	$	274		$	(6	)	$	268
Inventories	1,924			(16		)	1,908
Property, plant and equipment^(a)	2,410			(53		)	2,357
Identifiable intangible assets, excluding in-process research and development^(a)	8,270			65			8,335
In-process research and development	995			5			1,000
Other noncurrent assets	408			(46		)	362
Long-term debt	(1,928		)	—			(1,928		)
Benefit obligations	(117		)	—			(117		)
Net income tax accounts	(3,394		)	25			(3,369		)
Other noncurrent liabilities	(39		)	—			(39		)
Total identifiable net assets	8,803			(25		)	8,778
Goodwill	7,284			25			7,309
Net assets acquired/total consideration transferred	$	16,087		$	—		$	16,087


The following table provides supplemental pro forma information as if the acquisition of Hospira had occurred on January 1, 2014:									The following table provides supplemental pro forma information as if the acquisition of Hospira had occurred on January 1, 2014:
	Unaudited Supplemental Pro Forma Consolidated Results									Unaudited Supplemental Pro Forma Consolidated Results
	Three Months Ended				Nine Months Ended					Three Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)	September 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014			March 29, 2015
Revenues	$	12,957	$	13,512	$	38,034	$	39,824		$	12,039
Net income attributable to Pfizer Inc. common shareholders	2,471		2,679		7,432		6,966			2,375
Diluted earnings per share attributable to Pfizer Inc. common shareholders	0.40		0.42		1.19		1.08			0.38


^(b)	Transaction costs represent external costs ~~directly related to the acquisition of Hospira and primarily include expenditures~~ for banking, legal, accounting and other similar ~~services.~~services, most of which are directly related to the terminated transaction with Allergan.


^(c)	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.~~processes, primarily related to the acquisition of Hospira.


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

																									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, 2014^(a)	$	1,114		$	—		$	52		$	1,166
Balance, December 31, 2015^(a)													$	1,109		$	—		$	48		$	1,157
Provision	306			209			40			555			24			1			4			30
Utilization and other^(b)	(281		)	(209		)	(66		)	(556		)	(165		)	(1		)	(9		)	(175		)
Balance, September 27, 2015^(c)	$	1,139		$	—		$	26		$	1,165
Balance, April 3, 2016^(c)													$	968		$	—		$	43		$	1,011


^(a)	Included in Other current liabilities~~($735~~ ($776 million) and Other noncurrent liabilities ($~~431~~381 million).


^(a)	Interest income increased in the third quarter and first nine months of 2015, primarily due to higher investment returns. Interest expense decreased in the third quarter and first nine months of 2015, primarily due to the repayment of a portion of long-term debt in the first quarter of 2015 and the benefit of the effective conversion of some fixed-rate liabilities to floating-rate liabilities.


^(b)	In the first nine months of 2014, primarily includes approximately $610 million for Neurontin-related matters (including off-label promotion actions and antitrust actions) and approximately $55 million for an Effexor-related matter.



The following table provides additional information about the intangible assets that were impaired during 2015 in Other (income)/deductions––net:
									Nine Months Ended
	Fair Value^(a)								September 27, 2015
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––IPR&D^(b)	$	—	$	—	$	—	$	—	$	28
Intangible assets––Developed technology rights^(b)	85		—		—		85		115
Intangible assets––Indefinite-lived brands^(b)	22		—		—		22		20
Total	$	107	$	—	$	—	$	107	$	163


^(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~~.


^(c)	As of September 27, 2015, derivative instruments at fair value include interest rate swaps ($13 million), foreign currency swaps ($565 million) and foreign currency forward-exchange contracts ($194 million) and, as of December 31, 2014, include interest rate swaps ($1 million), foreign currency swaps ($13 million) and foreign currency forward-exchange contracts ($78 million).


^(d)	~~As of September 27, 2015, derivative instruments at fair value include interest rate swaps ($144 million), foreign currency swaps ($776~~41 million) and foreign currency forward-exchange contracts ($9 million) and, as of December 31, ~~2014,~~2015, include interest rate swaps ($16835 million), foreign currency swaps ($89 million) and foreign currency forward-exchange contracts ($20 million).


^(d)	~~Involving U.S. securities.~~ These securities are valued by third party models that use significant inputs derived from observable market data like prepayment rates, default rates, and recovery rates.



The following table provides the components of senior unsecured long-term debt acquired from Hospira:
(MILLIONS OF DOLLARS)	Maturity Date	As of September 27, 2015
6.05% Notes (2017 Notes) ^{(a), (d)}	2017	$	586
5.20% Notes (2020 Notes) ^{(b), (d)}	2020	391
5.80% Notes (2023 Notes) ^{(b), (d)}	2023	408
5.60% Notes (2040 Notes) ^{(c), (d), (e)}	2040	539
Total long-term debt acquired from Hospira		$	1,924


^(a)	~~Interest is payable semi-annually beginning March 30, 2016.~~


^(e)	If the 2040 Notes are redeemed on or after March 15, 2040 (six months prior to the maturity date of the 2040 Notes), the optional redemption price for the 2040 Notes will equal 100% of the principal amount of the 2040 Notes to be redeemed.



The following table provides the maturity schedule of our Long-term debt outstanding as of September 27, 2015:
(MILLIONS OF DOLLARS)	2017		2018		2019		2020		After 2020		TOTAL
Maturities	$	4,432	$	2,396	$	4,837	$	391	$	17,022	$	29,079


^(a)	~~Increase is primarily due to the acquisition of Hospira inventories, which were recorded at fair value. See~~ ~~Note 2A~~.



The following table provides the components of Identifiable intangible assets:
	September 27, 2015							December 31, 2014
(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
Finite-lived intangible assets
Developed technology rights	$	79,677	$	(46,636	)	$	33,041	$	70,946	$	(44,694	)	$	26,252
Brands	1,903		(911		)	992		1,951		(855		)	1,096
Licensing agreements and other	1,645		(902		)	742		991		(832		)	159
	83,225		(48,449		)	34,775		73,887		(46,381		)	27,506
Indefinite-lived intangible assets
Brands and other	7,156					7,156		7,273					7,273
In-process research and development	1,365					1,365		387					387
	8,522					8,522		7,660					7,660
Identifiable intangible assets^(a)	$	91,747	$	(48,449	)	$	43,297	$	81,547	$	(46,381	)	$	35,166