UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 2, ~~2016~~2017

TRANSITION REPORT PURSUANT TO SECTION 13

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

For the transition period from _______ to _______

COMMISSION FILE NUMBER 1-3619

----

PFIZER ~~INC.~~INC.

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive offices) (zip code)

(212) 733-2323

(Registrant’s telephone number)

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



YES X	NO ___

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



YES X	NO ___

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___

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



YES ____	NO X

At ~~November 7, 2016, 6,068,355,132~~May 8, 2017, 5,967,844,470 shares of the issuer’s voting common stock were outstanding.

Table of Contents



PART I. FINANCIAL INFORMATION	Page

Item 1.
Financial Statements

Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~October~~April 2, ~~2016~~2017 and ~~September 27, 2015~~April 3, 2016	5

Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~October~~April 2, ~~2016~~2017 and ~~September 27, 2015~~April 3, 2016	6

Condensed Consolidated Balance Sheets as of ~~October~~April 2, ~~2016~~2017 and December 31, ~~2015~~2016	7

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~October~~April 2, ~~2016~~2017 and ~~September 27, 2015~~April 3, 2016	8

Notes to Condensed Consolidated Financial Statements	9

Review Report of Independent Registered Public Accounting Firm	5041

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	5142

Item 3.
Quantitative and Qualitative Disclosures About Market Risk	~~107~~94

Item 4.
Controls and Procedures	~~107~~94

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings	~~108~~95

Item 1A.
Risk Factors	~~108~~95

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	~~109~~96

Item 3.
Defaults Upon Senior Securities	~~109~~96

Item 4.
Mine Safety Disclosures	~~109~~96

Item 5.
Other Information	~~109~~96

Item 6.
Exhibits	~~110~~97

Signature	~~111~~98

GLOSSARY OF DEFINED TERMS

Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q (defined below) refer to Pfizer Inc. and its subsidiaries. We also have used several other terms in this Quarterly Report on Form 10-Q, most of which are explained or defined below:



~~2015~~2016 Financial Report	Financial Report for the fiscal year ended December 31, ~~2015,~~2016, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015~~2016
~~2015~~2016 Form 10-K	Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015~~2016
AAV	Adeno-Associated Virus
ACA (Also referred to as U.S. Healthcare Legislation)	U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
ACIP	Advisory Committee on Immunization Practices
ALK	anaplastic lymphoma kinase
Allergan	Allergan plc
Alliance revenues	~~revenues~~Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us
~~AM-Pharma~~	~~AM-Pharma B.V.~~
Anacor	Anacor Pharmaceuticals, Inc.
Astellas	Astellas Pharma US, Inc.
ASU	Accounting Standards Update
ATM-AVI	aztreonam-avibactam
Bamboo	Bamboo Therapeutics, Inc.
~~Baxter~~	~~Baxter International Inc.~~
BMS	Bristol-Myers Squibb Company
CDC	U.S. Centers for Disease Control and Prevention
~~Celltrion~~Cellectis	~~Celltrion Inc. and Celltrion Healthcare, Co., Ltd. (collectively)~~Cellectis SA
Citibank	Citibank N.A.
Developed Markets	U.S., Western Europe, Japan, Canada, Australia, ~~Scandinavia,~~ South Korea, Scandinavian countries, Finland and New Zealand
~~DEUs~~	~~Dividend Equivalent Units~~
~~DVT~~	~~deep vein thrombosis~~
EEA	European Economic Area
EH	Essential Health
EMA	European Medicines Agency
Emerging Markets	Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey
EPS	earnings per share
EU	European Union
EURIBOR	Euro Interbank Offered Rate
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FDA	U.S. Food and Drug Administration
GAAP	Generally Accepted Accounting Principles
~~GHD~~	~~growth hormone deficiency~~
GIST	gastrointestinal stromal tumors
~~GIP~~	~~Global Innovative Pharmaceutical segment~~
GPD	Global Product Development organization
~~GS&Co.~~	~~Goldman, Sachs & Co.~~
HER2-	human epidermal growth factor receptor 2-negative
~~hGH-CTP~~	~~human growth hormone~~
HIS	Hospira Infusion Systems
Hisun	Zhejiang Hisun Pharmaceuticals Co., Ltd.
Hisun Pfizer	Hisun Pfizer Pharmaceuticals Company Limited
Hospira	Hospira, Inc.
HR+	hormone receptor-positive
ICU Medical	ICU Medical, Inc.
IH	Innovative Health
~~InnoPharma~~	~~InnoPharma, Inc.~~
IPR&D	in-process research and development



~~IRC~~	~~Internal Revenue Code~~
IRS	U.S. Internal Revenue Service
IV	intravenous
Janssen	Janssen Biotech Inc.
King	King Pharmaceuticals, Inc.
LDL	low density lipoprotein
LIBOR	London Interbank Offered Rate
Lilly	Eli Lilly & Company
LOE	loss of exclusivity



MCO	~~managed care organization~~Managed Care Organization
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
MDV	multi-dose vial
Medivation	Medivation, Inc.
Merck	Merck & Co., Inc.
Meridian	Meridian Medical Technologies, Inc.
Moody’s	Moody’s Investors Service
~~mRCC~~	~~metastatic renal cell carcinoma~~
NDA	new drug application
~~NOAC~~	~~Novel Oral Anticoagulant~~
NovaQuest	NovaQuest Co-Investment Fund ~~II, L.P. or NovaQuest Co-Investment Fund~~ V, L.P.~~, as applicable~~
NSCLC	non-small cell lung cancer
NYSE	New York Stock Exchange
OPKO	OPKO Health, Inc.
OTC	over-the-counter
PBM	Pharmacy Benefit Manager
~~PCS~~	~~Pfizer CenterOne (previously known as Pfizer CentreSource)~~
~~PDUFA~~	~~Prescription Drug User Fee Act~~
PE	~~pulmonary embolism~~
~~PGS~~	~~Pfizer Global Supply~~
Pharmacia	Pharmacia Corporation
PP&E	Property, plant & equipment
~~PTUs~~	~~Profit Units~~
Quarterly Report on Form 10-Q	Quarterly Report on Form 10-Q for the quarterly period ended ~~October~~April 2, ~~2016~~
~~RAR~~	~~Revenue Agent’s Report~~2017
RCC	renal cell carcinoma
~~recAP~~	~~recombinant human Alkaline Phosphatase~~
R&D	research and development
RPI	RPI Finance Trust
Sandoz	Sandoz, Inc., a division of Novartis AG
SEC	U.S. Securities and Exchange Commission
~~SGA~~	~~small for gestational age~~
S&P	Standard and Poor’s
Teuto	Laboratório Teuto Brasileiro S.A.
~~TSRUs~~	~~Total Shareholder Return Units~~
U.K.	United Kingdom
U.S.	United States
VAT	value added tax
~~VOC~~	~~Global Vaccines, Oncology and Consumer Healthcare segment~~
WRD	Worldwide Research and Development
Zoetis	Zoetis Inc.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three Months Ended				Nine Months Ended				Three Months Ended
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015		April 2, 2017			April 3, 2016
Revenues	$	13,045	$	12,087	$	39,196	$	34,804	$	12,779		$	13,005
Costs and expenses:
Cost of sales^(a)	3,085		2,219		9,111		6,238		2,470			2,851
Selling, informational and administrative expenses^(a)	3,559		3,270		10,414		9,761		3,308			3,385
Research and development expenses^(a)	1,881		1,722		5,360		5,342		1,708			1,731
Amortization of intangible assets	968		937		2,934		2,748		1,186			1,006
Restructuring charges and certain acquisition-related costs	531		581		988		727		157			141
Other (income)/deductions––net	1,417		661		2,815		670		(1		)	330
Income from continuing operations before provision for taxes on income	1,604		2,697		7,575		9,319		3,951			3,561
Provision for taxes on income(b)	284		567		1,194		2,178		821			513
Income from continuing operations(b)	1,320		2,130		6,380		7,141		3,130			3,048
Discontinued operations––net of tax	—		8		—		14		—			—
Net income before allocation to noncontrolling interests(b)	1,319		2,139		6,380		7,155		3,130			3,048
Less: Net income attributable to noncontrolling interests	—		9		25		23		9			9
Net income attributable to Pfizer Inc.(b)	$	1,320	$	2,130	$	6,355	$	7,132	$	3,121		$	3,038

Earnings per common share––basic:
Earnings per common share––basic^(b):
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.22	$	0.34	$	1.04	$	1.15	$	0.52		$	0.49
Discontinued operations––net of tax	—		—		—		—		—			—
Net income attributable to Pfizer Inc. common shareholders	$	0.22	$	0.35	$	1.04	$	1.15	$	0.52		$	0.49

Earnings per common share––diluted:
Earnings per common share––diluted^(b):
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.22	$	0.34	$	1.03	$	1.14	$	0.51		$	0.49
Discontinued operations––net of tax	—		—		—		—		—			—
Net income attributable to Pfizer Inc. common shareholders	$	0.21	$	0.34	$	1.03	$	1.14	$	0.51		$	0.49

Weighted-average shares––basic	6,066		6,168		6,095		6,176		6,006			6,150
Weighted-average shares––diluted	6,138		6,243		6,164		6,259		6,092			6,225
Cash dividends paid per common share	$	0.30	$	0.28	$	0.90	$	0.84	$	0.32		$	0.30


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


^(b)	Amounts for the three months ended April 3, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016. For additional information, see Note 1B. Basis of Presentation and Significant Accounting Policies––Adoption of New Accounting Standards.

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



	Three Months Ended
(MILLIONS OF DOLLARS)	April 2, 2017			April 3, 2016
Net income before allocation to noncontrolling interests	$	3,130		$	3,048

Foreign currency translation adjustments, net	228			67
	228			67
Unrealized holding losses on derivative financial instruments, net	(9		)	(273		)
Reclassification adjustments for realized gains^(a)	(241		)	(339		)
	(251		)	(612		)
Unrealized holding gains on available-for-sale securities, net	150			129
Reclassification adjustments for realized losses^(a)	137			209
	287			339
Benefit plans: actuarial gains, net	1			—
Reclassification adjustments related to amortization^(b)	163			139
Reclassification adjustments related to settlements, net^(b)	52			26
Other	45			38
	261			203
Benefit plans: prior service costs and other, net	—			—
Reclassification adjustments related to amortization^(b)	(45		)	(41		)
Reclassification adjustments related to curtailments, net^(b)	(7		)	(6		)
Other	1			5
	(52		)	(42		)
Other comprehensive income/(loss), before tax	474			(44		)
Tax provision/(benefit) on other comprehensive income/(loss)^(c)	25			(41		)
Other comprehensive income/(loss) before allocation to noncontrolling interests	$	449		$	(4	)

Comprehensive income before allocation to noncontrolling interests	$	3,579		$	3,044
Less: Comprehensive income attributable to noncontrolling interests	15			4
Comprehensive income attributable to Pfizer Inc.	$	3,563		$	3,040

Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) October 2,
2016
September 27,
2015
October 2,
2016
September 27,
2015
Net income before allocation to noncontrolling interests $ 1,319
$ 2,139
$ 6,380
$ 7,155

Foreign currency translation adjustments, net 418
(535 ) 999
(2,170 )
418
(535 ) 999
(2,170 )
Unrealized holding losses on derivative financial instruments, net (126 ) (217 ) (970 ) (80 )
Reclassification adjustments for realized (gains)/losses^(a)
150
(35 ) 280
(545 )
24
(251 ) (690 ) (625 )
Unrealized holding gains/(losses) on available-for-sale securities, net 261
25
740
(502 )
Reclassification adjustments for realized (gains)/losses^(a)
(112 ) 69
(129 ) 815
149
94
611
312
Benefit plans: actuarial losses, net (82 ) (144 ) (101 ) (122 )
Reclassification adjustments related to amortization^(b)
140
140
418
409
Reclassification adjustments related to settlements, net^(b)
28
36
76
98
Other 69
(10 ) 51
120
155
23
444
506
Benefit plans: prior service credits and other, net 95
—
182
506
Reclassification adjustments related to amortization^(b)
(45 ) (46 ) (127 ) (115 )
Reclassification adjustments related to curtailments, net^(b)
(8 ) (4 ) (14 ) (21 )
Other 6
(1 ) 12
(3 )
48
(51 ) 54
366
Other comprehensive income/(loss), before tax 794
(721 ) 1,418
(1,611 )
Tax provision/(benefit) on other comprehensive income/(loss)^(c)
116
(65 ) 111
267
Other comprehensive income/(loss) before allocation to noncontrolling interests $ 678
$ (656 ) $ 1,307
$ (1,878 )

Comprehensive income before allocation to noncontrolling interests $ 1,997
$ 1,483
$ 7,687
$ 5,277
Less: Comprehensive income/(loss) attributable to noncontrolling interests —
2
24
(1 )
Comprehensive income attributable to Pfizer Inc. $ 1,997
$ 1,481
$ 7,664
$ 5,278


^(a)	Reclassified into Other (income)/deductions—net and Cost of salesin the condensed consolidated statements of income.


^(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.


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

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(MILLIONS OF DOLLARS)	October 2, 2016			December 31, 2015			April 2, 2017			December 31, 2016
	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	2,094		$	3,641		$	4,057		$	2,595
Short-term investments	12,277			19,649			10,503			15,255
Trade accounts receivable, less allowance for doubtful accounts: 2016—$672; 2015—$384	9,836			8,176
Trade accounts receivable, less allowance for doubtful accounts: 2017—$588; 2016—$609							8,892			8,225
Inventories	7,507			7,513			7,415			6,783
Current tax assets	2,825			2,662			2,791			3,041
Other current assets	2,843			2,154			2,218			2,249
Assets held for sale	1,119			9			3			801
Total current assets	38,501			43,804			35,878			38,949
Long-term investments	9,507			15,999			7,346			7,116
Property, plant and equipment, less accumulated depreciation: 2016—$14,838; 2015—$13,502	13,284			13,766
Property, plant and equipment, less accumulated depreciation: 2017—$15,050; 2016—$14,807							13,238			13,318
Identifiable intangible assets, less accumulated amortization	54,238			40,356			52,427			52,648
Goodwill	56,281			48,242			54,656			54,449
Noncurrent deferred tax assets and other noncurrent tax assets	1,859			1,794			1,909			1,812
Other noncurrent assets	4,759			3,420			3,329			3,323
Total assets	$	178,430		$	167,381		$	168,784		$	171,615

Liabilities and Equity
Short-term borrowings, including current portion of long-term debt	$	13,633		$	10,159
Short-term borrowings, including current portion of long-term debt: 2017—$3,292; 2016—$4,225							$	7,680		$	10,688
Trade accounts payable	3,476			3,620			3,393			4,536
Dividends payable	1,821			1,852			—			1,944
Income taxes payable	1,158			418			790			437
Accrued compensation and related items	2,048			2,359			1,858			2,487
Other current liabilities	12,623			10,990			11,143			11,023
Total current liabilities	34,759			29,399			24,864			31,115

Long-term debt	30,437			28,740			36,330			31,398
Pension benefit obligations, net	5,312			6,310			5,300			6,406
Postretirement benefit obligations, net	1,808			1,809			1,742			1,766
Noncurrent deferred tax liabilities	31,687			26,877			30,857			30,753
Other taxes payable	4,767			3,992			4,027			4,000
Other noncurrent liabilities	6,059			5,257			6,918			6,337
Total liabilities	114,829			102,384			110,038			111,776

Commitments and Contingencies

Preferred stock	25			26			23			24
Common stock	461			459			463			461
Additional paid-in capital	82,534			81,016			83,111			82,685
Treasury stock	(84,346		)	(79,252		)	(89,414		)	(84,364		)
Retained earnings	72,846			71,993			74,847			71,774
Accumulated other comprehensive loss	(8,214		)	(9,522		)	(10,594		)	(11,036		)
Total Pfizer Inc. shareholders’ equity	63,306			64,720			58,435			59,544
Equity attributable to noncontrolling interests	294			278			311			296
Total equity	63,601			64,998			58,746			59,840
Total liabilities and equity	$	178,430		$	167,381		$	168,784		$	171,615

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Three Months Ended
(MILLIONS OF DOLLARS)	April 2, 2017			April 3, 2016
Operating Activities
Net income before allocation to noncontrolling interests	$	3,130		$	3,048
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	1,555			1,425
Asset write-offs and impairments	35			146
Loss on sale of HIS net assets	37			—
Deferred taxes from continuing operations	38			(204		)
Share-based compensation expense	218			143
Benefit plan contributions in excess of expense	(986		)	(853		)
Other adjustments, net	(211		)	229
Other changes in assets and liabilities, net of acquisitions and divestitures^(a)	(2,225		)	(2,125		)
Net cash provided by operating activities	1,589			1,808

Investing Activities
Purchases of property, plant and equipment	(358		)	(301		)
Purchases of short-term investments	(701		)	(3,489		)
Proceeds from redemptions/sales of short-term investments	2,235			7,922
Net proceeds from redemptions/sales of short-term investments with original maturities of three months or less	3,778			493
Purchases of long-term investments	(740		)	(1,308		)
Proceeds from redemptions/sales of long-term investments	846			1,142
Acquisitions of businesses, net of cash acquired	(585		)	(110		)
Other investing activities, net	297			6
Net cash provided by investing activities	4,772			4,355

Financing Activities
Proceeds from short-term borrowings	2,554			682
Principal payments on short-term borrowings	(2,530		)	(1,350		)
Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less	(2,113		)	1,724
Proceeds from issuance of long-term debt	5,273			—
Principal payments on long-term debt	(1,253		)	(1,536		)
Purchases of common stock	(5,000		)	(5,000		)
Cash dividends paid	(1,945		)	(1,854		)
Proceeds from exercise of stock options	313			296
Other financing activities, net^(a)	(220		)	(132		)
Net cash used in financing activities	(4,921		)	(7,171		)
Effect of exchange-rate changes on cash and cash equivalents	21			(73		)
Net increase/(decrease) in cash and cash equivalents	1,461			(1,080		)
Cash and cash equivalents, beginning	2,595			3,641
Cash and cash equivalents, end	$	4,057		$	2,561

Supplemental Cash Flow Information
Non-cash transactions:
Receipt of ICU Medical common stock^(b)	$	428		$	—
Promissory note from ICU Medical^(b)	75			—
Cash paid (received) during the period for:
Income taxes	$	195		$	518
Interest	216			409
Interest rate hedges	32			(27		)

Nine Months Ended
(MILLIONS OF DOLLARS) October 2,
2016
September 27,
2015
Operating Activities
Net income before allocation to noncontrolling interests $ 6,380
$ 7,155
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:

Depreciation and amortization 4,208
3,733
Asset write-offs and impairments 1,146
864
Write-down of HIS net assets to fair value less estimated costs to sell 1,422
—
Deferred taxes from continuing operations (1,335 ) (165 )
Share-based compensation expense 532
488
Benefit plan contributions in excess of expense (775 ) (804 )
Other adjustments, net 68
(184 )
Other changes in assets and liabilities, net of acquisitions and divestitures (1,718 ) (1,297 )
Net cash provided by operating activities 9,929
9,790

Investing Activities

Purchases of property, plant and equipment (1,134 ) (786 )
Purchases of short-term investments (15,170 ) (21,068 )
Proceeds from redemptions/sales of short-term investments 20,685
33,609
Net proceeds from redemptions/sales of short-term investments with original maturities of three months or less 6,485
5,557
Purchases of long-term investments (4,771 ) (6,578 )
Proceeds from redemptions/sales of long-term investments 6,915
4,535
Acquisitions of businesses, net of cash acquired (17,679 ) (16,322 )
Acquisitions of intangible assets (96 ) (48 )
Other investing activities, net 60
346
Net cash used in investing activities (4,704 ) (756 )

Financing Activities

Proceeds from short-term borrowings 6,397
2,022
Principal payments on short-term borrowings (3,321 ) (16 )
Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less (963 ) 1,907
Proceeds from issuance of long-term debt 5,031
—
Principal payments on long-term debt (4,317 ) (2,994 )
Purchases of common stock (5,000 ) (6,160 )
Cash dividends paid (5,496 ) (5,211 )
Proceeds from exercise of stock options 946
1,165
Other financing activities, net 29
171
Net cash used in financing activities (6,693 ) (9,115 )
Effect of exchange-rate changes on cash and cash equivalents (79 ) (162 )
Net decrease in cash and cash equivalents (1,547 ) (244 )
Cash and cash equivalents, beginning 3,641
3,343
Cash and cash equivalents, end $ 2,094
$ 3,099

Supplemental Cash Flow Information
Cash paid during the period for:

Income taxes $ 1,430
$ 1,414
Interest 1,177
1,162


^(a)	Amounts for the three months ended April 3, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016. For additional information, see Note 1B.


^(b)	In connection with the sale of HIS net assets to ICU Medical, on February 3, 2017, Pfizer received 3.2 million newly issued shares of ICU Medical common stock valued at $428 million and a promissory note in the amount of $75 million. For additional information, see Note 2B.

Amounts may not add due to rounding.

See Notes to Condensed Consolidated Financial Statements.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Significant Accounting Policies

A. Basis of Presentation

See the Glossary of Defined Terms at the beginning of this Quarterly Report on Form 10-Q for terms used throughout the condensed consolidated financial statements and related notes of this Quarterly Report on Form 10-Q.

We prepared the condensed consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted.

The financial information included in our condensed consolidated financial statements for subsidiaries operating outside the U.S. is as of and for the three ~~and nine~~ months ended ~~August~~February 26, 2017 and February 28, ~~2016 and August 23, 2015.~~2016. The financial information included in our condensed consolidated financial statements for U.S. subsidiaries is as of and for the three ~~and nine~~ months ended ~~October~~April 2, ~~2016~~2017 and ~~September 27, 2015.~~April 3, 2016.

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

We are responsible for the unaudited financial statements included in this Quarterly Report on Form 10-Q. The interim financial statements include all normal and recurring adjustments that are considered necessary for the fair ~~presentation~~statement of our condensed consolidated balance sheets and condensed consolidated statements of income. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our ~~2015~~2016 Form 10-K.

~~Unless~~We manage our commercial operations through two distinct business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH). Beginning in the ~~context requires otherwise, references~~second quarter of 2016, we reorganized our operating segments to ~~“Pfizer,” “the Company,” “we,” “us” or “our”~~ reflect that we manage our innovative pharmaceutical and consumer healthcare operations as one business segment, IH. We have revised prior-period segment information to reflect the reorganization. For additional information, see Note 13 and Notes to Consolidated Financial Statements––Note 18. Segment, Geographic and Other Revenue Information in ~~this Quarterly Report on Form 10-Q refer to Pfizer Inc. and its subsidiaries.~~

Pfizer’s 2016 Financial Report.

Certain amounts in the condensed consolidated financial statements and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.

~~Effective in the second~~Our recent significant business development activities include:

•

On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical. The operating results of HIS are included in the condensed consolidated statement of income and EH’s operating results through February 2, 2017 and, therefore, our financial results, and EH’s financial results, for the first quarter of 2017 reflect approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations, while our financial results, and EH’s financial results, for the first quarter of 2016 reflect three months of legacy HIS global operations. Assets and liabilities associated with HIS are presented as held for sale in the condensed consolidated balance sheet as of December 31, 2016. The HIS assets held for sale are reported in Assets held for sale and HIS liabilities held for sale are reported in Other current liabilities.

On December 22, 2016, our segments were reorganized to reflect that we now manage our innovative pharmaceutical and consumer healthcare operations as one business segment, Pfizer Innovative Health (IH) (previously these businesses were managed as two segments: the GIP segment and the VOC segment). Also, in the second quarter of 2016, we changed the name of our Established Products business to Pfizer Essential Health (EH). We have revised prior-period segment information to reflect the reorganization. For additional information, see ~~Note 13~~.

~~In the condensed consolidated balance sheet as of December 31, 2015, we performed certain reclassifications to conform to the current period presentation of~~ ~~Other current assets~~, ~~Other noncurrent assets~~, ~~Short-term borrowings, including current portion of long-term debt~~ ~~and~~ ~~Long-term debt, and in the condensed consolidated statement of cash flows for the nine months ended September 27, 2015, we performed certain reclassifications to conform to the current presentation of~~ ~~Other changes in assets and liabilities, net of acquisitions and divestitures~~, ~~Principal payments on short-term borrowings,~~ ~~and~~ ~~Principal payments on long-term debt,~~ ~~for debt issuance costs in accordance with the adoption of a new accounting standard. For additional information, see~~ ~~Note 1B~~.

~~On October 6, 2016, we announced that we entered into a definitive agreement under~~ which ICU Medical will acquire all of Pfizer’s global infusion therapy net assets, HIS, for approximately $1 billion in cash and ICU Medical stock. HIS includes IV pumps, solutions, and devices. Pfizer has also agreed to certain restrictions on transfer of its ICU Medical shares for at least 18 months. Assets and liabilities associated with HIS were reclassified as held for sale in the condensed consolidated balance sheet as of October 2, 2016. The companies expect to complete the transactionfalls in the first fiscal quarter of 2017 ~~subject to customary closing conditions, including required regulatory approvals. For additional information, see~~ ~~Note 2B.~~

~~On September 28, 2016 (the acquisition date),~~for our international operations, we acquired ~~Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired).~~the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of ~~Medivation,~~this business, and, in accordance with our ~~domestic and~~ international reporting ~~periods,~~period, our condensed consolidated financial statements and EH’s operating results for the ~~three and nine~~first quarter of 2017 reflect approximately two months ~~ended October 2, 2016 reflect three business days~~ of legacy ~~Medivation~~AstraZeneca small molecule anti-infectives business international operations, which were immaterial. ~~See~~ ~~Note 2A~~

On September 28, 2016, we acquired Medivation for ~~additional information.~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~On June 24, 2016 (the acquisition date), we completed our acquisition of Anacor for $99.25~~$81.50 per share. ~~The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion, net of cash acquired), plus $698 million debt assumed.~~ Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of ~~Anacor,~~Medivation. As a result, legacy Medivation operations are reflected in our results of operations, IH’s operating results, and ~~in accordance with our domestic reporting period, our consolidated financial statements~~cash flows for the ~~three and nine months ended October 2, 2016 reflect approximately three months~~first quarter of ~~legacy Anacor operations, which were immaterial.~~ ~~See Note 2A~~2017, but not for ~~additional information.~~the first quarter of 2016.

On ~~April 6,~~June 24, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 was terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement. In connection with the termination of the merger agreement, on April 8, 2016 (which fell into Pfizer’s second fiscal quarter), Pfizer paid Allergan $150 million (pre-tax)acquired Anacor for ~~reimbursement of Allergan’s expenses associated with the terminated transaction (see~~ ~~Note 4). Pfizer and Allergan also released each other from any and all claims in connection with the merger agreement.~~

~~On September 3, 2015, we acquired Hospira and, commencing~~$99.25 per share. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of ~~Hospira.~~Anacor. As a result, legacy ~~Hospira~~Anacor operations, which were not material, are reflected in our results of operations, ~~EH’s~~IH’s operating results, and cash flows for the ~~third~~first quarter ~~and first nine months~~ of ~~2016. In accordance with our domestic and international reporting periods, our consolidated statements of income~~2017, but not for the ~~third~~first quarter of 2016.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For additional information, see Note 2and ~~first nine months of 2015 reflect only one month of legacy Hospira U.S. operations but no financial results from legacy Hospira international operations. Legacy Hospira assets~~Notes to Consolidated Financial Statements––Note 2. Acquisitions, Assets and ~~liabilities are reflected~~ Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment in ~~our balance sheets as of October 2,~~Pfizer’s 2016 ~~and December 31, 2015.~~ ~~See Note 2A~~ ~~for additional information.~~Financial Report.

B. Adoption of New Accounting Standards

WeIn the fourth quarter of 2016, we adopted a new accounting standard for certain elements of the accounting for share-based payments as of January 1, ~~2016 that changed~~2016. Specifically, the ~~presentation~~new standard requires excess tax benefits or deficiencies (including tax benefits of ~~debt issuance costs related~~dividend equivalents) of share-based compensation to abe recognized ~~debt liability~~ as a ~~direct deduction~~component of the Provision for taxes on income, whereas excess tax benefits or deficiencies previously were recognized in Additional paid-in capital. The net tax benefit for the Company was $22 million for the first quarter of 2016. Also, in the diluted net earnings per share calculation, when applying the treasury stock method for shares that could be repurchased, the assumed proceeds no longer include the amount of excess tax benefit.

Another element of the new accounting standard requires that we now present excess tax benefits as operating activities in our consolidated statements of cash flow. We elected to adopt this presentation on a prospective basis as of January 1, 2016. Additionally, cash paid by us when directly withholding shares for tax-withholding purposes is now a cash outflow from financing activities. This reclassification was required to be adopted retrospectively. As a result, $26 million of cash outflows for the ~~carrying value~~first quarter of ~~that associated debt, consistent with~~2016 was reclassified from operating activities to financing activities in the presentation of a debt discount. The update does not impact the measurement or recognition of debt issuance costs. As of October 2, 2016, debt issuance costs were $89 million and are presented as contra-liabilities to ~~Short-term borrowings, including current portion of long-term debt~~ ~~($1 million) and~~ ~~Long-termdebt~~ ~~($88 million). In the December 31, 2015~~ condensed consolidated ~~balance sheet, we have reclassified debt issuance costs~~statement of ~~$79 million ($1 million from~~ ~~Other current assets~~ ~~and $79 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.~~cash flows. For additional information, see Notes to Consolidated Financial Statements––Note ~~7A.~~1B. Basis of Presentation and SignificantAccounting Policies:Adoption of New Accounting Standards included in our 2016 Financial Report.

We adopted a new standard as of January 1, 2016 that requires an acquirer to recognize adjustments made in the measurement period to provisional amounts of assets acquired and liabilities assumed in a business combination in the reporting period in which the adjustment amounts are determined. There was no material impact to our condensed consolidated financial statements in the third quarter and first nine months of 2016 from adopting this standard. For additional information, see ~~Note 2A.~~

We adopted a new standard as of January 1, ~~2016~~2017 that amended guidance on the assessment of whether an entity is the primary beneficiary of a variable interest entity. Under this new guidance, when evaluating whether an entity is the primary beneficiary, a single decision maker must consider its indirect interest held through related ~~to the accounting for hybrid financial instruments issued or held as investments and there~~parties under common control proportionately. There was no material impact to our condensed consolidated financial statements from adopting this standard.

~~C. Fair Value~~We adopted a new standard as of January 1, 2017 related to inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value, which is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. There was no material impact to our condensed consolidated financial statements from adopting this standard.

~~Our~~Note 2. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement, Equity-Method Investments and Cost-Method Investment

A. Acquisitions

AstraZeneca’s Small Molecule Anti-Infectives Business (EH)

On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S., including the commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets ATM-AVI and CXL (ceftaroline fosamil-AVI). Under the terms of the agreement, we made an upfront payment of approximately $552 million to AstraZeneca upon the close of the transaction and will make a deferred payment of $175 million in January 2019. In addition, AstraZeneca is eligible to receive up to $250 million in milestone payments and up to $600 million if sales of Zavicefta™ exceed certain thresholds during the next nine years, as well as tiered royalties on sales of Zavicefta™ and ATM-AVI in certain markets for a period ending on the later of ten years or the loss of patent protection or loss of regulatory exclusivity. The total royalty payments are unlimited during the royalty term and the undiscounted payments are expected to be in the range of approximately $250 million to $425 million. The total fair value ~~methodologies depend on~~of consideration transferred for AstraZeneca’s small molecule anti-infectives business was approximately $1,045 million, which includes $555 million in cash plus the ~~following types of inputs:~~

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

Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).

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

~~A single estimate of~~ fair value ~~can result from a complex series~~ of ~~judgments about future events~~contingent consideration of $490 million (which is composed of the deferred payment and ~~uncertainties~~the expected milestone and ~~can rely heavily~~royalty payments). Of the cash consideration, approximately $3 million was not paid as of April 2, 2017, and was recorded in Other current liabilities. In connection with this acquisition, we provisionally recorded $902 million in Identifiable intangible assets, primarily consisting of $683 million in Developed technology rights and $219 million in IPR&D. We also recorded $96 million in Other current assets related to the economic value of inventory which was retained by AstraZeneca for sale on ~~estimates~~our behalf, $68 millionin Goodwill and ~~assumptions.~~

$20 million of net deferred tax liabilities. The allocation of the consideration transferred to the assets and the liabilities assumed has not yet been finalized.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~Note 2. Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment~~

~~A. Acquisitions~~

Medivation, Inc. (IH)

On September 28, 2016, ~~(the acquisition date),~~ we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Of this consideration, ~~$1.0 billion~~approximately $365 million was not paid as of ~~October~~April 2, ~~2016,~~2017, and was recorded in Other current liabilities. Medivation is now a wholly-owned subsidiary of Pfizer. Medivation is a biopharmaceutical company focused on developing and commercializing small molecules for oncology. Medivation’s portfolio includes Xtandi (enzalutamide), an androgen receptor inhibitor that blocks multiple steps in the androgen receptor signaling pathway within ~~the~~ tumor ~~cell.~~cells. Xtandi is being developed and commercialized through a collaboration ~~between Pfizer and~~with Astellas. Astellas has exclusive commercialization rights for Xtandi outside the U.S. In addition, Medivation has two development-stage oncology assets in its pipeline: talazoparib, which is currently in a Phase 3 study for the treatment of BRCA-mutated breast cancer, and pidilizumab, an immuno-oncology ~~asset being developed for diffuse large B-cell lymphoma and other hematologic malignancies.~~asset. In connection with this acquisition, we provisionally recorded ~~$13.2~~$13.1 billion in Identifiable intangible assets, primarily consisting of ~~$8.5~~$8.7 billion of Developed technology rights with an average useful life of approximately 12 years and ~~$4.8~~$4.4 billion of ~~In-process research and development,~~ IPR&D, and provisionally recorded $5.5 billion of Goodwill, $4.4 billion of net ~~deferred~~income tax liabilities, and ~~$374~~$340 million of assumed contingent consideration. The allocation of the consideration transferred to the assets acquired and the liabilities assumed has not yet been finalized.

Bamboo Therapeutics, Inc. (R&D)

On August 1, 2016, ~~(the acquisition date),~~ we acquired all the remaining equity in Bamboo, a ~~privately held~~privately-held biotechnology company focused on developing gene therapies for the potential treatment of patients with certain rare diseases relating to neuromuscular conditions and those affecting the central nervous system, for $150 million, plus potential milestone payments of up to $495 million contingent upon the progression of key assets through development, regulatory approval and commercialization. The total fair value of the consideration transferred for Bamboo was approximately $331 million, including cash of $130 million ($101 million, net of cash acquired), contingent consideration of $157 million, consisting of milestone payments, and the fair value of Pfizer’s previously held equity interest in Bamboo of $44 million. We previously purchased a minority stake in Bamboo in the first quarter of 2016 for a payment of approximately $43 million. Upon acquiring the remaining interest in Bamboo, in the third quarter of 2016, we recognized a gain of $1 million on our existing investment in Other (income)/deductions––net. This acquisition provides us with several clinical and pre-clinical assets that complement our rare disease portfolio, an advanced recombinant AAV vector design and production technology, and a fully functional Phase I/II gene therapy manufacturing facility. Bamboo is now a wholly-owned subsidiary of Pfizer. In connection with this acquisition, we provisionally recorded $325 million of Identifiable intangible assets, consisting entirely of ~~In-process research and development.~~ IPR&D. We also provisionally recorded ~~$130~~$133 million of Goodwill and ~~$94~~$93 million of net deferred tax liabilities. The allocation of the consideration transferred to the assets acquired and the liabilities assumed has not yet been finalized.

Anacor Pharmaceuticals, Inc. (IH)

On June 24, 2016, ~~(the acquisition date),~~ we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion net of cash acquired), plus $698 million debt assumed. Anacor is now a wholly-owned subsidiary of Pfizer. Anacor is a biopharmaceutical company focused on novel small-molecule therapeutics derived from its boron chemistry platform. ~~Included within~~ Anacor’s ~~pipeline is~~crisaborole, a non-steroidal topical PDE-4 inhibitor with anti-inflammatory ~~properties.~~properties, was approved by the FDA on December 14, 2016 under the trade name, Eucrisa. In connection with this acquisition, we recorded $698 million as the fair value of notes payable in cash, and provisionally recorded ~~$5.0~~$4.9 billion in Identifiable intangible assets, primarily consisting of $4.8 billion of ~~In-process research and development~~IPR&D, and provisionally recorded ~~$1.8 billion~~$647 million of Goodwill and ~~$1.6 billion~~$352 million of net ~~deferred~~income tax liabilities. ~~The~~We do not expect significant adjustments to the allocation of the consideration transferred to the assets acquired and the liabilities ~~assumed~~assumed; however, the assessment has not yet been finalized.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Hospira, Inc.~~

On September 3, 2015 (the acquisition date), we acquired Hospira, a leading provider of sterile injectable drugs and infusion technologies as well as a provider of biosimilars, for $90 per share in cash. The total fair value of consideration transferred for Hospira was approximately $16.1 billion in cash ($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.

The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date, as well as adjustments made in the first nine months of 2016 to the amounts initially recorded in 2015 (measurement period adjustments) with a corresponding change to goodwill. The measurement period adjustments did not have a material impact on our earnings in any period. The final allocation of the consideration transferred to the assets acquired and the liabilities assumed has been completed.

(MILLIONS OF DOLLARS)
Amounts Recognized
as of Acquisition Date (as previously reported as of December 31, 2015)

Measurement Period Adjustments^(a)

Amounts Recognized as of Acquisition Date (as adjusted) Final
Working capital, excluding inventories $ 274
$ 68
$ 342
Inventories 1,924
(23 ) 1,901
PP&E 2,410
(57 ) 2,352
Identifiable intangible assets, excluding IPR&D 8,270
20
8,290
IPR&D 995
35
1,030
Other noncurrent assets 408
(46 ) 362
Long-term debt (1,928 ) —
(1,928 )
Benefit obligations (117 ) —
(117 )
Net income tax accounts (3,394 ) 14
(3,380 )
Other noncurrent liabilities (39 ) (23 ) (61 )
Total identifiable net assets 8,803
(12 ) 8,791
Goodwill 7,284
12
7,295
Net assets acquired/total consideration transferred $ 16,087
$ —
$ 16,087


^(a)	The changes in the estimated fair values are primarily to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date. The measurement period adjustments did not result from intervening events subsequent to the acquisition date.

~~Environmental Matters~~—In the ordinary course of business, Hospira incurs liabilities for environmental matters such as remediation work, asset retirement obligations and environmental guarantees and indemnifications. The contingencies for environmental matters are not significant to Pfizer’s financial statements.

~~Legal Matters~~—Hospira is involved in various legal proceedings, including product liability, patent, commercial, antitrust and environmental matters and government investigations, of a nature considered normal to its business. The contingencies arising from legal matters are not significant to Pfizer’s financial statements.

~~Tax Matters—In the ordinary course of business, Hospira incurs liabilities for income taxes~~. Income taxes are exceptions to both the recognition and fair value measurement principles associated with the accounting for business combinations. Reserves for income tax contingencies continue to be measured under the benefit recognition model as previously used by Hospira. Net liabilities for income taxes approximate $3.4 billion as of the acquisition date, which includes $109 million for uncertain tax positions. The net tax liability includes the recording of additional adjustments of approximately $3.2 billion for the tax impact of fair value adjustments and approximately $719 million for income tax matters that we intend to resolve in a manner different from what Hospira had planned or intended. For example, because we plan to repatriate certain overseas funds, we provided deferred taxes on Hospira’s unremitted earnings for which no taxes have been previously provided by Hospira as it was Hospira’s intention to indefinitely reinvest those earnings.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) September 27,
2015
September 27,
2015
Revenues $ 12,957
$ 38,034
Net income attributable to Pfizer Inc. common shareholders 2,513
7,577
Diluted EPS attributable to Pfizer Inc. common shareholders 0.40
1.21

The unaudited supplemental pro forma consolidated results were prepared using the acquisition method of accounting and do not purport to reflect what the combined company’s results of operations would have been had the acquisition occurred on January 1, 2014, nor do they project the future results of operations of the combined company or reflect the expected realization of any cost savings associated with the acquisition. The actual results of operations of the combined company may differ significantly from the pro forma adjustments reflected here due to many factors.

~~The unaudited supplemental pro forma consolidated results reflect the historical financial information of Pfizer and Hospira, adjusted to give effect to the acquisition~~B. Sale of Hospira ~~as if it had occurred on January 1, 2014, primarily for the following pre-tax adjustments:~~Infusion Systems Net Assets to ICU Medical, Inc. (EH)

~~Elimination of Hospira’s historical intangible asset amortization expense (approximately $9 million in the third quarter of 2015 and $33 million in the first nine months of 2015).~~

Additional amortization expense (approximately $70 million in the third quarter of 2015 and $321 million in the first nine months of 2015) related to the fair value of identifiable intangible assets acquired.

~~Additional depreciation expense (approximately $14 million in the third quarter of 2015 and $57 million in the first nine months of 2015) related to the fair value adjustment to PP&E acquired.~~

Adjustment related to the non-recurring fair value adjustment to acquisition-date inventory estimated to have been sold (the elimination of $75 million of charges in the third quarter of 2015 and $66 million of charges in the first nine months of 2015).

~~Adjustment to decrease interest expense (approximately $3 million in the third quarter of 2015 and $23 million in the first nine months of 2015) related to the fair value adjustment of Hospira debt.~~

Adjustment for non-recurring acquisition-related costs directly attributable to the acquisition (the elimination of $680 million of charges in the third quarter of 2015 and $724 million of charges in the first nine months of 2015), reflecting non-recurring charges incurred by both Hospira and Pfizer, which would have been recorded in 2014 under the pro forma assumption that the Hospira acquisition was completed on January 1, 2014.

The above adjustments were adjusted for the applicable tax impact. The taxes associated with the adjustments related to the fair value adjustment for acquired intangible assets, PP&E, inventory and debt reflect the statutory tax rates in the various jurisdictions where the adjustments are expected to be incurred. The taxes associated with the elimination of Hospira’s historical intangible asset amortization expense and the adjustment for the acquisition-related costs directly attributable to the acquisition were based on the tax rate in the jurisdiction in which the related deductible costs were incurred.

~~Marketed Vaccines Business of Baxter International Inc.~~

~~On December 1, 2014 (which fell 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. In connection with this acquisition, we recorded $376 million in ~~Identifiable intangible assets,~~ ~~primarily consisting of $371 million in~~ ~~Developed technology rights.~~ ~~We also recorded $194 million of~~ ~~Inventories~~ ~~and $12 million in~~ ~~Goodwill. The final allocation of the consideration transferred to the assets acquired and the liabilities assumed has been completed.~~

~~B. Assets and Liabilities Held for Sale~~

On October 6, 2016, we announced that we entered into a definitive agreement under which ICU Medical ~~will~~would acquire all of ~~Pfizer’s~~our global infusion therapy net assets, HIS, for approximately $1 billion in cash and ICU Medical ~~stock.~~common stock. HIS includes IV pumps, solutions, and devices. ~~Under~~As a result of the recent performance of HIS relative to ICU Medical’s expectations, on January 5, 2017, we entered into a revised agreement with ICU Medical under which ICU Medical would acquire HIS for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing.

The revised transaction closed on February 3, 2017. At closing, under the terms of the revised agreement, ~~Pfizer will receive approximately $400~~we received 3.2 million in newly issued shares of ICU Medical common stock ~~and $600~~(as originally agreed), which we valued at approximately $428 million ~~in cash from~~(based upon the closing price of ICU Medical ~~subject to customary adjustment~~common stock on the closing date less a discount for

lack of marketability) and are reported in Long-term investments on the condensed consolidated balance sheet as of April 2, 2017, a

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

promissory note in the amount of $75 million, which is reported in Other noncurrent assets on the condensed consolidated balance sheet as of April 2, 2017, and net cash of approximately $200 million before customary adjustments for net working ~~capital. Upon completion~~capital, which is reported in Other investing activities, net on the condensed consolidated statement of cash flows for the three months ended April 2, 2017. In addition, we are entitled to receive a contingent amount of up to an additional $225 million in cash based on ICU Medical’s achievement of certain cumulative performance targets for the combined company through December 31, 2019. After receipt of the ~~transaction, which the companies expect to occur in the first quarter of 2017, subject to customary closing conditions, including required regulatory approvals, Pfizer will~~ICU Medical shares, we own approximately ~~16.6%~~16% of ICU ~~Medical. Pfizer has also~~Medical as of April 2, 2017. We have agreed to certain restrictions on transfer of ~~its~~our ICU Medical shares for 18 months after the closing date. The promissory note from ICU Medical has a term of three years and bears interest at ~~least 18 months. At October 2, 2016,~~LIBOR plus 2.25% for the first year and LIBOR plus 2.50% for the second and third years. In the first quarter of 2017, we ~~determined that~~recognized a pre-tax loss of approximately $37 million in Other (income)/deductions––net upon the ~~carrying~~closing of the transaction in February 2017, representing an incremental charge to amounts previously recorded to write down the HIS net assets to fair value less costs to sell.

While we have received the full purchase price excluding the contingent amount as of the February 3, 2017 closing, the sale of the HIS net assets ~~held~~was not completed in certain non-U.S. jurisdictions due to temporary regulatory or operational constraints. In these jurisdictions, which represent a relatively small portion of the HIS net assets, we continue to operate the net assets for ~~sale exceeded their fair value less estimated costs to sell, resulting in a pre-tax impairment charge~~the net economic benefit of ~~$1.4 billion, which is included in~~ ~~Other (income)/deductions––net~~ ~~(see~~ ~~Note 4~~).

~~Assets~~ICU Medical, and ~~liabilities~~we are indemnified by ICU Medical against risks associated with ~~HIS were reclassified as held for~~such operations during the interim period, subject to our obligations under the definitive transaction agreements. We expect the sale ~~in the condensed consolidated balance sheet as of October 2, 2016. The HIS assets held for sale are reported in~~ ~~Assets held for sale~~ ~~and HIS liabilities held for sale are reported in~~ ~~Other current liabilities. The amounts associated with HIS, as well as other assets classified as held for sale as of October 2, 2016 and December 31, 2015, consisted~~ of the ~~following:~~

(MILLIONS OF DOLLARS) October 2,
2016
December 31,
2015
Assets Held for Sale
Inventories $ 369
$ —
Property, plant and equipment 441
—
Identifiable intangible assets 1,322
—
Goodwill 243
—
Other assets 60
—
Less: adjustment to HIS assets for net realizable value^(a)
(1,394 ) —
Total HIS assets held for sale 1,042
—
Other assets held for sale^(b)
77
9
Assets held for sale $ 1,119
$ 9

Liabilities Held for Sale
Accrued compensation and related items $ 42
$ —
Other liabilities 68
—
Total HIS liabilities held for sale $ 110
$ —


^(a)	For the quarter ending October 2, 2016, we recorded an adjustment to HIS assets for net realizable value of $1,394 million plus estimated costs to sell of $28 million for a total impairment on HIS net assets of $1,422 million.


^(b)	~~Other assets held for sale consist primarily of property, plant and equipment and other assets.~~

~~C. Research~~HIS net assets in these jurisdictions to be completed by the first quarter of 2018. As such, and ~~Development and Collaborative Arrangements~~

~~Research and Development Arrangement with NovaQuest Co-Investment Fund II, L.P.~~

~~On November 1, 2016,~~as we ~~announced the discontinuation~~have already received all of the ~~global clinical development program~~non-contingent proceeds from the sale and ICU Medical is contractually obligated to complete the transaction, we have treated these jurisdictions as sold for ~~bococizumab. Except~~accounting purposes.

In connection with the sale transaction, we entered into certain transitional agreements designed to facilitate the orderly transition of the HIS net assets to ICU Medical. These agreements primarily relate to administrative services, which are generally to be provided for a refund to NovaQuest of development cost amounts prepaid by NovaQuest to the extent such amounts were not used for program expenses, no additional payments are expected to be received from or paid to NovaQuest under this agreement.

In May 2016, our agreement with NovaQuest became effective, under which NovaQuest agreed to fund up to $250 million in development costs related to certain Phase III clinical trials of Pfizer’s bococizumab compound and Pfizer agreed to use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. NovaQuest’s development funding was expected to cover up to 40% of the development costs and was to be received over five quarters during 2016 and 2017. As there was a substantive and genuine transfer of risk to NovaQuest, the development funding applicable to program expenses through the third quarter of 2016 has been recognized by us as an obligation to perform contractual services and therefore has been recognized as a reduction of ~~Research and development expenses~~ ~~as incurred. The reduction to~~ ~~Research and development expenses~~ ~~for the third quarter of 2016 totaled $67.6 million and for the first nine months of 2016 totaled $136.9 million.~~

~~Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P.~~

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 paymentsperiod of up to ~~approximately $267 million in total based on achievement~~24 months after the closing date. We will also manufacture and supply certain HIS products for ICU Medical and ICU Medical will manufacture and supply certain retained Pfizer products for us after closing, generally for a term of ~~first commercial sale~~five years. These agreements are not material to Pfizer and ~~certain levels~~none confers upon us the ability to influence the operating and/or financial policies of ~~cumulative net sales as well as royalties on rivipansel net sales over approximately eight years. NovaQuest’s development funding is expected~~ICU Medical subsequent to ~~cover up to 100% of~~ the ~~development~~sale.

C. Collaboration Arrangement

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

costs and will be received over approximately twelve quarters from 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. The reduction to~~ ~~Research and development expenses~~ for the third quarter of 2016 totaled $14.5 million and for the first nine months of 2016 totaled $29.5 million. 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.~~

~~Research and Development Arrangement with RPI Finance Trust~~

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 U.S. or certain major markets in the 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 third quarter of 2016 totaled $11.0 million and for the first nine months of 2016 totaled $32.7 million. Fixed milestone payments due upon approval will be recorded as intangible assets and amortized to ~~Amortization of intangible assets~~ ~~over the estimated commercial life of the Ibrance product and sales-based royalties will be recorded as~~ ~~Cost of sales~~ ~~when incurred.~~

Collaboration with ~~Eli Lilly~~Merck & ~~Company~~Co., Inc.

In ~~October~~ 2013, we entered into a worldwide, except for Japan, collaboration agreement with ~~Lilly to jointly develop~~Merck for the development and ~~globally commercialize Pfizer’s tanezumab,~~commercialization of ertugliflozin (PF-04971729), our investigational oral sodium glucose cotransporter (SGLT2) inhibitor currently in Phase 3 development for the treatment of type 2 diabetes. Under the agreement, we are collaborating with Merck on the clinical development and commercialization of ertugliflozin, and ertugliflozin-containing fixed-dose combinations with metformin and Januvia (sitagliptin) tablets.

In the first quarter of 2017, we received a $90 million milestone payment from Merck upon the FDA’s acceptance for review of the NDAs for ertugliflozin and two fixed-dose combinations (ertugliflozin plus Januvia (sitagliptin) and ertugliflozin plus metformin), which ~~provides that Pfizer~~has been deferred and ~~Lilly will equally~~primarily reported in Other noncurrent liabilities and is being recognized in Other (income)/deductions––net over a multi-year period. We are eligible for additional payments associated with the achievement of future clinical, regulatory and commercial milestones. We share ~~product-development expenses as well as~~ potential revenues and certain ~~product-related costs. Following~~costs with Merck on a 60%/40% basis, with Pfizer having the decision by the 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 six 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.

~~Collaboration with OPKO Health, Inc.~~

We entered into a collaborative agreement with OPKO, which closed in January 2015, to develop and commercialize OPKO’s long-acting hGH-CTP for the treatment of GHD in adults and children, as well as for the treatment of growth failure in children born 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. 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.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

40% share.

D. Equity-Method Investments

Investment in Hisun Pfizer Pharmaceuticals Company Limited

In the first quarter of 2016, we determined that we had an other-than-temporary ~~declines~~decline in the value of Hisun Pfizer, our 49%-owned equity-method investment in China, and, therefore, we recognized a loss of ~~$211~~$81 million ~~for the first nine months of 2016~~ in Other (income)/deductions––net (see Note 4). The ~~declines~~decline in value resulted from lower expectations as to the future cash flows to be generated by Hisun Pfizer, primarily as a result of an increase in risk due to the continued slowdown in the Chinese ~~economy and changes in the expected timing and number of new product introductions by Hisun Pfizer.~~economy. As of ~~October~~April 2, ~~2016,~~2017, the carrying value of our investment in Hisun Pfizer is ~~$529~~$270 million, which is included in Long-term investments. We are continuing to evaluate strategic alternatives with Hisun. These strategic alternatives could impact the value of our investment in Hisun Pfizer in future periods.

In valuing our investment in Hisun Pfizer, we used discounted cash flow techniques, ~~utilizing a 13.0% discount rate,~~ reflecting our best estimate of the various risks inherent in the projected cash flows, and a nominal terminal year growth factor. Some of the more significant estimates

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which include the expected impact of competitive, legal, economic and/or regulatory forces on the products; the long-term growth rate, which seeks to project the sustainable growth rate over the long-term; and the discount rate, which seeks to reflect the various risks inherent in the projected cash flows, including country risk. ~~Changes in economic conditions or other factors underlying these assumptions could negatively impact the value of our investment in Hisun Pfizer in future periods.~~

Investment in Laboratório Teuto Brasileiro S.A.

We have an option to acquire the remaining 60% of Teuto, a 40%-owned generics company in Brazil, and Teuto’s other shareholders have an option to sell their 60% stake in the company to us. Under the terms of our original agreement with Teuto’s other shareholders, 2016 was the final year in which the call and put options could be exercised. We and the other Teuto shareholders have agreed to extend the period in which the options can be exercised to June 30, 2017. Our investment in Teuto is accounted for under the equity method due to the significant influence we have over the operations of Teuto through our board representation, minority veto rights and 40% voting interest.

In the first quarter of 2016, we determined that we had an other-than-temporary decline in the value of Teuto, ~~a 40%-owned generics company in Brazil,~~ and, therefore, we recognized a loss of $50 million ~~for the first nine months of 2016~~ in Other (income)/deductions––net~~(see~~ (see Note 4) related to our equity-method investment. The decline in value resulted from lower expectations as to the future cash flows to be generated by Teuto, primarily due to a slowdown in Brazilian economic conditions, which have been impacted by political risk, higher inflation, and the depreciation of the Brazilian ~~real.~~

Real.

In valuing our investment in Teuto, we used discounted cash flow techniques, ~~utilizing a 17.5% discount rate,~~ reflecting our best estimate of the various risks inherent in the projected cash flows, and a nominal terminal year growth factor. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which include the expected impact of competitive, legal, economic and/or regulatory forces on the products; the long-term growth rate, which seeks to project the sustainable growth rate over the long-term; and the discount rate, which seeks to reflect the various risks inherent in the projected cash flows, including country risk.

We have an option to acquire the remaining 60% of Teuto, and Teuto’s shareholders have an option to sell their 60% stake in the company to us. Under the terms of our agreement with Teuto’s other shareholders, 2016 is the final year in which the call and put options may be exercised. Our investment in Teuto is accounted for under the equity method due to the significant influence we have over the operations of Teuto through our board representation, minority veto rights and 40% voting interest.

~~E. Cost-Method Investment~~

~~AM-Pharma B.V.~~

In April 2015, we acquired a minority equity interest in AM-Pharma, a privately-held Dutch biopharmaceutical company focused on the development of 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, which is expected to read out in 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.~~

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

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

In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and

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

All of our businesses and functions may be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as groups such as information technology, shared services and corporate operations.

In connection with our acquisition of Hospira, we are focusing our efforts on achieving an appropriate cost structure for the combined company. For up to a three-year period post-acquisition, we expect to incur costs of approximately $1 billion(not including costs of $215 million for full-year 2015 associated with the return of acquired ~~in-process research and development~~IPR&D rights as described in the Current-Period Key Activities section of Notes to Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives in our ~~2015~~2016 Financial Report) associated with the integration of Hospira.

~~Manufacturing~~manufacturing plant network rationalization and optimization ~~where execution timelines are necessarily long. Our~~initiatives, and additional cost-reduction/productivity initiatives across the enterprise.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Optimization of our manufacturing plant network ~~strategy is expected~~ to ~~result in the exit of seven sites over the next several years. In connection with these activities, during 2014-2016,~~support IH and EH products and pipelines. During 2017-2019, we expect to incur costs of approximately ~~$400~~$750 million related to this initiative. Through April 2, 2017, we incurred approximately $49 million associated with ~~prior acquisition activity~~this initiative.

Activities in non-manufacturing related areas, which include further centralization of our corporate and costs of approximately $1.1 billion associated with new non-acquisition-related cost-reduction initiatives. Through October 2, 2016, we incurred approximately $365 million and $828 million, respectively, associated with these initiatives.

~~The 2014 global commercial structure reorganization, which primarily includes the streamlining of certain~~platform functions, ~~the realignment of regional locations and colleagues to support the businesses,~~ as well as ~~implementing the necessary system changes to support different reporting requirements. Through October 2, 2016, we incurred costs of approximately $219 million and have completed this initiative.~~

~~Other new cost-reduction/productivity initiatives, primarily related to commercial property rationalization and~~ other ~~consolidation and savings opportunities. In connection with these cost-reduction~~ activities ~~during 2014-2016,~~where opportunities are identified. During 2017-2019, we expect to incur costs of approximately ~~$1.3 billion.~~$150 million related to this initiative. Through ~~October~~April 2, ~~2016,~~2017, we incurred approximately ~~$895~~$29 million associated with ~~these initiatives.~~this initiative.

The costs expected to be incurred during ~~2014-2016,~~2017-2019, of approximately ~~$3 billion in total~~$900 million for the above-mentioned programs (but not including expected costs associated with the Hospira integration), include restructuring charges, implementation costs and additional depreciation––asset restructuring. Of this amount, we expect that about a quarter of the charges will be non-cash.

Current-Period Key Activities

InFor the ~~first nine~~three months ~~of 2016,~~ended April 2, 2017, we incurred ~~approximately $1.2 billion in cost-reduction and acquisition-related~~ costs ~~(excluding transaction costs) primarily in connection~~of $78 million associated with the 2017-2019 program, $78 million associated with the integration of Hospira and ~~the aforementioned programs.~~

$47 million associated with all other acquisition-related initiatives.



The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
	Three Months Ended
(MILLIONS OF DOLLARS)	April 2, 2017		April 3, 2016
Restructuring charges^(a):
Employee terminations	$	19	$	24
Asset impairments	24		1
Exit costs	2		4
Total restructuring charges	45		30
Transaction costs^(b)	12		24
Integration costs^(c)	101		87
Restructuring charges and certain acquisition-related costs	157		141
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows^(d):
Cost of sales	14		45
Research and development expenses	—		4
Total additional depreciation––asset restructuring	14		49
Implementation costs recorded in our condensed consolidated statements of income as follows^(e):
Cost of sales	15		43
Selling, informational and administrative expenses	9		12
Research and development expenses	7		6
Total implementation costs	31		62
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	202	$	252

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) October 2,
2016
September 27,
2015
October 2,
2016
September 27,
2015
Restructuring charges^(a):

Employee terminations $ 347
$ 241
$ 464
$ 306
Asset impairments 27
198
45
209
Exit costs 29
30
64
40
Total restructuring charges 404
469
574
555
Transaction costs^(b)
54
64
114
70
Integration costs^(c)
74
48
300
102
Restructuring charges and certain acquisition-related costs 531
581
988
727
Additional depreciation––asset restructuringrecorded in our condensed consolidated statements of income as follows^(d):

Cost of sales 46
23
145
67
Research and development expenses 1
1
5
3
Total additional depreciation––asset restructuring 47
24
151
71
Implementation costs recorded in our condensed consolidated statements of income as follows^(e):

Cost of sales 46
23
127
64
Selling, informational and administrative expenses 23
16
56
55
Research and development expenses 8
2
17
13
Other (income)/deductions––net 1
2
2
3
Total implementation costs 78
42
202
135
Total costs associated with acquisitions and cost-reduction/productivity initiatives $ 655
$ 647
$ 1,341
$ 933

^(a)

In the ~~nine~~three months ended ~~October~~April 2, 2017, restructuring charges are largely associated with cost-reduction and productivity initiatives not associated with acquisitions, as well as our acquisitions of Medivation and Anacor. Inthe three monthsendedApril 3, 2016, restructuring charges are largely associated with cost-reduction and productivity initiatives not associated with acquisitions. In the three months ended April 2, 2017, Employee terminations represent the expected reduction of the workforce by approximately ~~2,100~~150employees, mainly in manufacturing, sales, research and corporate. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination.

The restructuring charges for the three monthsended April 2, 2017 are associated with the following:

IH ($9 million); EH ($18 million income); WRD/GPD ($10 million); manufacturing operations ($24 million); and Corporate ($19 million).

The restructuring charges for the three monthsendedApril 3, 2016 are associated with the following:

For the third quarter of 2016, the IH segment ($148 million); the EH segment ($28 million); WRD, GPD and Medical (M) (WRD/GPD/M) ($52 million); manufacturing operations ($108 million); and Corporate ($67 million).

~~For the first nine months of 2016, IH ($162 million); EH ($19 million); WRD/GPD/M ($104 million); manufacturing operations ($181 million); and Corporate ($107 million).~~

~~The restructuring charges for 2015 are associated with the following:~~

~~For the third quarter of 2015,~~ IH ($9 million); EH ($~~280~~3 million); WRD/~~GPD/M~~GPD ($503 million); manufacturing operations ($2614 million); and Corporate ($~~104~~1 million).

~~For the first nine monthsof 2015, IH ($55 million); EH ($288 million); WRD/GPD/M ($66 million); manufacturing operations ($18 million); and Corporate ($127 million).~~

In September 2015, in order to eliminate certain redundancies in Pfizer’s biosimilar drug products pipeline created as a result of the acquisition of Hospira, Pfizer opted to return rights to Celltrion that Hospira had previously acquired to potential biosimilars to Rituxan® ~~(rituximab) and Herceptin~~® (trastuzumab). As such, upon return of the acquired rights, in the third quarter and first nine months of 2015, we incurred charges of $205 million, which are comprised of (i) a write-off of the applicable IPR&D assets, totaling $160 million, which is included in ~~Asset impairments; (ii) a write-off of amounts prepaid to Celltrion in the amount of $25 million, which is included in~~ ~~Asset impairments~~;~~and (iii) a payment to Celltrion of $20 million, which is included in~~ ~~Exit costs~~.

^(b)

Transaction costs represent external costs for banking, legal, accounting and other similar services, ~~most~~virtually all of which in the ~~third~~first quarter of ~~2016~~2017 are directly related to our acquisition of ~~Medivation, and most of which~~Medivation. Transaction costs in the first ~~nine months~~quarter of 2016 ~~are directly~~were primarily related to ~~our acquisitions of Medivation and Anacor, and~~ the terminated transaction with Allergan. ~~Transaction costs in 2015 represent external costs directly related to the acquisition of Hospira and primarily include expenditures for banking, legal, accounting and other similar services.~~

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

^(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. In the ~~third~~first quarter of 2017 and 2016, integration costs mostly relate to our acquisition of Hospira and for the first nine months of 2016, integration costs mostly relate to our acquisition of Hospira and the terminated transaction with Allergan. Integration costs in 2015 represent external incremental costs directlywere primarily related to our acquisition of Hospira.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


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


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



The following table provides the components of and changes in our restructuring accruals:
(MILLIONS OF DOLLARS)	Employee Termination Costs			Asset Impairment Charges			Exit Costs		Accrual
Balance, December 31, 2016^(a)	$	1,547		$	—		$	36	$	1,583
Provision	19			24			2		45
Utilization and other^(b)	(159		)	(24		)	4		(179		)
Balance, April 2, 2017^(c)	$	1,406		$	—		$	42	$	1,449

The following table provides the components of and changes in our restructuring accruals:
(MILLIONS OF DOLLARS)
Employee
Termination Costs

Asset
Impairment Charges

Exit Costs
Accrual
Balance, December 31, 2015^(a)
$ 1,109
$ —
$ 48
$ 1,157
Provision 464
45
64
574
Utilization and other^(b)
(360 ) (45 ) (50 ) (455 )
Balance, October 2, 2016^(c)
$ 1,213
$ —
$ 62
$ 1,275


^(a)	Included in Other current liabilities ($~~776~~863 million) and Other noncurrent liabilities ($~~381~~720 million).


^(b)	Includes adjustments for foreign currency translation.


^(c)	Included in Other current liabilities ($~~714~~718 million) and Other noncurrent liabilities ($~~561~~731 million).

Note 4. Other (Income)/Deductions—Net


The following table provides components of Other (income)/deductions––net:	The following table provides components of Other (income)/deductions––net:													The following table provides components of Other (income)/deductions––net:
		Three Months Ended						Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)		October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015				April 2, 2017			April 3, 2016
Interest income^(a)		$	(123	)	$	(121	)	$	(357	)	$	(332	)		$	(81	)	$	(113	)
Interest expense^(a)		291			278			889			864				309			306
Net interest expense		168			157			532			533				228			193
Royalty-related income(b)		(233		)	(204		)	(695		)	(683		)		(86		)	(187		)
Certain legal matters, net^(b)(c)		(40		)	—			494			99				8			274
Net gains on asset disposals^(c)(d)		(47		)	(35		)	(81		)	(230		)		(132		)	(9		)
Impairment on remeasurement of HIS net assets^(d)		1,422			—			1,422			—
Loss on sale of HIS net assets^(e)															37			—
Certain asset impairments^(e)(f)		133			633			1,080			658				12			131
Business and legal entity alignment costs^(f)(g)		69			60			180			224				21			51
Other, net^(g)(h)		(55		)	50			(117		)	70				(90		)	(122		)
Other (income)/deductions––net		$	1,417		$	661		$	2,815		$	670			$	(1	)	$	330

^(a)

Interest income ~~increased~~decreased in the first ~~nine months~~quarter of ~~2016,~~2017, primarily ~~due to higher~~driven by a lower investment ~~returns.~~balance. Interest expense increased slightly in the ~~third~~first quarter ~~and first nine months~~ of ~~2016,~~2017, primarily ~~due to~~as a result of higher interest rates on ~~legacy Hospira debt acquired in September 2015 and the addition of new~~interest rate swaps associated with fixed rate debt, ~~in the second quarter of 2016, partially~~mostly offset by the ~~maturity~~retirement of ~~other fixed rate~~high-coupon debt inand the ~~second quarter~~issuance of ~~2016.~~new low-coupon debt.

^(b)

Royalty-related income decreased in the first quarter of 2017, primarily due to lower royalty income for Enbrel of $117 million, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013), partially offset by the addition of Xtandi royalty-related income of $35 million.

^(c)

In the first ~~nine months~~ quarter of 2016, primarily includes ~~amounts to resolve~~an accrual for a ~~Multi-District Litigation relating to Celebrex~~then unresolved legal matter and Bextra pending against the Company in New York federal court for $486 million, which is subject to final court approval, partially offset by the reversal of a legal accrual where a loss is no longer deemed probable. In addition, the first nine months of 2016 includes a settlement related to a patent matter. ~~See~~ ~~Note 12A2~~ ~~for additional information.~~

^(c)(d)

In the first ~~nine months~~quarter of ~~2016,~~2017, primarily includes gains on sales of investments in equity and debt securities (approximately $54 million), a gain on sale of property (approximately $48 million) and gains on sales/out-licensing of product and compound rights (approximately ~~$49~~$42 million). In the first ~~nine months~~quarter of ~~2015,~~2016, primarily includes gains on sales/out-licensing of product and compound rights (approximately ~~$76 million) and gains on sales of investments in equity securities (approximately $160~~$16 million).

^(d)(e)

In the ~~third~~first quarter ~~and first nine months~~ of ~~2016,~~2017, represents aan incremental charge ~~related~~ to ~~the write-down of~~amounts previously recorded to write down the HIS net assets to fair value less ~~estimated~~ costs to ~~sell. In October 2016, ICU Medical and Pfizer announced that they entered into a definitive agreement under which ICU Medical will acquire all~~sell related to the sale of ~~Pfizer’s global infusion therapy~~HIS net assets ~~HIS, for approximately $1 billion~~to ICU Medical.

^(f)

In the first quarter of 2016, primarily includes an impairment loss of $81 millionrelated to Pfizer’s 49%-owned equity-method investment with Hisun in ~~cash~~China, Hisun Pfizer, and ~~ICU Medical stock. HIS includes IV pumps, solutions~~an impairment loss of $50 million related to Pfizer’s 40%-owned equity-method investment in Teuto. For additional information concerning Hisun Pfizer and ~~devices. See~~ Teuto, see Note 2B ~~for additional information~~.2D.

^(e)(g)

In the third quarter of 2016, primarily includes intangible asset impairment charges of $126 million, reflecting $97 million of sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma and $29 million of other IPR&D assets acquired in connection with our acquisition of King in 2011. The intangible asset impairment charges for the third quarter of 2016 are associated with the following: EH ($97 million) and IH ($29 million). In the first nine months of 2016, primarily includes intangible asset impairment charges of $767 million, reflecting (i) $331 million related to developed technology rights for a generic injectable antibiotic product for the treatment of bacterial infections; and (ii) $265 million related to an IPR&D compound for the treatment of anemia, both acquired in connection with our acquisition of Hospira; (iii) $97 million of sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma; and (iv) $74 million of other IPR&D assets, $45 million of which were acquired in connection with our acquisition of Hospira and $29 million of which were acquired in connection with our acquisition of King in 2011. The intangible asset impairment charges for the first nine months of 2016 are associated with the following: EH ($738 million) and IH ($29 million). In addition, the first nine months of 2016 includes an impairment loss of $211 million related to Pfizer’s

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

49%-owned equity-method investment with Zhejiang Hisun Pharmaceuticals Co., Ltd. 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 2D.~~

The intangible asset impairment charge for 2016 for the IPR&D compound for the treatment of anemia acquired in connection with our acquisition of Hospira reflects, among other things, the impact of regulatory delays, including delays resulting from a recent court ruling, requiring a 180-day waiting period after approval before a biosimilar product can be launched. The intangible asset impairment charges for 2016 for the sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma reflect, among other things, the impact of portfolio prioritization decisions and decreased commercial profiles of certain compounds. The intangible asset impairment charges for 2016 for developed technology rights and other IPR&D assets acquired in connection with our acquisition of Hospira reflect, among other things, the impact of new scientific findings, updated commercial forecasts, changes in pricing, and an increased competitive environment. The intangible asset impairment charges for 2016 for other IPR&D assets acquired in connection with our acquisition of King reflect changes in the competitive environment.

In the third quarter and first nine months of 2015, primarily includes an impairment loss of $470 million related to Pfizer's 49%-owned equity-method investment in Hisun Pfizer, and impairment charges for intangible assets of $163 million reflecting (i) $115 million related to developed technology rights for the treatment of attention deficit hyperactivity disorder; (ii) $28 million related to an IPR&D project for the treatment of attention deficit hyperactivity disorder; and (iii) $20 million related to an indefinite-lived Consumer Healthcare brand. The intangible asset impairment charges for the third quarter and first nine months of 2015 are associated with the following: IH ($20 million) and EH ($143 million). The intangible asset impairment charges for 2015 reflect, among other things, updated commercial forecasts due to increased competition.


^(f)	~~In the third quarter and first nine months of 2016 and 2015, represents~~Represents expenses for changes to our infrastructure to 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.


^(g)(h)	In the first ~~nine months~~quarter of 2016, primarily includes, among other things, ~~$150 million paid to Allergan for reimbursement of Allergan’s expenses associated with the terminated transaction (see~~ ~~Note 1A). The first nine months of 2016, also includes~~ income of $116 million from resolution of a contract disagreement.

The following table provides additional information about the intangible assets that were impaired during 2016 in Other (income)/deductions––net:

Fair Value^(a)

Nine Months Ended
October 2, 2016
(MILLIONS OF DOLLARS) Amount Level 1 Level 2 Level 3 Impairment
Intangible assets––IPR&D^(b)
$ 50
$ —
$ —
$ 50
$ 436
Intangible assets––Developed technology rights ^(b)
66
—
—
66
331
Total $ 116
$ —
$ —
$ 116
$ 767


^(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~~.

^(b)

Reflects intangible assets written down to fair value in the first nine months of 2016. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product and the impact of technological risk associated with IPR&D assets; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

~~Note 5. Tax Matters~~

~~A. Taxes on Income from Continuing Operations~~

Our effective tax rate for continuing operations was 17.7% for the third quarter of 2016, compared to 21.0% for the third quarter of 2015 and was 15.8% for the first nine months of 2016, compared to 23.4% for the first nine months of 2015.

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

~~a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; 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:~~

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

the unfavorable tax effects of an impairment charge related to the write-down of HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

Our effective tax rate for continuing operations was 20.8% for the first quarter of 2017, compared to 14.4% for the first quarter of 2016.

The ~~lower~~higher effective tax rate for the first ~~nine months~~quarter of ~~2016~~2017 in comparison with the same period in ~~2015~~2016 was primarily due to:

~~a favorable change in~~ the ~~jurisdictional mix~~non-recurrence of ~~earnings as a result of operating fluctuations in the normal course of business;~~

benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position;

the non-recurrence of benefits associated with our Venezuela operations; ~~as well as~~

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

~~partially offset by:~~

the ~~unfavorable~~ tax ~~effects of~~impact on an ~~impairment~~incremental charge ~~related~~ to amounts previously recorded to write down the ~~write-down of~~ HIS net assets to fair value less ~~estimated~~ costs to sell ~~mainly~~ related to ~~goodwill, which is not deductible for tax purposes, and~~the sale of HIS net assets to ICU Medical,

partially offset by:

the change in the jurisdictional mix of ~~intangible assets.~~earnings as a result of operating fluctuations in the normal course of business.

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 IRS:

With respect to Pfizer, the IRS has issued a ~~RAR~~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~~2014-2017 are open, but not under audit. All other tax years are closed.

With respect to Hospira, the ~~federal income tax audit of tax years 2010-2011 was effectively settled in the second quarter of 2016. The~~ IRS is currently auditing tax years 2012-2013 and 2014 through short-year 2015. All other tax years are closed. The tax years under audit for Hospira are not considered material to Pfizer.

With respect to Anacor and Medivation, the open tax years 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)~~(2010-2017), Japan ~~(2015-2016)~~(2015-2017), Europe ~~(2007-2016,~~(2011-2017, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America ~~(1998-2016,~~(1998-2017, primarily reflecting Brazil) and Puerto Rico ~~(2010-2016)~~(2010-2017).

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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



The following table provides the components of Tax provision/(benefit) on other comprehensive income/(loss):
	Three Months Ended
(MILLIONS OF DOLLARS)	April 2, 2017			April 3, 2016
Foreign currency translation adjustments, net^(a)	$	(21	)	$	(14	)
Unrealized holding gains/(losses) on derivative financial instruments, net	3			(36		)
Reclassification adjustments for realized gains	(52		)	(72		)
	(49		)	(108		)
Unrealized holding gains on available-for-sale securities, net	38			17
Reclassification adjustments for realized losses	11			26
	48			43
Benefit plans: actuarial gains, net	—			—
Reclassification adjustments related to amortization	50			47
Reclassification adjustments related to settlements, net	12			9
Other	5			(1		)
	66			55
Benefit plans: prior service costs and other, net	—			—
Reclassification adjustments related to amortization	(17		)	(15		)
Reclassification adjustments related to curtailments, net	(3		)	(2		)
Other	—			1
	(19		)	(16		)
Tax provision/(benefit) on other comprehensive income/(loss)	$	25		$	(41	)

The following table provides the components of Tax provision/(benefit) on other comprehensive income/(loss):
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) October 2,
2016
September 27,
2015
October 2,
2016
September 27,
2015
Foreign currency translation adjustments, net^(a)
$ —
$ (7 ) $ (15 ) $ 90
Unrealized holding losses on derivative financial instruments, net —
(57 ) (192 ) (160 )
Reclassification adjustments for realized (gains)/losses 32
15
81
43
32
(42 ) (112 ) (117 )
Unrealized holding gains/(losses) on available-for-sale securities, net 40
6
106
(63 )
Reclassification adjustments for realized (gains)/losses (14 ) 1
(16 ) 63
26
7
90
—
Benefit plans: actuarial losses, net (31 ) (51 ) (39 ) (43 )
Reclassification adjustments related to amortization 47
43
140
133
Reclassification adjustments related to settlements, net 10
12
27
35
Other 14
(9 ) 5
29
40
(4 ) 133
154
Benefit plans: prior service credits and other, net 35
(4 ) 66
188
Reclassification adjustments related to amortization (17 ) (36 ) (47 ) (42 )
Reclassification adjustments related to curtailments, net (3 ) 18
(5 ) (8 )
Other 2
2
1
2
18
(19 ) 15
139
Tax provision/(benefit) on other comprehensive income/(loss) $ 116
$ (65 ) $ 111
$ 267


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

Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests


The following table provides the changes, net of tax, in Accumulated other comprehensive loss:	The following table provides the changes, net of tax, in Accumulated other comprehensive loss:																		The following table provides the changes, net of tax, in Accumulated other comprehensive loss:
		Net Unrealized Gains/(Losses)									Benefit Plans									Net Unrealized Gains/(Losses)									Benefit Plans
(MILLIONS OF DOLLARS)		Foreign Currency Translation Adjustments			Derivative Financial Instruments			Available-For-Sale Securities			Actuarial Gains/(Losses)			Prior Service (Costs)/Credits and Other		Accumulated Other Comprehensive Loss				Foreign Currency Translation Adjustments			Derivative Financial Instruments			Available-For-Sale Securities			Actuarial Gains/(Losses)			Prior Service (Costs)/Credits and Other			Accumulated Other Comprehensive Income/(Loss)
Balance, December 31, 2015		$	(5,863	)	$	421		$	(227	)	$	(4,733	)	$	880	$	(9,522	)
Balance, December 31, 2016																				$	(6,659	)	$	348		$	(131	)	$	(5,473	)	$	879		$	(11,036	)
Other comprehensive income/(loss)^(a)		1,016			(578		)	522			310			39		1,308				242			(201		)	239			195			(32		)	442
Balance, October 2, 2016		$	(4,847	)	$	(157	)	$	295		$	(4,423	)	$	919	$	(8,214	)
Balance, April 2, 2017																				$	(6,417	)	$	147		$	108		$	(5,278	)	$	847		$	(10,594	)


^(a)	Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $1$7 million ~~loss~~income for the first ~~nine~~three months of ~~2016~~. 2017.

As of ~~October~~April 2, ~~2016,~~2017, with respect to derivative financial instruments, the amount of unrealized pre-tax ~~losses~~net gains on derivative financial instruments estimated to be reclassified into income within the next 12 months is ~~$129~~$78 million, ~~(which~~which is expected to be offset primarily by ~~gains~~losses resulting from reclassification adjustments related to foreign currency exchange-denominated intercompany sales and gains related to available-for-sale ~~securities).~~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)	October 2, 2016			December 31, 2015			April 2, 2017			December 31, 2016
Selected financial assets measured at fair value on a recurring basis^(a)
Trading funds and securities^(b)	$	304		$	287		$	297		$	325
Available-for-sale debt securities^(c)	17,522			32,078			13,236			18,632
Money market funds	1,724			934			1,706			1,445
Available-for-sale equity securities^(c)	590			603			553			540
Derivative financial instruments in a receivable position^(d):
Interest rate swaps	1,923			837			648			625
Foreign currency swaps	90			135			232			79
Foreign currency forward-exchange contracts	186			559			179			551
	22,340			35,433			16,852			22,198
Other selected financial assets
Held-to-maturity debt securities, carried at amortized cost^{(c), (e)}	1,270			1,388			1,857			1,242
Private equity securities, carried at equity-method or at cost^(e), ^(f)	1,003			1,336
Restricted stock and private equity securities, carried at cost or at equity-method^(e), ^(f)							1,187			735
	2,272			2,724			3,044			1,977
Total selected financial assets	$	24,613		$	38,157		$	19,896		$	24,175
Selected financial liabilities measured at fair value on a recurring basis^(a)
Derivative financial instruments in a liability position^(g):
Interest rate swaps	$	3		$	139		$	227		$	148
Foreign currency swaps	1,349			1,489			1,396			1,374
Foreign currency forward-exchange contracts	503			81			143			143
	1,855			1,709			1,765			1,665
Other selected financial liabilities
Short-term borrowings:
Principal amount	13,602			10,160			7,678			10,674
Net fair value adjustments related to hedging and purchase accounting	47			2			10			24
Net unamortized discounts, premiums and debt issuance costs^(h)	(16		)	(3		)
Net unamortized discounts, premiums and debt issuance costs							(8		)	(11		)
Total short-term borrowings, carried at historical proceeds, as adjusted^(e)	13,633			10,159			7,680			10,688
Long-term debt:
Principal amount	28,073			27,573			35,590			30,529
Net fair value adjustments related to hedging and purchase accounting	2,447			1,294			896			998
Net unamortized discounts, premiums and debt issuance costs^(h)	(83		)	(127		)
Net unamortized discounts, premiums and debt issuance costs							(156		)	(130		)
Total long-term debt, carried at historical proceeds, as adjusted^(i)(h)	30,437			28,740			36,330			31,398
	44,071			38,899			44,010			42,085
Total selected financial liabilities	$	45,926		$	40,608		$	45,775		$	43,750


^(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 liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than 2% that use Level 1 inputs and money market funds measured at net asset value.

^(b)

As of ~~October~~April 2, ~~2016,~~2017, trading funds and securities are composed of ~~$196~~$238 million of trading equity funds ~~$12 million of trading securities~~ and ~~$96~~$59 million of trading debt funds. As of December 31, ~~2015,~~2016, trading funds and securities are composed of ~~$185~~$236 million of trading equity funds and ~~$102~~$89 million of trading debt funds. As of ~~October~~April 2, ~~2016~~2017 and December 31, ~~2015,~~2016, trading equity funds of ~~$69~~$53 million and ~~$85~~$71 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 ~~$91~~$36 million as of ~~October~~April 2, ~~2016;~~2017; and foreign currency forward-exchange contracts with fair values of ~~$136~~$162 million as of December 31, ~~2015.~~2016.

^(e)

The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities at cost and short-term borrowings not measured at fair value on a recurring basis were not significant as of ~~October~~April 2, ~~2016~~2017 or December 31, ~~2015.~~2016. 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. ~~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.~~

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


^(f)	Restricted stock as of April 2, 2017 is primarily composed of $428 million representing the value of 3.2 million shares of ICU Medical common stock received on February 3, 2017. See Note 2B for additional information. Our ~~private~~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 ~~$211~~$261 million and foreign currency forward-exchange contracts with fair values of ~~$145~~$106 million as of ~~October~~April 2, ~~2016;~~2017; and foreign currency swaps with fair values of ~~$234~~$269 million and foreign currency forward-exchange contracts with fair values of ~~$59~~$113 million as of December 31, ~~2015.~~2016.


^(h)	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. See ~~Note 1B~~ ~~for additional information.~~

⁽ⁱ⁾

The fair value of our long-term debt (not including the current portion of long-term debt) was ~~$34.3~~$40.4 billion as of ~~October~~April 2, ~~2016~~2017 and ~~$32.7~~$34.9 billion as of December 31, ~~2015.~~2016. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. ~~Generally, the difference between the~~Long-term debt includes foreign currency long-term borrowings with fair ~~value~~values 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.~~$4.3 billion as of April 2, 2017, which are used as hedging instruments.



The following table provides the classification of these selected financial assets and liabilities in our condensed consolidated balance sheets:
(MILLIONS OF DOLLARS)	April 2, 2017		December 31, 2016
Assets
Cash and cash equivalents	$	986	$	547
Short-term investments	10,503		15,255
Other current assets^(a)	511		567
Long-term investments	7,346		7,116
Other noncurrent assets^(b)	549		689
	$	19,896	$	24,175
Liabilities
Short-term borrowings, including current portion of long-term debt	$	7,680	$	10,688
Other current liabilities^(c)	434		443
Long-term debt	36,330		31,398
Other noncurrent liabilities^(d)	1,331		1,222
	$	45,775	$	43,750

The following table provides the classification of these selected financial assets and liabilities in our condensed consolidated balance sheets:
(MILLIONS OF DOLLARS) October 2,
2016
December 31,
2015
Assets
Cash and cash equivalents $ 628
$ 978
Short-term investments 12,277
19,649
Other current assets^(a)
293
587
Long-term investments 9,507
15,999
Other noncurrent assets^(b)
1,907
944
$ 24,613
$ 38,157
Liabilities

Short-term borrowings, including current portion of long-term debt^(c)
$ 13,633
$ 10,159
Other current liabilities^(d)
805
645
Long-term debt^(c)
30,437
28,740
Other noncurrent liabilities^(e)
1,050
1,064
$ 45,926
$ 40,608

^(a)

As of ~~October~~April 2, ~~2016,~~2017, derivative instruments at fair value include interest rate swaps ($49159 million), foreign currency swaps ($67195 million) and foreign currency forward-exchange contracts ($~~177~~156 million) and, as of December 31, ~~2015,~~2016, include interest rate swaps ($226 million), foreign currency swaps ($4643 million) and foreign currency forward-exchange contracts ($~~538~~497 million).

^(b)

As of ~~October~~April 2, ~~2016,~~2017, derivative instruments at fair value include interest rate swaps ($~~1.9 billion)~~489 million), foreign currency swaps ($2337 million) and foreign currency forward-exchange contracts ($923 million) and, as of December 31, ~~2015,~~2016, include interest rate swaps ($~~835~~599 million), foreign currency swaps ($8936 million) and foreign currency forward-exchange contracts ($2054 million).


^(c)	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. ~~See~~ ~~Note 1B~~ ~~for additional information.~~

^(d)

As of ~~October~~April 2, ~~2016,~~2017, derivative instruments at fair value include foreign currency swaps ($296 million) and foreign currency forward-exchange contracts ($138 million) and, as of December 31, 2016, include interest rate swaps ($1 million), foreign currency swaps ($~~320~~300 million) and foreign currency forward-exchange contracts ($~~483 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~~143 million).

^(e)(d)

As of ~~October~~April 2, ~~2016,~~2017, derivative instruments at fair value include interest rate swaps ($2226 million), foreign currency swaps ($~~1.0~~1.1 billion) and foreign currency forward-exchange contracts ($205 million) and, as of December 31, ~~2015,~~2016, include interest rate swaps ($~~134~~147 million), and foreign currency swaps ($~~928 million) and foreign currency forward-exchange contracts ($1 million)~~1.1 billion).

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								October 2, 2016		Years								April 2, 2017
(MILLIONS OF DOLLARS)	Within 1		Over 1 to 5		Over 5 to 10		Over 10		Total		Within 1		Over 1 to 5		Over 5 to 10		Over 10		Total
Available-for-sale debt securities
Corporate debt^(a)	$	2,399	$	3,824	$	2,088	$	25	$	8,336	$	2,418	$	2,709	$	1,567	$	14	$	6,708
Western European, Asian, Scandinavian and other government debt^(b)	4,247		661		8		—		4,916
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities	3		56		1		—		61
Western European, Scandinavian and other government debt^(b)											3,090		422		—		—		3,512
Western European, Scandinavian and other government agency debt^(b)											875		137		—		—		1,012
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities											556		—		—		—		556
Other asset-backed debt^(c)											355		120		17		3		495
U.S. government debt	702		93		—		—		795		427		60		—		—		487
Western European, Scandinavian and other government agency debt^(b)	1,245		137		—		—		1,383
Supranational debt^(b)	306		346		—		—		652		220		245		—		—		465
Other asset-backed debt^(c)	449		331		20		3		803
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities	575		1		—		—		576
Held-to-maturity debt securities
Time deposits and other	1,046		1		—		—		1,048		1,505		—		3		—		1,509
Western European government debt^(b)	222		—		—		—		222		348		—		—		—		348
Total debt securities	$	11,195	$	5,451	$	2,118	$	29	$	18,792	$	9,795	$	3,693	$	1,587	$	17	$	15,092


^(a)	Issued by a diverse group of corporations, ~~largely consisting of financial institutions, virtually~~with a significant concentration in the technology sector, all of which are investment-grade.


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

^(c)

Includes receivable-backed,loan-backed, ~~receivable-backed,~~ and mortgage-backed securities, all of which are ~~investment-grade~~high quality and in senior positions in the capital structure of the security. ~~Loan-backed~~Receivable-backed securities are collateralized by credit cards receivables, 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~~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 ~~$8.0~~$4.1 billion as of ~~October~~April 2, ~~2016~~2017 and ~~$4.9~~$5.8 billion as of December 31, ~~2015.~~

~~On June 24, 2016, we acquired Anacor and assumed its short-term debt with an acquisition date fair value of $698 million, which was redeemed in the second and third quarters of~~ 2016.

D. Long-Term Debt

~~On June 3, 2016, we completed a public offering of $5.0 billion aggregate principal amount of senior unsecured notes with a weighted-average~~



The following table provides the principal amounts of senior unsecured long-term debt issued in the first quarter of 2017:
		As of April 2, 2017
(MILLIONS)	Maturity Date	Euro		U.S. Dollar
3-month EURIBOR + 0.20% floating rate notes (0% floor)	March 6, 2019	€	1,250	$	1,335
0.00% euro notes^(a)	March 6, 2020	1,000		1,068
0.25% euro notes^(a)	March 6, 2022	1,000		1,068
1.00% euro notes^(a)	March 6, 2027	750		801
Total euro long-term debt issued in the first quarter of 2017^(b)		€	4,000	$	4,271
4.20% notes^(c)	March 17, 2047			1,065
Total long-term debt issued in the first quarter of 2017				$	5,336


^(a)	Redeemable at any time, in whole, or in part, at our option prior to 30 to 90 days of maturity date at the comparable German government bond rate, plus 0.15%; plus, in each case, accrued and unpaid interest. The fixed rate euro notes are also redeemable at our option, in whole, or in part, within 30 to 90 days of maturity date.

^(b)The weighted average effective interest rate ~~of 2.09%. The~~for the euro notes ~~are redeemable, in whole or in part,~~ at any time at our option, at a redemption price equal to the greater of 100% of the principal amount of the notes or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate, plus an incremental spread ranging between 0.5% and 0.15%, depending on the maturity; plus, in each case, accrued and unpaid interest. Interest is payable semi-annually.issuance was 0.23%.


^(c)	The notes, issued in U.S. dollars in Taiwan, are redeemable, at our option, in whole but not in part, on each March 17 on or after March 17, 2020.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



The following table provides the maturity schedule of our Long-term debt outstanding as of April 2, 2017:
(MILLIONS OF DOLLARS)	2018		2019		2020		2021		After 2021		Total
Maturities	$	3,235	$	4,682	$	1,422	$	4,270	$	22,721	$	36,330

The following table provides the principal amounts and components of unsecured long-term debt issued in the second quarter of 2016:
(MILLIONS OF DOLLARS) Maturity Date
As of October 2,
2016

1.20% Notes (2018 Notes) June 1, 2018 $ 1,250
1.45% Notes (2019 Notes) June 3, 2019 850
1.95% Notes (2021 Notes) June 3, 2021 1,150
2.75% Notes (2026 Notes) June 3, 2026 1,250
4.40% Notes (2044 Notes) May 15, 2044 500
Total long-term debt issued in the second quarter of 2016 $ 5,000

The following table provides the maturity schedule of our Long-term debt outstanding as of October 2, 2016:
(MILLIONS OF DOLLARS) 2017 2018 2019 2020 After 2020 Total
Maturities $ —
$ 3,618
$ 5,678
$ 383
$ 20,758
$ 30,437

E. Derivative Financial Instruments and Hedging Activities

Foreign Exchange Risk

As of ~~October~~April 2, ~~2016,~~2017, the aggregate notional amount of foreign exchange derivative financial instruments hedging or offsetting foreign currency exposures was ~~$36.4~~$26.3 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 ~~1.9~~$1.9 billion U.K. pound debt maturing in 2038.

We designate foreign currency forward-exchange contracts as cash flow hedges of a portion of our forecasted euro, Japanese yen, U.K. pound, Australian dollar, and Canadian dollar-denominated intercompany inventory sales expected to occur no more than two years from the date of each hedge. As of April 2, 2017, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted sales was $3.2 billion, with a pre-tax gain of $112 million deferred in Accumulated other comprehensive loss. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $96 million within the next 12 months into Cost of sales. In the first quarter of 2017, we recognized a $45 million gain as an offset to Cost of sales.

Interest Rate Risk

As of ~~October~~April 2, ~~2016,~~2017, the aggregate notional amount of interest rate derivative financial instruments designated as fair value hedges was ~~$19.5~~$14.9 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																		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)}						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 and COS (Effective Portion)^{(a), (d)}
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015			April 2, 2017			April 3, 2016			April 2, 2017			April 3, 2016			April 2, 2017		April 3, 2016
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign currency swaps	$	—		$	—		$	87		$	(96	)	$	(39	)	$	(86	)	$	—		$	—		$	88		$	55		$	46	$	118
Foreign currency forward-exchange contracts	2			—			(212		)	(89		)	(111		)	120			(3		)	1			(96		)	(328		)	195		221
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency forward-exchange contracts	—			—			—			(5		)	—			—			—			(2		)	—			(12		)	—		—

Derivative Financial Instruments Not Designated as Hedges:
Foreign currency forward-exchange contracts	20			50			—			—			—			—			(141		)	(1		)	—			—			—		—
Foreign currency swaps	(4		)	—			—			—			—			—			1			(23		)	—			—			—		—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings	—			—			—			(12		)	—			—			—			—			—			(26		)	—		—
All other net	—			—			—			(32		)	—			—
Foreign currency long-term debt																			—			—			(57		)	—			—		—
	$	18		$	49		$	(126	)	$	(235	)	$	(150	)	$	35		$	(143	)	$	(25	)	$	(66	)	$	(311	)	$	242	$	339

	Nine 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)	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign currency swaps	$	—		$	—		$	(204	)	$	(594	)	$	(165	)	$	(451	)
Foreign currency forward-exchange contracts	1			—			(770		)	532			(118		)	996
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency forward-exchange contracts	1			2			(15		)	254			—			—

Derivative Financial Instruments Not Designated as Hedges:
Foreign currency forward-exchange contracts	(49		)	(64		)	—			—			—			—
Foreign currency swaps	(9		)	(2		)	—			—			—			—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings	—			—			(26		)	6			—			—
All other net	—			—			1			(18		)	—			—
	$	(56	)	$	(64	)	$	(1,014	)	$	180		$	(283	)	$	545


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

OCI = Other comprehensive income/(loss), included in thecondensed consolidated statements of comprehensive income.


^(b)	~~Also, includes~~Includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges (primarily interest rate swaps), as well as the offsetting gains and losses attributable to the hedged items in such hedging relationships.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


^(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 Other comprehensive income/(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 hedging instruments, the effective portion is included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.

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 ~~October~~April 2, ~~2016,~~2017, the aggregate fair value of these derivative instruments that are in a net liability position was ~~$542~~$837 million, for which we have posted collateral of ~~$551~~$882 million in the normal course of business. If there had been a ratings downgrade, ~~to below an A rating by S&P or the equivalent rating by Moody~~’s, we would not have been required to post any collateral to our counterparties.

F. Credit Risk

On an ongoing basis, we review the creditworthiness of counterparties to our foreign exchange and interest rate agreements and do not expect to incur a significant loss from failure of any counterparties to perform under the agreements. There are no significant concentrations of credit risk related to our financial instruments with any individual ~~counterparty.~~counterparty, except for certain significant customers. As of ~~October~~April 2, ~~2016,~~2017, we had ~~$2.1 billion~~$890 million due from a well-diversified, ~~highly rated~~high quality group ~~(S&P ratings~~ of ~~mostly A or better) of bank counterparties~~technology sector companies 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 credit-support agreements that provide for the ability to request collateral payments depending on levels of ~~exposure.~~exposure, our credit rating and the credit rating of the counterparty. As of ~~October~~April 2, ~~2016,~~2017, we received cash collateral of ~~$1.3 billion~~$242 million from various counterparties. The collateral primarily supports the approximate fair value of our derivative contracts. With respect to the collateral received, 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 2, 2017		December 31, 2016
Finished goods	$	3,160	$	2,293
Work-in-process	3,445		3,696
Raw materials and supplies	809		793
Inventories^(a)	$	7,415	$	6,783
Noncurrent inventories not included above^(b)	$	665	$	683

The following table provides the components of Inventories:
(MILLIONS OF DOLLARS) October 2,
2016
December 31,
2015
Finished goods $ 2,680
$ 2,714
Work-in-process 3,965
3,932
Raw materials and supplies 862
867
Inventories^(a)
$ 7,507
$ 7,513
Noncurrent inventories not included above^(b)
$ 583
$ 594

^(a)

The change from December 31, ~~2015~~2016 reflects ~~among other things,~~ the ~~reclassification~~build of ~~$369 million~~inventory primarily for new product launches and to ~~Assets held~~meet targeted levels for ~~sale~~ ~~during~~certain products, partially offset by inventory reductions in the ~~third quarter~~normal course of ~~2016 (see~~ ~~Note 2B)~~.

business, including those related to demand.


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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 9. Identifiable Intangible Assets and Goodwill

A. Identifiable Intangible Assets

Balance Sheet Information



The following table provides the components of Identifiable intangible assets:
	April 2, 2017							December 31, 2016
(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	$	89,027	$	(50,894	)	$	38,133	$	83,390	$	(49,650	)	$	33,740
Brands	2,096		(1,060		)	1,037		2,092		(1,032		)	1,060
Licensing agreements and other	1,871		(1,031		)	840		1,869		(1,005		)	864
	92,994		(52,985		)	40,009		87,351		(51,687		)	35,664
Indefinite-lived intangible assets
Brands and other	6,895					6,895		6,883					6,883
IPR&D^(a)	5,522					5,522		10,101					10,101
	12,418					12,418		16,984					16,984
Identifiable intangible assets^(b)	$	105,411	$	(52,985	)	$	52,427	$	104,335	$	(51,687	)	$	52,648

The following table provides the components of Identifiable intangible assets:
October 2, 2016 December 31, 2015
(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 $ 83,935
$ (49,105 ) $ 34,830
$ 77,613
$ (47,193 ) $ 30,419
Brands 2,117
(1,013 ) 1,104
1,973
(928 ) 1,044
Licensing agreements and other 1,801
(985 ) 816
1,619
(918 ) 701
87,854
(51,103 ) 36,750
81,205
(49,040 ) 32,165
Indefinite-lived intangible assets
Brands and other 6,918

6,918
7,021

7,021
In-process research and development 10,569

10,569
1,171

1,171
17,487

17,487
8,192

8,192
Identifiable intangible assets^(a)
$ 105,341
$ (51,103 ) $ 54,238
$ 89,396
$ (49,040 ) $ 40,356


^(a)	The ~~increase~~decrease in IPR&D primarily reflects the transfer of $4.8 billion from IPR&D to Developed technology rights to reflect the approval of Eucrisa, partially offset by IPR&D acquired as part of the acquisition of AstraZeneca’s small molecule anti-infectives business (see Note 2A).

^(b)

The decrease in Identifiable intangible assets, less accumulated amortization, is primarily ~~related~~due to amortization, partially offset by assets acquired as part of the ~~acquisitions of Medivation, Anacor and Bamboo (see~~ ~~Note 2A), the impact of foreign exchange and the impact of measurement period adjustments related to our~~ acquisition of ~~Hospira~~AstraZeneca’s small molecule anti-infectives business (see Note 2A~~), partially offset by amortization, impairments and the reclassification of $1.3 billion to~~ ~~Assets held for sale~~ ~~during the third quarter of 2016 (see~~ ~~Note 2B~~). ~~For information about impairments, see~~ ~~Note 4~~.



Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization:
	April 2, 2017
	IH		EH		WRD
Developed technology rights	68	%	32	%	—	%
Brands, finite-lived	74	%	26	%	—	%
Brands, indefinite-lived	71	%	29	%	—	%
IPR&D	81	%	12	%	6	%

Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization:
October 2, 2016
IH EH WRD
Developed technology rights 64 % 35 % — %
Brands, finite-lived 74 % 26 % — %
Brands, indefinite-lived 71 % 29 % — %
In-process research and development 92 % 5 % 3 %

Amortization

Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in ~~Amortization of intangible assets,~~ ~~as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in~~ ~~Cost of sales, Selling, informational and administrative expenses~~ ~~and/or~~ ~~Research and development expenses, as appropriate.~~ Total amortization expense for finite-lived intangible assets was ~~$988 million for the third quarter of 2016 and $950 million for the third quarter of 2015, and $3.0~~$1.2 billion for the first ~~nine months~~quarter of ~~2016~~2017 and ~~$2.8~~$1.0 billion for the first ~~nine months~~quarter of ~~2015.~~2016.

I~~n-Process Research and Development~~

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

B. Goodwill



The following table provides the components of and changes in the carrying amount of Goodwill:
(MILLIONS OF DOLLARS)	IH		EH			Total
Balance, December 31, 2016	$	30,134	$	24,315		$	54,449
Additions^(a)	3		68			71
Other^(b)	171		(35		)	136
Balance, April 2, 2017	$	30,308	$	24,348		$	54,656


^(a)	EH additions primarily relate to our acquisition of AstraZeneca’s small molecule anti-infectives business and is subject to change until we complete the valuation of assets acquired and liabilities assumed from AstraZeneca (see Note 2A).


^(b)	Primarily reflects the impact of foreign exchange and an adjustment of our estimate of goodwill associated with the HIS net assets sold.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~B. Goodwill~~

The following table provides the components of and changes in the carrying amount of Goodwill:
(MILLIONS OF DOLLARS) IH EH Total
Balance, December 31, 2015 $ 23,809
$ 24,433
$ 48,242
Additions^(a)
7,403
12
7,415
Other^(b)
494
130
624
Balance, October 2, 2016 $ 31,706
$ 24,575
$ 56,281


^(a)	IH additions primarily relate to our acquisitions of Medivation, Anacor and Bamboo and are subject to change until we complete the valuations of assets acquired and liabilities assumed from Medivation, Anacor and Bamboo (see ~~Note 2A~~).


^(b)	~~Primarily reflects the impact of foreign exchange and, with respect to EH, the impact of the reclassification of $243 million to~~ ~~Assets held for sale~~ ~~during the third quarter of 2016 (see~~ ~~Note 2B~~).

Effective in the second quarter of 2016, our segments were reorganized to reflect that we now manage our innovative pharmaceutical and consumer healthcare operations as one business segment, IH (previously these businesses were managed as two segments: the GIP segment and the VOC segment). As a result of this change, our goodwill associated with our former GIP segment is required to be reallocated to new reporting units. The allocation of goodwill is a complex process that requires, among other things, that we determine the fair value of each reporting unit. Therefore, we have not yet completed the allocation, but we expect that it will be completed in the current year.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Note 10. Pension and Postretirement Benefit Plans



The following table provides the components of net periodic benefit cost:
	Three Months Ended
	Pension Plans
	U.S. Qualified						U.S. Supplemental (Non-Qualified)				International						Postretirement Plans
(MILLIONS OF DOLLARS)	Apr 2, 2017			Apr 3, 2016			Apr 2, 2017		Apr 3, 2016		Apr 2, 2017			Apr 3, 2016			Apr 2, 2017			Apr 3, 2016
Net periodic benefit cost/(credit):
Service cost	$	68		$	63		$	6	$	5	$	41		$	42		$	11		$	10
Interest cost	162			134			14		12		50			60			23			22
Expected return on plan assets	(259		)	(241		)	—		—		(84		)	(98		)	(9		)	(8		)
Amortization of:
Actuarial losses	115			99			13		9		28			23			8			7
Prior service costs (credits)	2			1			—		—		(1		)	—			(46		)	(41		)
Curtailments	5			2			—		—		—			—			(7		)	(6		)
Settlements	31			15			21		10		1			1			—			—
	$	124		$	73		$	53	$	35	$	35		$	27		$	(21	)	$	(16	)

The following table provides the components of net periodic benefit cost:
Three Months Ended
Pension Plans

U.S.
Qualified^(a)

U.S.
Supplemental
(Non-Qualified)^(b)

International^(c)

Postretirement
Plans^(d)
(MILLIONS OF DOLLARS) Oct 2, 2016
Sep 27, 2015
Oct 2, 2016
Sep 27, 2015
Oct 2, 2016
Sep 27, 2015
Oct 2, 2016
Sep 27, 2015
Net periodic benefit cost/(credit):
Service cost^(e)
$ 69
$ 71
$ 5
$ 5
$ 41
$ 46
$ 11
$ 14
Interest cost^(e)
218
169
18
13
58
77
33
26
Expected return on plan assets (239 ) (272 ) —
—
(95 ) (105 ) (8 ) (13 )
Amortization of:

Actuarial losses 99
89
9
11
23
31
9
9
Prior service costs (credits) 1
(2 ) —
—
(1 ) (2 ) (45 ) (43 )
Curtailments 2
1
1
—
—
—
(8 ) (4 )
Settlements 21
32
7
4
1
1
—
—
Special termination benefits —
—
—
—
—
1
—
—
$ 170
$ 88
$ 39
$ 33
$ 27
$ 49
$ (9 ) $ (11 )

Nine Months Ended
Pension Plans

U.S.
Qualified^(a)

U.S.
Supplemental
(Non-Qualified)^(b)

International^(c)

Postretirement
Plans^(d)
(MILLIONS OF DOLLARS) Oct 2, 2016
Sep 27, 2015
Oct 2, 2016
Sep 27, 2015
Oct 2, 2016
Sep 27, 2015
Oct 2, 2016
Sep 27, 2015
Net periodic benefit cost/(credit):
Service cost^(e)
$ 193
$ 216
$ 14
$ 17
$ 126
$ 140
$ 31
$ 41
Interest cost^(e)
486
505
40
41
178
232
77
91
Expected return on plan assets (721 ) (813 ) —
—
(291 ) (314 ) (25 ) (39 )
Amortization of:
Actuarial losses 297
253
27
34
70
94
23
28
Prior service costs (credits) 4
(5 ) (1 ) (1 ) (2 ) (5 ) (127 ) (104 )
Curtailments 5
2
1
—
(1 ) —
(14 ) (20 )
Settlements 52
76
23
21
2
1
—
—
Special termination benefits —
—
—
—
—
1
—
—
$ 316
$ 235
$ 105
$ 110
$ 81
$ 150
$ (36 ) $ (5 )

^(a)

The increase in net periodic benefit costs for the three months ended October 2, 2016, compared to the three months ended September 27, 2015, for our U.S. qualified pension plans was primarily due to (i) higher interest costs resulting from a change in our approach in the third quarter of 2016 for measuring service and interest costs (the adjustment increased interest costs by $57 million related to prior periods in 2016 (see (e) below)), (ii) a lower expected return on plan assets resulting from a lower expected rate of return, as well as a net decrease of approximately $1.1 billion in the asset base, due in part to lump-sum payments made in 2015 to certain terminated vested colleagues to settle Pfizer’s pension obligation, partially offset by a voluntary contribution of $1.0 billion made at the beginning of January 2016, and (iii) an increase in the amounts amortized for actuarial losses, primarily as a result of the addition of Hospira qualified plans. The aforementioned increases were partially offset by lower settlement activity in 2016. The increase in net periodic benefit costs for the nine months ended October 2, 2016, compared to the nine months ended September 27, 2015, for our U.S. qualified pension plans was primarily driven by (i) a lower expected return on plan assets resulting from a lower expected rate of return, as well as a net decrease of approximately $1.1 billion in the asset base, due in part to lump-sum payments made in 2015 to certain terminated vested colleagues to settle Pfizer’s pension obligation, partially offset by a voluntary contribution of $1.0 billion made at the beginning of January 2016, and (ii) an increase in the amounts amortized for actuarial losses, primarily as a result of the addition of Hospira qualified plans. The aforementioned increases were partially offset by (i) lower service costs resulting from a higher discount rate, (ii) lower settlement activity, and (iii) lower interest costs resulting from a lower beginning benefit obligation.

^(b)

The increase in net periodic benefit costs for the three months ended October 2, 2016, compared to the three months ended September 27, 2015, for our U.S. non-qualified pension plans was primarily due to (i) higher interest costs resulting from a change in our approach in the third quarter for measuring service and interest costs (the adjustment increased interest costs by $4 million related to prior periods in 2016

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

(see (e) below)), and (ii) higher settlement activity. The aforementioned increases were partially offset by a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation. The decrease in net periodic benefit costs for the nine months ended October 2, 2016, compared to the nine months ended September 27, 2015, for our U.S. non-qualified pension plans was primarily driven by (i) a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation, and (ii) lower service costs resulting from a higher discount rate. The aforementioned decreases were partially offset by an increase in settlement activity.

^(c)

The decrease in net periodic benefit costs for the three and nine months ended October 2, 2016, compared to the three and nine months ended September 27, 2015, for our international pension plans was primarily driven by (i) lower service and interest costs, resulting from a change in our approach for measuring service and interest costs (see (e) below), and (ii) a decrease in the amounts amortized for actuarial losses resulting from large gains in 2015, which decreased the plan net loss position. The aforementioned decreases to our net periodic benefit costs were partially offset by a decrease in the expected return on plan assets due to a lower expected rate of return on plan assets.

^(d)

The decrease in net periodic benefit credit for the three months ended October 2, 2016, compared to the three months ended September 27, 2015, for our postretirement plans was primarily driven by (i) higher interest costs resulting from a change in our approach in the third quarter of 2016 for measuring service and interest costs (the adjustment increased interest costs by $8 million related to prior periods in 2016 (see (e) below)), and (ii) a decrease in expected return on plan assets, resulting from a decrease in plan assets, reflecting payments by the plan for IRC 401(h) reimbursements to Pfizer for eligible 2014 and 2015 prescription drug expenses for certain retirees. The aforementioned changes were partially offset by (i) higher curtailment gains and (ii) lower service costs resulting from a higher discount rate. The increase in net periodic benefit credit for the nine months ended October 2, 2016, compared to the nine months ended September 27, 2015, for our postretirement plans was primarily driven by (i) an increase in prior service credits due to the postretirement medical plan cap changes during 2016 and 2015, (ii) lower interest costs resulting from a lower benefit obligation, and (iii) lower service costs resulting from a higher discount rate. The aforementioned changes were partially offset by (i) a decrease in expected return on plan assets, primarily resulting from a decrease in plan assets, reflecting payments by the plan for IRC 401(h) reimbursements to Pfizer for eligible 2014 and 2015 prescription drug expenses for certain retirees, (ii) lower curtailment gains, and (iii) a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation.

^(e)

Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for certain international pension and other postretirement benefit plans. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the 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 for certain international plans 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 $42 million, which is recognized evenly over each quarter of the year. Effective January 1, 2016, the Company made a similar change for its U.S. pension and other postretirement benefit plans, but in the third quarter of 2016, we determined that our use of the bond model required the measurement of such costs to be conceptually aligned with the measurement of the pension benefit obligation. As such, 2016 service and interest costs for the U.S. plans were measured utilizing a single weighted-average discount rate derived from the bond model consistent with the approach used in 2015, resulting in an adjustment to increase net periodic pension cost by $112 million in the third quarter of 2016.

As of and for the ~~nine~~three months ended ~~October~~April 2, ~~2016,~~2017, we contributed and expect to contribute from our general assets as follows:

Pension Plans
(MILLIONS OF DOLLARS) U.S. Qualified U.S. Supplemental (Non-Qualified) International Postretirement Plans
Contributions from/(reimbursements of) our general assets for the nine months ended October 2, 2016^(a)
$ 1,000
$ 123
$ 145
$ (28 )
Expected contributions from our general assets during 2016^(b)
$ 1,000
$ 146
$ 194
$ 20



	Pension Plans
(MILLIONS OF DOLLARS)	U.S. Qualified		U.S. Supplemental (Non-Qualified)		International		Postretirement Plans
Contributions from our general assets for the three months ended April 2, 2017	$	1,000	$	75	$	49	$	53
Expected contributions from our general assets during 2017^(a)	$	1,095	$	152	$	165	$	188


^(a)	~~Contributions to the postretirement plans reflect IRC 401(h) reimbursements totaling $198 million received for eligible 2014 and 2015 prescription drug expenses for certain retirees.~~

^(b)

Contributions expected to be made for ~~2016~~ are inclusive of amounts contributed during the ~~nine~~three months ended ~~October~~April 2, ~~2016,~~2017, including the $1.0 billion voluntary contribution that was made in January ~~2016~~2017 for the U.S. qualified plans, which was considered pre-funding for future anticipated mandatory contributions and is also expected to reduce Pension Benefit Guaranty Corporation variable rate premiums. The U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 11. Earnings Per Common Share Attributable to Common Shareholders


The following table provides the detailed calculation of Earnings per common share (EPS):	The following table provides the detailed calculation of Earnings per common share (EPS):									The following table provides the detailed calculation of Earnings per common share (EPS):
		Three Months Ended				Nine Months Ended					Three Months Ended
(IN MILLIONS)		October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015			April 2, 2017		April 3, 2016
EPS Numerator––Basic
Income from continuing operations		$	1,320	$	2,130	$	6,380	$	7,141		$	3,130	$	3,048
Less: Net income attributable to noncontrolling interests		—		9		25		23			9		9
Income from continuing operations attributable to Pfizer Inc.		1,320		2,122		6,355		7,118			3,121		3,038
Less: Preferred stock dividends––net of tax		—		—		1		1			—		—
Income from continuing operations attributable to Pfizer Inc. common shareholders		1,320		2,121		6,354		7,117			3,121		3,038
Discontinued operations––net of tax		—		8		—		14			—		—
Less: Discontinued operations––net of tax, attributable to noncontrolling interests		—		—		—		—
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders		—		8		—		14
Net income attributable to Pfizer Inc. common shareholders		$	1,319	$	2,130	$	6,355	$	7,131		$	3,121	$	3,038
EPS Numerator––Diluted
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions		$	1,320	$	2,121	$	6,355	$	7,117		$	3,121	$	3,038
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions		—		8		—		14			—		—
Net income attributable to Pfizer Inc. common shareholders and assumed conversions		$	1,320	$	2,130	$	6,355	$	7,131		$	3,121	$	3,038
EPS Denominator
Weighted-average number of common shares outstanding––Basic		6,066		6,168		6,095		6,176			6,006		6,150
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements		72		75		68		83
Weighted-average number of common shares outstanding––Diluted		6,138		6,243		6,164		6,259
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans^(a)		36		55		56		48
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements^(a)											86		75
Weighted-average number of common shares outstanding––Diluted^(a)											6,092		6,225
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans^(b)											48		91

^(a)

Amounts for the three months ended April 3, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, that requires, when applying the treasury stock method for shares that could be repurchased, that the assumed proceeds no longer include the amount of excess tax benefit (see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies:Adoption of New Accounting Standards included in our 2016 Financial Report).


^(b)	These common stock equivalents were outstanding for the ~~nine~~three months ended ~~October~~April 2, ~~2016~~2017 and ~~September 27, 2015,~~April 3, 2016, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 12. Commitments and Contingencies

We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our tax contingencies, see Note 5B.

On ~~March 8, 2016,~~February 2, 2017, we entered into an accelerated share repurchase agreement with ~~Goldman, Sachs & Co. (GS&Co.)~~Citibank to repurchase $5 billion of our common stock. Pursuant to the terms of the agreement, on ~~March 10, 2016,~~February 6, 2017, we paid $5 billion to ~~GS&Co.~~Citibank and received an initial delivery of approximately ~~136~~126 million shares of our common stock from ~~GS&Co. based on~~Citibank at a price of ~~$29.36~~$31.73 per share, which represented, based on the closing ~~share~~ price of our common stock on the NYSE on ~~March 8, 2016,~~February 2, 2017, approximately 80% of the notional amount of the accelerated share repurchase agreement. ~~On June 20, 2016,~~As of April 2, 2017, the accelerated share repurchase agreement with GS&Co. was completed, which, per the terms of the agreement, resulted in GS&Co. owing us a certain number of shares of Pfizer common stock. Pursuant to the agreement’s settlement terms, we received an additional 18 million shares of our common stock from GS&Co. on June 20, 2016. The average price paid for all of the shares delivered under the accelerated share repurchase agreement was $32.38 per share. The common stock received is included in Treasury Stock. At settlement of the agreement, which is expected to occur during or prior to the third quarter of 2017, Citibank may be required to deliver additional shares of common stock. to us, or, under certain circumstances, we may be required to deliver shares of our common stock or may elect to make a cash payment to Citibank, with the number of shares to be delivered or the amount of such payment, as well as the final average price per share, based on the difference between the volume-weighted average price, less a discount, of Pfizer’s common stock during the term of the transaction. This agreement was entered into pursuant to our previously announced share repurchase authorization. ~~After giving effect to this accelerated share repurchase agreement,~~At April 2, 2017, our remaining share-purchase authorization iswas approximately ~~$11.4 billion at October 2, 2016.~~$6.4 billion.

A. Legal Proceedings

Our non-tax contingencies include, but are not limited to, the following:

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

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

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

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

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

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

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

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

The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be, or is, a

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

class action and, if not certified, our view of the likelihood that a class will be certified by the court; the jurisdiction in which

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters in which we are the plaintiff, we consider, among other things, the financial significance of the product protected by the patent. As a result of considering qualitative factors in our determination of principal matters, there are some matters discussed below with respect to which management believes that the likelihood of possible loss in excess of amounts accrued is remote.

A1. Legal Proceedings––Patent Litigation

Like other pharmaceutical companies, we are involved in numerous suits relating to our patents, including but not limited to, those discussed below. Most of the suits involve claims by generic drug manufacturers that patents covering our products, processes or dosage forms are invalid and/or do not cover the product of the generic drug manufacturer. Also, counterclaims, as well as various independent actions, have been filed alleging that our assertions of, or attempts to enforce, patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents on a number of our products that are discussed below, patent rights to certain of our products are being challenged in various other countries. We are also party to other patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for alleged delay of generic entry. Additionally, our licensing and collaboration partners face challenges by generic drug manufacturers to patents covering several of their products that may impact our licenses or co-promotion rights to such products. We may also become involved in other proceedings, such as inter partes review, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts relating to our intellectual property or the intellectual property rights of others. We are also subject to patent litigation pursuant to which one or more third parties seeks damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our subsidiary, Hospira, is involved in patent and patent-related disputes over its attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded significant damages, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold in the event that we or one of our subsidiaries, like Hospira, is found to have willfully infringed valid patent rights of a third party.

Actions In Which We Are The Plaintiff

Bosulif (bosutinib)

In December 2016, Wyeth LLC, Wyeth Pharmaceuticals Inc., and PF Prism C.V. (collectively, Wyeth) brought a patent-infringement action against Alembic Pharmaceuticals, Ltd, Alembic Pharmaceuticals, Inc. (collectively, Alembic), Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries Limited (collectively, Sun), in the U.S. District Court for the District of Delaware in connection with abbreviated new drug applications respectively filed with the FDA by Alembic and Sun, each seeking approval to market generic versions of bosutinib. Both Alembic and Sun are challenging patents, which expire in 2026, covering polymorphic forms of bosutinib and methods of treating chronic myelogenous leukemia. In March 2017, Wyeth brought a patent-infringement action against MSN Laboratories Private Limited and MSN Pharmaceuticals, Inc. (collectively, MSN), in the U.S. District Court for the District of Delaware in connection with an abbreviated new drug application filed with the FDA by MSN, seeking approval to market a generic version of bosutinib, and challenging a patent expiring in 2026 covering polymorphic forms of bosutinib.

EpiPen

In July 2010, King, which we acquired in 2011 and is a wholly-owned subsidiary, brought a patent-infringement action against Sandoz ~~Inc., a division of Novartis AG (Sandoz),~~ in the U.S. District Court for the District of New Jersey in connection with Sandoz’s abbreviated new drug application filed with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name.

Flector Patch (diclofenac)

In October 2015, the owners (Teikoku Seiyaku Co., Ltd. and Altergon SA) of a patent covering Pfizer's Flector Patch product, along with the New Drug Application holder (IBSA Institut Biochemique SA), brought a patent-infringement action against Actavis Laboratories UT, Inc. in the U.S. District Court for the District of Delaware in connection with an abbreviated new drug application filed by Actavis Laboratories UT, Inc. with the FDA requesting approval to launch a generic version of Flector Patch prior to the 2019 expiration of the patent. In August 2016, Pfizer subsidiary Alpharma Pharmaceuticals LLC was added as a plaintiff to the lawsuit.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Precedex Premix

In June 2014,Ben Venue Laboratories, Inc. (Ben Venue)notified our subsidiary, Hospira, that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that a patent relating to the use of Precedex in an intensive care unit setting, which expires in March 2019, was invalid or not infringed. In August 2014, Hospira and Orion Corporation (co-owner of the patent that is the subject of the lawsuit) filed suit against Ben Venue, Hikma Pharmaceuticals PLC (Hikma), and West-Ward Pharmaceutical Corp. in the U.S. District Court for the District of Delaware asserting the validity and infringement of the patent that is the subject of the lawsuit. In October 2014, Eurohealth International Sarl was substituted for Ben Venue and Hikma. In June 2016, this case was settled on terms not material to Pfizer.

In June 2015, Amneal Pharmaceuticals LLC (Amneal) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In August 2015, Hospira filed suit against Amneal in the U.S. District Court for the District of Delaware asserting the validity and infringement of the patents that are the subject of the lawsuit.

In December 2015, Fresenius Kabi USA LLC (Fresenius) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In January 2016, Hospira filed suit against Fresenius in the U.S. District Court for the Northern District of Illinois asserting the validity and infringement of the patents that are the subject of the lawsuit.

In August 2016, Par Sterile Products, LLC (Par) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In September 2016, Hospira filed suit against Par in the U.S. District Court for the District of Delaware asserting the validity and infringement of the patents that are the subject of the lawsuit. In December 2016, the case was stayed pending the outcome of Hospira’s suit against Amneal (including all appeals).

Toviaz (fesoterodine)

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

Beginning in May 2013, several generic drug manufacturers notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Toviaz and asserting the invalidity, unenforceability and/or non-infringement of all of our patents for Toviaz that are listed in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the “Orange Book”. Beginning in June 2013, we filed actions against all of those generic drug manufacturers in the U.S. District Court for the District of Delaware, asserting the infringement of five of the patents for Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019 and a patent covering salts of fesoterodine that expires in 2022. In June and July 2015, we settled with four of the generic defendants. The trial relating to the four remaining defendants occurred in July 2015. In April 2016, the District Court held that the patents that were the subject of the lawsuit were valid and infringed. The defendants’ deadline to appeal this decision expired in June 2016.

In December 2014, Mylan Pharmaceuticals, Inc. (Mylan Pharmaceuticals) notified us that it had filed anabbreviated new drug application with the FDA seeking approval to market a generic version of Toviaz and asserting the invalidity, unenforceability and/or non-infringement of all of our patents for Toviaz that are listed in the Orange Book. In January 2015, we filed an action against Mylan Pharmaceuticals in the U.S. District Court for the District of Delaware, asserting the infringement of five of the patents for Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019 and a patent covering salts of fesoterodine that expires in 2022. In January 2017, the District Court issued a verdict finding that the five patents that are the subject of the lawsuit are valid and infringed.

In December 2016, Torrent Pharmaceuticals, Ltd. (Torrent) notified us that it had filed anabbreviated new drug application with the FDA seeking approval to market a generic version of Toviaz and asserting the invalidity, unenforceability and/or non-infringement of all of our patents for Toviaz that are listed in the Orange Book. In February 2017, we filed an action against Torrent in the U.S. District Court for the District of Delaware, asserting the infringement of the same five patents that are the subject of the action against Mylan Pharmaceuticals.

Xeljanz (tofacitinib)

In February 2017, we brought a patent-infringement action against MicroLabs USA Inc. and MicroLabs Ltd. (collectively, MicroLabs) in the U.S. District Court for the District of Delaware asserting the infringement and validity of three patents

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~Tygacil (tigecycline)~~

~~In November 2014, Mylan Laboratories Limited (formerly Agila Specialties Private Limited) (Mylan Laboratories)notified us that it had filed an~~challenged by MicroLabs in its abbreviated new drug application ~~with the FDA~~ seeking approval to market a generic version of ~~Tygacil. Mylan Laboratoriesasserts~~tofacitinib 5 mg tablets. Of the ~~invalidity and non-infringement~~three patents that are the subject of the ~~polymorph patent for Tygacil~~lawsuit, one covers the active ingredient and expires in December 2020, the second covers an enantiomer of tofacitinib and expires in 2022, and the ~~formulation patent~~third covers a polymorphic form of tofacitinib and expires in 2023. Three other patents for ~~Tygacil. Mylan Laboratories has~~Xeljanz expiring in December 2020 have not been challenged ~~the composition-of-matter patent. In January 2015,~~by MicroLabs.

Separately, also in February 2017, we ~~filed suit~~brought a patent-infringement action against ~~MylanLaboratories~~Sun Pharmaceutical Industries Ltd. in the U.S. District Court for the District of Delaware asserting the infringement and validity ~~and infringement~~ of ~~the polymorph~~our patent ~~and the formulation patent for Tygacil.~~

~~In addition,~~covering a polymorphic form of tofacitinib, expiring in ~~September 2015 and December 2015, we received notices of Section 505(b)(2) new drug applications filed~~2023, that was challenged by each of Mylan Laboratories and Accord Healthcare Inc. (Accord) for tigecycline injectable products. Mylan Laboratories and Accord assert the invalidity and non-infringement of the polymorph patent for Tygacil and two formulation patents for Tygacil that expireSun Pharmaceutical Industries Ltd. in 2028 and 2029, respectively. In October 2015, we filed suit against Mylan Laboratories in the U.S. District Court for the District of Delaware and in the U.S. District Court for the District of West Virginia asserting the validity and infringementof the patents that are the subject of the lawsuit. In February 2016, we filed suit against Accord in the U.S. District Court for the District of Delaware and in the U.S. District Court for the Middle District of North Carolina asserting the validity and infringement~~of the patents that are the subject of the lawsuit.~~

~~Precedex Premix~~

~~In June 2014,Ben Venue Laboratories, Inc. (Ben Venue)notified our subsidiary, Hospira, that it had filed an~~its abbreviated new drug application ~~with the FDA~~ seeking approval to market a generic version of ~~Hospira’s premix version of Precedex and containing allegations that~~tofacitinib 11 mg extended release tablets.

In March 2017, we brought a patent ~~relating to the use of Precedex in an intensive care unit setting, which expires in March 2019, was invalid or not infringed. In August 2014, Hospira~~infringement action against Zydus Pharmaceuticals (USA) Inc. and ~~Orion Corporation (co-owner of the patent that is the subject of the lawsuit) filed suit against Ben Venue, Hikma Pharmaceuticals PLC (Hikma), and West-Ward Pharmaceutical Corp.~~Cadila Healthcare Ltd. (collectively, Zydus) in the U.S. District Court for the District of Delaware asserting the ~~validity~~infringement and ~~infringement~~validity of the ~~patent~~same three patents that isare the subject of the ~~lawsuit. In October 2014, Eurohealth International Sarl was substituted for Ben Venue and Hikma. In June 2016, this case was settled on terms not material to Pfizer.~~

~~In June 2015, Amneal Pharmaceuticals LLC (Amneal) notified Hospira that it had filed an~~action against MicroLabs, which Zydus challenged in its abbreviated new drug application ~~with the FDA~~ seeking approval to market a generic version of ~~Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expire~~tofacitinib 5 mg tablets.

Also in ~~2032, were invalid or not infringed. In August 2015, Hospira filed suit against Amneal~~March 2017, we brought separate actions in the U.S. District Court for the District of Delaware ~~asserting~~against Prinston Pharmaceutical Inc., Zhejiang Huahai Pharmaceutical Co., Ltd., Huahai US Inc. and Solco Healthcare US, LLC (collectively Prinston) and against Breckenridge Pharmaceutical Inc., Pensa Pharma S.A and Laboratorios Del Dr. Esteve, S.A. (collectively Breckenridge) on the ~~validity~~two patents expiring in 2022 and ~~infringement of the patents~~2023, respectively, that ~~are the subject of the lawsuit.~~

~~In December 2015, Fresenius Kabi USA LLC (Fresenius) notified Hospira that it had filed an~~were challenged by Prinston and Breckenridge in their respective abbreviated new drug ~~application with the FDA~~applications seeking approval to market a generic ~~version~~versions of ~~Hospira’s premix version of Precedex~~tofacitinib 5 mg tablets.

Xtandi (enzalutamide)

In December 2016, Medivation and ~~containing allegations that four patents relating to~~Medivation Prostate Therapeutics, Inc. (collectively, the ~~Precedex premix formulations~~Medivation Group); Astellas Pharma Inc., Astellas US LLC and their use, all of which expire in 2032, were invalid or not infringed. In January 2016, Hospira filed suit against Fresenius in the U.S. District Court for the Northern District of Illinois asserting the validityAstellas Pharma US, Inc. (collectively, Astellas); and ~~infringement~~The Regents of the ~~patents that are the subject~~University of ~~the lawsuit.~~

~~In August 2016, Par Sterile Products, LLC (Par) notified Hospira that it had~~California filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In September 2016, Hospira filed suit against Parpatent-infringement suits in the U.S. District Court for the District of Delaware ~~asserting~~against Actavis Laboratories FL, Inc. and Actavis LLC (collectively, Actavis); and Zydus; and Apotex Inc. and Apotex Corp. (collectively, Apotex) in connection with those companies’ respective abbreviated new drug applications filed with the ~~validity~~FDA for approval to market generic versions of enzalutamide. The generic manufacturers are challenging patents, which expire as early as 2026, covering enzalutamide and ~~infringement of the patents that are the subject of the lawsuit.~~treatments for prostate cancer.

Matters Involving Our Collaboration/Licensing Partners

Nexium 24HR (esomeprazole)

We have an exclusive license from AstraZeneca PLC (AstraZeneca) to market in the U.S. the OTC version of Nexium (Nexium 24HR). Beginning in October 2014, Actavis Laboratories FL, Inc., and subsequently Andrx Labs, LLC (Andrx), Perrigo Company plc (Perrigo), Lupin Limited and, in October 2015, Dr. Reddy’s Laboratories, Inc. & Ltd. (Dr. Reddy’s) notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Nexium 24HR prior to the expiration of one or more of AstraZeneca’s patents listed in the Orange Book for Nexium 24HR. From November 2014 through November 2015, AstraZeneca filed actions against each of Actavis Laboratories FL, Inc., Andrx, Perrigo, Lupin Limited and Dr. Reddy’s in the U.S. District Court for the District of New Jersey asserting the infringement of the challenged patents. In March 2017, the cases against Actavis and Andrx were settled on terms not material to Pfizer. We are not a party to AstraZeneca’s patent-infringement actions.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Toviaz (fesoterodine)––Inter-Partes Reviews

In January 2016, Mylan Pharmaceuticals and Mylan Laboratories filed petitions with the U.S. Patent & Trademark Office requesting Inter Partes Reviews of five of the patents covering fesoterodine, the active ingredient in Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019 and a patent covering salts of fesoterodine that expires in 2022. The patents are owned by UCB, and we have an exclusive, worldwide license to market Toviaz from UCB. In July 2016, the Patent Trial and Appeal Board agreed to institute Inter Partes Reviews of all five patents. Amerigen Pharmaceuticals Limited, Alembic Pharmaceuticals Limited and Torrent Pharmaceuticals Limited have joined the Inter-Partes Reviews.

~~Action~~

Eliquis

In February, March, and April 2017, twenty-five generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed abbreviated new drug applications seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the three patents listed in the Orange Book for Eliquis. The patents currently are set to expire in 2019, 2023, and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. In April 2017, BMS and Pfizer filed patent infringement actions against all generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031 patent, some challenged both the 2031 and 2023 patent, and one generic company challenged all three patents.

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(UNAUDITED)

Actions In Which We Are The Defendant

Inflectra (infliximab-dyyb)

In March 2015, Janssen and New York University, together, brought a patent-infringement action in the U.S. District Court for the District of Massachusetts against Hospira, Celltrion Healthcare Co. Ltd. and Celltrion Inc. alleging that infliximab-dyyb, to be marketed by Hospira in the U.S. under the brand name Inflectra, would infringe six patents relating to infliximab, its manufacture and use. ~~Four~~Claims with respect to four of the patents have since been dismissed by the plaintiffs, leaving two patents at issue in the ongoing action: the infliximab antibody patent and a patent relating to cell culture media. In August 2016, the U.S. District Court for the District of Massachusetts ruled that the antibody patent was invalid, and Janssen has appealed that ruling to the Court of Appeals for the Federal Circuit.

A2. Legal Proceedings––Product Litigation

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

Asbestos

Between 1967 and 1982, Warner-Lambert owned American Optical Corporation, which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. As of ~~October~~April 2, ~~2016,~~2017, approximately ~~56,000~~56,300 claims naming American Optical and numerous other defendants were pending in various federal and state courts seeking damages for alleged personal injury from exposure to asbestos and other allegedly hazardous materials. Warner-Lambert was acquired by Pfizer in 2000 and is a wholly-owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.

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

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

~~Celebrex and Bextra~~

Beginning in late 2004, several purported class actions were filed in federal and state courts alleging that Pfizer and certain of our current and former officers violated federal securities laws by misrepresenting the safety of Celebrex and Bextra. In June 2005, the federal actions were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (~~In re Pfizer Inc. Securities, Derivative and “ERISA” Litigation MDL-1688~~) in the U.S. District Court for the Southern District of New York. In March 2012, the court in the Multi-District Litigation certified a class consisting of all persons who purchased or acquired Pfizer stock between October 31, 2000 and October 19, 2005. In May 2014, the court in the Multi-District Litigation granted Pfizer’s motion to exclude the testimony of the plaintiffs’ loss causation and damages expert. We subsequently filed a motion for summary judgment seeking dismissal of the litigation, and the plaintiffs filed a motion for leave to submit an amended report by their expert. In July 2014, the court denied the plaintiffs’ motion for leave to submit an amended report and granted our motion for summary judgment, dismissing the plaintiffs’ claims in their entirety. In August 2014, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Second Circuit. In April 2016, the U.S. Court of Appeals for the Second Circuit reversed the District Court’s decision and remanded the case to the District Court for further proceedings. In July 2016, the parties reached an agreement in principle to resolve this matter for all defendants for $486 million, ~~which was recorded in~~ ~~Other (income)/deductions––net~~ ~~for the nine months ended October 2, 2016~~. ~~The agreement is subject to final court approval, and the payment will be made in accordance with the terms of the settlement agreement.~~

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Effexor

~~Personal Injury Actions~~

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

~~Antitrust Actions~~

Beginning in May 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR in the Orange Book, enforcing certain patents for Effexor XR and entering into a litigation settlement agreement with a generic drug manufacturer with respect to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.

In October 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement, but declined to dismiss the other direct purchaser plaintiff claims. In January 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs have appealed to the U.S. Court of Appeals for the Third Circuit. Motions to dismiss remain pending as to the end-payer plaintiffs’ remaining claims.

~~Zoloft~~

A number of individual lawsuits and multi-plaintiff lawsuits have been filed against us and/or our subsidiaries in various federal and state courts alleging personal injury as a result of the purported ingestion of Zoloft. Among other types of actions, the Zoloft personal injury litigation includes actions alleging a variety of birth defects as a result of the purported ingestion of Zoloft by women during pregnancy. Plaintiffs in these birth-defect actions seek compensatory and punitive damages and the disgorgement of profits resulting from the sale of Zoloft. In April 2012, the federal birth-defect cases were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (~~In re Zoloft Products Liability Litigation MDL-2342~~) in the U.S. District Court for the Eastern District of Pennsylvania. A number of plaintiffs have voluntarily dismissed their actions. In April 2016, the District Court granted our motion for summary judgment, dismissing the claims of almost all of the remaining plaintiffs. In May 2016, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Third Circuit.

~~Lipitor~~

~~Whistleblower Action~~

In 2004, a former employee filed a “whistleblower” action against us in the U.S. District Court for the Eastern District of New York. The complaint remained under seal until September 2007, at which time the U.S. Attorney for the Eastern District of New York declined to intervene in the case. We were served with the complaint in December 2007. Plaintiff alleges off-label promotion of Lipitor in violation of the Federal Civil False Claims Act and the false claims acts of certain states, and he seeks treble damages and civil penalties on behalf of the federal government and the specified states as the result of their purchase, or reimbursement of patients for the purchase, of Lipitor allegedly for such off-label uses. Plaintiff also seeks compensation as a whistleblower under those federal and state statutes. In addition, plaintiff alleges that he was wrongfully terminated, in violation of the anti-retaliation provisions of applicable federal and New York law, and he seeks damages and the reinstatement of his employment. In 2009, the District Court dismissed without prejudice the off-label promotion claims and, in 2010, plaintiff filed an amended complaint containing off-label promotion allegations that are substantially similar to the allegations in the original complaint. In November 2012, the District Court dismissed the amended complaint. In December 2012, plaintiff appealed the District Court’s decision to the U.S. Court of Appeals for the Second Circuit. In August 2014, the U.S. Court of Appeals for the Second Circuit dismissed the appeal for lack of jurisdiction and sent the case back to the District Court for clarification of its

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

ruling regarding the plaintiff’s employment claims. In November 2014, the District Court granted plaintiff’s motion for a partial final judgment certifying the dismissal of the false claims counts, and plaintiff appealed the order dismissing those claims to the U.S. Court of Appeals for the Second Circuit. In May 2016, the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s dismissal of the false claims counts, and it subsequently denied a petition for panel rehearing. In November 2016, the District Court administratively closed Plaintiff’s employment law claims, subject to plaintiff requesting to reopen them by January 2017.

~~Antitrust Actions~~

Beginning in November 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain affiliates of Pfizer, and, in most of the actions, Ranbaxy, Inc. (Ranbaxy) and certain affiliates of Ranbaxy. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor, and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation (MDL) (~~In re Lipitor Antitrust Litigation MDL-2332) in the U.S. DistrictCourt for the District of New Jersey.~~

In September 2013 and 2014, the District Court dismissed with prejudice the claims by direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other MDL plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the U.S. Court of Appeals for the Third Circuit.

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

Personal Injury Actions

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

Antitrust Actions

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(UNAUDITED)

In October 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement but declined to dismiss the other direct purchaser plaintiff claims. In January 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs have appealed to the U.S. Court of Appeals for the Third Circuit. Motions to dismiss remain pending as to the end-payer plaintiffs’ remaining claims.

Zoloft

A number of individual lawsuits and multi-plaintiff lawsuits have been filed against us and/or our subsidiaries in various federal and state courts alleging personal injury as a result of the purported ingestion of Zoloft. Among other types of actions, the Zoloft personal injury litigation includes actions alleging a variety of birth defects as a result of the purported ingestion of Zoloft by women during pregnancy. Plaintiffs in these birth-defect actions seek compensatory and punitive damages and the disgorgement of profits resulting from the sale of Zoloft. In April 2012, the federal birth-defect cases were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Zoloft Products Liability Litigation MDL-2342) in the U.S. District Court for the Eastern District of Pennsylvania. A number of plaintiffs have voluntarily dismissed their actions. In April 2016, the District Court granted our motion for summary judgment, dismissing the claims of almost all of the remaining plaintiffs. In May 2016, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Third Circuit.

Lipitor

Antitrust Actions

Beginning in November 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain affiliates of Pfizer, and, in most of the actions, Ranbaxy, Inc. (Ranbaxy) and certain affiliates of Ranbaxy. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor, and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation (In re Lipitor Antitrust Litigation MDL-2332) in the U.S. DistrictCourt for the District of New Jersey.

In September 2013 and 2014, the District Court dismissed with prejudice the claims by direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the U.S. Court of Appeals for the Third Circuit.

Personal Injury Actions

A number of individual and multi-plaintiff lawsuits have been filed against us in various federal and state courts alleging that the plaintiffs developed type 2 diabetes as a result of the purported ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages.

In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Lipitor (Atorvastatin Calcium) Marketing, Sales Practices and Products Liability Litigation (No. II) MDL-2502) in the U.S. District Court for the District of South Carolina. In 2016, certain cases in the Multi-District Litigation were remanded to federal courts in California and certain state courts. In January 2017, the District Court granted our motion for summary judgment, dismissing substantially all of the remaining cases pending in the Multi-District Litigation. In January 2017, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Fourth Circuit.

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Viagra

A number of individual and multi-plaintiff lawsuits have been filed against us in various federal and state courts alleging that the plaintiffs developed melanoma and/or the exacerbation of melanoma as a result of the purported ingestion of Viagra. Plaintiffs seek compensatory and punitive damages.

In April 2016, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In Re: Viagra (Sildenafil Citrate) Products Liability Litigation, MDL-2691) in the U.S. District Court for the Northern District of California. In December 2016, federal actions filed against Lilly and filed against both us and Lilly, were transferred for coordinated pre-trial proceedings to the Multi-District Litigation (In re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation, MDL-2691).

Chantix/Champix

Beginning in December 2008, purported class actions were filed against us in the Ontario Superior Court of Justice (Toronto Region), the Superior Court of Quebec (District of Montreal), the Court of Queen’s Bench of Alberta, Judicial District of Calgary, and the Superior Court of British Columbia (Vancouver Registry) on behalf of all individuals and third-party payers in Canada who have purchased and ingested Champix or reimbursed patients for the purchase of Champix. Each of these actions asserts claims under Canadian product liability law, including with respect to the safety and efficacy of Champix and, on behalf of the putative class, seeks monetary relief, including punitive damages. In June 2012, the Ontario Superior Court of Justice certified the Ontario proceeding as a class action, defining the class as consisting of the following: (i) all persons in Canada

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

who ingested Champix during the period from April 2, 2007 to May 31, 2010 and who experienced at least one of a number of specified neuropsychiatric adverse events; (ii) all persons who are entitled to assert claims in respect of Champix pursuant to Canadian legislation as the result of their relationship with a class member; and (iii) all health insurers who are entitled to assert claims in respect of Champix pursuant to Canadian legislation. The Ontario Superior Court of Justice certified the class against Pfizer Canada Inc. only and ruled that the action against Pfizer should be stayed until after the trial of the issues that are common to the class members. The actions in Quebec, Alberta and British Columbia have been stayed in favor of the Ontario action, which iswas proceeding on a national basis. In April 2017, the Ontario Superior Court issued an order granting plaintiffs’ motion for voluntary discontinuance of the Ontario action, with the discontinuance to come into effect in 60 days from the date the order was issued.

Celebrex

Beginning in July 2014, purported class actions were filed in the U.S. District Court for the Eastern District of Virginia against Pfizer and certain subsidiaries of Pfizer relating to Celebrex. The plaintiffs seek to represent U.S. nationwide or multi-state classes consisting of persons or entities who directly purchased from the defendants, or indirectly purchased or reimbursed patients for some or all of the purchase price of, Celebrex or generic Celebrex from May 31, 2014 until the cessation of the defendants’ allegedly unlawful conduct. The plaintiffs allege delay in the launch of generic Celebrex in violation of federal antitrust laws or certain state antitrust, consumer protection and various other laws as a result of Pfizer fraudulently obtaining and improperly listing a patent on Celebrex, engaging in sham litigation and prolonging the impact of sham litigation through settlement activity that further delayed generic entry. Each of the actions seeks treble damages on behalf of the putative class for alleged price overcharges for Celebrex since May 31, 2014. In December 2014, the District Court granted the parties’ joint motions to consolidate the direct purchaser and end-payer cases, and all such cases were consolidated as of March 2015. In October 2014 and March 2015, we filed motions to dismiss the direct purchasers’ and end-payers’ amended complaints, respectively. In November 2015, the District Court denied in part and granted in part our motion to dismiss the direct purchasers’ amended complaint. In February 2016, the District Court denied in part and granted in part our motion to dismiss the end-payers’ amended complaint, and in August 2016, the District Court dismissed substantially all of the end-payer’s remaining claims. In February 2017, the District Court dismissed with prejudice all of the end-payers’ claims. In March 2017, the end-payers appealed the District Court’s order dismissing their claims with prejudice to the U.S. Court of Appeals for the Fourth Circuit.

Intravenous ~~Saline Solution~~Solutions

InBeginning in November 2016, a purported class ~~action was~~actions were filed in the U.S. District Court for the Northern District of Illinois against Hospira, Hospira Worldwide, Inc. and certain other defendants relating to intravenous saline solution. ~~The plaintiff seeks~~Plaintiffs seek to represent ~~a class~~classes consisting of all persons and entities in the U.S. who directly purchased intravenous saline solution sold by any of the defendants from January 1, 2013 until the time the defendants’ allegedly unlawful conduct ceases. ~~The plaintiff alleges~~Plaintiffs allege that the defendants’ conduct restricts output and artificially fixes, raises, maintains and/or stabilizes the prices of intravenous saline solution sold throughout the U.S. in violation of federal antitrust laws. ~~The plaintiff seeks~~Plaintiffs seek treble damages (for ~~itself~~themselves and on behalf of the putative ~~class)~~classes) and an injunction against defendants for alleged price overcharges for intravenous saline solution in the U.S. since January 1, 2013. On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, which includes intravenous saline solution, to ICU Medical. The litigation is the subject of cross-claims for indemnification by both Pfizer and ICU Medical under the purchase agreement.

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Separately, in April 2017, Pfizer, Hospira and an employee of Pfizer received grand jury subpoenas issued by the United States District Court for the Eastern District of Pennsylvania, in connection with an investigation by the U.S. Department of Justice, Antitrust Division. The subpoenas seek documents related to the sale, manufacture, pricing and shortages of intravenous solutions, including saline, as well as communications among market participants regarding these issues. The Department of Justice investigation is also the subject of cross-claims for indemnification by both Pfizer and ICU Medical under the purchase agreement. In addition, in August 2015, the New York Attorney General issued a subpoena to Hospira for similar information. Hospira has produced records to the New York Attorney General and will coordinate with ICU Medical to produce records to the New York Attorney General as appropriate going forward, and Hospira and Pfizer will coordinate with ICU Medical to produce records to the Department of Justice.

Xtandi

In April 2014, the Regents of the University of California (the Regents) filed a complaint against the Medivation Group in California Superior Court in San Francisco. Medivation was acquired by Pfizer in September 2016 and is now a wholly-owned subsidiary of Pfizer. The Regents’ complaint seeks a 10% share, under a license agreement between the Medivation Group and the Regents, of certain payments the Medivation Group receives with respect to Xtandi under ~~Medivation’s~~the Medivation Group’s sub-licensing and collaboration agreement with Astellas. Trial is scheduled to commence in May 2017.

Hormone Therapy Consumer Class Action

A certified consumer class action is pending against Wyeth in the U.S. District Court for the Southern District of California based on the alleged off-label marketing of its hormone therapy products. The case was originally filed in December 2003. The class consists of California consumers who purchased Wyeth’s hormone-replacement products between January 1995 and January 2003 and who do not seek personal injury damages therefrom. The class seeks compensatory and punitive damages, including a full refund of the purchase price.

Eliquis

A number of individual and multi-plaintiff lawsuits have been filed against us and Bristol-Myers Squibb Company in various federal and state courts pursuant to which plaintiffs seek to recover for personal injuries, including wrongful death, due to bleeding as a result of the alleged ingestion of Eliquis. Plaintiffs seek compensatory and punitive damages.

In February 2017, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In Re: Eliquis (Apixaban) Products Liability Litigation MDL-2754) in the U.S. District Court for the Southern District of New York.

EpiPen

Beginning in February 2017, purported class actions were filed in various federal courts by direct and indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan N.V., and Mylan N.V. Chief Executive Officer, Heather Bresch. The plaintiffs in these actions seek to represent U.S. nationwide classes comprising persons or entities who directly purchased or paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. Against Pfizer and/or its affiliates, plaintiffs generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal antitrust laws and various state antitrust or consumer protection laws. At least one lawsuit also alleges that Pfizer and/or Mylan N.V. violated the federal Racketeer Influenced and Corrupt Organizations Act. Plaintiffs also filed various consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan Pharmaceuticals regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2009 on behalf of the putative indirect purchaser class and since 2013 on behalf of the putative direct purchaser class.

A3. Legal Proceedings––Commercial and Other Matters

Average Wholesale Price Litigation

Pfizer, certain of its subsidiaries and other pharmaceutical manufacturers were sued in various state courts by a number of states alleging that the defendants provided average wholesale price (AWP) information for certain of their products that was higher than the actual average prices at which those products were sold. The AWP is used to determine reimbursement levels under Medicare Part B and Medicaid and in many private-sector insurance policies and medical plans. All but one of those actions have been resolved through settlement, dismissal or final judgment. The plaintiff state, Illinois,in the one remaining action claims that the alleged spread between the AWPs at which purchasers were reimbursed and the actual sale prices was promoted by the defendants as an incentive to purchase certain of their products. The actionalleges, among other things, fraudand violation of the state’s unfair trade practices andconsumer protection statutes and seeks monetary and other relief, including civil penalties and treble damages.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Monsanto-Related Matters

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

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

In connection with its spin-off in 1997, Solutia assumed, and agreed to indemnify Pharmacia for, liabilities related to Former Monsanto’s chemical businesses. As the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s indemnification obligations relating to Former Monsanto’s chemical businesses are limited to sites that Solutia has owned or operated. In addition, in connection with its spinoff that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities primarily related to Former Monsanto’s chemical businesses, including, but not limited to, any such liabilities that Solutia assumed. Solutia’s and New Monsanto’s assumption of, and agreement to, indemnify Pharmacia for these liabilities apply to pending actions and any future actions related to Former Monsanto’s chemical businesses in which Pharmacia is named as a defendant, including, without limitation, actions asserting environmental claims, including alleged exposure to polychlorinated biphenyls. Solutia and New Monsanto are defending and indemnifying Pharmacia in connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses.

Environmental Matters

In 2009, we submitted to the U.S. Environmental Protection Agency (EPA) a corrective measures study report with regard to Pharmacia’s discontinued industrial chemical facility in North Haven, Connecticut and a revised site-wide feasibility study with regard to Wyeth Holdings Corporation’s discontinued industrial chemical facility in Bound Brook, New Jersey. In September 2010, our corrective measures study report with regard to the North Haven facility was approved by the EPA, and we commenced construction of the site remedy in late 2011 under an Updated Administrative Order on Consent with the EPA. In July 2011, Wyeth Holdings Corporation finalized an Administrative Settlement Agreement and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPA with regard to the Bound Brook facility. In May 2012, we completed construction of an interim remedy to address the discharge of impacted groundwater from that facility to the Raritan River. In September 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area, which is generally in accordance with one of the remedies evaluated in our revised site-wide feasibility study. In March 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for two adjacent lagoons. In September 2015, the U.S., on behalf of the EPA, lodged a complaint and consent decree with the federal District Court for the District of New Jersey that will allow Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. In December 2015, the consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court. ~~The~~We have accrued for the estimated costs of the site remedy for the North Haven facility and the site remediation for the Bound Brook ~~facility are covered by accruals previously taken by us.~~facility.

In August 2016, Pfizer Pharmaceuticals LLC (PPLLC) and the EPA began negotiations to resolve alleged past deviations from certain administrative provisions of the federal Clean Air Act at our Barceloneta, Puerto Rico manufacturing facility. In September 2016, PPLLC and the EPA entered into a Consent Agreement and Final Order pursuant to which PPLLC will pay a $190,000 civil penalty to resolve the EPA’s allegation that, at certain times in the past, the Barceloneta facility did not file a risk management plan with the EPA.

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

A4. Legal Proceedings––Government Investigations

Like other pharmaceutical companies, we are subject to investigations and extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. As a result, we have interactions with government agencies on an ongoing basis. Criminal charges, and substantial fines and/or civil penalties, as well as limitations on our ability to conduct business in applicable jurisdictions, could result from government investigations. Among the investigations by government agencies isare the ~~matter~~matters discussed below.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Phenytoin Sodium Capsules

In 2012, Pfizer sold the U.K. Marketing Authorisation for phenytoin sodium capsules to a third party, but retained the right to supply the finished product to that third party. In May 2013, the U.K. Competition & Markets Authority (CMA) informed us that it had launched an investigation into the supply of phenytoin sodium capsules in the U.K. market. In August 2015, the CMA issued a Statement of Objections alleging that Pfizer and Pfizer Limited, a U.K. subsidiary, engaged in conduct that violates U.K. and EU antitrust laws. In December 2016, the CMA imposed a £84.2 million fine on Pfizer and Pfizer Limited. Pfizer appealed the CMA Decision to The Competition Appeal Tribunal in February 2017.

~~A5. Legal Proceedings––Matters Resolved During the First Nine Months of 2016~~

During the first nine months of 2016, certain matters, including the matters discussed below, were resolved or were the subject of definitive settlement agreements or settlement agreements in principle.

~~Sutent (sunitinib malate)~~Civil Investigative Demand relating to Pharmacy Benefit Managers

In ~~May 2010, Mylan Pharmaceuticals notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market~~March 2016, Pfizer received a generic version of Sutent and challenging on various grounds the Sutent composition-of-matter patent, which expires in 2021, and two other patents that expire in 2020 and 2021, respectively. In June 2010, we filed suit against Mylan Pharmaceuticals inCivil Investigative Demand from the U.S. ~~District Court~~Attorney’s Office for the Southern District of ~~Delaware asserting~~New York related to Pfizer’s contractual relationships with pharmacy benefit managers with respect to certain pharmaceutical products over the ~~infringement of those three patents. The patent expiring~~period from January 1, 2006 to the present. We have been providing information to the government in ~~2020 was dismissed~~response to this Civil Investigative Demand.

Subpoenas relating to Copayment Assistance Organizations

In December 2015 and July 2016, Pfizer received subpoenas from the ~~case prior to trial. In October 2014, the court held that the two patents expiring in 2021 were valid and infringed. In October 2014, Mylan Pharmaceuticals appealed the decision to the~~ U.S. Court of Appeals for the Federal Circuit. In January 2016, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court’s decision upholding the validity and infringement of the two patents expiring in 2021.

~~Protonix~~

~~In 2009, the U.S. Department of Justice (DOJ) filed a civil complaint in intervention in two~~ ~~qui tam~~ actions that had been filed under seal in the U.S. District Court for the District of Massachusetts. The complaint alleged that Wyeth’s practices relating to the pricing for Protonix for Medicaid rebate purposes between 2001 and 2006, prior to Wyeth’s acquisition by Pfizer, violated the Federal Civil False Claims Act and federal common law. The two ~~qui tam~~ actions have been unsealed, and the complaints included substantially similar allegations. In addition, in 2009, several states and the District of Columbia filed a complaint under the same docket number in the U.S. District CourtAttorney’s Office for the District of Massachusetts asserting violations of various state laws based on allegations substantially similar to those set forth in the civil complaint filed by the DOJ. On February 12, 2016, Wyeth and the DOJ reached an agreement in principle to resolve the actions pending in the U.S. District Court for the District of Massachusetts for $784.6 million, which was recorded in ~~Other (income)/deductions––net~~ ~~for the year ended December 31, 2015 and paid on April 29, 2016.In April 2016, the agreement was finalized. The final agreement does not include an admission of liability by Wyeth. In August 2016, the Court entered an Order of Dismissal.~~

~~Effexor XR (venlafaxine HCl)~~

In 2006, Wyeth and Wyeth Canada Limited (the Wyeth companies) filed an action in the Federal Court in Canada against Ratiopharm Inc. (Ratiopharm) seeking to prevent Ratiopharm from obtaining approval in Canada for its generic version of Effexor XR priorrequesting documents related to the ~~expiration of one of the Wyeth companies’ patents. As a result of~~Patient Access Network Foundation and other 501(c)(3) organizations that action, Ratiopharm was enjoined from obtaining regulatory approval for its generic product. However, in August 2007, the Federal Court of Appeal in Canada ruled that the patent at issue could not be asserted against Ratiopharm under the applicable Canadian regulations governing approvals, and it dismissed the Wyeth companies’ action.

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

The trial in this action was held in January 2014, and the Federal Court issued various findings in March 2014. On June 30, 2014, the Federal Court issued a judgment based on those findings, awarding Teva Canada Limited damages of approximately Canadian dollars 125 million, consisting of compensatory damages, pre-judgment interest and legal costs. This judgment was satisfied by Pfizer Canada Inc., as successorMedicare patients. We have been providing information to the ~~Wyeth companies,~~government in ~~July 2014. In September 2014, Pfizer Canada Inc. appealed the judgment and, in May 2016, the Federal Court~~response to these subpoenas.

Intravenous Solutions

See Note 12A2. Legal Proceedings––Product Litigation––Intravenous Solutions above for information regarding government investigations related to sales of ~~Appeal vacated the lower court’s decision and remanded the case to the lower court for further proceedings. The lower court will determine whether to affirm, decrease or raise this amount.~~

intravenous solution products.

B. Guarantees and Indemnifications

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~infringement~~patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of ~~October~~April 2, ~~2016,~~2017, recorded amounts for the estimated fair value of these indemnifications were not significant.

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

Note 13. Segment, Geographic and Other Revenue Information

A. Segment Information

We manage our commercial operations through two distinct business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH). Effective in the second quarter of 2016, our segments were reorganized to reflect that we now manage our innovative pharmaceutical and consumer healthcare operations as one business segment, IH (previously these businesses were managed as two segments: the GIP segment and the VOC segment). We have revised prior-period information (Revenues and Earnings, as defined by management) to reflect the reorganization. Also, in the second quarter of 2016, we changed the name of our Established Products business to Pfizer Essential Health. The IH and EH segments are each led by a single manager. Each operating segment has responsibility for its commercial activities and for certain IPR&D projects for new investigational products and additional indications for in-line products that generally have achieved proof-of-concept. Each business has a geographic footprint across developed and emerging markets. Our chief operating decision maker uses the revenues and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation.

We regularly review our segments and the approach used by management ~~to evaluate~~for performance evaluation and ~~allocate resources.~~resource allocation.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Operating Segments



Some additional information about our business segments follows:
IH Segment		EH Segment
IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives, as well as products for consumer healthcare. Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare and include leading brands, such as Prevnar/Prevenar 13, Xeljanz, Eliquis, Lyrica (U.S., Japan and certain other markets), Enbrel (outside the U.S. and Canada), Viagra (U.S. and Canada), Ibrance and Xtandi, as well as several well-known, OTC consumer products.healthcare.		EH 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, select branded products including anti-infectives and, ~~infusion systems.~~through February 2, 2017, HIS. EH also includes ~~a new EH research and development~~an R&D organization, as well as our contract manufacturing business.
Leading brands include: - Prevnar 13 - Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Viagra (U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer healthcare products (e.g., Advil and Centrum)		Leading brands include: - Lipitor - Premarin family - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia countries) - Celebrex - Pristiq - Several sterile injectable products

~~Effective as of the beginning of 2016, the following changes impact EH:~~

Our entire contract manufacturing business, Pfizer CentreOne (previously known as Pfizer CentreSource or PCS), is part of EH. 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; and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in EH since we acquired Hospira on September 3, 2015. Prior to 2016, PCS was managed outside our operating segments as part of PGS and reported as "Other Business Activities". We have reclassified prior period PCS operating results ($116 million of PCS revenues and $15 million of PCS earnings in the third quarter of 2015, and $360 million of PCS revenues and $66 million of PCS earnings in the first nine months of 2015) to conform to the current period presentation as part of EH.

In connection with the formation of a new EH R&D organization, certain functions transferred from Pfizer’s WRD organization to the new EH R&D organization. The new R&D organization within EH expects to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars. We have reclassified approximately $68 million of costs in the third quarter of 2015 and $202 million of costs in the first nine months of 2015 from WRD to EH to conform to the current period presentation as part of EH.

~~Effective as of the beginning of the second quarter of 2016, the following changes impact IH:~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

WRD and Innovative portfolios, certain development-related functions transferred from IH to GPD. We have reclassified approximately $76 million of costs in the first quarter of 2016, approximately $77 million of costs in the third quarter of 2015 and approximately $223 million of costs in the first nine months of 2015 from IH to GPD to conform to the current period presentation as part of GPD.

~~Our chief operating decision maker uses the revenues and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation.~~

Other Costs and Business Activities

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

WRD, which is generally responsible for research projects for our IH business until proof-of-concept is achieved and then for transitioning those projects to the IH segment via the ~~newly formed~~ GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.

GPD, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects. In connection with the formation of the GPD organization, certain development-related functions transferred from WRD and IH to GPD. In addition to the costs transferred from IH to GPD described above, we reclassified costs from WRD of approximately $78 million in the first quarter of 2016, approximately $86 million in the third quarter of 2015 and approximately $244 million in the first nine months of 2015 to GPD to conform to the current period presentation as part of GPD.

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

Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2017, Corporate also includes the costs associated with our Pfizer Medical organization (Medical), previously reported as part of Other Business Activities. Medical is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations.

Other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations that are not directly ~~attributable~~assessed to an operating ~~segment.~~segment as business unit (segment) management does not manage these costs, (which include manufacturing variances associated with production).

Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and PP&E; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, which are substantive and/or unusual, and in some cases recurring, ~~or unusual~~ items that are evaluated on an individual basis by management and which include non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities.

Segment Assets

We manage our assets on a total company basis, not by operating segment, as many of our operating assets are shared (such as our plant network assets) or commingled (such as accounts receivable, as many of our customers are served by both operating segments). Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were approximately ~~$178~~$169 billion as of ~~October~~April 2, ~~2016~~2017 and approximately ~~$167~~$172 billion as of December 31, ~~2015.~~2016.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Selected Income Statement Information

																					The following table provides selected income statement information by reportable segment:
	Three Months Ended										Three Months Ended
	Revenues				Earnings^(a)						Revenues				Earnings^(a)
(MILLIONS OF DOLLARS)	October 2, 2016		September 27, 2015		October 2, 2016			September 27, 2015			April 2, 2017		April 3, 2016		April 2, 2017			April 3, 2016
Reportable Segments:
IH^(b)	$	7,332	$	6,752	$	4,187		$	4,018		$	7,415	$	7,033	$	4,649		$	4,103
EH^(c)	5,712		5,335		3,128			3,181			5,364		5,972		3,006			3,659
Total reportable segments	13,045		12,087		7,315			7,199			12,779		13,005		7,655			7,762
Other business activities^(d)	—		—		(786		)	(715		)
Other business activities^{(d), (e)}											—		—		(688		)	(668		)
Reconciling Items:
Corporate^(e)	—		—		(1,504		)	(1,376		)	—		—		(1,344		)	(1,390		)
Purchase accounting adjustments^(e)	—		—		(966		)	(960		)	—		—		(1,172		)	(1,153		)
Acquisition-related costs^(e)	—		—		(280		)	(541		)	—		—		(124		)	(116		)
Certain significant items^(f)	—		—		(1,969		)	(837		)	—		—		(157		)	(638		)
Other unallocated	—		—		(206		)	(73		)	—		—		(219		)	(235		)
	$	13,045	$	12,087	$	1,604		$	2,697		$	12,779	$	13,005	$	3,951		$	3,561

	Nine Months Ended
	Revenues				Earnings^(a)
(MILLIONS OF DOLLARS)	October 2, 2016		September 27, 2015		October 2, 2016			September 27, 2015
Reportable Segments:
IH^(b)	$	21,471	$	19,120	$	12,470		$	10,831
EH^(c)	17,725		15,683		9,985			9,540
Total reportable segments	39,196		34,804		22,454			20,371
Other business activities^(d)	—		—		(2,190		)	(2,127		)
Reconciling Items:
Corporate^(e)	—		—		(4,123		)	(3,949		)
Purchase accounting adjustments^(e)	—		—		(3,103		)	(2,698		)
Acquisition-related costs^(e)	—		—		(598		)	(631		)
Certain significant items^(f)	—		—		(4,112		)	(1,369		)
Other unallocated	—		—		(753		)	(278		)
	$	39,196	$	34,804	$	7,575		$	9,319


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

^(b)

~~Effective as~~Medivation’s and Anacor’s commercial operations are included in IH’s operating results in our condensed consolidated statements of income, commencing from their respective acquisition dates of September 28, 2016 and June 24, 2016. Therefore, our results of operations, and IH’s operating results, for the first quarter of 2016 do not include financial results from Medivation or Anacor. In connection with the formation in early 2016 of the GPD organization, beginning ofin the second quarter of 2016, ~~in connection with the formation of the GPD organization,~~ certain development-related functions transferred from IH to GPD. We have reclassified approximately $76 million of costs from IH to GPD in the first quarter of ~~2016, approximately $77 million~~2016.

^(c)

On February 3, 2017, we completed the sale of ~~costs in the third quarter~~our global infusion therapy net assets, HIS, to ICU Medical. The operating results of 2015 and approximately $223 million of costs in the first nine months of 2015 from IH to GPD to conform to the current period presentation as part of GPD. Additionally, Anacor's and Medivations’s commercial operationsHIS are included in ~~IH's~~EH’s operating results through February 2, 2017 and, therefore, financial results for EH for the first quarter of 2017 reflect approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations, while financial results for EH for the first quarter of 2016 reflect three months of legacy HIS global operations. The financial results of AstraZeneca’s small molecule anti-infectives business, which is primarily outside the U.S., are included in our condensed consolidated financial statements ~~of income. As a result,~~ commencing from the acquisition date of ~~June 24,~~December 22, 2016, ~~IH's~~which falls in the first fiscal quarter of 2017 for our international operations. Therefore, in accordance with our international reporting period, our condensed consolidated statement of income and EH’s operating results for the ~~third~~first quarter ~~and first nine months~~ of ~~2016 include~~2017 reflect approximately ~~three~~two months of legacy ~~Anacor operations, which were immaterial, and commencing from the acquisition date of September, 28, 2016, IH's operating results for the third quarter and first nine months of 2016 reflect three~~AstraZeneca small molecule anti-infectives business ~~days of legacy Medivation~~international operations, which were immaterial.

^(c)

On September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our condensed consolidated statement of income includes the operating results of Hospira. As a result, legacy Hospira commercial operations, including the legacy Hospira One-2-One contract manufacturing business, are included in EH’s operating results in our condensed consolidated statements of income for the third quarter and first nine months of 2016. In accordance with our domestic and international reporting periods, our results of operations and EH's operating results for the third quarter and first nine months of 2015 reflect only one month of legacy Hospira U.S. operations but no financial results from legacy Hospira international operations. See ~~Note 2A~~ for additional information. Effective as of the beginning of 2016, our entire contract manufacturing business, Pfizer CentreOne (previously known as Pfizer CentreSource or PCS), is part of EH. 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; and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in EH since we acquired Hospira on September 3, 2015. Prior to 2016, PCS was managed outside our operating segments as part of PGS and reported as "Other Business Activities". We have reclassified prior period PCS operating results ($116 million of PCS revenues and $15 million of PCS earnings in the third quarter of 2015, and $360 million of PCS revenues and $66 million of PCS earnings in the first nine months of 2015) to conform to the current period presentation as part of EH. As noted above, also effective as of the beginning of 2016, in connection with the formation of a new EH R&D organization, certain functions transferred from Pfizer’s WRD organization to the new EH R&D organization. We have reclassified approximately $68 million of costs in the third quarter of 2015 and $202 million of costs in the first nine months of 2015 from WRD to EH to conform to the current period presentation as part of EH.

^(d)

Other business activities includes the costs managed by our WRD and GPD ~~and Pfizer~~organizations. Effective in the first quarter of 2017, Medical, ~~organizations.~~previously reported as part of Other Business Activities, was reclassified to Corporate. We have reclassified approximately $27 million of costs from Other Business Activities to Corporate in the first quarter of 2016 to conform to the current period presentation.


^(e)	For a description, see the “Other Costs and Business Activities” section above.


^(f)	Certain significant items are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges)~~, or unusual items~~ that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

For Earnings in the ~~third~~first quarter of 2017, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $78 million, (ii) charges for certain legal matters of $8 million, (iii) an incremental charge to amounts previously recorded to write down the HIS net assets to fair value less costs to sell of $37 million, (iv) charges for business and legal entity alignment of $21 million and (v) other charges of $13 million. For additional information, see Note 2B, Note 3 and Note 4.

For Earnings in the first quarter of 2016, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of ~~$375~~$137 million, (ii) ~~income~~charges for certain legal matters of ~~$40~~$286 million, (iii) ~~an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell of $1.4 billion, (iv)~~ certain asset impairment charges of ~~$126~~$131 million, ~~(v)~~(iv) charges for business and legal entity alignment of ~~$69 million and (vi) other charges of $17 million. For additional information, see~~ ~~Note 2B, Note 3~~ ~~and~~ ~~Note 4.~~

For Earnings in the third quarter of 2015, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $107 million, (ii) certain asset impairment charges of $633 million, (iii) charges for business and legal entity alignment of $60 million and (iv) other charges of $36 million. For additional information, see ~~Note 3~~ ~~and~~ ~~Note 4.~~

For Earnings in the first nine months of 2016, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $743 million, (ii) charges for certain legal matters of $506 million, (iii) an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell of $1.4 billion, (iv) certain asset impairment charges of $1.1 billion, (v) charges for business and legal entity alignment of $180 million and (vi) other charges of $189 million. For additional information, see ~~Note 2B~~, ~~Note 3~~ ~~and~~ ~~Note 4.~~

For Earnings in the first nine months of 2015, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $302 million, (ii) certain asset impairment charges of $633 million, (iii) charges for business and legal entity alignment of $224 million, (iv) charges for certain legal matters of $92$51 million and (v) other charges of ~~$117~~$34 million. For additional information, see Note 3 andNote 4.4.

Equity in the net income of investees accounted for by the equity method is not significant for any of our operating segments.

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Geographic Information


The following table provides revenues by geographic area^(a):	The following table provides revenues by geographic area^(a):													The following table provides revenues by geographic area^(a):
		Three Months Ended						Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)		October 2, 2016		September 27, 2015		% Change		October 2, 2016		September 27, 2015		% Change			April 2, 2017		April 3, 2016		% Change
U.S.		$	6,530	$	5,565	17		$	19,561	$	14,993	30			$	6,637	$	6,661	—
Developed Europe^(b)		2,218		2,315		(4	)	6,982		7,006		—			2,021		2,346		(14	)
Developed Rest of World^(c)		1,711		1,513		13		4,940		4,562		8			1,554		1,516		3
Emerging Markets^(d)		2,586		2,694		(4	)	7,714		8,243		(6	)		2,567		2,482		3
Revenues		$	13,045	$	12,087	8		$	39,196	$	34,804	13			$	12,779	$	13,005	(2	)

^(a)

~~On September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our condensed consolidated statement of income includes the operating results of Hospira. As a result, legacy Hospira~~Medivation’s and Anacor’s commercial operations are included in our condensed consolidated statements of income, ~~for the third quarter~~commencing from their respective acquisition dates of September 28, 2016 and ~~first nine months of~~June 24, 2016. ~~In accordance with our domestic and international reporting periods,~~Therefore, our results of operations ~~and EH's operating results~~ for the ~~third~~first quarter ~~and first nine months~~ of ~~2015 reflect only one month of legacy Hospira U.S. operations but no~~2016 do not include financial results from ~~legacy Hospira international operations.~~Medivation or Anacor. On ~~June 24, 2016,~~February 3, 2017, we ~~acquired Anacor. Commencing from~~completed the ~~acquisition date,~~sale of our ~~condensed consolidated statement~~global infusion therapy net assets, HIS, to ICU Medical. The commercial operations of ~~income includes the operating results of Anacor. As a result, legacy Anacor operations~~HIS are included in our condensed consolidated statements of income ~~for the third quarter~~through February 2, 2017 and, ~~first nine months of 2016. In accordance with~~therefore, our ~~domestic reporting period, our results of operations and IH's operating~~financial results for the ~~third~~first quarter of 2017 reflect approximately one month of legacy HIS domestic operations and ~~first nine months of 2016 include~~ approximately ~~three~~two months of legacy ~~Anacor operations. Additionally, on September 28, 2016, we acquired Medivation. Commencing from the acquisition date, our condensed consolidated statement of income includes the operating~~HIS international operations, while financial results ~~of Medivation. As a result, legacy Medivation operations are included~~ in our condensed consolidated statements of income for the ~~third~~first quarter ~~and first nine months of 2016. In accordance with our domestic and international reporting periods, our results of operations and IH's operating results for the third quarter and first nine months~~ of 2016 reflect three ~~business days~~months of legacy ~~Medivation operations, which were immaterial. See~~ ~~Note 2A~~ ~~for additional information.~~

HIS global operations.


^(b)	Developed Europe region includes the following markets: Western Europe, ~~Finland~~Scandinavian countries and ~~the Scandinavian countries.~~Finland. Revenues denominated in euros were ~~$1.7~~$1.6 billion and $1.8 billion in the ~~third~~first quarter of 2017 and 2016, ~~and 2015, respectively, and $5.3 billion and $5.4 billion in the first nine months of 2016 and 2015,~~ respectively.


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


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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

C. Other Revenue Information

Significant Product Revenues



The following table provides detailed revenue information:
	Three Months Ended
(MILLIONS OF DOLLARS)	April 2, 2017		April 3, 2016
PFIZER INNOVATIVE HEALTH (IH)^(a)	$	7,415	$	7,033
Internal Medicine	$	2,377	$	2,124
Lyrica IH^(b)	1,131		1,011
Eliquis alliance revenues and direct sales	564		373
Viagra IH^(c)	249		300
Chantix/Champix	239		220
Toviaz	63		64
BMP2	62		51
All other Internal Medicine	69		105
Vaccines	$	1,465	$	1,570
Prevnar 13/Prevenar 13	1,392		1,509
All other Vaccines	73		62
Oncology	$	1,347	$	1,001
Ibrance	679		429
Sutent	250		278
Xalkori	142		139
Xtandi alliance revenues	131		—
Inlyta	85		101
All other Oncology	61		55
Inflammation & Immunology (I&I)	$	871	$	947
Enbrel (Outside the U.S. and Canada)	588		733
Xeljanz	250		197
Eucrisa	9		—
All other I&I	24		17
Rare Disease	$	507	$	568
BeneFIX	149		185
Refacto AF/Xyntha	130		129
Genotropin	104		125
Somavert	56		55
All other Rare Disease	67		75
Consumer Healthcare	$	848	$	822
PFIZER ESSENTIAL HEALTH (EH)^(d)	$	5,364	$	5,972
Legacy Established Products (LEP)^(e)	$	2,606	$	2,800
Lipitor	404		411
Norvasc	228		236
Premarin family	228		256
Relpax	82		78
EpiPen	81		97
Zithromax	79		80
Xalatan/Xalacom	77		89
Zoloft	68		79
Effexor	66		70
Xanax	55		52
All other LEP	1,238		1,352
Sterile Injectable Pharmaceuticals (SIP)^(f)	$	1,552	$	1,524
Sulperazon	122		96
Medrol	120		113
Tygacil	74		76
Fragmin	71		78
Precedex	64		69
All other SIP	1,100		1,092

The following table provides detailed revenue information:
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) October 2,
2016
September 27,
2015
October 2,
2016
September 27,
2015
PFIZER INNOVATIVE HEALTH (IH)^(a)
$ 7,332
$ 6,752
$ 21,471
$ 19,120
Internal Medicine $ 2,243
$ 1,954
$ 6,557
$ 5,500
Lyrica IH^(b)
1,049
947
3,107
2,701
Viagra IH^(c)
297
333
897
955
Chantix/Champix 198
159
631
491
Toviaz 60
59
191
193
BMP2 63
57
175
169
Alliance revenues^(d)
417
343
1,139
841
All other Internal Medicine^(m)
159
56
416
149
Vaccines $ 1,641
$ 1,629
$ 4,576
$ 4,536
Prevnar/Prevenar 13 1,536
1,576
4,302
4,384
FSME/IMMUN-TicoVac 33
28
102
93
All other Vaccines 72
26
172
60
Oncology $ 1,104
$ 786
$ 3,206
$ 2,026
Ibrance 550
230
1,492
408
Sutent 260
279
823
815
Xalkori 140
122
415
353
Inlyta 95
105
304
311
All other Oncology 60
50
172
139
Inflammation & Immunology (I&I) $ 960
$ 987
$ 2,907
$ 2,816
Enbrel (Outside the U.S. and Canada) 701
844
2,201
2,426
Xeljanz 235
127
649
351
All other I&I 24
16
57
40
Rare Disease $ 585
$ 579
$ 1,768
$ 1,776
BeneFIX 176
194
543
561
Genotropin 147
142
425
447
Refacto AF/Xyntha 140
130
408
392
Somavert 59
54
173
158
Rapamune 38
32
131
138
All other Rare Disease 25
27
88
80
Consumer Healthcare $ 798
$ 817
$ 2,457
$ 2,465
PFIZER ESSENTIAL HEALTH (EH)⁽^e)
$ 5,712
$ 5,335
$ 17,725
$ 15,683
Legacy Established Products (LEP)^(f)
$ 2,708
$ 2,919
$ 8,373
$ 8,701
Lipitor 422
454
1,294
1,404
Premarin family 244
263
751
753
Norvasc 238
241
714
744
EpiPen 110
107
300
268
Xalatan/Xalacom 91
98
273
299
Relpax 83
91
248
254
Zoloft 72
95
228
274
Effexor 70
66
207
213
Zithromax/Zmax^(g)
56
63
203
203
Xanax/Xanax XR 55
55
163
164
Cardura 49
52
143
158
Neurontin 45
45
136
148
Tikosyn 20
44
136
123
Depo-Provera 36
45
103
133
All other LEP 1,119
1,199
3,473
3,563
Sterile Injectable Pharmaceuticals (SIP)^(h)
$ 1,461
$ 957
$ 4,481
$ 2,436
Medrol^(g)
102
98
330
284
Sulperazon 102
72
304
251
Fragmin 80
84
240
246
Tygacil 69
81
203
231
All other SIP 1,108
621
3,405
1,424

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Three Months Ended
(MILLIONS OF DOLLARS)	April 2, 2017		April 3, 2016
Peri-LOE Products^(g)	$	822	$	1,090
Celebrex	175		172
Lyrica EH^(b)	141		218
Pristiq	116		178
Vfend	107		156
Viagra EH^(c)	89		96
Zyvox	77		127
Revatio	65		66
All other Peri-LOE Products	53		76
Biosimilars^(h)	$	105	$	66
Inflectra/Remsima	78		36
All other Biosimilars	27		30
Pfizer CentreOne⁽ⁱ⁾	$	182	$	188
Hospira Infusion Systems (HIS)^(j)	$	97	$	304
Revenues	$	12,779	$	13,005

Total Lyrica^(b)	$	1,271	$	1,229
Total Viagra^(c)	$	339	$	396
Total Alliance revenues	$	656	$	360

Peri-LOE Products⁽ⁱ⁾
$ 1,023
$ 1,229
$ 3,224
$ 4,073
Lyrica EH^(b)
191
273
623
925
Celebrex 194
212
550
640
Pristiq 174
185
546
523
Vfend 140
165
459
510
Zyvox 94
165
334
696
Viagra EH^(c)
89
97
286
318
Revatio 73
53
213
181
All Other Peri-LOE Products 68
79
214
280
Infusion Systems^(j)
$ 281
$ 94
$ 879
$ 94
Biosimilars^(k)
$ 83
$ —
$ 228
$ —
Pfizer CentreOne^(l)
$ 156
$ 136
$ 540
$ 380
Revenues $ 13,045
$ 12,087
$ 39,196
$ 34,804

Total Lyrica^(b)
$ 1,240
$ 1,220
$ 3,730
$ 3,626
Total Viagra^(c)
$ 387
$ 430
$ 1,183
$ 1,274
Total Alliance revenues $ 419
$ 349
$ 1,155
$ 881

^(a)

The IH ~~business, previously known as the Innovative Products~~ business encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare and includes all legacy Medivation and Anacor commercial operations. Medivation’s and Anacor’s commercial operations are included in IH’s operating results in our ~~condensed~~ consolidated statements of income, commencing from ~~the~~their respective acquisition ~~date~~dates of September 28, 2016 ~~for Medivation~~ and ~~from the acquisition date of~~ June 24, 2016. Therefore, our first-quarter 2016 ~~for Anacor. As a result, IH’s revenues for the third quarter and first nine months~~results of ~~2016 include three business days of legacy Medivation~~ operations, and ~~approximately three months of legacy Anacor operations,~~IH’s operating results, do not include financial results from Medivation or Anacor. Through December 31, 2016, includes Duavive/Duavee and Viviant (recorded in All other Internal Medicine in 2016), which were ~~immaterial.~~transferred from Innovative Health to Essential Health effective January 1, 2017 (recorded in All other LEP (EH) beginning January 1, 2017), in order to align these products with our management of the women’s health portfolio within EH.


^(b)	Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH.


^(c)	Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH.


^(d)	~~Includes Eliquis (2016 and 2015) and Rebif (2015 only).~~

^(e)

The EH ~~business, previously known as the Established Products~~ business encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, ~~Infusion Systems,~~HIS (through February 2, 2017), Biosimilars and Pfizer CentreOne and includes all legacy Hospira commercial operations. ~~Hospira's commercial operations, including~~On February 3, 2017, we completed the ~~legacy Hospira One-2-One sterile injectables contract manufacturing business,~~sale of our global infusion therapy net assets, HIS, to ICU Medical. The operating results of HIS are included in EH’s operating results ~~in our condensed consolidated statements of income, commencing from the acquisition date of September 3, 2015. Therefore, in accordance with our domestic~~through February 2, 2017, and, ~~international reporting periods, our results of operations and EH's operating~~therefore, financial results for EH for the ~~third~~first quarter ~~and first nine months~~ of ~~2015~~2017 reflect ~~only~~approximately one month of legacy ~~Hospira U.S.~~HIS domestic operations ~~but no~~and approximately two months of legacy HIS international operations, while financial results ~~from legacy Hospira international operations. Also, effective as of~~for EH for the ~~beginning~~first quarter of 2016 our entire contract manufacturing business, Pfizer CentreOne (previously known as Pfizer CentreSource or PCS), is part of EH. Pfizer CentreOne consists of (i) legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including our manufacturing and supply agreements with Zoetis; 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 ($116 million in the third quarter of 2015 and $360 million in the first ninereflect three months of ~~2015) to conform to the current period presentation as part of EH.~~legacy HIS global operations.

^(f)(e)

Legacy Established Products primarily include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). Effective January 1, 2017, All other LEP includes Duavive/Duavee and Viviant, which were transferred from Innovative Health (recorded in All other Internal Medicine (IH) in 2016), in order to align these products with our management of the women’s health portfolio within EH.See note (a) above.


^(g)(f)	Prior period revenues for Medrol and Zithromax/Zmax may not agree to previously-disclosed revenues because revenues for those products are now split between the Legacy Established Products and the Sterile Injectable Pharmaceuticals categories.


^(h)	Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products).

^(i)(g)

Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products ~~primarily include~~include: Lyrica in ~~certain developed~~ Europe, ~~markets, Pristiq globally, Celebrex, Zyvox~~Russia, Turkey, Israel and ~~Revatio in most developed markets, Vfend and~~Central Asia; Viagra in ~~certain developed Europe markets~~all countries (excluding the U.S. and ~~Japan,~~Canada); and ~~Inspra in the EU.~~worldwide revenues for Celebrex, Pristiq, Zyvox, Vfend, Revatio and Inspra.


^(h)	Biosimilars include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle East markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle East markets.


⁽ⁱ⁾	Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, and revenues related to our manufacturing and supply agreements, including with Zoetis.


^(j)	~~Infusion Systems include~~ HIS (through February 2, 2017) includes Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets.


^(k)	Biosimilars include Inflectra (biosimilar infliximab) in certain European markets, Nivestim (biosimilar filgrastim) in certain Asian markets and Retacrit (biosimilar epoetin zeta) in certain international markets.


^(l)	Pfizer CentreOne (previously known as Pfizer CentreSource or PCS) includes (i) revenues from legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including revenues related to our manufacturing and supply agreements with Zoetis; and (ii) revenues from legacy Hospira’s One-2-One sterile injectables contract manufacturing operation.


^(m)	~~Includes Eliquis direct sales markets.~~

We performed certain reclassifications, primarily ~~between Legacy Established Products and Sterile Injectable Pharmaceuticals,~~within Pfizer CentreOne, to conform to the current period presentation.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Note 14. Subsequent Event Regarding Equity~~

On October 26, 2016, the Compensation Committee approved the modification of current outstanding grants of TSRU awards, to permit a holder who is "retiree eligible" (at least age 55 with at least 10 years of service), to elect to exercise and convert his/her TSRUs when vested, into PTUs. The value received upon the election and conversion is calculated by taking the change in stock price (20 trading day average ending on the exercise date (Election Price) less the grant price) plus accumulated dividends from the grant date, times the number of TSRUs exercised. This value is divided by the Election Price to determine the number of PTUs. The PTUs will be entitled to earn DEUs, and the PTUs and DEUs will be settled in Pfizer common stock on the TSRUs original settlement date (i.e., the fifth or seventh anniversary of grant), and will be subject to all of the terms and conditions of the original grant including forfeiture provisions. This modification applies to approximately 2,900 employees, including members of senior management. There was no incremental compensation cost resulting from the modification.

REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have reviewed the condensed consolidated balance sheet of Pfizer Inc. and Subsidiary Companies as of ~~October~~April 2, ~~2016,~~2017, and the related condensed consolidated statements of income, comprehensive income and cash flows for the three-month ~~and nine-month~~ periods ended ~~October~~April 2, ~~2016~~2017 and ~~September 27, 2015.~~April 3, 2016. These condensed consolidated financial statements are the responsibility of the Company’s management.

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

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

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Pfizer Inc. and Subsidiary Companies as of December 31, ~~2015,~~2016, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February ~~29, 2016,~~23, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2015,~~2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

New York, New York

~~November 10, 2016~~May 11, 2017

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

Introduction

See the Glossary of Defined Terms at the beginning of this Quarterly Report on Form 10-Q for terms used throughout this MD&A. Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and footnotes to assist readers in understanding Pfizer’s results of operations, financial condition and cash flows. The MD&A is organized as follows:



●	Overview of Our Performance, Operating Environment, Strategy and Outlook	Beginning on page 5344
	This section provides information about the following: Our Business; our performance during the ~~third~~first quarter of 2017 and ~~first nine months of 2016 and 2015;~~2016; Our Operating Environment; The Global Economic Environment; Our Strategy; Our Business Development Initiatives, such as acquisitions, dispositions, licensing and collaborations; and ~~our~~Our Financial Guidance for ~~2016.~~2017.
●	Analysis of the Condensed Consolidated Statements of Income	Beginning on page 6656
	This section includes a Revenues Overview section as well as the following sub-sections:
	○ Revenues - Major Products	Beginning on page 7059
	This sub-section provides revenue information for several of our major biopharmaceutical products.
	○ Revenues - Selected Product ~~Descriptions~~Discussion	Beginning on page 7160
	This sub-section provides an overview of several of our biopharmaceutical products.
	○ Product Developments - Biopharmaceutical	Beginning on page 7663
	This sub-section provides an overview of important biopharmaceutical product developments.
	○ Costs and Expenses	Beginning on page 7967
	This sub-section provides a discussion about our costs and expenses.
	○ Provision for Taxes on Income	Beginning on page 8270
	This sub-section provides a discussion of items impacting our tax provisions.
	○ Non-GAAP Financial Measure (Adjusted Income)	Beginning on page 8370
	This sub-section provides a discussion of an alternative view of performance used by management.
●	Analysis of Operating Segment Information	Beginning on page 8975
	This section provides a discussion of the performance of each of our operating segments.
●	Selected Balance Sheet Information by Operating Segment	Beginning on page 80
	This section provides a discussion of certain balance sheet accounts by Operating Segment.
●	Analysis of the Condensed Consolidated Statements of Comprehensive Income	Beginning on page 9580
	This section provides a discussion of changes in certain components of other comprehensive income.
●	Analysis of the Condensed Consolidated Balance Sheets	Beginning on page 9581
	This section provides a discussion of changes in certain balance sheet ~~accounts.~~accounts, including Accumulated other comprehensive loss.
●	Analysis of the Condensed Consolidated Statements of Cash Flows	Beginning on page 9682
	This section provides an analysis of our cash flows for the first ~~nine~~three months of ~~2016~~2017 and ~~2015.~~2016.
●	Analysis of Financial Condition, Liquidity and Capital Resources	Beginning on page 9783
	This section provides an analysis of selected measures of our liquidity and of our capital resources as of ~~October~~April 2, ~~2016~~2017 and December 31, ~~2015,~~2016, as well as a discussion of our outstanding debt and other commitments that existed as of ~~October~~April 2, ~~2016~~2017 and December 31, ~~2015.~~2016. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future activities.
●	New Accounting Standards	Beginning on page ~~102~~87
	This section discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted.
●	Forward-Looking Information and Factors That May Affect Future Results	Beginning on page ~~103~~90
	This section provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements presented in this MD&A, relating to, among other things, our anticipated ~~future~~ operating and financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans and plans relating to share repurchases and dividends. ~~Such forward-looking statements are based on management’s plans and assumptions, which are inherently susceptible to uncertainty and changes in circumstances.~~ Also included in this section is a discussion of legal proceedings and contingencies.

Certain amounts in our MD&A may not add due to rounding. All percentages have been calculated using unrounded amounts.

																									The following table provides the components of the condensed consolidated statements of income:
	Three Months Ended								Nine Months Ended								Three Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)	October 2, 2016			September 27, 2015			% Change		October 2, 2016			September 27, 2015			% Change		April 2, 2017			April 3, 2016			% Change
Revenues	$	13,045		$	12,087		8		$	39,196		$	34,804		13		$	12,779		$	13,005		(2	)

Cost of sales	3,085			2,219			39		9,111			6,238			46		2,470			2,851			(13	)
% of revenues	23.6		%	18.4		%			23.2		%	17.9		%			19.3		%	21.9		%

Selling, informational and administrative expenses	3,559			3,270			9		10,414			9,761			7		3,308			3,385			(2	)
% of revenues	27.3		%	27.1		%			26.6		%	28.0		%			25.9		%	26.0		%

Research and development expenses	1,881			1,722			9		5,360			5,342			—		1,708			1,731			(1	)
% of revenues	14.4		%	14.2		%			13.7		%	15.3		%			13.4		%	13.3		%

Amortization of intangible assets	968			937			3		2,934			2,748			7		1,186			1,006			18
% of revenues	7.4		%	7.7		%			7.5		%	7.9		%			9.3		%	7.7		%

Restructuring charges and certain acquisition-related costs	531			581			(9	)	988			727			36		157			141			11
% of revenues	4.1		%	4.8		%			2.5		%	2.1		%			1.2		%	1.1		%

Other (income)/deductions––net	1,417			661			*		2,815			670			*		(1		)	330			*
Income from continuing operations before provision for taxes on income	1,604			2,697			(41	)	7,575			9,319			(19	)	3,951			3,561			11
% of revenues	12.3		%	22.3		%			19.3		%	26.8		%			30.9		%	27.4		%

Provision for taxes on income	284			567			(50	)	1,194			2,178			(45	)	821			513			60
Effective tax rate	17.7		%	21.0		%			15.8		%	23.4		%			20.8		%	14.4		%

Income from continuing operations	1,320			2,130			(38	)	6,380			7,141			(11	)	3,130			3,048			3
% of revenues	10.1		%	17.6		%			16.3		%	20.5		%			24.5		%	23.4		%

Discontinued operations––net of tax	—			8			*		—			14			(99	)	—			—			—

Net income before allocation to noncontrolling interests	1,319			2,139			(38	)	6,380			7,155			(11	)	3,130			3,048			3
% of revenues	10.1		%	17.7		%			16.3		%	20.6		%			24.5		%	23.4		%

Less: Net income attributable to noncontrolling interests	—			9			*		25			23			9		9			9			(8	)
Net income attributable to Pfizer Inc.	$	1,320		$	2,130		(38	)	$	6,355		$	7,132		(11	)	$	3,121		$	3,038		3
% of revenues	10.1		%	17.6		%			16.2		%	20.5		%			24.4		%	23.4		%

Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.22		$	0.34		(37	)	$	1.04		$	1.15		(10	)	$	0.52		$	0.49		6
Discontinued operations––net of tax	—			—			—		—			—			—
Net income attributable to Pfizer Inc. common shareholders	$	0.22		$	0.35		(37	)	$	1.04		$	1.15		(10	)	$	0.52		$	0.49		6

Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	0.22		$	0.34		(37	)	$	1.03		$	1.14		(9	)	$	0.51		$	0.49		6
Discontinued operations––net of tax	—			—			—		—			—			—
Net income attributable to Pfizer Inc. common shareholders	$	0.21		$	0.34		(37	)	$	1.03		$	1.14		(10	)	$	0.51		$	0.49		6

Cash dividends paid per common share	$	0.30		$	0.28		7		$	0.90		$	0.84		7		$	0.32		$	0.30		7

* Calculation not meaningful.

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business

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

We manage our commercial operations through two distinct business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH). Each operating segment has responsibility for its commercial activities and for certain IPR&D projects for new investigational products and additional indications for in-line products that generally have achieved proof-of-concept. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 13A. Segment, Geographic and Other Revenue Information: Segment Information and the “Our ~~Strategy”~~Strategy––Commercial Operations” section of this MD&A below.

The majority of our revenues come from the manufacture and sale of biopharmaceutical products. As explained more fully in our ~~2015~~2016 Form 10-K, the biopharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. These factors include, among others: the loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights, the ability to replenish innovative biopharmaceutical products, healthcare legislation, pipeline productivity, the regulatory environment, pricing and access pressures and competition. We also face challenges as a result of the global economic environment. For additional information about these factors and challenges, see the “Our Operating Environment” and “The Global Economic Environment” sections of this MD&A and of our ~~2015~~2016 Financial Report and Part I, Item 1A, “Risk Factors” of our ~~2015~~2016 Form 10-K.

The financial information included in our condensed consolidated financial statements for our subsidiaries operating outside the U.S. is as of and for the three ~~and nine~~ months ended ~~August~~February 26, 2017 and February 28, ~~2016 and August 23, 2015.~~2016. The financial information included in our condensed consolidated financial statements for U.S. subsidiaries is as of and for the three ~~and nine~~ months ended ~~October~~April 2, ~~2016~~2017 and ~~September 27, 2015.~~April 3, 2016.



References to developed and emerging markets in this MD&A include:
Developed markets		U.S., Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New Zealand

Emerging markets (includes, but is not limited to)		Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey

References to operational variances in this MD&A pertain to period-over-period growth rates that exclude the impact of foreign ~~exchange as well as the negative currency impact related to Venezuela.~~exchange. The operational variances are determined by multiplying or dividing, as appropriate, our current ~~year~~period U.S. dollar results by the current ~~year~~period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. WeAlthough exchange rate changes are part of our business, they are not within our control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, we believe presenting ~~these~~ operational variances provides useful information in evaluating the results of our business.

Our significant business ~~because exchange rate changes, while part of our ongoing business, can mask positive or negative trends in the business and are not within our control.~~development activities include:

•

On February 3, 2017, we completed the sale of Pfizer’s global infusion therapy net assets, HIS, to ICU Medical for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing.At closing, we received 3.2 million newly issued shares of ICU Medical common stock, which we valued at approximately $428 million, a promissory note in the amount of $75 million and net cash of approximately $200 million before customary adjustments for net working capital. In addition, we are entitled to receive a contingent amount of up to an additional $225 million in cash based on ICU Medical’s achievement of certain cumulative performance targets for the combined company through December 31, 2019. The operating results of HIS are included in the condensed consolidated statement of income and EH’s operating results through February 2, 2017 and, therefore, financial results for the first quarter of 2017 reflect approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations, while financial results for the first quarter of 2016 reflect three months of legacy HIS global operations. Assets and liabilities associated with HIS are presented as held for sale in the condensed consolidated balance

~~On October 6, 2016, we announced that we entered into a definitive agreement under which ICU Medical will acquire all~~sheet as of ~~Pfizer’s global infusion therapy net~~December 31, 2016. The HIS assets HIS, for approximately $1 billion in cash and ICU Medical stock. HIS includes IV pumps, solutions and devices. Under the terms of the agreement, Pfizer will receive approximately $400 million in newly issued shares of ICU Medical common stock and $600 million in cash from ICU Medical, subject to customary adjustments for net working capital. Upon completion of the transaction, which the companies expect to occur in the first quarter of 2017, subject to customary closing conditions, including required regulatory approvals, Pfizer will own approximately 16.6% of ICU Medical. Pfizer has also agreed to certain restrictions on transfer of its ICU Medical shares for at least 18 months. Assets and liabilities associated with HIS were reclassified as held for sale are reported in ~~the condensed consolidated balance sheet as of October 2, 2016. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2B.~~ ~~Acquisitions,~~ Assets held for sale and ~~Liabilities Held~~HIS liabilities held for ~~Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale~~ ~~and the “Our Strategy” section of this MD&A below.~~

~~On September 28, 2016 (the acquisition date), we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion~~sale are reported in ~~cash ($13.9 billion, net of cash acquired). Of this consideration, $1 billion was not paid as of October 2, 2016, and was recorded in~~ Other current ~~liabilities~~. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Medivation, and, in accordance with our domestic and international reporting periods, our consolidated financial statements for the three and nine months ended October 2, 2016 reflect three business days of legacy Medivation operations, which were immaterial.~~See Notes to Condensed Consolidated Financial Statements––Note 2A.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~ ~~for additional information.~~liabilities.

•

On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S., including the commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets ATM-AVI and CXL (ceftaroline fosamil-AVI). The total fair value of the consideration transferred for this business was approximately $555 million in cash plus contingent consideration of $490 million. Of this cash consideration, approximately $3 million was not paid as of April 2, 2017, and was recorded in Other current liabilities. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of this business, and, in accordance with our international reporting period, our condensed consolidated financial statements for the first quarter of 2017 reflect approximately two months of legacy AstraZeneca small molecule anti-infectives business international operations, which were immaterial.

•

On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Of this consideration, approximately $365 million was not paid as of April 2, 2017, and was recorded in Other current liabilities. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Medivation. As a result, legacy Medivation operations are reflected in our results of operations, IH’s operating results, and cash flows for the first quarter of 2017, but not for the first quarter of 2016.

On August 24, 2016, we announced that we entered into an agreement with AstraZeneca to acquire the development and commercialization rights to its small molecule anti-infectives business, primarily outside the U.S. The agreement includes the commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets aztreonam-avibactam (ATM-AVI) and CXL (ceftaroline fosamil-AVI). Under the terms of the agreement, Pfizer will make an upfront payment of $550 million to AstraZeneca upon the close of the transaction and a deferred payment of $175 million in January 2019. In addition, AstraZeneca is eligible to receive up to $250 million in milestone payments, up to $600 million in sales-related payments, as well as tiered royalties on sales of Zavicefta™ and ATM-AVI in certain markets. The transaction is expected to close in the fourth quarter of 2016, subject to customary closing conditions, including antitrust clearance in certain jurisdictions.

On June 24, 2016, ~~(the acquisition date),~~ we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion, net of cash acquired), plus $698 million debt assumed. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Anacor, and, in accordance with our domestic reporting period, our consolidated statements of income for the third quarter and first nine months of 2016 reflect approximately three months of legacy Anacor operations, which were immaterial. See Notes to Condensed Consolidated Financial Statements––~~Note 2A.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~ ~~for additional information.~~

On April 6, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 was terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement. In connection with the termination of the merger agreement, on April 8, 2016 (which fell into Pfizer’s second fiscal quarter), Pfizer paid Allergan $150 million (pre-tax) for reimbursement of Allergan’s expenses associated with the terminated transaction (see the Notes to Condensed Consolidated Financial Statements––~~Note 4~~. ~~Other (Income)/Deductions~~––~~Net). Pfizer and Allergan also released each other from any and all claims in connection with the merger agreement.~~

~~On September 3, 2015, we acquired Hospira and, commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Hospira.~~Anacor. As a result, legacy ~~Hospira~~Anacor operations are reflected in our results of operations, ~~EH’s~~IH’s operating results, and cash flows for the ~~third~~first quarter ~~and first nine months~~ of ~~2016. In accordance with our domestic and international reporting periods, our consolidated statements of income~~2017, but not for the ~~third~~first quarter ~~and first nine months~~ of 2015 reflect only one month of legacy Hospira U.S. operations but no financial results from legacy Hospira international operations. Legacy Hospira assets and liabilities are reflected in our balance sheets as of October 2, 2016 and December 31, 2015. See the “Our Business Development Initiatives” and the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” sections of this~~MD&A and~~2016.

For additional information, see Notes to Condensed Consolidated Financial Statements––Note ~~2A.~~ 2. Acquisitions, Sale of Hospira Infusion Systems Net Assets, ~~and Liabilities Held for Sale, Research and Development and~~ Collaborative ~~Arrangements,~~Arrangement, Equity-Method Investments and Cost-Method Investment~~: Acquisitions~~ ~~for additional information.~~ and the “Our Strategy” and “Our Business Development Initiatives” sections of this MD&A below.

Our ~~2016~~First Quarter 2017 Performance

Revenues––~~Third~~First Quarter ~~2016~~2017

Revenues in the ~~third~~first quarter of ~~2016 were $13.0 billion, an increase of 8%~~2017 decreased 2% compared to the same period in ~~2015,~~2016, which reflects an operational ~~increase~~decrease of ~~$1.2 billion, or 10%~~1%, ~~partially offset by the~~and an unfavorable impact of foreign exchange of ~~$224 million, or 2%~~1%.

~~Revenues––First Nine Months 2016~~

~~Revenues~~ in the first nine months of 2016 were $39.2 billion, an increase of 13% compared to the same period in 2015, which reflects an operational increase of $5.6 billion, or 16%, partially offset by the unfavorable impact of foreign exchange of $1.3 billion, or 4%.

Compared to the first ~~nine months~~quarter of ~~2015,~~2016, revenues infor the first ~~nine months~~quarter of ~~2016~~2017 were ~~favorably~~unfavorably impacted by approximately ~~$800~~$300 million as a result of one less selling day in the ~~first nine months of 2016 having four additional~~U.S. and two fewer selling days in ~~both the U.S. and~~ international markets. This imbalance in selling days will ~~be offset~~result in ~~the fourth quarter of 2016 resulting~~one less U.S. selling day and one less international selling day in ~~essentially the same number of selling days in 2016~~full-year 2017, as ~~2015.~~

compared to 2016.

The following provides an analysis of the third quarter and the first nine months of 2016 operational revenue growth for Pfizer standalone revenues (excluding Hospira):
Three Months Ended Nine Months Ended
(BILLIONS OF DOLLARS) October 2, 2016 October 2, 2016
Operational revenues––Pfizer-standalone increase:
Operational consolidated revenues increase $ 1.2
$ 5.6
Less: Operational growth from legacy Hospira (0.8 ) (3.1 )
Operational revenues––Pfizer-standalone increase $ 0.4
$ 2.5

Components of operational revenues––Pfizer-standalone increase:
Operational revenue growth from certain key products––net $ 0.8
$ 3.7
Operational revenue decrease due to product losses of exclusivity and the expiry of the collaboration agreement to co-promote Rebif in the U.S. (0.4 ) (1.2 )
Operational revenues––Pfizer-standalone increase $ 0.4
$ 2.5



The following provides an analysis of the 2017 revenue decline:
(MILLIONS OF DOLLARS)

Revenues, for the three months ended April 3, 2016	$	13,005

Acquisition-related growth
Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)	131

Disposition-related impact
Approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to three months of legacy HIS global operations in the same period in 2016	(207		)

Operational growth/(decline)
Growth from key brands, including Ibrance and Eliquis (globally), Lyrica (IH) and Xeljanz (both primarily in the U.S.), as well as growth in the Pfizer Sterile Injectable Pharmaceuticals portfolio and Biosimilars	706
Decline from the Peri-LOE Products portfolio and the Legacy Established Products portfolio, as well as lower revenues for Enbrel (in most developed Europe markets), Prevnar 13/Prevenar 13 (globally) and Viagra (IH) (in the U.S.)	(688		)
Other operational factors, net	(53		)
Operational decline, net	(110		)

Operational revenues	12,895
Unfavorable impact of foreign exchange	(116		)
Revenues, for the three months ended April 2, 2017	$	12,779

See the “Analysis of the Condensed Consolidated Statements of Income––Revenues and Product Developments––Revenues––Overview” section below for more information, including a discussion of key drivers of our revenue performance.

~~Income from Continuing Operations Before Provision for Taxes on Income––Third Quarter 2016~~

~~Income from continuing operations before provision for taxes on income~~ for the third quarter of 2016 was $1.6 billion, compared to $2.7 billion in the third quarter of 2015, primarily reflecting, among other items, in addition to the operational and foreign exchange impacts for ~~Revenues~~ ~~described above:~~

~~a $1.4 billion charge related to the write-down of HIS net assets to fair value less estimated costs to sell (see also the Notes to Condensed Consolidated Financial Statements––Note 2B.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale)~~;

~~higher cost of sales (up $866 million) (see also the “Costs and Expenses––Cost of Sales” section of this MD&A);~~

higher selling, informational and administrative expenses (up $289 million) (see also the “Costs and Expenses––Selling, Informational and Administrative Expenses (SI&A) Expenses” section of this MD&A); and

~~higher research and development expenses (up~~ ~~$159 million) (see also the “Costs and Expenses––Research and Development (R&D) Expenses” section of this MD&A),~~

~~partially offset by:~~

~~lower asset impairments (down $501 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4~~. ~~Other~~ (~~Income)/Deductions~~––~~Net~~);

~~higher Other, net income (up $105 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4~~. ~~Other~~ (~~Income)/Deductions~~––~~Net); and~~

~~lower restructuring charges and certain acquisition-related costs (down $50 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 3~~. ~~Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives~~).

Income from Continuing Operations Before Provision for Taxes on Income––First ~~Nine Months 2016~~Quarter 2017

The following provides an analysis of the increase in Income from continuing operations before provision for taxes on income for the first ~~nine months~~quarter of ~~2016 was $7.6 billion, compared to $9.3 billion in the first nine monthsof 2015, primarily reflecting, among other items, in addition to the operational and foreign exchange impacts for~~ ~~Revenues~~ ~~described above:~~

~~higher cost of sales (up $2.9 billion) (see also the “Costs and Expenses––Cost of Sales” section of this MD&A);~~2017:

higher selling, informational and administrative expenses (up $654 million) (see also the “Costs and Expenses––Selling, Informational and Administrative Expenses (SI&A) Expenses” section of this MD&A);



(MILLIONS OF DOLLARS)
Income from continuing operations before provision for taxes on income, for the three months ended April 3, 2016	$	3,561

Unfavorable change in revenues	(226		)

Favorable changes:
Lower Cost of sales^(a)	381
Lower certain legal matters, net^(b)	266
Higher net gains on asset disposals^(b)	123
Lower certain asset impairments^(b)	119
Lower Selling, informational and administrative expenses^(c)	76
Lower Research and development expenses^(d)	23
Unfavorable changes:
Higher Amortization of intangible assets^(e)	(180		)
Lower royalty-related income^(b)	(101		)
Loss on sale of HIS net assets^(b)	(37		)
All other items	(54		)
Income from continuing operations before provision for taxes on income, for the three months ended April 2, 2017	$	3,951


^(a)	See the “Costs and Expenses––Cost of Sales” section of this MD&A.


^(b)	See the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net.


^(c)	See the “Costs and Expenses––Selling, Informational and Administrative Expenses ” section of this MD&A.


^(d)	See the “Costs and Expenses––Research and Development Expenses” section of this MD&A.


^(e)	See the “Costs and Expenses––Amortization of Intangible Assets” section of this MD&A.

~~higher asset impairments (up $422 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4~~. ~~Other~~ (~~Income)/Deductions~~––~~Net~~);

~~higher charges for legal matters (up $395 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4~~. ~~Other (Income)/Deductions~~––~~Net~~);

~~higher restructuring charges and certain acquisition-related costs (up $261 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 3~~. ~~Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives); and~~

~~higher amortization of intangible assets (up $186 million) (see also the “Costs and Expenses––Amortization of Intangible Assets” section of this MD&A); and~~

~~lower net gains on asset disposals (down $149 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4~~. ~~Other (Income)/Deductions~~––~~Net~~),

~~partially offset by:~~

~~higher Other, net income (up $187 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4~~. ~~Other~~ (~~Income)/Deductions~~––~~Net); and~~

~~lower charges for business and legal entity alignment costs (down $44 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4~~. ~~Other~~ (~~Income)/Deductions~~––~~Net~~).

For information on our tax provision and effective tax rate see the “Provision for Taxes on Income” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 5. Tax Matters.

Our Operating Environment

Industry-Specific Challenges

Intellectual Property Rights and Collaboration/Licensing Rights

The loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights can have a significant adverse effect on our revenues. We have lost exclusivity for a number of our products in certain markets and we have lost collaboration rights with respect to a number of our alliance products in certain markets, and we expect certain products to face significantly increased generic competition over the next few years.

As a result of a patent litigation settlement with several generic manufacturers, generic versions of Pristiq launched in the U.S. in March 2017. See the “Intellectual Property Rights and Collaboration/Licensing Rights” section of our ~~2015~~2016 Financial Report for additional information about (i) recent losses and expected losses of product exclusivity in the U.S., Europe or Japan impacting product revenues and (ii) recent losses ~~and expected losses~~ of collaboration rights impacting alliance revenues.

We expect to lose exclusivity for various other products in various markets over the next few years, including, among others, ~~Pristiq in the U.S. in March 2017 and~~ Viagra in the U.S. in ~~late 2017.~~December 2017 and the expiration of the basic product patent for Lyrica in the U.S. in December 2018. For additional information, see the “Patents and Other Intellectual Property Rights” section in Part I, Item 1, “Business” of our ~~2015~~2016 Form 10-K.

We will continue to aggressively defend our patent rights whenever we deem appropriate. For more detailed information about our significant products, see the discussion in the “Revenues––Major Products” and “Revenues––Selected Product Descriptions” sections of this MD&A. For a discussion of certain recent developments with respect to patent litigation, see Notes to Condensed Consolidated Financial Statements––Note 12A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation.

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

In March 2010, the ACA was enacted in the U.S. For additional information, see the “Government Regulation and Price Constraints” section in Part I, Item 1, “Business” of our ~~2015~~2016 Form 10-K.

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


•	$58 million in the first quarter of 2017 and $96 million in the first quarter of 2016, recorded as a reduction to Revenues related to the Medicare “coverage gap” discount provision; and


•	$37 million in the first quarter of 2017 and $32 million in the first quarter of 2016, recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs.

$143 million in the third quarter of 2016 and $120 million in the third quarter of 2015, and $302 million in the first nine months of 2016 and $276 million in the first nine months of 2015, recorded as a reduction to ~~Revenues~~ ~~related to the Medicare “coverage gap” discount provision; and~~

~~$95 million in the third quarter of 2016 and $81 million in the third quarter of 2015, and $219 million in the first nine months of 2016 and $170 million in the first nine months of 2015, recorded in~~ ~~Selling, informational and administrative expenses~~, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs.

Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures

Governments, MCOs and other payer groups continue to seek increasing discounts on our products through a variety of means, such as leveraging their purchasing power, implementing price controls, and demanding price cuts (directly or by rebate actions). In Europe, Japan, China, Canada, South Korea and some other international markets, governments provide healthcare at low direct cost to patients and regulate pharmaceutical prices or patient reimbursement levels to control costs for the government-sponsored healthcare ~~system.~~system, particularly under recent global economic pressures. In the U.S., a primary government activity with implications for pharmaceutical pricing is deficit

reduction. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, and/or any significant additional taxes or fees that may be imposed on us, as part of any broad deficit-reduction effort could have an adverse impact on our results of operations. Significant Medicare reductions could also result if Congress proceeds with certain proposals to convert the Medicare fee-for-service program into a premium support program, or if it chooses to implement the recommendations made annually by the Medicare Payment Advisory Commission, which are primarily intended to extend the fiscal solvency of the Medicare program. Similar reductions to Medicare spending could result if the threshold for action by the Independent Payment Advisory Board (IPAB) is reached, and the Secretary of the Department of Health and Human Services (to whom responsibility for developing savings proposals specified in the ACA is likely to default in the absence of a seated IPAB) is required to identify savings.

Consolidation among MCOs has increased the negotiating power of MCOs and other private insurers. Private third-party insurers, as well as governments, increasingly employ formularies to control costs by negotiating discounted prices in exchange for formulary inclusion. Failure to obtain or maintain timely or adequate pricing or formulary placement for our products or obtaining such pricing or placement at unfavorable pricing could adversely impact revenue.

Additionally, ~~federal~~efforts by government officials or legislators to implement measures to regulate prices or payment for pharmaceutical products could adversely affect our business if implemented. There has recently been considerable public and ~~state policy efforts designed specifically~~government scrutiny of pharmaceutical pricing and proposals to reduce patient out-of-pocket costs for medicines, or lower manufacturer prices and/or limit price increases could result in new mandatory rebates and discounts or other pricing restrictions. The current U.S. president-elect has introduced such policy proposals, and a November 2015 U.S. Departmentaddress the perceived high cost of ~~Health and Human Services forum dedicated to drug pricing could lead to further proposals in the future.~~pharmaceuticals. We believe medicines are the most efficient and effective use of healthcare dollars based on the value they deliver to the overall healthcare system. We continue to work with stakeholders to ensure access to medicines within an efficient and affordable healthcare system.

~~The ACA, which expanded~~Adoption of other new legislation at the ~~role~~federal or state level could further affect demand for, or pricing of, our products. In 2017, we may face uncertainties due to federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the ACA, including through the American Health Care Act of 2017, which was approved by the U.S. ~~government~~House of Representatives in May 2017. The U.S. Senate has indicated that it will use the American Health Care Act as a starting point for its own ACA repeal and replacement bill, the final form of which is uncertain, as is its likelihood of passage. Although the revenues generated for Pfizer by the Medicaid expansion and health insurance exchanges under the ACA have been exceeded by the new rebates, discounts, and taxes, there is no assurance that repeal or replacement of the ACA will not adversely affect our business and financial results, particularly if replacement legislation reduces incentives for employer-sponsored insurance coverage, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare ~~payer, is accelerating changes in~~reform will affect our business. We will continue to work with law makers and advocate for solutions that effectively improve patient health outcomes and lower costs to the ~~U.S.~~ healthcare ~~marketplace, and the~~system.

The potential for additional pricing and access pressures in the commercial sector continues to be significant. ~~Many of these developments may impact drug utilization, in particular branded drug utilization.~~ Some employers, seeking to avoid the tax on high-cost health insurance in the ACA ~~originally to be imposed in 2018 (now~~ to be imposed in 2020, ~~per the terms of the fiscal year 2016 omnibus appropriations legislation),~~ are already scaling back healthcare benefits and an increasing number are implementing high deductible benefit designs. ~~Some~~This is a trend that is likely to continue, especially if proposals to limit the tax exclusion for employer sponsored health insurance ultimately become law. Private third-party payers, such as health plans, increasingly challenge pharmaceutical product pricing, which could result in lower prices,

lower reimbursement rates and ~~PBMs~~a reduction in demand for our products. Pricing pressures for our products may occur as a result of highly competitive insurance markets. Healthcare provider purchasers, directly or through group purchasing organizations, are seeking ~~greater pricing predictability from pharmaceutical manufacturers in contractual negotiations. Other health plans and PBMs are increasing their focus on spending on specialty medicines by~~enhanced discounts or implementing co-insurance in place of a flat co-payment. Because co-insurance passes on a percentage of a drug’s cost to the patient, this shift has the potential to significantly increase patient out-of-pocket costs.

more rigorous bidding or purchasing review processes.

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

Outside the U.S., governments, including the different EU Member States, may use a variety of cost-containment measures for our pharmaceutical products, including price cuts, mandatory rebates, value-based pricing, and international reference pricing (i.e., the practice of a country linking its regulated medicine prices to those of other countries). This international patchwork of price regulation and differing economic conditions and assessments of value across countries has led to different prices in different countries and some third-party trade in our products between countries.

In particular, international reference pricing adds to the regional impact of price cuts in individual countries and hinders patient access and innovation. Price variations, exacerbated by international reference pricing systems, also have resulted from exchange rate fluctuations. The downward pricing pressure resulting from this dynamic can be expected to continue as a result of reforms to international reference pricing policies and measures targeting pharmaceuticals in some European countries.

In addition, several important multilateral organizations, such as the United Nations (UN) and the Organization for Economic Cooperation and Development (OECD), are increasing policy pressures and scrutiny of international pharmaceutical pricing through issuing reports and policy recommendations (e.g., 2016 UN High Level Panel Report on Access to Medicines and 2017 OECD Report on New Health Technologies––Managing Access, Value and Sustainability). Government adoption of these recommendations may lead to additional pricing pressures.

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

For additional information, see the “Regulatory Environment––Pipeline Productivity” and “Competition” sections of our ~~2015~~2016 Financial Report.

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~~Governments, corporations, and insurance companies, which provide insurance benefits to patients, ~~who are experiencing~~have implemented increases in ~~co-pays~~cost-sharing and restrictions on access to medicines, ~~as payers seek~~potentially causing patients to ~~control costs, sometimes~~ switch to generic products, delay treatments, skip doses or use less effective treatments. ~~We are exposed~~Government financing pressures can lead to negative pricing pressure in various markets ~~around the world. The U.S. has highly competitive insurance markets, and~~where governments take an active role in setting prices, access criteria (e.g., through public or private health technology assessments), or other means of cost control. Examples include Europe, Japan, China, Canada, South Korea and a number of other international markets. The U.S. continues to maintain competitive insurance markets, ~~have government-mandated reductions~~but has also seen significant increases in ~~prices~~patient cost-sharing and ~~access restrictions for certain biopharmaceutical products to control costs for the government-sponsored healthcare system, particularly under recent global economic pressures. Furthermore, some~~growing 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.~~

Weinfluence as government programs 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~~grow as a source of ~~Financial Condition, Liquidity and Capital Resources” section of this MD&A.~~coverage.


•	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, including those changes resulting from the volatility following the U.K. referendum in which voters approved the exit from the EU, 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 and more recently Egypt, 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” and the “Our Financial Guidance for ~~2016”~~2017” sections of this MD&A.

In June 2016, the U.K. electorate voted in a referendum to leave the ~~EU. The~~EU, which is commonly referred to as “Brexit”. In January 2017, the U.K. Prime Minister announced a 12-point plan of negotiating objectives and confirmed that the U.K. government ~~has~~will not seek continued membership of the EU single market. In March 2017, the U.K. government formally notified the European Council of ~~their~~its intention to leave the EU ~~and in November 2016, the High Court ruled that the government needed parliamentary approval to trigger~~after it triggered Article 50 of the Lisbon Treaty and begin negotiations. The U.K. government said it will appeal the decision and Britain’s Supreme Court is expected to consider the case in early December 2016. The U.K. Prime Minister said they still expect to begin the two-year negotiation process establishing the terms of the exit and outlining the future relationship between the U.K. and the ~~EU at the end of March 2017.~~EU. This process is expected to be highly complex and ~~if needed, may be bilaterally extended. The~~the end result of these negotiations may pose certain implications to our research, commercial and general business operations in the U.K. and the EU.

We generated approximately 2% of our worldwide revenues from the U.K. in the first quarter of 2017. However, except for the foreign currency exchange impact from the weakening U.K. pound relative to the U.S. dollar to date, there are no other immediate-term impacts to our business as there has not yet been a formal change in the relationship between the U.K. and the EU. In addition, because of the significant uncertainties associated with the negotiation process, any potential long-term impacts are not currently determinable.

~~Despite the challenging financial markets,~~ Pfizer maintains a strong financial ~~position.~~position while operating in a complex global environment. 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 S&P and 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 and credit ratings, 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 ~~2015~~2016 Form 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~~medicines 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 patient 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

~~Essential Health.~~ The IH and EH operating segments are each led by a single manager. Each operating segment has responsibility for its commercial activities and for certain IPR&D projects for new investigational products and additional indications for in-line products that generally have achieved proof-of-concept. Each business has a geographic footprint across developed and emerging markets.



	Some additional information about our business segments follows:
	IH Segment		EH Segment
●	IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives, as well as products for consumer healthcare. Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare and include leading brands, such as Prevnar/Prevenar 13, Xeljanz, Eliquis, Lyrica (U.S., Japan and certain other markets), Enbrel (outside the U.S. and Canada), Viagra (U.S. and Canada), Ibrance and Xtandi, as well as several well-known, OTC consumer products.healthcare.	●	EH 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, select branded products including anti-infectives and, ~~infusion systems.~~through February 2, 2017, HIS. EH also includes ~~a new EH research and development~~an R&D organization, as well as our contract manufacturing business.
●	We expect that the IH biopharmaceutical portfolio 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 help ensure a pipeline of highly-differentiated product candidates in areas of unmet medical need. The assets managed by IH are science-driven, highly differentiated and generally require a high-level of engagement with healthcare providers and consumers.	●	EH is expected to generate strong consistent cash flow by providing patients around the world with access to effective, lower-cost, high-value treatments. EH leverages our biologic development, regulatory and manufacturing expertise to seek to advance its biosimilar development portfolio. Additionally, EH leverages capabilities in formulation development and manufacturing expertise to help advance its generic sterile injectables portfolio. EH may also engage in targeted business development to further enable its commercial strategies.
●	IH will have continued focus on R&D productivity and pipeline strength while maximizing the value of our recently launched brands and in-line portfolio. Our acquisitions of Anacor and Medivation expanded our pipeline in the high priority therapeutic areas of inflammation and immunology and oncology.	●	For EH, we continue to invest in growth drivers and manage the portfolio to extract additional value while seeking opportunities for operating efficiencies. This strategy includes active management of our portfolio; maximizing growth of core product segments; acquisitions to strengthen core areas of our portfolio further, such as our recent acquisition of AstraZeneca’s small molecule anti-infectives business; and divestitures to increase focus on our core strengths. In line with this strategy, on February 3, 2017, we completed the sale of Pfizer’s global infusion therapy net assets, representing the infusion systems net assets that we acquired as part of the Hospira transaction, HIS, to ICU Medical.
	Leading brands include: - Prevnar 13 - Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Viagra (U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer healthcare products (e.g., Advil and Centrum)		Leading brands include: - Lipitor - Premarin family - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia countries) - Celebrex - Pristiq - Several sterile injectable products

We expect that the IH biopharmaceutical portfolio 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 help ensure a pipeline of highly-differentiated product candidates in areas of unmet medical need. The assets managed by IH are science-driven, highly differentiated and generally require a high-level of engagement with healthcare providers and consumers.

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

~~Effective as of the beginning of 2016, the following changes impact EH:~~

~~Effective as of the beginning of the second quarter of 2016, the following changes impact IH:~~

In connection with the formation of the GPD organization, a new unified center for late-stage development for our innovative products, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios, certain development-related functions transferred from IH to GPD. We have reclassified approximately $76 million of costs in the first quarter of 2016, approximately $77 million of costs in the third quarter of 2015 and approximately $223 million of costs in the first nine months of 2015 from IH to GPD to conform to the current period presentation as part of GPD.

In September 2016, we announced our decision to maintain our current business structure and not pursue a split into two separate publicly-traded companies at this time. Following this decision, we will continue to operate two distinct businesses, each with a focus on our strategic priorities to grow and increase operational efficiency. For IH, this means a continued focus on R&D productivity and pipeline strength while maximizing the value of our recently launched brands and in-line portfolio. Our recent acquisitions expand our pipeline in the high priority therapeutic areas of medical dermatology with Anacor and oncology with Medivation. For EH, we will continue to invest in growth drivers and manage the portfolio to extract additional value while seeking opportunities for operating efficiencies. This strategy includes active management of our portfolio; maximizing growth of core product segments; acquisitions to strengthen core areas of our portfolio further, such as our pending acquisition of AstraZeneca’s small molecule anti-infectives business; and divestitures to increase focus on our core strengths. In line with this strategy, on October 6, 2016, we announced an agreement with ICU Medical, a global device manufacturer, to divest the infusion systems net assets, which we acquired as part of the Hospira transaction. We expect the transaction to close in the first quarter of 2017, subject to required regulatory approvals and satisfaction of customary conditions to closing. For additional information, see Notes to Condensed Consolidated Financial Statements––~~Note 2B.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale.~~

~~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 2017 performance and selected balance sheet information as of December 31, 2016, ~~performance~~ for each of our operating segments, see the “Analysis of Operating Segment Information” ~~section~~and the “Selected Balance Sheet Information by Operating Segment” sections of this MD&A.

Description of Research and Development Operations

Innovation is critical to the success of our company, and drug discovery and development is time-consuming, expensive and unpredictable. Our R&D priorities include delivering a pipeline of differentiated therapies and vaccines with the greatest medical 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 primarily focuses on:

Biosimilars;

Inflammation and Immunology;

Metabolic Disease and Cardiovascular Risks;

Neuroscience;

Oncology;

Rare Diseases; and

Vaccines.

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~~spending is conducted through a ~~pipeline~~number of ~~differentiated therapies with the greatest scientific and commercial promise, innovating new capabilities that can position Pfizer~~matrix organizations:

Research Units within our WRD organization are generally responsible for ~~long-term leadership and creating new models~~research assets for ~~biomedical collaboration that will expedite the pace of innovation and productivity. To that end,~~ our ~~research primarily focuses on six high-priority areas~~IH business (assets that have not yet achieved proof-of-concept). Our Research Units are organized in a ~~mix~~variety of ~~small molecules~~ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources within a Research Unit between various projects as necessary because the workforce shares similar skills, expertise and/or focus.

Our R&D organization within the EH business supports the large ~~molecules––immunology~~base of EH products and ~~inflammation; cardiovascular~~is expected to develop potential new sterile injectable drugs and ~~metabolic diseases; oncology; vaccines; neuroscience~~therapeutic solutions, as well as biosimilars.

Our GPD organization is a unified center for late-stage development for our innovative products and ~~pain;~~is generally responsible for the clinical development of assets that are in clinical trials for our WRD and ~~rare diseases. Another~~Innovative portfolios. GPD is expected to enable more efficient and effective development and enhance our ability to accelerate and progress assets through our pipeline. GPD combines certain previously separate development-related functions from the IH business and the WRD organization 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 portfolio. GPD also provides technical support and other services to Pfizer R&D projects.

Our science-based and other platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based functions (which are part of our WRD organization), such as Pharmaceutical Sciences, Medicinal Chemistry, Regulatory and Drug Safety, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of ~~focus~~development, allowing us to react quickly in response to evolving needs.

We manage R&D operations on a total-company basis through our matrix organizations described above. Specifically, a single committee with representation from the R&D groups and the IH commercial organization is ~~biosimilars, which are being developed by~~accountable for aligning resources among all of our WRD, GPD and IH R&D projects and for seeking to ensure optimal capital allocation across the Innovative R&D portfolio. We believe that this approach also serves to maximize accountability and flexibility. Our EH R&D ~~organization.~~organization manages its resources separately from the WRD and GPD organizations.

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

While a significant portion of R&D is done internally, we continue to seek out promising chemical and biological lead molecules and innovative technologies developed by third parties to ~~enhance~~incorporate into our ~~pipeline of potential future products~~discovery and development processes or projects, as well as our product lines, by entering into collaborations, ~~alliance~~alliances and license agreements with other companies, as well as leveraging acquisitions and 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 funding agreements and equity- or debt-based investments allow us to share risk and cost and 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 the GPD organization, a new, unified center for late-stage development for our innovative products. GPD is expected to enable more efficient and effective development and enhance our ability to accelerate and progress assets through our pipeline. GPD combines certain previously separate development-related functions from the IH business and the WRD organization 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 Strategy––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. Also, the pursuit of valid business opportunities may require us to challenge intellectual property rights held by other companies that we

believe were improperly granted. Such challenges may include negotiation and litigation, which may not be successful. For additional information about our current efforts to enforce our intellectual property rights, see Notes to Condensed Consolidated Financial

~~Statements–~~ 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~~“Risks Related to Intellectual ~~Property"~~Property” in Part I, Item 1A, “Risk Factors” of our ~~2015~~2016 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 share repurchases and dividends. For additional information about our financial condition, liquidity, capital resources, share repurchases (including accelerated share repurchases) and dividends, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.

On March 8, 2016, we entered into an accelerated share repurchase agreement with GS&Co. to repurchase $5 billion of our common stock. This agreement was entered into pursuant to our previously announced share repurchase authorization. In June 2016, we completed the agreement. For additional information about our recent business development activities, see the ~~“Analysis of Financial Condition, Liquidity and Capital Resources–~~“Our Strategy––~~Share-Purchase Plans and Accelerated Share Repurchase Agreements”~~Our Business Development Initiatives” section of this MD&A, “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities" in Part II, Item 2 of this Quarterly Report on Form 10-Q and Notes to Condensed Consolidated Financial Statements––~~Note 12. Commitments and Contingencies.~~&A.

We remain focused on achieving an appropriate cost structure for the Company. For additional information about our cost-reduction and productivity initiatives, see the “Costs and Expenses––Restructuring 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 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 six high-priority therapeutic areas––immunology and inflammation; cardiovascular and metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases––and in emerging markets and essential health medicines, 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~~ acquisitions of Hospira, Medivation, ~~Hospira~~Anacor, and ~~Anacor, our pending acquisition of~~ AstraZeneca’s small molecule anti-infectives business, 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 scientific capabilities/portfolio as part of our regular, ongoing portfolio review process and also continue to consider business development activities that will advance our businesses. We have considered whether a further separation of our IH and EH businesses would be in the best interests of our shareholders. In September 2016, we announced that, after an extensive evaluation, our Board of Directors and Executive Leadership Team determined that Pfizer is best positioned to maximize future shareholder value creation in its current structure and will not pursue splitting Pfizer Innovative Health and Pfizer Essential Health into two, separate publicly-traded companies at this time. We will move forward with a focus on our strategic priorities to grow and increase operational efficiency to be more competitive. For additional information on our business development activities, see Notes to Condensed Consolidated Financial Statements––Note 2.

Acquisitions, Sale of Hospira Infusion Systems Net Assets, ~~and Liabilities Held for Sale, Research and Development and~~ Collaborative ~~Arrangements,~~Arrangement, Equity-Method Investments and Cost-Method Investment.

~~Acquisition of Hospira~~

~~Description of Transaction~~

On September 3, 2015 (the acquisition date), we acquired Hospira, a leading provider of sterile injectable drugs and infusion technologies as well as a provider of biosimilars, for approximately $16.1 billion in cash ($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~~

For the amounts recognized for the Hospira assets acquired and liabilities assumed as of the acquisition date, including measurement period adjustments recognized in the first nine months of 2016, see Notes to Condensed Consolidated Financial

~~Statements––Note 2A.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~.

~~Measurement Period Adjustments~~

In the first nine months of 2016, we recorded measurement period adjustments that reduced, on a net basis, the preliminary estimate of the fair value of identifiable net assets acquired by $12 million with a corresponding increase to goodwill. The measurement period adjustments did not result from intervening events subsequent to the acquisition date. The change in the provisional amounts did not have a material impact on our earnings.

~~Additional Recent Transactions and Events~~

~~Additional~~more significant recent transactions and events are described below:

~~Agreement to Sell Hospira Infusion Systems Net Assets to ICU Medical, Inc.~~––On October 6, 2016, we announced that we entered into a definitive agreement under which ICU Medical will acquire all of Pfizer’s global infusion therapy net assets, HIS, for approximately $1 billion in cash and ICU Medical stock. HIS includes IV pumps, solutions and devices. Under the terms of the agreement, Pfizer will receive approximately $400 million in newly issued shares of ICU Medical common stock and $600 million in cash from ICU Medical, subject to customary adjustments for net working capital. Upon completion of the transaction, which the companies expect to occur in the first quarter of 2017, subject to customary closing conditions, including required regulatory approvals, Pfizer will own approximately 16.6% of ICU Medical. Pfizer has also agreed to certain restrictions on transfer of its ICU Medical shares for at least 18 months.At October 2, 2016, we determined that the carrying value of the HIS net assets exceeded their fair value less estimated costs to sell, resulting in a pre-tax impairment charge of $1.4 billion which is included in ~~Other (income)/deductions––net~~ ~~(see Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net~~). The difference between the carrying value and fair value may change prior to closing as a result of several factors, including changes in the market price of the shares to be received from ICU Medical and changes in the carrying value of the HIS net assets prior to closing. For example, a 10% per share increase or decrease in ICU Medical’s stock price between October 6, 2016 and the final closing date would have a corresponding decrease or increase in the net realizable value impairment charge of $44 million. For assets and liabilities classified as held for sale as part of our agreement to divest HIS as of October 2, 2016, see Notes to Condensed Consolidated Financial Statements~~––Note 2B.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale.~~

~~Acquisition of Medivation, Inc.~~––On September 28, 2016 (the acquisition date), we acquired Medivation. For additional information, see the “Our Business” section of this MD&A. Medivation’s portfolio includes Xtandi (enzalutamide), an androgen receptor inhibitor that blocks multiple steps in the androgen receptor signaling pathway within the tumor cell. Xtandi is being developed and commercialized through a collaboration between Pfizer and Astellas. Astellas has exclusive commercialization rights for Xtandi outside the U.S. In addition, Medivation has two development-stage oncology assets in its pipeline: talazoparib, which is currently in a Phase 3 study for the treatment of BRCA-mutated breast cancer, and pidilizumab, an immuno-oncology asset being developed for diffuse large B-cell lymphoma and other hematologic malignancies. We expect this acquisition will accelerate our leadership in Oncology––~~a high priority area for our company.~~

~~Agreement to Acquire AstraZeneca’s Anti-Infectives Business~~––On August 24, 2016, we announced that we entered into an agreement with AstraZeneca to acquire the development and commercialization rights to its small molecule anti-infectives business, primarily outside the U.S. The agreement includes the commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets ATM-AVI and CXL (ceftaroline fosamil-AVI). Under the terms of the agreement, Pfizer will make an upfront payment of $550 million to AstraZeneca upon the close of the transaction and a deferred payment of $175 million in January 2019. In addition, AstraZeneca is eligible to receive up to $250 million in milestone payments, up to $600 million in sales-related payments, as well as tiered royalties on sales of Zavicefta™ and ATM-AVI in certain markets. The transaction is expected to close in the fourth quarter of 2016, subject to customary closing conditions, including antitrust clearance in certain jurisdictions.

~~Acquisition of Bamboo Therapeutics, Inc.~~––On August 1, 2016 (the acquisition date), we acquired all the remaining equity in Bamboo, a privately held biotechnology company, focused on developing gene therapies for the treatment of patients with certain rare diseases relating to neuromuscular conditions and those affecting the central nervous system, for $150 million, plus potential milestone payments of up to $495 million contingent upon the progression of key assets through development, regulatory approval and commercialization. We previously purchased a minority stake in Bamboo in the first quarter of 2016 for a payment of approximately $43 million. This acquisition provides us with several clinical and pre-clinical assets that complement our rare disease portfolio, an advanced recombinant AAV vector design and production technology, and a fully functional Phase I/II gene therapy manufacturing facility.

~~Acquisition of Anacor Pharmaceuticals, Inc.~~––On June 24, 2016 (the acquisition date), we completed the acquisition of Anacor. For additional information, see the “Our Business” section of this MD&A. Included within Anacor’s pipeline is

•

Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)––On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical. In connection with this transaction, we recognized a loss of approximately $37 million in Other (income)/deductions––net in the first quarter of 2017, representing an incremental charge to amounts previously recorded to write down the HIS net assets to fair value less costs to sell. We may record additional adjustments to the loss on the sale of HIS net assets in future periods, pending final working capital adjustments, local market closes, among other agreement provisions, which we do not expect to have a material impact on our consolidated financial statements.

•

Acquisition of AstraZeneca’s Small Molecule Anti-Infectives Business (EH)––On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S., including the commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets ATM-AVI and CXL (ceftaroline fosamil-AVI). The total fair value of the consideration transferred for this business was approximately $555 million in cash plus contingent consideration of $490 million.

•

Acquisition of Medivation, Inc. (IH)––On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Medivation’s portfolio includes Xtandi (enzalutamide), an androgen receptor inhibitor that blocks multiple steps in the androgen receptor signaling pathway within tumor cells. Xtandi is being developed and commercialized through a collaboration with Astellas. Astellas has exclusive commercialization rights for Xtandi outside the U.S. In addition, Medivation has two development-stage oncology assets in its pipeline: talazoparib, which is currently in a Phase 3 study for the treatment of BRCA-mutated breast cancer, and pidilizumab, an immuno-oncology asset.

•

Acquisition of Bamboo Therapeutics, Inc. (R&D)––On August 1, 2016, we acquired all the remaining equity in Bamboo, a privately-held biotechnology company, focused on developing gene therapies for the potential treatment of patients with certain rare diseases relating to neuromuscular conditions and those affecting the central nervous system, for $150 million, plus potential milestone payments of up to $495 million contingent upon the progression of key assets through development, regulatory approval and commercialization. We previously purchased a minority stake in Bamboo in the first quarter of 2016 for a payment of approximately $43 million. This acquisition provides us with several clinical and pre-clinical assets that complement our rare disease portfolio, an advanced recombinant AAV vector design and production technology, and a fully functional Phase I/II gene therapy manufacturing facility.

•

Acquisition of Anacor Pharmaceuticals, Inc. (IH)––On June 24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion net of cash acquired) plus $698 million debt assumed. Anacor’s crisaborole, a non-steroidal topical PDE-4 inhibitor with anti-inflammatory properties, was approved by the FDA on December 14, 2016 under the trade name, Eucrisa, for the treatment of mild-to-moderate atopic dermatitis in patients two years of age and older, commonly referred to as a type of eczema. Anacor also holds the rights to Kerydin, a topical treatment for onychomycosis (toenail fungus) that is distributed and commercialized by Sandoz in the U.S.

•

Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P.––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. NovaQuest’s development funding is expected to cover up to 100% of the development costs and will be received over approximately twelve quarters from 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. The reduction to Research and development expenses for the first quarter of 2017 totaled $17.2 million. 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. 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.

•

Research and Development Arrangement with RPI Finance Trust––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). 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 2017 and 2016 totaled $14.5 million and $8.8 million, respectively. If successful and upon approval of Ibrance in the U.S. or certain major markets in the 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. Fixed milestone payments due upon approval will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the Ibrance product and sales-based royalties will be recorded as Cost of sales when incurred.

crisaborole, which is currently under review by the FDA for the treatment of mild-to-moderate atopic dermatitis in children and adults, commonly referred to as a type of eczema. The PDUFA goal timing for the completion of the FDA’s review of the crisaborole NDA is early 2017. Anacor also holds the rights to Kerydin, a topical treatment for onychomycosis (toenail fungus) that is distributed and commercialized by Sandoz ~~in the U.S.~~

~~Research and Development Arrangement with NovaQuest Co-Investment Fund II, L.P.~~––On November 1, 2016, we announced the discontinuation of the global clinical development program for bococizumab. Except for a refund to NovaQuest of development cost amounts prepaid by NovaQuest to the extent such amounts were not used for program expenses, no additional payments are expected to be received from or paid to NovaQuest under this agreement. In May 2016, our agreement with NovaQuest became effective, under which NovaQuest agreed to fund up to $250 million in development costs related to certain Phase III clinical trials of Pfizer’s bococizumab compound and Pfizer agreed to use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. NovaQuest’s development funding was expected to cover up to 40% of the development costs and was to be received over five quarters during 2016 and 2017. As there was a substantive and genuine transfer of risk to NovaQuest, the development funding applicable to program expenses through the third quarter of 2016 has been recognized by us as an obligation to perform contractual services and therefore has been recognized as a reduction of ~~Research and development expenses~~ ~~as incurred. The reduction to~~ ~~Research and development expenses~~ ~~for the third quarter of 2016 totaled $67.6 million and for the first nine months of 2016 totaled $136.9 million.~~

~~Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P.~~––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 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. The reduction to~~ ~~Research and development expenses~~ for the third quarter of 2016 totaled $14.5 million and for the first nine months of 2016 totaled $29.5 million. 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~~––On April 6, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 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~~––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 U.S. or certain major markets in the 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 third quarter of 2016 totaled $11.0 million and for the first nine months of 2016 totaled $32.7 million. Fixed milestone payments due upon approval will be recorded as intangible assets and amortized to ~~Amortization of intangible assets~~ ~~over the estimated commercial life of the Ibrance product and sales-based royalties will be recorded as~~ ~~Cost of sales~~ ~~when incurred.~~

~~Minority Interest in AM-Pharma B.V.~~––In April 2015, we acquired a minority equity interest in AM-Pharma, a privately-held Dutch biopharmaceutical company focused on the development of 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, which is expected to read out in 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.~~––We entered into a collaborative agreement with OPKO, which closed in January 2015, to develop and commercialize OPKO’s long-acting hGH-CTP for the treatment of GHD in adults and children, as well

as for the treatment of growth failure in children born 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. 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.~~––On December 1, 2014 (which fell 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.

For a description of the more significant recent transactions through February ~~29, 2016,~~23, 2017, the filing date of our ~~2015~~2016 Form 10-K, see the “Our Business Development Initiatives” section of our ~~2015~~2016 Financial Report.

Our Financial Guidance for ~~2016~~2017

On ~~November 1, 2016,~~May 2, 2017, we ~~updated~~reaffirmed our ~~2016~~2017 financial guidance ~~and related components as set forth below~~^{(a), (b)}:issued on January 31, 2017.



Pfizer’s complete 2017 financial guidance is summarized below^{(a), (b)}:
Revenues	$52.0 to ~~$53.0~~$54.0 billion
~~(previously $51.0 to $53.0 billion)~~
Adjusted cost of sales as a percentage of revenues	~~21.5%~~20.0% to ~~22.0%~~
~~(previously~~ 21.0% ~~to 22.0%)~~
Adjusted selling, informational and administrative expenses	$~~14.2~~13.7 to $14.7 billion
~~(previously $13.7 to $14.7 billion)~~
Adjusted research and development expenses	$~~7.8~~7.5 to ~~$8.1~~$8.0 billion
~~(previously $7.4 to $7.8 billion)~~
Adjusted other (income)/deductions	Approximately ~~($600 million)~~$100 million of ~~income~~
~~(previously approximately ($500 million) of income)~~deductions
Effective tax rate on adjusted income	Approximately ~~24.0%~~23.0%
Adjusted diluted EPS	$~~2.38~~2.50 to ~~$2.43~~
~~(previously $2.38 to $2.48)~~$2.60


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

Does not assume the completion of any business development transactions not completed as of April 2, 2017, including any one-time upfront payments associated with such transactions.

Exchange rates assumed are a blend of the actual exchange rates in effect through first-quarter 2017 and mid-April 2017 exchange rates for the remainder of the year.


•	Reflects an anticipated negative revenue impact of $2.4 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.

Reflects the anticipated negative impact of $0.5 billion on revenues and $0.03 on adjusted diluted EPS as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2016.

Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of between 6.0 to 6.1 billion shares, which reflects our $5.0 billion accelerated share repurchase agreement executed in February 2017.


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

Pfizer does not provide guidance for GAAP Reported financial measures (other than Revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, acquisition-related expenses and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.

~~Does not assume the completion of any business development transactions not completed as of October 2, 2016, including any one-time upfront payments associated with such transactions.~~

~~Exchange rates assumed are a blend of the actual exchange rates in effect through the third quarter of 2016 and the mid-October 2016 exchange rates for the remainder of the year.~~

Guidance for 2016 revenues reflects the anticipated negative impact of $1.8 billion due to recent and expected generic competition for certain products that have recently lost or are anticipated to soon lose patent protection.

Our November 1, 2016 announced decision to discontinue development of bococizumab. As a result, 2016 financial guidance for Adjusted R&D expenses was negatively impacted by $0.3 billion and 2016 financial guidance for Adjusted diluted EPS was negatively impacted by $0.04. This represents the estimated net impact of expected close down costs of approximately $400 million for these activities less spending no longer required for the trials.

Guidance for 2016 revenues also reflects the anticipated negative impact of $1.4 billion as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2015, including $0.8 billion due to the estimated significant negative currency impact related to Venezuela. The anticipated negative impact on adjusted diluted EPS resulting from unfavorable changes in foreign exchange rates compared to foreign exchange rates from 2015 is approximately $0.20, including $0.08 due to the estimated significant negative currency impact related to Venezuela.

~~Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately 6.2 billion 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 “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A.

~~For additional~~ information about our actual costs and anticipated costs and cost savings associated with our three-year cost-reduction ~~initiatives announced~~initiative entered into in ~~2014,~~the fourth quarter of 2016, the Hospira acquisition, our recent business development activities, and ~~our~~ global commercial structure, 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 ~~2016~~2017 financial guidance is subject to a number of factors and ~~uncertainties—~~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 2015 Financial Report;~~ and Part I, Item 1A, “Risk Factors” of our ~~2015~~2016 Form 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 in our ~~2015~~2016 Form 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~~2016 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~~2016 Form 10-K.

For a discussion of recently adopted accounting standards, See Notes to Condensed Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant AccountingPolicies: Adoption of New Accounting Standards.

~~Benefit Plans~~

Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for 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 yield curve used to measure the respective plan obligations. For 2016, we elected to measure service and interest costs by applying the spot rates along the yield curve for certain international plans 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 $42 million, which is expected to be recognized evenly over each quarter of the year. Effective January 1, 2016, the Company made a similar change for its U.S. pension and other postretirement benefit plans, but in the third quarter of 2016, we determined that our use of the bond model required the measurement of such costs to be conceptually aligned with the measurement of the pension benefit obligation. As such, 2016 service and interest costs for the U.S. plans were measured utilizing a single weighted-average discount rate derived from the bond model consistent with the approach used in 2015, resulting in an adjustment to increase net periodic pension cost by $112 million in the third quarter of 2016.

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:
	Three Months Ended																Three Months Ended
	Worldwide				U.S.				International				World-wide	U.S.	Inter-national		Worldwide				U.S.				International				World-wide		U.S.		Inter-national
(MILLIONS OF DOLLARS)	Oct 2, 2016		Sep 27, 2015		Oct 2, 2016		Sep 27, 2015		Oct 2, 2016		Sep 27, 2015		% Change in Revenues				Apr 2, 2017		Apr 3, 2016		Apr 2, 2017		Apr 3, 2016		Apr 2, 2017		Apr 3, 2016		% Change in Revenues
Operating Segments^(a):
IH	$	7,332	$	6,752	$	4,244	$	3,722	$	3,088	$	3,030	9	14	2		$	7,415	$	7,033	$	4,493	$	4,114	$	2,922	$	2,919	5		9		—
EH	5,712		5,335		2,286		1,843		3,426		3,492		7	24	(2	)	5,364		5,972		2,144		2,547		3,220		3,425		(10	)	(16	)	(6	)
Total revenues	$	13,045	$	12,087	$	6,530	$	5,565	$	6,515	$	6,522	8	17	—		$	12,779	$	13,005	$	6,637	$	6,661	$	6,142	$	6,344	(2	)	—		(3	)

	Nine Months Ended
	Worldwide				U.S.				International				World-wide	U.S.	Inter-national
(MILLIONS OF DOLLARS)	Oct 2, 2016		Sep 27, 2015		Oct 2, 2016		Sep 27, 2015		Oct 2, 2016		Sep 27, 2015		% Change in Revenues
Operating Segments^(a):
IH	$	21,471	$	19,120	$	12,308	$	10,153	$	9,163	$	8,967	12	21	2
EH	17,725		15,683		7,253		4,840		10,472		10,844		13	50	(3	)
Total revenues	$	39,196	$	34,804	$	19,561	$	14,993	$	19,636	$	19,811	13	30	(1	)

^(a)

IH = the Innovative Health segment; and EH = the Essential Health segment. For additional information about each operating segment, see the “Our Strategy––Commercial Operations” ~~section~~and “Analysis of Operating Segment Information” sections of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.

The percentages of worldwide revenues by geographic area are as follows:

Revenues––~~Third~~First Quarter ~~2016~~2017

The decrease in Revenues in the ~~third~~first quarter of ~~2016~~2017 reflects an operational decrease of $110 million, or 1%, and an unfavorable impact of foreign exchange of $116 million, or 1%. In the U.S., revenues were ~~$13.0 billion, an increase~~flat in the first quarter of 8%2017, compared to the same period in ~~2015, which reflects an operational increase of $1.2 billion, or 10%, partially offset by the unfavorable impact of foreign exchange of $224 million, or 2%. The operational increasewas primarily the result of:~~

~~the inclusion of a full quarter of~~2016. International revenues from legacy Hospira global operations of $1.1 billion in the third quarter of 2016 compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter of 2015, resulting in operational growth of $800 million in the third quarter of 2016; and

the continued growth from key brands including Ibrance, Xeljanz, Lyrica (IH) and Chantix/Champix, all primarily in the U.S., and Eliquis globally (collectively, up approximately $770 million in the third quarter of 2016),

~~partially offset by:~~

the loss of exclusivity and associated biosimilar or generic (as applicable) competition for Enbrel, Zyvox and Lyrica (EH), primarily in most developed Europe markets (collectively, down approximately $220 million in the third quarter of 2016);

~~the year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S. (down approximately $120 million in the third quarter of 2016);~~

a 4% operational decline from the legacy Established Products portfolio, primarily due to a decline from certain developed markets (down by approximately $110 million in the third quarter of 2016); and

the Prevnar/Prevenar 13 franchise, primarily driven by an expected decline in revenues for the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to the prior-year quarter, partially offset by the impact of favorable timing of CDC purchases for the pediatric indication (down approximately $30 million in the third quarter of 2016).

~~Revenues––First Nine Months 2016~~

~~Revenues~~decreased 1% operationally in the first ~~nine months~~quarter of ~~2016, were $39.2 billion, an increase of 13%~~2017, compared to the same period in ~~2015, which reflects~~2016. Foreign exchange had an ~~operational increase of $5.6 billion, or 16%, partially offset by the~~ unfavorable impact of ~~foreign~~approximately 2% on international revenues. Emerging markets revenues increased $157 million, or 6% operationally, in the first quarter of 2017, compared to the same period in 2016. Foreign exchange had an unfavorable impact of ~~$1.3 billion, or 4%.~~approximately 3% on emerging markets revenues. This operational growth in emerging markets was primarily driven by our IH segment as well as our Sterile Injectable Pharmaceuticals portfolio. Compared to the first ~~nine months~~quarter of ~~2015,~~2016, revenues infor the first ~~nine months~~quarter of ~~2016~~2017 were ~~favorably~~unfavorably impacted

by approximately ~~$800~~$300 million as a result of one less selling day in the ~~first nine months of 2016 having four additional~~U.S. and two fewer selling days in ~~both the U.S. and~~ international markets. This imbalance in selling days will ~~be offset~~result in ~~the fourth quarter of 2016 resulting~~one less U.S. selling day and one less international selling day in ~~essentially the same number of selling days in 2016~~full-year 2017, as ~~2015. The operational increase,which includes the impact of the additional selling days in the first nine months of 2016, was primarily the result of:~~

~~the inclusion of nine months of revenues from legacy Hospira global operations of $3.5 billion in the first nine months of 2016~~ compared to ~~the inclusion of only one month of legacy Hospira U.S. operations in the first nine months of 2015, resulting in operational growth of $3.1 billion in the first nine months of 2016; and~~2016.

the continued growth from key brands including Ibrance, Lyrica (IH), Xeljanz and Chantix/Champix and Consumer Healthcare, all primarily in the U.S., as well as Eliquis globally (collectively, up approximately $2.7 billion in the first nine months of 2016),

~~partially offset by:~~

the loss of exclusivity and associated generic competition for Zyvox, primarily in the U.S. and certain developed Europe markets, Lyrica (EH) in most developed Europe markets and Celebrex in most developed markets, as well as biosimilar competition for Enbrel in most developed Europe markets (collectively, down approximately $730 million in the first nine months of 2016); and

~~the year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S. (down approximately $260 million in the first nine months of 2016).~~

~~Geographically,~~

in the U.S., revenues increased $1.0 billion, or 17%, in the third quarter of 2016, and increased $4.6 billion, or 30%, in the first nine months of 2016, compared to the same periods in 2015, reflecting, among other things:

◦

the inclusion of a full quarter and nine months of revenues from legacy Hospira U.S. operations of approximately $840 million in the third quarter of 2016, and $2.6 billion in the first nine months of 2016, as compared to only one month of revenues from legacy Hospira U.S. operations of $330 million in the third quarter and first nine months of 2015, resulting in operational growth of approximately $510 million and $2.3 billion in the third quarter and first nine months of 2016, respectively; and


◦	the continued strong performance of several key products including Ibrance, Eliquis, Xeljanz, Lyrica (IH), and Chantix (collectively, up approximately $650 million in the third quarter of 2016 and $2.2 billion in the first nine months of 2016),

~~partially offset by:~~


◦	the year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S. (down approximately $120 million in the third quarter of 2016 and $260 million in the first nine months of 2016);


◦	~~the loss of exclusivity and associated generic competition for Zyvox (down approximately $10 million in the third quarter of 2016 and $180 million in the first nine months of 2016); and~~

◦

with respect to the third quarter of 2016, the expected decline in revenues for Prevnar 13 primarily driven by the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to the prior-year quarter (down approximately $40 million in the third quarter of 2016).

in our international markets, revenues decreased $8 million, or were relatively flat, in the third quarter of 2016, and decreased $176 million, or 1%, in the first nine months of 2016, compared to the same periods in 2015. Foreign exchange unfavorably impacted international revenues by approximately $223 million, or 3%, in the third quarter of 2016 and unfavorably impacted international revenues by approximately $1.3 billion, or 6% in the first nine months of 2016. Operationally, revenues increased $216 million, or 3%, in the third quarter of 2016 and increased $1.1 billion, or 5%, in the first nine months of 2016, compared to the same periods in 2015, reflecting, among other things:


◦	the inclusion of legacy Hospira international operations of approximately $290 million in the third quarter of 2016 and $850 million in the first nine months of 2016, compared to no financial results from legacy Hospira international operations in the third quarter and first nine months of 2015;


◦	~~the continued strong performance of Eliquis (up approximately $80 million in the third quarter of 2016 and $260 million in the first nine months of 2016); and~~


◦	the continued strong volume growth from certain other products in emerging markets, excluding the contributions from legacy Hospira and Eliquis and, for the first nine months of 2016, lower revenues from the Prevenar 13 pediatric indication (collectively, up approximately $150 million in the third quarter of 2016 and $460 million in the first nine months of 2016),

~~partially offset by:~~


◦	lower revenues primarily in most developed Europe markets for Enbrel, Zyvox and Lyrica (EH) as a result of the loss of exclusivity and associated biosimilar or generic (as applicable) competition (collectively, down approximately $200 million in the third quarter of 2016 and $470 million in the first nine months of 2016); and


◦	with respect to the first nine months of 2016, lower revenues for Prevenar 13, primarily for the pediatric indication, mostly in emerging markets, reflecting timing of purchases from Gavi, the Vaccine Alliance, and certain other markets, compared to the prior-year period (down approximately $60 million in the first nine months of 2016).

During the third quarter of 2016, international revenues represented 50% of total revenues, compared to 54% in the third quarter of 2015. Excluding foreign exchange, international revenues in the third quarter of 2016 represented 51% of total revenues. During the first nine months of 2016, international revenues represented 50% of total revenues compared to 57% in the first nine months of 2015. Excluding foreign exchange, international revenues in the first nine months of 2016 represented 52% of total revenues. The decline in the percentage of international revenues is primarily due to the inclusion of Hospira.



The following provides an analysis of the change in revenues by geographic areas in the first quarter of 2017:
(MILLIONS OF DOLLARS)	Three Months Ended April 2, 2017
	Worldwide			U.S.			International

Acquisition-related growth:
Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)	$	131		$	131		$	—

Disposition-related impact:
Approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to three months of legacy HIS global operations in the same period in 2016	(207		)	(175		)	(32		)

Operational growth/(decline):
Continued growth from key brands, including Ibrance and Eliquis globally, as well as Lyrica (IH) and Xeljanz, both primarily in the U.S.	620			446			174
Growth/(decline) in the Pfizer Sterile Injectable Pharmaceuticals portfolio	45			(13		)	58
Growth in Biosimilars, primarily driven by Inflectra in certain developed Europe markets and in the U.S.	41			17			24
Decline from Peri-LOE Products, including Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, Lyrica in most developed Europe markets and Zyvox in developed Europe markets and in the U.S.	(253		)	(79		)	(174		)
Growth/(decline) in the Legacy Established Products portfolio	(153		)	(162		)	8
Lower revenues for Enbrel in most developed Europe markets, primarily due to continued biosimilar competition	(117		)	—			(117		)
Decline in Prevnar 13/Prevenar 13 revenues, primarily driven by the continued decline in revenues for the adult indication in the U.S. due to a smaller remaining “catch up” opportunity compared to the same period in 2016, partially offset by the favorable impact from the timing of government purchases for the pediatric indication. International revenues decreased primarily due to the unfavorable timing of government purchases in certain emerging markets for the pediatric indication, partially offset by modest growth of the adult indication in certain developed Europe markets	(113		)	(93		)	(20		)
Decline in Viagra (IH) revenues in the U.S. primarily due to lower market demand	(51		)	(51		)	—
Other operational factors, net	(53		)	(44		)	(9		)
Operational decline, net	(110		)	(24		)	(87		)

Unfavorable impact of foreign exchange	(116		)	—			(116		)
Revenues decrease	$	(226	)	$	(24	)	$	(203	)

For additional information about operating segment revenues, see the “Analysis of Operating Segment Information” section of this MD&A. For additional information about certain specific products, see the “Analysis of the Condensed Consolidated Statements of Income—Revenues and Product Developments—Revenues—Selected Product Discussion” 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 chargebacks, rebates ~~chargebacks~~ and sales allowances to wholesalers, and, to a lesser extent, distributors like MCOs, retailers and 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 revenue deductions:
	Three Months Ended				Nine Months Ended				Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015		April 2, 2017		April 3, 2016
Medicare rebates^(a)	$	285	$	264	$	777	$	713	$	260	$	276
Medicaid and related state program rebates^(a)	338		302		1,073		874		445		371
Performance-based contract rebates^{(a), (b)}	629		579		1,854		1,625		729		589
Chargebacks^(c)	1,465		1,285		4,318		3,537		1,498		1,439
Sales allowances^(d)	1,177		1,121		3,268		3,015		1,111		976
Sales returns and cash discounts	356		318		1,044		945		324		364
Total^(e)	$	4,251	$	3,869	$	12,334	$	10,708	$	4,367	$	4,015


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

^(b)

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


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


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

^(e)

For the three months ended ~~October~~April 2, ~~2016,~~2017, associated with the following segments: IH ($~~1.8~~1.9 billion) and EH ($~~2.4~~2.5 billion). For the three months ended ~~September 27, 2015,~~April 3, 2016, associated with the following segments: IH ($1.6 billion); and EH ($2.3 billion). For the nine months ended October 2, 2016, associated with the following segments: IH ($5.1 billion) and EH ($7.2 billion). For the nine months ended September 27, 2015, associated with the following segments: IH ($4.2 billion) and EH ($6.52.4 billion).

Total revenue deductions for the ~~third~~first quarter of ~~2016~~2017 increased ~~10% compared to the third quarter of 2015, and total revenue deductions for the first nine months of 2016 increased 15%~~9% compared to the first ~~nine months~~quarter of ~~2015. The increase in revenue deductions is consistent with increased sales, specifically~~2016, primarily as a result of:

an increase in chargebacks from EH products, primarily due to the inclusion of legacy Hospira sterile injectables in 2016, compared to the inclusion of only one month of legacy Hospira sterile injectables in 2015, and from certain IH products;

an increase in performance-based contract rebates primarily due to sales to managed care customers in the U.S. and ~~for the first nine months of 2016,~~ higher rebates in certain ~~developed Europe~~ markets outside the U.S. due to competitive pressures ~~post loss~~post-loss of exclusivity for certain ~~products;~~products and volume-based rebates;

an increase in sales allowances;

an increase in Medicaid and related state program rebates, primarily as a result of updated estimates of sales related to these ~~programs.~~programs; and

an increase in chargebacks from EH products, primarily legacy Pfizer Sterile Injectable Pharmaceuticals.

Our accruals for Medicare rebates, Medicaid and related state program rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts totaled $4.2 billion as of ~~October~~April 2, ~~2016,~~2017, of which approximately $2.8 billion is included in Other current liabilities, $~~344~~369 million is included in Other noncurrent liabilities and approximately ~~$1.1~~$1.0 billion is included against Trade accounts receivable, less allowance for doubtful accounts, in our condensed consolidated balance sheet.Our accruals for Medicare rebates, Medicaid and related state program rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts totaled$~~3.9~~4.3 billion as of December 31, ~~2015,~~2016, of which approximately ~~$2.6~~$2.8 billion is included in Other current liabilities, $~~272~~357 million is included in Other noncurrent liabilities and approximately ~~$1.1~~$1.2 billion is included against Trade accounts receivable, less allowance for doubtful accounts, in our condensed consolidated balance sheet.

Revenues—Major Products

																							The following table provides revenue information for several of our major products:
			Three Months Ended						Nine Months Ended								Three Months Ended
(MILLIONS OF DOLLARS)	(MILLIONS OF DOLLARS)				% Change^(a)						% Change^(a)				(MILLIONS OF DOLLARS)				% Change^(a)
PRODUCT		PRIMARY INDICATIONS OR CLASS	October 2, 2016		Total		Oper.		October 2, 2016		Total		Oper.			PRIMARY INDICATIONS OR CLASS	April 2, 2017		Total		Oper.
TOTAL REVENUES			$	13,045	8		10		$	39,196	13		16				$	12,779	(2	)	(1	)
PFIZER INNOVATIVE HEALTH (IH)^(b)	PFIZER INNOVATIVE HEALTH (IH)^(b)		$	7,332	9		10		$	21,471	12		15		PFIZER INNOVATIVE HEALTH (IH)^(b)		$	7,415	5		6
Internal Medicine	Internal Medicine		$	2,243	15		14		$	6,557	19		20		Internal Medicine		$	2,377	12		12
Lyrica IH^(c)		Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	1,049		11		9		3,107		15		16			Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	1,131		12		12
Eliquis alliance revenues and direct sales																Atrial fibrillation, deep vein thrombosis, pulmonary embolism	564		51		52
Viagra IH^(d)		Erectile dysfunction	297		(11	)	(11	)	897		(6	)	(6	)		Erectile dysfunction	249		(17	)	(17	)
Chantix/Champix		An aid to smoking cessation treatment	198		24		24		631		29		30			An aid to smoking cessation treatment in adults 18 years of age or older	239		9		9
Toviaz		Overactive bladder	60		1		(3	)	191		(1	)	(2	)		Overactive bladder	63		—		—
BMP2		Development of bone and cartilage	63		12		12		175		4		4			Development of bone and cartilage	62		21		21
Alliance revenues^(e)		Various	417		22		20		1,139		35		35
All other Internal Medicine⁽ⁿ⁾		Various	159		*		*		416		*		*			Various	69		(35	)	(35	)
Vaccines	Vaccines		$	1,641	1		1		$	4,576	1		2		Vaccines		$	1,465	(7	)	(6	)
Prevnar/Prevenar 13		Vaccines for prevention of pneumococcal disease	1,536		(3	)	(2	)	4,302		(2	)	—
FSME/IMMUN-TicoVac		Tick-borne encephalitis vaccine	33		20		20		102		10		10
Prevnar 13/Prevenar 13																Vaccines for prevention of pneumococcal disease	1,392		(8	)	(7	)
All other Vaccines		Various	72		*		*		172		*		*			Various	73		18		21
Oncology	Oncology		$	1,104	41		41		$	3,206	58		60		Oncology		$	1,347	35		36
Ibrance		Advanced breast cancer	550		*		*		1,492		*		*			Advanced breast cancer	679		58		59
Sutent		Advanced and/or metastatic RCC, refractory GIST and advanced pancreatic neuroendocrine tumor	260		(7	)	(6	)	823		1		5			Advanced and/or metastatic RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor	250		(10	)	(9	)
Xalkori		ALK-positive NSCLC and ROS1-positive NSCLC	140		14		15		415		18		20			ALK-positive NSCLC and ROS1-positive NSCLC	142		2		4
Xtandi alliance revenues																Advanced prostate cancer	131		*		*
Inlyta		Advanced RCC	95		(9	)	(11	)	304		(2	)	(1	)		Advanced RCC	85		(16	)	(15	)
All other Oncology		Various	60		20		19		172		23		23			Various	61		10		10
Inflammation & Immunology (I&I)	Inflammation & Immunology (I&I)		$	960	(3	)	2		$	2,907	3		10		Inflammation & Immunology (I&I)		$	871	(8	)	(7	)
Enbrel (Outside the U.S. and Canada)		Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis	701		(17	)	(12	)	2,201		(9	)	(2	)		Rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis	588		(20	)	(18	)
Xeljanz		Rheumatoid arthritis	235		85		86		649		85		87			Rheumatoid arthritis	250		27		27
All Other I&I		Various	24		55		40		57		45		36
Eucrisa																Mild to moderate atopic dermatitis (eczema)	9		*		*
All other I&I																Various	24		38		36
Rare Disease	Rare Disease		$	585	1		2		$	1,768	—		2		Rare Disease		$	507	(11	)	(9	)
BeneFIX		Hemophilia	176		(10	)	(9	)	543		(3	)	(1	)		Hemophilia	149		(19	)	(18	)
Refacto AF/Xyntha																Hemophilia	130		1		5
Genotropin		Replacement of human growth hormone	147		4		2		425		(5	)	(3	)		Replacement of human growth hormone	104		(17	)	(16	)
Refacto AF/Xyntha		Hemophilia	140		8		11		408		4		8
Somavert		Acromegaly	59		9		9		173		9		11			Acromegaly	56		3		5
Rapamune		Prevention of organ rejection in kidney transplantation	38		18		24		131		(5	)	2
All other Rare Disease		Various	25		(6	)	(11	)	88		10		9			Various	67		(11	)	(10	)
Consumer Healthcare	Consumer Healthcare		$	798	(2	)	2		$	2,457	—		5		Consumer Healthcare		$	848	3		3
PFIZER ESSENTIAL HEALTH (EH)^(f)(e)	PFIZER ESSENTIAL HEALTH (EH)^(f)(e)		$	5,712	7		10		$	17,725	13		18		PFIZER ESSENTIAL HEALTH (EH)^(f)(e)		$	5,364	(10	)	(9	)
Legacy Established Products (LEP)^(g)(f)	Legacy Established Products (LEP)^(g)(f)		$	2,708	(7	)	(4	)	$	8,373	(4	)	2		Legacy Established Products (LEP)^(g)(f)		$	2,606	(7	)	(5	)
Lipitor		Reduction of LDL cholesterol	422		(7	)	—		1,294		(8	)	—			Reduction of LDL cholesterol	404		(2	)	2
Norvasc																Hypertension	228		(3	)	—
Premarin family		Symptoms of menopause	244		(7	)	(7	)	751		—		—			Symptoms of menopause	228		(11	)	(11	)
Norvasc		Hypertension	238		(1	)	1		714		(4	)	—
Relpax																Symptoms of migraine headache	82		6		6
EpiPen		Epinephrine injection used in treatment of life-threatening allergic reactions	110		3		3		300		12		12			Epinephrine injection used in treatment of life-threatening allergic reactions	81		(16	)	(17	)
Zithromax																Bacterial infections	79		(1	)	4
Xalatan/Xalacom		Glaucoma and ocular hypertension	91		(8	)	(11	)	273		(9	)	(7	)		Glaucoma and ocular hypertension	77		(13	)	(15	)
Relpax		Treats the symptoms of migraine headache	83		(9	)	(11	)	248		(2	)	(2	)
Zoloft		Depression and certain anxiety disorders	72		(25	)	(22	)	228		(17	)	(11	)		Depression and certain anxiety disorders	68		(14	)	(13	)
Effexor		Depression and certain anxiety disorders	70		6		9		207		(3	)	2			Depression and certain anxiety disorders	66		(5	)	(4	)
Zithromax/Zmax^(h)		Bacterial infections	56		(11	)	(10	)	203		—		4
Xanax/Xanax XR		Anxiety disorders	55		(1	)	(1	)	163		(1	)	2
Cardura		Hypertension/Benign prostatic hyperplasia	49		(5	)	(5	)	143		(10	)	(6	)
Neurontin		Seizures	45		—		6		136		(8	)	3
Tikosyn		Maintenance of normal sinus rhythm, conversion of atrial fibrillation/flutter	20		(56	)	(56	)	136		11		11
Depo-Provera		Contraceptive	36		(21	)	(18	)	103		(22	)	(18	)
Xanax																Anxiety disorders	55		5		6
All other LEP		Various	1,119		(7	)	(2	)	3,473		(3	)	5			Various	1,238		(8	)	(7	)
Sterile Injectable Pharmaceuticals (SIP)⁽ⁱ⁾			$	1,461	53		55		$	4,481	84		88
Medrol^(h)		Adrenocortical steroid	102		4		9		330		16		22
Sterile Injectable Pharmaceuticals (SIP)^(g)															Sterile Injectable Pharmaceuticals (SIP)^(g)		$	1,552	2		3
Sulperazon		Antibiotic	102		42		51		304		21		28			Antibiotic	122		27		34
Medrol																Adrenocortical steroid	120		6		7
Tygacil																Antibiotic	74		(2	)	(1	)
Fragmin		Anticoagulant	80		(6	)	(2	)	240		(3	)	2			Anticoagulant	71		(8	)	(6	)
Tygacil		Antibiotic	69		(15	)	(12	)	203		(12	)	(6	)
Precedex																Sedative	64		(7	)	(9	)
All other SIP		Various	1,108		78		80		3,405		*		*			Various	1,100		1		2
Peri-LOE Products^(h)															Peri-LOE Products^(h)		$	822	(25	)	(23	)
Celebrex																Arthritis pain and inflammation, acute pain	175		2		2
Lyrica EH^(c)																Epilepsy, neuropathic pain and generalized anxiety disorder	141		(35	)	(32	)
Pristiq																Depression	116		(35	)	(36	)
Vfend																Fungal infections	107		(32	)	(30	)
Viagra EH^(d)																Erectile dysfunction	89		(7	)	(3	)
Zyvox																Bacterial infections	77		(39	)	(39	)
Revatio																Pulmonary arterial hypertension	65		(3	)	(2	)
All other Peri-LOE Products																Various	53		(30	)	(28	)

Peri-LOE Products^(j)
$ 1,023
(17 ) (15 ) $ 3,224
(21 ) (17 )
Lyrica EH^(c)
Epilepsy, neuropathic pain and generalized anxiety disorder 191
(30 ) (27 ) 623
(33 ) (30 )
Celebrex Arthritis pain and inflammation, acute pain 194
(8 ) (8 ) 550
(14 ) (11 )
Pristiq Depression 174
(6 ) (5 ) 546
5
7
Vfend Fungal infections 140
(15 ) (14 ) 459
(10 ) (6 )
Zyvox Bacterial infections 94
(43 ) (41 ) 334
(52 ) (48 )
Viagra EH^(d)
Erectile dysfunction 89
(8 ) (3 ) 286
(10 ) (4 )
Revatio Pulmonary arterial hypertension 73
37
36
213
18
19
All Other Peri-LOE Products Various 68
(14 ) (14 ) 214
(24 ) (20 )
Infusion Systems^(k)
Various $ 281
*
*
$ 879
*
*
Biosimilars^(l)
Various $ 83
*
*
$ 228
*
*
Pfizer CentreOne^(m)
$ 156
15
15
$ 540
42
44
Total Lyrica^(c)
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury $ 1,240
2
1
$ 3,730
3
4
Total Viagra^(d)
Erectile dysfunction $ 387
(10 ) (9 ) $ 1,183
(7 ) (5 )
Total Alliance revenues Various $ 419
20
18
$ 1,155
31
31



		Three Months Ended
(MILLIONS OF DOLLARS)				% Change^(a)
PRODUCT	PRIMARY INDICATIONS OR CLASS	April 2, 2017		Total		Oper.
Biosimilars⁽ⁱ⁾	Various	$	105	57		62
Inflectra/Remsima	Inflammatory diseases	78		*		*
All other Biosimilars	Various	27		(12	)	(8	)
Pfizer CentreOne^(j)		$	182	(3	)	(3	)
Hospira Infusion Systems (HIS)^(k)	Various	$	97	(68	)	(68	)
Total Lyrica^(c)	Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	$	1,271	3		4
Total Viagra^(d)	Erectile dysfunction	$	339	(14	)	(14	)
Total Alliance revenues	Various	$	656	82		83


^(a)	As compared to the three ~~and nine~~ months ended ~~September 27, 2015.~~April 3, 2016.

^(b)

The IH ~~business, previously known as the Innovative Products~~ business encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare and includes all legacy Medivation and Anacor commercial operations. ~~Medivation's~~Medivation’s and ~~Anacor's~~Anacor’s commercial operations are included in ~~IH's~~IH’s operating results in our consolidated statements of income, commencing from ~~the~~their respective acquisition ~~date~~dates of September 28, 2016 ~~for Medivation~~ and ~~from the acquisition date of~~ June 24, 2016. Therefore, our first-quarter 2016 ~~for Anacor. As a result, IH's revenues for the third quarter and first nine months~~results of ~~2016 include three business days of legacy Medivation~~ operations, and ~~approximately three months of legacy Anacor operations,~~IH’s operating results, do not include financial results from Medivation or Anacor. Through December 31, 2016, includes Duavive/Duavee and Viviant (recorded in All other Internal Medicine in 2016), which were ~~immaterial.~~transferred from Innovative Health to Essential Health effective January 1, 2017 (recorded in All other LEP (EH) beginning January 1, 2017), in order to align these products with our management of the women’s health portfolio within EH.


^(c)	Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH.


^(d)	Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH.


^(e)	~~Includes Eliquis (2016 and 2015) and Rebif (2015 only).~~

^(f)

approximately two months of legacy HIS international operations, while financial results for EH for the first quarter of 2016 reflect three months of legacy HIS global operations.

^(g)(f)


^(h)(g)	Prior period revenues for Medrol and Zithromax/Zmax may not agree to previously-disclosed revenues because revenues for those products are now split between the Legacy Established Products and the Sterile Injectable Pharmaceuticals categories.


⁽ⁱ⁾	Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products).

^(j)(h)


⁽ⁱ⁾	Biosimilars include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle East markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle East markets.


^(j)	Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, and revenues related to our manufacturing and supply agreements, including with Zoetis.


^(k)	~~Infusion Systems include~~HIS (through February 2, 2017) includes Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets.


^(l)	Biosimilars include Inflectra (biosimilar infliximab) in certain European markets, Nivestim (biosimilar filgrastim) in certain Asian markets and Retacrit (biosimilar epoetin zeta) in certain international markets.

^(m)

Pfizer CentreOne (previously known as Pfizer CentreSource or PCS) includes (i) revenues from legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including revenues related to our manufacturing and supply agreements with Zoetis; and (ii) revenues from legacy Hospira’s One-2-One sterile injectables contract manufacturing operation. For additional information, see Notes to Condensed Consolidated Financial Statements––~~Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.~~


⁽ⁿ⁾	~~Includes Eliquis direct sales markets.~~


*	Calculation not ~~meaningful.~~meaningful or greater than 100%.

~~We performed certain reclassifications, primarily between Legacy Established Products and Sterile Injectable Pharmaceuticals, to conform to current period presentation.~~

Revenues––Selected Product ~~Descriptions~~Discussion

The information included in “Revenues—Selected Product Discussion” below should be read in conjunction with the revenue information included in the “Revenues—Major Products” section.

All products have been impacted to some extent by the number of selling days in the first ~~nine months~~quarter of ~~2016~~2017 compared to the first ~~nine months~~quarter of ~~2015;~~ 2016. Revenues for the first ~~nine months~~quarter of ~~2016 had four additional~~2017 were unfavorably impacted by approximately $300 million as a result of one less selling day in the U.S. and two fewer selling days in ~~both the U.S. and~~ international markets. This imbalance in selling days will ~~be offset~~result in one less U.S. selling day and one less international selling day in the ~~fourth quarter of 2016 resulting in essentially the same number of selling days in 2016~~full year 2017 as ~~2015.~~

~~Prevnar/Prevenar 13~~ ~~(IH)~~isour pneumococcal conjugate vaccine for the prevention of pneumococcal disease. Overall, worldwide revenues for Prevnar/Prevenar 13 decreased 2% operationally in the third quarter of 2016, and were relatively flat operationally in the first nine months of 2016, compared to ~~the same periods in 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in both the third quarter, and in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~2016.


•	Prevnar 13/Prevenar 13 (IH) worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter, compared to the same period in 2016.

In the U.S., revenues for Prevnar 13 decreased 3%9% in the ~~third~~first quarter of ~~2016,~~2017, compared to the same period in ~~2015,~~2016, primarily ~~due to~~driven by the ~~expected~~ decline in revenues for ~~Prevenar 13 for adults~~the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to the prior-year quarter. Revenues in the U.S. increased 1% in the first nine months of 2016, compared to the same period in 2015, primarily driven by the timing of government purchases for the pediatric indication and price increases in both the public and private markets, partially offset by the aforementioned decline of the “catch up” opportunity compared to the same period in 2015. We believe the “catch-up” opportunity (i.e., the opportunity to reach adults ~~aged~~age 65 and older who have not been previously vaccinated with Prevnar 13) ~~in adults~~compared to the prior-year quarter. Given the success since the launch of the adult indication, approximately 50% of the eligible patient pool 65 years and above in the U.S. ~~will continue to be large given current demographics and aging trends. However,~~has already been vaccinated. While the remaining eligible population ~~of adults aged 65 years and older will require additional effort~~is large, this cohort is much more difficult to capture. ~~As a result,~~The decrease was partially offset by the ~~opportunity will diminish over time as this “catch-up” opportunity becomes fully realized.~~

timing of government purchases for the pediatric indication.

Internationally, revenues for Prevenar 13 ~~increased 1%~~decreased 4% operationally in the ~~third~~first quarter of ~~2016,~~2017, compared to the same period in ~~2015, driven~~2016, primarily due to unfavorable timing of government purchases in certain emerging markets for the pediatric indication, partially offset by a modest ~~increase in the uptake for~~growth of the adult indication in certain markets, and decreased 3% operationally in the first nine months of 2016, compared to the same period in 2015, driven by timing of orders from Gavi, the Vaccine Alliance, as well as in certain emergingdeveloped Europe markets. Foreign exchange had an unfavorable impact on international revenues ~~of 2% in the third quarter of 2016, and 4%~~ in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015.~~2016.

In 2014, the ACIP voted to recommend Prevnar 13 for routine use to help protect adults aged 65 years and older against pneumococcal disease, which for adults includes pneumonia caused by the 13 pneumococcal serotypes included in the vaccine. These ACIP recommendations were subsequently approved by the directors at the CDC and U.S. Department of Health and

Human Services, and were published in the Morbidity and Mortality Weekly Report in September 2014 by the CDC. As with other vaccines, the CDC regularly monitors the impact of vaccination and reviews the recommendations; in this case, however, the CDC announced formally that it will conduct this review in 2018. Currently, we are working with a number of U.S. investigators to monitor the proportion of community-acquired pneumonia caused by the serotypes included in Prevnar 13 and continue to observe trends.


•	Lyrica (EH (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/IH (revenues from all other geographies)) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017 compared to the same period in 2016.

In July 2016, the FDA approved an expanded age indication to include adults 18 through 49 years of age, in addition to the already approved indications for adults 50 years and older, for active immunization for the prevention of pneumonia and invasive disease caused by 13 ~~Streptococcus pneumoniae~~ (~~S. pneumoniae~~) serotypes (1, 3, 4, 5, 6A, 6B, 7F, 9V, 14, 18C, 19A, 19F, and 23F), and for children 6 weeks through 17 years of age (prior to the 18th birthday) for the prevention of invasive disease caused by the 13 S~~treptococcus pneumoniae~~ strains in the vaccine. Prevenar 13 is now approved in the U.S., the EU and more than 40 other countries for use in adults 18 to 49 years of age. Prevnar 13 is the only pneumococcal vaccine approved across the entire lifespan.

In April 2016, the EMA approved a new 4-dose, MDV presentation for Prevenar 13. In addition, in July 2016, we received the World Health Organization prequalification approval for the Prevenar 13 MDV presentation. This MDV presentation is expected to be introduced under the Advance Market Commitment program in early 2017, for shipment to countries covered by Gavi, the Vaccine Alliance. This new presentation will help to significantly reduce storage requirements and shipping costs in Gavi eligible countries.

~~Lyrica~~ (EH (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/IH (revenues from all other geographies)) is indicated in the U.S. for three neuropathic pain conditions, fibromyalgia and adjunctive therapy for adult patients with partial onset seizures. In certain markets outside the U.S., indications include neuropathic pain (peripheral and central), fibromyalgia, adjunctive treatment of epilepsy and generalized anxiety disorder. Worldwide revenues for Lyrica increased 1% operationally in the third quarter of 2016, and 4% operationally in the first nine months of 2016, compared to the same periods in 2015. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2016, and had an unfavorable impact on worldwide revenues of 1% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

In the U.S., revenues increased ~~12% in the third quarter of 2016, and 19%~~14% in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015,~~2016, driven by ~~volume growth~~increased demand and positive price ~~increases.~~impact.

Internationally, Lyrica revenues decreased ~~13% operationally in the third quarter of 2016, and~~ 14% operationally in the first ~~nine months~~quarter of ~~2016~~2017, compared to the same ~~periods~~period in ~~2015,~~2016, primarily due to losses of exclusivity in developed Europe markets and a new National Health Insurance (NHI) price in Japan starting in April 2016, partially offset ~~in the first nine months of 2016,~~ by operational growth in certain markets, primarily in ~~Japan and Australia. Foreign exchange had a de minimis impact on international revenues in the third quarter of 2016, and had an unfavorable impact on international revenues of 3% in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Lyrica revenues in our IH segment increased 9% operationally in the third quarter of 2016, and 16% operationally in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~ Foreign exchange had a favorable impact of 1% on Lyrica IH revenues in the third quarter of 2016, and an unfavorable impact of 1% in the first nine months of 2016, compared to the same periods in 2015. ~~In our EH segment, revenues from Lyrica decreased 27% operationally in the third quarter of 2016, and 30% operationally in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~ ~~Foreign exchange had an unfavorable impact of 3% on Lyrica EH revenues in both the third quarter~~Australia, Asia and the ~~first nine months of 2016, compared to the same periods in 2015.~~

~~Enbrel~~ (IH, outside the U.S. and Canada), indicated for the treatment of moderate-to-severe rheumatoid arthritis, polyarticular juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis, recorded a 12% operational decrease in worldwide revenues, excluding the U.S. and Canada, in the third quarter of 2016, compared to the same period in 2015, primarily due to the impact of the entrance of the first etanercept biosimilar, as well as mandated price reductions across certain markets in Europe. Worldwide revenues, excluding the U.S. and Canada, decreased 2% operationally in the first nine months of 2016, compared to the same period in 2015, primarily due to the impact of the entrance of the first etanercept biosimilar, as well as mandated price reductions across certain markets in Europe, partially offset by stronger demand and price increases in emerging markets, specifically in Latin America. Foreign exchange had an unfavorable impact on revenues of 5% in the third quarter of 2016, and 7% in the first nine months of 2016, compared to the same periods in 2015.

~~Ibrance~~ (IH) was launched in the U.S. in February 2015, and subsequently in certain international markets as a treatment for a certain form of advanced breast cancer. Ibrance recorded worldwide revenues of $550 million in the third quarter of 2016, and $1.5 billion in the first ~~nine months~~ of 2016, nearly all of which were recorded in the U.S. The significant revenues relate to the strength of our scientific/clinical data, continued positive patient experience as well as Ibrance being the only registered product in

~~this class of medicines in any country. Ibrance is currently approved in the U.S. and over 50 other countries with the most recent approval by the EMA on November 9, 2016.~~

~~Lipitor~~ (EH) is indicated for the treatment of elevated LDL-cholesterol levels in the blood. Lipitor faces generic competition in all major developed markets. Branded Lipitor recorded worldwide revenues of $422 million, or relatively flat operationally in the third quarter of 2016, and $1.3 billion in the first ~~nine months~~ of 2016, or relatively flat operationally, compared to the same periods in 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 7% in the third quarter of 2016, and 8% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~In the U.S., revenues decreased 33% in the third quarter of 2016 and 6% in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015, primarily due to lower patient demand.~~

~~In our international markets, revenues increased 4% operationally in the third quarter of 2016, and 1% operationally in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015, driven by strong volume growth in China, partially offset by lower volume in certain emerging markets, primarily in the~~ Middle ~~East, and in developed international markets, and pricing pressures in international markets.~~East. Foreign exchange had an unfavorable impact on international revenues ~~of 8% in the third quarter of 2016, and 9%~~ in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015.~~2016.

~~Viagra~~ ~~(IH (U.S. and Canada revenues)/EH (all other revenues excluding U.S. and Canada)) isindicated for the treatment of erectile dysfunction. Viagra~~Lyrica worldwide revenues ~~decreased 9% operationally~~ in ~~the third quarter of 2016, and 5%~~our IH segment increased operationally in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015,~~2016, primarily driven by increased demand and positive price impact in the U.S. and increased demand in Australia and Korea. Foreign exchange had a de minimis impact on Lyrica IH revenues in the first quarter of 2017, compared to the same period in 2016. In our EH segment, worldwide revenues from Lyrica decreased operationally in the first quarter of 2017, compared to the same period in 2016, due to ~~new access constraints and increased rebates.~~losses of exclusivity in developed Europe markets. Foreign exchange had an unfavorable impact on Lyrica EH worldwide revenues ~~of 1% in the third quarter of 2016, and 2%~~ in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015. Revenues in the U.S. decreased 11% in the third quarter of 2016, and 6%~~2016.

•

Ibrance (IH) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016, most of which were recorded in the U.S. The significant revenues relate to our scientific/clinical data, continued positive patient experience as well as Ibrance being the first (in the U.S.) and only (outside of the U.S.) registered product in this class of medicines. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	Enbrel (IH, outside the U.S. and Canada) worldwide revenues, excluding the U.S. and Canada, decreased operationally in the first quarter of 2017, compared to the same period in 2016, primarily due to continued biosimilar competition, which is expected to continue. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	Lipitor (EH) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016. In the U.S., revenues decreased 27% in the first quarter of 2017, compared to the same period in 2016, primarily due to lower volumes.

In our international markets, revenues increased 5% operationally in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015, primarily reflecting new access constraints, lower patient~~2016, driven by strong demand ~~and higher rebates,~~in China, partially offset by price increases, higher sales to the Department of Veterans Affairs and the Department of Defense and shifts in wholesaler buying patterns. International revenues decreased 3% operationally both in the third quarter and in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015, primarily from~~ lower volumes in ~~China~~Japan and certain Middle East markets, as well as pricing pressures in ~~developed international markets.~~China. Foreign exchange had an unfavorable impact on international revenues ~~of 5% in the third quarter of 2016, and 7%~~ in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Viagra revenues in our IH segment decreased 11% operationally in the third~~ quarter of ~~2016 and 6% operationally in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~ ~~Foreign exchange had a de minimis impact on Viagra IH revenues in the third quarter and in the first nine months of 2016, compared to the same periods in 2015.~~ ~~In our EH segment, revenues from Viagra decreased 3% operationally in the third quarter of 2016, and 4% operationally in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~ Foreign exchange had an unfavorable impact of 5% on Viagra EH revenues in the third quarter of 2016, and an unfavorable impact of 7% in the first nine months of 2016, compared to the same periods in 2015.

~~Sutent~~ (IH) is indicated for the treatment of advanced renal cell carcinoma, including mRCC; GIST after disease progression on, or intolerance to, imatinib mesylate; and advanced pancreatic neuroendocrine tumor. Sutent worldwide revenues decreased 6% operationally in the third quarter of 2016,2017, compared to the same period in ~~2015, primarily due to competitive pressures, cost containment measures and timing of shipments to certain emerging markets. Sutent~~2016.

•

Viagra (IH (U.S. and Canada revenues)/EH (all other revenues excluding U.S. and Canada)) worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016, primarily due to lower market demand. Foreign exchange had a de minimis impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016. Revenues in the U.S. decreased 17% in the first quarter of 2017, compared to the same period in 2016, primarily due to lower market demand. International revenues decreased 3% operationally in the first quarter of 2017, compared to the same period in 2016, primarily from lower volumes in China. Foreign exchange had an unfavorable impact on international revenues in the first quarter of 2017, compared to the same period in 2016.

In our EH segment, worldwide revenues ~~increased 5%~~from Viagra decreased operationally in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same period in ~~2015,~~2016, primarily ~~due to price increases~~from lower volumes in China, partially offset by increased demand in certain emerging markets in Europe and the ~~U.S., as well as strong demand across geographies in the first half of the year.~~Middle East. Foreign exchange had an unfavorable impact on ~~worldwide~~Viagra EH revenues ~~of 1% in the third quarter of 2016, and 4%~~ in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Our~~ ~~Premarin~~ ~~family of products (EH) helps women address moderate-to-severe menopausal symptoms. Premarin worldwide revenues decreased 7% operationally in the third~~ quarter of ~~2016, and were relatively flat operationally in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015. Revenues in the U.S. decreased 7% in the third quarter of 2016~~2017, compared to the same period in ~~2015, primarily driven by prescription volume declines and lower market growth, partially offset by favorable pricing. Revenues in the U.S.~~ ~~increased 1%~~ ~~in the first nine months of 2016 compared to the same period in 2015, primarily driven by price increases, partially offset by prescription volume declines and lower market growth.~~2016.

~~Norvasc~~ ~~(EH) is indicated for the treatment of hypertension. Norvasc worldwide revenues increased 1% operationally in the third quarter of 2016, and were relatively flat operationally in the first~~ ~~nine months~~ of 2016, compared to the same periods in 2015. Results for the third quarter of 2016 were primarily impacted by strong demand in China, partially offset by generic erosion in Japan and volume declines in certain emerging markets, primarily in the Middle East. Results for the first ~~nine months~~ of 2016 were primarily impacted by generic erosion in Japan, offset by strong demand in China. Foreign exchange had an unfavorable impact on worldwide revenues of 2% in the third quarter of 2016, and 4% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Xeljanz~~ (IH) is approved for use as a second-line therapy for the treatment of adult patients with moderate to severe active rheumatoid arthritis who have had an inadequate response or intolerance to methotrexate and is available in 50 markets including the U.S., Japan, Australia, Turkey, Canada, Switzerland and Brazil. Xeljanz worldwide revenues increased 86% operationally in the third quarter of 2016, and 87% operationally in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015. In the U.S., Xeljanz revenues increased 79% in both the third quarter and in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015, driven by increased adoption among rheumatologists and growing awareness among patients as well as price increases.~~

•

Xeljanz (IH) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016. In the U.S., Xeljanz revenues increased 21% in the first quarter of 2017, compared to the same period in 2016, driven by increased adoption among rheumatologists, growing awareness among patients, improvements in payer access and price increases. Foreign exchange had a de minimis impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.

•

Sutent (IH) worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016, primarily due to competitive pressure in the U.S. and Europe and cost containment measures in certain developed international markets, partially offset by price increases in the U.S. and strong demand in Japan and certain emerging markets. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	Chantix/Champix (IH) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016. Foreign exchange had a de minimis impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.

~~Xeljanz recorded international revenues of $32 million in the third quarter of 2016 and $82 million in the first~~ ~~nine months~~ ~~of 2016. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in the third quarter of 2016 and 2% in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Chantix/Champix~~ (IH) is approved as an aid to smoking-cessation treatment in adults 18 years of age and older in multiple markets worldwide. Worldwide revenues increased 24% operationally in the third quarter of 2016, and 30% operationally in the first ~~nine months~~ of 2016, compared to the same periods in 2015. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2016, and an unfavorable impact on worldwide revenues of 2% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

In the U.S., Chantix revenues increased ~~38% in the third quarter of 2016, and 47%~~12% in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015,~~2016, primarily due to price increases, increased demand due to more effective branded direct-to-consumer campaigns, including the promotion of the Reduce-to-Quit Approach, and continued expansion of unrestricted managed care coverage.

•

Norvasc (EH) worldwide revenues were flat operationally in the first quarter of 2017, compared to the same period in 2016. Results for the first quarter of 2017 were impacted by lower volumes in certain Middle East markets, generic competition in Japan and pricing pressures in China, offset by strong demand in China. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	The Premarin family of products (EH) worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016. Revenues in the U.S. decreased 12% in the first quarter of 2017, compared to the same period in 2016, primarily driven by prescription volume declines and lower market growth, partially offset by price increases.

Internationally, ~~Champix~~Premarin revenues decreased 1%3% operationally in the ~~third~~first quarter of 2017, compared to 2016, primarily due to lower volume in Mexico, partially offset by price increases. Foreign exchange had a favorable impact on international revenues in the first quarter of 2017, compared to the same period in 2015, primarily due to prescription market contraction due to electronic cigarette uptake and wholesaler buying patterns in the U.K., partially offset by demand in South Korea driven by reforms to the government sponsored smoking cessation subsidy program. Internationally, Champix2016.

•

Celebrex (EH) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016, primarily driven by favorable rebates in the U.S. and volume growth in emerging markets, primarily China and certain Middle East markets. This was partially offset by the loss of exclusivity and associated generic competition in the U.S. and most developed international markets. Foreign exchange had a de minimis impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.

•

BeneFIX and ReFacto AF/Xyntha (IH)––BeneFIX worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016, primarily as a result of erosion of market share in the U.S. and European countries due to increasing adoption of extended half-life treatment options. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.

ReFacto AF/Xyntha worldwide revenues increased 3% operationally in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same period in ~~2015, primarily~~2016, largely due to growth in South Korea (driven by reforms to the government sponsored smoking cessation subsidy program), Spain and the Netherlands, partially offset by the timing of government purchases in Turkey. Foreign exchange had a de minimis impact on international revenues in the third quarter of 2016, and an unfavorable impact on international revenues of 5% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

In September 2016, a joint meeting of the FDA’s Psychopharmacologic Drugs Advisory Committee and Drug Safety Risk Management Advisory Committee reviewed data from EAGLES (Evaluating Adverse Events in a Global Smoking Cessation Study) evaluating the neuropsychiatric safety of Chantix. The Committees recommended by a majority vote to remove the boxed warning regarding serious neuropsychiatric adverse events from the Chantix labeling. The role of the Advisory Committees is to provide recommendations to the FDA; however, the FDA makes the final labeling decisions. Earlier this year, Pfizer submitted to the FDA a supplemental New Drug Application (sNDA) requesting updates to the Chantix labeling based on the safety and efficacy outcomes of EAGLES. In addition to requesting removal of the boxed warning, Pfizer proposed retaining the Warnings and Precautions section in the labeling regarding serious neuropsychiatric events occurring in patients attempting to quit smoking and updating it with EAGLES data.

~~Celebrex~~ (EH) is indicated for the treatment of the signs and symptoms of osteoarthritis and rheumatoid arthritis worldwide and for the management of acute pain in adults in the U.S., Japan and certain other markets. Celebrex recorded an 8% operational decrease in worldwide revenues in the third quarter of 2016, and an 11% operational decrease in worldwide revenues in the first ~~nine months~~ of 2016, compared to the same periods in 2015, primarily driven by the loss of exclusivity and associated generic competition in the U.S. and most developed international markets, partially offset by growth in China and other emerging markets. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2016, and an unfavorable impact on worldwide revenues of 3% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

Internationally, Celebrex revenues increased 1% operationally in the third quarter of 2016, compared to the same period in 2015, primarily driven by growth in China and other emerging markets, primarily in the Middle East. Internationally, revenues decreased 6% operationally in the first ~~nine months~~ of 2016, compared to the same period in 2015, driven by the loss of exclusivity and launch of multi-source generic competition in most developed markets, partially offset by volume growth in China and other emerging markets. Foreign exchange had an unfavorable impact on international revenues of 1% in the third quarter of 2016, and 4% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Pristiq~~ (EH) is indicated for the treatment of major depressive disorder in the U.S. and in various other countries. Pristiq has also been indicated for treatment of moderate-to-severe vasomotor symptoms associated with menopause in certain international markets. Worldwide revenues for Pristiq decreased 5% operationally in the third quarter of 2016, compared to the same period in 2015, primarily due to lower U.S. volumes partially offset by favorable pricing. Worldwide revenues for Pristiq increased 7% operationally in the first ~~nine months~~ of 2016, compared to the same period in 2015, primarily due to growth in the U.S. driven by favorable pricing. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in the third quarter of 2016, and 2% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~BeneFIX and ReFacto AF/Xyntha~~ (IH) are recombinant hemophilia products that assist patients with their lifelong hemophilia bleeding disorders. BeneFIX worldwide revenues decreased 9% operationally in the third quarter of 2016, and 1% operationally in the first ~~nine months~~ of 2016, compared to the same periods in 2015, primarily as a result of erosion of market share in the U.S. and certain Middle East and European countries due to the launch of new extended half-life treatment options. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in the third quarter of 2016 and 2% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~ReFacto AF/Xyntha recorded an 11% operational increase in worldwide revenues in the third quarter of 2016, compared to the same period in 2015, driven by~~ increased product demand ~~primarily across various international markets. ReFacto AF/Xyntha recorded an 8% operational increase~~ in ~~the first~~ ~~nine months~~ ~~of 2016, compared to the same period in 2015, largely due to product~~

~~demand across Europe and certain other international markets. Foreign exchange had an unfavorable impact on worldwide revenues of 3% in the third quarter of 2016, and 4% in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Xalkori~~ (IH) is indicated for the treatment of patients with locally advanced or metastatic NSCLC that is ALK-positive or ROS1-positive. Xalkori worldwide revenues increased 15% operationally in the third quarter of 2016, and 20% operationally in the first ~~nine months~~ of 2016, compared to the same periods in 2015, as a result of a steady increase in diagnostic rates for the ALK gene mutation across key markets, which has led to more patients being treated, and price increases in the U.S. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2016, and an unfavorable impact on worldwide revenues of 2% in the first ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

~~Zyvox~~ (EH) is used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide revenues decreased 41% operationally in the third quarter of 2016, and 48% operationally in the first ~~nine months~~ of 2016, compared to the same periods in 2015, due to generic competition in the U.S. and developed international markets and corresponding pricing pressures. Zyvox revenues in emerging markets increased 13% operationally in the third quarter of 2016, compared to the same period in 2015, primarily driven by growth in China and certain emerging markets. Foreign exchange had an unfavorable impact on worldwide revenues ~~of 3% in the third quarter of 2016, and 4%~~ in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015.~~

~~Inlyta~~ ~~(IH) is indicated for~~2016. In the ~~treatment of patients with advanced RCC after failure of a prior systemic treatment. Worldwide~~U.S., ReFacto AF/Xyntha revenues decreased ~~11% operationally in the third quarter of 2016, and 1% operationally~~18% in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015,~~2016, primarily due to increased competition due to new entrants in the second line market primarily in the U.S., offsetting the growth in certain emerging markets, particularly in China, following the launch in the third quarterincreasing adoption of ~~2015, as well as Argentina. Foreign exchange had a 1% favorable impact on worldwide revenues in the third quarter of 2016, and a 1% unfavorable impact on worldwide revenues in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~extended half-life treatment options.

~~Alliance revenues~~ ~~(IH/EH) increased 18% operationally in the third quarter of 2016, and 31% operationally in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015, mainly due to:~~

•

Xalkori (IH) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016, driven by international markets, as a result of a steady increase in diagnostic rates for the ALK gene mutation across key markets outside the U.S., which has led to more patients being treated. This increase was partially offset by declines in the U.S. and Japan due to competitive pressure partially mitigated by the March 2016 FDA approval of the supplemental NDA to treat patients with metastatic NSCLC whose tumors are ROS1-positive. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	Pristiq (EH) worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016, primarily due to loss of exclusivity in the U.S. in March 2017. Foreign exchange had a favorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	Inlyta (IH) worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016, primarily due to increased competition in the U.S. and Europe, partially offset by performance in key emerging markets. Foreign exchange had an unfavorable impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	Inflectra/Remsima (EH) worldwide revenues increased operationally in the first quarter of 2017, compared to the same period in 2016, due to continued uptake in developed markets in Europe, and the U.S. launch in the fourth quarter of 2016, partially offset by pricing pressures in Europe.

•

Zyvox (EH) worldwide revenues decreased operationally in the first quarter of 2017, compared to the same period in 2016, due to generic competition in developed international markets and the U.S. and corresponding pricing pressures, partially offset by strong volume growth in China. Foreign exchange had a de minimis impact on worldwide revenues in the first quarter of 2017, compared to the same period in 2016.


•	Eucrisa (IH) is approved in the U.S. for the treatment of mild to moderate atopic dermatitis for patients two years of age and older. The FDA approved Eucrisa on December 14, 2016, and Eucrisa was launched in the U.S. late in the first quarter of 2017. Eucrisa is a novel non-steroidal topical ointment and is the first new prescription treatment for atopic dermatitis approved in over 10 years.


•	Alliance revenues (IH/EH) increased operationally in the first quarter of 2017, compared to the same period in 2016, mainly due to:


◦	an increase in Eliquis alliance revenues due to higher demand resulting from increased market penetration of novel oral anticoagulants and market share gains; and

~~partially offset by:~~

◦

the ~~year-end 2015 expiry~~inclusion of ~~the collaboration agreement to co-promote Rebif~~Xtandi alliance revenues of $131 million in the U.S.~~, which resulted in a decrease~~ resulting from the September 2016 acquisition of ~~approximately $120 million in the third quarter of 2016, and approximately $260 million in the first~~ ~~nine months~~ ~~of 2016, compared to the same periods in 2015.~~

Medivation.

Foreign exchange had ~~a favorable impact on alliance revenues of 2% in the third quarter of 2016, and a de minimis~~an unfavorable impact on alliance revenues in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015.~~

~~Eliquis~~ (apixaban) (IH) is being jointly developed and commercialized by Pfizer and BMS. The two companies share commercialization expenses and profit/losses equally on a global basis. In April 2015, we signed an agreement with BMS to transfer full commercialization rights in certain smaller markets to us, beginning in the third quarter of 2015. BMS supplies the product to us at cost plus a percentage of the net sales to end-customers in these markets. Eliquis is part of the NOAC market; the agents in this class were developed as alternative treatment options to warfarin in appropriate patients. Eliquis (apixaban) is approved for multiple indications in major markets around the world:

2016.

◦•

Eliquis (IH) has been jointly developed and is commercialized by Pfizer and BMS. Pfizer funds between 50% and 60% of all development costs depending on the study. Profits and losses are shared equally on a global basis except for in certain countries where Pfizer commercializes Eliquis and pays BMS compensation based on a percentage of net sales. We have full commercialization rights in certain smaller markets, beginning in the third quarter of 2015. BMS supplies the product to ~~reduce~~us at cost plus a percentage of the ~~risk~~net sales to end-customers in these markets. Eliquis is part of ~~stroke and systemic embolism~~the Novel Oral Anticoagulant (NOAC) market; the agents in ~~patients with nonvalvular atrial fibrillation;~~this class were developed as alternative treatment options to warfarin in appropriate patients.

◦•

~~for the treatment of DVT~~

Xtandi (IH) is being developed and ~~PE, and for the reduction~~commercialized through a collaboration with Astellas. The two companies share equally in the ~~risk~~gross profits (losses) related to U.S. net sales of ~~recurrent DVT~~Xtandi. Subject to certain exceptions, Pfizer and ~~PE following initial therapy;~~Astellas also share equally all Xtandi commercialization costs attributable to the U.S. market. Pfizer and


◦	~~for the prophylaxis~~ Astellas also share certain development and other collaboration expenses and Pfizer receives tiered royalties as a percentage of ~~DVT, which may lead~~international Xtandi net sales (recorded in Other (income)/deductions—net). While there has been some displacement in Xtandi revenues relative to ~~PE, in patients who have undergone hip or knee replacement surgery.~~

Eliquis utilization and adoption continues to expand across key markets. Over 4 million patients already have been prescribed Eliquis. It is now the number one prescribed NOAC among cardiologists in the U.S. Japan and several European countries.

~~Xtandi~~ (enzalutamide) (IH) is being developed and commercialized through a collaboration between Pfizer and Astellas. The two companies share equally in the gross profits (losses) related to U.S. net sales of Xtandi. Subject to certain exceptions, Pfizer and Astellas also share equally all Xtandi commercialization costs attributable to the U.S. market. Pfizer and Astellas also share certain development and other collaboration expenses and Pfizer receives tiered royalties as a percentage of international Xtandi net sales. Xtandi is approved for the following indications:


◦	~~treatment of patients with metastatic castration-resistant prostate cancer (mCRPC)~~demand growth in the U.S., ~~Europe~~reflecting an increase in utilization of patient assistance programs which provide free medicines to patients, we expect patient assistance program utilization as a percentage of total demand to stabilize and ~~many other countries worldwide; and~~


◦	~~treatment of patients with castration-resistant prostate cancer (CRPC) in Japan.~~moderate gradually throughout 2017.

See the ~~“Our Operating Environment—Intellectual Property Rights and Collaboration/Licensing Rights”~~“Analysis of the Consolidated Statements of Income—Revenues—Selected Product Descriptions” section of our ~~2015~~2016 Financial Report for additional information regarding the ~~expiration~~primary indications or class of ~~various contract rights relating to Enbrel and Rebif.~~the selected products discussed above.

See Notes to Condensed Consolidated Financial Statements—Note 12.Commitments and Contingencies for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above.

Product Developments—Biopharmaceutical

We continue to invest in R&D to provide potential future sources of revenues through the development of new products, as well as through additional uses for in-line and alliance products. Notwithstanding our efforts, there are no assurances as to when, or if, we will receive regulatory approval for additional indications for existing products or any of our other products in development.

delivering a pipeline of differentiated therapies with the greatest scientific and commercial ~~promise,~~ promise;

innovating new capabilities that can position Pfizer for long-term ~~leadership~~leadership; and

creating new models for biomedical collaboration that will expedite the pace of innovation and productivity. ~~To that end, our research~~

Our R&D primarily focuses ~~on six high-priority areas that have a mix of small molecules~~on:

Biosimilars;

Inflammation and ~~large molecules—immunology~~Immunology;

Metabolic Disease and ~~inflammation; cardiovascular~~Cardiovascular Risks;

Neuroscience;

Oncology

Rare Diseases; and ~~metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases. Another area of focus is biosimilars, which are being developed by our EH R&D organization.~~

Vaccines.

For additional information about our R&D organization, including the ~~new~~ EH R&D organization, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook—Our Strategy—~~Commercial~~Description of Research and Development Operations” section of this MD&A.

A comprehensive update of Pfizer’s development pipeline was published on ~~November 1, 2016~~May 2, 2017 and is available at www.pfizer.com/~~pipeline.~~science/drug-product-pipeline. It includes an overview of our research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.

The following series of tables provides information about significant regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan, as well as additional indications and new drug candidates in late-stage development.



RECENT FDA APPROVALS
PRODUCT	INDICATION	DATE APPROVED
Bavencio (Avelumab)	Treatment for patients with locally advanced or metastatic urothelial carcinoma with disease progression on or after platinum-based therapy, which is being developed in collaboration with Merck KGaA, Germany	May 2017
Bavencio (Avelumab)	Treatment of adults and pediatric patients 12 years and older with metastatic Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany	March 2017
Eucrisa (Crisaborole)	A non-steroidal topical anti-inflammatory PDE-4 inhibitor for the treatment of mild-to-moderate atopic dermatitis	December 2016
Troxyca (oxycodone HCI/ naltrexone/HCI)	Extended-release capsules for the management of pain severe enough to require daily, around-the-clock long-term opioid treatment and for which alternative treatment options are inadequate	August 2016
~~Xalkori (Crizotinib)~~	~~Treatment of patients with ROS1-positive metastatic non-small cell lung cancer~~	~~March 2016~~
~~Xeljanz (Tofacitinib)~~	~~Extended-release 11mg tablets for the once-daily treatment of moderate to severe rheumatoid arthritis in patients who have had an inadequate response or intolerance to methotrexate~~	~~February 2016~~
~~Ibrance (Palbociclib)~~	~~Treatment of HR+, HER2- advanced or metastatic breast cancer in combination with fulvestrant in women with disease progression following endocrine therapy~~	~~February 2016~~



PENDING U.S. NDAs AND SUPPLEMENTAL FILINGS
PRODUCT	PROPOSED INDICATION	DATE FILED^*
~~Crisaborole (PF-06930164)~~Xeljanz (Tofacitinib)	~~A non-steroidal topical anti-inflammatory PDE-4 inhibitor for the treatment~~Treatment of ~~mild-to-moderate atopic dermatitis~~adult patients with active psoriatic arthritis	~~March 2016~~May 2017
~~Retacrit~~PF-06438179^(a)	A potential biosimilar to Remicade® (infliximab)	April 2017
Ertugliflozin	Treatment of type 2 diabetes, which is being developed in collaboration with Merck	March 2017
Inotuzumab ozogamicin	Treatment of acute lymphoblastic leukemia	February 2017
Lyrica (Pregabalin)	Controlled Release (once-a-day) dosing	February 2017
Mylotarg (Gemtuzumab ozogamicin)	Treatment of acute myeloid leukemia	January 2017
Retacrit^(b)	A potential biosimilar to Epogen® and Procrit® (epotein alfa)	February 2015
Tafamidis meglumine^(b)(c)	Treatment of transthyretin familial amyloid polyneuropathy	February 2012


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

^(a)

Remicade® is a registered trademark of Janssen. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade® (infliximab) in the 28 countries that form the EEA to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization rights to PF-06438179 in all countries outside of the EEA.

^(b)

Epogen® is a registered U.S. trademark of Amgen Inc.; Procrit® is a registered U.S. trademark of Johnson & Johnson. In October 2015, we received a “complete response” letter from the FDA with respect to our biologics license application for Retacrit, our proposed biosimilar to epoetin alfa, which was submitted for all indications of the reference product. In December 2016, we completed the resubmission of the biologics license application to the FDA for Retacrit in response to the “complete response” letter. We are ~~working diligently~~continuing to ~~address~~work closely with the ~~content of the letter.~~FDA on next steps.

^(\b)(c)

In May 2012, the FDA’s Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to the tafamidis NDA. The FDA has requested the completion of a second efficacy study, and also has asked for additional information on the data within the current tafamidis NDA. Pfizer initiated study B3461028 in December 2013, a global Phase 3 study to support a potential new indication in transthyretin cardiomypathy, which includes transthyretin familial amyloid cardiomyopathy (TTR-FAC) and wild-type cardiomyopathy (WT-CM). We anticipate results from this study in 2018, and continue to work with the FDA to identify next steps.



REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
PRODUCT	DESCRIPTION OF EVENT	DATE APPROVED	DATE FILED^*
Sutent (Sunitinib)	Application filed in the EU for the adjuvant treatment of renal cell carcinoma	—	April 2017
Xeljanz (Tofacitinib)	Approval in the EU for Xeljanz in combination with methotrexate for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to one or more disease-modifying antirheumatic drugs. Xeljanz can be given as monotherapy in case of intolerance to methotrexate or when treatment with methotrexate is inappropriate	March 2017	—
Ertugliflozin	Application filed in the EU for the treatment of type 2 diabetes, which is being developed in collaboration with Merck	—	February 2017
Mylotarg (Gemtuzumab ozogamicin)	Application filed in the EU for the treatment of acute myeloid leukemia	—	December 2016
Ibrance (Palbociclib)	Approval in the EU for palbociclib in combination with endocrine therapy for the treatment of HR+, HER2- advanced or metastatic breast cancer, as well as for the treatment of recurrent advanced breast cancer	November 2016	—
Ibrance (Palbociclib)	Application filed in Japan for palbociclib in combination with endocrine therapy for the treatment of inoperable or recurrent breast cancer	—	October 2016
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~ Bavencio (Avelumab)	Application filed in the EU for the treatment of metastatic Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany	—	October 2016
Xalkori (Crizotinib)	Approval in the EU for the treatment of ROS1-positive non-small cell lung cancer	August 2016	—
Xalkori (Crizotinib)	Application filed in Japan for the treatment of ROS1-positive non-small cell lung cancer	—	August 2016
Inotuzumab ozogamicin^(a)	Application filed in the EU for the treatment of acute lymphoblastic leukemia	—	May 2016
Trumenba^(b)	Application filed in the EU for a prophylactic vaccine for active immunization to prevent invasive disease caused by Neisseria meningitidis serogroup B in individuals 10 through 25 years of age	—	May 2016
~~Xeljanz (Tofacitinib)~~	~~Application filed in the EU for the treatment of patients with moderate to severe rheumatoid arthritis who have had an inadequate response or intolerance to methotrexate~~	—	~~March 2016~~
~~Eliquis (Apixaban)~~^(a)	~~Approval in Japan for the treatment and prevention of recurrence of venous thromboembolism (DVT and PE)~~	~~December 2015~~	—
~~Xalkori (Crizotinib)~~	~~Approval in the EU for first line treatment of ALK-positive non-small cell lung cancer~~	~~November 2015~~	—


*	For applications in the EU, the dates set forth in this column are the dates on which the EMA validated our submissions.

^(a)

~~This indication~~In April 2017, the EMA’s Committee for ~~Eliquis (apixaban) was developed~~Medicinal Products for Human Use issued an opinion recommending that inotuzumab ozogamicin be granted approval as monotherapy for the treatment of adults with relapsed or refractory CD22-positive B-cell precursor Philadelphia chromosome negative (Ph-) acute lymphoblastic leukemia (ALL) and ~~is being commercialized in collaboration~~Philadelphia chromosome positive (Ph+) ALL, who have previously failed treatment with ~~BMS.~~at least one tyrosine kinase inhibitor (TKI).


^(b)	In March 2017, the EMA’s Committee for Medicinal Products for Human Use issued an opinion recommending that Trumenba be granted approval for active immunization of individuals 10 years and older to prevent invasive meningococcal disease caused by Neisseria meningitidis serogroup B.



LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS
PRODUCT	PROPOSED INDICATION
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1, in combination with Inlyta (axitinib), a tyrosine kinase inhibitor, for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for the first-line treatment of stage IIIb/IV non-small cell lung cancer, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for treatment of stage IIIb/IV non-small cell lung cancer that has progressed after a platinum-containing doublet, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for treatment of platinum-resistant/refractory ovarian cancer, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for the first-line treatment of ovarian cancer, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for maintenance treatment, in the first-line setting, for patients with urothelial cancer, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for maintenance treatment of advanced or metastatic gastric/ gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for the third-line treatment of advanced or metastatic gastric/ gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (Avelumab)	A monoclonal antibody that inhibits PD-L1 for treatment of locally advanced squamous cell carcinoma of the head and neck, which is being developed in collaboration with Merck KGaA, Germany
Bosulif (Bosutinib)	First-line treatment for patients with chronic phase Philadelphia chromosome positive chronic myelogenous leukemia, which is being developed in collaboration with Avillion Group
Inlyta (Axitinib)	Adjuvant treatment of renal cell carcinoma, which is being developed in collaboration with SFJ Pharmaceuticals Group
Ibrance (Palbociclib)	Treatment of high-risk early breast cancer, in collaboration with the German Breast Group
Ibrance (Palbociclib)	Treatment of HR+ early breast cancer, in collaboration with the Alliance Foundation Trials, LLC, and the Austrian Breast Colorectal Cancer Study Group
~~Lyrica (Pregabalin)~~	~~CR (once-a-day) dosing~~
Sutent (Sunitinib)	Adjuvant treatment of renal cell carcinoma (ex-EU)
Xtandi (Enzalutamide)	Treatment of non-metastatic castrate resistant prostate cancer
Xtandi (Enzalutamide)	Treatment of non-metastatic high risk hormone-sensitive prostate cancer
Xtandi (Enzalutamide)	Treatment of metastatic ~~hormone sensitive~~hormone-sensitive prostate cancer
Xtandi (Enzalutamide)	Treatment of triple negative breast cancer
Xeljanz (Tofacitinib)	Treatment of ulcerative colitis
Xeljanz (Tofacitinib)	Treatment of psoriatic arthritis (ex-U.S.)
Vyndaqel (Tafamidis meglumine)	Adult symptomatic transthyretin cardiomyopathy



NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT
CANDIDATE	PROPOSED INDICATION
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	A monoclonal antibody that inhibits PD-L1, in combination with Inlyta (axitinib), a tyrosine kinase inhibitor, for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	~~A monoclonal antibody that inhibits PD-L1 for the first-line treatment of stage IIIb/IV non-small cell lung cancer, which is being developed in collaboration with Merck KGaA, Germany~~
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	A monoclonal antibody that inhibits PD-L1 for treatment of stage IIIb/IV non-small cell lung cancer that has progressed after a platinum-containing doublet, which is being developed in collaboration with Merck KGaA, Germany
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	~~A monoclonal antibody that inhibits PD-L1 for treatment of platinum-resistant/refractory ovarian cancer, which is being developed in collaboration with Merck KGaA, Germany~~
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	~~A monoclonal antibody that inhibits PD-L1 for the first-line treatment of ovarian cancer, which is being developed in collaboration with Merck KGaA, Germany~~
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	~~A monoclonal antibody that inhibits PD-L1 for maintenance treatment, in the first-line setting, for patients with urothelial cancer, which is being developed in collaboration with Merck KGaA, Germany~~
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	A monoclonal antibody that inhibits PD-L1 for maintenance treatment of advanced or metastatic gastric/gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
~~Avelumab (PF-06834635)~~ ~~(MSB0010718C)~~	A monoclonal antibody that inhibits PD-L1 for the third-line treatment of advanced or metastatic gastric/gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
Dacomitinib	A ~~pan-HER~~pan-human epidermal growth factor receptor (HER) tyrosine kinase inhibitor for the first-line treatment of patients with advanced non-small cell lung cancer with ~~EGFR~~estimated glomerular filtration rate (eGFR) activating mutations, which is being developed in collaboration with SFJ Pharmaceuticals Group
~~Ertugliflozin~~Lorlatinib (PF-06463922)	~~An oral SGLT2~~A next generation ALK/ROS1 tyrosine kinase inhibitor for the treatment of ~~type 2 diabetes, which is being developed in collaboration~~patients with ~~Merck & Co., Inc.~~ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitors
~~Inotuzumab ozogamicin~~	~~An antibody drug conjugate, consisting of an anti-CD22 monotherapy antibody linked to a cytotoxic agent, calicheamycin, for the treatment of acute lymphoblastic leukemia (ex-EU)~~
~~PF-06836922~~PF-06425090	A ~~long-acting hGH-CTP~~prophylactic vaccine for ~~the treatment of growth hormone deficiency in adults, which is being developed in collaboration with OPKO Health, Inc.~~active immunization to prevent clostridium difficile colitis
~~PF-06438179~~PF-05280014^(a)	~~A potential biosimilar to Remicade® (infliximab)~~
~~PF-05280014~~^(b)	A potential biosimilar to Herceptin®(trastuzumab)
PF-05280586^(c)(b)	A potential biosimilar to Rituxan®(rituximab)
PF-06439535^(d)(c)	A potential biosimilar to Avastin® (bevacizumab)
PF-06410293^(e)(d)	A potential biosimilar to Humira® (adalimumab)
Rivipansel (GMI-1070)	A pan-selectin inhibitor for the treatment of vaso-occlusive crisis in hospitalized individuals with sickle cell disease, which was licensed from GlycoMimetics Inc.
~~talazoparib~~Somatrogon (PF-06836922	A long-acting hGH-CTP for the treatment of growth hormone deficiency in adults, which is being developed in collaboration with OPKO
Talazoparib (MDV3800)	An oral PARP inhibitor for the treatment of patients with germline breast cancer susceptibility gene BRCA mutated advanced breast cancer
Tanezumab	An anti-nerve growth factor monoclonal antibody for the treatment of pain, which is being developed in collaboration with Lilly

^(a)

~~Remicade® is a registered trademark of Janssen Biotech, Inc. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade~~^®(infliximab) in the 28 countries that form the EEA to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization and manufacturing rights to PF-06438179 in all countries outside of the EEA.


^(b)	Herceptin® is a registered trademark of Genentech, Inc.


^(c)(b)	Rituxan® is a registered trademark of Biogen MA Inc.


^(d)(c)	Avastin® is a registered trademark of Genentech, Inc.


^(e)(d)	Humira® is a registered trademark of AbbVie Biotechnology Ltd.

~~In November 2016, we announced the discontinuation of the global clinical development program for bococizumab, our investigational Proprotein Convertase Subtilisin Kexin type 9 inhibitor (PCSK9i).~~

~~Inflectra™~~

~~In 2009, Hospira entered into an agreement to develop and market certain biosimilar molecules with Celltrion Inc. and Celltrion Healthcare, Co., Ltd. (collectively, Celltrion) including Inflectra~~^™(infliximab) for patients with autoimmune diseases. In Europe, Inflectra has now launched in 38 markets. Celltrion possesses the right to commercialize its infliximab product under the brand name Remsima^™ in the same European markets as Hospira. We have exclusive commercialization rights from Celltrion to its infliximab product in the U.S., Canada and certain other territories. In December 2014, Hospira launched Inflectra in Canada. In April 2016, the FDA approved Inflectra (infliximab-dyyb) across all eligible indications of the reference product, Remicade® (infliximab).In October 2016, we announced that we will begin shipping Inflectra to wholesalers in the U.S. in late November 2016. Patent litigation associated with Inflectra is ongoing, in which Janssen and New York University allege that the marketing of Inflectra in the U.S. would infringe one or more patents. If an appellate court ultimately holds such patents are valid and infringed, we could be liable for patent infringement damages, including the possibility of owing Janssen its lost profits, and/or a requirement to cease selling Inflectra in the

~~U.S. during the term of one or more of the valid, infringed patents. Inflectra has also been approved in other certain markets, where we will market it under the brand name Remsima™.~~

Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the “Our Strategy––Our Business Development Initiatives” section of this MD&A.

COSTS AND EXPENSES

Cost of Sales


	Three Months Ended							Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			% Change	October 2, 2016			September 27, 2015			% Change	April 2, 2017			April 3, 2016			% Change
Cost of sales	$	3,085		$	2,219		39	$	9,111		$	6,238		46	$	2,470		$	2,851		(13	)
As a percentage of Revenues	23.6		%	18.4		%		23.2		%	17.9		%		19.3		%	21.9		%

Cost of sales ~~increased 39% in the third quarter of 2016 and 46%~~ decreased 13% in the first ~~nine months of 2016, compared to the same periods in 2015, primarily due to:~~

~~the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter and first nine months of 2015; and~~

~~the unfavorable impact of foreign exchange of 9% in the third~~ quarter of ~~2016 and 6% in the first nine months of 2016.~~

~~The increase in~~ ~~Cost of sales~~ ~~as a percentage of revenues in the third quarter of 2016,~~2017, compared to the same period in ~~2015, was~~2016, primarily due to:

anthe $193 million nonrecurring 2016 unfavorable change in product mix due to (i) the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter of 2015, with products that carry a higher cost; and (ii) the impact of ~~losses~~acquired Hospira inventory, which is measured at fair value on the acquisition date and was amortized over the turn of ~~exclusivity on products which formerly had~~ the related inventory in 2016;

a ~~higher gross margin;~~

~~an increase~~decrease in ~~royalty expense; and~~costs associated with our cost-reduction/productivity initiatives;


•	the inclusion of approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to the inclusion of three months of legacy HIS global operations in the first quarter of 2016; and

the ~~unfavorable~~favorable impact of foreign exchange,

partially offset by:

~~a favorable~~an unfavorable change in product mix, ~~related to legacy Pfizer~~including products ~~excluding losses of~~that have lost exclusivity.

The ~~increase~~decrease in Cost of sales as a percentage of revenues in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same period in ~~2015,~~2016, was primarily due to:

anthe non-recurrence of the unfavorable change in product mix due to (i) the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the first nine months of 2015,with products that carry a higher cost, as well as the impact of acquired Hospira inventory, which is measured at fair value on the acquisition date and amortized over the turn of the related ~~inventory; and (ii) the impact~~inventory in 2016;

a decrease in costs associated with our cost-reduction/productivity initiatives;


•	the inclusion of approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to the inclusion of three months of legacy HIS global operations in the first quarter of 2016; and

an increase in alliance revenues, which have no associated cost of ~~losses of exclusivity on products which formerly had a higher gross margin; and~~

~~the unfavorable impact of foreign exchange,~~sales,

partially offset by:

~~a favorable~~an unfavorable change in product mix, ~~related to legacy Pfizer~~including products ~~excluding losses of~~that have lost exclusivity.

Selling, Informational and Administrative (SI&A) Expenses


	Three Months Ended							Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			% Change	October 2, 2016			September 27, 2015			% Change	April 2, 2017			April 3, 2016			% Change
Selling, informational and administrative expenses	$	3,559		$	3,270		9	$	10,414		$	9,761		7	$	3,308		$	3,385		(2	)
As a percentage of Revenues	27.3		%	27.1		%		26.6		%	28.0		%		25.9		%	26.0		%

SI&A expenses ~~increased 9%~~decreased 2% in the ~~third~~first quarter of ~~2016~~2017 compared to the same period in ~~2015,~~2016, primarily due to:

~~increased investments to support certain recently launched products and other in-line biopharmaceutical products; and~~

the ~~inclusion~~non-recurrence of ~~legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter of 2015,~~

~~partially offset by:~~

~~the favorable impact of foreign exchange of 2% in the third quarter of 2016; and~~

~~lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives.~~

~~SI&A expenses increased 7% in the first nine months of 2016 compared to the same period in 2015, primarily due to:~~

an ~~increase in the~~ allowance for doubtful trade accounts receivable of approximately $280 million, resulting from unfavorable developments with a ~~distributor;~~

~~the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations~~distributor that was recorded in the first ~~nine months~~quarter of ~~2015;~~2016; and

~~increased investments to support certain recently launched products and other in-line biopharmaceutical products,~~


•	the inclusion of approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to the inclusion of three months of legacy HIS global operations in the first quarter of 2016,

partially offset by:

~~the favorable impact~~additional investments across several of ~~foreign exchange of 3%~~our key products; and

an increase in ~~the first nine months of 2016; and~~charitable contributions.

~~lower field force, advertising and promotional expenses, reflecting the benefits of cost-reduction and productivity initiatives.~~

Research and Development (R&D) Expenses


	Three Months Ended							Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			% Change	October 2, 2016			September 27, 2015			% Change	April 2, 2017			April 3, 2016			% Change
Research and development expenses	$	1,881		$	1,722		9	$	5,360		$	5,342		—	$	1,708		$	1,731		(1	)
As a percentage of Revenues	14.4		%	14.2		%		13.7		%	15.3		%		13.4		%	13.3		%

R&D expenses ~~increased 9%~~decreased 1% in the ~~third~~first quarter of ~~2016,~~2017, compared to the same period in ~~2015,~~2016, primarily due to:

the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016; and

the inclusion of approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to the inclusion of three months of legacy HIS global operations in the first quarter of 2016,

partially offset by:

increased costs associated with our oncology programs, ~~primarily our avelumab alliance with Merck KGaA; and~~

the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter of 2015, and increased investment in legacy Hospira biosimilar and sterile injectable development programs,

~~partially offset by:~~

development funding of $93 million under which we had an obligation to perform contractual services related to certain clinical trials of bococizumab, Ibrance and rivipansel (see Notes to Condensed Consolidated Financial Statements––~~Note 2C.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Research and Development and Collaborative Arrangements~~).

~~R&D expenses were relatively flat in the first nine months of 2016, compared to the same period in 2015, primarily due to:~~

~~the non-recurrence of the $295 million upfront payment to OPKO in the first quarter of 2015 associated with a worldwide development and commercialization agreement; and~~

development funding of $199 million under which we had an obligation to perform contractual services related to certain clinical trials of bococizumab, Ibrance and rivipansel (see Notes to Condensed Consolidated Financial Statements––~~Note 2C.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Research and Development and Collaborative Arrangements~~),

~~offset by:~~

~~increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA; and~~

~~increased investments in certain late-stage pipeline programs,~~ including ~~bococizumab for which we announced the discontinuation of our global clinical development program in November 2016.~~

~~Description of Research and Development Operations~~

Innovation is critical to the success of our company, and drug discovery and development is time-consuming, expensive and unpredictable. Our R&D spending is conducted through a number of matrix organizations, and in 2016, we announced changes to our research and development operations that we believe will create a stronger and more efficient research and development engine across our IH and EH businesses.

Research Units within our WRD organization continue to be generally responsible for research assets for our IH business (assets that have not yet achieved proof-of-concept). Our Research Units are organized in a variety of ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus.

~~Because of our structure, we can rapidly redeploy resources within a Research Unit between various projects as necessary because the workforce shares similar skills, expertise and/or focus.~~

We created an R&D organization within the EH business, which supports the large base of EH products and is expected to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars.

We formed the GPD organization, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects.

Our science-based and other platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based functions (which are part of our WRD organization), such as Pharmaceutical Sciences, Medicinal Chemistry, Regulatory and Drug Safety, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of development, allowing us to react quickly in response to evolving needs.

We manage R&D operations on a total-company basis through our matrix organizations described above. Specifically, a single committee with representation from the R&D groups and the IH commercial organization is accountable for aligning resources among all of our WRD, GPD and IH R&D projects and for seeking to ensure optimal capital allocation across the Innovative R&D portfolio. We believe that this approach also serves to maximize accountability and flexibility. Our EH R&D organization manages its resources separately from the WRD and GPD organizations.

For additional information on Cost of sales, SI&A and R&D expenses by operating segment, see the “Analysis of Operating Segment Information” section of this MD&A.

Amortization of Intangible Assets


	Three Months Ended							Nine Months Ended							Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			% Change	October 2, 2016			September 27, 2015			% Change	April 2, 2017			April 3, 2016			% Change
Amortization of intangible assets	$	968		$	937		3	$	2,934		$	2,748		7	$	1,186		$	1,006		18
As a percentage of Revenues	7.4		%	7.7		%		7.5		%	7.9		%		9.3		%	7.7		%

Amortization of intangible assets increased ~~3% in the~~ ~~third quarter~~ ~~of 2016 and 7%~~18% in the first ~~nine months~~quarter of ~~2016,~~2017, compared to the same ~~periods~~period in ~~2015,~~2016, primarily due to ~~purchase accounting charges~~the inclusion of amortization expense of approximately ~~$126~~$258 million ~~pre-tax in the third quarter of 2016 and $383 million pre-tax for the first nine months of 2016~~(pre-tax) related to the identifiable intangible assets acquired from ~~Hospira,~~Medivation and Anacor, partially offset by assets that became fully amortized at the end of their estimated useful lives.

See also Notes to Condensed Consolidated Financial Statements—Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets.

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


	Three Months Ended						Nine Months Ended					Three Months Ended
(MILLIONS OF DOLLARS)	Oct 2, 2016		Sep 27, 2015		% Change		Oct 2, 2016		Sep 27, 2015		% Change	April 2, 2017		April 3, 2016		% Change
Restructuring charges and certain acquisition-related costs	$	531	$	581	(9	)	$	988	$	727	36	$	157	$	141	11
Total additional depreciation—asset restructuring	47		24		97		151		71		*	14		49		(71	)
Total implementation costs	78		42		83		202		135		49	31		62		(50	)
Costs associated with acquisitions and cost-reduction/productivity initiatives^(a)	$	655	$	647	1		$	1,341	$	933	44	$	202	$	252	(20	)


^(a)	Comprises Restructuring charges and certain acquisition-related costs as well as costs associated with our cost-reduction/productivity initiatives included in Cost of sales, Research and development expenses and/or Selling, informational and administrative expenses, as appropriate.


*	~~Calculation not meaningful.~~

Included in Restructuring charges and certain acquisition-related costs are (i) restructuring charges of ~~$404~~$45 million in the ~~third~~first quarter of ~~2016 and $574 million for the first nine months of 2016~~2017 for employee termination costs, exit costs and asset impairments, which are largely associated with cost-reduction and productivity initiatives not associated with acquisitions, as well as our acquisitions of ~~Hospira~~Medivation and ~~Medivation;~~Anacor; (ii) transaction costs, such as banking, legal, accounting and other similar services, of ~~$54~~$12 million in the ~~third~~first quarter of ~~2016, most~~2017, virtually all of which are directly related to our acquisition of Medivation in September 2016, and $114 million for the first nine months of 2016, most of which are directly related to our acquisitions of Medivation and Anacor, as well as costs associated with our terminated transaction with Allergan;Medivation; and (iii) integration costs, representing external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes of ~~$73~~$101 million in the ~~third~~first quarter of ~~2016,~~2017, primarily related to our acquisition of ~~Hospira and $300 million for the first nine months of 2016, primarily related to our acquisition of Hospira and the terminated transaction with Allergan.~~Hospira. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

Included in Restructuring charges and certain acquisition-related costs in the first quarter of 2016 are (i) restructuring charges of $30 million for employee termination costs and asset impairments, which are largely associated with cost-reduction and productivity initiatives not associated with acquisitions; (ii) transaction costs, such as banking, legal, accounting and other similar services, of $24 million, most of which are directly related to our terminated transaction with Allergan plc; and (iii) integration costs, representing external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes, of $87 million, primarily related to our acquisition of Hospira.

In connection with our acquisition of Hospira, we are focusing our efforts on achieving an appropriate cost structure for the combined company. We expect to achieve $1 billion of annual cost savings by 2018 in connection with the Hospira acquisition, 25% more than our initial cost savings target of $800 ~~million.~~million, and have achieved approximately $660 million of cost savings through April 2, 2017. The one-time costs to generate the savings are expected to be approximately $1 billion (not including costs of $215 million for full-year 2015 associated with the return of acquired ~~in-process research and development~~IPR&D rights), incurred for up to a three-year period post-acquisition.

In ~~early~~2016, we substantially completed previously disclosed cost-reduction initiatives begun in 2014 ~~we announced that we would be incurring costs in 2014-2016 related to new programs:~~associated with our ~~new~~ global commercial structure reorganization, ~~and additional cost-reduction/productivity initiatives. We also have an ongoing~~ manufacturing plant network rationalization and optimization ~~initiative underway.~~initiatives, and additional cost-reduction/productivity initiatives across the enterprise. Through December 31, 2016, we incurred $3.1 billion (pre-tax) in total costs for the 2014-2016 program. The cumulative ongoing annual cost savings associated with the 2014-2016 program (but not including expected cost savings associated with the Hospira acquisition), are approximately $3.1 billion. These savings were recognized, for the most part, through the end of 2016. However, savings from costs incurred in the last half of 2016 are expected to largely occur in 2017 and are reflected in our 2017 financial guidance.

New Cost-Reduction/Productivity Initiatives—2017 through 2019 Activities

As a result of the evaluation performed in connection with our decision in September 2016 to not pursue, at that time, splitting IH and EH into two separate publicly-traded companies, we have identified new opportunities to potentially achieve greater optimization and efficiency to become more competitive in our business. Therefore, we have initiated new enterprise-wide cost-reduction/productivity initiatives, which we expect to complete by the end of 2019. These initiatives will encompass all areas of our cost base and will include further centralization of our corporate and platform functions and optimization of our manufacturing plant network to support IH and EH products and pipelines, as well as activities in other areas where opportunities are identified. The action plans related to these new initiatives are underway and, in order to achieve targeted savings of approximately $1.2 billion by 2020, we expect to incur total costs of approximately $900 million over the next three years. Of this amount, we expect about 80% to be manufacturing operations related and we expect about a quarter of the total charges will be non-cash. For additional information about these programs and expected and actual total costs, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

The ~~expected cumulative ongoing annual cost savings associated with the above-mentioned programs (but not including~~ expected cost savings in 2017 associated with ~~the Hospira acquisition),~~these activities are ~~estimated to be approximately $3 billion. These savings will be recognized, for the most part, through the end of 2016. However, savings from charges incurred~~reflected in ~~the last half of 2016 are expected to largely occur in 2017.~~our 2017 financial guidance.

In addition to these major initiatives, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products.

Other (Income)/Deductions—Net


	Three Months Ended					Nine Months Ended					Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016		September 27, 2015		% Change	October 2, 2016		September 27, 2015		% Change	April 2, 2017			April 3, 2016		% Change
Other (income)/deductions––net	$	1,417	$	661	*	$	2,815	$	670	*	$	(1	)	$	330	*


*	Calculation not meaningful.

For information about the components of Other (income)/deductions—net, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net.

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

PROVISION FOR TAXES ON INCOME


	Three Months Ended								Nine Months Ended								Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			% Change		October 2, 2016			September 27, 2015			% Change		April 2, 2017			April 3, 2016			% Change
Provision for taxes on income	$	284		$	567		(50	)	$	1,194		$	2,178		(45	)	$	821		$	513		60
Effective tax rate on continuing operations	17.7		%	21.0		%			15.8		%	23.4		%			20.8		%	14.4		%

For information about our effective tax rate and the events and circumstances contributing to the changes between periods, see Notes to Condensed Consolidated Financial Statements—Note 5. Tax Matters.

NON-GAAP FINANCIAL MEASURE (ADJUSTED INCOME)

General Description of Non-GAAP Financial Measure (Adjusted Income)

Adjusted income is an alternative view of performance used by management. We measure the performance of the overall Company on this basis in conjunction with other performance metrics. Because Adjusted income is an important internal measurement for Pfizer, we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. We report Adjusted income, certain components of Adjusted income, and Adjusted diluted earnings per share in order to portray the results of our major operations––the discovery, development, manufacture, marketing and sale of prescription medicines, vaccines ~~medical devices~~ and consumer healthcare (OTC) products––prior to considering certain income statement elements. We have defined Adjusted income as Net income attributable to Pfizer Inc. before the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and certain significant items, which are described below. Also, see the ~~“Adjusted Income–~~“Non-GAAP Financial Measure (Adjusted Income)––General Description of ~~Adjusted Income Measure”~~Non-GAAP Financial Measure (Adjusted Income)” section of our ~~2015~~2016 Financial Report for additional information. Similarly, we have defined the Adjusted income components as Cost of sales, Selling, informational and administrative expenses, Research and development expenses, Amortization of intangible assets and Other (income)/deductions––net, each before the impact of purchase accounting for acquisitions, acquisition-related costs and certain significant items. We have defined Adjusted diluted earnings per share as Earnings per common share attributable to Pfizer Inc.––dilutedbefore the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and certain significant items. The Adjusted income measure and the Adjusted income component measures and the Adjusted diluted earnings per share measure are not, and should not be viewed as, ~~a substitute~~substitutes for U.S. GAAP net income, U.S. GAAP net income components or U.S. GAAP diluted earnings per share.

The following are examples of how the Adjusted income and Adjusted diluted earnings per share measures are utilized:

senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income and Adjusted diluted earnings per share basis;

our annual budgets are prepared on an Adjusted income and Adjusted diluted earnings per share basis; and

senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. See the “Adjusted Income––General Description of Adjusted Income Measure” section of our ~~2015 Financial Report for additional information.~~


•	senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. See the “Non-GAAP Financial Measure (Adjusted Income)––General Description of Non-GAAP Financial Measure (Adjusted Income)” section of our 2016 Financial Report for additional information.

Adjusted income and its components and Adjusted diluted earnings per share are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, Adjusted income and its components (unlike U.S. GAAP net income and its components) and Adjusted diluted earnings per share (unlike U.S. GAAP diluted earnings per share) may not be comparable to the calculation of similar measures of other companies. Adjusted income and its components and Adjusted diluted earnings per share are presented solely to permit investors to more fully understand how management assesses performance.

We also recognize that, as internal measures of performance, the Adjusted income and its components and Adjusted diluted earnings per share measures have limitations, and we do not restrict our performance-management process solely to these metrics. A limitation of these measures is that they provide a view of our operations without including all events during a period, such as the effects of an acquisition or amortization of purchased intangibles, and do not provide a comparable view of our performance to other companies in the biopharmaceutical industry. We also use other specifically tailored tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, total shareholder return, both on an absolute basis and relative to a group of pharmaceutical industry peers (pre-2015) or a ~~publicly traded~~publicly-traded pharmaceutical index, plays a significant role in determining payouts under certain of Pfizer’s long-term incentive compensation plans.

See the accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the ~~third~~first quarter of 2017 and ~~first nine months of~~ 2016 ~~and~~ ~~2015~~ below.

Purchase Accounting Adjustments

Adjusted income is calculated prior to considering certain significant purchase accounting impacts resulting from business combinations and net asset acquisitions. These impacts, primarily associated with ~~Pharmacia (acquired in 2003),~~ Wyeth (acquired in 2009)~~, King (acquired in 2011)~~, Hospira (acquired in 2015), Anacor (acquired in June 2016) and Medivation (acquired in September 2016), can include the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, amortization related to the increase in fair value of the acquired finite-lived intangible assets, and to a much lesser extent, depreciation related to the increase/decrease in fair value of the acquired fixed assets (primarily manufacturing facilities), amortization related to the increase in fair value of acquired debt, and the fair value changes associated with contingent consideration. Therefore, the Adjusted income measure includes the revenues earned upon the sale of the acquired products without considering the acquisition cost of those products.

Acquisition-Related Costs

Adjusted income is calculated prior to considering transaction, integration, restructuring and additional depreciation costs associated with business combinations because these costs are unique ~~and vary with~~to each transaction and represent costs that were incurred to restructure and integrate two businesses as a result of the acquisition decision. For additional clarity, only transaction costs, additional depreciation and restructuring and integration activities that are associated with a business combination or a net-asset acquisition are included in acquisition-related costs. We have made no adjustments for the resulting synergies.

Discontinued Operations

Adjusted income is calculated prior to considering the results of operations included in discontinued operations, as well as any related gains or losses on the disposal of such operations.

Certain Significant Items

Adjusted income is calculated prior to considering certain significant items. Certain significant items represent substantive and/or unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspects of their nature. Certain significant items may be highly variable and difficult to predict. Furthermore, in some cases it is reasonably possible that they could reoccur in future periods. For example, major non-acquisition-related cost-reduction programs stand on their own as they are specific to an event or goal with a defined term, but we may have subsequent programs based on reorganizations of the business, cost productivity or in response to loss of exclusivity or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of ~~previously~~litigation matters at acquired companies that were inestimable, ~~and~~not probable or unresolved ~~matters~~ at the date of acquisition. Unusual items may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be a major non-acquisition-related restructuring charge and associated implementation costs; amounts related to certain disposals of businesses, products or facilities that do not qualify as discontinued operations under U.S. GAAP; certain intangible asset impairments; adjustments related to the resolution of certain tax positions; the impact of adopting certain significant, event-driven tax legislation; or charges related to certain legal matters, such as certain of those discussed in Notes to Condensed Consolidated Financial Statements—Note 12A. Commitments and Contingencies: Legal Proceedings, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Normal, ongoing defense costs of the Company or settlements of and accruals for legal matters made in the normal course of our business would not be considered certain significant items.

~~Reconciliation~~Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items


	Three Months Ended October 2, 2016																Three Months Ended April 2, 2017
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported		Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted			GAAP Reported			Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	13,045	$	—		$	—		$	—	$	—		$	13,045		$	12,779		$	—		$	—		$	—	$	—		$	12,779
Cost of sales	3,085		(32		)	(3		)	—		(93		)	2,957			2,470			(7		)	(3		)	—		(26		)	2,434
Selling, informational and administrative expenses	3,559		(5		)	—			—		(23		)	3,531			3,308			(6		)	—			—		(14		)	3,288
Research and development expenses	1,881		—			—			—		(8		)	1,873			1,708			4			—			—		(7		)	1,705
Amortization of intangible assets	968		(936		)	—			—		—			32			1,186			(1,151		)	—			—		—			35
Restructuring charges and certain acquisition-related costs	531		—			(277		)	—		(254		)	—			157			—			(121		)	—		(36		)	—
Other (income)/deductions––net	1,417		6			—			—		(1,590		)	(168		)	(1		)	(13		)	—			—		(74		)	(88		)
Income from continuing operations before provision for taxes on income	1,604		966			280			—		1,969			4,819			3,951			1,172			124			—		157			5,404
Provision for taxes on income^(b)	284		366			73			—		370			1,094			821			340			43			—		(1		)	1,204
Income from continuing operations	1,320		600			207			—		1,599			3,726			3,130			832			82			—		157			4,201
Discontinued operations––net of tax	—		—			—			—		—			—			—			—			—			—		—			—
Net income attributable to noncontrolling interests	—		—			—			—		—			—			9			—			—			—		—			9
Net income attributable to Pfizer Inc.	1,320		600			207			—		1,599			3,726			3,121			832			82			—		157			4,192
Earnings per common share attributable to Pfizer Inc.––diluted	0.21		0.10			0.03			—		0.26			0.61			0.51			0.14			0.01			—		0.03			0.69

Nine Months Ended October 2, 2016
IN MILLIONS, EXCEPT PER COMMON SHARE DATA GAAP Reported

Purchase Accounting Adjustments^(a)

Acquisition-Related Costs^(a)

Discontinued Operations^(a)

Certain Significant Items^(a)

Non-GAAP Adjusted
Revenues $ 39,196
$ —
$ —
$ —
$ —
$ 39,196
Cost of sales 9,111
(284 ) (3 ) —
(240 ) 8,584
Selling, informational and administrative expenses 10,414
(13 ) —
—
(59 ) 10,342
Research and development expenses 5,360
1
—
—
(24 ) 5,336
Amortization of intangible assets 2,934
(2,841 ) —
—
—
94
Restructuring charges and certain acquisition-related costs 988
—
(595 ) —
(393 ) —
Other (income)/deductions––net 2,815
33
—
—
(3,395 ) (547 )
Income from continuing operations before provision for taxes on income 7,575
3,103
598
—
4,112
15,388
Provision for taxes on income^(b)
1,194
962
47
—
1,377
3,581
Income from continuing operations 6,380
2,141
550
—
2,735
11,807
Discontinued operations––net of tax —
—
—
—
—
—
Net income attributable to noncontrolling interests 25
—
—
—
—
25
Net income attributable to Pfizer Inc. 6,355
2,141
550
—
2,735
11,782
Earnings per common share attributable to Pfizer Inc.––diluted 1.03
0.35
0.09
—
0.44
1.91

See end of tables for notes ^(a) and ^(b).

Three Months Ended September 27, 2015
IN MILLIONS, EXCEPT PER COMMON SHARE DATA GAAP Reported

Purchase Accounting Adjustments^(a)

Acquisition-Related Costs^(a)

Discontinued Operations^(a)

Certain Significant Items^(a)

Non-GAAP Adjusted
Revenues $ 12,087
$ —
$ —
$ —
$ —
$ 12,087
Cost of sales 2,219
(87 ) (12 ) —
(13 ) 2,108
Selling, informational and administrative expenses 3,270
—
—
—
6
3,276
Research and development expenses 1,722
2
—
—
1
1,725
Amortization of intangible assets 937
(904 ) —
—
—
33
Restructuring charges and certain acquisition-related costs 581
—
(529 ) —
(52 ) —
Other (income)/deductions––net 661
28
—
—
(779 ) (90 )
Income from continuing operations before provision for taxes on income 2,697
960
541
—
837
5,035
Provision for taxes on income^(b)
567
271
167
—
294
1,298
Income from continuing operations 2,130
689
374
—
543
3,736
Discontinued operations––net of tax 8
—
—
(8 ) —
—
Net income attributable to noncontrolling interests 9
—
—
—
—
9
Net income attributable to Pfizer Inc. 2,130
689
374
(8 ) 543
3,728
Earnings per common share attributable to Pfizer Inc.––diluted 0.34
0.11
0.06
—
0.09
0.60


	Nine Months Ended September 27, 2015																	Three Months Ended April 3, 2016
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported		Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)			Certain Significant Items^(a)			Non-GAAP Adjusted			GAAP Reported		Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	34,804	$	—		$	—		$	—		$	—		$	34,804		$	13,005	$	—		$	—		$	—	$	—		$	13,005
Cost of sales	6,238		(89		)	(37		)	—			(73		)	6,037			2,851		(200		)	—			—		(87		)	2,565
Selling, informational and administrative expenses	9,761		2			—			—			(37		)	9,726			3,385		(1		)	—			—		(15		)	3,368
Research and development expenses	5,342		5			—			—			(12		)	5,334			1,731		2			—			—		(10		)	1,723
Amortization of intangible assets	2,748		(2,648		)	—			—			—			100			1,006		(975		)	—			—		—			31
Restructuring charges and certain acquisition-related costs	727		—			(594		)	—			(133		)	—			141		—			(116		)	—		(26		)	—
Other (income)/deductions––net	670		33			—			—			(1,113		)	(410		)	330		20			—			—		(500		)	(149		)
Income from continuing operations before provision for taxes on income	9,319		2,698			631			—			1,369			14,017			3,561		1,153			116			—		638			5,468
Provision for taxes on income^(b)	2,178		770			191			—			406			3,545
Provision for taxes on income^{(b), (c)}																		513		324			(99		)	—		544			1,282
Income from continuing operations(c)	7,141		1,928			440			—			962			10,472			3,048		829			215			—		94			4,186
Discontinued operations––net of tax	14		—			—			(14		)	—			—			—		—			—			—		—			—
Net income attributable to noncontrolling interests	23		—			—			—			—			23			9		—			—			—		—			9
Net income attributable to Pfizer Inc.(c)	7,132		1,928			440			(14		)	962			10,449			3,038		829			215			—		94			4,177
Earnings per common share attributable to Pfizer Inc.––diluted	1.14		0.31			0.07			—			0.15			1.67			0.49		0.13			0.03			—		0.02			0.67


^(a)	For details of adjustments, see “Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income” below.

^(b)

The effective tax rate on Non-GAAP Adjusted income was ~~22.7%~~22.3% in the ~~third~~first quarter of ~~2016,~~, compared with ~~25.8%~~23.4% in the ~~third~~first quarter of ~~2015.~~2016. This decline was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, as well as an increase in tax 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 a decrease in tax benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations. The effective tax rate on Non-GAAP Adjusted income was 23.3% in the first nine months of 2016, compared with 25.3% in the first nine months of 2015. This decline was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, as well as an increase in tax benefits associated with the U.S. R&D tax credit, which was not in effect in the first nine months of the prior year but was permanently extended on December 18, 2015, partially offset by a decrease in tax benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations.

^(c)

GAAP Reported and Non-GAAP Adjusted amounts for the three months ended April 3, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring: (i) excess tax benefits or deficiencies (including tax benefits of dividend equivalents) of share-based compensation to be recognized as a component of the Provision for taxes on income (the net tax benefit was $22 million in the first quarter of 2016) and (ii) in the diluted net earnings per share calculation, when applying the treasury stock method for shares that could be repurchased, the assumed proceeds no longer include the amount of excess tax benefit. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Adoption of New Accounting Standards in Pfizer’s 2016 Financial Report.

Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income

																			Adjusted income, as shown above, excludes the following items:
	Three Months Ended						Nine Months Ended						Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015			April 2, 2017			April 3, 2016
Purchase accounting adjustments
Amortization, depreciation and other^(a)	$	934		$	873		$	2,819		$	2,609		$	1,165		$	954
Cost of sales	32			87			284			89			7			200
Total purchase accounting adjustments––pre-tax	966			960			3,103			2,698			1,172			1,153
Income taxes^(b)	(366		)	(271		)	(962		)	(770		)	(340		)	(324		)
Total purchase accounting adjustments––net of tax	600			689			2,141			1,928			832			829
Acquisition-related costs
Restructuring charges^(c)	150			417			181			422			9			4
Transaction costs^(c)	54			64			114			70			12			24
Integration costs^(c)	73			48			300			102			101			87
Additional depreciation––asset restructuring^(d)	3			12			3			37			3			—
Total acquisition-related costs––pre-tax	280			541			598			631			124			116
Income taxes^(e)	(73		)	(167		)	(47		)	(191		)	(43		)	99
Total acquisition-related costs––net of tax	207			374			550			440			82			215
Discontinued operations
Total discontinued operations––net of tax, attributable to Pfizer Inc.^(f)	—			(8		)	—			(14		)	—			—
Certain significant items
Restructuring charges^(g)	254			52			393			133			36			26
Implementation costs and additional depreciation––asset restructuring^(h)	122			55			350			169			42			111
Certain legal matters, net⁽ⁱ⁾	(40		)	—			506			92			8			286
Impairment on remeasurement of HIS net assets⁽ⁱ⁾	1,422			—			1,422			—
Loss on sale of HIS net assets⁽ⁱ⁾													37			—
Certain asset impairments⁽ⁱ⁾	126			633			1,073			633			—			131
Business and legal entity alignment costs^(j)	69			60			180			224			21			51
Other^(k)	17			36			189			117			13			34
Total certain significant items––pre-tax	1,969			837			4,112			1,369			157			638
Income taxes^(l)	(370		)	(294		)	(1,377		)	(406		)	1			(544		)
Total certain significant items––net of tax	1,599			543			2,735			962			157			94
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc.	$	2,406		$	1,598		$	5,426		$	3,317		$	1,071		$	1,138


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


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

^(c)

Included in Restructuring charges and certain acquisition-related costs ~~(see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives~~). Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations. Transaction costs primarily represent external costs for banking, legal, accounting and other similar services. 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. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.


^(d)	Included in Cost of sales. Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions.

^(e)


^(f)	Included in Discontinued operations––net of tax.~~For the three and nine months ended September 27, 2015, represents post-close adjustments~~.


^(g)	Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions. Included in Restructuring charges and certain acquisition-related costs (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).

^(h)

Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For the three months ended April 2, 2017, included in Cost of sales ($26 million), Selling, informational and administrative expenses ($9 million) and Research and development expenses ($7 million). For the three months ended April 3, 2016, virtually all included in Cost of

~~For the three months ended October 2, 2016, virtually all included in~~ ~~Cost of sales~~sales ($8988 million), Selling, informational and administrative expenses ($2312 million) and Research and development expenses ($810 million). ~~For the three months ended September 27, 2015, virtually all included in~~ ~~Cost of sales~~ ~~($34 million),~~ ~~Selling, informational and administrative expenses~~ ~~($16 million) and~~ ~~Research and development expenses~~ ~~($3 million). For the nine months ended October 2, 2016, virtually all included in~~ ~~Cost of sales~~ ~~($269 million),~~ ~~Selling, informational and administrative expenses~~ ~~($56 million) and~~ ~~Research and development expenses~~ ~~($22 million). For the nine months ended September 27, 2015, virtually all included in~~ ~~Cost of sales~~ ~~($95 million),~~ ~~Selling, informational and administrative expenses~~ ~~($55 million) and~~ ~~Research and development expenses~~ ~~($16 million).~~


⁽ⁱ⁾	Included in Other (income)/deductions—net (see ~~the “Other (Income)/Deductions—Net” section of this MD&A and~~ Notes to Condensed Consolidated Financial Statements—Note 4. ~~Other (Income)/Deductions—Net~~).


^(j)	Included in Other (income)/deductions––net. Represents expenses for changes to our infrastructure to 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.

^(k)

InFor the ~~third quarter of 2016,~~three months ended April 2, 2017, included in ~~Cost of sales~~ ~~($4 million) and~~ Other (income)/deductions––net ($137 million)~~. For the third quarter of 2015, included in~~ ~~Cost of sales~~ ~~($21 million income),~~ and Selling, informational and administrative expenses ($225 million ~~income),~~ ~~Research and development expenses~~ ~~($4 million income) and~~ ). For the three months ended April 3, 2016, primarily all included in Other (income)/deductions––~~net~~ ~~($84 million). For the first nine months of 2016, included in~~ ~~Cost of sales~~ ~~($29 million income),~~ ~~Selling, informational and administrative expenses~~ ~~($3 million),~~ ~~Research and development expenses~~ ~~($2 million) and~~ ~~Other (income)/deductions––net~~ ~~($213 million). For the first nine months of 2015, included in~~ ~~Cost of sales~~ ~~($21 million income),~~ ~~Selling, informational and administrative expenses~~ ~~($19 million income),~~ ~~Research and development expenses~~ ~~($4 million income) and~~ ~~Other (income)/deductions––net~~ ~~($161 million).~~net.

^(l)

Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The ~~third quarter of 2016~~three months ended April 2, 2017 was unfavorably impacted by the ~~tax effects of~~taxes on an ~~impairment~~incremental charge ~~related~~ to ~~the write-down of~~amounts previously recorded to write down the HIS net assets to fair value less ~~estimated~~ costs to sell ~~mainly~~ related to ~~goodwill, which is not deductible for tax purposes, and~~ the ~~jurisdictional mix~~sale of ~~intangible assets.~~HIS net assets to ICU Medical. The ~~first nine~~three months ofended April 3, 2016 ~~were~~was favorably impacted by benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position, as well as benefits associated with our Venezuela operations, partially offset by the unfavorable tax effects of an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.operations.

ANALYSIS OF OPERATING SEGMENT INFORMATION

The following tables and associated notes provide additional information about the performance of our two operating segments—the IH segment and the EH segment. For additional information about each operating segment, see the “Our Strategy––Commercial Operations” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 13. Segment, Geographic and Other Revenue Information, as well as the “Selected Balance Sheet Information by Operating Segment” section of ~~the~~this MD&A in our Form 10-Q for the quarter ended April 3, 2016, which presents selected balance sheet information for the businesses previously managed as the GIP segment and the VOC segment, which are now managed as the IH segment, and for the Established Products business, which has been renamed Pfizer Essential Health.

~~Effective as of the beginning of 2016, the following changes impact EH:~~

~~Effective as of the beginning of the second quarter of 2016, the following changes impact IH:~~

																																					The following tables provide revenue and cost information by reportable operating segment and a reconciliation of that information to our condensed consolidated statements of income:
	Third Quarter of 2016																		Three Months Ended April 2, 2017
(MILLIONS OF DOLLARS)	Innovative Health (IH)^(a)			Essential Health (EH)^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported			Innovative Health (IH)^(a)			Essential Health (EH)^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
Revenues	$	7,332		$	5,712		$	—		$	13,045		$	—		$	13,045		$	7,415		$	5,364		$	—		$	12,779		$	—		$	12,779
Cost of sales	1,039			1,546			372			2,957			128			3,085			849			1,450			136			2,434			36			2,470
% of revenue	14.2		%	27.1		%	*			22.7		%	*			23.6		%	11.4		%	27.0		%	*			19.1		%	*			19.3		%
Selling, informational and administrative expenses	1,647			813			1,071			3,531			28			3,559			1,514			708			1,066			3,288			20			3,308
Research and development expenses	671			292			911			1,873			8			1,881			523			252			930			1,705			3			1,708
Amortization of intangible assets	25			7			—			32			936			968			26			9			—			35			1,151			1,186
Restructuring charges and certain acquisition-related costs	—			—			—			—			531			531			—			—			—			—			157			157
Other (income)/deductions––net	(237		)	(73		)	142			(168		)	1,584			1,417			(146		)	(61		)	119			(88		)	87			(1		)
Income from continuing operations before provision for taxes on income	$	4,187		$	3,128		$	(2,496	)	$	4,819		$	(3,215	)	$	1,604
Income/(loss) from continuing operations before provision for taxes on income																			$	4,649		$	3,006		$	(2,251	)	$	5,404		$	(1,453	)	$	3,951

See end of tables for notes (a) through (d).

Nine Months Ended October 2, 2016
(MILLIONS OF DOLLARS)
Innovative Health (IH)^(a)

Essential Health (EH)^(a)

Other^(b)

Non-GAAP
Adjusted^(c)

Reconciling Items^(d)

GAAP Reported
Revenues $ 21,471
$ 17,725
$ —
$ 39,196
$ —
$ 39,196
Cost of sales 2,930
4,677
977
8,584
527
9,111
% of revenue 13.6 % 26.4 % *
21.9 % *
23.2 %
Selling, informational and administrative expenses 4,947
2,435
2,960
10,342
72
10,414
Research and development expenses 1,815
876
2,645
5,336
23
5,360
Amortization of intangible assets 74
20
—
94
2,841
2,934
Restructuring charges and certain acquisition-related costs —
—
—
—
988
988
Other (income)/deductions––net (764 ) (267 ) 484
(547 ) 3,362
2,815
Income from continuing operations before provision for taxes on income $ 12,470
$ 9,985
$ (7,066 ) $ 15,388
$ (7,813 ) $ 7,575

Third Quarter of 2015
(MILLIONS OF DOLLARS)
Innovative Health (IH)^(a)

Essential Health (EH)^(a)

Other^(b)

Non-GAAP
Adjusted^(c)

Reconciling Items^(d)

GAAP Reported
Revenues $ 6,752
$ 5,335
$ —
$ 12,087
$ —
$ 12,087
Cost of sales 876
1,159
74
2,108
111
2,219
% of revenue 13.0 % 21.7 % *
17.4 % *
18.4 %
Selling, informational and administrative expenses 1,524
799
953
3,276
(7 ) 3,270
Research and development expenses 558
241
926
1,725
(3 ) 1,722
Amortization of intangible assets 23
10
—
33
904
937
Restructuring charges and certain acquisition-related costs —
—
—
—
581
581
Other (income)/deductions––net (247 ) (54 ) 211
(90 ) 751
661
Income from continuing operations before provision for taxes on income $ 4,018
$ 3,181
$ (2,164 ) $ 5,035
$ (2,337 ) $ 2,697


	Nine Months Ended September 27, 2015																		Three Months Ended April 3, 2016
(MILLIONS OF DOLLARS)	Innovative Health (IH)^(a)			Essential Health (EH)^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported			Innovative Health (IH)^(a)			Essential Health (EH)^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
Revenues	$	19,120		$	15,683		$	—		$	34,804		$	—		$	34,804		$	7,033		$	5,972		$	—		$	13,005		$	—		$	13,005
Cost of sales	2,579			3,203			255			6,037			200			6,238			894			1,453			217			2,565			287			2,851
% of revenue	13.5		%	20.4		%	*			17.3		%	*			17.9		%	12.7		%	24.3		%	*			19.7		%	*			21.9		%
Selling, informational and administrative expenses	4,546			2,343			2,837			9,726			35			9,761			1,686			737			946			3,368			16			3,385
Research and development expenses	1,873			660			2,801			5,334			7			5,342			562			276			885			1,723			8			1,731
Amortization of intangible assets	70			30			—			100			2,648			2,748			24			7			—			31			975			1,006
Restructuring charges and certain acquisition-related costs	—			—			—			—			727			727			—			—			—			—			141			141
Other (income)/deductions––net	(778		)	(93		)	461			(410		)	1,080			670			(235		)	(160		)	246			(149		)	480			330
Income from continuing operations before provision for taxes on income	$	10,831		$	9,540		$	(6,354	)	$	14,017		$	(4,698	)	$	9,319
Income/(loss) from continuing operations before provision for taxes on income																			$	4,103		$	3,659		$	(2,294	)	$	5,468		$	(1,907	)	$	3,561

^(a)

Amounts represent the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment.On September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our condensed consolidated statement of income includes the operating results of Hospira. As a result, legacy Hospira commercial operations, including the legacy Hospira One-2-One contract manufacturing business, are included in EH’s operating results in our condensed consolidated statements of income for the third quarter and first nine months of 2016. In accordance with our domestic and international reporting periods, our consolidated statements of income for the third quarter and first nine months of 2015 reflect only one month of legacy Hospira U.S. operations but no financial results from legacy Hospira international operations. Additionally, Medivation’s and Anacor's commercial operations are included in IH's operating results in our consolidated statements of income, commencing from the acquisition date of September 28, 2016 for Medivation and from the acquisition date of June 24, 2016 for Anacor. As a result, IH's operating results for the third quarter and first nine months of 2016 include three business days of legacy Medivation operations and approximately three months of legacy Anacor operations, which were all immaterial. See Notes to Condensed Consolidated Financial Statements––~~Note 2A.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~ ~~for additional information.~~

On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical. The operating results of HIS are included in EH’s operating results through February 2, 2017 and, therefore, financial results for EH for the first quarter of 2017 reflect approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations, while financial results for EH for the first quarter of 2016 reflect three months of legacy HIS global operations.

The financial results of AstraZeneca’s small molecule anti-infectives business, which is primarily outside the U.S., are included in EH’s operating results in our consolidated statement of income, commencing from the acquisition date of December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations. Therefore, in accordance with our international reporting period, our results of operations and EH’s operating results for the first quarter of 2017 reflect approximately two months of legacy AstraZeneca small molecule anti-infectives business international operations, which were immaterial.

Medivation’s and Anacor’s commercial operations are included in IH’s operating results in our condensed consolidated statements of income, commencing from their respective acquisition dates of September 28, 2016 and June 24, 2016. Therefore, IH’s operating results for the first quarter of 2016 do not include financial results from Medivation or Anacor. See Notes to Condensed Consolidated Financial Statements––Note 2A. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement, Equity-Method Investments and Cost-Method Investment: Acquisitions for additional information.


^(b)	Other comprises the ~~revenues and~~ costs included in our Adjusted income components (see footnote (c) below) that are managed outside of our two operating segmentsand includes the following:



	Three Months Ended April 2, 2017
	Other Business Activities
(MILLIONS OF DOLLARS)	WRD⁽ⁱ⁾			GPD⁽ⁱⁱ⁾			Corporate⁽ⁱⁱⁱ⁾			Other Unallocated^(iv)			Total
Revenues	$	—		$	—		$	—		$	—		$	—
Cost of sales	—			—			(26		)	162			136
Selling, informational and administrative expenses	—			(1		)	1,061			6			1,066
Research and development expenses	526			181			220			5			930
Amortization of intangible assets	—			—			—			—			—
Restructuring charges and certain acquisition-related costs	—			—			—			—			—
Other (income)/deductions––net	(18		)	—			90			48			119
Loss from continuing operations before provision for taxes on income	$	(508	)	$	(180	)	$	(1,344	)	$	(219	)	$	(2,251	)

Third Quarter of 2016
Other Business Activities
(MILLIONS OF DOLLARS)
WRD⁽ⁱ⁾

GPD⁽ⁱⁱ⁾

Medical⁽ⁱⁱⁱ⁾

Corporate^(iv)

Other Unallocated^(v)
Total
Revenues $ —
$ —
$ —
$ —
$ —
$ —
Cost of sales —
—
—
104
268
372
Selling, informational and administrative expenses —
1
32
1,041
(3 ) 1,071
Research and development expenses 575
172
1
168
(5 ) 911
Amortization of intangible assets —
—
—
—
—
—
Restructuring charges and certain acquisition-related costs —
—
—
—
—
—
Other (income)/deductions––net 5
—
—
191
(54 ) 142
Loss from continuing operations before provision for taxes on income $ (580 ) $ (173 ) $ (33 ) $ (1,504 ) $ (206 ) $ (2,496 )

Nine Months Ended October 2, 2016
Other Business Activities
(MILLIONS OF DOLLARS)
WRD⁽ⁱ⁾

GPD⁽ⁱⁱ⁾

Medical⁽ⁱⁱⁱ⁾

Corporate^(iv)

Other Unallocated^(v)
Total
Revenues $ —
$ —
$ —
$ —
$ —
$ —
Cost of sales —
—
—
194
783
977
Selling, informational and administrative expenses —
1
93
2,817
48
2,960
Research and development expenses 1,629
487
—
522
6
2,645
Amortization of intangible assets —
—
—
—
—
—
Restructuring charges and certain acquisition-related costs —
—
—
—
—
—
Other (income)/deductions––net (22 ) —
—
590
(83 ) 484
Loss from continuing operations before provision for taxes on income $ (1,608 ) $ (488 ) $ (94 ) $ (4,123 ) $ (753 ) $ (7,066 )

Third Quarter of 2015
Other Business Activities
(MILLIONS OF DOLLARS)
WRD⁽ⁱ⁾

GPD⁽ⁱⁱ⁾

Medical⁽ⁱⁱⁱ⁾

Corporate^(iv)

Other Unallocated^(v)
Total
Revenues $ —
$ —
$ —
$ —
$ —
$ —
Cost of sales —
—
—
29
44
74
Selling, informational and administrative expenses —
—
34
905
14
953
Research and development expenses 526
163
7
223
7
926
Amortization of intangible assets —
—
—
—
—
—
Restructuring charges and certain acquisition-related costs —
—
—
—
—
—
Other (income)/deductions––net (15 ) —
—
219
8
211
Loss from continuing operations before provision for taxes on income $ (510 ) $ (163 ) $ (41 ) $ (1,376 ) $ (73 ) $ (2,164 )


	Nine Months Ended September 27, 2015																		Three Months Ended April 3, 2016
	Other Business Activities																		Other Business Activities
(MILLIONS OF DOLLARS)	WRD⁽ⁱ⁾			GPD⁽ⁱⁱ⁾			Medical⁽ⁱⁱⁱ⁾			Corporate^(iv)			Other Unallocated^(v)			Total			WRD⁽ⁱ⁾			GPD⁽ⁱⁱ⁾			Corporate⁽ⁱⁱⁱ⁾			Other Unallocated^(iv)			Total
Revenues	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Cost of sales	—			—			—			77			178			255			—			—			40			177			217
Selling, informational and administrative expenses	—			—			88			2,712			37			2,837			—			—			927			18			946
Research and development expenses	1,611			467			20			683			20			2,801			528			154			197			6			885
Amortization of intangible assets	—			—			—			—			—			—			—			—			—			—			—
Restructuring charges and certain acquisition-related costs	—			—			—			—			—			—			—			—			—			—			—
Other (income)/deductions––net	(59		)	—			—			476			44			461			(14		)	—			226			34			246
Loss from continuing operations before provision for taxes on income	$	(1,552	)	$	(467	)	$	(108	)	$	(3,949	)	$	(278	)	$	(6,354	)	$	(514	)	$	(154	)	$	(1,390	)	$	(235	)	$	(2,294	)

⁽ⁱ⁾

WRD—the ~~research and development~~R&D expenses managed by our WRD organization, which is generally responsible for research projects for our IH business until proof-of-concept is achieved and then for transitioning those projects to the IH segment via the ~~newly formed~~ GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities. In connection with the formation of the GPD organization, effective in the second quarter of 2016, certain development-related functions transferred from WRD to GPD. See note (ii) below for additional information.

activities. In connection with the formation of the new EH R&D organization, certain functions transferred from WRD to the new EH R&D organization. We have reclassified approximately $68 million of costs in the third quarter of 2015 and $202 million of costs in the first nine months of 2015 from WRD to EH to conform to the current period presentation as part of EH. Also, in connection with the formation of the new GPD organization, beginning in the second quarter of 2016, certain development-related functions transferred from WRD to GPD. See note (ii) below for additional information.

⁽ⁱⁱ⁾

GPD––the costs associated with our ~~newly formed~~ GPD organization, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects. In connection with the formation in early 2016 of the GPD organization, effective in the second quarter of 2016, certain development-related functions transferred from WRD and IH to GPD. We have reclassified ~~costs of~~ approximately $78 million of costs from WRD and $76 million of costs from IH to GPD in the first quarter of 2016, approximately $86 million from WRD and $77 million from IH in the third quarter of 2015 and approximately $244 million from WRD and $223 million from IH in the first nine months of 2015 to GPD to conform to the current period presentation as part of GPD.2016.


⁽ⁱⁱⁱ⁾	Medical—the costs associated with our Pfizer Medical organization, which is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations.

^(iv)

Corporate—the costs associated with Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2017, Corporate also includes the costs associated with our Pfizer Medical organization (Medical), previously reported as part of Other Business Activities. Medical is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations. We have reclassified approximately $27 million of Medical costs from Other Business Activities to Corporate in the first quarter of 2016 to conform to the current period presentation. In the first quarter of 2017, we recognized a $45 million gain as an offset to Cost of sales related to euro, Japanese yen and U.K. pound-denominated forward contacts designated as hedges of foreign exchange-denominated intercompany sales.


^(v)(iv)	Other Unallocated—other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations that are not directly ~~attributable~~assessed to an operating ~~segment.~~segment as business unit (segment) management does not manage these costs (which include manufacturing variances associated with production).

Although we typically provide qualitative information about our Other costs on an annual basis, updated estimates are provided in the first nine months of 2016, reflecting:(i) the reorganization of our IH business; (ii) the transfer of certain WRD functions to EH; and (iii) the transfer of certain development-related functions from WRD and IH to GPD. For information purposes only, for the first nine months of 2016, we estimate that Other costs, in the aggregate and as described above, but excluding (i) net interest-related expense not attributable to an operating segment included in Corporate (approximately $616 million for the first nine months of 2016 in ~~Other (income)/deductions––net); and (ii) net income from investments not attributable to an operating segment and included in Corporate (approximately $76 million for the first nine months of 2016 in~~ ~~Other (income)/deductions––net), are generally associated with our operating segments, as follows:~~



~~Nine Months Ended October 2, 2016~~
~~(PERCENTAGES)~~	IH	EH
~~WRD/GPD/Medical Costs~~
~~Selling, informational and administrative expenses~~	~~69% - 71%~~	~~29% - 31%~~
~~Research and development expenses~~	~~98% - 100%~~	~~0% - 2%~~
~~Other (income)/deductions––net~~	*	*
~~Total WRD/GPD/Medical Costs~~	~~97% - 99%~~	~~1% - 3%~~

~~Corporate/Other Unallocated Costs~~
~~Cost of sales~~	~~19% - 21%~~	~~79% - 81%~~
~~Selling, informational and administrative expenses~~	~~50% - 52%~~	~~48% - 50%~~
~~Research and development expenses~~	~~81% - 83%~~	~~17% - 19%~~
~~Other (income)/deductions––net~~	*	*
~~Total Corporate/Other Unallocated Costs~~	~~47% - 49%~~	~~51% - 53%~~

~~Total WRD/GPD/Medical and Corporate/Other Unallocated Costs~~
~~Cost of sales~~	~~19% - 21%~~	~~79% - 81%~~
~~Selling, informational and administrative expenses~~	~~51% - 53%~~	~~47% - 49%~~
~~Research and development expenses~~	~~94% - 96%~~	~~4% - 6%~~
~~Other (income)/deductions––net~~	*	*
~~Total WRD/GPD/Medical and Corporate/Other Unallocated Costs~~	~~64% - 66%~~	~~34% - 36%~~


*											~~Amounts not material. After excluding net interest expense included in Corporate and net income from investments not attributable to an operating segment and included in Corporate,~~ ~~Other (income)/deductions––net~~ ~~approximates $57 million of income for the first nine months of 2016.~~

For information purposes only, the following tables present reconciliations of our segment operating results to segment operating results including estimated Other costs generally associated with each segment. While we do not manage our segments or have performance goals under such an allocated manner, we believe that some investors may find this information useful in their analyses.

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

~~WRD/GPD/Medical~~––~~The~~ For information ~~provided in~~purposes only, for the ~~table~~first quarter of 2017, we estimate that Other costs, as described above, for combined WRD and GPD costs of $688 million, and ~~Medical was substantially all derived from our estimates of the costs incurred in connection with the R&D projects associated with each operating segment.~~

~~Corporate/Other Unallocated~~––The information provided in the table above for Corporate and Other Unallocated was derived mainly using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from research and development and manufacturing costs, and, to a lesser extent, specific identification. Management believes that the allocations ofcombined Corporate and Other Unallocated costs of $1.4 billion after excluding (i) net interest-related expense not attributable to an operating segment included in Corporate (approximately $240 million for the first quarter of 2017 in Other (income)/deductions––net); and (ii) net income from investments and other assets not attributable to an operating segment included in Corporate (approximately $39 million for the first quarter of 2017 in Other(income)/deductions––net), are ~~reasonable.~~generally associated with our operating segments, as follows:



	Three Months Ended April 2, 2017
				Estimated Other Costs Associated with IH⁽ⁱⁱ⁾
(MILLIONS OF DOLLARS)	Innovative Health Non-GAAP Adjusted^{(i), (iii)}			Estimated WRD/GPD⁽ⁱⁱ⁾			Estimated Corporate/Other Unallocated⁽ⁱⁱ⁾			Innovative Health with Estimated Other Costs Associated with Innovative Health Non-GAAP Adjusted^(ii), ⁽ⁱⁱⁱ⁾
Revenues	$	7,415		$	—		$	—		$	7,415
Cost of sales	849			—			1			850
Selling, informational and administrative expenses	1,514			—			637			2,151
Research and development expenses	523			700			192			1,415
Amortization of intangible assets	26			—			—			26
Restructuring charges and certain acquisition-related costs	—			—			—			—
Other (income)/deductions––net	(146		)	(18		)	(38		)	(203		)
Income from continuing operations before provision for taxes on income	4,649			(681		)	(792		)	3,176



	Three Months Ended April 2, 2017
				Estimated Other Costs Associated with EH⁽ⁱⁱ⁾
(MILLIONS OF DOLLARS)	Essential Health Non-GAAP Adjusted^{(i), (iii)}			Estimated WRD/GPD⁽ⁱⁱ⁾			Estimated Corporate/Other Unallocated⁽ⁱⁱ⁾			Essential Health with Estimated Other Costs Associated with Essential Health Non-GAAP Adjusted^{(ii), (iii)}
Revenues	$	5,364		$	—		$	—		$	5,364
Cost of sales	1,450			—			134			1,584
Selling, informational and administrative expenses	708			—			429			1,137
Research and development expenses	252			6			32			290
Amortization of intangible assets	9			—			—			9
Restructuring charges and certain acquisition-related costs	—			—			—			—
Other (income)/deductions––net	(61		)	—			(25		)	(86		)
Income from continuing operations before provision for taxes on income	3,006			(6		)	(570		)	2,429


⁽ⁱ⁾	Amount represents the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment. See note (a) above for more information.


⁽ⁱⁱ⁾	Represents costs not assessed to an operating segment, as business unit (segment) management does not manage these costs. For a description of these other costs and business activities, see note (b) above.


•	WRD/GPD––The information provided for WRD and GPD was substantially all derived from our estimates of the costs incurred in connection with the R&D projects associated with each operating segment.

•

Corporate/Other Unallocated––The information provided for Corporate and Other Unallocated was derived mainly using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from research and development and manufacturing costs, and, to a lesser extent, specific identification and estimates. Management believes that the allocations of Corporate and Other Unallocated costs are reasonable.

The estimated Other costs generally associated with our operating segments do not purport to reflect the additional amounts that each of our operating segments would have incurred had each segment operated as a standalone company during the period presented.


⁽ⁱⁱⁱ⁾	See note (c) below for an explanation of our Non-GAAP Adjusted financial measure.


^(c)	See the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A for a definition of these “Adjusted Income” components.

^(d)

Includes costs associated with (i) purchase accounting adjustments; (ii) acquisition-related costs; and (iii) certain significant items, which are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges), ~~or unusual items~~ that are evaluated on an individual basis by management. For additional information about these reconciling items and/or our Non-GAAP ~~Adjusted~~adjusted measure of performance, see the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A.

Innovative Health Operating Segment

IH ~~Revenues~~ increased 9% to $7.3 billion in the third quarter of 2016, compared to $6.8 billion in the same period in 2015, and increased 12% to $21.5 billion in the first nine months of 2016, compared to $19.1 billion in the same period in 2015. Foreign exchange had an unfavorable impact of 1% on IH revenues in the third quarter of 2016, and an unfavorable impact of 3% in the first nine months of 2016, compared to the same periods in 2015. IH ~~Revenues~~ increased by 10% operationally in the third quarter of 2016 and 15% operationally in the first nine months of 2016 compared to the same periods in 2015, primarily due to the following operational factors:

◦•

~~continued growth from Ibrance, primarily~~

IH Revenues increased $381 million, or 5%, to $7.4 billion in the ~~U.S.~~first quarter of 2017, ~~Eliquis globally, as well as Xeljanz, Lyrica, Chantix and Consumer Healthcare, all primarily~~compared to $7.0 billion in the ~~U.S. (collectively, up approximately $790 million for the third quarter~~same period in 2016. Foreign exchange had an unfavorable impact of ~~2016 and $2.7 billion for the first nine months of 2016),~~

~~partially offset by:~~


◦	~~a decline in Rebif~~1% on IH revenues in the U.S. due to the year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S., as well as lower revenues for Enbrel in most developed Europe markets, primarily due to biosimilar competition (down approximately $220 million for the thirdfirst quarter of ~~2016 and $300 million for the first nine months of 2016); and~~

◦

the Prevnar/Prevenar 13 franchise, primarily driven by an expected decline in revenues for the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity2017, compared to the ~~prior-year quarter, partially offset~~same period in 2016. IH Revenues increased by 6% operationally in the ~~impact of favorable timing of CDC purchases for the pediatric indication (down approximately $30 million for the third~~first quarter of ~~2016 and $20 million, or relatively flat, for~~2017, compared to the ~~first nine months of 2016).~~same period in 2016.



The following provides an analysis of the revenue increase for IH:
(MILLIONS OF DOLLARS)	Three Months Ended April 2, 2017
Acquisitions
Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)	$	131

Operational growth/(decline)
Continued growth from key brands, including Ibrance and Eliquis globally, as well as Lyrica and Xeljanz, both primarily in the U.S.	620
Lower revenues for Enbrel in most developed Europe markets, primarily due to continued biosimilar competition	(117		)
Decline in Prevnar 13/Prevenar 13 revenues, primarily driven by the continued decline in revenues for the adult indication in the U.S. due to a smaller remaining “catch up” opportunity compared to the same period in 2016, partially offset by the favorable impact from the timing of government purchases for the pediatric indication. International revenues decreased primarily due to the unfavorable timing of government purchases in certain emerging markets for the pediatric indication, partially offset by modest growth of the adult indication in certain developed Europe markets	(113		)
Decline in Viagra revenues in the U.S. primarily due to lower market demand	(51		)
Other operational factors, net	(47		)
Operational growth, net	423

Unfavorable impact of foreign exchange	(42		)
IH Revenues increase	$	381

Total IH revenues from emerging markets were ~~$944~~$933 million in the ~~third~~first quarter of 2017, compared to $872 million in the first quarter of 2016, ~~compared to $985 million~~reflecting an 8% operational increase in the ~~third~~first quarter of ~~2015, reflecting 10% operational growth in the third quarter of 2016, which was more than~~2017, partially offset by the unfavorable impact of foreign exchange of ~~14%~~1%. IH revenues from emerging markets were $2.7 billion in the first nine months of 2016, compared to $3.0 billion in the first nine months of 2015, reflecting 8% operational growth in the first nine months of 2016, which was more than offset by the unfavorable impact of foreign exchange of 16%.

~~Cost of sales~~ ~~as a percentage of~~ ~~Revenues~~ increased 1.2 percentage points in the third quarter of 2016, compared to the same period in 2015, driven by the unfavorable impact of foreign exchange, partially offset by an increase in alliance revenues, which have no associated cost of sales. ~~Cost of sales~~ ~~as a percentage of~~ ~~Revenues~~ ~~was essentially flat in first nine months of 2016, compared to the first nine months of 2015. The increase in~~ ~~Cost of sales~~ of 19% in the third quarter of 2016, compared to the same period in 2015, was primarily driven by the unfavorable impact of foreign exchange, an increase in royalty expense and increased sales volumes. The increase in ~~Cost of sales~~ of 14% in the first nine months of 2016, compared to the same period in 2015, was primarily driven by the unfavorable impact of foreign exchange, an increase in sales volumes and an increase in royalty expense.

~~The increase in~~ ~~Selling, informational and administrativeexpenses~~ of 8% in the third quarter of 2016, compared to the same period in 2015, reflects increased investment across select key products, including Eliquis, Xeljanz and Prevnar 13, partially offset by the favorable impact of foreign exchange. The increase in ~~Selling, informational and administrativeexpenses~~ of 9% in the first nine months of 2016, compared to the same period in 2015, reflects an increase in the allowance for doubtful trade accounts receivable, resulting from unfavorable developments with a distributor, and additional investment across select key products, including Eliquis and Ibrance, partially offset by the favorable impact of foreign exchange.

~~The increase in~~ ~~Research and developmentexpenses~~ of 20% in the third quarter of 2016, compared to the same period in 2015, primarily reflects increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA. The decrease in ~~Research and developmentexpenses~~ of 3% in the first nine months of 2016, compared to the same period in 2015, primarily reflects the non-recurrence of the $295 million upfront payment made to OPKO in the first quarter of 2015, partially offset by increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA and increased investment in certain late-stage pipeline programs, including bococizumab (for which we announced the discontinuation of our global clinical development program during the fourth quarter of 2016) (see Notes to Condensed Consolidated Financial Statements––~~Note 2C.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Research and Development and Collaborative Arrangements~~).

•

Cost of sales as a percentage of Revenues decreased 1.3 percentage points in the first quarter of 2017, compared to the same period in 2016, driven by a favorable change in product mix, including an increase in alliance revenues, which have no associated cost of sales. The decrease in Cost of sales of 5% in the first quarter of 2017, compared to the same period in 2016, was primarily driven by favorable product mix and favorable foreign exchange, partially offset by an increase in royalty expense.

•

The decrease in Selling, informational and administrativeexpenses of 10% in the first quarter of 2017, compared to the same period in 2016, was primarily driven by the non-recurrence of an allowance for doubtful trade accounts receivable, resulting from unfavorable developments with a distributor that was recorded in the first quarter of 2016, partially offset by additional investment across several of our key products.


•	The decrease in Research and developmentexpenses of 7% in the first quarter of 2017, compared to the same period in 2016, primarily reflects the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016, partially offset by increased costs associated with our oncology programs, including legacy Medivation operations.

•

The unfavorable change in Other (income)/deductions––net in the first quarter of 2017, compared to the same period in 2016, primarily reflects a net decrease in royalty income, due to lower royalty income for Enbrel, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013), partially offset by the addition of Xtandi royalty-related income.

Essential Health Operating Segment

•

EH Revenues decreased $608 million, or 10%, to $5.4 billion in the first quarter of 2017, compared to $6.0 billion in the same period in 2016. Foreign exchange had an unfavorable impact of 1% on EH revenues in the first quarter of 2017, compared to the same period in 2016. EH Revenues decreased by 9% operationally in the first quarter of 2017, compared to the same period in 2016. Excluding the performance of HIS in both periods, EH Revenues declined 6% operationally in the first quarter of 2017, compared to the same period in 2016.

~~Third Quarter 2016~~



The following provides an analysis of the revenue decrease for EH:
(MILLIONS OF DOLLARS)	Three Months Ended April 2, 2017

Disposition
Approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to three months of legacy HIS global operations in the first quarter of 2016	$	(207	)

Operational growth/(decline)
Decline from Peri-LOE Products, including Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, Lyrica in most developed Europe markets and Zyvox in developed Europe markets and in the U.S.	(253		)
Decline in the Legacy Established Products portfolio	(153		)
Growth in the Pfizer Sterile Injectable Pharmaceuticals portfolio as well as growth in Biosimilars, primarily driven by Inflectra in certain developed Europe markets and in the U.S.	86
Other operational factors, net	(6		)
Operational decline, net	(534		)

Unfavorable impact of foreign exchange	(74		)
EH Revenues decrease	$	(608	)

Total EH ~~Revenues~~ ~~increased 7%, to $5.7~~revenues in developed markets were $3.7 billion in the ~~third~~first quarter of 2017, compared to $4.4 billion in the first quarter of 2016, ~~compared to $5.3 billion~~reflecting a 14% operational decline in the ~~same period~~first quarter of 2017, primarily driven by operational declines in ~~2015.~~the Peri-LOE Products portfolio, legacy HIS operations as well as the Legacy Established Products portfolio, partially offset by operational growth in Biosimilars. Foreign exchange had ~~an unfavorable~~a de minimis impact ~~of 3%~~ on total EH revenues in developed markets in the ~~third~~first quarter of ~~2016,~~2017, compared to the same period in ~~2015. Revenues increased by~~2016. Excluding the performance of HIS in both periods, EH revenues in developed markets declined 10% operationally in the ~~third~~first quarter of ~~2016,~~2017, compared to the same period in ~~2015, primarily due to the inclusion of a full quarter of~~2016.

Total EH revenues from ~~legacy Hospira global operations of $1.1~~emerging markets were $1.6 billion in the ~~third~~first quarter of 2017, compared to $1.6 billion in the first quarter of 2016, ~~compared to $330 million~~reflecting 5% operational growth in the ~~third~~first quarter of ~~2015, due to~~2017, primarily driven by operational growth from the ~~inclusion~~Pfizer Sterile Injectable Pharmaceuticals portfolio, largely offset by the unfavorable impact of ~~only one month~~foreign exchange of ~~legacy Hospira U.S. operations in~~

~~the third quarter of 2015, and to a lesser extent,~~4%. Excluding the performance of the legacy Pfizer Sterile Injectables Pharmaceuticals portfolio, partially offset by the loss of exclusivity and associated generic competition for certain Peri-LOE Products, primarily Lyrica and Zyvox,HIS in both ~~primarily~~periods, EH revenues in ~~most developed Europe markets. EH~~ ~~Revenues~~ ~~excluding the contribution from the legacy Hospira portfolio, decreased 5%~~emerging markets grew 6% operationally in the ~~third~~first quarter of ~~2016,~~2017, compared to the same period in ~~2015, primarily due to the following operational factors:~~2016.


•	Cost of sales as a percentage of Revenues increased 2.7 percentage points in the first quarter of 2017, compared to the same period in 2016, primarily due to:


◦	cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a ~~15% operational decline from~~result of harmonizing the ~~Peri-LOE Products portfolio, largely due~~Hospira cost policy;


◦	charges related to ~~the loss of exclusivity and associated generic competition for Lyrica and Zyvox, both primarily in most developed Europe markets (down by approximately $180 million~~a product recall that occurred in the ~~third~~first quarter of ~~2016);~~2017; and


◦	~~a 4% operational decline from~~ the ~~legacy Established Products portfolio, primarily due to a decline from certain developed markets (down by approximately $110 million in the third quarter~~impact of ~~2016),~~product losses of exclusivity,

partially offset by:

◦

~~7% operational growth from~~ the inclusion of approximately one month of legacy ~~Pfizer Sterile Injectable Pharmaceuticals portfolio, mostly in emerging markets~~HIS domestic operations and ~~the U.S. (up by~~ approximately ~~$50 million~~two months of legacy HIS international operations in the ~~third~~first quarter of ~~2016).~~2017, compared to the inclusion of three months of legacy HIS global operations in the first quarter of 2016.

Total EH revenues from emerging markets were $1.6 billion in the third quarter of 2016, compared to $1.7 billion in the third quarter of 2015, reflecting 9% operational growth in the third quarter of 2016, driven by the inclusion of legacy Hospira operations and reflecting operational growth from the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio and the Legacy Established Products portfolio, which was more than offset by the unfavorable impact of foreign exchange of 13%.

~~First Nine Months of 2016~~

EH ~~Revenues~~ increased 13% to $17.7 billion in the first nine months of 2016, compared to $15.7 billion in the same period in 2015. Foreign exchange had an unfavorable impact of 5% in the first nine months of 2016, compared to the same period in 2015. Revenues increased by 18% operationally in the first nine months of 2016, compared to the same period in 2015, primarily due to the inclusion of nine months of revenues from legacy Hospira global operations of $3.5 billion in the first nine months of 2016, compared to $330 million in the first nine months of 2015 due to the inclusion of only one month of legacy Hospira U.S. operations in the first nine months of 2015, partially offset by the loss of exclusivity and associated generic competition for certain Peri-LOE Products, primarily Zyvox in the U.S. and certain developed Europe markets, as well as Lyrica in certain developed Europe markets. EH ~~Revenues~~ excluding the contribution from the legacy Hospira portfolio, decreased 2% operationally in the first nine months of 2016, compared to the same period in 2015, primarily due to the following operational factors:


•	The slight decrease in Cost of sales in the first quarter of 2017, compared to the same period in 2016, primarily reflects:


◦	the inclusion of approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to the inclusion of three months of legacy HIS global operations in the first quarter of 2016;


◦	the favorable impact of foreign exchange; and


◦	a ~~17% operational decline from the Peri-LOE Products portfolio, primarily due to the loss of exclusivity and associated generic competition for certain Peri-LOE Products, primarily Zyvox~~net decrease in ~~the U.S. and certain developed Europe markets as well as Lyrica in certain developed Europe markets (down by approximately $710 million in the first nine months of 2016),~~royalty expense,

partially offset by:


◦	~~10% operational growth in~~cost increases reflecting the shift to EH of certain legacy ~~Pfizer Sterile Injectable Pharmaceuticals portfolio, mostly in emerging markets and~~Hospira costs that were previously unallocated to EH as a result of harmonizing the ~~U.S. (up by approximately $220 million in the first nine months of 2016);~~Hospira cost policy; and


◦	~~2% operational growth in the Legacy Established Products portfolio, largely in the U.S. and emerging markets (up by approximately $160 million~~charges related to a product recall that occurred in the first ~~nine months~~quarter of ~~2016).~~2017.


•	Selling, informational and administrativeexpenses decreased 4% in the first quarter of 2017, compared to the same period in 2016, primarily due to the inclusion of approximately one month of legacy HIS domestic operations and approximately two

~~Total EH revenues from emerging markets were $5.0 billion~~

months of legacy HIS international operations in the first nine months of 2016, compared to $5.3 billion in the first nine months of 2015, reflecting 9% operational growth in the first nine months of 2016, driven by the inclusion of legacy Hospira operations and reflecting operational growth from the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio and the Legacy Established Products portfolio, which was more than offset by the unfavorable impact of foreign exchange of 14%.

~~Third Quarter and First Nine Months of 2016~~

~~Cost of sales~~ ~~as a percentage of~~ ~~Revenues~~ ~~increased 5.3 percentage points in the third~~ quarter of ~~2016, and increased 6.0 percentage points in the first nine months of 2016, compared to the same periods in 2015, primarily due to the inclusion of legacy Hospira global operations in 2016,~~2017, compared to the inclusion of ~~only one month~~three months of legacy ~~Hospira U.S.~~HIS global operations in the ~~third quarter and~~ first ~~nine months of 2015, the unfavorable impact of foreign exchange and the impact of product losses of exclusivity resulting in an unfavorable change in product mix. The increase in~~ ~~Cost of sales~~ ~~of 33%in the third~~ quarter of 2016 and 46% in the first nine months of 2016, compared to the same periods in 2015, was driven by the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter and first nine months of 2015 and the unfavorable impact of foreign exchange, partially offset by lower volumes in developed markets.2016.

~~Selling, informational and administrativeexpenses~~ increased 2% in the third quarter of 2016, and 4% in the first nine months of 2016, compared to the same periods in 2015, primarily due to the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter and first nine months of 2015, partially offset by lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and the favorable impact of foreign exchange.

~~Research and developmentexpenses~~ ~~increased 21% in the third quarter of 2016, and increased~~33% in the first nine months of 2016, compared to the same periods in 2015, reflecting the inclusion of legacy Hospira global operations in 2016, compared to the inclusion of only one month of legacy Hospira U.S. operations in the third quarter and first nine months of 2015 and increased investment in legacy Hospira biosimilar and sterile injectable development programs.

~~The favorable change in~~ ~~Other (income)/deductions––net~~ ~~in the first nine months~~ ~~of 2016, compared to the same period in 2015~~, ~~primarily reflects resolution of a contract disagreement and the favorable impact of foreign exchange.~~



•	Research and developmentexpenses decreased 9% in the first quarter of 2017, compared to the same period in 2016, primarily due to the inclusion of approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations in the first quarter of 2017, compared to the inclusion of three months of legacy HIS global operations in the first quarter of 2016, and the close-out of certain post-marketing clinical trials.


•	The unfavorable change in Other (income)/deductions––net in the first quarter of 2017, compared to the same period in 2016, primarily reflects the non-recurrence of a resolution of a contract disagreement in the first quarter of 2016, partially offset by the favorable impact of foreign exchange.

SELECTED BALANCE SHEET INFORMATION BY OPERATING SEGMENT



For information purposes only, the following table contains selected balance sheet information by operating segment, reflecting the more meaningful operating accounts at the segment level. This information has been developed for annual disclosure purposes only. Although we manage our assets and liabilities on a total company basis, not by operating segment, as many of our operating assets are shared or commingled, we believe that some investors may find this information useful.
	As of December 31, 2016
(MILLIONS OF DOLLARS)	IH^{(a), (b)}		EH^{(a), (b)}		Corporate/Unallocated^{(a), (c)}		Total Company
Trade accounts receivable, less allowance for doubtful accounts	$	4,615	$	3,610	$	—	$	8,225
Inventories	3,027		3,756		—		6,783
Trade accounts payable	2,808		1,695		34		4,536
Other selected balance sheet information:
Noncurrent inventories^(d)	53		630		—		683


^(a)	The selected balance sheet information is presented as of December 31, 2016 after all significant intercompany balances and transactions between legal entities have been eliminated. For subsidiaries operating outside the U.S., the selected balance sheet information is included as of November 30, 2016.

The selected balance sheet information by operating segment has been derived from the consolidated financial statements and accounting records of Pfizer and does not purport to reflect amounts that would have been reported had either of the operating segments been managed as a standalone company as of, or prior to, December 31, 2016 and, additionally, does not purport to reflect amounts that would have been reported had separate financial statements been prepared for either of the operating segments on a carve-out basis as of December 31, 2016.

Management believes that the selected balance sheet information by operating segment is reasonable.


^(b)	The selected balance sheet information for each operating segment has been developed as follows:


•	Trade accounts receivable, less allowance for doubtful accounts––significantly all amounts were derived using specific identification methods.


•	Inventories (including noncurrent portion)––these amounts were derived using specific identification methods and with respect to shared inventory components, these amounts were derived using proportional allocation methods based on associated manufacturing costs and related product-specific inventory.


•	Trade accounts payable––the amounts were derived using specific identification methods and using proportional allocation methods based on associated manufacturing costs, certain research and development costs or other operating costs, as appropriate.


^(c)	Corporate/Unallocated includes a portion of the following line item:


•	Trade accounts payable––the portion of this account included as Corporate/Unallocated primarily relates to liabilities associated with specific legal entities not identified with operating segments.


^(d)	Included in Other noncurrent assets on the consolidated balance sheet.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Changes in the components of Accumulated other comprehensive loss ~~for the third quarter and the first nine months~~ ~~of 2016~~ ~~reflect the following:~~

~~For~~ ~~Foreign currency translation adjustments, net,~~ ~~for the third quarter of 2016 and~~ for the first ~~nine months~~quarter of ~~2016, primarily reflects~~2017 reflect the ~~weakening of the U.S. dollar against the euro, Australian dollar and Japanese yen, partially offset by the strengthening of the U.S. dollar against U.K. pound.~~following:

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

~~For~~ ~~Benefit plans: actuarial losses, net,~~ for the third quarter of 2016, reflects (i) the impact of favorable foreign exchange and (ii) a decrease in the impact of remeasurement activity from the prior year. For the first nine months of 2016, reflects (i) a decrease in the impact of favorable foreign exchange from the prior year and (ii) a decrease in the impact of remeasurement activity from the prior year. For additional information, see Notes to Condensed Consolidated Financial Statements—~~Note 10. Pension and Postretirement Benefit Plans~~.

~~For~~ ~~Benefit plans: prior service credits and other, net~~, for the third quarter of 2016, reflects an increase of $95 million as a result of changes to our Puerto Rico Postretirement Plan. For the first nine months of 2016, reflects a decrease in the impact of plan changes from the prior year. For additional information, see Notes to Condensed Consolidated Financial Statements—~~Note 10. Pension and Postretirement Benefit Plans~~.


•	For Foreign currency translation adjustments, net, primarily reflects the weakening of the U.S. dollar against the Australian dollar, Brazilian real and the Canadian dollar, partially offset by the strengthening of the U.S. dollar against the euro.


•	For Unrealized holding losses on derivative financial instruments, net and Unrealized holding gains on available-for-sale securities, net, reflect the impact of fair value remeasurements and the reclassification of realized amounts into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.

•

For Benefit plans: actuarial gains, net, primarily reflects the reclassification into income for amounts related to (i) the amortization of changes in the pension benefit obligation previously recognized in Other comprehensive income; and (ii) settlement activity, as well as the impact of favorable foreign exchange. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.

ANALYSIS OF THE CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

For information about events and circumstances impacting our tax-related accounts, see Notes to Condensed Consolidated Financial Statements—Note 5. Tax Matters.

For information related to changes in Accumulated other comprehensive loss, see the “Analysis of the Condensed Consolidated Statements of Comprehensive Income” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests.

The changes in our asset and liability accounts as of ~~October~~April 2, ~~2016,~~2017, compared to December 31, ~~2015,~~2016, generally reflect, among other things, the impact of assets acquired and liabilities assumed as part of the ~~acquisitions~~acquisition of ~~Medivation, Bamboo~~AstraZeneca’s small molecule anti-infectives business and ~~Anacor (see Notes to Condensed Consolidated Financial Statements––Note 2A.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~ ~~and~~ ~~Note 9. Identifiable Intangible Assets and Goodwill~~ ~~for additional information),~~fluctuations in foreign currency exchange rates. The following explanations exclude the ~~reclassification~~impact of ~~assets and liabilities related to~~ the ~~pending~~acquisition of AstraZeneca’s small molecule anti-infectives business, the sale of ~~Pfizer’s global infusion therapy net assets,~~ HIS to ICU Medical (see Notes to Condensed Consolidated Financial Statements––Note ~~2B.~~ 2. Acquisitions, Sale of Hospira Infusion Systems Net Assets, ~~and Liabilities Held for Sale, Research and Development and~~ Collaborative ~~Arrangements,~~Arrangement, Equity-Method Investments and Cost-Method Investment~~: Assets~~ and ~~Liabilities Held for Sale~~ ~~and~~ Note 9. Identifiable Intangible Assets and Goodwill for additional information) and ~~fluctuations in foreign currency exchange rates~~. ~~The following explanations exclude the impact of the acquisitions of Medivation, Bamboo and Anacor, the pending sale of HIS to ICU Medical and~~ foreign exchange.

~~For~~ ~~Trade accounts receivable, less allowance for doubtful accounts,~~


•	For Trade accounts receivable, less allowance for doubtful accounts, the change reflects the timing of sales and collections in the normal course of business.


•	For Inventories, the change reflects the build of inventory primarily for new product launches and to meet targeted levels for certain products, partially offset by inventory reductions in the normal course of business, including those related to demand.


•	For Other current assets, the change reflects an increase in VAT receivable balances due to a change in our supply chain, partially offset by a decrease in receivables from royalty agreements as a result of contract terminations, as well as the timing of receipts and payments in the normal course of business.


•	For PP&E,the change reflects depreciation during the period, partially offset by capital additions in the normal course of business.


•	For Identifiable intangible assets, less accumulated amortization, the change primarily reflects amortization for the period.


•	For Other noncurrent assets, the change reflects a decrease in receivables associated with our derivative financial instruments.


•	For Trade accounts payable, the change reflects the timing of purchases and payments in the normal course of business, including the impact of efforts to improve working capital efficiencies.


•	For Accrued compensation and related items, the decrease reflects normal bonus payments made to employees, partially offset by current year’s accruals.

•

For Other current liabilities, the change reflects an increase due to the timing of payments for accrued interest, security purchases, restructuring and charitable contributions, as well as net funds due to ICU Medical for net economic benefit payments (see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement, Equity-Method Investments and Cost-Method Investment: Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)), partially offset by payments to settle liabilities related to the closeout of bococizumab clinical studies and restructuring matters, and payments in the normal course of business.


•	For Pension benefit obligations, net, the decrease primarily reflects the $1.0 billion voluntary pension contribution in January 2017.

•

For Other noncurrent liabilities, the change reflects an increase in deferred revenue from a milestone payment received from Merck for the ertugliflozin collaboration agreement (see Notes to Condensed Consolidated Financial Statements––Note 2C. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement, Equity-Method Investments and Cost-Method Investment: Collaboration Arrangement) and deferred consideration for transitional and manufacturing service agreements received from ICU Medical (see Notes to Condensed Consolidated Financial Statements––Note 2B.

Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement, Equity-Method Investments and Cost-Method Investment: Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)) and an increase in ~~the allowance for doubtful accounts, resulting from unfavorable developments with a distributor.~~

~~For~~ ~~Inventories,~~ ~~the change reflects inventory builds in the normal course of business, partially offset by planned inventory reductions.~~

~~For~~ ~~Other current assets,~~ ~~the change reflects an increase in VAT receivable balances due to a change in our supply chain, partially offset by a decrease in receivables associated with our derivative financial instruments.~~

~~For PP&E,the change reflects depreciation during the period, partially offset by capital additions in the normal course of business.~~

~~For~~ ~~Identifiable intangible assets, less accumulated amortization, the change primarily reflects amortization and impairments for the period (see Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions—Net~~ ~~for additional information on impairments for the period).~~

~~For~~ ~~Other noncurrent assets,~~ ~~the change reflects an increase in receivables~~liabilities associated with our derivative financial instruments, ~~and an increase in noncurrent VAT receivable balances due to a change in our supply chain.~~

~~For~~ ~~Trade accounts payable,~~ ~~the change reflects the timing of purchases and payments in the normal course of business.~~

~~For~~ ~~Accrued compensation and related items,~~ ~~the decrease reflects prior year’s bonus payments made to employees,~~ partially offset by ~~current year’s accruals.~~

~~For~~ ~~Other current liabilities, the change reflects consideration due for the acquisition of Medivation (see Notes to Condensed Consolidated Financial Statements––Note 2A.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~), an increase in VAT payable balances due to a change in our supply chain, partially offset by payments and accruals for certain legal and restructuring matters, and payments for interest and the timing of other accruals and payments in the normal course of business.

~~For~~ ~~Pension benefit obligations, net~~ ~~and~~ ~~Postretirement benefit obligations, net, the change reflects a $1.0 billion voluntary pension contribution in January 2016, as well as the information provided in Notes to Condensed Consolidated Financial Statements—Note 10.~~ ~~Pension and Postretirement Benefit Plans~~.

~~For~~ ~~Other noncurrent liabilities, the change reflects an increase in the payables associated with our restructuring matters and~~distributions from deferred ~~revenue from a co-development agreement, partially offset by payments and accruals for certain legal matters,~~compensation plans, and changes in accruals in the normal course of business.

~~For~~ ~~Treasury stock,~~ ~~the change reflects $5 billion paid to GS&Co. in March 2016 pursuant to the terms of an accelerated share repurchase agreement. See Notes to Condensed Consolidated Financial Statements—Note 12. Commitments and Contingencies~~ ~~for additional information.~~


•	For Treasury stock, the change reflects $5 billion paid to Citibank in February 2017 pursuant to the terms of an accelerated share repurchase agreement. See Notes to Condensed Consolidated Financial Statements—Note 12. Commitments and Contingencies for additional information.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended								Three Months Ended
(MILLIONS OF DOLLARS)	October 2, 2016			September 27, 2015			% Change		April 2, 2017			April 3, 2016			% Change
Cash provided by/(used in):
Operating activities(a)	$	9,929		$	9,790		1		$	1,589		$	1,808		(12	)
Investing activities	(4,704		)	(756		)	*		4,772			4,355			10
Financing activities(a)	(6,693		)	(9,115		)	(27	)	(4,921		)	(7,171		)	(31	)
Effect of exchange-rate changes on cash and cash equivalents	(79		)	(162		)	(51	)	21			(73		)	*
Net decrease in Cash and cash equivalents	$	(1,547	)	$	(244	)	*
Net increase/(decrease) in Cash and cash equivalents									$	1,461		$	(1,080	)	*


*	Calculation not meaningful.

^(a)

Amounts for the three months ended April 3, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, that requires that cash flows present (i) excess tax benefits as Other tax accounts, net as part of operating activities, rather than financing activities on a prospective basis beginning in the year of adoption, and (ii) cash paid by us when directly withholding shares for tax-withholding purposes as a cash outflow from financing activities, rather than operating activities and is reflected in the year of adoption. The year-to-date excess tax benefit was $26 million in the first quarter of 2016. For cash paid by us for withholding purposes, $131 million for the first quarter of 2016 is presented as financing activitiesin the condensed consolidated statements of cash flows. (see Notes to Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards).

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

Operating Activities

Our net cash provided by operating activities was ~~$9.9~~$1.6 billion in the first ~~nine~~three months of ~~2016,~~2017, compared to ~~$9.8~~$1.8 billion in the same period in ~~2015.~~2016. The ~~slight increase~~decrease in net cash provided by operating activities reflects the decrease in our net income after adjustments for the non-cash changes, as well as the timing of receipts from customers and payments to vendors in the ordinary course of ~~business~~business.

In the first three months of 2017, the line item Other adjustments, net primarily reflects, among other items, the decrease in the provision for bad debt expense and an increase in ~~bonus payments made to employees.~~net gains on sales of property, plant and equipment.

In the first ~~nine~~three months of ~~2016~~2017 and ~~2015,~~2016, the line item Other changes in assets and liabilities, net of acquisitions and divestitures, primarily reflects changes, in the normal course of business, in trade accounts receivable, inventories, other current assets, other noncurrent assets, trade accounts payable, accrued compensation and other current and non-current liabilities. For the first nine months of 2016 and 2015, this line item also includes the adjustments necessary to reflect the payments of certain legal claims accrued in prior periods, including for the first nine months of 2016, Protonix-related matters, and for the first nine months of 2015, Neurontin-related matters, partially offset by the deferral of an upfront payment received from Lilly as part of a collaborative arrangement. For additional information about accounts receivable, see also the “Selected Measures of Liquidity and Capital Resources: Accounts Receivable” section of this MD&A.

For additional information about changes in other assets and liabilities account balances see also “Analysis of the Condensed Consolidated Balance Sheets” in this MD&A.

Investing Activities

Our net cash ~~used in~~provided by investing activities was ~~$4.7~~$4.8 billion in the first ~~nine~~three months of ~~2016,~~2017, compared to ~~net cash used in investing activities of $756 million~~$4.4 billion in the same period in ~~2015.~~2016. The increase in net cash ~~used in~~provided by investing activities was primarily attributable to:


•	net proceeds from sales of investments of $5.4 billion in the first three months of 2017, compared to net proceeds from sales of investments of $4.8 billion in the first three months of 2016,

net redemptions/proceeds from sale of investments of $14.1 billion in the first nine months of 2016, compared to net redemptions/proceeds of investments of $16.1 billion in the first nine months of 2015; andpartially offset by:

•

an increase in cash paid for acquisitions, net of cash acquired, of $475 million, primarily for the acquisition of AstraZeneca’s small molecule anti-infectives business in the first three months of 2017 (see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement, Equity-Method Investments and Cost-Method Investment: Acquisitions).

cash paid of $17.7 billion, net of cash acquired, primarily for the acquisitions of Medivation, Bamboo and Anacor in the first nine months of 2016 compared to cash paid of $16.3 billion, net of cash acquired, primarily for the acquisition of Hospira and the acquisition of Baxter’s portfolio of marketed vaccines in the first nine months of 2015. (see Notes to Condensed Consolidated Financial Statements—~~Note 2A.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions~~).

Financing Activities

Our net cash used in financing activities was ~~$6.7~~$4.9 billion in first ~~nine~~three months of ~~2016,~~2017, compared to ~~net cash used in financing activities of $9.1~~$7.2 billion in the same period in ~~2015.~~2016. The decrease in net cash used in financing activities was primarily attributable to:

~~the issuance of long-term debt of $5 billion on June 3, 2016; and~~

~~purchases of common stock of $5.0 billion in the first nine months of 2016, compared to $6.2 billion in the first nine months of 2015,~~


•	the issuance of long-term debt of $5.3 billion in the first three months of 2017 (see Notes to Condensed Consolidated Financial Statements––Note 7D. Financial Instruments: Long-Term Debt),

partially offset by:

~~net proceeds on short-term borrowings of $2.1 billion in the first nine months of 2016, compared to net proceeds on borrowings of $3.9 billion in the first nine months of 2015;~~

~~higher repayments on long-term debt of $4.3 billion in the first nine months of 2016, compared to $3.0 billion in the first nine months of 2015;~~

~~higher cash dividends paid of $5.5 billion in the first nine months of 2016, compared to $5.2 billion in the first nine months of 2015; and~~

~~lower proceeds from the exercise of stock options of $946 million in the first nine months of 2016, compared to $1.2 billion in the first nine months of 2015.~~


•	net payments on short-term borrowings of $2.1 billion in the first three months of 2017, compared to net proceeds on short-term borrowings of $1.1 billion in the first three months of 2016.

ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We rely largely on operating cash flows, short-term investments, short-term commercial paper borrowings and long-term debt to provide for our liquidity requirements. We continue our efforts to improve cash inflows through working capital efficiencies. We target specific areas of focus including accounts receivable, inventories, accounts payable, and other working capital, which allows us to optimize our operating cash flows. Due to our significant operating cash flows as well as our financial assets, access to capital markets and available lines of credit and revolving credit agreements, we believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future, which include:

the working capital requirements of our operations, including our ~~research and development~~R&D activities;

investments in our business;

dividend payments and potential increases in the dividend rate;

share repurchases;

the cash requirements associated with our cost-reduction/productivity initiatives;

paying down outstanding debt;

contributions to our pension and postretirement plans; and

business-development activities.

Our long-term debt is rated high-quality by both S&P and Moody’s. See the “Credit Ratings” section below. As market conditions change, we continue to monitor our liquidity position. We have taken and will continue to take a conservative approach to our financial investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, well-diversified available-for-sale debt securities.

Selected Measures of Liquidity and Capital Resources

												The following table provides certain relevant measures of our liquidity and capital resources:
(MILLIONS OF DOLLARS, EXCEPT RATIOS AND PER COMMON SHARE DATA)	October 2, 2016			December 31, 2015		April 2, 2017			December 31, 2016
Selected financial assets:
Cash and cash equivalents^(a)	$	2,094		$	3,641	$	4,057		$	2,595
Short-term investments^(a)	12,277			19,649		10,503			15,255
Long-term investments^(a)	9,507			15,999		7,346			7,116
	23,879			39,290		21,906			24,967
Debt:
Short-term borrowings, including current portion of long-term debt	13,633			10,159		7,680			10,688
Long-term debt	30,437			28,740		36,330			31,398
	44,071			38,899		44,010			42,085
Selected net financial assets/(liabilities)^(b)	$	(20,192	)	$	391
Selected net financial liabilities^(b)						$	(22,103	)	$	(17,118	)

Working capital^(c)	$	3,742		$	14,405	$	11,014		$	7,834
Ratio of current assets to current liabilities	1.11:1			1.49:1		1.44:1			1.25:1
Total Pfizer Inc. shareholders’ equity per common share^(d)	$	10.44		$	10.48	$	9.80		$	9.81


^(a)	See Notes to Condensed Consolidated Financial Statements––Note 7. Financial Instruments for a description of certain assets held and for a description of ~~the~~ credit risk related to our financial instruments held.

^(b)

The ~~change~~increase in selected net financial ~~assets/(liabilities)~~liabilities is predominantly a result of ~~cash paid for acquisitions of businesses, particularly Medivation and Anacor.~~the increase in long term debt. We retain a strong financial liquidity position as a result of our net cash provided by operating activities, our ~~high quality~~high-quality financial asset portfolio and access to capital markets. Both Moody’s and S&P rating agencies maintained our strong investment-grade corporate ~~debt-rating~~debt rating subsequent to the ~~acquisitions.~~acquisitions of Medivation and Anacor. For additional information, see the “Credit Ratings” section of this MD&A.

^(c)

The ~~decrease~~increase in working capital is primarily due to a decrease in short-term ~~investments and an increase in short term~~ borrowings, which occurred as a result of our issuance of long-term debt, and the timing of accruals, cash receipts and payments in the ordinary course of business, partially offset by ~~the reclassification of~~ ~~Assets held for sale~~ ~~(see Notes to Condensed Consolidated Financial Statements––Note 2B.~~ ~~Acquisitions, Assets and Liabilities Held for Sale, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale). Our financing and investing activities were partially funded from the~~a decrease in short-term ~~investments and the increase in short-term borrowings.~~

investments.


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

For additional information about the sources and uses of our funds, see the “Analysis of the Condensed Consolidated Balance Sheets” and the “Analysis of the Condensed Consolidated Statements of Cash Flows” sections of this MD&A.

On ~~June 3, 2016,~~March 17, 2017, we completed a public offering of ~~$5.0~~$1.065 billion ~~aggregate~~ principal amount of senior unsecured notes due 2047 with an interest rate of 4.20%, and on March 6, 2017, we completed a public offering of €4.0 billion principal amount of senior unsecured notes with a ~~weighted average~~weighted-average effective interest rate of ~~2.09%~~0.23% (see Notes to Condensed Consolidated Financial Statements––Note 7D. Financial Instruments: Long-Term Debt).

Domestic and International Short-Term Funds

Many of our operations are conducted outside the U.S., and significant portions of our cash, cash equivalents and short-term investments are held internationally. We generally hold up to $10 billion of these short-term funds in U.S. tax jurisdictions. The amount of funds held in U.S. tax jurisdictions can fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons, such as business-development activities. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and international cash flows (both inflows and outflows). Repatriation of overseas funds can result in additional U.S. federal, state and local income tax payments. We record U.S. deferred tax liabilities for certain unremitted earnings, but when amounts earned overseas are expected to be indefinitely reinvested outside the U.S., no accrual for U.S. taxes is provided.

Accounts Receivable

We continue to monitor developments regarding government and government agency receivables in several European markets where economic conditions remain challenging and uncertain. Historically, payments from a number of these European governments and government agencies extend beyond the contractual terms of sale. Specifically, we ~~have~~ received ~~limited~~delayed payments ~~in 2015 and~~for 2016 revenues from the Greek government; the vast majority of Greece government ~~on outstanding receivables; such~~ receivables pertain to ~~2015 and 2016~~2017 revenues. Also, the Greek government has restructured its debt to other third parties in the third quarter of 2016. ~~Accordingly, we have adjusted~~We determined our allowance for doubtful accounts to reflect these events, and have ~~$65~~$33 million in net receivables from the Greek government as of ~~October~~April 2, ~~2016.~~2017. Reported revenues from all customers in Greece for the ~~nine months~~quarter ended ~~October~~April 2, ~~2016~~2017 were ~~$195~~$62 million.

We believe that our allowance for doubtful accounts is appropriate. Our assessment is based on an analysis of the following: (i) payments received to date; (ii) the consistency of payments from customers; (iii) direct and observed interactions with the

governments (including court petitions) and with market participants (for example, the factoring industry); and (iv) various third-party assessments of repayment risk (for example, rating agency publications and the movement of rates for credit default swap instruments).

As of ~~October~~April 2, ~~2016,~~2017, we had about ~~$693~~$490 million in aggregate gross accounts receivable from governments and/or government agencies in Italy, Spain, Greece and Portugal where economic conditions remain challenging and uncertain. Such receivables in excess of one year from the invoice date, totaling ~~$93~~$62 million, were as follows: ~~$64~~$43 million in Italy; ~~$20~~$14 million in Portugal; $6$3 million in Greece; and $3$2 million in Spain.

Although certain European governments and government agencies sometimes delay payments beyond the contractual terms of sale, we seek to appropriately balance repayment risk with the desire to maintain good relationships with our customers and to ensure a humanitarian approach to local patient needs.

We will continue to closely monitor repayment risk and, when necessary, we will continue to adjust our allowance for doubtful accounts.

Our assessments about the recoverability of accounts receivables can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Notes to Consolidated Financial Statements––Note 1C. Basis of Presentation and Significant Accounting Policies:Estimates and Assumptions included in our ~~2015~~2016 Financial Report.

Credit Ratings

Two major corporate debt-rating organizations, Moody’s and S&P, assign ratings to our short-term and long-term debt. A security rating is not a recommendation to buy, sell or hold securities and the rating is subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.



The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured long-term debt:
NAME OF RATING AGENCY	Pfizer Commercial Paper	Pfizer Long-Term Debt	Date of Last Rating Change
NAME OF RATING AGENCY	Rating	Rating	Date of Last Rating Change
Moody’s^(a)	P-1	A1	October 2009
S&P^(b)	A-1+	AA	October 2009


^(a)	In September 2016, ~~Moody's~~Moody’s updated their credit outlook from negative outlook to stable.


^(b)	In April 2016, S&P updated their credit outlook from negative watch to stable.

Debt Capacity

We have available lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We maintain cash and cash equivalent balances and short-term investments in excess of our commercial paper and other short-term borrowings. As of ~~October~~April 2, ~~2016,~~2017, we had access to ~~$7.9~~$7.7 billion of lines of credit, of which ~~$866~~$676 million expire within one year. Of these lines of credit, ~~$7.9~~$7.7 billion ~~are~~were unused, of which our lenders have committed to loan us $7.1 billion at our request. Also, $7.0 billion of our unused lines of credit, all of which expire in ~~2020,~~2021, may be used to support our commercial paper borrowings.

Global Economic Conditions––General

The global economic environment has not had, nor do we anticipate it will have, a material impact on our liquidity or capital resources. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future. ~~As market conditions change, we continue to~~We monitor our liquidity ~~position.~~position continuously in the face of evolving economic conditions.

Global Economic Conditions––U.K.

process is expected to be highly complex and ~~may, if needed, be bi-laterally extended. The~~the end result of these negotiations may pose certain implications to our research, commercial and general business operations in the U.K. and the EU.

Global Economic Conditions––Venezuela Operations

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

In the second quarter of 2015, the Venezuelan government identified three official rates of exchange. These are the CENCOEX rate of 6.3; the SICAD rate of 13.5 (as of ~~October 2016)~~February 2017); and the SIMADI rate of ~~650~~700 (as of ~~October 2016)~~February 2017). Effective in March 2016, the CENCOEX rate was replaced by the DIPRO rate of 10 (as of ~~October 2016)~~February 2017); the SICAD rate ceased to be offered; and the SIMADI rate was planned to be replaced by the DICOM rate, but the DICOM rate is not published. The Venezuelan government continues to publish the SIMADI rate, which is commonly referred to as the DICOM rate, and that rate has grown from 206 in March 2016 to about ~~650~~717 (as of ~~October 2016)~~May 2017). Based on recent conditions in Venezuela, we resolved that our Venezuelan bolivar-denominated net monetary assets that are subject to revaluation are no longer expected to be substantially settled at the Venezuelan government CENCOEX official rate of 6.3 or the DIPRO official rate of 10, but at a rate of 500 at the end of the second quarter and third quarter of ~~2016.~~2016, and 670 at the end of the fourth quarter of 2016 and at the end of the first quarter of 2017.

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

On July 11, 2016, the Venezuelan government administration announced a new program under a State of Emergency decree that is intended to control the use of raw materials, production and distribution of products, specifically for medicines and foods. It is uncertain how this program will be applied to Pfizer in Venezuela. We continue to operate in Venezuela and have ~~$12~~$8 million of net monetary assets and ~~$61~~$49 million of non-monetary assets, excluding inventory carried at lower of cost or market, in Venezuela at ~~August 28, 2016,~~February 26, 2017, our international quarter-end.

~~Expected Future Payments in Connection with Decision to Discontinue the Global Clinical Development Program for Bococizumab~~

On November 1, 2016, we announced the discontinuation of the global clinical development program for bococizumab. We anticipate incurring future payments of approximately $400 million in the fourth quarter of 2016 to close out the studies, which, after taking into account net costs of the studies that would have been incurred in the fourth quarter absent discontinuation of the program, will result in an estimated incremental fourth-quarter 2016 unfavorable impact to ~~Research and development expenses~~ ~~of approximately $300 million. We have incorporated this estimated impact in our updated 2016 financial guidance. See the “Our Financial Guidance for 2016” section of this MD&A.~~

Off-Balance Sheet Arrangements

In the ordinary course of business and in connection with the sale of assets and businesses, we often indemnify our counterparties against certain liabilities that may arise in connection with a transaction or that are related to activities prior to a transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters, and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of ~~October~~April 2, ~~2016,~~2017, recorded amounts for the estimated fair value of these indemnifications were not significant.

Certain of our co-promotion or license agreements give our licensors or partners the rights to negotiate for, or in some cases to obtain under certain financial conditions, co-promotion or other rights in specified countries with respect to certain of our products.

Share-Purchase Plans and Accelerated Share Repurchase Agreements

On ~~March 8, 2016,~~February 2, 2017, we entered into an accelerated share repurchase agreement with ~~GS&Co.~~Citibank to repurchase $5 billion of our common stock. ~~Pursuant~~For additional information, see Notes to ~~the terms~~Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies and “Unregistered Sales of ~~the agreement,~~Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities” in Part II, Item 2 of this Quarterly Report on March 10, 2016, we paid $5 billion to GS&Co. and received an initial delivery of approximately 136 million shares of our common stock from GS&Co. based on a price of $29.36 per share, which represented, based on the closing share price of our common stock on the NYSE on March 8, 2016, approximately 80% of the notional amount of the accelerated share repurchase agreement. On June 20, 2016, the accelerated share repurchase agreement with GS&Co. was completed, which, per the terms of the agreement, resulted in GS&Co. owing us a certain number of shares of Pfizer common stock. Pursuant to the agreement’s settlement terms, we received an additional 18 million shares of our common stock from GS&Co. on June 20, 2016. The average price paid for all of the shares delivered under the accelerated share repurchase agreement was $32.38 per share. The common stock received is included in ~~Treasury stock. This agreement was entered into pursuant to our previously announced share repurchase authorization.~~Form 10-Q.


The following table provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced share-purchase plans, including our accelerated share repurchase agreements:
The following table provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced accelerated share repurchase agreements:								The following table provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced accelerated share repurchase agreements:
	Three Months Ended				Nine Months Ended				Three Months Ended
(SHARES IN MILLIONS, DOLLARS IN BILLIONS)	October 2 2016		September 27, 2015^(a)		October 2 2016^(b)		September 27, 2015^(c)		April 2 2017^(a)		April 3, 2016^(b)
Shares of common stock purchased	—		—		154		182		126		136
Cost of purchase	$	—	$	0.2	$	5.0	6.2		$	5.0	$	5.0

^(a)

Represents ~~$160 million paid~~shares purchased pursuant to ~~GS&Co. in July 2015 to settle~~ an accelerated share repurchase agreement ~~entered into~~ with Citibank. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies and “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities” in Part II, Item 2 of this Quarterly Report on February 9, 2015 with GS&Co. to repurchase shares of our common stock under our previously announced share repurchase authorization. This agreement was completed in July 2015, and pursuant to the agreement’s settlement terms, we elected to settle the agreement in cash and paid an additional $160 million to GS&Co. on July 13, 2015, resulting in a total of approximately $5.2 billion paid to GS&Co.Form 10-Q.

^(b)

Represents shares purchased pursuant to ~~and received upon settlement of~~ an accelerated share repurchase agreement entered into on March 8, 2016. For additional information, see ~~Notes to Condensed Consolidated Financial Statements––Note 12~~. ~~Commitments and Contingencies~~ ~~and “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities" in Part II, Item 2 of this Quarterly Report on Form 10-Q.~~


^(c)	~~Includes approximately~~ ~~151 million shares purchased for $5.2 billion pursuant to an accelerated share repurchase agreement (see note (a) above). For additional information, see~~ Notes to Consolidated Financial Statements––Note 12. Equity in our ~~2015 Form 10-K.~~2016 Financial Report.

~~After giving effect to the accelerated share repurchase agreements,~~At April 2, 2017, our remaining share-purchase authorization iswas approximately ~~$11.4 billion as of October 2, 2016.~~$6.4 billion.

Dividends on Common Stock

In ~~September 2016,~~April 2017, our Board of Directors declared a dividend of ~~$0.30~~$0.32 per share, payable on ~~December~~June 1, ~~2016,~~2017, to shareholders of record at the close of business on ~~November 11, 2016.~~May 12, 2017.

NEW ACCOUNTING STANDARDS

Recently Adopted Accounting Standards

See Notes to Condensed Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant AccountingPolicies: Adoption of New Accounting Standards.

Recently Issued Accounting Standards, Not Adopted as of ~~October~~April 2, ~~2016~~2017



The following table provides a brief description of recently issued accounting standards, not yet adopted:
Standard/Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
~~In March 2016, the FASB issued new guidance on accounting for~~ ~~employee share-based payments.~~ ~~The new guidance changes existing guidance as follows:~~ 1. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. Excess tax benefits will be recognized regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. ~~2. The minimum statutory tax withholding requirement to qualify for equity classification has changed to permit withholding up to the maximum statutory tax rates in the applicable jurisdictions.~~ ~~3. Cash paid by an employer when directly withholding shares for tax-withholding purposes will be classified as a financing activity in the statement of cash flows.~~ ~~4. An entity-wide accounting policy election may be made to either estimate the number of awards that are expected to vest (current GAAP) or to account for forfeitures when they occur.~~	~~January 1, 2017, with earlier application permitted.~~	Although it is difficult to predict the impact as it is dependent on the timing of when employees exercise stock options and the fair value of our stock price at that time, we do not anticipate a material impact to our consolidated financial statements upon adoption.
~~In July 2015, the FASB issued an update related to~~ ~~inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value.~~	~~January 1, 2017.~~	~~We do not expect the provisions of this new standard will have a material impact on our consolidated financial statements.~~
In May 2014, the FASB issued amended guidance related to revenue from contracts with customers. The new guidance introduces a new principles-based framework for revenue recognition and disclosure. Since its issuance the FASB has issued ~~five~~six ASUs, amending the guidance and effective date, and the SEC has rescinded certain related SEC guidance; the most recent of ~~which~~these changes was issued in ~~May~~December 2016.	January 1, 2018. ~~Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.~~	We have ~~not yet completed~~made substantial progress in completing our ~~final~~ review of the impact of this guidance ~~although we currently~~across our various business arrangements and revenue-related activities, and do not ~~anticipate~~expect the adoption of this standard to have a material impact on our financial statements and revenue recognition ~~practices. We continue~~ practices, or our internal controls. Under the development portion of our collaboration agreements, we expect the milestone payments, which are recorded in Other (income)/deductions––net, to ~~review variable consideration, potential disclosures, and our method of adoption to complete our evaluation~~be amortized over the development period rather than the life of the ~~impact on our consolidated financial statements. In addition,~~agreement, as we currently do. We continue to monitor additional changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our current conclusions.
In ~~August 2016,~~addition, we continue to monitor other changes, such as changes in our business, new collaboration arrangements, business combinations, etc., which may impact our current conclusions prior to the ~~FASB issued new guidance on the~~ ~~classification of certain transactions in the Statement of Cash Flows.~~	~~January 1, 2018. Earlier application is permitted, including~~ adoption ~~in an interim period.~~	~~We do not expect the provisions of this new standard will have a material impact on our consolidated financial statements.~~date.



Standard/Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
~~In October 2016, the FASB issued an update to its guidance on~~ ~~income tax~~ accounting. The new guidance replaces the prohibition against recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party with a requirement to do so, unless the asset transferred is inventory.	~~January 1, 2018. Earlier application is permitted in the first interim period of an annual reporting period.~~	~~We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. The impact of adoption will be recorded to~~ ~~Retained earnings.~~
In January 2016, the FASB issued an update to its guidance on recognition and measurement of financial assets and liabilities.Among other things, the new guidance makes the following targeted changes to existing guidance: 1. Requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. 2. Requires a qualitative assessment of equity investments without readily determinable fair values to identify impairment. 3. Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements.	January 1, 2018.	We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. However, as of April 2, 2017, we have $553 million in available-for-sale equity securities and approximately $1.2 billion of restricted stock and private equity securities which will be subject to the new rules. Further, for the three months ended April 2, 2017, we recognized $176 million of unrealized holding gains on available-for-sale equity securities in Other Comprehensive income/(loss), which would have been recorded to Other (income)/deductions––net under the new rules.
In August 2016, the FASB issued new guidance on the classification of certain transactions in the Statement of Cash Flows.	January 1, 2018. Earlier application is ~~permitted~~permitted.	We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. However, upon adoption, we expect to reclassify approximately $362 million of cash outflows related to debt redemption in 2016 from operating activities to financing activities. We also expect to reclassify approximately $28 million of cash inflows from trust-owned life insurance contracts in 2016 from operating activities to investing activities. In addition, the new guidance may impact the classification of certain cash flows related to contingent consideration in a business acquisition, depending on the ultimate settlement amount of the contingency.
In October 2016, the FASB issued new guidance on the presentation of restricted cash in the Statement of Cash Flows.	January 1, 2018. Earlier application is permitted.	We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. However, our restricted cash balances as of the ~~beginning~~end of 2016 were approximately $18.1 million of short-term restricted cash and $45.3 million of long-term restricted cash.
In October 2016, the FASB issued an ~~interim or annual reporting period.~~update to its guidance on income tax accounting. The new guidance replaces the prohibition against recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party with a requirement to do so, unless the asset transferred is inventory.	January 1, 2018.	We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. However, we anticipate that after adoption, our effective tax rate could be impacted by the immediate recognition of the tax consequences of intercompany asset transfers other than inventory. The impact of adoption will be recorded as a cumulative effect adjustment to Retained earnings.
In January 2017, the FASB issued new guidance to clarify the definition of a business. The new guidance provides a new framework for determining whether business development transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If the fair value of the gross assets acquired is concentrated in a single identifiable asset, the transaction will not qualify for treatment as a business. The new guidance also requires that to be considered a business, a set of integrated activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, without regard as to whether a market participant could replace missing elements. In addition, the new guidance narrows the definition of the term “output” to make it consistent with how outputs are described in the updated revenue recognition guidance.	January 1, 2018. Earlier application is permitted.	We have not yet completed our review of the impact of this guidance. However, we anticipate that after adoption, fewer transactions will be accounted for as business acquisitions (decreasing the amount of goodwill incurred and potentially increasing IPR&D expense) or disposals of a business.
In February 2017, the FASB issued amended guidance related to the derecognition of nonfinancial assets.	January 1, 2018. Earlier application is permitted.	We are assessing the impact of the provisions of this new guidance on our consolidated financial statements.



Standard/Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit cost. Under the new rules, entities that sponsor defined benefit plans will present net benefit cost as follows: 1. Service cost will be included in the same income statement line items where other employee compensation costs are reported. 2. The other components of net benefit cost will be presented outside of income from operations, if such a subtotal is presented. 3. Only the service cost component will be capitalized, when applicable (for example, as a cost of inventory, internal-use software, or a self-constructed fixed asset). If a separate line item is used to present the other components of net benefit cost, it should have an appropriate description. If a separate line item or items is not used, the line item or items in the income statement where the other components of net benefit cost are included must be disclosed.	January 1, 2018.	We have not yet completed our review of this new guidance on our consolidated financial statements, although we anticipate that after adoption, the net benefit costs other than service costs will be reclassified to Other (income)/deductions—net from their current classification within Cost of sales, Selling, informational and administrative expenses, and Research and development expenses. Effective January 1, 2018, future accruals under the Pfizer Consolidated Pension Plan (our largest U. S. defined benefit plan), will freeze, and the Pfizer defined contribution savings plan will provide additional annual contributions to those previously accruing benefits under the Pfizer Consolidated Pension Plan. This change will result in elimination of future service costs for the plan.
In May 2017, the FASB issued new guidance on the accounting for modifications of share-based payment awards. The new guidance clarifies that changes in the terms or conditions of a share-based payment award be accounted for as a modification unless all the following conditions are met: 1. The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. 2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. 3. The modification does not change the classification of the award as an equity instrument or a liability instrument.	January 1, 2018. Early application is permitted, including in interim periods.	We are assessing the impact of the provisions of this new guidance on our consolidated financial statements.
In February 2016, the FASB issued an update to its guidance on leases. The new ASU provides guidance for both lessee and lessor accounting models. Among other things, the new guidance requires that a right of use asset and a lease liability be recognized for leases with a duration of greater than one year.	January 1, 2019. Earlier application is permitted.	We have not yet completed our review of the impact of this guidance. However, we anticipate recognition of at least $1 billion of additional assets and corresponding liabilities ~~related to~~on our balance sheet. We are currently assessing the potential impact of embedded leases on our ~~balance sheet.~~financial statements.
In March 2017, the FASB issued new guidance that shortens the amortization period for certain callable debt securities held at a premium. The new guidance requires the premium to be amortized to the earliest call date.	January 1, 2019. Early application is permitted, including in interim periods, so long as any adjustments are reflected as of the beginning of the fiscal year that includes the interim period in which the guidance is applied.	We are assessing the impact of the provisions of this new guidance on our consolidated financial statements.
In June 2016, the FASB issued new guidance on accounting for credit losses of financial instruments. The new guidance replaces the incurred losses methodology in current GAAP with a methodology that reflects expected credit losses using an allowance account.	January 1, 2020. Earlier application is permitted as of fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.	We are assessing the impact of the provisions of this new guidance on our consolidated financial statements.
In January 2017, the FASB issued new guidance for goodwill impairment testing. The new guidance eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit.	January 1, 2020. Earlier application is permitted.	We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. However, we do not expect this new guidance to have a material impact on our consolidated financial statements.

FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This report and other written or oral statements that we make from time to time contain forward-looking ~~statements that set forth anticipated results based on management’s plans and assumptions.~~statements. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “will,” “may,” “could,” “likely,” “ongoing,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” “goal,” “objective,” “aim” and other words and terms of similar meaning or by using future dates in connection with any discussion of, among other things, our anticipated ~~future~~ operating and financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans and plans relating to share repurchases and dividends. In particular, these include statements relating to future actions, business plans and prospects, our acquisitions of Hospira, Anacor, ~~and~~ Medivation and ~~our pending acquisition of AstraZeneca's~~AstraZeneca’s small molecule anti-infectives business, the disposition of the HIS net assets, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, plans relating to share repurchases and dividends, government regulation and financial results, including, in particular, the financial guidance set forth in the “Our Financial Guidance for ~~2016”~~2017” section of this MD&A, the anticipated costs and cost savings, including from our acquisition of Hospira and our cost-reduction/productivity initiatives set forth in the ~~“Overview of Our Performance, Operating Environment, Strategy and Outlook” and~~ “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” ~~sections~~section of this MD&A and in Notes to Condensed Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives, the benefits expected from our ~~acquisitions of Hospira, Anacor and Medivation;~~business development transactions, and the contributions that we expect to make from our general assets to our pension and postretirement plans during ~~2016~~2017 set forth in Notes to Condensed Consolidated Financial Statements––Note 10. Pension and Postretirement Benefit Plans. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

the outcome of research and development activities including, without limitation, the ability to meet anticipated pre-clinical and clinical trial commencement and completion dates, regulatory submission and approval dates, and

launch dates for product candidates, as well as the possibility of unfavorable pre-clinical and clinical trial results, including unfavorable new clinical data and additional analyses of existing clinical data;

decisions by regulatory authorities regarding whether and when to approve our drug applications, which will depend on the assessment by such regulatory authorities of the benefit-risk profile suggested by the totality of the efficacy and safety information submitted; decisions by regulatory authorities regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products; and uncertainties regarding our ability to address the comments in complete response letters received by us with respect to certain of our drug applications to the satisfaction of the FDA;

the speed with which regulatory authorizations, pricing approvals and product launches may be achieved;

the outcome of post-approval clinical trials, which could result in the loss of marketing approval for a product or changes in the labeling for, and/or increased or new concerns about the safety or efficacy of, a product that could affect its availability or commercial potential;

risks associated with interim data, including the risk that final results of studies for which interim data have been provided and/or additional clinical trials may be different from (including less favorable than) the interim data results and may not support further clinical development of the applicable product candidate or indication;

the success of external business-development activities, including the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all, including our ability and the ability of ICU Medical and AstraZeneca to satisfy the conditions to closing the sale of our HIS net assets to ICU Medical, and the acquisition of the small molecule anti-infectives business from AstraZeneca, respectively;all;

competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;

the implementation by the FDA and regulatory authorities in certain other countries of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products, with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;

risks related to our ability to develop and launch biosimilars, including risks associated with ~~"at risk"~~“at risk” launches, defined as the marketing of a product by Pfizer before the final resolution of litigation (including any appeals) brought by a third party alleging that such marketing would infringe one or more patents owned or controlled by the third party;

the ability to meet competition from generic, branded and ~~branded competition~~biosimilar products after the loss or expiration of patent protection for our products or competitor products;

the ability to successfully market both new and existing products domestically and internationally;

difficulties or delays in ~~manufacturing;~~manufacturing, including possible legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, injunctions or voluntary recall of a product;

trade buying patterns;

the impact of existing and future legislation and regulatory provisions on product exclusivity;

trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or formulary placement for our products;

the impact of any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs or changes in the tax treatment of employer-sponsored health insurance that may be implemented, and/or any significant additional taxes or fees that may be imposed on the pharmaceutical industry as part of any broad deficit-reduction effort;

the impact of any U.S. healthcare reform or legislation, ~~enacted in 2010—~~including any repeal, substantial modification or invalidation of any or all of the provisions of the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation ~~Act––~~Act, and ~~of any modification, repeal~~the passage or ~~invalidation of any~~failure of the ~~provisions thereof;~~American Health Care Act;

U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; patient out-of-pocket costs for medicines, manufacturer prices and/or price increases that could result in new mandatory rebates and discounts or other pricing restrictions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; restrictions on direct-to-consumer advertising; limitations on interactions with healthcare professionals; or the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to

innovative medicines; as well as pricing pressures for our products as a result of highly competitive insurance markets;

legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;

the exposure of our operations outside the U.S. to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest, unstable governments and legal systems and inter-governmental disputes;

contingencies related to actual or alleged environmental contamination;

claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates;

any significant breakdown, infiltration or interruption of our information technology systems and infrastructure;

legal defense costs, insurance expenses and settlement ~~costs,~~ costs;

the risk of an adverse decision or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, product liability ~~patent matters,~~and other product-related litigation, including personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, commercial, environmental, government investigations, ~~consumer, commercial, securities, antitrust, environmental,~~ employment ~~tax issues, ongoing efforts to explore~~and other legal proceedings, including various means for resolving asbestos litigation, ~~and other legal proceedings;~~as well as tax issues;

our ability to protect our patents and other intellectual property, both domestically and internationally;

interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates and the volatility following the U.K. referendum in which voters approved the exit from the EU;

governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending and possible future proposals;

any significant issues involving our largest wholesale distributors, which account for a substantial portion of our revenues;

the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;

the end result of any negotiations between the U.K. government and the EU regarding the terms of the U.K.’s exit from the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU;

~~any significant issues involving our largest wholesaler customers, which account for a substantial portion of our revenues;~~

~~the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;~~

any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timeliness and compliance with applicable legal requirements and industry standards;

any significant issues that may arise related to our joint ventures and other third-party business arrangements;

changes in U.S. generally accepted accounting principles;

changes in interpretations of existing laws and regulations, or changes in laws and regulations, in the U.S. and other countries;

uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets; and the related risk that our allowance for doubtful accounts may not be adequate;

any changes in business, political and economic conditions due to actual or threatened terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas;

growth in costs and expenses;

changes in our product, segment and geographic mix;

the impact of purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items;

the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls, withdrawals and other unusual items, including our ability to realize the projected benefits of our cost-reduction and productivity initiatives ~~including those related to our research and development organization,~~ and of the internal separation of our commercial operations into our current operating structure;

the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;

risks related to internal control over financial reporting; and

risks and uncertainties related to our ~~recent~~ acquisitions of Hospira, Anacor, Medivation and ~~Medivation,~~AstraZeneca’s small molecule anti-infectives business, including, among other things, the ability to realize the anticipated benefits of the acquisitions of Hospira, Anacor, Medivation and ~~Medivation,~~AstraZeneca’s small molecule anti-infectives business, including the possibility that expected cost savings related to the acquisition of Hospira and accretion related to the acquisitions of Hospira, Anacor and Medivation will not be realized or will not be realized within the expected time frame; the risk that the businesses will not be integrated successfully; disruption from the transactions making it more difficult to maintain business and operational relationships; significant transaction costs; and unknown liabilities.

We cannot guarantee that any forward-looking statement will be ~~realized, although we believe we have been prudent in our plans and assumptions.~~realized. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements, and are cautioned not to put undue reliance on forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. You are advised, however, to consult any further disclosures we make on related ~~subjects in our Form 10-Q, 8-K and 10-K reports and our other filings with the SEC.~~subjects.

Our ~~2015~~2016 Form 10-K listed various important factors that could cause actual results to differ materially from past and projected future results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Risk Factors.” We incorporate that section of that Form 10-K in this filing and investors should refer to it. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

The operating segment information provided in this report does not purport to represent the revenues, costs and income from continuing operations before provision for taxes on income that each of our operating segments would have recorded had each segment operated as a standalone company during the periods presented. The selected balance sheet information by operating segment has been derived from the consolidated financial statements and accounting records of Pfizer and does not purport to reflect amounts that would have been reported had any of the operating segments been managed as a standalone company as of, or prior to, December 31, 2016 and, additionally, does not purport to reflect amounts that would have been reported had separate financial statements been prepared for any of the operating segments on a carve-out basis as of December 31, 2016.

This report includes discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data. In addition, clinical trial data are subject to differing interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.

Legal Proceedings and Contingencies

Information with respect to legal proceedings and contingencies required by this Item is incorporated herein by reference to

Notes to Condensed Consolidated Financial Statements––Note 12A. Commitments and Contingencies: Legal Proceedings in

Part I, Item 1, of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is incorporated by reference from the discussion under the heading Financial Risk Management in our ~~2015~~2016 Financial Report.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.

During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 12A. Commitments and Contingencies: Legal Proceedings in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Tax Matters

Additional information with respect to tax matters required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 5B. Tax Matters: Tax Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.

We account for income tax contingencies using a benefit recognition model. If our initial assessment fails to result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to “more likely than not”; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. We regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase or decrease the technical merits of a position relative to the “more-likely-than-not” standard.

Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.

Item 1A. Risk Factors

The “Our Operating Environment” and “Forward-Looking Information and Factors That May Affect Future Results” sections of the MD&A of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” of our ~~2015~~2016 Form 10-K are incorporated by reference herein. There have been no material changes from the risk factors discussed in Part I, Item 1A, “Risk Factors” of our ~~2015~~2016 Form 10-K.

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

The following table provides certain information with respect to our purchases of shares of the Company’s common stock during the ~~third~~first fiscal quarter of ~~2016:~~2017:

Issuer Purchases of Equity Securities^(a)

Period
Total Number of
Shares Purchased^(b)

Average Price
Paid per Share^(b)

Total Number of Shares Purchased as Part of Publicly Announced Plan
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan^(a)

July 4, 2016 through July 31, 2016 7,898
$ 35.54
—
$ 11,355,862,076
August 1, 2016 through August 28 2016 16,271
$ 36.50
—
$ 11,355,862,076
August 29, 2016 through October 2, 2016 43,475
$ 34.80
—
$ 11,355,862,076
Total 67,644
$ 35.29
—



Period	Total Number of Shares Purchased^{(a), (b)}	Average Price Paid per Share^{(a), (b)}		Total Number of Shares Purchased as Part of Publicly Announced Plan^(a)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan^(a)
January 1, 2017 through January 29, 2017	25,427	$	32.59	—	$	11,355,862,076
January 30, 2017 through February 26 2017	127,312,839	$	31.75	126,063,662	$	6,355,862,076
February 27, 2017 through April 2, 2017	4,455,187	$	34.45	—	$	6,355,862,076
Total	131,793,453	$	31.84	126,063,662

^(a)

OnOur October ~~23,~~ 2014 ~~we announced that the Board of Directors had authorized an~~ $11 billion share-purchase plan ~~and share purchases commenced thereunder~~was exhausted in ~~January 2015 (the October 2014 Stock Purchase Plan).~~the first quarter of 2017. In December 2015, the Board of Directors authorized ~~a new~~an $11 billion share repurchase program, ~~to be utilized over time.~~and share repurchase commenced thereunder in the first quarter of 2017. On ~~March 8, 2016,~~February 2, 2017, we entered into an accelerated share repurchase agreement with ~~GS&Co.~~Citibank to repurchase $5 billion of our common stock. Pursuant to the terms of the agreement, on ~~March 10, 2016,~~February 6, 2017, we paid $5 billion to ~~GS&Co.~~Citibank and received an initial delivery of approximately ~~136~~126 million shares of our common stock from ~~GS&Co. based on~~Citibank at a price of ~~$29.36~~$31.73 per share, which represented, based on the closing ~~share~~ price of our common stock on the NYSE on ~~March 8, 2016,~~February 2, 2017, approximately 80% of the notional amount of the accelerated share repurchase agreement. ~~On June 20, 2016,~~As of April 2, 2017, the accelerated share repurchase agreement with GS&Co. was completed, which, per the terms of the agreement, resulted in GS&Co. owing us a certain number of shares of Pfizer common stock. Pursuant to the agreement’s settlement terms, we received an additional 18 million shares of our common stock from GS&Co. on June 20, 2016. The average price paid for all of the shares delivered under the accelerated share repurchase agreement was $32.38 per share. The common stock received is included in Treasury Stock. At settlement of the agreement, which is expected to occur during or prior to the third quarter of 2017, Citibank may be required to deliver additional shares of common stock. to us, or, under certain circumstances, we may be required to deliver shares of our common stock or may elect to make a cash payment to Citibank, with the number of shares to be delivered or the amount of such payment, as well as the final average price per share, based on the difference between the volume-weighted average price, less a discount, of Pfizer’s common stock during the term of the transaction. This agreement was entered into pursuant to our previously announced share repurchase authorization. ~~After giving effect to the accelerated share repurchase agreement,~~At April 2, 2017, our remaining share-purchase authorization iswas approximately ~~$11.4 billion at October 2, 2016.~~$6.4 billion.

^(b)

~~These~~

In addition to the amounts purchased under the accelerated share repurchase agreement, these columns reflect the following transactions during the ~~third~~first fiscal quarter of ~~2016:~~2017: (i) the surrender to Pfizer of ~~44,460~~3,240,616 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees; (ii) the surrender to Pfizer of 1,506,981 shares of common stock to satisfy tax withholding obligations in connection with the vesting of performance share awards issued to employees; (iii) the surrender of 976,042 shares of common stock to satisfy withholding obligations in connection with the settlement of total shareholder return units; (iv) the open market purchase by the trustee of ~~23,098~~5,467 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance share awards and who deferred receipt of such awards; and ~~(iii)~~(v) the surrender to Pfizer of 86685 shares of common stock to satisfy tax withholding obligations in connection with the ~~settlement~~vesting of ~~total shareholder return units.~~stock options issued to employees.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



~~Exhibit 2.1~~		Agreement and Plan of Merger, dated as of August 20, 2016, by and among Pfizer Inc., Montreal, Inc. and Medivation, Inc. is incorporated by reference from our Current Report on Form 8-K filed on August 22, 2016 (File No. 001-03619). (Pursuant to Item 601(b)(2) of Regulation S-K, the registrant hereby agrees to supplementally furnish to the Securities and Exchange Commission upon request any omitted schedule or exhibit to the Merger Agreement.)
Exhibit 12	-	Computation of Ratio of Earnings to Fixed Charges.
Exhibit 15	-	Accountants’ Acknowledgment.
Exhibit 31.1	-	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	-	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	-	Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	-	Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101:
EX-101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
EX-101.SCH EX-101.CAL EX-101.LAB EX-101.PRE EX-101.DEF		~~XBRL Instance Document~~ XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Calculation Linkbase XBRL Taxonomy Extension Label Linkbase XBRL Taxonomy Extension Presentation Linkbase XBRL Taxonomy Extension Definition Document

SIGNATURE

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



		Pfizer Inc.
		(Registrant)


Dated:	~~November 10, 2016~~May 11, 2017	/s/ Loretta V. Cangialosi
		Loretta V. Cangialosi, Senior Vice President and Controller (Principal Accounting Officer and Duly Authorized Officer)

~~111~~98



(MILLIONS OF DOLLARS)	Amounts Recognized as of Acquisition Date (as previously reported as of December 31, 2015)			Measurement Period Adjustments^(a)			Amounts Recognized as of Acquisition Date (as adjusted) Final
Working capital, excluding inventories	$	274		$	68		$	342
Inventories	1,924			(23		)	1,901
PP&E	2,410			(57		)	2,352
Identifiable intangible assets, excluding IPR&D	8,270			20			8,290
IPR&D	995			35			1,030
Other noncurrent assets	408			(46		)	362
Long-term debt	(1,928		)	—			(1,928		)
Benefit obligations	(117		)	—			(117		)
Net income tax accounts	(3,394		)	14			(3,380		)
Other noncurrent liabilities	(39		)	(23		)	(61		)
Total identifiable net assets	8,803			(12		)	8,791
Goodwill	7,284			12			7,295
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:
	Unaudited Supplemental Pro Forma Consolidated Results
	Three Months Ended		Nine Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)	September 27, 2015		September 27, 2015
Revenues	$	12,957	$	38,034
Net income attributable to Pfizer Inc. common shareholders	2,513		7,577
Diluted EPS attributable to Pfizer Inc. common shareholders	0.40		1.21



The following table provides additional information about the intangible assets that were impaired during 2016 in Other (income)/deductions––net:
	Fair Value^(a)								Nine Months Ended October 2, 2016
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––IPR&D^(b)	$	50	$	—	$	—	$	50	$	436
Intangible assets––Developed technology rights ^(b)	66		—		—		66		331
Total	$	116	$	—	$	—	$	116	$	767



The following table provides the maturity schedule of our Long-term debt outstanding as of October 2, 2016:
(MILLIONS OF DOLLARS)	2017		2018		2019		2020		After 2020		Total
Maturities	$	—	$	3,618	$	5,678	$	383	$	20,758	$	30,437



The following table provides the components of Identifiable intangible assets:
	October 2, 2016							December 31, 2015
(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	$	83,935	$	(49,105	)	$	34,830	$	77,613	$	(47,193	)	$	30,419
Brands	2,117		(1,013		)	1,104		1,973		(928		)	1,044
Licensing agreements and other	1,801		(985		)	816		1,619		(918		)	701
	87,854		(51,103		)	36,750		81,205		(49,040		)	32,165
Indefinite-lived intangible assets
Brands and other	6,918					6,918		7,021					7,021
In-process research and development	10,569					10,569		1,171					1,171
	17,487					17,487		8,192					8,192
Identifiable intangible assets^(a)	$	105,341	$	(51,103	)	$	54,238	$	89,396	$	(49,040	)	$	40,356



Peri-LOE Products⁽ⁱ⁾	$	1,023	$	1,229	$	3,224	$	4,073
Lyrica EH^(b)	191		273		623		925
Celebrex	194		212		550		640
Pristiq	174		185		546		523
Vfend	140		165		459		510
Zyvox	94		165		334		696
Viagra EH^(c)	89		97		286		318
Revatio	73		53		213		181
All Other Peri-LOE Products	68		79		214		280
Infusion Systems^(j)	$	281	$	94	$	879	$	94
Biosimilars^(k)	$	83	$	—	$	228	$	—
Pfizer CentreOne^(l)	$	156	$	136	$	540	$	380
Revenues	$	13,045	$	12,087	$	39,196	$	34,804

Total Lyrica^(b)	$	1,240	$	1,220	$	3,730	$	3,626
Total Viagra^(c)	$	387	$	430	$	1,183	$	1,274
Total Alliance revenues	$	419	$	349	$	1,155	$	881



Peri-LOE Products^(j)		$	1,023	(17	)	(15	)	$	3,224	(21	)	(17	)
Lyrica EH^(c)	Epilepsy, neuropathic pain and generalized anxiety disorder	191		(30	)	(27	)	623		(33	)	(30	)
Celebrex	Arthritis pain and inflammation, acute pain	194		(8	)	(8	)	550		(14	)	(11	)
Pristiq	Depression	174		(6	)	(5	)	546		5		7
Vfend	Fungal infections	140		(15	)	(14	)	459		(10	)	(6	)
Zyvox	Bacterial infections	94		(43	)	(41	)	334		(52	)	(48	)
Viagra EH^(d)	Erectile dysfunction	89		(8	)	(3	)	286		(10	)	(4	)
Revatio	Pulmonary arterial hypertension	73		37		36		213		18		19
All Other Peri-LOE Products	Various	68		(14	)	(14	)	214		(24	)	(20	)
Infusion Systems^(k)	Various	$	281	*		*		$	879	*		*
Biosimilars^(l)	Various	$	83	*		*		$	228	*		*
Pfizer CentreOne^(m)		$	156	15		15		$	540	42		44
Total Lyrica^(c)	Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	$	1,240	2		1		$	3,730	3		4
Total Viagra^(d)	Erectile dysfunction	$	387	(10	)	(9	)	$	1,183	(7	)	(5	)
Total Alliance revenues	Various	$	419	20		18		$	1,155	31		31



	Nine Months Ended October 2, 2016
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported		Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	39,196	$	—		$	—		$	—	$	—		$	39,196
Cost of sales	9,111		(284		)	(3		)	—		(240		)	8,584
Selling, informational and administrative expenses	10,414		(13		)	—			—		(59		)	10,342
Research and development expenses	5,360		1			—			—		(24		)	5,336
Amortization of intangible assets	2,934		(2,841		)	—			—		—			94
Restructuring charges and certain acquisition-related costs	988		—			(595		)	—		(393		)	—
Other (income)/deductions––net	2,815		33			—			—		(3,395		)	(547		)
Income from continuing operations before provision for taxes on income	7,575		3,103			598			—		4,112			15,388
Provision for taxes on income^(b)	1,194		962			47			—		1,377			3,581
Income from continuing operations	6,380		2,141			550			—		2,735			11,807
Discontinued operations––net of tax	—		—			—			—		—			—
Net income attributable to noncontrolling interests	25		—			—			—		—			25
Net income attributable to Pfizer Inc.	6,355		2,141			550			—		2,735			11,782
Earnings per common share attributable to Pfizer Inc.––diluted	1.03		0.35			0.09			—		0.44			1.91



	Three Months Ended September 27, 2015
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported		Purchase Accounting Adjustments^(a)			Acquisition-Related Costs^(a)			Discontinued Operations^(a)			Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	12,087	$	—		$	—		$	—		$	—		$	12,087
Cost of sales	2,219		(87		)	(12		)	—			(13		)	2,108
Selling, informational and administrative expenses	3,270		—			—			—			6			3,276
Research and development expenses	1,722		2			—			—			1			1,725
Amortization of intangible assets	937		(904		)	—			—			—			33
Restructuring charges and certain acquisition-related costs	581		—			(529		)	—			(52		)	—
Other (income)/deductions––net	661		28			—			—			(779		)	(90		)
Income from continuing operations before provision for taxes on income	2,697		960			541			—			837			5,035
Provision for taxes on income^(b)	567		271			167			—			294			1,298
Income from continuing operations	2,130		689			374			—			543			3,736
Discontinued operations––net of tax	8		—			—			(8		)	—			—
Net income attributable to noncontrolling interests	9		—			—			—			—			9
Net income attributable to Pfizer Inc.	2,130		689			374			(8		)	543			3,728
Earnings per common share attributable to Pfizer Inc.––diluted	0.34		0.11			0.06			—			0.09			0.60



	Third Quarter of 2015
(MILLIONS OF DOLLARS)		Innovative Health (IH)^(a)			Essential Health (EH)^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
Revenues		$	6,752		$	5,335		$	—		$	12,087		$	—		$	12,087
Cost of sales		876			1,159			74			2,108			111			2,219
% of revenue		13.0		%	21.7		%	*			17.4		%	*			18.4		%
Selling, informational and administrative expenses		1,524			799			953			3,276			(7		)	3,270
Research and development expenses		558			241			926			1,725			(3		)	1,722
Amortization of intangible assets		23			10			—			33			904			937
Restructuring charges and certain acquisition-related costs		—			—			—			—			581			581
Other (income)/deductions––net		(247		)	(54		)	211			(90		)	751			661
Income from continuing operations before provision for taxes on income		$	4,018		$	3,181		$	(2,164	)	$	5,035		$	(2,337	)	$	2,697



Period	Total Number of Shares Purchased^(b)	Average Price Paid per Share^(b)		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan^(a)
July 4, 2016 through July 31, 2016	7,898	$	35.54	—	$	11,355,862,076
August 1, 2016 through August 28 2016	16,271	$	36.50	—	$	11,355,862,076
August 29, 2016 through October 2, 2016	43,475	$	34.80	—	$	11,355,862,076
Total	67,644	$	35.29	—