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, ~~2005~~2006 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________to_______ COMMISSION FILE NUMBER 1-3619 ----
PFIZER INC. (Exact name of registrant as specified in its charter)

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

235 East 42nd Street, New York, New York 10017 (Address of principal executive offices) (zip code) (212) 573-2323 (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 is a large accelerated filer, an accelerated filer, ~~(as defined~~or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange ~~Act).~~Act (Check one): ~~YES~~Large accelerated filer X NO Accelerated Filer Non-accelerated filer Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO X At ~~November 4, 2005, 7,371,396,380~~May 2, 2006, 7,327,389,419 shares of the issuer's voting common stock were outstanding.

FORM 10-Q

For the Quarter Ended
~~October~~April 2, ~~2005~~2006

Table of Contents

PART I. FINANCIAL INFORMATION	Page

Item 1.

Financial Statements:

Condensed Consolidated Statements of Income for the three months ended April 2, 2006 and ~~nine months ended October 2,~~April 3, 2005 ~~and September 26, 2004~~	3

Condensed Consolidated Balance Sheets at ~~October~~April 2, ~~2005~~2006 and December 31, ~~2004~~2005	4

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~October~~April 2, ~~2005~~2006 and ~~September 26, 2004~~April 3, 2005	5

Notes to Condensed Consolidated Financial Statements	6

Review Report of Independent Registered Public Accounting Firm	1820

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations	1921

Item 3.
Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.

Controls and Procedures	4746

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings	47

Item 2.1A.
Risk Factors	48

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3.
Defaults Upon Senior Securities	48

Item 4.
Submission of Matters to a Vote of Security Holders	48

Item 5
Other Information	50

Item 6.

Exhibits	50

Signature	51

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 of dollars, except per common share data)		Oct. 2, 2005		Sept. 26, 2004		Oct. 2, 2005		Sept. 26, 2004		April 2, 2006		April 3, 2005

Revenues	$	12,189	$	12,831	$	37,705	$	37,593	$	12,660	$	13,091

Costs and expenses:
Cost of sales^(a)		1,908		1,640		6,180		5,185		1,973		2,191
Selling, informational and administrative expenses^(a)		3,931		4,036		12,242		12,227		3,810		4,085
Research and development expenses^(a)		1,783		1,888		5,421		5,356		1,588		1,764
Amortization of intangible assets^(a)		836		843		2,576		2,496		828		882
Merger-related in-process research and development charges		1,390		--		1,652		955		--		2
Restructuring charges and merger-related costs		307		190		796		726		306		219
Other (income)/deductions - net		(163)		283		669		140		(272)		1,038

Income from continuing operations before provision for taxes on income, and minority interests		2,197		3,951		8,169		10,508
Income from continuing operations before provision for taxes on income and minority interests										4,427		2,910

Provision for taxes on income		591		650		2,815		2,040		315		2,635

Minority interests		4		3		9		7		4		3

Income from continuing operations		1,602		3,298		5,345		8,461		4,108		272

Discontinued operations:
(Loss)/income from discontinued operations - net of tax		(16)		(3)		(37)		27
Loss from discontinued operations - net of tax										--		(12)
Gains on sales of discontinued operations - net of tax		3		46		44		48		3		41

Discontinued operations - net of tax		(13)		43		7		75		3		29

Net income	$	1,589	$	3,341	$	5,352	$	8,536	$	4,111	$	301

Earnings per common share - Basic:
Earnings per common share - basic:
Income from continuing operations	$	0.22	$	0.44	$	0.73	$	1.12	$	0.56	$	0.04
Discontinued operations - net of tax		--		0.01		--		0.01		--		--
Net income	$	0.22	$	0.45	$	0.73	$	1.13	$	0.56	$	0.04

Earnings per common share - Diluted:
Earnings per common share - diluted:
Income from continuing operations	$	0.22	$	0.43	$	0.72	$	1.11	$	0.56	$	0.04
Discontinued operations - net of tax		--		0.01		--		0.01		--		--
Net income	$	0.22	$	0.44	$	0.72	$	1.12	$	0.56	$	0.04

Weighted-average shares used to calculate earnings per common share:
Basic		7,333		7,501		7,372		7,554		7,314		7,416

Diluted		7,382		7,569		7,424		7,642		7,324		7,474

Cash dividends paid per common share	$	0.19	$	0.17	$	0.57	$	0.51	$	0.24	$	0.19

^(a)	~~Includes~~Exclusive of amortization of intangible assets, except as disclosed in Note 11B, Goodwill and Other Intangible ~~Assets:~~Assets: Other Intangible Assets.

See accompanying Notes to Condensed Consolidated Financial Statements.

PFIZER INC AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(millions of dollars)		Oct. 2, 2005*		Dec. 31, 2004**		April 2, 2006*		Dec. 31, 2005**
ASSETS
Current Assets
Cash and cash equivalents	$	959	$	1,808	$	2,869	$	2,247
Short-term investments		12,430		18,085		12,633		19,979
Accounts receivable, less allowance for doubtful accounts: 2005 - $181; 2004 - $205		9,348		9,367
Accounts receivable, less allowance for doubtful accounts						10,352		9,765
Short-term loans		611		653		445		510
Inventories		6,556		6,660		6,663		6,039
Prepaid expenses and taxes		2,724		2,939		4,302		3,196
Assets held for sale		140		182		151		160
Total current assets		32,768		39,694		37,415		41,896
Long-term investments and loans		2,784		3,873		2,543		2,497
Property, plant and equipment, less accumulated depreciation: 2005 - $9,199; 2004 - $8,534		17,519		18,385
Property, plant and equipment, less accumulated depreciation						17,103		17,090
Goodwill		23,806		23,756		23,741		23,774
Identifiable intangible assets, less accumulated amortization		28,976		33,251		28,073		27,786
Other assets, deferred taxes and deferred charges		4,490		4,725		4,084		4,522
Total assets	$	110,343	$	123,684	$	112,959	$	117,565

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings, including current portion of long-term debt: 2005 - $1,401; 2004 - $907	$	6,729	$	11,266
Short-term borrowings, including current portion of long-term debt					$	5,059	$	11,589
Accounts payable		1,809		2,672		1,892		2,226
Dividends payable		3		1,418		5		1,772
Income taxes payable		4,226		1,963		3,495		3,617
Accrued compensation and related items		1,636		1,939		1,504		1,675
Other current liabilities		5,990		7,136		7,717		7,522
Liabilities held for sale		2		64		2		2
Total current liabilities		20,395		26,458		19,674		28,403

Long-term debt		5,414		7,279		6,508		6,347
Pension benefit obligations		2,771		2,821		2,665		2,717
Postretirement benefit obligations		1,442		1,450		1,448		1,443
Deferred taxes on income		10,780		12,632
Deferred taxes						10,337		10,240
Other noncurrent liabilities		2,734		4,766		2,718		2,651
Total liabilities		43,536		55,406		43,350		51,801

Shareholders' Equity
Preferred stock		175		193		159		169
Common stock		439		438		439		439
Additional paid-in capital		67,530		67,098		67,931		67,759
Employee benefit trust, at fair value		(970)		(1,229)		(729)		(923)
Treasury stock		(39,385)		(35,992)		(40,757)		(39,767)
Retained earnings		38,033		35,492		41,715		37,608
Accumulated other comprehensive income		985		2,278		851		479

Total shareholders' equity		66,807		68,278		69,609		65,764
Total liabilities and shareholders' equity	$	110,343	$	123,684	$	112,959	$	117,565

* Unaudited.

** Condensed from audited financial statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

PFIZER INC AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Nine Months Ended				Three Months Ended
(millions of dollars)		Oct. 2, 2005		Sept. 26, 2004		April 2, 2006		April 3, 2005

Operating Activities:
Net income	$	5,352	$	8,536	$	4,111	$	301
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Discontinued operations - net of tax		(7)		(75)
Depreciation and amortization		4,143		3,782		1,351		1,366
Share-based compensation expense						172		22
Merger-related in-process research and development charges		1,652		955		--		2
Asset impairment charge and other costs associated with the suspension of Bextra sales		1,216		--
Deferred taxes		(279)		(471)
Other		193		479
Intangible asset impairments and other associated non-cash charges						--		1,213
Gains on disposal of investments, products and product lines						(76)		(4)
Loss from discontinued operations						--		18
Gains on sales of discontinued operations						(5)		(65)
Deferred taxes from continuing operations						(714)		483
Other deferred taxes						--		(4)
Other non-cash adjustments						25		98
Changes in assets and liabilities (net of businesses acquired and divested)		(2,274)		(2,856)		(903)		(237)

Net cash provided by continuing operating activities		9,996		10,350		3,961		3,193

Investing Activities:
Purchases of property, plant and equipment		(1,493)		(1,526)		(418)		(465)
Purchases of short-term investments		(16,840)		(11,369)		(2,735)		(4,891)
Proceeds from redemptions of short-term investments		23,179		6,427		10,438		2,531
Purchases of long-term investments		(650)		(1,132)		(216)		(494)
Proceeds from sales of long-term investments		655		1,432		4		437
Purchases of other assets		(392)		(613)		(35)		(70)
Proceeds from sales of other assets		6		267		3		5
Proceeds from the sales of businesses, product lines and other products						7		93
Acquisitions, net of cash acquired		(2,104)		(1,443)		(1,440)		--
Proceeds from the sales of businesses and product lines		108		1,192
Other investing activities		238		32		(177)		149

Net cash provided by/(used in) investing activities		2,707		(6,733)		5,431		(2,705)

Financing Activities:
Increase in short-term borrowings, net		9		2,094		826		1,591
Principal payments on short-term borrowings		(5,274)		(238)		(8,056)		(205)
Proceeds from issuances of long-term debt		5		2,592		1,035		1
Principal payments on long-term debt		(1,042)		(29)		(1)		(1)
Proceeds from common stock issuances		45		53
Purchases of common stock		(3,415)		(4,787)		(1,000)		(919)
Cash dividends paid		(4,177)		(3,821)		(1,743)		(1,400)
Stock option transactions and other		301		856		173		115

Net cash used in financing activities		(13,548)		(3,280)		(8,766)		(818)
Effect of exchange-rate changes on cash and cash equivalents		(4)		7		(4)		(2)
Net (decrease)/increase in cash and cash equivalents		(849)		344
Net increase/(decrease) in cash and cash equivalents						622		(332)
Cash and cash equivalents at beginning of period		1,808		1,520		2,247		1,808

Cash and cash equivalents at end of period	$	959	$	1,864	$	2,869	$	1,476

Supplemental Cash Flow Information:
Cash paid during the period for:
Income taxes	$	3,738	$	2,374	$	640	$	557
Interest		485		312		213		141

See accompanying Notes to Condensed Consolidated Financial Statements.

PFIZER INC AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1:1. Basis of Presentation

~~General~~

We prepared the condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three-month ~~and nine-month~~ periods ended ~~August 28, 2005~~February 26, 2006 and ~~August 22, 2004. The fiscal first quarter and nine months of 2005 had three additional business days compared to the fiscal first quarter and nine months of 2004.~~February 27, 2005.

We made certain reclassifications to the ~~2004~~2005 condensed consolidated financial statements to conform to the ~~2005~~2006 presentation.

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 document. The financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results.

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 Pfizer's Annual Report on Form 10-K for the year ended December 31, ~~2004.~~2005.

Note 2. Acquisitions and Dispositions

A. Acquisitions

On February 28, 2006, we completed the acquisition of the sanofi-aventis world-wide rights, including patent rights and production technology, to manufacture and sell Exubera, an inhaled form of insulin for use in adults with type 1 and type 2 diabetes, and the insulin-production business and facilities located in Frankfurt, Germany, previously jointly owned by Pfizer and sanofi-aventis, for approximately $1.4 billion (including transaction costs). In connection with the acquisition, as part of our preliminary purchase price allocation, we recorded an intangible asset for developed technology rights of approximately $1.0 billion, inventory valued at $218 million and goodwill of approximately $166 million, all of which have been allocated to our Human Health segment. The amortization of the developed technology rights will be primarily included in Cost of Sales. Given the size and complexity of the acquisition, the fair valuation and allocation work is still being finalized and is expected to be substantially complete in the second quarter. To the extent that our estimates need to be adjusted, we will do so.

Prior to the acquisition, in connection with our collaboration agreement with sanofi-aventis, we recorded a research and development milestone due to us from sanofi-aventis of approximately $118 million ($71 million, after tax) in Research and development expenses upon the approval of Exubera in January 2006 by the Food and Drug Administration (FDA).

B. Dispositions

We evaluate our businesses and product lines periodically for strategic fit within our operations. As a result of our evaluation, we decided to sell a number of businesses and product lines, certain of which qualified for Discontinued operations treatment. As of December 31, 2005, all of the transactions were completed. The impact of these divested businesses and product lines was not material to the consolidated operating results of Pfizer in the periods presented.

~~Share-Based Payments~~Assets held for sale and Liabilities held for sale on the balance sheet at April 2, 2006 and December 31, 2005, relate primarily to assets in Europe that we intend to sell but that are not related to Discontinued operations.

Note 3. Adoption of New Accounting Standards

~~In accordance with~~On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, as supplemented by the interpretation provided by SEC Staff Accounting Bulletin (SAB) No. 107, issued in March 2005. (SFAS 123R replaced SFAS 123, ~~Accounting for~~ Stock-Based Compensation, issued in 1995.) We have elected the modified prospective application transition method of adoption and, as such, prior period financial statements have not been restated. Under this method, the fair value of all stock options granted or modified after adoption must be recognized in the consolidated statement of income and total compensation cost related to nonvested awards not yet recognized, determined under the original provisions of SFAS 123, must also be recognized in the consolidated statement of income.

Prior to January 1, 2006, we ~~elect to account~~accounted for ~~our stock-based compensation~~stock options under Accounting ~~Principles~~Principle Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees~~. The~~, an elective accounting policy permitted by SFAS 123. Under this standard, since the exercise price of our stock options granted ~~equals~~is set equal to the market price on the date of ~~grant; as such, there is no recorded compensation~~the grant, we did not record any expense ~~related~~ to ~~grants~~the condensed consolidated statement of ~~stock options.~~

The weighted-average fair value per stock option granted was $5.00 and $6.33 for the three months ended October 2, 2005 and September 26, 2004, and $5.15 and $6.88 for the nine months ended October 2, 2005 and September 26, 2004. We estimated the fair values, as required under GAAP, using the Black-Scholes option-pricing model, modified for dividends and using the assumptions below. Pro forma compensation expenseincome related to stock options, ~~subject~~unless certain original grant date terms were subsequently modified. However, as required, we disclosed, in the Notes to ~~accelerated vesting upon retirement is recognized over~~Consolidated Financial Statements, the ~~period of employment up to the vesting date~~pro forma expense impact of the grant. In the first quarter of 2005, we changed our method of estimating expected dividend yield from historical patterns of dividend payments to a method that reflects a constant dividend yield during the expected term of the option.

Three Months Ended
Nine Months Ended
Oct. 2,
2005
Sept. 26,
2004
Oct. 2,
2005
Sept. 26,
2004
Expected dividend yield
2.76%
2.98%
2.90%
2.90%
Risk-free interest rate
3.81%
3.36%
3.96%
3.32%
Expected stock price volatility
20.00%
22.88%
21.93%
22.15%
Expected term until exercise (years)
5.59
5.64
5.75
5.75

~~The following table shows the effect on results for the three-month and nine-month periods ended October 2, 2005 and September 26, 2004~~stock option grants as if we had applied the fair-value-based recognition provisions of SFAS ~~123 to measure stock-based compensation expense~~123.

The adoption of SFAS 123R primarily impacted our accounting for ~~the option grants:~~

Three Months Ended
Nine Months Ended
(millions of dollars, except per common share data)
Oct. 2,
2005
Sept. 26,
2004
Oct. 2,
2005
Sept. 26,
2004

Net income available to common shareholders used in the calculation of basic earnings per common share:
As reported under GAAP*
$
1,588
$
3,340
$
5,348
$
8,532
Compensation expense - net of tax
(104)
(148)
(356)
(421)
Pro forma
$
1,484
$
3,192
$
4,992
$
8,111

Basic earnings per common share:
As reported under GAAP*
$
0.22
$
0.45
$
0.73
$
1.13
Compensation expense - net of tax
(0.02)
(0.02)
(0.05)
(0.06)
Pro forma
$
0.20
$
0.43
$
0.68
$
1.07

Net income available to common shareholders used in the calculation of diluted earnings per common share:
As reported under GAAP*
$
1,588
$
3,340
$
5,349
$
8,531
Compensation expense - net of tax
(104)
(148)
(356)
(421)
Pro forma
$
1,484
$
3,192
$
4,993
$
8,110

Diluted earnings per common share:
As reported under GAAP*
$
0.22
$
0.44
$
0.72
$
1.12
Compensation expense - net of tax
(0.02)
(0.02)
(0.05)
(0.06)
Pro forma
$
0.20
$
0.42
$
0.67
$
1.06

Includes stock-based compensation expense, net of related tax benefits, of $81 million for the nine months ended October 2, 2005 ($28 million for the three months ended October 2, 2005) and $40 million for the nine months ended September 26, 2004 (none for the three months ended September 26, 2004).

~~Net income available to common shareholders used in the calculation of basic earnings per common share represents net income reduced by preferred~~ stock dividends - net of tax. Net income available to common shareholders used in the calculation of diluted earnings per common share represents net income reduced by the incremental allocation of shares to the Employee Stock Ownership Plans (ESOPs) acquired as part of the Pharmacia acquisition.options (See Note 13, Share-Based Payments).

Note 2:4. Asset Impairment Charge ~~and Other Costs Associated with the Suspension of Bextra Sales~~

In the first ~~nine months~~quarter of 2005, we recorded charges totaling $1.2 billion ($~~762~~766 million, net of tax) in connection with the decision to suspend sales and marketing of Bextra. ~~This decision resulted from an April 7, 2005 request from the U.S. Food and Drug Administration (FDA), as part of its safety review of all COX-2 medicines.~~

The pre-tax ~~charges~~charge included $1.1 billion related to the impairment of developed technology rights ~~associated with Bextra~~ and $7$10 million related to the write-off of machinery and equipment, both of which ~~are~~were included in Other (income)/deductions - ~~net.~~net ~~In addition, in connection with the suspension, we also recorded $56 million in write-offs of inventory~~(See Note 11, Goodwill and ~~exit costs, included in~~ ~~Cost of sales~~Other Intangible Assets~~; $8 million related to the costs of administering the suspension of sales, included in~~ ~~Selling, informational and administrative expenses;~~ ~~and $212 million for an estimate of customer returns, primarily included against~~ ~~Revenues.~~ ~~Substantially all of these charges were recorded in the first quarter of 2005.~~).

~~Note 3: Income Taxes~~

~~Income Tax Charge Associated with Repatriation Decision~~

~~In the first nine months of 2005, we recorded an income tax charge of $1.7 billion, included in~~ ~~Provision for taxes on income~~~~, in connection with our decision to repatriate about $36.7 billion of foreign earnings in accordance with the~~ ~~American Jobs Creation Act of 2004~~ (the Jobs Act). In the first quarter of 2005, we recorded an initial estimated income tax charge of $2.2 billion based on the decision to repatriate $28.3 billion of foreign earnings; in the second quarter of 2005, we reduced our original estimate of the tax charge by $863 million and revised the repatriation of foreign earnings to $28.1 billion, principally as a result of guidance issued by the U.S. Treasury in May 2005. In the second quarter of 2005, we also recorded an additional tax charge of $373 million, primarily due to our decision to repatriate an additional $8.6 billion of foreign earnings.

As of October 2, 2005, we intend to continue to permanently reinvest the earnings of our international subsidiaries and, therefore, we have not recorded a U.S. tax provision on the remaining amount of unremitted earnings.

~~Tax Contingencies~~

In the second quarter of 2005, we recorded a tax benefit of $586 million primarily related to the resolution of certain tax positions. We believe that the IRS audits of the Pfizer Inc. tax returns for the years 1999-2001 and the Warner-Lambert Company tax returns for the years 1999 through the date of the merger with Pfizer (June 19, 2000) are substantially complete. In connection with those audits, we are currently in the process of appealing one matter related to the tax deductibility of a breakup fee paid by Warner-Lambert Company in 2000.

~~The IRS has commenced the audit of the Pfizer Inc. tax returns for the years 2002, 2003 and 2004. The 2005 tax year is also currently under audit.~~

As previously disclosed, with respect to Pharmacia Corporation (formerly known as Monsanto Company), the IRS has completed and closed its income tax return examinations and appeals through 1999 and has commenced the audit of the tax returns for the years 2000 through the date of merger with Pfizer (April 16, 2003).

We periodically reassess the likelihood of assessments resulting from audits of federal, state and foreign income tax filings. We believe that our accruals for tax liabilities are adequate for all open years.

Note 4:5. Adapting to Scale Initiative

We incurred the following costs in connection with our Adapting to Scale (AtS) productivity initiative, which was ~~announced~~launched in ~~the second quarter of~~early 2005:

						First Quarter
(millions of dollars)		Three Months Ended Oct. 2, 2005		Nine Months Ended Oct. 2, 2005		2006		2005

Implementation costs^(a)	$	104	$	136	$	186	$	--
Restructuring charges^(b)		153		174		301		--
Total AtS costs	$	257	$	310	$	487	$	--

^(a)

Included in Cost of sales ($36124 million), Selling, informational and administrative expenses ($6040 million), and Research and development expenses ($822 million) ~~for the three months ended October 2, 2005, and included in~~ ~~Cost of sales~~ ~~($37 million),~~ ~~Selling, informational and administrative expenses~~ ~~($81 million), and~~ ~~Research and development expenses~~ ~~($18 million) for the nine months ended October 2, 2005.~~.

^(b)

Included in Restructuring charges and merger-related costs.

In connection with the AtS initiative, Pfizer management has performed a comprehensive review of our processes, organizations, systems and decision-making procedures, in a company-wide effort to improve performance and efficiency. We expect the costs associated with this multi-year effort to continue through 2008 and to total approximately $4 billion to $5 billion, on a pre-tax basis. The actions associated with the AtS initiative will include restructuring charges, such as asset impairments, exit costs and severance costs (including any related impacts to our benefit plans, including settlements and curtailments) and associated implementation costs, such as accelerated depreciation charges, primarily associated with plant network optimization efforts, and expenses associated with system and process standardization and the expansion of shared services.

Through ~~October~~April 2, ~~2005,~~2006, the restructuring charges primarily relate to ~~employee termination costs at~~ our ~~manufacturing facilities in North America~~plant network optimization efforts and the restructuring of our U.S. marketing and worldwide research and development operations, while the implementation costs primarily relate to system and process standardization, ~~and to~~as well as the expansion of shared services.

The components of restructuring ~~costs~~charges associated with AtS follow:

(millions of dollars)		Nine Months Ended Oct. 2, 2005		Utilization Through Oct. 2, 2005		Accrual at Oct. 2, 2005	^(a)		Costs Incurred Through April 2, 2006		Utilization Through April 2, 2006		Accrual as of April 2, 2006	^(a)

Employee termination costs	$	106	$	49	$	57		$	478	$	351	$	127
Asset impairments		62		62		--			250		250		--
Other		6		--		6			23		7		16
	$	174	$	111	$	63		$	751	$	608	$	143

^(a)	Included in Other current liabilities.

During the ~~three months ended October 2, 2005,~~first quarter of 2006, we expensed ~~$85~~$173 million for Employee termination costs, ~~$62~~$119 million for Asset impairments and $6$9 million in Other. Through ~~October~~April 2, ~~2005,~~2006, Employee termination costs represent the approved reduction of the workforce by ~~922~~3,886 employees, mainly in manufacturing, sales and research. We notified affected individuals and ~~903~~3,610 employees were terminated as of ~~October~~April 2, ~~2005.~~2006. Employee termination costs are recorded as incurred and include accrued severance benefits, pension and postretirement benefits. Asset impairments primarily include charges to write-off inventory and write down ~~intangible assets, and~~ property, plant and equipment. Other primarily includes costs to exit certain activities.

Note 5:6. Merger-Related Costs

We incurred the following merger-related ~~costs primarily in connection with our acquisition of Pharmacia Corporation (Pharmacia), which was completed on April 16, 2003:~~costs:

			Three Months Ended				Nine Months Ended				First Quarter
(millions of dollars)	(millions of dollars)		Oct. 2, 2005		Sept. 26, 2004		Oct. 2, 2005		Sept. 26, 2004		2006		2005

Integration costs^(a)	Integration costs^(a)	$	93	$	113	$	390	$	367	Integration costs^(a)	$	2	$	106
Restructuring costs^(a)			61		77		232		359
Restructuring charges											3		113
Total merger-related costs(a)	Total merger-related costs(a)	$	154	$	190	$	622	$	726	Total merger-related costs(a)	$	5	$	219

^(a)	Included in Restructuring charges and merger-related costs.

In connection with the acquisition of Pharmacia, Pfizer management approved plans to restructure and integrate the operations of both legacy Pfizer and legacy Pharmacia to combine operations, eliminate duplicative facilities and reduce costs. Total merger-related expenditures expected to be incurred during 2003 through 2005 to achieve anticipated synergies are about $5.1 billion, on a pre-tax basis, with $5.0 billion incurred through October 2, 2005. The restructuring of our operations as a result of our acquisition of Pharmacia includes consulting, systems integrations,

^(a)	Included in Restructuring charges and merger-related costs. Amounts in 2005 primarily relate to our acquisition of Pharmacia Corporation (Pharmacia), which was completed on April 16, 2003.

Restructuring charges included severance, costs of vacating duplicative facilities, contract termination and other exit costs.

Through April 15, 2004, we recorded restructuring costs associated with employee terminations and exiting certain activities of legacy Pharmacia as liabilities assumed in the purchase business combination and recorded an increase to goodwill. Changes to previous estimates of restructuring costs included as part of the purchase allocation of Pharmacia are recorded as a reduction to goodwill or an expense to operations, as appropriate. Restructuring costs incurred for legacy Pfizer and restructuring costs incurred after April 15, 2004 for legacy Pharmacia are charged to the results of operations.

~~The components of merger-related restructuring costs associated with legacy Pfizer and legacy Pharmacia follow:~~

(millions of dollars)
Total
Utilization
Through
Oct. 2,
2005
^(a)
Accrual at
Oct. 2,
2005
^(b)

Costs capitalized through April 15, 2004:
Employee termination costs
$
1,535
$
1,502
$
33
Other
624
517
107
$
2,159
$
2,019
$
140
Costs expensed:
Employee termination costs
$
590
$
508
$
82
Asset impairments
421
421
--
Other
96
74
22

$
1,107
$
1,003
$
104
^(a)
~~Includes insignificant adjustments to original amounts established.~~
^(b)
~~Included in~~ ~~Other current liabilities.~~
~~During the three months ended October 2, 2005 and September 26, 2004, we expensed $1 million and $53 million for~~ ~~Employee termination costs~~~~, $53 million and $8 million for~~ ~~Asset impairments~~~~, and $7 million and $16 million in~~ ~~Other~~~~. During the first nine months of 2005 and 2004, we expensed $73 million and $201 million for~~ ~~Employee termination costs~~~~, $131 million and $122 million for~~ ~~Asset impairments~~~~, and $22 million and $31 million in~~ ~~Other~~.~~Through October 2, 2005,~~ ~~Employee termination costs~~ represent the approved reduction of the legacy Pfizer and legacy Pharmacia work force by 17,086 employees, mainly in corporate, manufacturing, distribution, sales and research. We notified affected individuals and 16,385 employees were terminated as of October 2, 2005. ~~Employee termination costs~~ ~~are recorded as incurred and include accrued severance benefits and costs associated with change-in-control provisions of certain Pharmacia employment contracts.~~ ~~Asset impairments~~ ~~primarily include charges to write down property, plant and equipment.~~ ~~Other~~ ~~primarily includes costs to exit certain activities of legacy Pfizer and legacy Pharmacia.~~Note 7.  Taxes on Income
~~Note 6: Acquisitions~~A.  Taxes on Income
On ~~September 14, 2005, we completed~~January 23, 2006, the ~~acquisition of all of the outstanding shares of Vicuron Pharmaceuticals, Inc. (Vicuron), a biopharmaceutical company focused~~Internal Revenue Service (IRS) issued final regulations on the development of novel anti-infectives, for approximately $1.9 billion in cash (including transaction costs). Vicuron has two products currently under New Drug Application (NDA) review by the FDA: anidulafungin for fungal infectionsStatutory Mergers and ~~dalbavancin for Gram-positive infections. The allocation of the purchase price includes in-process research and development of approximately $1.4 billion,~~Consolidations, which ~~was expensed and included in~~ ~~Merger-related in-process research and development charges~~~~, and goodwill of $243 million, which has been allocated to our Human Health segment. Neither of these items is deductible for tax purposes.~~
On April 12, 2005, we completed the acquisition of Idun Pharmaceuticals, Inc. (Idun), a biopharmaceutical company focused on the discovery and development of therapies to control apoptosis, and on August 15, 2005, we completed the acquisition of all outstanding shares of Bioren Inc. (Bioren), which focuses on technology for optimizing antibodies. The aggregate cost of these and other smaller acquisitions was approximately $340 million for the nine months ended October 2, 2005.
On February 10, 2004, we completed the acquisition of all the outstanding shares of Esperion Therapeutics, Inc., (Esperion), a biopharmaceutical company, for $1.3 billion in cash (including transaction costs). The allocation of the purchase price included in-process research and development of $920 million, which was expensed, and goodwill of $235 million, which was allocated to our Human Health segment. Neither of these items was deductible for tax purposes. The aggregate cost of other smaller acquisitions was approximately $170 million for the nine months ended September 26, 2004.
~~Note 7:  Dispositions~~
~~We evaluate our businesses and product lines periodically for strategic fit within our operations.~~impacted certain prior-period transactions. In the first quarter of ~~2004, we decided to sell a number of businesses and product lines and~~2006, we recorded a tax benefit of $217 million, reflecting the ~~results of these operations in~~ ~~Discontinued operations~~ ~~for 2005 and 2004. As of October 2, 2005, all of these discontinued operations have been sold. The~~total impact of these ~~divested businesses~~regulations.
In the first quarter of 2005, we recorded an income tax charge of $2.2 billion, included in Provision for taxes on income, in connection with our decision to repatriate about $28.3 billion of foreign earnings in accordance with the American Jobs Creation Act of 2004 (the Jobs Act). This first quarter impact was based on preliminary information available at the time. The final charge in 2005 was $1.7 billion on a repatriation amount of $37 billion. The change in the repatriation and ~~product lines~~corresponding tax amount was ~~not material~~due primarily to guidance issued by the U.S. Treasury in the second quarter of 2005, as well as our decision to increase the amount of the repatriation.
B.Tax Contingencies
On January 25, 2006, the Company was notified by the IRS Appeals Division that a resolution had been reached on the matter that we were in the process of appealing related to the ~~consolidated operating results~~tax deductibility of ~~Pfizer Inc~~a breakup fee paid by Warner-Lambert Company in 2000. As a result, in the ~~periods presented.~~
~~Assets held for sale~~ ~~and~~ ~~Liabilities held for sal~~~~e on the balance sheet at October 2, 2005, relate primarily to assets in Europe that~~first quarter of 2006 we ~~intend to sell but that are not~~recorded a tax benefit of approximately $441 million related to ~~Discontinued operations~~. the resolution of this issue.
The IRS is currently conducting audits of the Pfizer Inc. tax returns for the years 2002, 2003 and 2004. The 2005 and 2006 tax years are also currently under audit under the IRS Compliance Assurance Process, a recently introduced real time audit process.
With respect to Pharmacia Corporation, the IRS has completed audits of the tax returns for the years 2000 through 2002 and is currently conducting an audit for the 2003 tax year through the date of the merger with Pfizer (April 16, 2003).
We periodically reassess the likelihood of assessments resulting from audits of federal, state and foreign income tax filings. We believe that our accruals for tax liabilities are adequate for all open years.
Note 8:8.  Comprehensive Income/(Expense)
The components of comprehensive income/(expense) follow:
Three Months Ended
Nine Months Ended
First Quarter
(millions of dollars)
Oct. 2,
2005
Sept. 26,
2004
Oct. 2,
2005
Sept. 26,
2004
2006
2005

Net income
$
1,589
$
3,341
$
5,352
$
8,536
$
4,111
$
301
Other comprehensive income/(expense):
Net unrealized gain/(loss) on available-for-sale securities arising during the period - net of tax
7
(30)
(98)
153
Currency translation adjustment and other
(183)
689
(1,195)
451
310
(277)
Net unrealized gains/(losses) on derivative financial instruments
71
(19)
Net unrealized gains/(losses) on available-for-sale securities
3
(71)
Minimum pension liability
(12)
(2)
Total other comprehensive income/(expense)
(176)
659
(1,293)
604
372
(369)
Total comprehensive income/(expense)
$
1,413
$
4,000
$
4,059
$
9,140
$
4,483
$
(68)
Note 9:9.  Financial Instruments
A.  Long-Term Debt
On February 22, 2006, we issued the following Japanese yen fixed-rate bonds, to be used for general corporate purposes:
•
$508 million equivalent, senior unsecured notes, due February 2011, which pay interest semi-annually, beginning on August 22, 2006, at a rate of 1.2%; and
•
$466 million equivalent, senior unsecured notes, due February 2016, which pay interest semi-annually, beginning on August 22, 2006, at a rate of 1.8%.
The notes were issued under a $5 billion debt shelf registration filed with the SEC in November 2002. As of April 2, 2006, we had the ability to borrow $1 billion by issuing debt securities under our existing debt shelf registration statement filed with the SEC in November 2002.
B.  Derivative Financial Instruments and Hedging Activities
During the first ~~nine months~~quarter of ~~2005,~~2006, we entered into the following incremental ~~or new derivative and~~ hedging activities:
Instrument^(a)
Primary
Balance Sheet
Caption
^(b)

Hedge
Type
^(c)

Hedged Item
Notional Amount as of
April 2, 2006
(millions of dollars)
Maturity Date


LT yen debt
LTD
NI
Yen net investments
                $510
2011
LT yen debt
LTD
NI
Yen net investments
                  467
2016
~~Financial Instrument~~
~~Hedge Type~~
~~Hedged or Offset Item~~
~~Notional Amount~~
~~(millions of dollars)~~
~~Maturity Date~~
~~Swaps~~
~~Net investment~~
~~Euro net investments~~
             ~~$1,255~~
~~Sept.-Oct. 2006~~
~~Forward-exchange contracts~~
--
~~Short-term foreign currency assets and liabilities~~^(a)
                  ~~674~~
~~Through 2006~~
~~Forward-exchange contracts~~
~~Cash flow~~
~~Euro available-for-sale investments~~
                  ~~493~~
~~Through 2006~~
~~Forward-exchange contracts~~
~~Cash flow~~
~~Danish krone available-for-sale investments~~
                  ~~172~~
~~Through 2006~~
^(a)
~~Forward-exchange contracts~~LT yen debt = Long-term yen debt
^(b)
The primary balance sheet caption indicates the financial statement classification of the fair value amount associated with the financial instrument used to ~~offset short-term~~hedge foreign ~~currency assets and liabilities were primarily for intercompany transactions in euros, Australian dollars, U.K. pounds, Swedish krona and Canadian dollars for the nine months ended October 2, 2005.~~exchange risk. LTD = Long-term debt
^(c)
NI = Net investment hedge
These foreign exchange ~~derivatives~~debt instruments serve to protect ~~net income and~~ net investments against the impact of the translation into U.S. dollars of certain foreign exchange denominated transactions.
There was no material ineffectiveness in any hedging relationship reported in earnings in the first ~~nine months~~quarter of ~~2005.~~2006.
~~Long-Term Debt~~
~~In July 2005, we decided to exercise Pfizer's option to call, at par-value plus accrued interest, $1 billion of senior unsecured floating-rate notes, which were included in~~ ~~Long-term debt~~ ~~at December 31, 2004. Notice to call was given to the Trustees and the notes were redeemed in September 2005.~~
Note ~~10:~~10.  Inventories
The components of inventories follow:
(millions of dollars)
Oct. 2,
2005
Dec. 31,
2004

Finished goods
$
2,600
$
2,643
Work-in-process
2,714
2,703
Raw materials and supplies
1,242
1,314
Total inventories
$
6,556
$
6,660
~~A reclassification was made in 2004 from~~ ~~Finished goods~~ to ~~Work-in-process~~ ~~to better reflect the stage of completion.~~
(millions of dollars)
April 2,
2006
Dec. 31,
2005

Finished goods
$
2,559
$
2,303
Work-in-process
2,905
2,379
Raw materials and supplies
1,199
1,357
Total inventories^(a)
$
6,663
$
6,039

^(a)
Increase primarily due to the acquisition of sanofi-aventis' Exubera inventory, the build-up of inventory in advance of product launches and the impact of foreign exchange.

Note ~~11:~~11.  Goodwill and Other Intangible Assets
A.  Goodwill
The changes in the carrying amount of goodwill by segment for the ~~nine months ended October 2, 2005~~first quarter of 2006 follow:
(millions of dollars)
Human
Health
Consumer
Healthcare
Animal
Health
Other
Total

Balance, December 31, 2004
$
20,966
$
2,701
$
79
$
10
$
23,756
Other^(a)
13
62
(25)
--
50
Balance, October 2, 2005
$
20,979
$
2,763
$
54
$
10
$
23,806
(millions of dollars)
Human
Health
Consumer
Healthcare
Animal
Health
Other
Total

Balance, December 31, 2005
$
20,919
$
2,789
$
56
$
10
$
23,774
Additions^(a)
166
--
--
--
166
Other^(b)
(204)
5
--
--
(199)
Balance, April 2, 2006
$
20,881
$
2,794
$
56
$
10
$
23,741

^(a)
Primarily related to Exubera.
^(b)
Includes a reduction to goodwill related to the ~~acquisition~~resolution of ~~Vicuron,~~certain tax positions, partially offset by the impact of foreign ~~exchange and reductions to goodwill as a result of adjusting certain purchase accounting liabilities.~~exchange.
B.  Other Intangible Assets
The components of identifiable intangible assets, primarily included in our Human Health segment, follow:
Oct. 2, 2005
Dec. 31, 2004
April 2, 2006
Dec. 31, 2005
(millions of dollars)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization

Finite-lived intangible assets:
Developed technology rights
$
31,102
$
(8,070)
$
33,137
$
(5,967)
$31,848
$ (9,662)
$30,781
$(8,819)
Brands
1,057
(48)
1,037
(14)
1,024
(72)
1,022
(60)
License agreements
165
(28)
158
(17)
164
(34)
160
(30)
Trademarks
157
(92)
134
(90)
152
(91)
152
(91)
Other^(a)
436
(205)
390
(186)
504
(228)
452
(207)
Total amortized finite-lived intangible assets
32,917
(8,443)
34,856
(6,274)
33,692
(10,087)
32,567
(9,207)
Indefinite-lived intangible assets:
Brands
3,898
--
4,012
--
3,871
--
3,864
--
License agreements
316
--
356
--
302
--
296
--
Trademarks
227
--
235
--
227
--
227
--
Other^(b)
61
--
66
--
68
--
39
--
Total indefinite-lived intangible assets
4,502
--
4,669
--
4,468
--
4,426
--
Total identifiable intangible assets
$
37,419
$
(8,443)
$
39,525
$
(6,274)
$38,160
$(10,087)
$36,993
$(9,207)

Total identifiable intangible assets, less accumulated amortization
$
~~28,976~~28,073
$
~~33,251~~27,786

^(a)
Includes patents, non-compete agreements, customer contracts and other intangible assets.
^(b)
Includes pension-related intangible assets.
In the first ~~nine months~~quarter of 2006, we acquired the sanofi-aventis worldwide rights, including patent rights and production technology, to manufacture and sell Exubera. In connection with the acquisition, we recorded an intangible asset for developed technology rights of approximately $1.0 billion. The amortization of these developed technology rights will primarily be included in Cost of Sales.
In the first quarter of 2005, we recorded an impairment charge of $1.1 billion in Other (income)/deductions- net related to the developed technology rights for Bextra, a selective COX-2 inhibitor ~~(see Note 2,~~ ~~Asset Impairment Charge and Other Costs Associated~~(included in our Human Health segment) in connection with the ~~Suspension~~decision to suspend sales and marketing of ~~Bextra Sales~~~~) which was~~Bextra. In addition, in connection with the suspension, we recorded $10 million related to the write-off of machinery and equipment included in Other (income)/deductions - net.; $56 million in write-offs of inventory and exit costs, included in Cost of sales; $2 million related to the costs of administering the suspension of sales, included in Selling, informational and administrative expenses; and $71 million for an estimate of customer returns, primarily included against Revenues.
Amortization expense related to acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute our products are included in Amortization of intangible assets as they benefit multiple business functions. Amortization expense related to acquired intangible assets that are associated with a single function are included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate. Total amortization expense for finite-lived intangible assets was ~~$859~~$855 million for the ~~three months ended October 2, 2005~~first quarter of 2006 and ~~September 26, 2004 and $2.6 billion and $2.5 billion~~$901 million for the ~~nine months ended October 2, 2005 and September 26, 2004.~~first quarter of 2005.
The annual amortization expense expected for the fiscal years ~~2005~~2006 through ~~2010~~2011 is ~~$3.5 billion in 2005,~~ $3.4 billion in ~~2006 and 2007,~~2006; $3.3 billion in 2007; $2.7 billion in ~~2008~~2008; and ~~$2.5~~$2.4 billion in 2009, 2010 and ~~2010.~~2011.
Note ~~12:~~12.  Benefit Plans
The components of net periodic benefit cost of the U.S. and international pension plans and the postretirement plans for the ~~three months ended October 2,~~first quarter of 2006 and 2005 ~~and September 26, 2004~~ follow:

Pension Plans
U.S. Qualified
U.S. Supplemental
(Non-Qualified)
International
Postretirement Plans
(millions of dollars)
2005
2004
2005
2004
2005
2004
2005
2004

Service cost
$
80
$
71
$
9
$
8
$
71
$
67
$
10
$
7
Interest cost
104
98
15
15
76
71
28
18
Expected return on plan assets
(148)
(143)
--
--
(77)
(74)
(6)
(4)
Amortization of:
Prior service costs/(gains)
4
5
--
--
(1)
3
1
--
Net transition obligation
--
--
--
--
1
--
--
--
Actuarial losses
26
25
10
9
23
15
4
--
Curtailments and settlements - net
3
--
--
--
1
18
--
--
Special termination benefits
1
--
--
--
1
--
1
--
Net periodic benefit costs
$
70
$
56
$
34
$
32
$
95
$
100
$
38
$
21
~~The components of net periodic benefit cost of the U.S. and international pension plans and the postretirement plans for the nine months ended October 2, 2005 and September 26, 2004 follow:~~
Pension Plans
Pension Plans
U.S. Qualified
U.S. Supplemental
(Non-Qualified)
International
Postretirement Plans
U.S. Qualified
U.S. Supplemental
(Non-Qualified)
International
Postretirement Plans
(millions of dollars)
2005
2004
2005
2004
2005
2004
2005
2004
2006
2005
2006
2005
2006
2005
2006
2005

Service cost
$
239
$
215
$
28
$
25
$
224
$
197
$
29
$
27
$
94
$
79
$
11
$
9
$
74
$
77
$
12
$
9
Interest cost
310
293
44
44
234
214
84
80
112
104
15
15
74
80
32
28
Expected return on plan assets
(445)
(429)
--
--
(238)
(215)
(17)
(15)
(161)
(148)
--
--
(77)
(81)
(8)
(6)
Amortization of:
Prior service costs/(gains)
11
13
1
1
(2)
7
1
1
Net transition obligation
--
--
--
--
2
1
--
--
Prior service costs/(credits)
2
4
--
--
--
(1)
--
1
Actuarial losses
77
74
29
27
71
42
14
12
31
26
11
10
26
25
9
5
Curtailments and settlements - net
3
--
--
--
11
(1)
--
--
4
--
(1)
--
2
--
3
--
Special termination benefits
1
--
--
--
11
--
1
--
6
--
--
--
4
7
3
--
Net periodic benefit costs
$
196
$
166
$
102
$
97
$
313
$
245
$
112
$
105
$
88
$
65
$
36
$
34
$
103
$
107
$
51
$
37
For the first ~~nine months~~quarter of ~~2005,~~2006, we contributed from the Company's general assets, ~~$52 million to our U.S. qualified pension plans, $301~~$91 million to our international pension plans, ~~$124~~$40 million to our U.S. supplemental (non-qualified) pension plans and ~~$123~~$48 million to our postretirement plans. The Company made no contributions to our U.S. qualified pension plans during the first quarter of 2006. As of ~~October~~April 2, ~~2005,~~2006, we expect to contribute, from the Company's general assets during ~~2005,~~2006, a total (inclusive of amounts contributed during the first ~~nine months~~quarter of ~~2005)~~2006) of ~~$53~~$3 million to our U.S. qualified pension plans, ~~$396~~$343 million to our international pension plans, ~~$137~~$115 million to our U.S. supplemental (non-qualified) pension plans and ~~$166~~$159 million to our postretirement plans. The contributions from the Company's general assets include direct employer benefit payments.
Note 13.  Share-Based Payments
Our compensation programs can include share-based payments. In 2006 and 2005, the primary share-based awards and their generalterms and conditions are as follows:
•
Stock options, which entitle the holder to purchase, at the end of a vesting term, a specified number of shares of Pfizer common stock at a price per share set equal to the market price of Pfizer common stock on the date of grant.
•
Restricted stock units (RSUs), which entitle the holder to receive, at the end of a vesting term, a specified number of shares of Pfizer common stock, including shares resulting from dividend equivalents paid on such RSUs.
•
Performance share awards (PSAs) and performance-contingent share awards (PCSAs), which entitle the holder to receive, at the end of a vesting term, a number of shares of Pfizer common stock, within a range of shares from zero to a specified maximum, calculated using a non-discretionary formula, which measures Pfizer's performance relative to an industry peer group.
•
Restricted stock grants, which entitle the holder to receive, at the end of a vesting term, a specified number of shares of Pfizer common stock, and which also entitle the holder to receive dividends paid on such grants.
The Company's shareholders approved the Pfizer Inc. 2004 Stock Plan (the 2004 Plan) at the Annual Meeting of Shareholders held on April 22, 2004 and, effective upon that approval, new stock option and other share-based awards may be granted only under the 2004 Plan. The 2004 Plan allows a maximum of 3 million shares to be awarded to any employee per year and 475 million shares in total. Whole share awards count as three shares and stock options count as one share under the 2004 Plan toward the maximums.
In the past, we had various employee stock and incentive plans under which stock options and other share-based awards were granted. Stock options and other share-based awards that were granted under prior plans and were outstanding on April 22, 2004 continue in accordance with the terms of the respective plans.
As of April 2, 2006, 294 million shares were available for award, which include 17 million shares available for award under the legacy Pharmacia Long-Term Incentive Plan, which reflects award cancellations returned to the pool of available shares for legacy Pharmacia commitments.
Although not required to do so, historically, we have used authorized and unissued shares and shares held in our Employee Benefit Trust to satisfy our obligations under these programs.
A.  Impact on Net Income
Our net income for the first quarter of 2006 and 2005 includes $172 million and $22 million of total compensation cost for share-based payment arrangements ($124 million and $15 million, net of tax). Amounts capitalized as part of inventory cost were not significant. In the first quarter of 2006, the impact of modifications under the AtS productivity initiative to share-based awards was not significant and, in 2005, the impact of modifications under the Pharmacia restructuring program was not significant. Generally, these modifications resulted in an acceleration of vesting either in accordance with plan terms or at management's discretion.
B.  Stock Options
Stock options, which entitle the holder to purchase, at the end of a vesting term, a specified number of shares of Pfizer common stock at a price per share set equal to the market price of Pfizer common stock on the date of grant, are accounted for at fair value at the date of grant in the income statement beginning in 2006. These fair values are generally amortized on an even basis over the vesting term into Cost of sales, Selling, informational and administrative expense and Research and development expenses, as appropriate.
In 2005 and earlier years, stock options were accounted for under APB No. 25 using the intrinsic value method in the income statement and fair value information was disclosed. In these disclosures of fair value, we allocated stock option compensation expense based on the nominal vesting period, rather than the expected time to achieve retirement eligibility. In 2006, we changed our method of allocation and we allocate stock option compensation expense based on the substantive vesting period for all new awards, while continuing to allocate outstanding nonvested awards not yet recognized as of December 31, 2005 under the nominal vesting period method. Specifically, under this prospective change in accounting policy, compensation expense related to stock options granted prior to 2006 that are subject to accelerated vesting upon retirement eligibility is being recognized over the vesting term of the grant, even though the service period after retirement eligibility is not considered to be a substantive vesting requirement. The impact of this change was not significant.
All employees may receive stock option grants. In virtually all instances, stock options vest after three years of continuous service from the grant date and have a contractual term of ten years; for certain members of management, vesting may occur ratably over an extended period of up to five years. In all cases, even for stock options that are subject to accelerated vesting upon voluntary retirement, stock options must be held for at least one year from grant date before any vesting may occur.
The fair value of each stock option grant is estimated on the grant date using the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions noted in the following table, shown at their weighted-average values, as follows:
First Quarter
2006
2005


Expected dividend yield ^(a)
3.66%

2.90%
Risk-free interest rate ^(b)
4.59%

3.96%
Expected stock price volatility ^(c)
24.50%

21.93%
Expected term until exercise ^(d) (years)
6.00

5.75
^(a)
Determined using a constant dividend yield during the expected term of the option.
^(b)
Determined using the extrapolated yield on U.S. Treasury zero-coupon issues.
^(c)
Determined using implied volatility, after consideration of historical volatility.
^(d)
Determined using historical exercise and post-vesting termination patterns.
In the first quarter of 2006, we changed our method of estimating expected stock price volatility to reflect market-based inputs under emerging stock option valuation considerations. We use the implied volatility in a long-term traded option, after consideration of historical volatility. In the first quarter of 2005, we used an average term structure of volatility quoted to us by financial institutions, after consideration of historical volatility.
The following table summarizes stock option activity during the first quarter of 2006:
Shares (thousands)
Weighted-
Average
Exercise
Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
(millions)
Outstanding, January 1, 2006
627,404
$33.51
Granted
68,539
26.20
Exercised
(10,246)
15.42
Forfeited
(2,489)
31.58
Cancelled
(6,890)
35.78
Outstanding, April 2, 2006
676,318
33.03
5.7
$427
Vested and expected to vest^(a), April 2, 2006
666,752
33.06
5.6
427
Exercisable, April 2, 2006
459,142
34.12
4.3
427
^(a)
The number of options expected to vest takes into account an estimate of expected forfeitures.
The weighted-average grant date fair value per stock option in the first quarter of 2006 and 2005 was $5.42 and $5.15. The aggregate intrinsic value of stock options exercised in the first quarter of 2006 and 2005 was $105 million and $86 million. Cash received from the exercise of stock options in the first quarter of 2006 and 2005 was $159 million and $102 million, and the related tax benefits realized were $33 million and $23 million. As of April 2, 2006, the total compensation cost related to nonvested stock option awards not yet recognized was $680 million, pre-tax, and the weighted-average period over which the cost is expected to be recognized is 1.7 years.
C.  Restricted Stock Units
RSUs, which entitle the holder to receive, at the end of a vesting term, a specified number of shares of Pfizer common stock, including shares resulting from dividend equivalents paid on such RSUs, are accounted for at fair value at the date of grant. Most RSUs vest in substantially equal portions each year over five years; the fair value related to each year's portion is then amortized evenly into Cost of sales, Selling, informational and administrative expenses and Research and development expenses, as appropriate.
All employees may receive RSU grants. In most instances, as per above, RSUs vest over five years of continuous service from the grant date and have a contractual term of five years; for certain members of senior and key management, vesting may occur after three years of continuous service.
The fair value of each RSU grant is estimated on the grant date using the average price of Pfizer common stock on the date of grant.
The following table summarizes RSU activity during the first quarter of 2006:
(thousands of shares)
Shares

Weighted-Average
Grant Date Fair
Value Per Share

Nonvested, January 1, 2006
12,803
$26.89
Granted
12,635
26.15
Vested
(3,268)
27.28
Reinvested dividend equivalents
104
25.77
Forfeited
(337)
26.32
Nonvested, April 2, 2006
21,937
26.38
The weighted-average grant date fair value per RSU in the first quarter of 2005 was $26.21. The total fair value of shares vested during the first quarter of 2006 was $89 million. Generally, a major RSU program was initiated in 2005 and, therefore, no significant shares vested in the first quarter of 2005. As of April 2, 2006, the total compensation cost related to nonvested RSU awards not yet recognized was $458 million, pre-tax, and the weighted-average period over which the cost is expected to be recognized is 4.5 years.
D.  Performance Share Awards (PSAs) and Performance-Contingent Share Awards (PCSAs)
PSAs in 2006 and PCSAs prior to 2006 entitle the holder to receive, at the end of a vesting term, a number of shares of Pfizer common stock, within a specified range of shares, calculated using a non-discretionary formula, which measures Pfizer's performance relative to an industry peer group. PSAs are accounted for at fair value at the date of grant in the income statement beginning with grants in 2006. Further, PSAs are generally amortized on an even basis over the vesting term into Cost of sales, Selling, informational and administrative expense and Research and development expenses, as appropriate. For grants in 2005 and earlier years, PCSA grants are accounted for using the intrinsic value method in the income statement.
Senior and other key members of management may receive PSA and PCSA grants. In most instances, PSA grants vest after three years and PCSA grants vest after five years of continuous service from the grant date. In certain instances, PCSA grants vest over two to four years of continuous service from the grant date. The vesting terms are equal to the contractual terms.
The 2004 Plan limitations on the maximum amount of share-based awards apply to all awards including PCSA and PSA grants. In 2001, our shareholders approved the 2001 Performance-Contingent Share Award Plan (the 2001 Plan), allowing a maximum of 12.5 million shares to be awarded to all participants. This maximum was applied to awards for performance periods beginning after January 1, 2002 through 2004. The 2004 Plan is the only plan under which share-based awards may be granted in the future.
PSA grants made in 2006 will vest and be paid based on a non-discretionary formula, which measures our performance using relative total shareholder return over a performance period relative to an industry peer group. If our minimum performance in the measure is below the threshold level relative to the peer group, then no shares will be paid. PCSA grants made prior to 2006 will vest and be paid based on a non-discretionary formula, which measures our performance using relative total shareholder return and relative change in diluted earnings per common share (EPS) over a performance period relative to an industry peer group. If our minimum performance in the measures is below the threshold level relative to the peer group, then no shares will be paid.
As of January 1, 2006, we measure PSA grants at fair value using the average price of Pfizer common stock on the date of grant times the target number of shares. The target number of shares is determined by reference to the fair value of share-based awards to similar employees in the industry peer group. We measure PCSA grants at intrinsic value whereby the probable award was allocated over the term of the award, then the resultant shares were adjusted to fair value of our common stock at each accounting period until date of payment.
The following table summarizes PSA and PCSA activity during the first quarter of 2006, with the shares granted representing the maximum award that could be achieved:
(thousands of shares)
Shares

Weighted-Average
Grant Date
Value Per Share

Nonvested, January 1, 2006
13,366
$23.32
Granted
1,533
26.20
Vested
(1,583)
26.20
Forfeited^(a)
(1,513)
26.20
Nonvested, April 2, 2006
11,803
25.09
^(a)
Forfeited includes 345 thousand shares that were forfeited by retirees. At the discretion of the Compensation Committee, of the Company's Board of Directors, $9 million in cash was paid to such retirees, which amount was equivalent to the fair value of the forfeited shares pro rated for the portion of the performance period that was completed prior to retirement.
The weighted-average grant date intrinsic value per PCSA in the first quarter of 2005 was $26.15. The total intrinsic value of PCSA grants vested during the first quarter of 2006 and 2005 was $50 million and $56 million. As of April 2, 2006, the total compensation cost related to nonvested PSA grants not yet recognized was $18 million, pre-tax, and the weighted-average period over which the cost is expected to be recognized is 2.75 years.
We entered into forward-purchase contracts that partially offset the potential impact on net income of our obligation under the pre-2006 PCSAs. At settlement date we will, at the option of the counterparty to each of the contracts, either receive our own stock or settle the contracts for cash. Other contract terms are as follows:
Per Share
Maximum
Maturity (years)
(thousands of shares)
Purchase
Price
April 2,
2006
Dec. 31,
2005

3,051
$33.85
0.6
--
3,051
33.84
--
0.4
The financial statements include the following items related to these contracts:
Prepaid expenses and taxes includes:
fair value of these contracts
Other (income)/deductions - net includes:
changes in the fair value of these contracts
E.  Restricted Stock
Restricted stock grants, which entitle the holder to receive, at the end of a vesting term, a specified number of shares of Pfizer common stock, and which also entitle the holder to receive dividends paid on such grants, are accounted for at fair value at the date of grant.
Senior and key members of management received restricted stock awards prior to 2005. In most instances, restricted stock grants vest after three years of continuous service from the grant date. The vesting terms are equal to the contractual terms.
These awards have not been significant.
F.  Transition Information
The following table shows the effect on results for the first quarter of 2005 as if we had applied the fair-value-based recognition provisions of SFAS 123R to measure stock-based compensation expense for the option grants:
(millions of dollars, except per common share data)
First
Quarter
2005
Net income available to common shareholders used in the calculation of basic earnings per common share:
As reported under GAAP^(a)
$
299
Compensation expense - net of tax^(b)
(147)
Pro forma
$
152
Basic earnings per common share:
As reported under GAAP^(a)
$
0.04
Compensation expense - net of tax^(b)
(0.02)
Pro forma
$
0.02
Net income available to common shareholders used in the calculation of diluted earnings per common share:
As reported under GAAP^(a)
$
300
Compensation expense - net of tax^(b)
(147)
Pro forma
$
153
Diluted earnings per common share:
As reported under GAAP^(a)
$
0.04
Compensation expense - net of tax^(b)
(0.02)
Pro forma
$
0.02
^(a)
Includes stock-based compensation expense, net of related tax effects, of $15 million.
^(b)
Pro forma compensation expense related to stock options that are subject to accelerated vesting upon retirement is recognized over the period of employment up to the vesting date of the grant.
Note ~~13:~~14.  Earnings Per Common Share
Basic and diluted ~~earnings per common share (EPS)~~EPS were computed using the following common share data:
Three Months Ended
Nine Months Ended
First Quarter
(millions)
Oct. 2,
2005
Sept. 26,
2004
Oct. 2,
2005
Sept. 26,
2004
2006
2005

EPS Numerator - Basic:
Income from continuing operations
$
1,602
$
3,298
$
5,345
$
8,461
$
4,108
$
272
Less: Preferred stock dividends - net of tax
1
1
4
4
1
2
Income available to common shareholders from continuing operations
1,601
3,297
5,341
8,457
4,107
270
Discontinued operations - net of tax
(13)
43
7
75
3
29
Net income available to common shareholders
$
1,588
$
3,340
$
5,348
$
8,532
$
4,110
$
299

EPS Denominator - Basic:
Weighted-average number of common shares outstanding
7,333
7,501
7,372
7,554
7,314
7,416

EPS Numerator - Diluted:
Income from continuing operations
$
1,602
$
3,298
$
5,345
$
8,461
$
4,108
$
272
Less: ESOP contribution - net of tax
1
1
3
5
1
1
Income available to common shareholders from continuing operations
1,601
3,297
5,342
8,456
4,107
271
Discontinued operations - net of tax
(13)
43
7
75
3
29
Net income available to common shareholders
$
1,588
$
3,340
$
5,349
$
8,531
$
4,110
$
300

EPS Denominator - Diluted:
Weighted-average number of common shares outstanding
7,333
7,501
7,372
7,554
7,314
7,416
Common share equivalents: stock options, restricted stock units, stock issuable under employee compensation plans and convertible preferred stock
49
68
52
88
Common share equivalents: stock options, stock issuable under employee compensation plans and convertible preferred stock
10
58
Weighted-average number of common shares outstanding and common share equivalents
7,382
7,569
7,424
7,642
7,324
7,474
Outstanding stock options, representing about ~~563~~617 million shares and ~~513~~579 million shares of common stock during the ~~three-month~~first quarter of 2006 and ~~nine-month periods ended October 2,~~ 2005, ~~and about 391 million and 319 million shares of common stock during the three-month and nine-month periods ended September 26, 2004,~~ had exercise prices greater than the average market price of our common stock. These options were excluded from the computation of diluted EPS for these periods because their inclusion would have had an ~~antidilutive~~anti-dilutive effect.
Also, in the diluted computation, income from continuing operations and net income are reduced by the incremental contribution to the ESOPs, which were acquired as part of our Pharmacia acquisition. This contribution is the after-tax difference between the income that the ESOPs would have received in preferred stock dividends and the dividend on the common shares assumed to have been outstanding.
Note ~~14:~~15.  Segment Information
We operate in the following business segments:
Human Health

•
The Human Health segment, which represents our pharmaceutical business, includes treatments for cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye disease, endocrine disorders and allergies. The Human Health segment also includes our contract manufacturing and bulk pharmaceutical chemicals business.

Consumer Healthcare

•
The Consumer Healthcare segment includes self-medications for oral care, ~~upper respiratory~~upper-respiratory health, tobacco dependence, gastrointestinal health, skin care, eye care and hair growth.

Animal Health

•
The Animal Health segment includes prevention and treatments for diseases in livestock and companion animals.
Segment profit/(loss) is measured based on income from continuing operations before provision for taxes on income, minority interests and certain costs, such as significant impacts of purchase accounting for acquisitions and ~~restructuring charges~~merger-related costs and ~~merger-related costs.~~costs related to our AtS productivity initiative. This methodology is utilized by management to evaluate each business. Certain income/(expense) items that are excluded from the operating segments' profit/(loss) are considered corporate items and therefore are included in Corporate/Other.
Revenues and profit/(loss) by segment for the ~~three months~~first quarter of 2006 and ~~nine months ended October 2,~~ 2005, ~~and September 26, 2004,~~ follow:
Three Months Ended
Nine Months Ended
First Quarter
(millions of dollars)
Oct. 2,
2005
Sept. 26,
2004
Oct. 2,
2005
Sept. 26,
2004
2006
2005


Revenues:
Human Health
$
10,552
$
11,288
$
32,629
$
33,033
$
11,113
$
11,517
Consumer Healthcare
921
851
2,835
2,524
900
945
Animal Health
503
475
1,576
1,387
511
496
Corporate/Other^(a)
213
217
665
649
136
133
Total revenues
$
12,189
$
12,831
$
37,705
$
37,593
$
12,660
$
13,091

Profit/(loss)
Segment profit/(loss)^(b)
Human Health
$
4,876
$
5,332
$
14,811
$
15,269
$
5,745
$
5,378
Consumer Healthcare
169
170
457
483
146
159
Animal Health
85
82
288
237
99
81
Corporate/Other^(a)
(2,933)
^(b)
(1,633)
^(c)
(7,387)
^(b)
(5,481)
^(c)
(1,563)
^(c)
(2,708)
^(d)
Total profit/(loss)
$
2,197
$
3,951
$
8,169
$
10,508
$
4,427
$
2,910

^(a)
~~Includes certain income/(expense) items that are excluded from~~Corporate/Other includes the ~~operating segment profit/(loss) that are considered corporate items and, therefore, are included in~~manufacturing of empty two-piece gelatin capsules. Corporate/Other~~. These items include~~ also includes interest income/(expense), corporate expenses (e.g., corporate administration costs), other income/(expense) ~~items,~~(e.g., realized gains and losses attributable to our investments in debt and equity securities), certain ~~equity-based~~performance-based compensation expenses not allocated to the business segments, significant impacts of purchase accounting for acquisitions, certain milestone payments, ~~Adapting to Scale restructuring charges and implementation costs,~~ merger-related costs, ~~and~~ intangible asset ~~impairments.~~impairments and costs related to our AtS productivity initiative.
^(b)
~~For the three months~~Segment profit/(loss) equals income from continuing operations before provision for taxes on income and ~~nine months ended October 2, 2005,~~ ~~Corporate/Other~~ ~~includes (i)~~minority interests. Certain costs, such as significant impacts of purchase accounting for acquisitions, ~~of $2.2 billion and $4.1 billion, including acquired in-process research and development, incremental intangible asset amortization and other charges, (ii)~~ merger-related costs ~~of $154 million~~ and ~~$622 million, (iii) restructuring charges and implementation~~ costs ~~associated with the Adapting~~related to ~~Scale~~our AtS productivity initiative, ~~of $257 million and $310 million and (iv) costs associated with the suspension of Bextra's sales and marketing of $3 million and $1.2 billion.~~are included in Corporate/Other only. This methodology is utilized by management to evaluate each business.
^(c)
For the ~~three months and nine months ended September 26, 2004,~~first quarter of 2006, Corporate/Other includes (i) significant impacts of purchase accounting for acquisitions of ~~$827~~$812 million, ~~and $3.4 billion,~~ including ~~acquired in-process research and development,~~ incremental intangible asset amortization and other charges, (ii) merger-related costs of ~~$190~~$5 million, (iii) restructuring charges and implementation costs associated with the AtS productivity initiative of $487 million, (iv) gain on disposals of investments of $51 million and ~~$726~~(v) research and development milestone due to us from sanofi-aventis of approximately $118 million.
^(d)
For the first quarter of 2005, Corporate/Other includes (i) significant impacts of purchase accounting for acquisitions of $857 million, including acquired in-process R&D charges, incremental intangible asset amortization and other charges, (ii) merger-related costs of $219 million and (iii) costs associated with the ~~operating results~~suspension of ~~a divested legacy Pharmacia research facility~~Bextra's sales and marketing of ~~$64 million in the first nine months of 2004 and a litigation-related charge of $369 million in the third quarter of 2004.~~$1.2 billion.
Revenues for each group of similar products follow:

Three Months Ended
Nine Months Ended
(millions of dollars)
Oct. 2,
2005
Sept. 26,
2004
%
Change
Oct. 2,
2005
Sept. 26,
2004
%
Change

HUMAN HEALTH
Cardiovascular and metabolic diseases
$
4,467
$
4,251
5%
$
13,664
$
12,335
11%
Central nervous system disorders
1,590
2,090
(24)
4,718
6,072
(22)
Arthritis and pain
545
1,274
(57)
1,729
3,596
(52)
Infectious and respiratory diseases
1,073
1,015
6
3,657
3,375
8
Urology
629
647
(3)
1,958
1,865
5
Oncology
507
368
38
1,499
1,049
43
Ophthalmology
338
304
11
1,011
874
16
Endocrine disorders
262
226
16
783
668
17
All other
874
919
(5)
2,853
2,723
5
Alliance revenue
267
194
38
757
476
59
Total Human Health
10,552
11,288
(7)
32,629
33,033
(1)
CONSUMER HEALTHCARE
921
851
8
2,835
2,524
12
ANIMAL HEALTH
503
475
6
1,576
1,387
14
OTHER
213
217
(2)
665
649
2
Total revenues
$
12,189
$
12,831
(5)
$
37,705
$
37,593
--
Three Months Ended
(millions of dollars)
April 2,
2006
April 3,
2005


% Change

HUMAN HEALTH
Cardiovascular and metabolic diseases
$
4,748
$
4,726
--%
Central nervous system disorders
1,644
1,591
3
Arthritis and pain
640
637
--
Infectious and respiratory diseases
937
1,482
(37)
Urology
663
702
(6)
Oncology
470
479
(2)
Ophthalmology
337
333
1
Endocrine disorders
246
257
(4)
All other
1,104
1,068
3
Alliance revenue
324
242
34
Total Human Health
11,113
11,517
(4)
CONSUMER HEALTHCARE
900
945
(5)
ANIMAL HEALTH
511
496
3
OTHER
136
133
1
Total revenues
$
12,660
$
13,091
(3)
REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Pfizer Inc:
We have reviewed the condensed consolidated balance sheet of Pfizer Inc and Subsidiary Companies as of ~~October~~April 2, ~~2005,~~2006, the related condensed consolidated statements of income for the three-month ~~and nine-month~~ periods ended ~~October~~April 2, ~~2005~~2006 and ~~September 26, 2004,~~April 3, 2005, and the related condensed consolidated statements of cash flows for the ~~nine-month~~three-month periods ended ~~October~~April 2, ~~2005~~2006 and ~~September 26, 2004.~~April 3, 2005. 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, ~~2004,~~2005, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 24, ~~2005,~~2006, 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, ~~2004,~~2005, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
KPMG LLP
New York, New York
~~November 9, 2005~~May 8, 2006
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations (MD&A)
Introduction
Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and footnotes to assist readers in understanding Pfizer's results of operations, financial condition and cash flows. The MD&A is organized as follows:
•
Overview of Consolidated Operating Results. This section, beginning on page 23, provides a general description of Pfizer's business; discusses significant acquisitions made by Pfizer during the first quarter of 2006; provides information about our operating environment; and summarizes our productivity initiative.
•
Revenues. This section, beginning on page 25, provides an analysis of our products and revenues for the first quarters of 2006 and 2005, as well as an overview of important product developments.
•
Costs and Expenses. This section, beginning on page 34, provides a discussion about our costs and expenses.
•
Provision for Taxes on Income. This section, beginning on page 36, provides a discussion of items impacting our tax provision for the periods presented.
•
Adjusted Income. This section, beginning on page 36, provides a discussion of an alternative view of performance used by management.
•
Financial Condition, Liquidity and Capital Resources. This section, beginning on page 40, provides an analysis of our balance sheets as of April 2, 2006 and December 31, 2005, and cash flows for the three months ended April 2, 2006 and April 3, 2005, as well as a discussion of our outstanding debt and commitments that existed as of April 2, 2006 and December 31, 2005. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer's future commitments.
•
Outlook. This section, beginning on page 43, provides a discussion of our expectations for 2006.
•
Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 44 provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements set forth in this report relating to the financial results, operations and business prospects of the Company. Such forward-looking statements are based on management's current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances. Also included in this section is a discussion of Legal Proceedings and Contingencies.
Components of the Condensed Consolidated Statement of Income follow:
Third Quarter
First Nine Months
First Quarter
(millions of dollars, except per common share data)
2005
2004
% Change
2005
2004
% Change
2006
2005
% Change

Revenues
$
12,189
$
12,831
(5)
$
37,705
$
37,593
--
$
12,660
$
13,091
(3)

Cost of sales
1,908
1,640
16
6,180
5,185
19
1,973
2,191
(10)
% of revenues
15.7
%
12.8
%
16.4
%
13.8
%
15.6
%
16.7
%

Selling, informational and administrative expenses
3,931
4,036
(3)
12,242
12,227
--
3,810
4,085
(7)
% of revenues
32.3
%
31.5
%
32.5
%
32.5
%
30.1
%
31.2
%

Research and development expenses
1,783
1,888
(6)
5,421
5,356
1
1,588
1,764
(10)
% of revenues
14.6
%
14.7
%
14.4
%
14.2
%
12.5
%
13.5
%

Amortization of intangible assets
836
843
(1)
2,576
2,496
3
828
882
(6)
% of revenues
6.9
%
6.6
%
6.8
%
6.6
%
6.5
%
6.7
%

Merger-related in-process research and development charges
1,390
--
*
1,652
955
73
--
2
*
% of revenues
11.4
%
--
4.4
%
2.5
%
--
%
0.02
%

Restructuring charges and merger-related costs
307
190
62
796
726
10
306
219
40
% of revenues
2.5
%
1.5
%
2.1
%
1.9
%
2.4
%
1.7
%

Other (income)/deductions - net
(163)
283
*
669
140
378
(272)
1,038
*

Income from continuing operations before provision for taxes on income and minority interests
2,197
3,951
(44)
8,169
10,508
(22)
4,427
2,910
52
% of revenues
18.0
%
30.8
%
21.7
%
28.0
%
35.0
%
22.2
%

Provision for taxes on income
591
650
(9)
2,815
2,040
38
315
2,635
(88)

Effective tax rate
26.9
%
16.5
%
34.4
%
19.4
%
7.1
%
90.6
%

53
Minority interests
4
3
9
7
33
4
3
16

Income from continuing operations
1,602
3,298
(51)
5,345
8,461
(37)
4,108
272
M+
% of revenues
13.1
%
25.7
%
14.2
%
22.5
%
32.5
%
2.1
%

Discontinued operations - net of tax
(13)
43
*
7
75
(91)
3
29
(90)

Net income
$
1,589
$
3,341
(52)
$
5,352
$
8,536
(37)
$
4,111
$
301
M+
% of revenues
13.0
%
26.0
%
14.2
%
22.7
%
32.5
%
2.3
%

Earnings per common share - Basic:
Income from continuing operations
$
0.22
$
0.44
(50)
$
0.73
$
1.12
(35)
$
0.56
$
0.04
M+
Discontinued operations - net of tax
--
0.01
*
--
0.01
*
--
--
*
Net income
$
0.22
$
0.45
(51)
$
0.73
$
1.13
(35)
$
0.56
$
0.04
M+

Earnings per common share - Diluted:
Income from continuing operations
$
0.22
$
0.43
(49)
$
0.72
$
1.11
(35)
$
0.56
$
0.04
M+
Discontinued operations - net of tax
--
0.01
*
--
0.01
*
--
--
*
Net income
$
0.22
$
0.44
(50)
$
0.72
$
1.12
(36)
$
0.56
$
0.04
M+

Cash dividends paid per common share
$
0.19
$
0.17
$
0.57
$
0.51
Cash dividends paid per common - share
$
0.24
$
0.19

* Calculation not meaningful
M+ Change greater than one thousand percent.
OVERVIEW OF OUR CONSOLIDATED OPERATING RESULTS
Our Business
We are a research-based, global pharmaceutical company that discovers, develops, manufactures and markets leading prescription medicines for humans and animals, as well as many of the world's best known consumer healthcare products. Our longstanding value proposition has been to prove that our medicines cure or treat disease, including symptoms and suffering, and this remains our core mission. We have expanded our value proposition to also show that ~~our medicines~~ not only can our medicines cure or treat disease, but that they can also ~~can~~ markedly improve health systems by reducing overall healthcare costs, improving societies' economic well-being and increasing effective prevention and treatment of disease. We generate revenue through the sale of our products, as well as through alliance agreements by ~~copromoting~~co-promoting products discovered by other companies.
Acquisitions
On ~~September 14, 2005,~~February 28, 2006, we completed the acquisition of ~~all~~the sanofi-aventis world-wide rights, including patent rights and production technology, to manufacture and sell Exubera, an inhaled form of insulin for use in adults with type 1 and type 2 diabetes, and the ~~outstanding shares of Vicuron Pharmaceuticals, Inc. (Vicuron), a biopharmaceutical company focused on the development of novel anti-infectives,~~insulin-production business and facilities located in Frankfurt, Germany, previously jointly owned by Pfizer and sanofi-aventis, for approximately ~~$1.9~~$1.4 billion ~~in cash~~ (including transaction costs). ~~Vicuron has two products currently under New Drug Application (NDA) review by~~In connection with the ~~U.S. Food and Drug Administration (FDA): anidulafungin for fungal infections and dalbavancin for Gram-positive infections. The allocation~~acquisition, as part of ~~the~~our preliminary purchase price ~~includes in-process research and development~~allocation, we recorded an intangible asset for developed technology rights of approximately ~~$1.4~~$1.0 billion, ~~which was expensed and included in~~ ~~Merger-related in-process research and development charges~~,inventory valued at $218 million and goodwill of ~~$243~~approximately $166 million, all of which ~~has~~have been allocated to our Human Health segment. ~~Neither~~The amortization of ~~these items is deductible for tax purposes.~~
~~On April 12, 2005, we completed~~the developed technology rights will be primarily included in Cost of Sales. Given the size and complexity of the acquisition, ~~of Idun Pharmaceuticals, Inc. (Idun), a biopharmaceutical company focused on~~ the ~~discovery~~fair valuation and ~~development of therapies~~allocation work is still being finalized and is expected to ~~control apoptosis, and on August 15, 2005,~~be substantially complete in the second quarter. To the extent that our estimates need to be adjusted, we ~~completed~~will do so.
Prior to the acquisition, of all outstanding shares of Bioren Inc. (Bioren), which focuses on technology for optimizing antibodies. The aggregate cost of these and other smaller acquisitions was approximately $340 million for the nine months ended October 2, 2005.
~~On February 10, 2004,~~in connection with our collaboration agreement with sanofi-aventis, we ~~completed the acquisition of all the outstanding shares of Esperion Therapeutics, Inc., (Esperion),~~recorded a ~~biopharmaceutical company, for $1.3 billion in cash (including transaction costs). The allocation of the purchase price included in-process~~ research and development milestone due to us from sanofi-aventis of ~~$920~~approximately $118 million ($71 million, after tax) in Research and development expenses upon the approval of Exubera in January 2006 by the Food and Drug Administration (FDA).
In April 2006, we entered into an agreement to acquire Rinat Neurosciences Corp., which was expensed, and goodwill of $235 million, which was allocated to our Human Health segment. Neither of these items was deductible for tax purposes. The aggregate cost of other smaller acquisitions was approximately $170 millionis developing therapeutic proteins for the ~~nine months ended September 26, 2004.~~treatment of central-nervous-system disorders, including an approach to alter the progression of Alzheimer's disease. In addition, in April 2006, we reached an agreement with Schwarz Pharma AG to acquire exclusive worldwide rights to fesoterodine, a new drug candidate for treatment of overactive bladder.
Our Operating Environment
We are navigating a period of significant change for the Company. Aggressive cost-cutting efforts, coupled with investments in business development and significantly improved research and development (R&D) productivity, are preparing us to transition to the next-generation Pfizer. Our strategy of driving growth in our in-line medicines and investing in promising new medicines is the essence of the new Pfizer.
We continue to face a ~~dynamically~~ challenging and dynamically changing environment in our pharmaceutical business, including the loss of exclusivity of major products, ~~continuing pressures on~~uncertainty concerning selective COX-2 inhibitor products, ~~the~~ increasing regulatory scrutiny of drug safety, the adoption of new direct-to-consumer advertising guidelines and lower prescription growth rates and increased competition in certain therapeutic areas.
Our performance in ~~2005~~2006 has been, and will continue to be, impacted by loss of U.S. exclusivity of ~~four major products --~~Neurontin, Diflucan ~~Neurontin,~~ and Accupril/Accuretic ~~during~~in 2004 and Zithromax in November 2005. In addition, we face the loss of U.S. exclusivity for Zoloft ~~during~~at the end of the second quarter of 2006 and Norvasc and Zyrtec during 2007. These seven products represented ~~33%~~29% of our Human Health revenues and ~~29%~~25% of our total revenues for the year ended December 31, ~~2004.~~2005. In addition, some of our products face competition in the form of new branded products or generic drugs, which treat similar diseases or indications. We have been able to limit the impact on revenues by highlighting the proven track record of safety and efficacy of our products. For example, the success of Lipitor is the result of an unprecedented array of clinical data supporting both efficacy and safety. Revenues in ~~2005~~2006 have also been, and may continue to be, impacted by ~~publicity and regulatory actions~~uncertainty regarding selective COX-2 inhibitor products (see further discussion in the section "Selected Product Descriptions"). Our total revenues decreased ~~5% in the third quarter of 2005 and were flat~~3% in the first ~~nine months~~quarter of ~~2005~~2006 as compared to the same ~~periods~~period in ~~2004.~~2005.
Partially offsetting these impacts in the first ~~nine months~~quarter of ~~2005~~2006 was the solid aggregate performance in ~~the aggregate of~~ the balance of our broad portfolio of patent-protected medicines. Our portfolio of medicines includes ~~five~~three of the world's 25 best-selling medicines, with 11four medicines that lead their therapeutic areas. Our results reflect two underlying forces. First, Pfizer markets the broadest array of in-line and recently launched products in the industry; and second, Pfizer is a business going through a process of ~~reinventing itself.~~transformation. We are addressing the loss of exclusivity of a number of products by advancing a number of internally developed, in-licensed and ~~copromoted~~co-promoted product candidates. During 2006, we expect to launch six new medicines--Exubera, Sutent and Eraxis, which already have been approved by the FDA, and varenicline, Zeven and indiplon, which are under review by the FDA.
We believe we have important competitive advantages that will serve us well and distinguish us from others in our industry. Our product portfolio and pipeline demonstrate the benefits of Pfizer's scale and our skill at leveraging the opportunities it provides us. Scale also enhances our status as 'partner of choice' with other companies who have promising product candidates and technologies, as well as giving us influence as a global purchaser of goods and services. We continue to build on and enhance our Research & Development capabilities through acquisitions and ~~collaborations; and through~~collaborations. Through targeted acquisitions, licensing opportunities and internal development, we are augmenting our commercial portfolio. We have also made progress with our Adapting to Scale initiative, which is a focused, company-wide effort to leverage our scale and strength more robustly and increase our productivity. (See further discussion in the section "Adapting to Scale Productivity Initiative and Merger-Related Synergies.")
We believe that our strategic and operating flexibility allows us to marshal and focus resources when and where they are needed, to change with a changing environment and to recognize and seize emerging opportunities.
Adapting to Scale Productivity Initiative and Merger-Related Synergies
During 2005 and the ~~second and third quarters~~first quarter of ~~2005,~~2006, we made progress with our multi-year productivity initiative, called Adapting to Scale (AtS), designed to increase efficiency and streamline ~~decision making~~decision-making across the Company. This initiative, ~~first announced~~launched in ~~April~~early 2005, follows the integration of Warner-Lambert and Pharmacia Corporation (Pharmacia), which resulted in the tripling of Pfizer's revenues over the past ~~five~~six years. The integration of those two companies ~~will result~~resulted in a combined expense reduction of approximately $6 billion, inclusive of $4.2 billion in Pharmacia-related synergies that will be achieved this year. The new AtS productivity initiative is expected to yield $4 billion in cost savings on an annual basis by 2008, based on a top-to-bottom business review completed during the first half of 2005.billion.
~~During 2005, we anticipate~~We now expect that cost savings from our AtS productivity initiative will exceed $600 million, greater than previously forecasted, mainly attributable to the Human Health business. We expect that annual cost savings will accelerate over the following three years, with aboutbe at least $2 billion in ~~savings targeted for~~ 2006, ~~about $3.5 billion in 2007 and~~growing to about $4 billion annually upon completion in 2008. These savings are expected to be realized in procurement, operating expenses and facilities, among other sources. We plan to use the cost savings we generate, in part, to fund key investments, including new product launches and the development of the many promising new medicines in our pipeline. The Company expects that the aggregate cost of implementing this initiative through 2008 will be approximately $4 billion to $5 billion on a pre-tax basis.
~~While some projects are already underway, during the fourth quarter~~Projects in various stages of ~~2005, we will continue to accelerate the~~ implementation ~~of changes, including:~~include:
•
Reorganizing Pfizer Global Research & Development (PGRD) to increase efficiency and effectiveness in bringing new therapies to patients-in-need while reducing the cost of research and development. PGRD ~~is being~~has been reorganized into eleven therapeutic ~~categories --~~areas: cardiovascular, metabolic, and endocrine; central nervous system; inflammation; allergy and respiratory; infectious diseases; pain; gastrointestinal and hepatitis; oncology; urology and sexual health; ophthalmology; and dermatology. Each therapeutic area will have three team leaders -- a research leader for compounds not yet in human testing, a development leader for compounds in human testing not yet marketed, and a commercial leader for marketed compounds. Discovery Research will retain its existing structure of six ~~drug-candidate-producing~~drug-candidate discovery sites. Development will move toward single sites for most therapeutic areas.

•
Continuing our optimization of Pfizer Global Manufacturing's plant network, which began with the acquisition of Pharmacia, to ensure that the Company's manufacturing facilities are aligned with current and future product needs. ~~Since December 2004, Pfizer has announced~~During 2005 and through the ~~divestiture~~first quarter of ~~facilities in Holland, MI; Angers~~2006, 15 sites were identified for rationalization (Angers and ~~Val-de-Reuil,~~Val de Reuil, France; Arecibo and Cruce Davila, Puerto Rico; Augusta, Georgia; Corby and Morpeth, U.K.; Holland, Michigan; Jakarta, Indonesia; Seoul, Korea; Orangeville, Canada; Parsippany, New Jersey; Tsukuba, Japan; Stockholm and ~~Stockholm, Sweden, as well as other, smaller facilities.~~Uppsala-Fyrislund, Sweden). In ~~the last few months, Pfizer announced the cessation of~~addition, there have been extensive reductions in site operations in ~~Corby,~~Sandwich, U.K. (the planned closure of drug product, distribution and ~~Orangeville, Canada; a significant downsizing in~~fermentation operations); Lincoln ~~NE;~~ and ~~that plants in Lititz, PA, Groton, CT,~~Omaha, Nebraska sites; and ~~Inchera and Little Island, Ireland would be restructured. We also determined that the Augusta, GA plant will be closed. The restructuring of the~~ Puerto Rico sites (staff reductions), with smaller staff reductions in Groton, Connecticut; Lititz, Pennsylvania; and Sandwich, U.K. operations will continue, with employment reduction at Barceloneta and Arecibo, Puerto Rico, to occur in the fourth quarter of 2005 in anticipation of cessation of operations at the Arecibo plant in the next few years. The sale of the Cruce Davila, Puerto Rico, plant is also being pursued. Since 2003, Pfizer has announced plans to reduce the number of plants in its global networks by more than 25%.Brooklyn, N.Y.

•
Realigning our European marketing teams and implementing initiatives designed to improve the effectiveness of our field force in Japan. During ~~the third quarter of~~ 2005, we completed a major reorganization of the U.S. field force, reshaping the management structure to be more responsive to commercial trends as the Medicare Modernization Act takes effect and driving greater sales-force accountability in preparation for the upcoming launch of new medicines.

•
Pursuing savings in information technology resulting from significant reductions in application software (already reduced from ~~about~~over 8,000 at the time of the Pharmacia acquisition in 2003 to ~~about 4,000 today, with considerable further reductions planned)~~fewer than 3,000) and data centers (to be reduced from 17 to 4), as well as rationalization of service providers, while enhancing our ability to invest in innovative technology opportunities to further propel our growth.

•
Reducing costs in purchased goods and services. Purchasing initiatives will focus on rationalizing suppliers, leveraging the approximately $16 billion of goods and services that Pfizer purchases annually, improving demand management to optimize levels of outside services needed and strategic sourcing from lower-cost sources. For example, savings from demand management will be derived in part from reductions in travel, entertainment, consulting and other external service expenses. Facilities savings are being found in site rationalization, energy conservation, and renegotiated service contracts.
REVENUES
Total revenues decreased ~~5% in the third quarter and were flat~~3% in the first ~~nine months~~quarter of ~~2005,~~2006, as compared to the same ~~periods~~period in 2004. The revenue decrease reflects the loss of exclusivity of key products and regulatory actions on the selective COX-2 inhibitors and other nonspecific non-steroidal anti-inflammatory drug (NSAID) products, which has resulted in a significant decline in prescription volume in the arthritis market. The decrease also reflects lower prescription growth and increased competition in key markets in the U.S., such as the lipid-lowering market, where the rate of growth in the third quarter declined significantly versus the first half of the year; and the erectile-dysfunction market, which has been in decline compared to 2004. In addition, although we anticipate a positive long-term impact of our initiative designed to increase the efficiency of our U.S. Human Health field force through stronger alignment with our customers (completed in September 2005), the short-term impact was a tempering of revenue performance in the third quarter. Partially offsetting these impacts in the first nine months of 2005, ~~was the solid performance in the aggregate of the balance of our broad portfolio of patent-protected medicines.~~primarily due to:
•
the loss of U.S. exclusivity of Zithromax in November 2005;
•
the continued decline in sales of Neurontin, Diflucan and Accupril/Accuretic, which lost U.S. exclusivity in 2004;
•
the suspension of sales of Bextra in the second quarter of 2005;
•
the strengthening of the U.S. dollar relative to many foreign currencies;
•
lower revenue for Zoloft, which has lost exclusivity in many European markets and will lose U.S. exclusivity at the end of the second quarter of 2006; and
•
lower revenue for Viagra, reflecting increased competition and declining overall erectile-dysfunction sales in several major markets;
partially offset by:
•
the solid aggregate performance in the balance of our broad portfolio of patent-protected medicines; and
•
revenues from new products launched in 2005 and the first quarter of 2006.
Changes in foreign exchange rates ~~increased revenues in the third quarter of 2005 by $175 million, or 1.4%, and increased~~decreased total revenues in the first ~~nine months~~quarter of ~~2005~~2006 by ~~$909~~$377 million, or ~~2.4%~~3%, compared to the same ~~periods~~period in ~~2004.~~2005. The foreign exchange impact on the ~~third~~first quarter ~~and first nine months~~ of ~~2005~~2006 revenue ~~comparisons~~comparison to the same ~~periods~~period in ~~2004~~2005 was due to the ~~weakening~~strengthening of the U.S. dollar relative to many foreign currencies, especially the ~~euro. We expect 2005 revenues~~euro which accounted for about 62% of the full year, at current foreign exchange rates, to evidence a modest decline relative to 2004, although a somewhat larger decline than previously anticipated, reflecting lower U.S. Human Health revenues.impact in the first quarter of 2006.
The impact of price changes on revenues was 3.2% in the ~~third~~first quarter of ~~2005 and 2.8% in the first nine months of 2005.~~2006.
The loss of patent protection with respect to any of our major products could have a material adverse effect on revenue and net income. We expect a substantial adverse impact from the loss of exclusivity of certain major products over the next few years.
Deductions from Revenues
As is typical in the pharmaceutical industry, our gross product sales are subject to a variety of deductions, primarily representing rebates and discounts to government agencies, wholesalers and managed care ~~organizations.~~organizations with respect to our pharmaceutical products. These deductions represent estimates of the related ~~liabilities~~obligations and, as such, judgment is required when estimating the impact of these sales deductions on gross sales for a reporting period. Historically, our adjustments to actual have not been material; on a quarterly basis, they generally have been less than 0.5% of Human Health net sales and can result in either a net increase or a net decrease to income.
Rebates under Medicaid and related state programs reduced revenues by ~~$257~~$205 million in the first quarter of 2006 and ~~$956~~$375 million ~~for~~in the ~~three months and nine months ended October 2, 2005 and $338 million and $1.0 billion for the three months and nine months ended September 26, 2004.~~first quarter of 2005. Performance-based ~~contracts also provide for rebates to several customers. Contract~~contract rebates reduced revenues by ~~$513~~$544 million in the first quarter of 2006 and ~~$1.7 billion for~~$587 million in the ~~three months and nine months ended October 2, 2005 and $501 million and $1.5 billion for the three months and nine months ended September 26, 2004.~~first quarter of 2005. These contracts are with managed care customers, including health maintenance organizations and pharmacy benefit managers, who receive rebates based on the achievement of contracted performance terms for products. Rebates are product-specific and, therefore, for any given year are impacted by the mix of products sold. Chargebacks (primarily discounts to U.S. federal government agencies) reduced revenues by ~~$324~~$352 million in the first quarter of 2006 and ~~$916~~$294 million ~~for~~in the ~~three months and nine months ended October 2, 2005 and $290 million and $864 million for the three months and nine months ended September 26, 2004.~~first quarter of 2005.
Our accruals for Medicaid rebates, contract rebates and chargebacks totaled ~~$1.7~~$1.8 billion at ~~October~~April 2, ~~2005~~2006 and December 31, ~~2004.~~2005.
Revenues by Country
Revenues by country for the ~~third~~first quarter ~~and first nine months~~ of ~~2005~~2006 and the changes from the same ~~periods~~period in ~~2004~~2005 follow:
Third Quarter
First Quarter
(millions of dollars)
2005
% of
Revenues
2004
% of
Revenues
%
Change
2006
% of
Revenues
2005
% of
Revenues
%
Change





United States
$
6,395
52.5
%
$
7,377
57.5
%
(13)%
$
7,067
55.8
$
6,974
53.3
1
Japan
848
7.0
760
5.9
12
716
5.7
882
6.7
(19)
All other
4,946
40.5
4,694
36.6
5
4,877
38.5
5,235
40.0
(7)
Consolidated
$
12,189
100.0
%
$
12,831
100.0
%
(5)
$
12,660
100.00
$
13,091
100.00
(3)

First Nine Months
(millions of dollars)
2005
% of
Revenues
2004
% of
Revenues
%
Change

United States
$
19,558
51.9
%
$
21,122
56.2
%
(7)%
Japan
2,631
7.0
2,309
6.1
14
All other
15,516
41.1
14,162
37.7
10
Consolidated
$
37,705
100.0
%
$
37,593
100.0
%
--
Geographic Revenues by Segment
Geographic revenues by segment for the ~~third~~first quarter ~~and first nine months~~ of ~~2005~~2006 and the changes from the same ~~periods~~period in ~~2004~~2005 follow:
Third Quarter
Revenues
% Change in Revenues
First Quarter
% Change in Revenues
U.S.
International
U.S.
International
U.S.
International
U.S.
International
(millions of dollars)
2005
2004
2005
2004
05/04
05/04
2006

2005

2006
2005

06/05

06/05



Human Health
$
5,609
$
6,619
$
4,943
$
4,669
(15)%
6%
$6,340
$6,229
$4,773
$5,288
2
(10)
Consumer Healthcare
493
453
428
398
9
8
451
483
449
462
(6)
(3)
Animal Health
228
231
275
244
(1)
12
229
219
282
277
4
2
Other
65
74
148
143
(14)
4
47
43
89
90
10
(3)
Total Revenues
$
6,395
$
7,377
$
5,794
$
5,454
(13)
6
$7,067
$6,974
$5,593
$6,117
1
(9)

First Nine Months
Revenues
% Change in Revenues
U.S.
International
U.S.
International
(millions of dollars)
2005
2004
2005
2004
05/04
05/04

Human Health
$
17,203
$
18,967
$
15,426
$
14,066
(9)%
10%
Consumer Healthcare
1,439
1,290
1,396
1,234
12
13
Animal Health
710
647
866
740
10
17
Other
206
218
459
431
(5)
6
Total Revenues
$
19,558
$
21,122
$
18,147
$
16,471
(7)
10
Human Health
Pfizer's Human Health business continued to show solid performance in many of our products, although revenue declines from loss of exclusivity on major products, the impact of foreign exchange and other challenges ~~to revenue~~ more than offset that performance.
Pfizer's Human Health worldwide revenues declined 7%4% in the ~~third~~first quarter of ~~2005~~2006 compared to the ~~third quarter~~same period of ~~2004 and 1% year-to-date.~~2005. In the U.S., Human Health revenues ~~declined 15%~~increased 2% in the ~~third~~first quarter of 2006 compared to the same period of 2005. The decline in Human Health revenue internationally of 10% is attributable to the unfavorable impact of foreign exchange of $338 million (7% of the decline). Also contributing to the decline in Human Health international revenue is a 32% decline in international sales of Celebrex in the first quarter 2006, due to strong sales in the beginning of the first quarter of 2005 ~~compared~~related to the ~~third~~Vioxx withdrawal.
The first quarter of 2004 and 9% year-to-date. The loss of exclusivity on key products (primarily Neurontin) has resulted in a decline in third-quarter worldwide revenues of approximately $800 million and year-to-date worldwide revenues of approximately $2.4 billion in comparison to the same periods in the prior year. The regulatory actions relating to Celebrex and the suspension of sales of Bextra have contributed to an additional decline in third-quarter 2005 selective COX-2 inhibitor worldwide revenues of $754 million (down 67%) and year-to-date selective COX-2 inhibitor worldwide revenues of $2.0 billion (down 62%) in comparison to the same periods in the prior year.
~~The third quarter of 2005~~2006 was also impacted by increased competition and the overall market decline ~~for~~as branded prescriptions in the U.S. ~~Branded prescriptions~~declined 3.6% in the ~~U.S. declined 3% in the third~~first quarter of ~~2005 relative to the third quarter of 2004. The third quarter of 2005 also exhibited a significant change in growth trends relative~~2006 compared to the first ~~half~~quarter of 2005.
Our in-line medicines are continuing to drive performance; recent and upcoming launches of new medicines will replenish and expand the ~~year~~portfolio as older medicines lose exclusivity.
($ millions, except % growth)
Human Health
1Q06 Revenues
Impact on Total
Human Health
1Q06/1Q05
% Growth

In-Line Products^(a)and New Products^(b)
$10,561
2
%
Loss-of-exclusivity products and Bextra^(c)
552
(6)
Total Human Health revenues
$11,113

(4)
%
^(a)
In-Line Products is defined as first-quarter 2006 worldwide revenues of all Human Health products other than those referred to in notes (b) and (c).
^(b)
New Products is defined as first-quarter 2006 worldwide revenues of products launched since the beginning of 2004--Caduet, Inspra, Lyrica, Macugen, Olmetec, Onsenal, Revatio, Sutent, and Zmax.
^(c)
Loss-of-Exclusivity Products and Bextra is defined as first-quarter 2006 worldwide revenues of products that have lost U.S. exclusivity since the beginning of 2004--Accupril/Accuretic, Diflucan, Neurontin, and Zithromax--and of Bextra, sales of which were suspended in a number of U.S. therapeutic markets. Examples include the branded statins market, where total prescriptions grew 7% in the third quarter versus 10% in the first half of 2005, and the erectile-dysfunction market, with total prescriptions declining 7% in the third quarter versus zero growth in the first half of 2005.
Revenue information for several of our major Human Health products ~~which includes three additional business days in our fiscal calendar in the first quarter and nine months of 2005 compared to the same periods in 2004, follows:~~follow:
Third Quarter
First Nine Months
First Quarter
(millions of dollars)
Product
Primary Indications
2005
% Change
from 2004
2005
% Change
from 2004
Primary Indications
2006

% Change
from 2005

Cardiovascular and
metabolic diseases:
Lipitor
Reduction of LDL cholesterol
$2,897
6 %
$8,829
16 %
Reduction of LDL cholesterol
$3,107
1%
Norvasc
Hypertension
1,131
9
3,462
8
Hypertension
1,183
1
Cardura
Hypertension/Benign prostatic hyperplasia
132
(12)
441
(4)
Hypertension/Benign prostatic hyperplasia
126
(18)
Caduet
Reduction of LDL cholesterol and hypertension
77
147
Accupril/Accuretic
Hypertension/Congestive heart failure
77
(51)
250
(50)
Hypertension/Congestive heart failure
68
(32)
Caduet
Reduction of LDL cholesterol and hypertension
48
927
121
249
Central nervous
system disorders:
Zoloft
Depression and anxiety disorders
807
1
2,448
2
Depression and certain anxiety disorders
779
(8)
Lyrica
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy
192
860
Geodon/Zeldox
Schizophrenia and acute manic or mixed episodes associated with bipolar disorder
182
32
Neurontin
Epilepsy and post-herpetic neuralgia
155
(80)
498
(78)
Epilepsy and post-herpetic neuralgia
127
(30)
Geodon
Schizophrenia and acute manic or mixed episodes associated with bipolar disorder
148
18
430
33
Aricept^(a)
Alzheimer's disease
82
(3)
Xanax/Xanax XR
Anxiety/Panic disorders
101
--
306
13
Anxiety/Panic disorders
82
(20)
Aricept**
Alzheimer's disease
85
11
255
15
Lyrica
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy
80
M+
139
M+
Relpax
Migraine headaches
67
42
170
49
Migraine headaches
66
24
Arthritis and pain:
Celebrex
Arthritis pain and inflammation, acute pain
446
(44)
1,258
(45)
Arthritis pain and inflammation, acute pain
491
19
Bextra
Arthritis pain and inflammation
(73)
*
(59)
*
Arthritis pain and inflammation
--
*
Infectious and
respiratory diseases:
Zithromax/Zmax
Bacterial infections
402
19
1,623
38
Bacterial infections
259
(67)
Zyvox
Bacterial infections
157
30
453
38
Bacterial infections
186
30
Vfend
Fungal infections
106
54
285
40
Fungal infections
117
33
Diflucan
Fungal infections
103
(52)
370
(54)
Fungal infections
107
(23)
Urology:
Viagra
Erectile dysfunction
386
(4)
1,215
1
Erectile dysfunction
390
(11)
Detrol/Detrol LA
Overactive bladder
231
--
705
14
Overactive bladder
260
3
Oncology:
Camptosar
Metastatic colorectal cancer
229
81
674
85
Metastatic colorectal cancer
212
--
Ellence
Breast cancer
86
--
273
7
Breast cancer
73
(19)
Aromasin
Breast cancer
63
61
176
88
Breast cancer
70
26
Sutent
Metastatic renal cell carcinoma (mRCC) and malignant gastrointestinal stromal tumors (GIST)
16
*
Ophthalmology:
Xalatan/Xalacom
Glaucoma and ocular hypertension
338
11
1,011
16
Glaucoma and ocular hypertension
337
1
Endocrine disorders:
Genotropin
Replacement of human growth hormone
200
14
604
13
Replacement of human growth hormone
197
(3)
All other:
Zyrtec/Zyrtec-D
Allergies
338
2
1,035
10
Allergies
421
23
Alliance revenue:
Aricept, Macugen, Mirapex, Olmetec, Rebif and Spiriva
Alzheimer's disease (Aricept), neovascular (wet) age-related macular degeneration (Macugen), Parkinson's disease (Mirapex), hypertension (Olmetec), multiple sclerosis (Rebif), chronic obstructive pulmonary disease (Spiriva)
267
38
757
59
Alzheimer's disease (Aricept), neovascular (wet) age-related macular degeneration (Macugen), Parkinson's disease (Mirapex), hypertension (Olmetec), multiple sclerosis (Rebif), chronic obstructive pulmonary disease (Spiriva)
324
34

*^(a)
~~Calculation not meaningful.~~
**
Represents direct sales under license agreement with Eisai Co., Ltd.
M+*
~~Change greater than one-thousand percent.~~ Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
~~Selected~~Human Health--Selected Product Descriptions:
•
Lipitor, for the treatment of elevated cholesterol levels in the blood, is the most widely used treatment for lowering cholesterol and the best-selling pharmaceutical product of any kind in the ~~world. In our international markets, Lipitor showed revenue growth of 14%~~world, reaching over $3.1 billion in worldwide sales in the ~~third~~first quarter of ~~2005,~~2006, an increase of 1% compared to the ~~third quarter of 2004.~~same period in 2005. In the U.S., ~~Lipitor revenues grew 1%~~sales of $2 billion represent growth of 3% over the previous year's first quarter. While sales were lower than expected in the ~~third~~first quarter, Lipitor leads prescriptions for U.S. patients receiving statin therapy for the first time in 12 months, with nearly a 37% share of new-to-market patients in January 2006, more than twice the share of the closest competitor (according to the Verispan longitudinal patient database). Internationally, Lipitor sales in the first quarter of ~~2005,~~2006 resulted in a 3% decline compared to the ~~third quarter~~same period in 2005, reflecting the impact of ~~2004. This performance reflects in part an unexpectedly rapid slowdown~~foreign exchange.
Lipitor began to face competition in the U.S. ~~lipid-lowering market~~from generic pravastatin (Pravachol) in April 2006 and will begin to face competition in the U.S. from generic simvastatin (Zocor) in June 2006. In April 2006, we launched a new advertising campaign for Lipitor that highlights its unique benefit profile and advantageous formulary positioning. Scientific data continue to reinforce the trend toward the use of higher dosages of statins for greater cholesterol reduction.
New clinical findings continue to demonstrate the benefit of Lipitor on a wide range of endpoints, helping to support its differentiation versus the competition and maintain its rank as the world's top-selling medicine. Data from a ~~whole and marginal Lipitor prescription share erosion during the quarter of one percentage point. Evidence~~sub-analysis of the ~~substantial lipid-market deceleration can be seen~~Treating to New Targets (TNT) study, presented at the American College of Cardiology in ~~category new-prescription growth rates~~March 2006, showed that patients with kidney dysfunction taking 80 mg of Lipitor had significantly greater improvements in kidney function than patients taking 10 mg. Half of these patients on 80 mg had normal kidney function at the end of the study. This further builds on the wealth of evidence that Lipitor is a powerful lipid-lowering agent, which leads to improved health outcomes for ~~the third quarter~~a broad range of 8% versus first-half growth of 17%, representing more than a 50% drop from robust trends exhibited during the first six months of this year. Despite this market slowdown, Lipitor still accounts for more than 40% of all lipid-lowering prescriptions, a 26.4% advantage versus its next nearest competitor.patients -- even those with impaired kidney function.

In ~~September~~December 2005, the ~~FDA approved~~U.S. District Court for the District of Delaware determined that two U.S. patents covering atorvastatin, the active ingredient in Lipitor, ~~use to reduce~~are valid and infringed by the ~~risk~~product of ~~stroke and myocardial infarction~~generic manufacturer Ranbaxy Laboratories Limited (Ranbaxy), thus protecting Lipitor's exclusivity in ~~patients with type 2 diabetes. The FDA's decision was based on~~ the ~~findings~~U.S. until June 2011. In addition, in October 2005, the United Kingdom's High Court of Justice upheld the exclusivity of the ~~Collaborative Atorvastatin Diabetes Study (CARDS),~~basic patent covering atorvastatin. The ruling prevents Ranbaxy from introducing a ~~landmark trial~~generic version of ~~more than 2,800 patients with type 2 diabetes, near-normal cholesterol,~~atorvastatin in the U.K. until the patent expires in November 2011. Both the U.S. and ~~at least one other risk factor, such as high blood pressure or smoking. CARDS showed that patients using Lipitor experienced 48% fewer strokes than those on placebo.~~the U.K. decisions have been appealed. The ~~CARDS study's steering committee stopped the trial nearly two years earlier than planned because~~appeal of the ~~clinical benefits among patients who took Lipitor.~~
~~In addition,~~U.S. decision is scheduled to be heard in May 2006, and the ~~FDA expanded~~appeal of the ~~Lipitor label~~U.K. decision is scheduled to ~~include data on the reduction~~be heard in the incidence of stroke in patients with multiple risk factors, as shown in the Anglo-Scandinavian Cardiac Outcomes Trial (ASCOT) clinical trial. The ASCOT trial found that Lipitor reduced the relative risk of stroke by 26% compared to placebo. The study involved people with normal or borderline cholesterol and no prior history of heart disease with controlled high blood pressure and at least three other risk factors for heart disease, such as family history, age over 55, smoking, diabetes, and obesity. Patients with multiple risk factors, including diabetes, face a greater threat of heart attack and stroke. Reducing their risk of such cardiovascular events is extremely important.June 2006.

•
Norvasc is the world's most-prescribed branded medicine for treating hypertension. It achieved ~~an increased rate of growth~~a 1% increase in worldwide sales in the first ~~nine months~~quarter of ~~2005~~2006 compared to the same period in ~~2004 (8% in 2005 as compared to 4% in 2004), despite patent expirations in many European Union (E.U.) countries.~~2005. Norvasc maintains exclusivity in many major markets globally, including the U.S., Japan, Canada and ~~Australia.~~Australia, but has experienced patent expirations in many European Union (E.U.) countries.

•
Zoloft, which has lost exclusivity in many European markets and will lose U.S. market exclusivity at the end of the second quarter of 2006, experienced an 8% revenue decline in the first quarter of 2006 compared to the same period in 2005. It is the most-prescribed antidepressant in the U.S. It is indicated for the treatment of major depressive disorder, panic disorder, obsessive-compulsive disorder (OCD) in adults and children, post-traumatic stress disorder (PTSD), premenstrual dysphoric disorder (PMDD) and social anxiety disorder (SAD). Zoloft is approved for acute and long-term use in all of these indications, with the exception of ~~PMDD, and~~PMDD. It is the only approved agent for the long-term treatment of PTSD and SAD, an important differentiating feature as these disorders tend to be chronic.
In the U.S., in February 2005, Pfizer implemented FDA instructions that require the makers of all currently marketed antidepressants, including tricyclic agents, monoamine oxidase (MAO) inhibitors, selective serotonin reuptake inhibitors such as Zoloft, selective norepinephrine reuptake inhibitors and atypical antidepressants, to include a black-box warning that antidepressants increased the risk of suicidal thinking and behavior in children and adolescents in pooled, short-term studies. In the nine completed clinical trials of Zoloft involving children and adolescents, which included studies of Zoloft in children diagnosed with depression, OCD, or both, no suicides occurred. The trials found no statistically significant differences between Zoloft-treated children and adolescents and placebo controls in their rates of suicide attempts or ideation.

•
~~Neurontin,~~ for use in adjunctive therapy for epilepsy, is also approved in more than 60 markets for the treatment of a range of neuropathic pain conditions. Neurontin has also been approved for the management of post-herpetic neuralgia (PHN), a, painful condition that affects many people in the aftermath of the viral infection commonly known as shingles. Neurontin was the first oral medication approved in the U.S. for the treatment of PHN.
In the latter half of 2004, Ivax Corporation (Ivax), Alpharma Inc. (Alpharma) and Teva Pharmaceuticals Industries Ltd. (Teva) launched generic versions of Neurontin (gabapentin) at-risk, despite ongoing patent litigation. We are aggressively pursuing our claims of patent infringement against Ivax, Alpharma, Teva and other generic manufacturers. (See Part II, Item 1, ~~Legal Proceedings~~.) Following those at-risk launches, we launched generic gabapentin through Greenstone, our U.S. generic pharmaceutical subsidiary. However, the introduction of generic versions of gabapentin caused a 78% reduction in Neurontin sales for the first nine months of 2005 as compared to the same period in 2004.
•
~~Geodon~~Geodon/Zeldox, a psychotropic agent, is a dopamine and serotonin receptor antagonist indicated for the treatment of schizophrenia and acute manic or mixed episodes associated with bipolar disorder. ~~Available~~It is available in both an oral capsule and rapid-acting intramuscular ~~formulation, Geodon has been launched in 54 countries, where more than six million prescriptions have been written for more than one million patients worldwide.~~formulation. In the U.S., Geodon hit an all-time ~~U.S.~~ new prescription share weekly high of ~~6% in the third quarter~~6.9% during March 2006 and is ~~now~~ the second-fastest-growing atypical anti-psychotic medication. In the first quarter of 2006, total Geodon worldwide sales grew 32% compared to the same period in 2005.

~~The~~Geodon growth is due to the improved perception among clinicians of its efficacy, increased benefits from optimal dosing, and its favorable metabolic profile, as confirmed by the Clinical Antipsychotic Trials of Intervention Effectiveness (CATIE) trial. The CATIE schizophrenia study, supported by the National Institute of Mental Health and ~~recently~~ published in the New England Journal of Medicine, confirms that Geodon is an effective anti-psychotic and is less likely to worsen weight, lipids, and glucose metabolism than other agents. In fact, Geodon was associated with some improvement in these metabolic parameters. These findings are noteworthy because of the higher prevalence of metabolic issues among patients with schizophrenia and are consistent with previous Pfizer-sponsored clinical trials involving Geodon.
The U.S. Patent and Trademark Office granted a five-year extension to the Geodon U.S. patent, extending its exclusivity to 2012.

•
Lyrica achieved $192 million in worldwide revenue in the first quarter of 2006. It was approved by the European Commission on March 27, 2006, to treat generalized anxiety disorder (GAD) in adults, thereby providing a new treatment option for the approximately 12 million Europeans living with GAD.

Lyrica was approved by the FDA in June 2005 for adjunctive therapy for adults with partial onset seizures. This ~~latest~~ indication builds on the earlier FDA approval of Lyrica for two of the most common forms of neuropathic pain ~~-- diabetic~~--diabetic peripheral neuropathy, a chronic neurologic condition affecting ~~nearly~~about three million Americans, and post-herpetic neuralgia. Lyrica was launched in the U.S., Canada, and Italy in September 2005 and is now approved in more than 50 countries and is currently available in more than 2530 markets. ~~Market penetration~~More than 1 million patients have now been prescribed Lyrica since its introduction. Lyrica has been rapid; after one full year of Lyrica sales, Germany and the U.K. posted Lyrica sales shares of 14.2% and 9.5%, respectively, in the anti-epileptic drug market, surpassing those of many established competitors in both countries. Clinical evidence favorable to Lyrica also continues to grow. The September 2005 edition of ~~Epilepsia~~ ~~focused on the medication's lack of interactions with other drugs. Additionally, at the August 2005 meeting~~already gained more than a 9.0% new prescription share of the ~~International Epilepsy Congress, data from an independently conducted meta-analysis showed Lyrica to be among the best in class for treatment~~U.S. anti-epileptic market as of ~~drug-resistant epilepsy.~~April 7, 2006, continuing its performance as one of Pfizer's most successful pharmaceutical launches.

•
Celebrex and Bextra
Celebrex achieved a 19% increase in worldwide sales in the first quarter of 2006 compared to the same period in 2005. Strong clinical data continue to support Celebrex as an important medicine for patients with arthritis. The SUCCESS-1 study (Successive Celecoxib Efficacy and Safety Study), recently published in the American Journal of Medicine, showed that people with osteoarthritis who take Celebrex experience significantly fewer gastrointestinal problems than patients who take non-specific non-steroidal anti-inflammatory drugs.

It was this gastrointestinal profile that led researchers to choose high-dose Celebrex for investigational trials in the area of chemoprevention. The first efficacy data from two of these long-term clinical studies -- Adenoma Prevention with Celecoxib (APC) and Prevention of Sporadic Adenomatous Polyps (PreSAP) -- were presented in April 2006 at the American Association for Cancer Research meeting. These studies showed that Celebrex helps stop the regrowth of pre-cancerous polyps (adenomas) that can lead to colon cancer. The final cardiovascular safety results from these long-term polyp studies are consistent with the current Celebrex label.
Pfizer began to reintroduce branded advertising in April 2006, in alignment with our new Direct-to-Consumer (DTC) advertising principles, highlighting Celebrex's unique clinical profile and benefits. In July 2005, the FDA approved a sixth indication for Celebrex --ankylosing spondylitis -- a form of spinal arthritis that affects more than one million people in the U.S.

On April 7, 2005, the FDA announced a decision to require boxed warnings of potential cardiovascular risk for all COX-2 pain relievers and all prescription ~~NSAIDs,~~nonspecific non-steroidal anti-inflammatory drugs (NSAIDs), including older ~~non-specific~~nonspecific drugs such as ibuprofen and naproxen. On July 29, 2005, Pfizer and the FDA finalized the label changes for Celebrex. The final U.S. label contains a boxed warning of potential serious cardiovascular and gastrointestinal risks for Celebrex that are consistent with warnings for all other prescription NSAIDs. The boxed warning provides that Celebrex is contraindicated for patients who recently have undergone coronary artery bypass graft surgery. The label recommends that Celebrex be prescribed at the lowest effective dose for the shortest duration consistent with individual patient treatment goals. Pfizer is continuing to conduct additional clinical studies evaluating the benefits and risks of Celebrex. Pfizer is supporting Cleveland Clinic's 20,000 patient prospective study to definitively evaluate the relative safety of Celebrex and two older pain medications in patients with heart disease or at high risk of heart disease.

The market for pain relievers has shown considerable change since the withdrawal of Vioxx in September 2004. Sales of Celebrex began to decline in the late 2004. However, following regulatory reviews of these medicines in February 2005 in both the U.S. and the E.U., the market for prescription pain relievers indicated lower, but stabilizing levels compared to pre-Vioxx withdrawal levels. Revenues from Celebrex in 2005, prior to the FDA's decision in April 2005, were already expected to be significantly lower than in 2004.
In September 2005, with full implementation of revised labeling, Pfizer began to focus renewed attention on Celebrex, with the goal of making the pain reliever available to increased numbers of patients. Celebrex is supported by a large body of scientific and clinical-trial evidence of efficacy and safety accumulated over 10 years in more than 40,000 patients worldwide. In July, the FDA approved a sixth indication for Celebrex -- ankylosing spondylitis -- a form of spinal arthritis that affects more than one million people in the U.S.
In June 2005, the Committee for Human Medicinal Products (CHMP) concluded its COX-2 referral process and recommended that both Celebrex and Dynastat (parecoxib) remain available to patients. The European Medicines Evaluation Agency (EMEA) ~~has~~ required new labeling for all COX-2 drugs that includes a restriction on use for patients with established heart disease or stroke and additional warnings to physicians regarding use in patients with cardiovascular risk factors. This new labeling was implemented for all COX-2 medicines across the E.U. in July of 2005.

~~Further,~~In April 2005, the FDA decided that, while Bextra's cardiovascular risk could not be differentiated from other NSAIDs, the additional, increased risk of rare but serious skin reactions associated with Bextra, already described in its label, warranted its withdrawal from the market. ~~In 2004, we recorded $1.3 billion in revenue for Bextra.~~ We respectfully disagree with the FDA's position regarding the relative risk/benefit profile of Bextra. However, in deference to the regulatory agency's view, we suspended sales of the ~~medicine pending further discussions with the FDA.~~medicine. In addition, at the request of European and other regulators, we suspended sales of Bextra in the E.U., Canada and many other markets around the world.

In connection with the decision to suspend sales of Bextra in the U.S., the E.U., and certain other markets, we recorded certain charges totaling $1.2 billion ($762 million, net of tax) in the first nine months of 2005. These pre-tax charges included $1.1 billion related to the impairment of developed technology rights associated with Bextra and $7 million related to the write-off of machinery and equipment, both of which are included in ~~Other (income)/deductions-net~~~~; $56 million in write-offs of inventory and exit costs, included in~~ ~~Cost of sales~~~~; $8 million related to the costs of administering the suspension of sales, included in~~ ~~Selling, informational and administrative expenses;~~ ~~and $212 million for an estimate of customer returns, primarily included against~~ ~~Revenues.~~ ~~Substantially all of these charges were recorded in the first quarter of 2005.~~
•
Zithromax~~, whose composition~~ experienced a 69% decline in worldwide sales in the first quarter of ~~matter~~2006 compared to the first quarter of 2005, reflecting the expiration of its composition-of-matter patent in the U.S. ~~expires~~ in November 2005 ~~remained the number-one prescribed oral antibiotic during the third quarter of 2005, despite~~and the end of Pfizer's active sales promotion in July ~~when~~2005. During the ~~U.S. sales force began promoting Zmax. Sales in~~fourth quarter of 2005, four generic versions of oral solid azithromycin were launched, including one authorized generic by Pfizer's Greenstone subsidiary. Through the ~~U.S. are expected to be adversely affected by~~first quarter of 2006, generic azithromycin constituted 74.2% of the ~~loss~~total oral solid azithromycin adult prescription volume. Pfizer's generic had captured 52.9% of ~~market exclusivity beginning in November 2005.~~total generic azithromycin prescriptions.
•
Zmax,a single-dose, sustained-release form of azithromycin for adults, was introduced in the U.S. in ~~July 2005. Zmax has surpassed all other recent antibiotic introductions (including line extensions)~~August 2005 for treatment of mild-to-moderate acute bacterial sinusitis and community-acquired pneumonia in ~~week 10 prescription volume, even though the Zmax launch occurred in the summer, before the beginning of the respiratory season.~~adult patients appropriate for oral therapy due to susceptible pathogens. Single-dose Zmax delivers higher azithromycin serum concentrations during the first 24 hours than Zithromax and assures complete compliance compared to multi-dose ~~regimes, demonstrating a clear benefit of the new medication. A supplemental Marketing Authorization Application (MAA) for Zmax was approved in Europe in September 2005.~~regimes.
•
~~Diflucan~~ ~~is a systemic antifungal. The decrease in sales in the first nine months of 2005 compared to the same period in 2004 is mainly due to loss of exclusivity in the U.S. in July 2004.~~
•
Viagra remains the leading treatment for erectile dysfunction and one of the world's most recognized pharmaceutical brands, with more than ~~63%~~59.6% of U.S. total prescriptions in the erectile dysfunction market through the first quarter of 2006.
Viagra sales declined 11% worldwide in the first quarter of 2006 compared to the same period in 2005, reflecting aggressive competition and declining overall erectile dysfunction sales in ~~its market~~several major markets. We expect to see continued pressure on sales in the U.S. More than 45 states have either eliminated erectile dysfunction coverage or have enacted "Preferred Drug Lists" that have the potential to limit Pfizer sales to state Medicaid programs, and Medicare coverage will end in 2007. Effective January 1, 2006, federal funds may not be used for reimbursement of ~~phosphodiesterase-5 (PDE5) inhibitors through August 2005, even as~~erectile dysfunction medications by the ~~entire market's sales were down for the period.~~Medicaid program.

In addition, Viagra faces aggressive competition from other global brands. Year-to-date 2005 Viagra sales are ahead 1% worldwide over last year, and third-quarter 2005 sales are down 4% from the same period last year. Pfizer ~~plans~~has begun to introduce ~~new branded advertising compliant with our direct-to-consumer advertising guidelines to highlight the unique clinical profile for Viagra, as well as~~ new unbranded advertising to address the needs of potential new patients who may be hesitant to try any medication for erectile dysfunction.

On July 8, 2005, the FDA approved an update to the Viagra label to reflect rare post-marketing reports of non-arteritic anterior ischemic optic neuropathy (NAION) in patients taking PDE5 inhibitor medications. The updated label notes that in rare instances, men taking PDE5 inhibitors, including Viagra, reported a sudden decrease or loss of vision in one or both eyes and that it is not possible to determine whether these events are related directly to these medicines, to the patient's underlying vascular risk factors, to a combination of these factors, or other factors. Most of the reported NAION cases occurred in Viagra users with underlying anatomic or vascular risk factors associated with the development of NAION.
•
Camptosar ~~is a semisynthetic camptothecin derivative that works by inhibiting the topoisomerase 1 enzyme, which is involved in cancer cell replication. Camptosar~~ is indicated as ~~first-line~~first line therapy for metastatic colorectal cancer in combination with 5-fluorouracil and leucovorin. It is also indicated as second-line therapy for patients in whom metastatic colorectal cancer has recurred or progressed despite following initial fluorouracil-based therapy. Camptosar is for intravenous use only. Revenue ~~growth of 85%~~ in the first ~~nine months~~quarter of ~~2005 compared~~2006 was comparable to the same period in ~~2004 was impacted in part by Pfizer's acquisition of marketing rights to Campto/Camptosar in Europe and Asia (except Japan) in late 2004.~~2005. Among current oncology medications, the National Comprehensive Cancer Network, an alliance of 19 of the world's leading cancer centers, has issued guidelines recommending Camptosar as an option across all lines of treatment for advanced colorectal cancer.

•
Xalatan/Xalacom, a prostaglandin analogue used to lower the intraocular pressure associated with glaucoma and ocular hypertension, is the most-prescribed branded glaucoma medicine in the world. Clinical data showing its advantages in treating intra-ocular pressure compared with beta blockers should support the continued growth of this important medicine. Xalacom, the only fixed combination prostaglandin (Xalatan) and beta blocker, is available primarily in European markets. Xalatan/Xalacom sales grew 1% in the first quarter of 2006 compared to the same period in 2005.

•
Zyrtecprovides strong, rapid and long-lasting relief for seasonal and year-round allergies and hives with once-daily dosing. Zyrtec continues to be the most-prescribed antihistamine in the U.S. in a challenging market. The 23% increase in sales in the first ~~nine months~~quarter of ~~2005~~2006 compared to the same period in ~~2004~~2005 is attributable to ~~stabilization in the prescription antihistamine market subsequent~~a new DTC ad campaign featuring new insight that allergy symptoms can worsen over time due to ~~the Rx~~exposure to ~~over-the-counter switch of loratadine as the majority of the managed care plans have completed their formulary tier changes in this category.~~
•
~~Macugen~~, a treatment for neovascular (wet) age-related macular degeneration, is a product whose revenues are included in alliance revenues. It was launched in the U.S. in January 2005 and launched in Canada in September 2005. We anticipate that the European Commission will grant marketing authorization for Macugen during the fourth quarter of 2005.new allergens.

•
Caduet,a the first multi-target single pill combining Norvasc and Lipitor, ~~and Norvasc, has successfully completed the Mutual Recognition Procedure (MRP)~~recorded worldwide revenues in the ~~E.U. and is~~amount of $77 million with a growth rate of 147% for the first ~~multi-target combination product~~quarter of 2006 compared to ~~receive a broad approval for prevention of cardiovascular events~~the same period in 2005. Caduet launched in the ~~E.U.~~U.S. in May 2004 and continues to grow at significantly higher rates than the overall U.S. cardiovascular market. Caduet is also available in Mexico, Chile, Brazil, Philippines, Singapore/Malaysia and most recently Caduet was launched in India, Korea, and Canada. In total, Caduet has now ~~approved~~received approvals in ~~the following E.U. countries:~~38 markets with approvals pending in 17 additional markets. During 2006, Caduet is expected to launch in Austria, Turkey, South Africa, France ~~Spain, Portugal, Austria, Iceland, Luxembourg, Cyprus, the Czech Republic, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia~~ and Slovenia. It is indicated for prevention of cardiovascular events in hypertensive patients with three concomitant cardiovascular risk factors, normal to mildly elevated cholesterol levels, without clinically evident coronary heart disease, where combined use of amlodipine and low dose atorvastatin is considered appropriate, and in accordance with current treatment guidelines. The Caduet Marketing Authorization application has been officially withdrawn from the MRP in Belgium, Denmark, Estonia, Ireland, Italy, Netherlands, Norway, the U.K., Sweden, Germany, Finland and Greece. These countries had reservations as to whether the benefit of Caduet, the first cardiovascular, multi-target, fixed combination product, had been demonstrated,based upon current European regulatory guidelines for fixed combination products. As a result, these countries did not mutually recognize the proposed label and Pfizer decided to withdraw the application from these countries. Pfizer will continue to explore regulatory approval opportunities for Caduet.Spain.
Consumer Healthcare
Revenues of our Consumer Healthcare business ~~which include three additional business days in our fiscal calendar~~ in the first quarter ~~and nine months~~ of ~~2005~~2006 compared to the same ~~periods~~period in ~~2004,~~2005 follow:
Third Quarter
First Nine Months
First Quarter
(millions of dollars)
2005
2004
% Change
2005
2004
% Change
2006
2005
% Change

Consumer Healthcare
$
921
$
851
8%
$
2,835
$
2,524
12%
$
900
$
945
(5)
On February 7, 2006, we announced that we are exploring strategic options for our Consumer Healthcare business, including possible sale or spin-off of the business. We expect to reach a decision by the end of the third quarter of 2006.
The ~~increase~~decrease in Consumer Healthcare revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2005,~~2006, as compared to the same ~~periods~~period in ~~2004,~~2005, was attributable to:
•
a 36% decrease in Zantac reflecting the ~~4% increase in the third quarter and 13% increase in the first nine months of~~ 2005 ~~in sales of Listerine mouthwash, which benefited from the U.S.~~initial launch of ~~Listerine Whitening in April 2005, as well as continued strong performance in international markets;~~Zantac 150;

•
~~growth from Sudafed and other upper-respiratory products, Zantac, and~~sales declines in tobacco dependence ~~products;~~
•
~~inclusion of Purell sales in 2005 following the acquisition of the Purell brand in November 2004;~~products and Listerine PocketPaks; and

•
the ~~favorable~~unfavorable impact of the ~~weakening~~strengthening of the U.S. dollar relative to many foreign currencies.
Animal Health
Revenues of our Animal Health business ~~which include three additional business days in our fiscal calendar~~ in the first quarter ~~and nine months~~ of ~~2005~~2006 compared to the same ~~periods~~period in ~~2004,~~2005 follow:
Third Quarter
First Nine Months
First Quarter
(millions of dollars)
2005
2004
% Change
2005
2004
% Change
2006
2005
% Change

Livestock products
$
301
$
287
5%
$
958
$
840
14%
$
312
$
303
3
Companion animal products
202
188
8
618
547
13
199
193
3
Total Animal Health
$
503
$
475
6
$
1,576
$
1,387
14
$
511
$
496
3
The increase in Animal Health revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2005,~~2006, as compared to the same ~~periods~~period in ~~2004,~~2005, was attributable to:
•
in livestock, the continued performance of Draxxin (for treatment of respiratory disease in cattle and swine) in Europe and in the U.S., as well as Spectramast (antibiotic formulated to treat clinical mastitis) which was launched in the U.S. in May 2005, partially offset by a slowdown in the third quarter due to delay in the U.S. cattle season;;

•
in companion animal, increased promotional activities throughout our markets resulted in Revolution (a parasiticide for dogs and ~~Clavamox~~cats) growing at a double-digit ~~rates~~rate for the first ~~nine months of 2005, and the launch of Simplicef (small animal anti-infective) in the U.S. in the fourth~~ quarter of ~~2004; and~~2006;
partially offset by:

•
a decline in sales of Rimadyl due to a slow-down in the ~~favorable~~U.S. NSAID market and increased generic competition; and
•
the unfavorable impact of the ~~weakening~~strengthening of the U.S. dollar relative to many foreign currencies.
~~COSTS AND EXPENSES~~
~~Cost of Sales~~
Cost of sales grew 16% in the third quarter of 2005 and 19% for the first nine months of 2005, and increased as a percentage of revenues, as compared with the prior year periods. The increases reflect unfavorable geographic, segment and product mix, and adverse changes in production volume, among other factors. In the first quarter of 2005, we also recorded charges for write-offs of inventory and exit costs related to the suspension of Bextra sales (see Note 2, ~~Asset Impairment Charge and Other Costs Associated with the Suspension of Bextra Sales~~).
~~Cost of sales as a percentage of revenues will remain under pressure throughout the remainder of 2005.~~
~~Selling, Informational and Administrative Expenses~~
Selling, informational and administrative expenses decreased 3% in the third quarter and were flat in the first nine months of 2005, as compared to the same periods in 2004, reflecting an increase in merger-related synergies, and the impact of the Company's AtS productivity initiative, partially offset by the unfavorable impact of foreign exchange.
~~Research and Development Expenses~~
Research and development (R&D) expenses decreased 6% in the third quarter and increased 1% in the first nine months of 2005, as compared to the same periods in 2004. The decline in the third quarter of 2005 reflects the initial benefits associated with the AtS productivity initiative and changes in year-over-year timing of various expenses.
Product Developments
We continue to invest in R&D to provide future sources of revenue through the development of new products, as well as through additional uses for existing in-line and alliance products. We have a broad and deep pipeline of medicines in development. However, 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.
Certain significant regulatory actions by, and filings pending with, the FDA and other regulatory authorities follow:
Recent FDA Approvals:
Product
Indication

Date Approved

~~Aromasin~~Genotropin
Treatment of ~~early breast cancer in post-menopausal women~~short stature and growth problems resulting from Turner's syndrome
~~October 2005~~May 2006

~~Lipitor~~Geodon
~~Reduce the risk of stroke and myocardial infarction in patients with type 2 diabetes~~Liquid oral suspension
~~September 2005~~March 2006

~~Norvasc~~Eraxis (anidulafungin)
~~For treatment~~Treatment of ~~angiographically documented coronary artery disease~~candidemia and invasive candidiasis
~~September 2005~~February 2006
Treatment of esophageal candidiasis
February 2006

~~Celebrex~~Exubera
~~For the relief~~Inhaled form of ~~the signs~~insulin for use in adults with type 1 and ~~symptoms associated with ankylosing spondylitis~~type 2 diabetes
~~July 2005~~January 2006

~~Lyrica~~Sutent
~~Add-on therapy for adult epilepsy patients with partial onset seizures~~Treatment of mRCC and GIST
~~June 2005~~
~~Revatio~~
~~Oral treatment for adult pulmonary arterial hypertension (PAH)~~
~~June 2005~~
~~Zmax~~
~~Single dose version of Zithromax for acute bacterial sinusitis and community-acquired pneumonia.~~
~~June 2005~~
~~Zyvox~~
~~For the treatment of bacterial infections in pediatric patients~~
~~May 2005~~
~~Depo-SubQ Provera~~
~~Subcutaneous formulations to treat pain associated with endometriosis.~~
~~March 2005~~
~~Ellence~~
~~Adjuvant long-term cancer treatment~~
~~March 2005~~January 2006
We continue to expect to launch Exubera in the U.S. about mid-year 2006 and we will be launching Exubera in certain European countries shortly.
Pending U.S. New Drug Applications (NDAs) and Supplemental Filings:
Product
Indication

Date Submitted

~~Sutent~~Varenicline
~~Treatment of metastatic renal cell carcinoma and malignant gastrointestinal stromal tumors~~Nicotine-receptor partial agonist for smoking cessation
~~August 2005~~
~~Anidulafungin~~
~~Treatment of candidemia and invasive candidiasis~~
~~August 2005~~
~~Treatment of esophageal candidiasis~~
~~May~~November 2005

Aricept
Treatment of severe Alzheimer's disease
August ~~2005~~
~~Genotropin~~
~~Treatment of short stature and growth problems resulting from Turner's syndrome~~
~~June~~ 2005

Vfend
Pediatric filing
June 2005

Indiplon
Modified-release tablets for treatment of multiple aspects of insomnia
May 2005

Immediate-release capsules for treatment of multiple aspects of insomnia
April 2005

~~Exubera~~
~~Inhaled form of insulin for use in adults with type 1 and type 2 diabetes~~
~~December 2004~~
~~Oporia~~
~~Vaginal atrophy~~
~~December 2004~~
~~Dalbavancin~~Zeven (dalbavancin)
Treatment of Gram-positive bacterial infections
December 2004

Norvasc
Reduction of cardiovascular risk, including risk of coronary heart disease, myocardial infarction, cardiovascular procedures and strokes
August 2004

~~Fragmin~~
~~Use in oncology patients to reduce cardiac toxicity associated with chemotherapy~~
~~March 2004~~
~~In September 2005, we~~We received "not-approvable" letters from the FDA for Oporia for the prevention of post-menopausal osteoporosis in September 2005 and for the treatment of vaginal atrophy in January 2006. We are currently in discussions with the FDA regarding these letters, and we continue to develop Oporia. In March 2006, we received a "not-approvable" letter for Fragmin for use in oncology patients, and we are currently in discussions with the FDA regarding this letter as well. In September 2005, we received a "not-approvable" letter for Dynastat (parecoxib), an injectable prodrug for valdecoxib for the treatment of acute pain. ~~Pfizer~~We have had discussions with the FDA regarding this letter, and we are developing plans to ~~discuss these "not-approvable" letters with~~seek to address the ~~FDA.~~FDA's concerns
In ~~September 2005, an FDA advisory committee recommended that~~January 2006, the FDA ~~approve~~ ~~Exubera~~, an inhaled form of insulin for use in adults with type 1 and type 2 diabetes. The FDA is not obligated to follow the recommendation of the advisory committee. In October 2005, the FDA extended the review period for Exubera to study more data on the diabetes treatment.
~~An NDA for~~ ~~Sutent~~, a novel multi-targeted oral compound for treatment of metastatic renal cell carcinoma (mRCC) and malignant gastrointestinal stromal tumors (GIST), was submitted to the FDA on August 10, 2005. The FDA has accepted this submission and granted Sutent priority-review status for this important cancer therapy. Priority designation allows for an expedited review of the NDA filing and is intended for product candidates that may provide a significant improvement compared to marketed products. An MAA for Sutent was also submitted to European regulatory authorities during the quarter.
~~On September 14, 2005, Pfizer completed the acquisition of Vicuron.~~ ~~Anidulafungin~~, one of the key products acquired in the Vicuron acquisition, is a novel, broad-spectrum antifungal agent of the echinocandin class that is currently under review by the FDA. The filing for the treatment of candidemia/invasive candidiasis has been granted priority-review status. In a Phase 3 trial, anidulafungin demonstrated clinical efficacy greater than fluconazole, including disease due to Candida glabrata, with a comparable safety profile in the treatment of candidemia/invasive candidiasis. Pfizer is currently assessing the potential of anidulafungin in treating additional patient populations.
~~The FDA has~~ designated as approvable the NDA for ~~Dalbavancin~~Zeven ~~, a new injectable antibiotic to treat Gram-positive infections, which was also acquired in the Vicuron acquisition.~~(dalbavancin). We anticipate a ~~rapid and~~ successful resolution of outstanding issues to allow final ~~NDA~~FDA approval in the ~~coming~~next several months. ~~The addition of these two medications would broaden Pfizer's existing portfolio of anti-infectives, where~~
An NDA for varenicline, a nicotine-receptor partial agonist for smoking cessation, was submitted to the ~~Company has~~FDA in November 2005. In December 2005, the FDA granted varenicline priority-review status.
In April 2006, Pfizer entered into an agreement with Schwarz Pharma AG (Schwarz) under which Pfizer will acquire exclusive worldwide rights to fesoterodine, a ~~long history of providing patients~~new drug candidate for treatment for overactive bladder. Earlier this year, Schwarz submitted an NDA for fesoterodine with both the FDA and ~~physicians with life-saving medicines.~~the EMEA.
Other Regulatory Approvals and Filings:

Product
Description of Event
Date Approved

Date Submitted


~~Revatio~~Lyrica
Approval in the E.U. for ~~treating PAH~~treatment of generalized anxiety disorder (GAD) in adults
~~November 2005~~March 2006
--
Application submitted in ~~Canada~~the E.U. for ~~treating PAH~~the treatment of broad neuropathic pain
--
~~December 2004~~
~~Geodon~~
~~Approval in the E.U. for treating manic or mixed episodes of moderate severity in bipolar disorder~~
~~October 2005~~
--January 2006

~~Aromasin~~Varenicline
Approval in ~~the E.U.~~Canada for ~~treating early breast cancer in post-menopausal women~~smoking cessation
~~August 2005~~February 2006
--
~~Sutent~~
Application submitted in the E.U. for ~~the treatment of metastatic renal cell carcinoma and malignant gastrointestinal stromal tumors~~smoking cessation
--
~~August~~November 2005

~~Aricept~~Exubera
Approval in ~~Canada~~the E.U. as an inhaled form of insulin for ~~fast dissolving tablet~~use in adults with type 1 and 2 diabetes
~~July 2005~~January 2006
--
~~Caduet~~Application submitted in Canada as an inhaled form of insulin for use in adults with type 1 and 2 diabetes
~~Approval in certain E.U. countries for cardiovascular event prevention~~
~~July 2005~~--
--
~~Lyrica~~
~~Approval in Canada for neuropathic pain~~
~~June 2005~~
--April 2006

Macugen
Approval in ~~Canada and Brazil~~E.U for age-related macular degeneration (AMD)
~~May 2005~~January 2006
--

Application submitted in Switzerland for AMD
--
January 2005

Application submitted in ~~the E.U. and~~ Australia for AMD
--
September 2004

~~Fragmin~~Zoloft
Approval in ~~the E.U.~~Japan for treatment of ~~deep vein thrombosis in cancer patients~~depression
~~April 2005~~January 2006
--

~~Vfend~~Detrol/Detrol LA
Approval in Japan for treatment of ~~aspergillosis~~overactive bladder
~~April 2005~~January 2006
--

~~Approval~~Sutent
Application submitted in Canada for ~~treatment of serious, invasive, fluconazole-resistant candida infections~~mRCC and ~~first-line treatment of candidemia in non-neutropenic patients was granted~~GIST
--
November 2005
Application submitted in the E.U. for mRCC and GIST
~~January 2005~~--
August 2005
Somavert
Application submitted in Japan for Acromegaly
--
May 2005
Revatio
Application submitted in Canada for treating pulmonary arterial hypertension
--
December 2004

Zmax
Application submitted in the E.U. for sustained release
--
October 2004

Genotropin
Application submitted in Japan for treatment of short stature and growth problems
--
July 2004
~~Neurontin~~
~~Application submitted in Japan for epilepsy~~
--
~~April 2004~~
~~Exubera~~
~~Application submitted in the E.U. as an inhaled form of insulin for use in adults with type 1 and type 2 diabetes~~
--
~~February 2004~~
~~In September and October of 2005,~~On April 28, 2006, the CHMP ~~of the European Medicines Evaluation Agency~~ issued a positive ~~opinions~~opinion recommending that ~~marketing authorizations be granted by~~ the European Commission grant conditional marketing authorization for ~~Macugen~~Sutent to treat mRCC, or advanced kidney cancer, after failure of interferon alpha or interleukin-2-based therapy. A positive opinion was also granted for GIST, a rare stomach and ~~Exubera~~~~, respectively.~~intestinal cancer, in patients who are resistant or intolerant to imatinib mesylate. The approvals require final authorization from the European ~~Commission is not obligated to follow the opinions of the CHMP. The European Commission is expected to act upon the CHMP recommendations for Macugen by the end of 2005 and Exubera in early 2006.~~Commission.
Ongoing or planned clinical trials for additional uses and dosage forms for our products include:
Product
Indication

~~Celebrex~~
~~Sporadic adenomatous polyposis - a precancerous condition caused by growths (polyps) in the intestines~~
Camptosar IV
Adjuvant colorectal cancer

Gastric cancer

~~Geodon~~Geodon/Zeldox
Bipolar relapse prevention, Bipolar pediatric
Lyrica
Fibromyalgia
Revatio
Pediatric pulmonary arterial hypertension
Macugen
Diabetic ~~Macular Edema~~macular edema

Xalatan (new delivery device)
Ocular hypertension

Zyvox
Catheter-related infections

Bone and joint infections
Drug candidates in late-stage development include ~~varenicline, a nicotine-receptor partial agonist for smoking cessation, which has concluded Phase 3 trials;~~ maraviroc (UK-427,857), a CCR-5 receptor antagonist for HIV; torcetrapib/atorvastatin, a combination CETP inhibitor/statin for heart disease; asenapine, for schizophrenia and bipolar disorder, under co-development with Akzo Nobel's Organon healthcare unit; ~~and~~ Zithromax/chloroquine for treatment of ~~malaria. The Company anticipates filing~~malaria; PF-3512676, a toll-like receptor 9 agonist for non-small cell lung cancer developed in partnership with Coley Pharmaceutical Group, Inc.; and ticilimumab (CP-675,206), an ~~NDA with the FDA~~anti-CTLA4 monoclonal antibody for ~~varenicline by the end of 2005.~~melanoma. The FDA has granted fast-track designation for maraviroc's clinical development program.
Torcetrapib/atorvastatin, which combines the new chemical entity torcetrapib (a CETP inhibitor discovered by Pfizer that raises HDL-cholesterol) with atorvastatin (Lipitor), iscontinuing in global Phase 3 clinical trials. This comprehensive 12,000-subject development program includes three comparative atherosclerotic imaging trials (a coronary intravascular ultrasound study and two carotid ultrasound studies), as well as a full range of blood-lipid efficacy studies comparing torcetrapib/atorvastatin to Lipitor, other statins and fibrates. In addition to these Phase 3 studies, the development program includes a definitive mortality and morbidity trial that is enrolling 13,000 patients.
Despite effective treatments, cardiovascular disease remains the number one killer worldwide with a residual relative risk of 6060% to 70% after treatment with statins. Therefore, the primary objective of the torcetrapib/atorvastatin development program is to provide clear evidence that substantially raising HDL-cholesterol and further lowering LDL-cholesterol can reduce cardiovascular risk beyond what can be achieved with current treatments. Torcetrapib ~~will be~~is being developed with atorvastatin in order to rigorously test this hypothesis and the new CETP inhibition mechanism of action. This development program represents a major commitment by Pfizer to significantly advance the understanding of lipids and atherosclerosis in order to provide an important new tool for patients and prescribers in preventing and treating the global burden of cardiovascular disease.
The clinical development program for the selective cytotoxic agent edotecarin was terminated in the first quarter of 2005; development rights for edotecarin were returned to Banyu Pharmaceuticals, Inc.
Pfizer's participation in the clinical development programs for capravirine, a non-nucleoside reverse transcriptase inhibitor for HIV, and Daxas, a phosphodiesterase-4 inhibitor for chronic obstructive pulmonary disease and asthma, was terminated in the second quarter 2005; development rights were returned to Shiongi & Co. Ltd and Altana Pharma, Inc. respectively.
Additional product-related programs are in various stages of discovery and development.
~~Merger-Related In-Process~~ COSTS AND EXPENSES
Cost of Sales
Cost of sales decreased 10% in the first quarter of 2006, and decreased as a percentage of revenues, as compared with the same period in 2005. The decrease reflects operational efficiencies, reflecting savings related to our AtS productivity initiative of about $100 million and the favorable impact of foreign exchange.
Selling, Informational and Administrative Expenses
Selling, informational and administrative expenses decreased 7% in the first quarter of 2006, as compared to the same period in 2005, reflecting savings related to our AtS productivity initiative of about $300 million and the favorable impact of foreign exchange.
Research and Development ~~Charges~~Expenses
~~The estimated value~~R&D expenses decreased 10% in the first quarter of ~~merger-related in-process research and development charges (IPR&D) is expensed at~~2006, as compared to the ~~acquisition date. In~~same period in 2005, ~~we expensed $1.7 billion of IPR&D, primarily~~reflecting savings related to our ~~acquisition~~AtS productivity initiative of ~~Vicuron Pharmaceuticals, Inc. on September 14, 2005 ($1.4 billion)~~about $100 million, a R&D milestone due to us from sanofi-aventis (approximately $118 million, pre-tax), and ~~our acquisition~~the favorable impact of ~~Idun Pharmaceuticals, Inc. on April 12, 2005 ($250 million). In 2004, we expensed $955 million of IPR&D, primarily related to our acquisition of Esperion Therapeutics, Inc. on February 10, 2004.~~foreign exchange.
Adapting to Scale Initiative
~~We incurred the following costs in connection with our Adapting to Scale (AtS) initiative, which was announced in the second quarter of 2005:~~
(millions of dollars)
Three
Months
Ended
Oct. 2,
2005
Nine
Months
Ended
Oct. 2,
2005

Implementation costs^(a)
$
104
$
136
Restructuring charges^(b)
153
174
Total AtS costs
$
257
$
310
^(a)
~~Included in~~ ~~Cost of sales~~ ~~($36 million),~~ ~~Selling, informational and administrative expenses~~ ~~($60 million), and~~ ~~Research and development~~~~expenses~~ ~~($8 million) for the three months ended October 2, 2005, and included in~~ ~~Cost of sales~~ ~~($37 million),~~ ~~Selling, informational and administrative expenses~~ ~~($81 million), and~~ ~~Research and development expenses~~ ~~($18 million) for the nine months ended October 2, 2005.~~
^(b)
~~Included in~~ ~~Restructuring charges and merger-related costs.~~
In connection with the AtS productivity initiative, which was launched in early 2005, Pfizer management has performed a comprehensive review of our processes, organizations, systems and decision-making procedures, in a company-wide effort to improve performance and efficiency. We expect the costs associated with this multi-year effort to continue through 2008 and to total approximately $4 billion to $5 billion, on a pre-tax basis. We now expect that cost savings from our AtS productivity initiative will be at least $2 billion in 2006, growing to about $4 billion annually upon completion in 2008. The actions associated with the AtS productivity initiative will include restructuring charges, such as asset impairments, exit costs and severance costs (including any related impacts to our benefit plans, including settlements and curtailments) and associated implementation costs, such as accelerated depreciation charges, primarily associated with plant network optimization efforts, and expenses associated with system and process standardization and the expansion of shared ~~services.~~services (See Notes to the Condensed Consolidated Financial Statements - Note 5, Adapting to Scale Initiative.)
~~Through October 2, 2005,~~We incurred the following costs in connection with our AtS productivity initiative:
First Quarter
(millions of dollars)
2006
2005

Implementation costs^(a)
$
186
$
--
Restructuring charges^(b)
301
--
Total AtS costs
$
487
$
--
^(a)
Included in Cost of sales ($124 million), Selling, informational and administrative expenses ($40 million), and Research and development expenses ($22 million).
^(b)
Included in Restructuring charges and merger-related costs.
Merger-Related Costs
In connection with acquisitions, we typically restructure and integrate the operations of the acquired companies to eliminate duplicative facilities and reduce costs. In certain instances, legacy Pfizer operations may be impacted by restructuring ~~charges primarily relate to employee termination costs at our manufacturing facilities in North America and~~actions.
We incurred the ~~implementation costs primarily relate to system and process standardization and to expansion of shared services.~~following merger-related costs:
~~The components of restructuring costs associated with AtS follow:~~
(millions of dollars)
Nine
Months
Ended
Oct. 2,
2005
Utilization
Through
Oct. 2,
2005
Accrual at
Oct. 2,
2005
^(a)
Employee termination costs
$
106
$
49
$
57
Asset impairments
62
62
--
Other
6
--
6

$
174
$
111
$
63
First Quarter
(millions of dollars)
April 2,
2006
April 3,
2005

Integration costs
$
2
$
106
Restructuring charges
3
113
Total merger-related costs^(a)
$
5
$
219

^(a)
Included in Restructuring charges and merger-related costs. Amounts in 2005 primarily relate to our acquisition of Pharmacia Corporation (Pharmacia), which was completed on April 16, 2003.~~Other current liabilities.~~
~~During the three months ended October 2, 2005, we expensed $85 million for~~ ~~Employee termination costs~~~~, $62 million for~~ ~~Asset impairments~~ ~~and $6 million in~~ ~~Other~~~~. Through October 2, 2005,~~ ~~Employee termination~~ costs represent the approved reduction of the workforce by 922 employees, mainly in manufacturing, sales and research. We notified affected individuals and 903 employees were terminated as of October 2, 2005. ~~Employee termination costs~~ ~~are recorded as incurred and include accrued severance benefits, pension and postretirement benefits.~~ ~~Asset impairments~~ ~~primarily include~~Restructuring charges ~~to write down intangible assets, and property, plant and equipment.~~ ~~Other~~ ~~primarily includes costs to exit certain activities.~~
~~Merger-Related Costs~~
~~We incurred the following merger-related costs primarily in connection with our acquisition of Pharmacia Corporation (Pharmacia), which was completed on April 16, 2003:~~

Three Months Ended
Nine Months Ended
(millions of dollars)
Oct. 2,
2005
Sept. 26,
2004
Oct. 2,
2005
Sept. 26,
2004

Integration costs^(a)
$
93
$
113
$
390
$
367
Restructuring costs^(a)
61
77
232
359
Total merger-related costs
$
154
$
190
$
622
$
726

^(a)
Included in Restructuring charges and merger-related costs.

In connection with the acquisition of Pharmacia, Pfizer management approved plans to restructure and integrate the operations of both legacy Pfizer and legacy Pharmacia to combine operations, eliminate duplicative facilities and reduce costs. Total merger-related expenditures expected to be incurred during 2003 through 2005 to achieve anticipated synergies are about $5.1 billion, on a pre-tax basis, with $5.0 billion incurred through October 2, 2005. The restructuring of our operations as a result of our acquisition of Pharmacia includes consulting, systems integrations,included severance, costs of vacating duplicative facilities, contract termination and other exit costs.
Through April 15, 2004, we recorded restructuring costs associated with employee terminations and exiting certain activities of legacy Pharmacia as liabilities assumed in the purchase business combination and recorded an increase to goodwill. Changes to previous estimates of restructuring costs included as part of the purchase allocation of Pharmacia are recorded as a reduction to goodwill or an expense to operations, as appropriate. Restructuring costs incurred for legacy Pfizer and restructuring costs incurred after April 15, 2004 for legacy Pharmacia are charged to the results of operations.
~~The components of merger-related restructuring costs associated with legacy Pfizer and legacy Pharmacia follow:~~
(millions of dollars)
Total
Utilization
Through
Oct. 2,
2005
^(a)
Accrual at
Oct. 2,
2005
^(b)

Costs capitalized through April 15, 2004:
Employee termination costs
$
1,535
$
1,502
$
33
Other
624
517
107
$
2,159
$
2,019
$
140
Costs expensed:
Employee termination costs
$
590
$
508
$
82
Asset impairments
421
421
--
Other
96
74
22

$
1,107
$
1,003
$
104
^(a)
~~Includes insignificant adjustments to original amounts established.~~
^(b)
~~Included in~~ ~~Other current liabilities.~~
~~During the three months ended October 2, 2005 and September 26, 2004, we expensed $1 million and $53 million for~~ ~~Employee termination costs~~~~, $53 million and $8 million for~~ ~~Asset impairment~~~~, and $7 million and $16 million in~~ ~~Other~~~~. During the first nine months of 2005 and 2004, we expensed $73 million and $201 million for~~ ~~Employee termination costs~~~~, $131 million and $122 million for~~ ~~Asset impairment~~~~, and $22 million and $31 million in~~ ~~Other~~.~~Through October 2, 2005,~~ ~~Employee termination costs~~ represent the approved reduction of the legacy Pfizer and legacy Pharmacia work force by 17,086 employees, mainly in corporate, manufacturing, distribution, sales and research. We notified affected individuals and 16,385 employees were terminated as of October 2, 2005. ~~Employee termination costs~~ ~~are recorded as incurred and include accrued severance benefits and costs associated with change-in-control provisions of certain Pharmacia employment contracts.~~ ~~Asset impairments~~ ~~primarily include charges to write down property, plant and equipment.~~ ~~Other~~ ~~primarily includes costs to exit certain activities of legacy Pfizer and legacy Pharmacia.~~
Other (Income)/Deductions - Net

In the first ~~nine months~~quarter of 2005, we recorded impairment charges of $1.1 billion related to the developed technology rights for Bextra, a selective COX-2 inhibitor, and $7$10 million related to the write-off of machinery and equipment, ~~(see Note 2,~~ ~~Asset Impairment Charge and Other Costs Associated with the Suspension of Bextra Sales~~), both of which are included in Other (income)/deductions - ~~net~~.

~~In addition, in connection with the suspension of Bextra sales, we recorded $56 million in write-offs of inventory and exit costs, included in~~- ~~Cost of sales~~~~; $8 million related to the costs of administering the suspension of sales, included in~~ ~~Selling, informational and administrative expenses;~~ ~~and $212 million for an estimate of customer returns, primarily included against~~ ~~Revenues.~~ ~~Substantially all of these charges were recorded in the first quarter of 2005.~~

In the third quarter of 2004, Pfizer recorded a litigation-related charge of $369 million related to the resolution of claims against Quigley Company, Inc., a wholly owned subsidiary of Pfizer, which is included in ~~Other (income)/deductions -~~ net.

PROVISION FOR TAXES ON INCOME

On January 25, 2006, the Company was notified by the Internal Revenue Service (IRS) Appeals Division that a resolution had been reached on the matter that we were in the process of appealing related to the tax deductibility of a breakup fee paid by the Warner-Lambert Company in 2000. As a result, in the first quarter of 2006 we recorded a tax benefit of approximately $441 million related to the resolution of this issue.

On January 23, 2006, the IRS issued final regulations on Statutory Mergers and Consolidations, which impacted certain prior-period transactions. In the first ~~nine months~~quarter of 2006, we recorded a tax benefit of $217 million, reflecting the total impact of these regulations.

Our effective tax rate for continuing operations was 7.1% for the first quarter of 2006 compared to 90.6% in the same period in 2005. The lower tax rate for the first quarter of 2006 is primarily due to tax benefits related to the resolution of the tax matter and the change in tax regulations as discussed above. The higher tax rate for the first quarter of 2005 ~~we recorded an income tax~~is primarily due to the recording of a $2.2 billion charge ~~of $1.7 billion, included in~~ ~~Provision for taxes on income~~~~, in connection with~~related to our decision to repatriate ~~about $36.7 billion of~~certain foreign earnings ~~in accordance with~~under the American Jobs Creation Act of 2004 (the Jobs Act)~~. In~~ in the first quarter of 2005 ~~we recorded an initial estimated income tax charge of $2.2 billion based~~(See Notes to Condensed Consolidated Financial Statements--Note 7, Taxes on the decision to repatriate $28.3 billion of foreign earnings. In the second quarter of 2005, we reduced our original estimate of the tax charge by $863 million and revised the repatriation of foreign earnings to $28.1 billion, principally as a result of guidance issued by the U.S. Treasury in May 2005. In the second quarter of 2005, we also recorded an additional tax charge of $373 million, primarily due to our decision to repatriate an additional $8.6 billion of foreign earnings.Income).

~~In the second quarter of 2005, we recorded a tax benefit of $586 million, primarily related to the resolution of certain tax positions.~~

Our effective tax rate for continuing operations was 34.4% for the first nine months of 2005 compared to 19.4% in the same period in 2004. The increase in the effective tax rate for the first nine months of 2005 is due to the previously mentioned tax charge associated with the repatriation of foreign earnings and a $1.7 billion non-deductible charge for IPR&D, primarily relating to our acquisition of Vicuron Pharmaceuticals, Inc. and Idun Pharmaceuticals, Inc., partially offset by the tax benefit of $586 million primarily related to the resolution of certain tax positions. Income taxes in the first nine months of 2004 were impacted by a $955 million non-deductible charge for IPR&D, primarily relating to our acquisition of Esperion.

ADJUSTED INCOME

General Description of Adjusted Income Measure

Adjusted income is an alternative view of performance used by management and we believe that investors' understanding of our performance is enhanced by disclosing this performance measure. The Company reports Adjusted income in order to portray the results of our major operations--the discovery, development, manufacture, marketing and sale of prescription medicines for humans and animals, as well as our over-the-counter products--prior to considering certain income statement elements. We have defined Adjusted income as Net income before ~~discontinued operations,~~ significant impact of purchase accounting for acquisitions, merger-related costs, discontinued operations and certain significant items. The Adjusted income measure is not, and should not be viewed as, a substitute for U.S. GAAP Net income.

The Adjusted income measure is an important internal measurement for Pfizer. We measure the performance of the overall Company on this basis. The following are examples of how the Adjusted income measure is utilized.

•	Senior management receives a monthly analysis of the operating results of our Company that is prepared on an Adjusted income basis;

•	The annual budgets of our Company are prepared on an Adjusted income basis; and

•	Annual and long-term compensation, including annual cash bonuses, merit-based salary adjustments and stock options, for various levels of management, is based on financial measures that include Adjusted income. The Adjusted income measure currently represents a significant portion of target objectives that are utilized to determine the annual compensation for various levels of management, although the actual weighting of the objective may vary by level of management and job responsibility and may be considered in the determination of certain long-term compensation plans. The portion of senior management's bonus, merit-based salary increase and stock option awards based on the Adjusted income measure ranges from 10% to 30%.

Despite the importance of this measure to management in goal setting and performance measurement, we stress that Adjusted income is a non-GAAP financial measure that has no standardized meaning prescribed by U.S. GAAP and, therefore, has limits in its usefulness to investors. Because of its non-standardized definition, Adjusted income (unlike U.S. GAAP Net income) may not be comparable with the calculation of similar measures for other companies. Adjusted income is presented solely to permit investors to more fully understand how management assesses the performance of our Company.

We also recognize that, as an internal measure of performance, the Adjusted income measure has limitations and we do not restrict our performance-management process solely to this metric. A limitation of the Adjusted income measure is that it provides a view of our Company's operations without including all events during a period such as the effects of an acquisition, merger-related costs or amortization of purchased intangibles and does not provide a comparable view of our performance to other companies in the pharmaceutical industry. We also use other specifically tailored tools designed to ensure the highest levels of performance in our Company. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, for senior levels of management, a portion of their long-term compensation is based on U.S. GAAP Net income.

Purchase Accounting Adjustments

Adjusted income is calculated prior to considering certain significant purchase-accounting impacts, such as those related to our acquisitions of Pharmacia ~~Vicuron~~ and ~~Esperion~~Exubera, as well as ~~net-asset~~net asset acquisitions. These impacts can include charges for purchased in-process ~~research and development,~~R&D, the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value and the incremental charges related to the amortization of finite-lived intangible assets for the increase to fair value. Therefore, the Adjusted income measure includes the revenues earned upon the sale of the acquired products without considering the aforementioned significant charges.

Certain of the purchase-accounting adjustments associated with a business combination, such as the amortization of intangibles acquired in connection with our acquisition of Pharmacia, can occur for up to 40 years (these assets have a weighted-average useful life of approximately 10nine years), but this presentation provides an alternative view of our performance that is used by management to internally assess business performance. We believe the elimination of amortization attributable to acquired intangible assets provides management and investors an alternative view of our business results by trying to provide a degree of parity to internally developed intangible assets for which research and development costs have been previously expensed.

However, a completely accurate comparison of internally developed intangible assets and acquired intangible assets cannot be achieved through Adjusted income. This component of Adjusted income is derived solely with the impacts of the items listed in the first paragraph of this section. We have not factored in the impacts of any other differences in experience that might have occurred if Pfizer had discovered and developed those intangible assets on its own and this approach does not intend to be representative of the results that would have occurred in those circumstances. For example, our research and development costs in total, and in the periods presented, may have been different; our speed to commercialization and resulting sales, if any, may have been different; or our costs to manufacture may have been different. In addition, our marketing efforts may have been received differently by our customers. As such, in total, there can be no assurance that our Adjusted income amounts would have been the same as presented had Pfizer discovered and developed the acquired intangible assets.

Merger-Related Costs

Adjusted income is calculated prior to considering integration and restructuring costs associated with business combinations because these costs are unique to each transaction and represent costs that were incurred to restructure and integrate two businesses as a result of the acquisition decision. For additional clarity, only restructuring and integration activities that are associated with a purchase business combination or a net-asset acquisition are included in merger-related costs. We have not factored in the impacts onof synergies that would have resulted had these costs not been incurred.

We believe that viewing income prior to considering these charges provides investors with a useful additional perspective because the significant costs incurred in a business combination result primarily from the need to eliminate duplicate assets, activities or employees--a natural result of acquiring a fully integrated set of activities. For this reason, we believe that the costs incurred to convert disparate systems, to close duplicative facilities or to eliminate duplicate positions (for example, in the context of a business combination) can be viewed differently from those costs incurred in other, more normal business contexts.

The integration and restructuring costs associated with a business combination may occur over several years with the more significant impacts ending within three years of the transaction. Because of the need for certain external approvals for some actions, the span of time needed to achieve certain restructuring and integration activities can be lengthy. For example, due to the highly regulated nature of the pharmaceutical business, the closure of excess facilities can take several years as all manufacturing changes are subject to extensive validation and testing and must be approved by the FDA. In other situations, we may be required by local laws to obtain approvals prior to terminating certain employees. This approval process can delay the termination action.

Discontinued Operations

Adjusted income is calculated prior to considering gains or losses on the sale of businesses and product lines included in discontinued operations as well as the related results of operations. We believe that this presentation is meaningful to investors because, while we review our businesses and product lines ~~on an ongoing basis~~periodically for strategic fit with our operations, we do not build or run our businesses with an intent to sell them.

Certain Significant Items

Adjusted income is calculated prior to considering certain significant items. Certain significant items represent substantive, unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual nature. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be a major non-acquisition-related restructuring charge and associated implementation costs for a program which is specific in nature with a defined term, such as those related to our ~~Adapting to Scale~~AtS initiative; costs associated with a significant recall of one of our products; charges related to sales or disposals of products or facilities that do not qualify as discontinued operations as defined by 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, such as charges attributable to the repatriation of foreign earnings in accordance with the Jobs Act; or possible charges related to legal matters, such as certain of those discussed in Legal Proceedings in our Form 10-K and in Part II: Other Information; Item 1, Legal Proceedings included in our Form 10-Q filings. Normal, ongoing defense costs of the Company or settlements and accruals on legal matters made in the normal course of our business would not be considered a certain significant item.

Reconciliation

A reconciliation between Net income, as reported under U.S. GAAP, and Adjusted income follows:

		Third Quarter					First Nine Months					First Quarter
(millions of dollars)		2005		2004	% Incr./ (Decr.)		2005		2004	% Incr./ (Decr.)		2006		2005	% Incr./ (Decr.)

Reported Net income	$	1,589	$	3,341	(52)%	$	5,352	$	8,536	(37)%
Reported net income											$	4,111	$	301	M+
Purchase accounting adjustments - net of tax		1,963		521	276		3,401		2,558	33		582		622	(6)
Merger-related costs - net of tax		67		112	(40)		397		463	(14)		3		151	(98)
Discontinued operations - net of tax		13		(43)	*		(7)		(75)	(91)		(3)		(29)	(90)
Certain significant items - net of tax		179		229	(22)		2,092		269	678		(232)		2,955	*
Adjusted income	$	3,811	$	4,160	(8)	$	11,235	$	11,751	(4)	$	4,461	$	4,000	12

*	Calculation not meaningful.
M+	Change greater than one-thousand percent.
Certain amounts and percentages may reflect rounding adjustments.

Adjusted income as shown above excludes the following items:

		Third Quarter				First Nine Months				First Quarter
(millions of dollars)		2005		2004		2005		2004		2006		2005

Purchase accounting adjustments, pre-tax:
In-process research and development charges^(a)	$	1,390	$	--	$	1,652	$	955	$	--	$	2
Intangible amortization and other^(b)		811		827		2,494		2,450		812		855
Total purchase accounting adjustments, pre-tax		2,201		827		4,146		3,405		812		857
Income taxes		(238)		(306)		(745)		(847)		(230)		(235)
Total purchase accounting adjustments - net of tax		1,963		521		3,401		2,558		582		622
Merger-related costs, pre-tax:
Integration costs^(c)		93		113		390		367		2		106
Restructuring costs^(c)		61		77		232		359		3		113
Total merger-related costs, pre-tax		154		190		622		726		5		219
Income taxes		(87)		(78)		(225)		(263)		(2)		(68)
Total merger-related costs - net of tax		67		112		397		463		3		151
Discontinued operations, pre-tax:
Loss/(income) from discontinued operations^(d)		10		3		44		(42)
Loss from discontinued operations^(d)										--		18
Gains on sales of discontinued operations^(d)		(7)		(65)		(72)		(68)		(5)		(65)
Total discontinued operations, pre-tax		3		(62)		(28)		(110)		(5)		(47)
Income taxes		10		19		21		35		2		18
Total discontinued operations - net of tax		13		(43)		(7)		(75)		(3)		(29)
Certain significant items, pre-tax
Asset impairment charges and other costs associated with the suspension of selling Bextra^(e)		3		--		1,216		--
Litigation-related charge^(f)		--		369		--		369
Operating results of divested legacy Pharmacia research facility^(g)		--		--		--		64
Restructuring charges--Adapting to Scale^(c)		153		--		174		--
Implementation costs--Adapting to Scale^(h)		104		--		136		--
Asset impairment charges ^(e)										--		1,213
Sanofi-aventis research and development milestone^(f)										(118)		--
Restructuring charges - Adapting to Scale^(c)										301		--
Implementation costs - Adapting to Scale^(g)										186		--
Gain on disposals of investments^(h)										(51)		--
Total certain significant items, pre-tax		260		369		1,526		433		318		1,213
Income taxes		(81)		(140)		(547)		(164)		(109)		(447)
Resolution of certain tax positions⁽ⁱ⁾		--		--		(586)		--		(441)		--
Tax impact of the repatriation of foreign earnings⁽ⁱ⁾		--		--		1,699		--		--		2,189
Total certain significant items - net of tax		179		229		2,092		269		(232)		2,955
Total purchase accounting adjustments, merger-related costs, discontinued operations and certain significant items - net of tax	$	2,222	$	819	$	5,883	$	3,215	$	350	$	3,699

^(a)	Included in Merger-related in-process research and development charges.
^(b)	Included primarily in Amortization of intangible assets.
^(c)	Included in Restructuring charges and merger-related costs.
^(d)	Included in Discontinued operations - net of ~~tax.~~tax.
^(e)	Included in ~~Selling, informational and administrative expenses~~ ~~($3 million) for the three months ended October 2, 2005, and included~~ in Cost of sales ($56 million), Selling informational and administrative expenses ($82 million) andOther (income)/deductions - net($ ($1.2 billion) ~~for the nine months ended October 2, 2005.~~.
^(f)	~~(f)~~Included in Research and development expenses.
(g)	Included in Cost of sales ($124 million), Selling, informational and administrative expenses ($40 million), and Research and developmentexpenses ($22 million).
(h)	Included in Other (income)/deductions - net.
^(g)	~~Included in~~ ~~Research and development expenses.~~
^(h)	~~Included in~~ ~~Cost of sales~~ ~~($36 million),~~ ~~Selling, informational and administrative expenses~~ ~~($60 million), and~~ ~~Research and development~~~~expenses~~ ~~($8 million) for the three months ended October 2, 2005, and included in~~ ~~Cost of sales~~ ~~($37 million),~~ ~~Selling, informational and administrative expenses~~ ~~($81 million), and~~ ~~Research and development expenses~~ ~~($18 million) for the nine months ended October 2, 2005.~~
⁽ⁱ⁾	Included in Provision for taxes on income.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Net Financial ~~Asset Position~~Assets

Our net financial asset position follows:

(millions of dollars)		Oct. 2, 2005		Dec. 31, 2004		April 2, 2006		Dec. 31, 2005

Financial assets:
Cash and cash equivalents	$	959	$	1,808	$	2,869	$	2,247
Short-term investments		12,430		18,085		12,633		19,979
Short-term loans		611		653		445		510
Long-term investments and loans		2,784		3,873		2,543		2,497
Total financial assets		16,784		24,419		18,490		25,233
Debt:
Short-term borrowings		6,729		11,266		5,059		11,589
Long-term debt		5,414		7,279		6,508		6,347
Total debt		12,143		18,545		11,567		17,936
Net financial assets	$	4,641	$	5,874	$	6,923	$	7,297

We rely largely on operating cash flow, short-term commercial paper borrowings and long-term debt to provide for the working capital needs of our operations, including our R&D activities. In addition, the proceeds from the repatriation of foreign earnings are being utilized to finance domestic activities over a multi-year time horizon, thereby reducing our reliance on domestic short-term borrowings. Our international borrowings will increase over the course of 2005 in order to fund the repatriation of foreign earnings. We believe that we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future.

~~Expected Impact of Repatriation of Foreign Earnings~~

Based on our decision to repatriate foreign earnings totaling about $36.7 billion in accordance with the Jobs Act, the use of proceeds includes domestic expenditures relating to advertising and marketing activities, research and development activities, capital assets and other asset acquisitions and non-executive compensation in accordance with the provisions of the Jobs Act (as in effect on October 2, 2005). As of October 2, 2005, we have completed the repatriation of approximately $23 billion. At October 2, 2005, our international subsidiaries held cash and cash equivalents and short-term investments totaling in excess of $3 billion. Additionally, our international subsidiaries are expected to generate cash flows during 2005, which, together with third-party borrowings as required, will be available to fund the balance of the repatriation.

Investments

Our short-term and long-term investments consist primarily of high-quality, liquid investment-grade available-for-sale debt securities. Wherever possible, cash management is centralized and intercompany financing is used to provide working capital to our operations. Where local restrictions prevent intercompany financing, working capital needs are met through operating cash flows and/or external borrowings. Our portfolio of short-term investments was reduced in the first quarter of 2006 and the proceeds were primarily used to pay down short-term borrowings.

Long-Term Debt ~~Capacity~~Issuance

~~Our short-term borrowings are rated P-1 by~~On February 22, 2006, we issued the following Japanese yen fixed-rate bonds, to be used for general corporate purposes:

•	$508 million equivalent, senior unsecured notes, due February 2011, which pay interest semi-annually, beginning on August 22, 2006, at a rate of 1.2%; and

•	$466 million equivalent, senior unsecured notes, due February 2016, which pay interest semi-annually, beginning on August 22, 2006, at a rate of 1.8%.

The notes were issued under a $5 billion debt shelf registration filed with the SEC in November 2002. Such yen debt is designated as a hedge of our yen net investments.

Credit Ratings

Two major corporate debt-rating organizations, Moody's Investors ~~Service~~Services (Moody's) and ~~A-1+ by~~ Standard & Poor's (S&P)~~. Our~~, assign ratings to our short-term and long-term debt. The following chart reflects the current ratings assigned to the Company's senior unsecured non-credit enhanced long-term debt ~~is rated Aaa~~and commercial paper issued directly by ~~Moody's and AAA~~the Company or by ~~S&P. Moody's and S&P are major corporate debt-rating organizations.~~ affiliates with a guarantee from the Company by each of these agencies:

		Long-Term-Debt
Name of Rating Agency	Commercial Paper	Rating	Outlook

Moody's	P-1	Aaa	Negative
S&P	A1+	AAA	Stable

In early April 2005, following the market withdrawal of Bextra and the FDA's decision requiring new labeling for Celebrex, Moody's placed our Aaa rating under review for possible downgrade. The review was completed in June 2005 when Moody's removed Pfizer from review status and reaffirmed our Aaa rating. However, Moody's maintained our rating outlook as negative. ~~S&P has~~Following our announcement in April 2006 of our target to purchase up to $4 billion of Pfizer stock in 2006, Moody's again reaffirmed our ~~AAA~~Aaa rating with a negative outlook. This reflects Moody's overall negative rating outlook for the major pharmaceutical sector and, ~~maintains our outlook as stable.~~specifically, their concern that disappointing product sales, setbacks in development of key pipeline products, or a shift towards a more aggressive financial profile, including an increased pace of share purchase levels, could result in Pfizer's financial metrics falling below those appropriate for a Aaa-rated company.

Our superior credit ratings are primarily based on our diversified product portfolio, our strong operating cash flow, our substantial financial assets, our strong late-stage product pipeline and on our desire to maintain a prudent financial profile. Our access to financing at favorable rates would be affected by a substantial downgrade in our credit ratings.

Debt Capacity

We have available lines of credit and revolving-credit agreements with a group of banks and other financial intermediaries. We maintain cash balances and short-term investments in excess of our commercial paper and other short-term borrowings. At ~~October~~April, 2, ~~2005,~~2006, we had access to ~~$3.0~~$3.5 billion of lines of credit, of which $1.1 billion expire within one year. Of these lines of credit, ~~$2.8~~$3.3 billion are unused, of which our lenders have committed to loan us ~~$1.7~~$2.2 billion at our request. ~~$1.5~~$2.0 billion of the unused lines of credit, ~~relate~~which expire in 2011, may be used to support our commercial paper borrowings.

At ~~October~~April 2, ~~2005,~~2006, we had the ability to borrow approximately ~~$2.0~~$1 billion by issuing debt securities under our existing debt shelf registration statement filed with the SEC in November 2002.

~~Long-Term Debt~~

~~In July 2005, we decided to exercise Pfizer's option to call, at par-value plus accrued interest, $1 billion of senior unsecured floating-rate notes, which were included in~~ ~~Long-term debt~~ ~~at December 31, 2004. Notice to call was given to the Trustees and the notes were redeemed in September 2005.~~

Goodwill and Other Intangible Assets

At ~~October~~April 2, ~~2005,~~2006, goodwill totaled ~~$23.8~~$23.7 billion (21% of our total assets) and other intangible assets, net of accumulated amortization, totaled ~~$29.0~~$28.1 billion ~~(26%~~(25% of our total assets). The largest components of goodwill and other intangible assets were acquired in connection with our acquisition of Pharmacia. ~~Other~~In the first quarter of 2006, we acquired the sanofi-aventis worldwide rights, including patent rights and production technology, to manufacture and sell Exubera. In connection with the acquisition, we recorded an intangible asset for developed technology rights of approximately $1.0 billion and goodwill of approximately $166 million. Finite-lived intangible assets, ~~included $23.0~~net include $22.2 billion ofrelated to developed technology rights and $952 million related to brands. Indefinite-lived intangible assets include $3.9 billion ~~of indefinite-lived~~related to brands.

The developed technology rights primarily represent the amortized acquisition-date fair value of the commercialized products that we acquired from Pharmacia. We acquired a well-diversified portfolio of developed technology rights across the therapeutic categories displayed in the table of major Human Health products in the "Revenues" section of MD&A. While the Arthritis and Pain therapeutic category represents about ~~28%~~27% of the total value of developed technology rights at ~~October~~April 2, ~~2005,~~2006, the balance of the value is evenly distributed across the following Human Health therapeutic product categories: Ophthalmology; Oncology; Urology; Infectious and Respiratory Diseases; Endocrine Disorders categories; and, as a group, the Cardiovascular and Metabolic Diseases; Central Nervous System Disorders and All Other categories.

SELECTED MEASURES OF LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth certain relevant measures of our liquidity and capital resources:

Oct. 2,
2005
Dec. 31,
2004

Cash and cash equivalents and short-term investments and loans (millions of dollars)
$
14,000
$
20,546

Working capital (millions of dollars)^(a)
$
12,373
$
13,236

Current ratio^(b)
1.61:1
1.50:1

Shareholders' equity per common share^(c)
$
9.11
$
9.19

^(a)
Working capital includes assets and liabilities held for sale at October 2, 2005 and December 31, 2004.
^(b)
Current ratio is the proportion of current assets to current liabilities.
^(c)
Represents total shareholders' equity divided by the actual number of common shares outstanding (which excludes treasury shares and those held by our employee benefit trust).

(millions of dollars, except ratios and per common share data)		April 2, 2006		Dec. 31, 2005

Cash and cash equivalents and short-term investments and loans	$	15,947	$	22,736

Working capital^(a)	$	17,741	$	13,493

Ratio of current assets to current liabilities		1.90:1		1.48:1

Shareholders' equity per common share^(b)	$	9.54	$	8.98

^(a)	Working capital includes assets and liabilities held for sale, which were not significant, as of April 2, 2006 and December 31, 2005.
^(b)	Represents total shareholders' equity divided by the actual number of common shares outstanding (which excludes treasury shares and those held by our employee benefit trust).

The ~~decrease~~increase in working capital ~~from~~as of April 2, 2006 as compared to December 31, ~~2004 to October 2,~~ 2005 was primarily ~~reflects:~~due to:

•	~~payment~~an increase in accounts receivable, less allowance for doubtful accounts, of ~~cash dividends on common~~$587 million, which is a result of revenue growth in our domestic markets in the immediately preceding period of about 35 days and ~~preferred stock, net~~the impact of ~~dividends payable at December 31, 2004 -- $2.8 billion;~~foreign currency translation;

•	~~purchases~~an increase in inventories of ~~our common stock -- $3.4 billion;~~$624 million, which is primarily due to the acquisition of sanofi-aventis' Exubera inventory, the build-up of inventory in advance of product launches and the impact of foreign exchange;

•	~~net cash paid to acquire Vicuron Pharmaceuticals, Inc. and other smaller businesses -- $2.1 billion;~~

•	~~payment~~the expected timing of ~~floating-rate notes --$1.0 billion;~~

•	~~purchases~~tax obligations of ~~property, plant and equipment -- $1.5 billion;~~about $632 million; and

•	~~purchases~~the timing of ~~other assets --$392 million,~~dividend accruals of $1.8 billion.

~~partially offset by:~~

~~cash from current-period operations.~~

Net Cash Provided by Operating Activities

During the first ~~nine months~~quarter of ~~2005,~~2006, net cash provided by continuing operating activities was ~~$10.0~~$4.0 billion, as compared to ~~$10.4~~$3.2 billion in the same period of ~~2004.~~2005. The ~~decrease~~increase in net cash provided by operating activities was primarily ~~driven by lower~~attributable to:

•

higher current period income from operations, net of non-cash items, ~~partially offset by the timing of receipts and payments in the ordinarily course of business. In the cash flows statement,~~ ~~Other~~ ~~includes adjustments for non-cash items such as valuation adjustments.~~

~~Net Cash Provided by/(Used in) Investing Activities~~

During the first nine months of 2005, net cash provided by investing activities was $2.7 billion, compared to net cash used of $6.7 billion in the same period in 2004. The change from net cash used in 2004 to net cash provided by investing activities in 2005 was primarily attributable to:

•	net redemptions of $6.3 billion from investments in 2005 primarily used to provide funds for the repatriation of foreign earnings in accordance with the Jobs Act compared to net purchases of $4.6 billion of investments in 2004,

partially offset by:

•	~~proceeds from sales~~the timing of ~~businesses~~other receipts and ~~product lines~~payments in the ordinary course of ~~$108 million in 2005 as compared to $1.2 billion in 2004; and~~

•	~~net cash used for acquisitions in 2005 of $2.1 billion as compared to $1.4 billion in 2004.~~business.

Net Cash Provided by/Used in ~~Financing~~Investing Activities

During the first ~~nine months~~quarter of ~~2005,~~2006, net cash ~~used in financing~~provided by investing activities was ~~$13.5~~$5.4 billion, as compared to ~~$3.3~~a net use of cash of $2.7 billion in the same period in ~~2004.~~2005. The ~~increase in~~change from net cash used in ~~financing~~2005 to net cash provided by investing activities in ~~2005~~2006 was primarily attributable to:

•	higher net ~~repayments~~redemptions of ~~$6.3 billion on total borrowings~~investments in ~~2005 (funds from the repatriation~~2006 (a positive change in cash and cash equivalents of ~~foreign earnings were used~~$9.9 billion) to ~~finance domestic activities, thereby reducing our reliance on short-term borrowings)~~provide funds for debt payments as compared to ~~total~~ net ~~borrowings~~purchases of ~~$4.4 billion~~investments in ~~2004,~~

•	~~an increase in cash dividends paid of $356 million as compared to the first nine months of 2004 due to an increase in the dividend rate and~~

•	~~a decrease of $568 million in the proceeds from the exercise of stock options,~~2005,

partially offset by:

•	~~a decrease~~the acquisition of Exubera in 2006 (an increased use of cash of $1.4 billion).

Net Cash Used in Financing Activities

During the first quarter of 2006, net cash used in financing activities was $8.8 billion, as compared to $818 million in the same period in 2005. The increase in net cash used in financing activities was primarily attributable to:

•	net repayments of $6.2 billion on total borrowings in 2006, compared to net borrowings of $1.4 billion in ~~purchases~~2005 (an increased use of ~~our common stock~~cash of $7.6 billion), and

•	an increase in ~~2005~~cash dividends paid of $343 million as compared to the ~~same period~~first quarter of 2005 primarily due to an increase in ~~2004.~~the dividend rate.

In June 2005, we announced a new $5 billion share-purchase program which is being funded by operating cash flows. Through the first quarter of 2006, we purchased approximately 60 million shares under the new program for approximately $1.5 billion.

In October 2004, we announced a $5 billion share-purchase ~~program. We~~program, which we completed ~~this share-purchase program by purchasing approximately $2.4 billion of the Company's stock~~ in the second quarter of ~~2005.~~2005 and was funded from operating cash flows. In ~~June 2005, Pfizer's Board of Directors authorized a new $5 billion share-purchase program. During~~total, under the ~~third quarter of 2005,~~October 2004 program, we purchased approximately ~~4.3~~185 million shares of common stock at a cost of approximately $111 million under the new program. The Company has purchased nearly 126 million shares of common stock, at a cost of approximately $3.4 billion, during 2005. We remain committed to completing this newly authorized $5 billion share-purchase program.shares.

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 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 are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not ~~generally~~ paid significant amounts under these provisions and at ~~October~~April 2, ~~2005,~~2006, recorded amounts for the estimated fair value of these indemnifications are not material.

Certain of our ~~copromotion~~co-promotion or license agreements ~~include additional provisions that~~ give our ~~alliance~~licensors or partners the ~~right~~rights to negotiate for, or in some cases to obtain, under certain financial conditions, ~~copromotion~~co-promotion or other rights in specified countries with respect to certain of our products.

RECENTLY ~~ISSUED~~ADOPTED ACCOUNTING STANDARDS

~~Share-Based Payment~~

~~In December 2004,~~On January 1, 2006, we adopted the ~~Financial Accounting Standards Board (FASB) issued~~provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment,~~. SFAS~~as supplemented by the guidance provided by Staff Accounting Bulletin (SAB) 107, issued in March 2005. (SFAS 123R replaces SFAS 123,Stock-Based Compensation~~. SFAS 123R requires that the fair value~~, issued in 1995.) (See Notes to Condensed Consolidated Financial Statements - Note 3, Adoption of the grant of employee stock options be reported as an expense. We plan to adopt SFAS 123R, when required, beginning in the first quarter of 2006. (We had previously disclosed an intention to adopt, when required, in mid-2005, but the SEC delayed the required effective date). Determining the impact of SFAS 123R on our future results of operations requires a number of complex estimates about future events. For example, such an assessment would require a prediction about the number of options to be granted, primarily in February of next year, and a forecast, as of the grant date, of our stock price, the market-based stock price volatility and the risk-free interest rate, all of which can be highly variable and difficult to predict. As such, currently, we cannot reasonably estimate the impact of SFAS 123R on our results of operations in 2006.

~~Conditional Asset Retirement Obligations~~

~~In March 2005, the FASB issued Interpretation No. 47,~~ New Accounting ~~for Conditional Asset Retirement Obligations~~ ~~(FIN 47). FIN 47 clarifies that conditional obligations meet the definition of an asset retirement obligation in SFAS 143,~~ ~~Accounting for Asset Retirement Obligations~~Standards, and therefore should be recognized if their fair value is reasonably estimable. We plan to adopt FIN 47 in the fourth quarter of 2005. We do not expect the provisions of FIN 47 to have a material impact on our consolidated financial statements.Note 13, Share-Based Payments).

OUTLOOK

Results in ~~2005~~2006 have been, and will continue to be, impacted by the loss of U.S. exclusivity of ~~four major products--Diflucan, Neurontin, and Accupril/Accuretic during~~certain key products since the beginning of 2004 and ~~Zithromax in November 2005.~~will be impacted by the loss of U.S. exclusivity of Zoloft at the end of the second quarter of 2006. Revenues also have been, and may continue to be, impacted by ~~publicity and regulatory actions regarding~~uncertainty related to selective COX-2 inhibitors, as well as lower prescription growth ~~and~~or increased competition in key markets in the U.S., such as the ~~lipid-lowering market and the~~ erectile-dysfunction market. ~~Full-year~~We continue to expect 2006 revenues to be comparable to those in 2005, with growth of in-line and new products substantially replacing revenue declines from loss of exclusivity. The anticipated growth of four products--Lipitor, Celebrex, Lyrica and Geodon--is expected to contribute significantly to our 2006 revenues. We are committed in our efforts to reach our full-year revenue goal for Lipitor, although it is an aggressive target given a challenging environment and a slower than expected start to the year. New clinical data, educational campaigns on Lipitor that highlight its unique benefit profile, and advantageous formulary positioning are expected to ~~evidence a modest decline relative~~contribute to ~~2004, although a somewhat larger decline than previously anticipated, reflecting lower Human Health revenues.~~growth. The same commitment is true for Celebrex, which remains an important treatment option for millions of arthritis patients. In the first quarter of 2006, Geodon delivered excellent results and Lyrica exceeded our high initial expectations. The contribution of new products is expected to continue to accelerate as we launch new products throughout the year.

~~In 2005, we anticipate Pharmacia merger-related~~We now expect AtS-related synergies of ~~approximately $4.2~~at least $2 billion in 2006, an increase of ~~$600 million~~at least $1.2 billion over ~~2004~~2005 synergies. ~~We also expect to achieve approximately $600 million in cost savings from our AtS productivityinitiative during 2005, greater than previously forecasted, mainly attributable to the Human Health business.~~

Given these and other factors, a reconciliation, at current exchange rates ~~we expect 2005~~and reflecting management's current assessment for 2006, of forecasted 2006 Adjusted income ~~of $14.2 to $14.4 billion,~~and Adjusted diluted EPS ~~of $1.92~~ to ~~$1.94,~~forecasted 2006 reported Net income ~~of $7.5 to $7.7 billion,~~ and reported diluted EPS ~~of $1.02 to $1.04,~~follows:

($ billions, except per-share amounts)
Net Income^(a)
Diluted EPS^(a)

Forecasted Adjusted income/diluted EPS
~$15.0
~$2.00
Intangible amortization, net of tax
(2.3)
(0.32)
Adapting to scale costs, net of tax
(1.1 -1.4)
(0.15-0.19)
Equity sales / other
0.1
0.01
Resolution of certain tax positions
0.4
0.06
Forecasted reported Net income/diluted EPS^(b)
~$ 11.8 - $12.1
~$1.56 - $1.60
Forecasted cash flow from operations is expected to be over $16 billion.^(a)
^(a)
Does not include the impacts of business-development transactions that have not been completed as of the end of the first quarter of 2006, as well as any potential impacts in connection with exploring strategic options for the Consumer Healthcare business.
^(b)
Estimates of 2006 reported Net income have been revised to reflect lower restructuring and implementation costs associated with our AtS productivity initiative in 2006.
Our forecasted financial performance in 2006 is subject to a number of factors and uncertainties--as described in the ~~"Cautionary~~"Forward Looking Information and Factors That May Affect Future Results" section below. The forecasted Adjusted income and diluted EPS ranges, as well as the forecasted reported Net income and diluted EPS ranges, are subject to a number of factors and uncertainties--changes in prescription growth rates and increased competition in key therapeutic markets and geographies; Adapting to Scale restructuring activities; the timing and rate of commercial acceptance of new-product launches; changes in the geographic, product, and segment mix of our revenues and income; changes in foreign exchange; the timing of regulatory actions; and other factors. Some of these factors and uncertainties may persist over ~~the~~our planning horizon. ~~We are currently assessing these factors and other variables as part of our annual planning process and have withdrawn our previously provided financial guidance for 2006 and 2007.~~
~~A reconciliation of forecasted 2005 Adjusted income and Adjusted diluted EPS to forecasted 2005 reported Net income and reported diluted EPS follows:~~
($ billions, except per-share amounts)
Net Income
Diluted EPS

Forecasted Adjusted income/diluted EPS
$14.2 - $14.4
$1.92 - $1.94
Intangible amortization and other
(2.3)
(.32)
In-process R&D charges (primarily Vicuron & Idun)
(1.7)
(.22)
Merger-related costs/productivity-initiative costs
(.9)
(.13)
Equity gains
.1
.02
Asset-impairment charges and other costs associated with the suspension of selling Bextra
(.8)
(.10)
Tax impact on repatriation of foreign earnings
(1.7)
(.23)
Resolution of certain tax positions
.6
.08
Forecasted reported Net income/diluted EPS
$  7.5 - $  7.7
$1.02 - $1.04
Pfizer's estimates of 2005 reported Net income of approximately $7.5 billion to $7.7 billion and reported diluted earnings per share of approximately $1.02 to $1.04, have been revised from the prior guidance of $9.1 billion and about $1.24. The revision is principally attributable to in-process R&D charges of $1.4 billion ($0.19 per share) related to the acquisition of Vicuron during the third quarter of 2005 and revised expectations (reflective of a lower revenue outlook, partially offset by greater expected savings associated with the Adapting to Scale productivity initiative and other expense revisions, and a lower effective tax rate), partially offset by anticipated gains on the sale of equity investments.
~~We expect to spend about $7.6 billion on research and development in 2005 and approximately $2.2 billion in capital expenditures for the full year 2005.~~
~~CAUTIONARY~~FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS
Our disclosure and analysis in this report, including but not limited to the information discussed in the Outlook section above, contain forward-looking information about our Company's financial results and estimates, business prospects, in-line products and ~~products in research~~product candidates that involve substantial risks and uncertainties. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "forecast" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, 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, and financial results. Among the factors that could cause actual results to differ materially are the following:
•
the success of research and development activities;

•
decisions by regulatory authorities regarding whether and when to approve our drug applications as well as their decisions regarding labeling and other matters that could affect the availability or commercial potential of our products;

•
the speed with which regulatory authorizations, pricing approvals, and product launches may be achieved;

•
competitive developments affecting our current growth products;

•
the ability to successfully market both new and existing products domestically and internationally;

•
difficulties or delays in manufacturing;

•
trade buying patterns;

•
the ability to meet generic and branded competition after the loss of patent protection for our products and competitor products;

•
the impact of existing and future regulatory provisions on product exclusivity;

•
trends toward managed care and healthcare cost containment;

•
possible U.S. legislation or regulatory action affecting, among other things, pharmaceutical pricing and reimbursement, including under Medicaid and Medicare, the importation of prescription drugs that are marketed outside the U.S. and sold at prices that are regulated by governments of various foreign countries, and the involuntary approval of prescription medicines for over-the-counter use;

•
the potential impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003;

•
legislation or regulations in markets outside the U.S. affecting product pricing, reimbursement or access;

•
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;

•
legal defense costs, insurance expenses, settlement costs and the risk of an adverse decision or settlement related to product liability, patent protection, governmental investigations, ongoing efforts to explore various means for resolving asbestos litigation and other legal proceedings;

•
the Company's ability to protect its patents and other intellectual property both domestically and internationally;

•
interest rate and ~~foreign currency exchange rate~~foreign-currency exchange-rate fluctuations;

•
governmental laws and regulations affecting domestic and foreign operations, including tax obligations;

•
changes in U.S. generally accepted accounting principles;

•
any changes in business, political and economic conditions due to the threat of future 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; and

•
the impact of acquisitions, divestitures, restructurings, product withdrawals and other unusual items, including the impact of the possible sale or spin-off of our ~~ability to integrate and to obtain the anticipated results and synergies from our acquisition of Pharmacia,~~Consumer Healthcare business and our ability to realize the projected benefits of our Adapting to Scale multi-year productivity initiative.
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.
We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our Form 10-K filing for the ~~2004~~2005 fiscal year listed various important factors that could cause actual results to differ materially from expected and historic 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 11A, of that filing under the heading ~~"Cautionary~~"Risk Factors and Cautionary Factors That May Affect Future Results." 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.
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.
Legal Proceedings and Contingencies
We and certain of our subsidiaries are involved in various patent, product liability, consumer, commercial, securities, environmental and tax litigations and claims; government investigations; and other legal proceedings that arise from time to time in the ordinary course of our business. We do not believe any of them will have a material adverse effect on our financial position.
We record accruals for such contingencies to the extent that we conclude their occurrence is probable and the related damages are estimable. If a range of liability is probable and estimable and some amount within the range appears to be a better estimate than any other amount within the range, we accrue that amount. If a range of liability is probable and estimable and no amount within the range appears to be a better estimate than any other amount within the range, we accrue the minimum of such probable range. Many claims involve highly complex issues relating to causation, label warnings, scientific evidence, actual damages and other matters. Often these issues are subject to substantial uncertainties and, therefore, the probability of loss and an estimation of damages are difficult to ascertain. Consequently, we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for these contingencies. These assessments can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Our assessments are based on estimates and assumptions that have been deemed reasonable by management. Litigation is inherently unpredictable, and excessive verdicts do occur. Although we believe we have substantial defenses in these matters, we could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in any particular period.
Patent claims include challenges to the coverage and/or validity of our patents on various products or processes. Although we believe we have substantial defenses to these challenges with respect to all our material patents, there can be no assurance as to the outcome of these matters, and a loss in any of these cases could result in a loss of patent protection for the drug at issue, which could lead to a significant loss of sales of that drug and could materially affect future results of operations.
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 2005 Financial Report, which is filed as exhibit 13 to our 2005 Form 10-K. We currently invest and borrow primarily on a short-term or effectively variable-rate basis.
Item 4.  Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.
During our most recent fiscal quarter, there has not ~~occurred~~been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, we do wish to highlight some changes which, taken together, will have a favorable impact on our controls over a multi-year period.
In January 2006, we implemented new information systems for our financial statement consolidation. This initiative further strengthened the overall design and operating effectiveness of our financial reporting controls. Additionally, we have begun a multi-year initiative to outsource some transaction-processing activities within certain accounting processes and are migrating to a consistent enterprise resource planning system across the organization. This is an enhancement of on-going activities to further develop our financial shared service capabilities and standardize our financial systems. None of these initiatives are in response to any identified deficiency or weakness in our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1.  Legal Proceedings.
Certain legal proceedings in which we are involved are discussed in Note 1718 to the consolidated financial statements included in our ~~2004~~2005 Financial ~~Report;~~Report and in Part I, Item 3, of our Annual Report on Form 10-K for the year ended December 31, ~~2004; and Part II, Item 1, of our Quarterly Reports on Form 10-Q for the quarters ended April 3 and July 3,~~ 2005. The following discussion is limited to certain recent developments concerning our legal proceedings and should be read in conjunction with those earlier Reports. Unless otherwise indicated, all proceedings discussed in those earlier Reports remain outstanding. Reference also is made to the Legal Proceedings and Contingencies section in Part I, Item 2, of this Form 10-Q.
~~Patent Matters~~
~~Lipitor (atorvastatin)~~
As previously reported, our patent rights to Lipitor are being challenged in various countries. On October 12, 2005, in an action brought by generic manufacturer Ranbaxy Ltd., the United Kingdom's High Court of Justice upheld our basic U.K. patent for Lipitor, which expires in 2011, but ruled that a second patent covering the calcium salt of atorvastatin, which expires in 2010, is invalid. Both sides intend to appeal the decision. If upheld on appeal, the decision will prohibit Ranbaxy from introducing a generic version of atorvastatin in the U.K. before the expiration of our basic patent in 2011.
The trial of our Lipitor patent-infringement action against Ranbaxy in the U.S. District Court for the District of Delaware was held in late 2004. While a decision is possible later this year, the court has not indicated when it intends to issue its judgment.
~~Neurontin (gabapentin)~~
As previously reported, in 2000, 2001 and 2003, Warner-Lambert brought patent infringement suits in various federal courts against several generic manufacturers that had filed abbreviated new drug applications with the FDA asserting the invalidity and non-infringement of our gabapentin (Neurontin) low-lactam patent. These suits were consolidated for pre-trial purposes in the U.S. District Court for the District of New Jersey. The defendant generic manufacturers filed various summary judgment motions asserting invalidity and non-infringement on a number of grounds. In August 2005, the court, while denying eight of the ten summary judgment motions, granted two motions for summary judgment of non-infringement. It is expected that both sides will appeal the decision.
Neurontin has faced generic competition in the U.S. since last year. The FDA granted approval to a number of manufacturers for their generic gabapentin products, and the manufacturers began to market those products, in 2004.
~~Xalatan (lantanoprost)~~
As previously reported, in November 2001, a generic manufacturer notified Pharmacia that it had filed an abbreviated new drug application with the FDA seeking approval to market a product containing latanoprost, which Pharmacia markets as Xalatan. In December 2001, Pharmacia filed suit against the generic manufacturer in the U.S. District Court for the District of New Jersey alleging infringement of various patents relating to latanoprost that are held by or licensed to Pharmacia. The generic manufacturer admitted infringement but claimed that these patents are invalid and unenforceable.
In July 2004, the court held that two of the three patents in suit are valid, infringed and enforceable, and it issued an injunction blocking sale of the generic product until the expiration of the later-expiring patent in March 2011. The generic manufacturer appealed the decision with respect to these two patents. The third patent, which also expires in March 2011, was held unenforceable. We appealed the decision with respect to the third patent. In July 2005, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court's decision as to all three patents, thereby blocking sale of the generic product until March 2011. In October 2005, the Federal Circuit denied the generic manufacturer's request for an en banc review of the three-member panel decision.
Product Liability Matters
~~Rezulin~~Asbestos
AsOn May 3, 2006, the balloting agent in the previously reported Chapter 11 bankruptcy proceeding involving Quigley Company, Inc. (Quigley), a wholly owned subsidiary of Pfizer, certified that the claimants approved by more than the requisite number of votes the reorganization plan that had been filed by Quigley in ~~April 2001, Louisiana Health Service Indemnity Company~~the U.S. Bankruptcy Court for the Southern District of New York. The reorganization plan also must be approved by both the Bankruptcy Court and ~~Eastern States Health and Welfare Fund filed a consolidated complaint against Warner-Lambert in~~ the U.S. District Court for the Southern District Court of New ~~York purportedly on behalf~~York. If approved by the courts, the reorganization plan will resolve all pending and future claims against Quigley and Pfizer in which claimants allege personal injury from exposure to Quigley products containing asbestos, silica or mixed dust.
Hormone-Replacement Therapy
As previously reported, Pfizer and certain affiliates of Pfizer, along with several other pharmaceutical manufacturers, have been named as defendants in a class consisting of all health benefit providers that paid for or reimbursed patients for the purchase of Rezulin between February 1997 and April 2001. In September 2005, the court granted Warner-Lambert's motion for summary judgment and dismissed the complaint. In November 2005, the plaintiffs appealed the decision.
~~Viagra~~
A number of lawsuits ~~including purported class actions, have been filed against us~~ in various federal and state courts alleging ~~that Viagra causes~~personal injury resulting from the use of certain ~~types~~estrogen and progestin medications prescribed for women to treat the symptoms of ~~visual injuries. The plaintiffs in~~menopause. As the result of the voluntary dismissal of certain purported class actions ~~seek to represent nationwide~~ and ~~certain statewide classes of Viagra users. All~~the withdrawal of the class action allegations by the plaintiffs in certain other actions, ~~seek damages for personal injury,~~this litigation now consists of individual actions and ~~the~~a few purported statewide class ~~actions also seek medical monitoring.~~actions.
Consumer and Commercial Matters
Lipitor
~~Beginning in September 2005,~~Since March 2006, a number of purported class actions have been filed against us in various federal courts alleging claims relating to the promotion of Lipitor. ~~In each of~~The plaintiffs allege that, through patient and medical education programs and other actions, the ~~actions,~~Company promoted Lipitor for use by certain patients contrary to cholesterol guidelines, which are referenced in the product labeling, that recommend changes to diet and exercise.
The plaintiffs seek to represent a nationwide ~~class~~and certain statewide classes consisting of ~~women (regardless of age)~~health and men over age 65 who in each case had no history of heart disease or diabetes and who purchased Lipitor within the last four years. In certain of the actions, the plaintiffs also seek to represent health insurers, employee benefit planswelfare funds and other third-party payors that ~~paid~~purchased Lipitor for such patients or reimbursed such patients for the purchase of Lipitor ~~used by individuals in either~~since January 1, 2002. Each of the ~~aforementioned two groups. The plaintiffs in these~~ actions ~~allege that~~alleges, among other things, fraud, unjust enrichment and the ~~Company engaged in false and misleading advertising in~~ violation of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO") and certain state consumer ~~protection laws by allegedly promoting Lipitor for the prevention of heart disease in the aforementioned two groups. The actions seek~~fraud statutes and seeks monetary and injunctive relief, including treble damages. In addition, a purported class action on behalf of residents of the Province of Quebec has been filed against us in Canada that asserts claims under Canadian law and seeks relief substantially similar to the claims asserted and the relief sought in the U.S. actions.
~~Celebrex and Bextra~~
As previously reported, the Company is a defendant in a number of product liability, consumer fraud, securities, fiduciary duty and ERISA (Employee Retirement Income Security Act of 1974) actions, including purported class and derivative actions, relating to Celebrex and Bextra. Certain current and former officers, directors and employees of Pfizer and Pharmacia also are named as defendants in some of those actions. In June 2005, the federal securities, fiduciary duty and ERISA actions were transferred to the U.S. District Court for the Southern District of New York for consolidated pre-trial proceedings. In September 2005, the federal product liability and consumer fraud actions were transferred to the U.S. District Court for the Northern District of California for consolidated pre-trial proceedings.
~~Other Matters~~
~~The Department of Justice~~
~~The U.S. Department of Justice has informed us that it is investigating Pharmacia's former contractual relationship with a health care intermediary.~~
~~We have received requests for information and documents from the U.S. Department of Justice relating to certain physician payments budgeted to our prescription pharmaceutical products.~~
~~Importation Cases~~
As previously reported, in 2004 a number of purported class actions were filed in the U.S. District Court for the District of Minnesota alleging that Pfizer and several other pharmaceutical manufacturers violated federal and state civil antitrust laws by conspiring to prevent the importation of brand-name prescription drugs from Canada. These suits all were consolidated into a single action, which sought to represent a nationwide class consisting of all persons who purchased or reimbursed patients for the purchase of prescription drugs manufactured and marketed by defendants that also are available in Canada. In August 2005, the court granted the defendants' motion to dismiss this action, and the plaintiffs have appealed the decision. The previously reported California state court action by a number of independent pharmacists in California that asserts similar claims under California antitrust and unfair business practices laws is still pending. The defendants' motion to dismiss the California action was partially granted and partially denied in July 2005.
~~Environmental Matters~~
As previously reported, in July 2005, the U.S. Environmental Protection Agency (EPA) proposed a civil penalty in the amount of $275,000 to settle certain alleged violations of the Federal Clean Air Act at our Kalamazoo, Michigan facility that were identified by the EPA during an inspection in 2004. In September 2005, this matter was resolved pursuant to a settlement that provides for a $47,250 civil penalty and a commitment to undertake two supplemental environmental projects at the facility. Corrective actions have been implemented.
Tax Matters
InOn January 25, 2006, the ~~second quarter of 2005, we recorded a tax benefit of $586 million primarily related to the resolution of certain tax positions. In addition, we believe that~~Company was notified by the IRS ~~audits of~~Appeals Division that a resolution had been reached on the Pfizer Inc. tax returns for the years 1999-2001 and the Warner-Lambert Company tax returns for the years 1999 through the date of the merger with Pfizer (June 19, 2000) are substantially complete. In connection with those audits,matter that we ~~are currently~~were in the process of appealing ~~one matter~~ related to the tax deductibility of a breakup fee paid by Warner-Lambert Company in 2000. As a result, in the first quarter of 2006 we recorded a tax benefit of approximately $441 million related to the resolution of this issue.
The IRS ~~has commenced the audit~~is currently conducting audits of the Pfizer Inc. tax returns for the years 2002, 2003 and 2004. The 2005 and 2006 tax ~~year is~~years are also currently under audit ~~as we are voluntary participants in~~under the IRS Compliance Assurance ~~Program, which results in real-time tax audits.~~Process, a recently introduced real time audit process.
~~As previously disclosed, with~~With respect to Pharmacia Corporation, ~~(formerly known as Monsanto Company),~~ the IRS has completed ~~and closed its income tax return examinations and appeals through 1999 and has commenced the audit~~audits of the tax returns for the years 2000 through 2002 and is currently conducting an audit for the year 2003 through the date of the merger with Pfizer (April 16, 2003).
We periodically reassess the likelihood of assessments resulting from audits of federal, state and foreign income tax filings. We believe that our accruals for tax liabilities are adequate for all open years.
Item 1A.  Risk Factors.
There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our 2005 Form 10-K.
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
This table provides certain information with respect to our purchases of shares of Pfizer's common stock during the fiscal ~~third~~first quarter of ~~2005:~~2006:
Issuer Purchases of Equity Securities^(a)
Issuer Purchases of Equity Securities^(a)
Issuer Purchases of Equity Securities^(a)

Period
Total Number of
Shares Purchased^(b)
Average Price
Paid per Share^(b)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan^(a)
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Plan^(a)
Total Number of
Shares Purchased^(b)
Average Price
Paid per Share^(b)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan^(a)
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Plan^(a)
July 4, 2005 through July 31, 2005
24,708
$26.64
---
$5,000,000,000
August 1, 2005 through August 31, 2005
1,642,722
$25.28
1,584,100
$4,960,003,230
September 1, 2005 through
October 2, 2005
2,814,503
$25.63
2,755,400
$4,889,364,758
January 1, 2006 through January 31, 2006
38,616
$24.70
--
$4,506,758,855
February 1, 2006 through February 28, 2006
11,632,281
$25.74
11,611,800
$4,207,854,134
March 1, 2006 through April 2, 2006
27,876,787
$26.16
26,797,200
$3,506,952,010
Total
4,481,933
$25.51
4,339,500
39,547,684
$26.04
38,409,000

^(a)
On June 23, 2005, Pfizer announced that the Board of Directors authorized a $5 billion share-purchase plan (the "2005 Stock Purchase Plan").
^(b)
In addition to purchases under ~~the~~ 2005 Stock Purchase Plan, this column reflects the following transactions during the fiscal ~~third~~first quarter of ~~2005:~~2006: (i) the deemed surrender to Pfizer of ~~79,419~~71,259 shares of common stock to pay the exercise price and to satisfy tax withholding obligations in connection with the exercise of employee stock options, (ii) the open-market purchase by the trustee of ~~57,434~~68,118 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance-contingent share awards and who deferred receipt of such awards and (iii) the surrender to Pfizer of ~~5,580~~999,307 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.
Item 3.  Defaults Upon Senior Securities.
None
Item 4.
Submission of Matters to a Vote of Security Holders.
The shareholders of the Company voted on 10 items at the Annual Meeting of Shareholders held on April 27, 2006:
1.

the election of thirteen directors to terms ending in 2007
2.
a proposal to ratify the appointment of KPMG LLP as independent registered public accounting firm for 2006
3.
a management proposal to amend the Company's Restated Certificate of Incorporation to eliminate the supermajority vote requirements and fair price provision
4.
a shareholder proposal relating to term limits for Directors
5.
a shareholder proposal requesting reporting on pharmaceutical price restraint
6.
a shareholder proposal relating to cumulative voting
7.
a shareholder proposal requesting separation of roles of Chairman and CEO
8.
a shareholder proposal requesting a report on political contributions
9.
a shareholder proposal requesting a report on the feasibility of amending Pfizer's corporate policy on laboratory animal care and use
10.
a shareholder proposal requesting justification for financial contributions which advance animal-based testing methodologies
The nominees for directors were elected based upon the following votes:
Nominee
Votes For
Votes Withheld

Michael S. Brown
6,102,310,577
169,316,436
M. Anthony Burns
5,782,328,339
489,298,674
Robert N. Burt
6,088,164,988
183,462,025
W. Don Cornwell
6,070,350,747
201,276,266
William H. Gray III
6,069,818,563
201,808,450
Constance J. Horner
6,054,431,318
217,195,695
William R. Howell
6,062,804,584
208,822,429
Stanley O. Ikenberry
6,022,468,102
249,158,911
George A. Lorch
4,917,678,164
1,353,948,849
Henry A. McKinnell
6,036,199,359
235,427,654
Dana G. Mead
4,897,576,886
1,374,050,127
Ruth J. Simmons
6,101,433,765
170,193,248
William C. Steere, Jr.
5,969,834,481
301,792,532
The proposal to ratify the appointment of KPMG LLP as independent registered public accounting firm for 2006 received the following votes:
•
6,127,461,331
Votes for approval
•
92,212,170
Votes against
•
51,953,512
Abstentions
There were no broker non-votes for this item.
The management proposal to amend the Company's Restated Certificate of Incorporation to eliminate the supermajority vote requirements and fair price provision received the following votes:
•
6,080,045,369
Votes for approval
•
116,218,734
Votes against
•
65,471,697
Abstentions
There were no broker non-votes for this item.
The shareholder proposal relating to term limits for Directors received the following votes:
•
329,621,061
Votes for approval
•
4,549,417,890
Votes against
•
72,870,252
Abstentions
•
1,319,717,810
Broker non-votes
The shareholder proposal requesting reporting on pharmaceutical price restraint received the following votes:
•
306,370,118
Votes for approval
•
4,074,948,434
Votes against
•
570,590,651
Abstentions
•
1,319,717,810
Broker non-votes
The shareholder proposal relating to cumulative voting received the following votes:
•
1,921,168,368
Votes for approval
•
2,930,414,590
Votes against
•
100,326,245
Abstentions
•
1,319,717,810
Broker non-votes
The shareholder proposal requesting separation of roles of Chairman and CEO received the following votes:
•
1,873,534,534
Votes for approval
•
3,008,731,582
Votes against
•
69,643,087
Abstentions
•
1,319,717,810
Broker non-votes
The shareholder proposal requesting a report on political contributions received the following votes:
•
443,207,460
Votes for approval
•
3,864,687,453
Votes against
•
644,014,290
Abstentions
•
1,319,717,810
Broker non-votes
The shareholder proposal requesting a report on the feasibility of amending Pfizer's corporate policy on laboratory animal care and use received the following votes:
•
279,343,928
Votes for approval
•
4,076,195,537
Votes against
•
596,369,738
Abstentions
•
1,319,717,810
Broker non-votes
The shareholder proposal requesting justification for financial contributions which advance animal-based testing methodologies received the following votes:
•
232,512,838
Votes for approval
•
4,121,285,648
Votes against
•
598,110,717
Abstentions
•
1,319,717,810
Broker non-votes
Item 5.  Other Information.
None
Item 6.
Exhibits.

1)  Exhibit 12
-
Computation of Ratio of Earnings to Fixed Charges

2)  Exhibit 15
-
Accountants' Acknowledgment

3)  Exhibit 31.1
-
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

4)  Exhibit 31.2
-
Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

5)  Exhibit 32.1
-
Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

6)  Exhibit 32.2
-
Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
PFIZER INC. AND SUBSIDIARY COMPANIES
SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, this report was signed on behalf of the Registrant by the authorized person named below.
Pfizer Inc.
(Registrant)


Dated:  ~~November 9, 2005~~May 8, 2006
/s/ Loretta V. Cangialosi

Loretta V. Cangialosi, Vice President, Controller
(Principal Accounting Officer and
Duly Authorized Officer)
Exhibit 12
PFIZER INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine
Months
Ended
Oct. 2,
Year Ended December 31,
Three
Months
Ended
April 2,
Year Ended December 31,
(in millions, except ratios)
2005

2004
2003
2002
2001
2000
2006

2005
2004
2003
2002
2001

Determination of earnings:
Income from continuing operations before provision for taxes on income, minority interests and cumulative effect of change in accounting principles
$
8,169
$
14,007
$
3,246
$
11,766
$
9,963
$
5,471
Income from continuing operations before provision for taxes on income, minority interests and cumulative effect of a change in accounting principles
$
4,427
$
11,534
$
14,007
$
3,246
$
11,766
$
9,963
Less:
Minority interests
9
10
3
6
14
13
4
16
10
3
6
14
Adjusted income
8,160
13,997
3,243
11,760
9,949
5,458
Income adjusted for minority interest
4,423
11,518
13,997
3,243
11,760
9,949
Add:
Fixed charges
471
510
442
322
305
444
223
635
510
442
322
305
Total earnings as defined
$
8,631
$
14,507
$
3,685
$
12,082
$
10,254
$
5,902
$
4,646
$
12,153
$
14,507
$
3,685
$
12,082
$
10,254

Fixed charges:
Interest expense ^(a)
$
347
$
347
$
270
$
251
$
266
$
381
$
181
$
471
$
347
$
270
$
251
$
266
Preferred stock dividends ^(b)
11
12
10
--
--
--
4
14
12
10
--
--
Rents ^(c)
113
151
162
71
39
63
38
150
151
162
71
39
Fixed charges
471
510
442
322
305
444
223
635
510
442
322
305

Capitalized interest
12
12
20
28
56
46
8
17
12
20
28
56

Total fixed charges
$
483
$
522
$
462
$
350
$
361
$
490
$
231
$
652
$
522
$
462
$
350
$
361

Ratio of earnings to fixed charges
17.9
27.8
8.0
34.5
28.4
12.0
20.1
18.6
27.8
8.0
34.5
28.4
All financial information reflects ~~as applicable,~~ the following as discontinued operations for 2006, 2005, 2004 and 2003: certain European generics businesses and ~~product lines as discontinued operations:~~for 2004 and 2003, our in-vitro allergy and autoimmune diagnostics testing, and surgical ~~ophthalmic,~~ophthalmics as well as, for 2004, 2003, 2002 and 2001 certain ~~European generic pharmaceutical,~~non-core consumer healthcare product lines (primarily marketed in Europe).
All financial information reflects the following as discontinued operations for 2003, 2002, and 2001: our confectionery, shaving and fish-care products businesses, ~~certain non-core consumer healthcare products lines (primarily marketed in Europe) and~~as well as the Estrostep, Loestrin and femhrt women's health product ~~lines.~~
~~Historical ratios of earnings to fixed charges reflect revisions to historical period's rent expense,~~lines for all the ~~impact of which was not significant to any period.~~years presented.
(a)
Interest expense includes amortization of debt premium, discount and expenses.

(b)
Preferred stock dividends are from our Series A convertible perpetual preferred stock held by an Employee Stock Ownership Plan assumed in connection with our acquisition of Pharmacia.

(c)
Rents included in the computation consist of one-third of rental expense which we believe to be a conservative estimate of an interest factor in our leases, which are not material.
Exhibit 15
ACCOUNTANTS' ACKNOWLEDGMENT
To the Shareholders and Board of Directors of Pfizer Inc:
We hereby acknowledge our awareness of the incorporation by reference of our report dated ~~November 9, 2005,~~May 8, 2006, included within the Quarterly Report on Form 10-Q of Pfizer Inc. for the quarter ended ~~October~~April 2, ~~2005,~~2006, in the following Registration Statements:
- Form S-8 dated October 27, 1983 (File No. 2-87473),
- Form S-8 dated March 22, 1990 (File No. 33-34139),
- Form S-8 dated January 24, 1991 (File No. 33-38708),
- Form S-8 dated November 18, 1991 (File No. 33-44053),
- Form S-8 dated May 27, 1993 (File No. 33-49631),
- Form S-8 dated May 19, 1994 (File No. 33-53713),
- Form S-8 dated October 5, 1994 (File No. 33-55771),
- Form S-8 dated December 20, 1994 (File No. 33-56979),
- Form S-8 dated March 29, 1996 (File No. 333-02061),
- Form S-8 dated September 25, 1997 (File No. 333-36371),
- Form S-8 dated April 24, 1998 (File No. 333-50899),
- Form S-8 dated April 22, 1999 (File No. 333-76839),
- Form S-8 dated June 19, 2000 (File No. 333-90975),
- Form S-8 dated June 19, 2000 (File No. 333-39606),
- Form S-8 dated June 19, 2000 (File No. 333-39610),
- Form S-3 dated October 20, 2000 (File No. 333-48382),
- Form S-8 dated April 27, 2001 (File No. 333-59660),
- Form S-8 dated April 27, 2001 (File No. 333-59654),
- Form S-3 dated October 30, 2002 (File No. 333-100853),
- Form S-3 dated December 16, 2002 (File No. 33-56435),
- Form S-8 dated April 16, 2003 (File No. 333-104581),
- Form S-8 dated April 16, 2003 (File No. 333-104582),
- Form S-8 dated November 18, 2003 (File No. 333-110571),
- Form S-8 dated December 18, 2003 (File No. 333-111333),
- Form S-8 dated April 26, 2004 (File No.333-114852), and
- Form S-3 dated March 1, 2005 (File No. 333-123058).
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
KPMG LLP
New York, New York
~~November 9, 2005~~May 8, 2006
Exhibit 31.1
CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Henry A. McKinnell, certify that:
1.
I have reviewed this report on Form 10-Q of Pfizer Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  ~~November 9, 2005~~May 8, 2006

/s/ Henry A. McKinnell
Henry A. McKinnell
Chairman of the Board and Chief Executive Officer
Exhibit 31.2
CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alan G. Levin, certify that:
1.
I have reviewed this report on Form 10-Q of Pfizer Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  ~~November 9, 2005~~May 8, 2006

/s/ Alan G. Levin
Alan G. Levin
Senior Vice President and Chief Financial Officer
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
Pursuant to 18 U. S. C. Section 1350, I, Henry A. McKinnell, hereby certify that, to the best of my knowledge, the Quarterly Report of Pfizer Inc. on Form 10-Q for the quarter ended ~~October~~April 2, ~~2005~~2006 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, and that the information contained in that Report fairly presents, in all material respects, the financial condition and results of operations of Pfizer Inc.

/s/ Henry A. McKinnell
Henry A. McKinnell
Chairman of the Board and Chief Executive Officer
~~November 9, 2005~~May 8, 2006
This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
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
Pursuant to 18 U. S. C. Section 1350, I, Alan G. Levin, hereby certify that, to the best of my knowledge, the Quarterly Report of Pfizer Inc. on Form 10-Q for the quarter ended ~~October~~April 2, ~~2005~~2006 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, and that the information contained in that Report fairly presents, in all material respects, the financial condition and results of operations of Pfizer Inc.
/s/ Alan G. Levin
Alan G. Levin
Senior Vice President and Chief Financial Officer
~~November 9, 2005~~May 8, 2006
This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

(millions of dollars)		Total		Utilization Through Oct. 2, 2005	^(a)		Accrual at Oct. 2, 2005	^(b)

Costs capitalized through April 15, 2004:
Employee termination costs	$	1,535	$	1,502		$	33
Other		624		517			107
	$	2,159	$	2,019		$	140
Costs expensed:
Employee termination costs	$	590	$	508		$	82
Asset impairments		421		421			--
Other		96		74			22
	$	1,107	$	1,003		$	104

^(a)	~~Includes insignificant adjustments to original amounts established.~~
^(b)	~~Included in~~ ~~Other current liabilities.~~

Instrument^(a)	Primary Balance Sheet Caption	^(b)	Hedge Type	^(c)	Hedged Item	Notional Amount as of April 2, 2006 (millions of dollars)	Maturity Date

LT yen debt	LTD		NI		Yen net investments	$510	2011
LT yen debt	LTD		NI		Yen net investments	467	2016

~~Financial Instrument~~		~~Hedge Type~~	~~Hedged or Offset Item~~	~~Notional Amount~~ ~~(millions of dollars)~~	~~Maturity Date~~


~~Swaps~~		~~Net investment~~	~~Euro net investments~~	~~$1,255~~	~~Sept.-Oct. 2006~~
~~Forward-exchange contracts~~		--	~~Short-term foreign currency assets and liabilities~~^(a)	~~674~~	~~Through 2006~~
~~Forward-exchange contracts~~		~~Cash flow~~	~~Euro available-for-sale investments~~	~~493~~	~~Through 2006~~
~~Forward-exchange contracts~~		~~Cash flow~~	~~Danish krone available-for-sale investments~~	~~172~~	~~Through 2006~~

^(a)	~~Forward-exchange contracts~~LT yen debt = Long-term yen debt
^(b)	The primary balance sheet caption indicates the financial statement classification of the fair value amount associated with the financial instrument used to ~~offset short-term~~hedge foreign ~~currency assets and liabilities were primarily for intercompany transactions in euros, Australian dollars, U.K. pounds, Swedish krona and Canadian dollars for the nine months ended October 2, 2005.~~exchange risk. LTD = Long-term debt
^(c)					NI = Net investment hedge

(millions of dollars)		Human Health		Consumer Healthcare		Animal Health		Other		Total

Balance, December 31, 2004	$	20,966	$	2,701	$	79	$	10	$	23,756
Other^(a)		13		62		(25)		--		50
Balance, October 2, 2005	$	20,979	$	2,763	$	54	$	10	$	23,806

^(a)	Primarily related to Exubera.
^(b)	Includes a reduction to goodwill related to the ~~acquisition~~resolution of ~~Vicuron,~~certain tax positions, partially offset by the impact of foreign ~~exchange and reductions to goodwill as a result of adjusting certain purchase accounting liabilities.~~exchange.

		Oct. 2, 2005				Dec. 31, 2004			April 2, 2006		Dec. 31, 2005
(millions of dollars)		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization	Gross Carrying Amount	Accumulated Amortization	Gross Carrying Amount	Accumulated Amortization

Finite-lived intangible assets:
Developed technology rights	$	31,102	$	(8,070)	$	33,137	$	(5,967)	$31,848	$ (9,662)	$30,781	$(8,819)
Brands		1,057		(48)		1,037		(14)	1,024	(72)	1,022	(60)
License agreements		165		(28)		158		(17)	164	(34)	160	(30)
Trademarks		157		(92)		134		(90)	152	(91)	152	(91)
Other^(a)		436		(205)		390		(186)	504	(228)	452	(207)
Total amortized finite-lived intangible assets		32,917		(8,443)		34,856		(6,274)	33,692	(10,087)	32,567	(9,207)
Indefinite-lived intangible assets:
Brands		3,898		--		4,012		--	3,871	--	3,864	--
License agreements		316		--		356		--	302	--	296	--
Trademarks		227		--		235		--	227	--	227	--
Other^(b)		61		--		66		--	68	--	39	--
Total indefinite-lived intangible assets		4,502		--		4,669		--	4,468	--	4,426	--
Total identifiable intangible assets	$	37,419	$	(8,443)	$	39,525	$	(6,274)	$38,160	$(10,087)	$36,993	$(9,207)

^(a)	Includes patents, non-compete agreements, customer contracts and other intangible assets.
^(b)	Includes pension-related intangible assets.

		Pension Plans
		U.S. Qualified				U.S. Supplemental (Non-Qualified)				International				Postretirement Plans
(millions of dollars)		2005		2004		2005		2004		2005		2004		2005		2004

Service cost	$	80	$	71	$	9	$	8	$	71	$	67	$	10	$	7
Interest cost		104		98		15		15		76		71		28		18
Expected return on plan assets		(148)		(143)		--		--		(77)		(74)		(6)		(4)
Amortization of:
Prior service costs/(gains)		4		5		--		--		(1)		3		1		--
Net transition obligation		--		--		--		--		1		--		--		--
Actuarial losses		26		25		10		9		23		15		4		--
Curtailments and settlements - net		3		--		--		--		1		18		--		--
Special termination benefits		1		--		--		--		1		--		1		--
Net periodic benefit costs	$	70	$	56	$	34	$	32	$	95	$	100	$	38	$	21

•	Stock options, which entitle the holder to purchase, at the end of a vesting term, a specified number of shares of Pfizer common stock at a price per share set equal to the market price of Pfizer common stock on the date of grant.

•	Restricted stock units (RSUs), which entitle the holder to receive, at the end of a vesting term, a specified number of shares of Pfizer common stock, including shares resulting from dividend equivalents paid on such RSUs.

•	Performance share awards (PSAs) and performance-contingent share awards (PCSAs), which entitle the holder to receive, at the end of a vesting term, a number of shares of Pfizer common stock, within a range of shares from zero to a specified maximum, calculated using a non-discretionary formula, which measures Pfizer's performance relative to an industry peer group.

•	Restricted stock grants, which entitle the holder to receive, at the end of a vesting term, a specified number of shares of Pfizer common stock, and which also entitle the holder to receive dividends paid on such grants.

^(a)	Determined using a constant dividend yield during the expected term of the option.
^(b)	Determined using the extrapolated yield on U.S. Treasury zero-coupon issues.
^(c)	Determined using implied volatility, after consideration of historical volatility.
^(d)	Determined using historical exercise and post-vesting termination patterns.

	Shares (thousands)	Weighted- Average Exercise Price Per Share	Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Outstanding, January 1, 2006	627,404	$33.51
Granted	68,539	26.20
Exercised	(10,246)	15.42
Forfeited	(2,489)	31.58
Cancelled	(6,890)	35.78
Outstanding, April 2, 2006	676,318	33.03	5.7	$427
Vested and expected to vest^(a), April 2, 2006	666,752	33.06	5.6	427
Exercisable, April 2, 2006	459,142	34.12	4.3	427

(thousands of shares)	Shares	Weighted-Average Grant Date Fair Value Per Share

Nonvested, January 1, 2006	12,803	$26.89
Granted	12,635	26.15
Vested	(3,268)	27.28
Reinvested dividend equivalents	104	25.77
Forfeited	(337)	26.32
Nonvested, April 2, 2006	21,937	26.38

(thousands of shares)	Shares	Weighted-Average Grant Date Value Per Share

Nonvested, January 1, 2006	13,366	$23.32
Granted	1,533	26.20
Vested	(1,583)	26.20
Forfeited^(a)	(1,513)	26.20
Nonvested, April 2, 2006	11,803	25.09


^(a)	Forfeited includes 345 thousand shares that were forfeited by retirees. At the discretion of the Compensation Committee, of the Company's Board of Directors, $9 million in cash was paid to such retirees, which amount was equivalent to the fair value of the forfeited shares pro rated for the portion of the performance period that was completed prior to retirement.

	Per Share	Maximum Maturity (years)
(thousands of shares)	Purchase Price	April 2, 2006	Dec. 31, 2005

3,051	$33.85	0.6	--
3,051	33.84	--	0.4

(millions of dollars, except per common share data)		First Quarter 2005

Net income available to common shareholders used in the calculation of basic earnings per common share:
As reported under GAAP^(a)	$	299
Compensation expense - net of tax^(b)		(147)
Pro forma	$	152
Basic earnings per common share:
As reported under GAAP^(a)	$	0.04
Compensation expense - net of tax^(b)		(0.02)
Pro forma	$	0.02
Net income available to common shareholders used in the calculation of diluted earnings per common share:
As reported under GAAP^(a)	$	300
Compensation expense - net of tax^(b)		(147)
Pro forma	$	153
Diluted earnings per common share:
As reported under GAAP^(a)	$	0.04
Compensation expense - net of tax^(b)		(0.02)
Pro forma	$	0.02

Human Health

•	The Human Health segment, which represents our pharmaceutical business, includes treatments for cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye disease, endocrine disorders and allergies. The Human Health segment also includes our contract manufacturing and bulk pharmaceutical chemicals business.

Consumer Healthcare

•	The Consumer Healthcare segment includes self-medications for oral care, ~~upper respiratory~~upper-respiratory health, tobacco dependence, gastrointestinal health, skin care, eye care and hair growth.

Animal Health

•	The Animal Health segment includes prevention and treatments for diseases in livestock and companion animals.

^(a)	~~Includes certain income/(expense) items that are excluded from~~Corporate/Other includes the ~~operating segment profit/(loss) that are considered corporate items and, therefore, are included in~~manufacturing of empty two-piece gelatin capsules. Corporate/Other~~. These items include~~ also includes interest income/(expense), corporate expenses (e.g., corporate administration costs), other income/(expense) ~~items,~~(e.g., realized gains and losses attributable to our investments in debt and equity securities), certain ~~equity-based~~performance-based compensation expenses not allocated to the business segments, significant impacts of purchase accounting for acquisitions, certain milestone payments, ~~Adapting to Scale restructuring charges and implementation costs,~~ merger-related costs, ~~and~~ intangible asset ~~impairments.~~impairments and costs related to our AtS productivity initiative.

^(b)	~~For the three months~~Segment profit/(loss) equals income from continuing operations before provision for taxes on income and ~~nine months ended October 2, 2005,~~ ~~Corporate/Other~~ ~~includes (i)~~minority interests. Certain costs, such as significant impacts of purchase accounting for acquisitions, ~~of $2.2 billion and $4.1 billion, including acquired in-process research and development, incremental intangible asset amortization and other charges, (ii)~~ merger-related costs ~~of $154 million~~ and ~~$622 million, (iii) restructuring charges and implementation~~ costs ~~associated with the Adapting~~related to ~~Scale~~our AtS productivity initiative, ~~of $257 million and $310 million and (iv) costs associated with the suspension of Bextra's sales and marketing of $3 million and $1.2 billion.~~are included in Corporate/Other only. This methodology is utilized by management to evaluate each business.

^(c)	For the ~~three months and nine months ended September 26, 2004,~~first quarter of 2006, Corporate/Other includes (i) significant impacts of purchase accounting for acquisitions of ~~$827~~$812 million, ~~and $3.4 billion,~~ including ~~acquired in-process research and development,~~ incremental intangible asset amortization and other charges, (ii) merger-related costs of ~~$190~~$5 million, (iii) restructuring charges and implementation costs associated with the AtS productivity initiative of $487 million, (iv) gain on disposals of investments of $51 million and ~~$726~~(v) research and development milestone due to us from sanofi-aventis of approximately $118 million.

^(d)	For the first quarter of 2005, Corporate/Other includes (i) significant impacts of purchase accounting for acquisitions of $857 million, including acquired in-process R&D charges, incremental intangible asset amortization and other charges, (ii) merger-related costs of $219 million and (iii) costs associated with the ~~operating results~~suspension of ~~a divested legacy Pharmacia research facility~~Bextra's sales and marketing of ~~$64 million in the first nine months of 2004 and a litigation-related charge of $369 million in the third quarter of 2004.~~$1.2 billion.

•	Overview of Consolidated Operating Results. This section, beginning on page 23, provides a general description of Pfizer's business; discusses significant acquisitions made by Pfizer during the first quarter of 2006; provides information about our operating environment; and summarizes our productivity initiative.

•	Revenues. This section, beginning on page 25, provides an analysis of our products and revenues for the first quarters of 2006 and 2005, as well as an overview of important product developments.

•	Costs and Expenses. This section, beginning on page 34, provides a discussion about our costs and expenses.

•	Provision for Taxes on Income. This section, beginning on page 36, provides a discussion of items impacting our tax provision for the periods presented.

•	Adjusted Income. This section, beginning on page 36, provides a discussion of an alternative view of performance used by management.

•	Financial Condition, Liquidity and Capital Resources. This section, beginning on page 40, provides an analysis of our balance sheets as of April 2, 2006 and December 31, 2005, and cash flows for the three months ended April 2, 2006 and April 3, 2005, as well as a discussion of our outstanding debt and commitments that existed as of April 2, 2006 and December 31, 2005. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer's future commitments.

•	Outlook. This section, beginning on page 43, provides a discussion of our expectations for 2006.

•	Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 44 provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements set forth in this report relating to the financial results, operations and business prospects of the Company. Such forward-looking statements are based on management's current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances. Also included in this section is a discussion of Legal Proceedings and Contingencies.

•	Reorganizing Pfizer Global Research & Development (PGRD) to increase efficiency and effectiveness in bringing new therapies to patients-in-need while reducing the cost of research and development. PGRD ~~is being~~has been reorganized into eleven therapeutic ~~categories --~~areas: cardiovascular, metabolic, and endocrine; central nervous system; inflammation; allergy and respiratory; infectious diseases; pain; gastrointestinal and hepatitis; oncology; urology and sexual health; ophthalmology; and dermatology. Each therapeutic area will have three team leaders -- a research leader for compounds not yet in human testing, a development leader for compounds in human testing not yet marketed, and a commercial leader for marketed compounds. Discovery Research will retain its existing structure of six ~~drug-candidate-producing~~drug-candidate discovery sites. Development will move toward single sites for most therapeutic areas.

•	Continuing our optimization of Pfizer Global Manufacturing's plant network, which began with the acquisition of Pharmacia, to ensure that the Company's manufacturing facilities are aligned with current and future product needs. ~~Since December 2004, Pfizer has announced~~During 2005 and through the ~~divestiture~~first quarter of ~~facilities in Holland, MI; Angers~~2006, 15 sites were identified for rationalization (Angers and ~~Val-de-Reuil,~~Val de Reuil, France; Arecibo and Cruce Davila, Puerto Rico; Augusta, Georgia; Corby and Morpeth, U.K.; Holland, Michigan; Jakarta, Indonesia; Seoul, Korea; Orangeville, Canada; Parsippany, New Jersey; Tsukuba, Japan; Stockholm and ~~Stockholm, Sweden, as well as other, smaller facilities.~~Uppsala-Fyrislund, Sweden). In ~~the last few months, Pfizer announced the cessation of~~addition, there have been extensive reductions in site operations in ~~Corby,~~Sandwich, U.K. (the planned closure of drug product, distribution and ~~Orangeville, Canada; a significant downsizing in~~fermentation operations); Lincoln ~~NE;~~ and ~~that plants in Lititz, PA, Groton, CT,~~Omaha, Nebraska sites; and ~~Inchera and Little Island, Ireland would be restructured. We also determined that the Augusta, GA plant will be closed. The restructuring of the~~ Puerto Rico sites (staff reductions), with smaller staff reductions in Groton, Connecticut; Lititz, Pennsylvania; and Sandwich, U.K. operations will continue, with employment reduction at Barceloneta and Arecibo, Puerto Rico, to occur in the fourth quarter of 2005 in anticipation of cessation of operations at the Arecibo plant in the next few years. The sale of the Cruce Davila, Puerto Rico, plant is also being pursued. Since 2003, Pfizer has announced plans to reduce the number of plants in its global networks by more than 25%.Brooklyn, N.Y.

•	Realigning our European marketing teams and implementing initiatives designed to improve the effectiveness of our field force in Japan. During ~~the third quarter of~~ 2005, we completed a major reorganization of the U.S. field force, reshaping the management structure to be more responsive to commercial trends as the Medicare Modernization Act takes effect and driving greater sales-force accountability in preparation for the upcoming launch of new medicines.

•	Pursuing savings in information technology resulting from significant reductions in application software (already reduced from ~~about~~over 8,000 at the time of the Pharmacia acquisition in 2003 to ~~about 4,000 today, with considerable further reductions planned)~~fewer than 3,000) and data centers (to be reduced from 17 to 4), as well as rationalization of service providers, while enhancing our ability to invest in innovative technology opportunities to further propel our growth.

•	the loss of U.S. exclusivity of Zithromax in November 2005;

•	the continued decline in sales of Neurontin, Diflucan and Accupril/Accuretic, which lost U.S. exclusivity in 2004;

•	the suspension of sales of Bextra in the second quarter of 2005;

•	the strengthening of the U.S. dollar relative to many foreign currencies;

•	lower revenue for Zoloft, which has lost exclusivity in many European markets and will lose U.S. exclusivity at the end of the second quarter of 2006; and

•	lower revenue for Viagra, reflecting increased competition and declining overall erectile-dysfunction sales in several major markets;

partially offset by:

•	the solid aggregate performance in the balance of our broad portfolio of patent-protected medicines; and

•	revenues from new products launched in 2005 and the first quarter of 2006.

		Third Quarter
		Revenues							% Change in Revenues		First Quarter				% Change in Revenues
		U.S.				International			U.S.	International	U.S.		International		U.S.	International
(millions of dollars)		2005		2004		2005		2004	05/04	05/04	2006	2005	2006	2005	06/05	06/05

Human Health	$	5,609	$	6,619	$	4,943	$	4,669	(15)%	6%	$6,340	$6,229	$4,773	$5,288	2	(10)
Consumer Healthcare		493		453		428		398	9	8	451	483	449	462	(6)	(3)
Animal Health		228		231		275		244	(1)	12	229	219	282	277	4	2
Other		65		74		148		143	(14)	4	47	43	89	90	10	(3)
Total Revenues	$	6,395	$	7,377	$	5,794	$	5,454	(13)	6	$7,067	$6,974	$5,593	$6,117	1	(9)


		First Nine Months
		Revenues							% Change in Revenues
		U.S.				International			U.S.	International
(millions of dollars)		2005		2004		2005		2004	05/04	05/04

Human Health	$	17,203	$	18,967	$	15,426	$	14,066	(9)%	10%
Consumer Healthcare		1,439		1,290		1,396		1,234	12	13
Animal Health		710		647		866		740	10	17
Other		206		218		459		431	(5)	6
Total Revenues	$	19,558	$	21,122	$	18,147	$	16,471	(7)	10

($ millions, except % growth)	Human Health 1Q06 Revenues	Impact on Total Human Health 1Q06/1Q05 % Growth

In-Line Products^(a)and New Products^(b)	$10,561	2	%
Loss-of-exclusivity products and Bextra^(c)	552	(6)
Total Human Health revenues	$11,113	(4)	%

^(a)	In-Line Products is defined as first-quarter 2006 worldwide revenues of all Human Health products other than those referred to in notes (b) and (c).

^(b)	New Products is defined as first-quarter 2006 worldwide revenues of products launched since the beginning of 2004--Caduet, Inspra, Lyrica, Macugen, Olmetec, Onsenal, Revatio, Sutent, and Zmax.

^(c)	Loss-of-Exclusivity Products and Bextra is defined as first-quarter 2006 worldwide revenues of products that have lost U.S. exclusivity since the beginning of 2004--Accupril/Accuretic, Diflucan, Neurontin, and Zithromax--and of Bextra, sales of which were suspended in a number of U.S. therapeutic markets. Examples include the branded statins market, where total prescriptions grew 7% in the third quarter versus 10% in the first half of 2005, and the erectile-dysfunction market, with total prescriptions declining 7% in the third quarter versus zero growth in the first half of 2005.

*^(a)	~~Calculation not meaningful.~~
**	Represents direct sales under license agreement with Eisai Co., Ltd.
M+*	~~Change greater than one-thousand percent.~~ Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.

•	Lipitor, for the treatment of elevated cholesterol levels in the blood, is the most widely used treatment for lowering cholesterol and the best-selling pharmaceutical product of any kind in the ~~world. In our international markets, Lipitor showed revenue growth of 14%~~world, reaching over $3.1 billion in worldwide sales in the ~~third~~first quarter of ~~2005,~~2006, an increase of 1% compared to the ~~third quarter of 2004.~~same period in 2005. In the U.S., ~~Lipitor revenues grew 1%~~sales of $2 billion represent growth of 3% over the previous year's first quarter. While sales were lower than expected in the ~~third~~first quarter, Lipitor leads prescriptions for U.S. patients receiving statin therapy for the first time in 12 months, with nearly a 37% share of new-to-market patients in January 2006, more than twice the share of the closest competitor (according to the Verispan longitudinal patient database). Internationally, Lipitor sales in the first quarter of ~~2005,~~2006 resulted in a 3% decline compared to the ~~third quarter~~same period in 2005, reflecting the impact of ~~2004. This performance reflects in part an unexpectedly rapid slowdown~~foreign exchange.

	Lipitor began to face competition in the U.S. ~~lipid-lowering market~~from generic pravastatin (Pravachol) in April 2006 and will begin to face competition in the U.S. from generic simvastatin (Zocor) in June 2006. In April 2006, we launched a new advertising campaign for Lipitor that highlights its unique benefit profile and advantageous formulary positioning. Scientific data continue to reinforce the trend toward the use of higher dosages of statins for greater cholesterol reduction.

	New clinical findings continue to demonstrate the benefit of Lipitor on a wide range of endpoints, helping to support its differentiation versus the competition and maintain its rank as the world's top-selling medicine. Data from a ~~whole and marginal Lipitor prescription share erosion during the quarter of one percentage point. Evidence~~sub-analysis of the ~~substantial lipid-market deceleration can be seen~~Treating to New Targets (TNT) study, presented at the American College of Cardiology in ~~category new-prescription growth rates~~March 2006, showed that patients with kidney dysfunction taking 80 mg of Lipitor had significantly greater improvements in kidney function than patients taking 10 mg. Half of these patients on 80 mg had normal kidney function at the end of the study. This further builds on the wealth of evidence that Lipitor is a powerful lipid-lowering agent, which leads to improved health outcomes for ~~the third quarter~~a broad range of 8% versus first-half growth of 17%, representing more than a 50% drop from robust trends exhibited during the first six months of this year. Despite this market slowdown, Lipitor still accounts for more than 40% of all lipid-lowering prescriptions, a 26.4% advantage versus its next nearest competitor.patients -- even those with impaired kidney function.

	In ~~September~~December 2005, the ~~FDA approved~~U.S. District Court for the District of Delaware determined that two U.S. patents covering atorvastatin, the active ingredient in Lipitor, ~~use to reduce~~are valid and infringed by the ~~risk~~product of ~~stroke and myocardial infarction~~generic manufacturer Ranbaxy Laboratories Limited (Ranbaxy), thus protecting Lipitor's exclusivity in ~~patients with type 2 diabetes. The FDA's decision was based on~~ the ~~findings~~U.S. until June 2011. In addition, in October 2005, the United Kingdom's High Court of Justice upheld the exclusivity of the ~~Collaborative Atorvastatin Diabetes Study (CARDS),~~basic patent covering atorvastatin. The ruling prevents Ranbaxy from introducing a ~~landmark trial~~generic version of ~~more than 2,800 patients with type 2 diabetes, near-normal cholesterol,~~atorvastatin in the U.K. until the patent expires in November 2011. Both the U.S. and ~~at least one other risk factor, such as high blood pressure or smoking. CARDS showed that patients using Lipitor experienced 48% fewer strokes than those on placebo.~~the U.K. decisions have been appealed. The ~~CARDS study's steering committee stopped the trial nearly two years earlier than planned because~~appeal of the ~~clinical benefits among patients who took Lipitor.~~

	~~In addition,~~U.S. decision is scheduled to be heard in May 2006, and the ~~FDA expanded~~appeal of the ~~Lipitor label~~U.K. decision is scheduled to ~~include data on the reduction~~be heard in the incidence of stroke in patients with multiple risk factors, as shown in the Anglo-Scandinavian Cardiac Outcomes Trial (ASCOT) clinical trial. The ASCOT trial found that Lipitor reduced the relative risk of stroke by 26% compared to placebo. The study involved people with normal or borderline cholesterol and no prior history of heart disease with controlled high blood pressure and at least three other risk factors for heart disease, such as family history, age over 55, smoking, diabetes, and obesity. Patients with multiple risk factors, including diabetes, face a greater threat of heart attack and stroke. Reducing their risk of such cardiovascular events is extremely important.June 2006.

•	Norvasc is the world's most-prescribed branded medicine for treating hypertension. It achieved ~~an increased rate of growth~~a 1% increase in worldwide sales in the first ~~nine months~~quarter of ~~2005~~2006 compared to the same period in ~~2004 (8% in 2005 as compared to 4% in 2004), despite patent expirations in many European Union (E.U.) countries.~~2005. Norvasc maintains exclusivity in many major markets globally, including the U.S., Japan, Canada and ~~Australia.~~Australia, but has experienced patent expirations in many European Union (E.U.) countries.

•	Zoloft, which has lost exclusivity in many European markets and will lose U.S. market exclusivity at the end of the second quarter of 2006, experienced an 8% revenue decline in the first quarter of 2006 compared to the same period in 2005. It is the most-prescribed antidepressant in the U.S. It is indicated for the treatment of major depressive disorder, panic disorder, obsessive-compulsive disorder (OCD) in adults and children, post-traumatic stress disorder (PTSD), premenstrual dysphoric disorder (PMDD) and social anxiety disorder (SAD). Zoloft is approved for acute and long-term use in all of these indications, with the exception of ~~PMDD, and~~PMDD. It is the only approved agent for the long-term treatment of PTSD and SAD, an important differentiating feature as these disorders tend to be chronic.

	In the U.S., in February 2005, Pfizer implemented FDA instructions that require the makers of all currently marketed antidepressants, including tricyclic agents, monoamine oxidase (MAO) inhibitors, selective serotonin reuptake inhibitors such as Zoloft, selective norepinephrine reuptake inhibitors and atypical antidepressants, to include a black-box warning that antidepressants increased the risk of suicidal thinking and behavior in children and adolescents in pooled, short-term studies. In the nine completed clinical trials of Zoloft involving children and adolescents, which included studies of Zoloft in children diagnosed with depression, OCD, or both, no suicides occurred. The trials found no statistically significant differences between Zoloft-treated children and adolescents and placebo controls in their rates of suicide attempts or ideation.

•	~~Neurontin,~~ for use in adjunctive therapy for epilepsy, is also approved in more than 60 markets for the treatment of a range of neuropathic pain conditions. Neurontin has also been approved for the management of post-herpetic neuralgia (PHN), a, painful condition that affects many people in the aftermath of the viral infection commonly known as shingles. Neurontin was the first oral medication approved in the U.S. for the treatment of PHN.

	In the latter half of 2004, Ivax Corporation (Ivax), Alpharma Inc. (Alpharma) and Teva Pharmaceuticals Industries Ltd. (Teva) launched generic versions of Neurontin (gabapentin) at-risk, despite ongoing patent litigation. We are aggressively pursuing our claims of patent infringement against Ivax, Alpharma, Teva and other generic manufacturers. (See Part II, Item 1, ~~Legal Proceedings~~.) Following those at-risk launches, we launched generic gabapentin through Greenstone, our U.S. generic pharmaceutical subsidiary. However, the introduction of generic versions of gabapentin caused a 78% reduction in Neurontin sales for the first nine months of 2005 as compared to the same period in 2004.

•	~~Geodon~~Geodon/Zeldox, a psychotropic agent, is a dopamine and serotonin receptor antagonist indicated for the treatment of schizophrenia and acute manic or mixed episodes associated with bipolar disorder. ~~Available~~It is available in both an oral capsule and rapid-acting intramuscular ~~formulation, Geodon has been launched in 54 countries, where more than six million prescriptions have been written for more than one million patients worldwide.~~formulation. In the U.S., Geodon hit an all-time ~~U.S.~~ new prescription share weekly high of ~~6% in the third quarter~~6.9% during March 2006 and is ~~now~~ the second-fastest-growing atypical anti-psychotic medication. In the first quarter of 2006, total Geodon worldwide sales grew 32% compared to the same period in 2005.

	~~The~~Geodon growth is due to the improved perception among clinicians of its efficacy, increased benefits from optimal dosing, and its favorable metabolic profile, as confirmed by the Clinical Antipsychotic Trials of Intervention Effectiveness (CATIE) trial. The CATIE schizophrenia study, supported by the National Institute of Mental Health and ~~recently~~ published in the New England Journal of Medicine, confirms that Geodon is an effective anti-psychotic and is less likely to worsen weight, lipids, and glucose metabolism than other agents. In fact, Geodon was associated with some improvement in these metabolic parameters. These findings are noteworthy because of the higher prevalence of metabolic issues among patients with schizophrenia and are consistent with previous Pfizer-sponsored clinical trials involving Geodon.

	The U.S. Patent and Trademark Office granted a five-year extension to the Geodon U.S. patent, extending its exclusivity to 2012.

•	Lyrica achieved $192 million in worldwide revenue in the first quarter of 2006. It was approved by the European Commission on March 27, 2006, to treat generalized anxiety disorder (GAD) in adults, thereby providing a new treatment option for the approximately 12 million Europeans living with GAD.

	Lyrica was approved by the FDA in June 2005 for adjunctive therapy for adults with partial onset seizures. This ~~latest~~ indication builds on the earlier FDA approval of Lyrica for two of the most common forms of neuropathic pain ~~-- diabetic~~--diabetic peripheral neuropathy, a chronic neurologic condition affecting ~~nearly~~about three million Americans, and post-herpetic neuralgia. Lyrica was launched in the U.S., Canada, and Italy in September 2005 and is now approved in more than 50 countries and is currently available in more than 2530 markets. ~~Market penetration~~More than 1 million patients have now been prescribed Lyrica since its introduction. Lyrica has been rapid; after one full year of Lyrica sales, Germany and the U.K. posted Lyrica sales shares of 14.2% and 9.5%, respectively, in the anti-epileptic drug market, surpassing those of many established competitors in both countries. Clinical evidence favorable to Lyrica also continues to grow. The September 2005 edition of ~~Epilepsia~~ ~~focused on the medication's lack of interactions with other drugs. Additionally, at the August 2005 meeting~~already gained more than a 9.0% new prescription share of the ~~International Epilepsy Congress, data from an independently conducted meta-analysis showed Lyrica to be among the best in class for treatment~~U.S. anti-epileptic market as of ~~drug-resistant epilepsy.~~April 7, 2006, continuing its performance as one of Pfizer's most successful pharmaceutical launches.

•	Celebrex and Bextra
	Celebrex achieved a 19% increase in worldwide sales in the first quarter of 2006 compared to the same period in 2005. Strong clinical data continue to support Celebrex as an important medicine for patients with arthritis. The SUCCESS-1 study (Successive Celecoxib Efficacy and Safety Study), recently published in the American Journal of Medicine, showed that people with osteoarthritis who take Celebrex experience significantly fewer gastrointestinal problems than patients who take non-specific non-steroidal anti-inflammatory drugs.

	It was this gastrointestinal profile that led researchers to choose high-dose Celebrex for investigational trials in the area of chemoprevention. The first efficacy data from two of these long-term clinical studies -- Adenoma Prevention with Celecoxib (APC) and Prevention of Sporadic Adenomatous Polyps (PreSAP) -- were presented in April 2006 at the American Association for Cancer Research meeting. These studies showed that Celebrex helps stop the regrowth of pre-cancerous polyps (adenomas) that can lead to colon cancer. The final cardiovascular safety results from these long-term polyp studies are consistent with the current Celebrex label.

	Pfizer began to reintroduce branded advertising in April 2006, in alignment with our new Direct-to-Consumer (DTC) advertising principles, highlighting Celebrex's unique clinical profile and benefits. In July 2005, the FDA approved a sixth indication for Celebrex --ankylosing spondylitis -- a form of spinal arthritis that affects more than one million people in the U.S.

	On April 7, 2005, the FDA announced a decision to require boxed warnings of potential cardiovascular risk for all COX-2 pain relievers and all prescription ~~NSAIDs,~~nonspecific non-steroidal anti-inflammatory drugs (NSAIDs), including older ~~non-specific~~nonspecific drugs such as ibuprofen and naproxen. On July 29, 2005, Pfizer and the FDA finalized the label changes for Celebrex. The final U.S. label contains a boxed warning of potential serious cardiovascular and gastrointestinal risks for Celebrex that are consistent with warnings for all other prescription NSAIDs. The boxed warning provides that Celebrex is contraindicated for patients who recently have undergone coronary artery bypass graft surgery. The label recommends that Celebrex be prescribed at the lowest effective dose for the shortest duration consistent with individual patient treatment goals. Pfizer is continuing to conduct additional clinical studies evaluating the benefits and risks of Celebrex. Pfizer is supporting Cleveland Clinic's 20,000 patient prospective study to definitively evaluate the relative safety of Celebrex and two older pain medications in patients with heart disease or at high risk of heart disease.

	The market for pain relievers has shown considerable change since the withdrawal of Vioxx in September 2004. Sales of Celebrex began to decline in the late 2004. However, following regulatory reviews of these medicines in February 2005 in both the U.S. and the E.U., the market for prescription pain relievers indicated lower, but stabilizing levels compared to pre-Vioxx withdrawal levels. Revenues from Celebrex in 2005, prior to the FDA's decision in April 2005, were already expected to be significantly lower than in 2004.

	In September 2005, with full implementation of revised labeling, Pfizer began to focus renewed attention on Celebrex, with the goal of making the pain reliever available to increased numbers of patients. Celebrex is supported by a large body of scientific and clinical-trial evidence of efficacy and safety accumulated over 10 years in more than 40,000 patients worldwide. In July, the FDA approved a sixth indication for Celebrex -- ankylosing spondylitis -- a form of spinal arthritis that affects more than one million people in the U.S.