FORM 10-Q

For the Quarter Ended
July 2, 20061, 2007

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

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

See accompanying Notes to Condensed Consolidated Financial Statements.

PFIZER INC AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

*    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)

See accompanying Notes to Condensed Consolidated Financial Statements.

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

Note 1.  Basis of Presentation

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 six-monthsix month periods ended May 28, 200627, 2007, and May 29, 2005.28, 2006.

We made certain reclassifications to the 2005 condensed consolidated financial statementsprior period amounts to conform to the 2006second-quarter 2007 presentation. These reclassifications are primarily related to discontinued operations (see Note 3, Discontinued Operations) as well as to better reflect jurisdictional netting of deferred taxes.

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, 2005.2006.

Note 2.  Adoption of New Accounting Policy

As of January 1, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes, and supplemented by FASB Financial Staff Position FIN 48-1, Definition of Settlement in FASB Interpretation No. 48, issued May 2, 2007, and changed our policy related to the accounting for income tax contingencies. To understand the cumulative effect of these accounting changes, see Note 6A.Taxes on Income: Adoption of New Accounting Standard.

We continue to account for income taxcontingencies using a benefit recognition model.Beginning January 1, 2007, if we consider that a tax position is 'more likely than not' of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. These assessments can be complex and we often obtain assistance from external advisors.

Under the benefit recognition model, if our initial assessment fails to result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit: (i) if there are changes in tax law or analogous case law that sufficiently raise the likelihood of prevailing on the technical merits of the position to more likely than not; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency.

Liabilities associated with uncertain tax positions are now classified as current only when we expect to pay cash within the next 12 months. Interest and penalties, if any, continue to be recorded in Provision for taxes on income and are classified on the balance sheet with the related tax liability.

Prior to 2007, our policy had been to account for income tax contingencies based on whether we determined our tax position to be 'probable' under current tax law of being sustained, as well as an analysis of potential outcomes under a given set of facts and circumstances.In addition, we previously considered all tax liabilities as current once the associated tax year was under audit.

Note 3.  Acquisitions

On May 16,In the first quarter of 2007, we acquired BioRexis Pharmaceutical Corp., a privately held biopharmaceutical company with a number of diabetes candidates and a novel technology platform for developing new protein drug candidates, and Embrex, Inc., an animal health company that possesses a unique vaccine delivery system known as Inovoject, which enables baby chicks to be vaccinated while inside their eggs. In connection with these and other small acquisitions, we recorded $283 million, in Acquisition-related in-process research and development charges in the first quarter of 2007.

In the second quarter of 2006, we completed the acquisition of all of the outstanding shares of Rinat Neuroscience Corp., a biologics company with several new central-nervous-system product candidates. In connection with the acquisition, as part of our preliminary purchase price allocation,this and other smaller acquisitions, we recorded $478$513 million, pre-tax, in Merger-relatedAcquisition-related in-process research and development charges.charges in the second quarter of 2006.

On February 28, 2006, we completed the acquisition of the sanofi-aventis world-wideworldwide 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 2006, in connection with the acquisition, as part of our preliminaryfinal purchase price allocation, we recorded an intangible asset for$1.0 billion of developed technology rights, of approximately $1.0 billion, inventory valued at $218 million and goodwill of approximatelyinventory and $166 million of Goodwill, all of which have been allocated to our Human HealthPharmaceutical segment. The amortization of the developed technology rights will beis primarily included in Cost of Salessales.  Given the size and complexity of the acquisition, the fair valuation and allocation work is still being finalized and is expected to be completed in the third 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 the first quarter of 2006 in Research and development expenses upon the approval of Exubera in January 2006 by the Food and Drug Administration (FDA).

Note 3.4.  Discontinued Operations

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:

The following amounts, primarily related to our Consumer Healthcare business which was sold in December 2006 for $16.6 billion, have been segregated from continuing operations and included in Discontinued operations - net of tax in the condensed consolidated statements of income:

The following assetsFor a period of time, we will continue to generate cash flows and liabilities, primarily related to report income statement activity in continuing operations that are associated with our former Consumer Healthcare business. The activities that give rise to these impacts are transitional in nature and generally result from agreements that ensure and facilitate the orderly transfer of business have been segregatedoperations to the new owner. Included in continuing operations for the second quarter of 2007 were the following amounts associated with these transition service agreements that will no longer occur after the full transfer of activities to the new owner: Revenues of $50 million; Cost of sales of $45 million; Selling, informational and included in Assetsadministrative expense of discontinued operations and other assets held for sale$5 million; and LiabilitiesOther (income)/deduction-net of discontinued operations and other liabilities held for sale, as appropriate,$7 million in the condensed consolidated balance sheets:

Net cash flows of our discontinued operations from each of the categories of operating, investing and financing activities were not significant for the six months ended July 2, 2006 and July 3, 2005.

Note 4. Adoption of New Accounting Standards

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, 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 accounted for stock options under Accounting Principle Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, an elective accounting policy permitted by SFAS 123. Under this standard, since the exercise price of our stock options granted is set equal to the market price on the date of the grant, we did not record any expense to the condensed consolidated statement of income related to stock options, unless certain original grant date terms were subsequently modified. However, as required, we disclosed, in the Notes to Consolidated Financial Statements, the pro forma expense impact of the stock option grants as if we had applied the fair-value-based recognition provisions of SFAS 123.

The adoption of SFAS 123R primarily impacted our accounting for stock options (see Note 14, Share-Based Payments).

Note 5.  Asset Impairment Charge

In the first six months of 2005, we recorded charges totaling $1.2 billion ($761 million, net2007: Revenues of tax) in connection with the decision to suspend$94 million; Cost of sales of Bextra. The pre-tax charge included $1.1 billion related to the impairment$80 million; Selling, informational and administrative expense of developed technology rights$7 million; and $7 million related to the write-off of machinery and equipment, both of which were included in Other (income)/deductions - netdeduction-net (see Note 12, Goodwill and Other Intangible Assets).of $9 million in income.

Note 6.5.  Adapting to Scale Productivity Initiative

We incurred the following costs in connection with our Adapting to Scale (AtS) productivity initiative, which was launched in early 2005:2005 and broadened in October 2006:

Included inAtS costs associated with Discontinued operations - net of tax are additional pre-tax AtS costs of $7 million and $15 million for the three months and six months ended July 2, 2006.in 2006 were not significant.

Through July 2, 2006,1, 2007, the restructuring charges primarily relate to our plant network optimization efforts and the restructuring of our U.S.worldwide marketing and worldwide research and development operations, while the implementation costs primarily relate to system and process standardization, as well as the expansion of shared services.

The components of restructuring charges associated with AtS follow:

During the three months and six months ended July 2, 2006,second quarter of 2007, we expensed $166 million and $331$821 million for Employee termination costs, $58 million and $177$93 million for Asset impairments and $121 million in Other. During the first six months of 2007, we expensed $1.6 billion for Employee termination costs, $116 million for Asset impairmentsand $38 million and $48$162 million in Other. Through July 2, 2006,1, 2007, costs incurred for Employee termination costs represent the approvedexpected reduction of the workforce by 5,096approximately 18,400 employees, mainly in research, manufacturing sales and research. We notified affected individuals and 4,714 employees were terminated assales. As of July 2, 2006.1, 2007, approximately 9,900 of these employees have been formally terminated. Employee termination costs are recorded as incurredwhen the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits. Asset impairments primarily include charges to write off inventory and write down property, plant and equipment. Other primarily includes costs to exit certain activities.

Note 7.  Merger-Related Costs

We incurred the following merger-related costs:

Included in Discontinued operations - net of tax are additional pre-tax merger-related costs of $4 million and $5 million for the three months and six months ended July 2, 2006 and $9 million and $16 million for the three months and six months ended July 3, 2005.

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

Note 8.6.  Taxes on Income

A.  Adoption of New Accounting Standard

As of January 1, 2007, we adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109, Accounting for Income Taxes, as supplemented by FASB Financial Staff Position FIN 48-1, Definition of Settlement in FASB Interpretation No. 48, issued May 2, 2007. See Note 2.Adoption of New Accounting Policy, for a full description of our accounting policy related to the accounting for income tax contingencies. As a result of the implementation of FIN 48, at the date of adoption, we reduced our existing liabilities for uncertain tax positions by approximately $11 million, which has been recorded as a direct adjustment to the opening balance of Retained earnings and changed the classification of virtually all amounts associated with uncertain tax positions approximately $4.0 billion, including the associated accrued interest of approximately $780 million, from current to noncurrent. For details, see section C. Tax Contingencies below.

B.  Taxes on Income

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

In the first six months of 2005, we recorded an income tax charge of $1.7 billion, included in Provision/(benefit) for taxes on income, in connection with our decision to repatriate about $37 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 estimate 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 $490 million, due primarily to guidance issued by the U.S. Treasury in the second quarter of 2005, partially offset by our decision to increase the amount of the repatriation.

B.Tax Contingencies

On January 25, 2006, the Company waswe were 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 tax deductibility of aan acquisition-related 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.issue.

InAs of July 1, 2007, we intend to permanently reinvest the second quarterearnings of 2005,our international subsidiaries and, therefore, we have not recorded a U.S. tax benefitprovision on unremitted earnings.

C.Tax Contingencies

We are subject to income tax in many jurisdictions and a certain degree of $586 million primarilyestimation is required in recording the assets and liabilities related to income taxes. For a description of our accounting policy associated with accounting for income taxcontingencies, see Note 2.Adoption of New Accounting Policy. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. Tax audits can involve complex issues and the resolution of certainissues may span multiple years, particularly if subject to negotiation or litigation.

The United States is one of our major tax positions.

Thejurisdictions and the IRS is currently conducting audits of the Pfizer Inc. tax returns for the years 2002, 2003 and 2004. The 2005, 2006 and 20062007 tax years are also currently under audit underas part of the IRS Compliance Assurance Process (CAP), a recently introduced real-time audit process.

All other tax years in the U.S. for Pfizer Inc. are closed under the statute of limitations. 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 year 2003 tax year through the date of the merger with Pfizer (April 16, 2003). Although the U.S. audits for Pharmacia Corporation for all previous years have been closed, tax years 2000 through 2002 are still open under the statute of limitations. In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (1998-2006), Japan (2004-2006), Europe (1996-2006, primarily reflecting Ireland, the U.K., France, Italy, Spain and Germany), and Puerto Rico (2002-2006).

We periodically reassessregularly reevaluate our tax positions and the likelihood of assessmentsassociated interest and penalties, if applicable, resulting from audits of federal, state and foreign income tax filings.filings, as well as changes in tax law that would either increase or decrease the technical merits of a position relative to the more likely than not standard. We believe that our accruals for tax liabilities are adequate for all open years. Many factors are considered in making these evaluations, including past history, recent interpretations of tax law, and the specifics of each matter. Because tax regulations are subject to interpretation and tax litigation is inherently uncertain, these evaluations can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. Our evaluations are based on estimates and assumptions that have been deemed reasonable by management. However, if our estimates and assumptions are not representative of actual outcomes, our results could be materially impacted.

Because tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon audit. The amounts associated with uncertain tax positions are as follows:

Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. These unrecognized tax benefits relate primarily to issues common among multinational corporations. Virtually all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate.

Tax assets associated with uncertain tax positions represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities to minimize double taxation. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction.

If our estimates of unrecognized tax benefits and potential tax benefits are not representative of actual outcomes, our financial statements could be materially affected in the period of settlement as we treat settlements as discrete items in the period of resolution. Based on the protocol of finalizing audits by the relevant taxing authorities, which could include formal administrative and legal proceedings, except for amounts reflected in Income taxes payable, we are unable to estimate the range of reasonably possible change related to our uncertain tax positions within the next 12 months. However, any settlements would likely result in a significant decrease in our uncertain tax positions.

Note 9.7.  Comprehensive Income

The components of comprehensive income/(expense) follow:

Amounts of comprehensive income associated with discontinued operations in 2006 were not significant.

Note 10.8.  Financial Instruments

A.  Long-Term Debt

On February 22, 2006,May 11, 2007, we issued the following Japanese yen fixed-rate bonds,notes to be used for general corporate purposes:

The notes were issued under a $5 billion debt shelfnew securities registration statement filed with the SEC in November 2002. As of July 2, 2006, we had the ability to borrow approximately $1 billion by issuing debt securities under that debt shelf registration statement.

In May 2006, 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 as of December 31, 2005 and included in Short-term debt as of July 2, 2006. Notice to call was given to the Trustees and the notes were redeemed early in the third quarter of 2006.March 2007.

B.  Derivative Financial Instruments and Hedging Activities

There was no material ineffectiveness in any hedging relationship reported in earnings in the first six months of 2006.2007.

Foreign Exchange Risk

During the first six months of 2006,2007, we entered into the following new or incremental hedging or offset activities:

These foreign exchangeforeign-exchange instruments serve to protect us against the impact of the translation into U.S. dollars of certain foreign exchangecurrency denominated transactions.

Interest Rate Risk

During the first six months of 2007, we entered into the following new hedging activities:

The interest rate instruments serve to hedge the fixed or variable interest rates on the hedged items, matching the amount and timing of the hedged items.

Note 11.9.  Inventories

The components of inventories follow:

Note 12.10.  Goodwill and Other Intangible Assets

A.  Goodwill

The changes in the carrying amount of goodwill by segment for the six months ended July 2, 20061, 2007, follow:

B.  Other Intangible Assets

The components of identifiable intangible assets, primarily included in our Human HealthPharmaceutical segment, follow:

In the first six months 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 be primarily included in Cost of Sales.

In the first six months 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 (included in our Human Health segment) in connection with the decision to suspend sales of Bextra. In addition, in connection with the suspension, we recorded $7 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; $5 million related to the costs of administering the suspension of sales, included in Selling, informational and administrative expenses; and $173 million for an estimate of customer returns, primarily included against Revenues. Substantially all of these charges were recorded in the first quarter of 2005.

Amortization expense related to acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute our products, compounds and intellectual property 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 expensesor,and Research and development expenses, as appropriate. Total amortization expense for finite-lived intangible assets was $848 million and $874$826 million for the three months ended July 2,second quarter of 2007 and $848 million for the second quarter of 2006, and July 3, 2005, and $1.7 billion and $1.8 billion for the first six months ended July 2, 2006of both 2007 and July 3, 2005.

Included in Discontinued operations - net2006. Amounts of tax is additional pre-tax amortization expense for finite-lived intangible assets of $4 million and $3 million for the three months ended July 2,associated with discontinued operations in 2006 and July 3, 2005 and $7 million and $5 million for the six months ended July 2, 2006 and July 3, 2005.were not significant.

The expected annual amortization expense expected for the fiscal years 2006 through 2011 is $3.4 billion in 2006; $3.3 billion in 2007; $2.7$2.8 billion in 2008; and $2.5$2.6 billion in 2009,2009; $2.5 in each of 2010 and 2011.2011; and $2.3 billion in 2012.

Note 13.11.  Pension and Postretirement Benefit Plans

The components of net periodic benefit costcosts of the U.S. and international pension plans and the postretirement plans, which provide medical and life insurance benefits to retirees and their eligible dependents, for the three months ended July 1, 2007, and July 2, 2006, and July 3, 2005 follow:

The components of net periodic benefit costcosts of the U.S. and international pension plans and the postretirement plans, which provide medical and life insurance benefits to retirees and their eligible dependents, for the first six months ended July 2,of 2007 and 2006, follow:

Japanese pension regulations permit employers with certain pension obligations to separate the social security benefits portion of those obligations and July 3, 2005 follow:transfer it, along with related plan assets, to the Japanese government. During the first quarter of 2007, our Japanese affiliate completed this transfer and effectively received a subsidy from the Japanese government of approximately $168 million. This subsidy was the result of the transfer of pension obligations of approximately $309 million (excluding the effect of any future salary increases of approximately $9 million) along with related plan assets of approximately $141 million. This transfer resulted in a settlement gain of approximately $106 million.