~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Note 4. Other (Income)/Deductions—Net



The following table provides components of Other (income)/deductions––net:
	Three Months Ended						Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Interest income^(a)	$	(59	)	$	(80	)	(125		)	(157		)
Interest expense^(a)	389			326			750			635
Net interest expense	330			245			625			478
Royalty-related income^(b)	(231		)	(121		)	(320		)	(217		)
Net gains on asset disposals	—			(15		)	(1		)	(22		)
Net gains recognized during the period on investments in equity securities^(c)	(36		)	(257		)	(147		)	(375		)
Net realized losses on sales of investments in debt securities	—			8			—			12
Income from collaborations, out-licensing arrangements and sales of compound/product rights^(d)	(22		)	(174		)	(104		)	(316		)
Net periodic benefit credits other than service costs^(e)	(51		)	(84		)	(91		)	(166		)
Certain legal matters, net^(f)	15			(88		)	19			(107		)
Certain asset impairments^(g)	10			40			160			40
Business and legal entity alignment costs^(h)	137			1			256			4
Net losses on early retirement of debt⁽ⁱ⁾	—			—			138			3
Other, net^(j)	(27		)	(106		)	(318		)	(64		)
Other (income)/deductions––net	$	126		$	(551	)	$	218		$	(728	)

The following table provides components of Other (income)/deductions––net:
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2018

October 1,
2017
September 30,
2018
October 1,
2017
Interest income^(a)
$ (82 ) $ (99 ) $ (240 ) $ (275 )
Interest expense^(a)
310
320
946
940
Net interest expense 228
220
706
666
Royalty-related income (143 ) (140 ) (360 ) (331 )
Net gains on asset disposals^(b)
(4 ) (13 ) (19 ) (36 )
Net gains recognized during the period on investments in equity securities^(c)
(94 ) (45 ) (460 ) (111 )
Net realized (gains)/losses on sales of investments in debt securities 8
(23 ) 12
(45 )
Income from collaborations, out-licensing arrangements and sales of compound/product rights^(d)
(139 ) (78 ) (455 ) (163 )
Net periodic benefit costs/(credits) other than service costs^(e)
(65 ) 28
(231 ) 81
Certain legal matters, net^(f)
37
183
(70 ) 194
Certain asset impairments^(g)
(1 ) 130
40
143
Adjustments to loss on sale of HIS net assets^(h)
(2 ) (12 ) (1 ) 52
Business and legal entity alignment costs⁽ⁱ⁾
—
16
4
54
Other, net^(j)
(239 ) (186 ) (309 ) (439 )
Other (income)/deductions––net $ (414 ) $ 79
$ (1,143 ) $ 65

^(a)

Interest income decreased in the ~~third~~second quarter and first ~~nine~~six months of ~~2018,~~2019, primarily driven by a lower investment balance. Interest expense ~~decreased~~increased in the ~~third~~second quarter ~~of 2018, primarily as a result of refinancing activity that occurred in the fourth quarter of 2017~~ and ~~a credit to interest expense due to settlement of a tax indemnification case. Interest expense increased for the~~ first ~~nine~~six months of ~~2018, primarily~~2019, mainly as a result of higher short-term interest rates, ~~offset, in part, by refinancing activity that occurred in~~as well as the ~~fourth quarter~~retirement of ~~2017.~~

^(b)

Inlower-coupon debt and the ~~first nine months~~issuance of ~~2017, primarily includes~~new debt with a ~~realized gain on sale of property of $52 million, partially offset by a realized net loss of $30 million related to~~higher coupon than the ~~sale of our 40% ownership investment in Teuto, including the extinguishment of a put option~~debt outstanding for the ~~then remaining 60% ownership interest.~~

^(c)

The net gains on investments in equity securities for the third quarter of 2018 include unrealized net gains on equity securities of $8 million and, for the first nine months of 2018, include unrealized net gains on equity securities of $344 million, reflecting the adoption of a new accounting standard in the first quarter of 2018. We continue to hold 2.5 million shares of ICU Medical common stock and we recognized unrealized gains of $24 million in the third quarter of 2018 and unrealized gains of $229 million in the first nine months of 2018 related to these remaining shares. Prior to the adoption of a new accounting standard in the first quarter of 2018, net unrealized gains and losses on virtually all equity securities with readily determinable fair values were reported in ~~Accumulated other comprehensive income. For additional information, see~~ ~~Note 1B,Note 2B~~ ~~and~~ ~~Note 7B~~.comparative prior year periods.


^(b)	The increase in royalty-related income for the second quarter and first six months of 2019 is primarily due to a one-time favorable resolution in the second quarter of 2019 of a legal dispute for $82 million.


^(c)	The second quarter of 2018 included gains of $142 million and the first six months of 2018 included gains of $203 million related to our investment in ICU Medical stock.For additional information, see Note 7B.

^(d)

Includes income from upfront and milestone payments from our collaboration partners and income from out-licensing arrangements and sales of compound/product rights. In the ~~third quarter~~first six months of ~~2018, primarily~~2019, mainly includes ~~among other things, (i) $40~~$68 million in milestone income from ~~a certain licensee, (ii) a $35 million milestone payment received from Shire~~Mylan Pharmaceuticals Inc. related to ~~their first dosing~~the FDA’s approval and launch of Wixela Inhub^®, a ~~patient in a Phase 3 clinical trial~~generic of ~~a compound out-licensed by Pfizer to Shire for the treatment of Crohn’s disease~~Advair Diskus^® (fluticasone propionate and ~~(iii) $45 million in gains related to sales of compound/product rights.~~salmeterol inhalation powder). In the ~~first nine months~~second quarter of 2018, primarily ~~includes,~~included, among other things, ~~(i) approximately $128~~$88 million in milestone income from multiple licensees ~~(ii)~~and an upfront payment to us of $75 million for the sale of an AMPA receptor potentiator for CIAS to Biogen, (iii) $110 million in milestone payments received from Shire, of which $75 million was received in the first quarter of 2018 related to their first dosing of a patient in a Phase 3 clinical trial for the treatment of ulcerative colitis and $35 million was received from Shire related to their first dosing of a patient in a Phase 3 clinical trial for the treatment of Crohn’s disease, (iv) a $40 million milestone payment from Merck in conjunction with the approval of ertugliflozin in the EU and (v) $45 million in gains related to sales of compound/product rights. In the third quarter of 2017, primarily includes, among other things, $50 million in milestone income from a certain licensee and a $15 million gain related to the sale of compound/product rights. In the first nine months of 2017, primarily includes, among other things, approximately $81 million in milestone income from multiple licensees and a $43 million gain related to the sale of compound/product rights.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

an α-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid (AMPA) receptor potentiator for cognitive impairment associated with schizophrenia (CIAS) to Biogen Inc. In the first six months of 2018, mainly includes, among other things, all of the factors discussed above for the second quarter of 2018, as well as a $75 million milestone payment received from Shire related to their first dosing of a patient in a Phase 3 clinical trial of a compound out-licensed by Pfizer to Shire for the treatment of ulcerative colitis, and a $40 million milestone payment from Merck in conjunction with the approval of ertugliflozin in the EU.


^(e)	For additional information, see Note ~~2B, Note 2C~~ ~~and~~ ~~Note 2D~~10.

^(e)(f)

~~Represents~~In the net periodic benefit costs/(credits), excluding service costs, as a result of the adoption of a new accounting standard in the first quarter of 2018. Effective January 1, 2018, the U.S. Pfizer Consolidated Pension Plan was frozen to future benefit accruals and for the thirdsecond quarter and first ~~nine~~six months of 2018, resulted in the recognition of lower net periodic benefit costs due to the extension of the amortization period for the actuarial losses. There was also a greater than expected gain on plan assets due to a higher plan asset base compared to the third quarter and first nine months of 2017. For additional information, see ~~Note 1B~~ ~~and~~ ~~Note 10~~.

^(f)

~~For the first nine months of 2018, the net credits~~ primarily ~~represent~~represented the reversal of a legal accrual where a loss was no longer deemed probable. In the third quarter and first nine months of 2017, primarily includes a $94 million charge to resolve a class action lawsuit filed by direct purchasers relating to Celebrex, which was approved by the court in April 2018, and a $79 million charge to reflect damages awarded by a jury in a patent matter.

^(g)

~~In the~~The second quarter and first ~~nine~~six months of ~~2018, primarily includes a $31 million~~2019 include an intangible asset impairment charge ~~recorded in~~of $10 million and the second quarter and first six months of 2018 included an intangible asset impairment charge of $31 million, which are all related to ~~an IH~~a finite-lived developed technology right, acquired in connection with our acquisition of Anacor, for the treatment for toenail fungus marketed in the U.S. market only,~~. The impairment charge recorded in the second quarter of 2018 related to IH reflects~~associated with Biopharma and reflect, among other things, updated commercial forecasts. ~~In the third quarter and~~The first ~~nine~~six months of ~~2017, primarily~~2019 also includes an intangible asset impairment ~~charge of $127~~charges of: (i) $90 million related to WRDM IPR&D, which relates to a pre-clinical stage asset from our acquisition of Bamboo for gene therapies for the potential treatment of patients with certain rare diseases; and (ii) $40 million related to a Biopharma developed technology ~~rights,~~right, acquired in connection with our acquisition of ~~Hospira,~~King, for government defense products. The WRDM IPR&D intangible asset impairment charge was the result of a ~~generic sterile injectable product for the treatment of edema associated with~~determination to not use certain ~~conditions.~~

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Bamboo IPR&D acquired in future rare disease development. The intangible asset impairment charge ~~for the third quarter and first nine months of 2017 is associated with EH and reflects, among other things, updated commercial forecasts and an increased competitive environment.~~

^(h)

~~Represents adjustments to amounts previously recorded in 2016 to write down the HIS net assets to fair value less costs to sell~~ related to the ~~sale~~Biopharma developed technology right reflects, among other things, updated commercial forecasts including manufacturing cost assumptions. In addition, the first six months of ~~HIS net assets to ICU Medical on February 3, 2017. For additional information, see~~ ~~Note 2B~~2019, includes other asset impairments of $20 million.

^(i)(h)

~~Represents~~In the second quarter and first six months of 2019, represents incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services. In the second quarter and first six months of 2018, represents expenses for changes to our infrastructure to align our commercial operations ~~of our current segments,~~that existed through December 31, 2018, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business.


⁽ⁱ⁾	In the first six months of 2019, represents net losses due to the early retirement of debt in the first quarter of 2019, inclusive of the related termination of cross-currency swaps.

^(j)

InThe second quarter of 2019 includes, among other things, charges of $81 million, reflecting the ~~third quarter~~change in the fair value of contingent consideration, dividend income of $76 million from our investment in ViiV and $25 million of income from insurance recoveries related to Hurricane Maria. The first ~~nine~~six months of ~~2018~~,2019 includes, a non-cash $343 million pre-tax gain associated with our transaction with Bain Capital to create a new biopharmaceutical company, Cerevel, to continue development of a portfolio of clinical and preclinical stage neuroscience assets primarily targeting disorders of the central nervous system (see ~~Note 2B). The third quarter and first nine months of~~ ~~2018~~ ~~also include,~~ among other things, dividend income of ~~$91~~$140 million from our investment in ViiV and ~~$226~~$50 million ~~respectively,~~of income from insurance recoveries related to Hurricane Maria. The second quarter of 2018 included, among other things, dividend income of $76 million from our investment in ViiV, and charges of ~~$122~~$23 million, ~~and $257 million, respectively,~~ reflecting the change in the fair value of contingent consideration. The first ~~nine~~six months of 2018 included, among other things, dividend income of $135 million from our investment in ViiV, and charges of $135 million reflecting the change in the fair value of contingent consideration. The second quarter and first six months of 2018 also ~~include~~included a non-cash $50 million pre-tax gain on the contribution of Pfizer’s allogeneic CAR T ~~therapy~~ development program assets obtained from Cellectis S.A. and Les Laboratoires Servier SAS in connection with our contribution agreement entered into with Allogene, ~~in which Pfizer obtained a 25% ownership stake in Allogene (see~~ ~~Note 2B~~), and a non-cash $17 million ~~pre-tax~~ gain on the cash settlement of a liability that we incurred in April 2018 upon the EU approval of ~~Mylotarg (see~~ ~~Note 7E~~). In the third quarter and first nine months of 2017, includes, among other things, dividend income of $54 million and $211 million, respectively, from our investment in ViiV and income of $62 million from resolution of a contract disagreement.

Mylotarg.



The following table provides additional information about the intangible assets that were impaired during 2019 in Other (income)/deductions:
	Fair Value^(a)								Six Months Ended June 30, 2019
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––IPR&D^(b)	$	—	$	—	$	—	$	—	$	90
Intangible assets––Developed technology rights^(b)	13		—		—		13		50
Total	$	13	$	—	$	—	$	13	$	140

The following table provides additional information about the intangible asset that was impaired during 2018 in Other (income)/deductions:

Fair Value^(a)
Nine Months Ended September 30, 2018
(MILLIONS OF DOLLARS) Amount Level 1 Level 2 Level 3 Impairment
Intangible assets––Developed technology right, finite-lived^(b)
$ 35
$ —
$ —
$ 35
$ 31


^(a)	The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis.

^(b)

Reflects an intangible ~~asset~~assets written down to fair value in the first ~~nine~~six months of ~~2018.~~2019. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

During the ~~fourth~~second quarter of ~~2017,~~2019, Pfizer reached settlement of disputed issues at the IRS Office of Appeals, thereby settling all issues related to U.S. tax returns of Pfizer for the years 2009-2010. As a result of settling these years, in the second quarter of 2019 we recorded a benefit of approximately $1.4 billion, representing tax and interest.

Our effective tax rate for continuing operations was (22.1)% for the second quarter of 2019, compared to 14.3% for the second quarter of 2018 and was (5.7)% for the first six months of 2019, compared to 13.9% for the first six months of 2018.

The lower effective tax rate for the second quarter and first six months of 2019 in comparison with the same periods in 2018 was primarily due to:

an ~~estimate~~increase in tax benefits associated with the resolution of certain tax ~~effects of the TCJA, including the impact on deferred tax assets and liabilities~~positions pertaining to prior years, primarily resulting from the ~~reduction in~~aforementioned favorable settlement with the ~~U.S. Federal corporate tax rate from 35% to 21%, the impact on valuation allowances and other state income tax considerations, the $15.2~~IRS;

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


•	the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the enactment of the TCJA, as well as


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

Our estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings for which we plan to elect, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, payment over eight years through 2026 ~~(with~~is reported in Incometaxes payable (approximately $750 million) and the remaining liability is reported in Other taxes payable in our consolidated balance sheet as of June 30, 2019. The first installment of ~~eight installments due~~$750 million was paid in April ~~2019) that is reported primarily in~~ ~~Other taxes payable~~, and deferred taxes on basis differences expected to give rise to future taxes on global intangible low-taxed income. In addition, we had provided deferred tax liabilities in the past on foreign earnings that were not indefinitely reinvested. As a result of the TCJA, we reversed an estimate of the deferred taxes that are no longer expected to be needed due to the change to the territorial tax system. The estimated amounts recorded may change in the future due to uncertain tax positions. With respect to the aforementioned repatriation tax liability related to the TCJA repatriation tax, our2019. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.

~~The TCJA subjects a U.S. shareholder to current tax on global intangible low-taxed income earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5,~~ ~~Accounting for Global Intangible Low-Taxed Income~~, states that we are permitted to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-taxed income in future years or provide for the tax expense related to such income in the year the tax is incurred. We have elected to recognize deferred taxes for temporary differences expected to reverse as global intangible low-taxed income in future years. However, given the complexity of these provisions, we have not finalized our analysis. We were able to make a reasonable estimate of the deferred taxes on the temporary differences expected to reverse in the future and provided a provisional deferred tax liability of approximately $1 billion as of December 31, 2017. The provisional amount is based on the evaluation of certain temporary differences inside each of our foreign subsidiaries that are expected to reverse as global intangible low-taxed income. However, as we continue to evaluate the TCJA’s global intangible low-taxed income provisions during the measurement period, we may revise the methodology used for determining the deferred tax liability associated with such income.

We believe that we have made reasonable estimates with respect to each of the above items, however, all of the amounts recorded remain provisional as we have not completed our analysis of the complex and far reaching effects of the TCJA. Further, we continue to consider our assertions on any remaining outside basis differences in our foreign subsidiaries as of

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~September 30, 2018~~ and have not completed our analysis. In the third quarter of 2018, we recorded a favorable adjustment to the provisional estimate of the impact of the legislation, primarily related to the remeasurement of deferred tax assets and liabilities as well as revised estimates of benefits related to certain tax initiatives. Under guidance issued by the staff of the SEC, we expect to finalize our accounting related to the tax effects of the TCJA on deferred taxes, valuation allowances, state tax considerations, the repatriation tax liability, global intangible low-taxed income, and any remaining outside basis differences in our foreign subsidiaries during the fourth quarter of 2018, as we complete the remainder of our tax return filings and as any interpretations or clarifications of the TCJA occur through further legislation or U.S. Treasury actions or other means.

~~Our effective tax rate for continuing operations was 1.6% for the third quarter of~~ ~~2018, compared to 20.3% for the third quarter of~~ ~~2017~~ ~~and was 9.9% for the first nine months of~~ ~~2018, compared to 20.1% for the first nine months of~~ ~~2017~~.

~~The lower effective tax rate for the third quarter and first nine months of~~ ~~2018~~ ~~in comparison with the same periods in~~ ~~2017~~ ~~was primarily due to:~~

the adoption of a territorial system and the lower U.S. tax rate as a result of the December 2017 enactment of the TCJA as well as favorable adjustments to the provisional estimate of the impact of the legislation;

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

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

B. ~~Deferred Taxes~~

We have not completed our analysis of the TCJA on our prior assertion of indefinitely reinvested earnings. Accordingly, we continue to evaluate our assertion with respect to our accumulated foreign earnings subject to the deemed repatriation tax and we also continue to evaluate the amount of earnings that are indefinitely reinvested. Additionally, we continue to evaluate our assertions on any remaining outside basis differences in our foreign subsidiaries as of ~~September 30, 2018~~ ~~as we have not finalized our analysis of the effects of all of the new provisions in the TCJA. As of~~ ~~September 30, 2018~~, it is not practicable to estimate the additional deferred tax liability that would be recorded if the earnings subject to the deemed repatriation tax and any remaining outside basis differences as of ~~September 30, 2018~~ ~~are not indefinitely reinvested. In accordance with the authoritative guidance issued by the SEC Staff Accounting Bulletin 118, we expect to complete our analysis within the measurement period.~~

C. Tax Contingencies

We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution.

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

During the second quarter of 2019, Pfizer reached settlement of disputed issues at the IRS Office of Appeals, thereby settling all issues related to U.S. tax returns of Pfizer for the years 2009-2010. As a result of settling these years, in the second quarter of 2019 we recorded a benefit of approximately $1.4 billion, representing tax and interest.

With respect to Pfizer, ~~the IRS has issued a Revenue Agent’s Report (RAR) for~~ tax ~~years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax~~ years 2011-2015 are currently under audit. Tax years ~~2016-2018~~2016-2019 are open, but not under audit. All other tax years are closed.

~~With respect to Hospira, the federal income tax audit of tax year 2014 through short-year 2015 was effectively settled in the second quarter of 2018. All other tax years are closed.~~

~~With respect to Anacor and Medivation, the open tax years are not considered material to Pfizer.~~

In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada ~~(2013-2018)~~(2013-2019), Japan ~~(2017-2018)~~(2017-2019), Europe ~~(2011-2018,~~(2011-2019, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America ~~(1998-2018,~~(1998-2019, primarily reflecting Brazil) and Puerto Rico ~~(2011-2018)~~(2014-2019).

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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



The following table provides the components of Tax provision/(benefit) on other comprehensive loss:
	Three Months Ended						Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Foreign currency translation adjustments, net^(a)	$	(17	)	$	101		$	10		$	67
Unrealized holding gains/(losses) on derivative financial instruments, net	(53		)	8			6			4
Reclassification adjustments for (gains)/losses included in net income	(4		)	72			(59		)	65
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)	—			—			—			1
	(57		)	79			(53		)	70
Unrealized holding gains/(losses) on available-for-sale securities, net	(1		)	(48		)	4			(28		)
Reclassification adjustments for (gains)/losses included in net income	3			20			5			(2		)
Reclassification adjustments for tax on unrealized gains from AOCI to Retained earnings^(c)	—			—			—			(45		)
	2			(29		)	9			(76		)
Benefit plans: actuarial gains/(losses), net	(1		)	(13		)	(1		)	25
Reclassification adjustments related to amortization	15			14			18			28
Reclassification adjustments related to settlements, net	—			7			1			15
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)	—			—			—			637
Other	8			27			3			6
	23			34			21			712
Benefit plans: prior service costs and other, net	—			—			—			—
Reclassification adjustments related to amortization of prior service costs and other, net	(11		)	(11		)	(22		)	(22		)
Reclassification adjustments related to curtailments of prior service costs and other, net	—			4			—			(3		)
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)	—			—			—			(144		)
Other	—			(6		)	—			—
	(11		)	(13		)	(22		)	(168		)
Tax provision/(benefit) on other comprehensive loss	$	(59	)	$	173		$	(34	)	$	605

The following table provides the components of Tax provision/(benefit) on other comprehensive income/(loss):
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS) September 30,
2018
October 1,
2017
September 30,
2018
October 1,
2017
Foreign currency translation adjustments, net^(a)
$ 14
$ (62 ) $ 82
$ (192 )
Unrealized holding gains/(losses) on derivative financial instruments, net 35
28
39
30
Reclassification adjustments for (gains)/losses included in net income (28 ) (29 ) 36
(169 )
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)
—
—
1
—
7
(1 ) 77
(139 )
Unrealized holding gains/(losses) on available-for-sale securities, net 20
37
(8 ) 93
Reclassification adjustments for gains included in net income (6 ) (49 ) (8 ) (45 )
Reclassification adjustments for tax on unrealized gains from AOCI to Retained earnings^(c)
—
—
(45 ) —
14
(12 ) (62 ) 47
Benefit plans: actuarial gains/(losses), net 2
(37 ) 27
(15 )
Reclassification adjustments related to amortization 15
60
43
152
Reclassification adjustments related to settlements, net 10
22
25
30
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)
—
—
637
—
Other 11
(33 ) 18
(46 )
38
11
750
121
Benefit plans: prior service costs and other, net —
—
—
—
Reclassification adjustments related to amortization (11 ) (17 ) (33 ) (50 )
Reclassification adjustments related to curtailments, net (1 ) (1 ) (4 ) (5 )
Reclassification adjustments of certain tax effects from AOCI to Retained earnings^(b)
—
—
(144 ) —
Other 1
1
1
1
(11 ) (17 ) (179 ) (55 )
Tax provision/(benefit) on other comprehensive income/(loss) $ 62
$ (80 ) $ 667
$ (218 )


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


^(b)	For additional information on the adoption of a new accounting standard related to reclassification of certain tax effects from AOCI, see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.


^(c)	For additional information on the adoption of a new accounting standard related to financial assets and liabilities, see Notes to Consolidated Financial Statements––Note 1B.Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.

Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests

The following table provides the changes, net of tax, in Accumulated other comprehensive loss:
Net Unrealized Gains/(Losses) Benefit Plans
(MILLIONS OF DOLLARS) Foreign Currency Translation Adjustments
Derivative Financial Instruments
Available-For-Sale Securities
Actuarial Gains/(Losses)
Prior Service (Costs)/Credits and Other
Accumulated Other Comprehensive Income/(Loss)
Balance, December 31, 2017 $ (5,180 ) $ (30 ) $ 401
$ (5,262 ) $ 750
$ (9,321 )
Other comprehensive income/(loss) due to the adoption of new accounting standards^(a)
(2 ) (1 ) (416 ) (637 ) 144
(913 )
Other comprehensive income/(loss)^(b)
(589 ) 279
(116 ) 361
(118 ) (183 )
Balance, September 30, 2018 $ (5,772 ) $ 248
$ (131 ) $ (5,538 ) $ 776
$ (10,417 )



The following table provides the changes, net of tax, in Accumulated other comprehensive loss:
	Net Unrealized Gains/(Losses)									Benefit Plans
(MILLIONS OF DOLLARS)	Foreign Currency Translation Adjustments			Derivative Financial Instruments			Available-For-Sale Securities			Actuarial Gains/(Losses)			Prior Service (Costs)/Credits and Other			Accumulated Other Comprehensive Income/(Loss)
Balance, December 31, 2018	$	(6,075	)	$	167		$	(68	)	$	(6,027	)	$	728		$	(11,275	)
Other comprehensive income/(loss)^(a)	(167		)	(200		)	61			116			(70		)	(260		)
Balance, June 30, 2019	$	(6,242	)	$	(33	)	$	(8	)	$	(5,911	)	$	658		$	(11,535	)


^(a)	Amounts represent the cumulative effect adjustments as of January 1, 2018 from the adoption of new accounting standards related to (i) financial assets and liabilities and (ii) the reclassification of certain tax effects from AOCI. For additional information, see ~~Note 1B.~~


^(b)	Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of ~~$20~~$2 million loss for the first ~~nine~~six months of ~~2018~~2019.

As of ~~September~~June 30, ~~2018~~2019, with respect to derivative financial instruments, the amount of unrealized pre-tax net gains on derivative financial instruments estimated to be reclassified into income within the next 12 months is approximately ~~$177 million, which is~~$153 million. The net gains are expected to be offset primarily by net losses ~~resulting~~ from reclassification adjustments ~~related to net losses~~ related to foreign currency exchange-denominated forecasted intercompany inventory sales and available-for-sale debt securities.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. Financial Instruments

A. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

~~On January 1, 2018, we adopted a new accounting and disclosure standard related to accounting for the recognition of financial assets and liabilities. For additional information see~~ ~~Note 1B~~.


The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in Notes to Consolidated Financial Statements––Note 1E. Basis of Presentation and Significant Accounting Policies: Fair Value in Pfizer’s 2017 Financial Report:
The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in Notes to Consolidated Financial Statements––Note 1E. Basis of Presentation and Significant Accounting Policies: Fair Value in Pfizer’s 2018 Financial Report:													The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in Notes to Consolidated Financial Statements––Note 1E. Basis of Presentation and Significant Accounting Policies: Fair Value in Pfizer’s 2018 Financial Report:
	September 30, 2018						December 31, 2017							June 30, 2019						December 31, 2018
(MILLIONS OF DOLLARS)	Total		Level 1		Level 2		Total		Level 1		Level 2			Total		Level 1		Level 2		Total		Level 1		Level 2
Financial assets measured at fair value on a recurring basis:
Short-term investments
Classified as equity securities:
Money market funds	$	1,184	$	—	$	1,184	$	2,115	$	—	$	2,115		$	4,727	$	—	$	4,727	$	1,571	$	—	$	1,571
Equity^(a)	29		17		12		35		16		19			26		15		12		29		17		11
	1,213		17		1,196		2,150		16		2,134			4,753		15		4,739		1,600		17		1,583
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	8,336		—		8,336		12,242		—		12,242			3,014		—		3,014		9,609		—		9,609
Corporate	2,890		—		2,890		2,766		—		2,766
Government—U.S.	8		—		8		252		—		252
Agency asset-backed—U.S.	17		—		17		23		—		23
Other asset-backed	5		—		5		79		—		79
Corporate and other														2,013		—		2,013		5,482		—		5,482
	11,256		—		11,256		15,362		—		15,362			5,027		—		5,027		15,091		—		15,091
Total short-term investments	12,469		17		12,452		17,512		16		17,496			9,780		15		9,766		16,691		17		16,674
Other current assets
Derivative assets:
Interest rate contracts	88		—		88		104		—		104			79		—		79		97		—		97
Foreign exchange contracts	488		—		488		234		—		234			334		—		334		477		—		477
Total other current assets	576		—		576		337		—		337			412		—		412		574		—		574
Long-term investments
Classified as equity securities:
Equity^(a)	1,563		1,527		36		1,440		1,398		42			1,425		1,400		25		1,223		1,193		30
Classified as trading securities:
Debt	50		50		—		73		73		—
Equity funds														53		53		—		50		50		—
	1,612		1,577		36		1,514		1,472		42			1,477		1,452		25		1,273		1,243		30
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	106		—		106		387		—		387			45		—		45		94		—		94
Corporate	3,210		—		3,210		4,172		36		4,136
Government—U.S.	421		—		421		495		—		495
Other asset-backed	4		—		4		35		—		35
Corporate and other														385		—		385		397		—		397
	3,742		—		3,742		5,090		36		5,054			430		—		430		491		—		491
Total long-term investments	5,354		1,577		3,778		6,603		1,507		5,096			1,907		1,453		454		1,764		1,243		521
Other noncurrent assets
Derivative assets:
Interest rate contracts	246		—		246		477		—		477			453		—		453		335		—		335
Foreign exchange contracts	220		—		220		7		—		7			249		—		249		232		—		232
Total other noncurrent assets	467		—		467		484		—		484			702		—		702		566		—		566
Total assets	$	18,866	$	1,594	$	17,272	$	24,937	$	1,523	$	23,414		$	12,801	$	1,467	$	11,334	$	19,595	$	1,260	$	18,335

Financial liabilities measured at fair value on a recurring basis:
Other current liabilities
Derivative liabilities:
Interest rate contracts	$	9	$	—	$	9	$	1	$	—	$	1		$	1	$	—	$	1	$	5	$	—	$	5
Foreign exchange contracts	80		—		80		201		—		201			109		—		109		78		—		78
Total other current liabilities	89		—		89		201		—		201			110		—		110		82		—		82
Other noncurrent liabilities
Derivative liabilities:
Interest rate contracts	653		—		653		177		—		177			—		—		—		378		—		378
Foreign exchange contracts	432		—		432		313		—		313			467		—		467		564		—		564
Total other noncurrent liabilities	1,085		—		1,085		490		—		490			467		—		467		942		—		942
Total liabilities	$	1,174	$	—	$	1,174	$	691	$	—	$	691		$	577	$	—	$	577	$	1,024	$	—	$	1,024

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Note 12. Contingencies and Certain Commitments

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A. Legal Proceedings

Our legal contingencies include, but are not limited to, the following:

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

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

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

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

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

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

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

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

The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be, or is, a class action and, if not certified, our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; whether related actions have been transferred to multidistrict litigation; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters in which we are the plaintiff, we consider, among other things, the financial significance of the product protected by the patent(s) at issue. As a result of considering qualitative factors in our determination of principal matters, there are some matters discussed below with respect to which management believes that the likelihood of possible loss in excess of amounts accrued is remote.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

A1.Legal Proceedings––Patent Litigation

Like other pharmaceutical companies, we are involved in numerous suits relating to our patents, including but not limited to, those discussed below. Most of the suits involve claims by generic drug manufacturers that patents covering our products, processes or dosage forms are invalid and/or do not cover the product of the generic drug manufacturer. Also, counterclaims, as well as various independent actions, have been filed alleging that our assertions of, or attempts to enforce, patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents on a number of our products that are discussed below, patent rights to certain of our products are being challenged in various other jurisdictions. We are also party to patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for allegedly causing delay of generic entry.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Additionally, our licensing and collaboration partners face challenges by generic drug manufacturers to patents covering products for which we have licenses or co-promotion rights. We also are often involved in other proceedings, such as inter partes review, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts relating to our intellectual property or the intellectual property rights of others. Also, if one of our patents is found to be invalid by such proceedings, generic or competitive products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio were challenged in inter partes review and post-grant review proceedings in the ~~United States.~~U.S. The Patent Trial and Appeal Board refused to initiate proceedings as to two patents. In June 2018, the Patent Trial and Appeal Board ruled on ~~one~~another patent, holding that one claim was valid and that all other claims were invalid. The party challenging that patent has appealed the decision. In March and June 2019, an additional patent was found invalid in separate proceedings by the Patent Trial and Appeal Board. We have appealed. Challenges to other patents remain pending ~~before~~in jurisdictions outside the U.S. ~~Patent and Trademark Office.~~The invalidation of ~~these~~all of the patents in our pneumococcal portfolio could potentially allow a competitor pneumococcal vaccine into the marketplace. In the event that any of the patents are found valid and infringed, a competitor pneumococcal vaccine might be prohibited from entering the market or required to pay Pfizer a royalty. We are also subject to patent litigation pursuant to which one or more third parties seeks damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our Hospira subsidiaries are involved in patent and patent-related disputes over their attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded significant damages, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold in the event that we or one of our subsidiaries, like Hospira, is found to have willfully infringed valid patent rights of a third party.

Actions In Which We Are The Plaintiff

Bosulif (bosutinib)

In December 2016, Wyeth LLC, Wyeth Pharmaceuticals Inc., and PF Prism C.V. (collectively, ~~Wyeth)~~the Wyeth Group) brought a patent-infringement action against Alembic Pharmaceuticals, Ltd, Alembic Pharmaceuticals, Inc. (collectively, Alembic), Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries ~~Limited~~Ltd. (collectively, Sun), in the U.S. District Court for the District of Delaware in connection with abbreviated new drug applications respectively filed with the FDA by Alembic and Sun, each seeking approval to market generic versions of bosutinib. Alembic is challenging ~~patents, which expire in 2026,~~a patent covering polymorphic forms of bosutinib, which expires in 2026, and a patent covering methods of treating chronic myelogenous ~~leukemia.~~leukemia, which expires in 2025. Sun is also challenging the same patent covering polymorphic forms of bosutinib that expires in 2026. In March 2017, the Wyeth Group brought a patent-infringement action against MSN Laboratories Private Limited and MSN Pharmaceuticals, Inc. (collectively, MSN), in the U.S. District Court for the District of Delaware in connection with an abbreviated new drug application filed with the FDA by MSN, seeking approval to market a generic version of bosutinib, and challenging a patent expiring in 2026 covering polymorphic forms of bosutinib. In September 2017, the case against MSN was dismissed. Also, in September 2017, the Wyeth Group brought an additional patent-infringement action against Sun in the U.S. District Court for the District of Delaware asserting the infringement and validity of two other patents challenged by Sun, ~~which expire in 2025 and 2026, respectively,~~ covering compositions of bosutinib and methods of treating chronic myelogenous ~~leukemia.~~leukemia, each of which expire in 2025.

EpiPen

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

Precedex Premix

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

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Eurohealth International Sarl was substituted for Ben Venue and Hikma. In June 2016, this case was settled on terms not material to Pfizer.

In June 2015, Amneal Pharmaceuticals LLC (Amneal) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In August 2015, Hospira filed suit against Amneal in the U.S. District Court for the District of Delaware asserting the validity and infringement of the patents that are the subject of the lawsuit. In January 2018, the District Court ruled that one of

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

the four patents was valid and infringed, and that the other three patents were invalid. In February and March 2018, respectively, each of Amneal and Hospira appealed the District Court decision to the U.S. Court of Appeals for the Federal Circuit. In January 2019, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court’s decision.

In December 2015, Fresenius Kabi USA LLC (Fresenius) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that ~~four~~certain patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In January 2016, Hospira filed suit against Fresenius in the U.S. District Court for the Northern District of Illinois, asserting the validity and infringement of those patents. In December 2018, the District Court ruled that the asserted patents ~~that are~~were invalid. Hospira has appealed the ~~subject~~District Court’s decision to the U.S. Court of Appeals for the ~~lawsuit.~~Federal Circuit.

In August 2016, Par Sterile Products, LLC (Par) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In September 2016, Hospira filed suit against Par in the U.S. District Court for the District of Delaware asserting the validity and infringement of the patents that are the subject of the lawsuit. In December 2016, the case was stayed pending the outcome of Hospira’s suit against Amneal (including all appeals). In February 2019, a new stay was entered, extending the stay until the outcome of the appeal in the Fresenius case.

In December 2017, Gland Pharma Limited (Gland) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that six patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In February 2018, Hospira filed suit against Gland in the U.S. District Court for the District of Delaware asserting the validity and infringement of four patents that are the subject of the lawsuit. The case against Gland has been stayed pending the outcome of the appeal in the Fresenius case.

In December 2017, Jiangsu Hengrui Medicine Co., Ltd. (Hengrui) notified Hospira that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that six patents relating to the Precedex premix formulations and their use, all of which expire in 2032, were invalid or not infringed. In February 2018, Hospira filed suit against Hengrui in the U.S. District Court for the District of Delaware asserting the validity and infringement of four patents that are the subject of the lawsuit. The case against Hengrui has been stayed pending the outcome of the appeal in the Fresenius case.

In February 2018, Baxter Healthcare Corporation (Baxter) filed a declaratory judgment action against Hospira in the U.S. District Court for the District of Delaware seeking a declaration of non-infringement of four patents relating to the Precedex premix formulations and their use. One of the patents included in the action ~~expires~~related to the use of Precedex in an intensive care unit setting and expired in 2019 and the other three patents expire in 2032. In March 2018, Hospira filed a counterclaim for infringement of the patent ~~expiring~~that expired in 2019. In November 2018, the case was dismissed by mutual agreement of the parties.

Xeljanz (tofacitinib)

In February 2017, we brought a patent-infringement action against MicroLabs USA Inc. and MicroLabs Ltd. (collectively, MicroLabs) in the U.S. District Court for the District of Delaware asserting the infringement and validity of three patents challenged by MicroLabs in its abbreviated new drug application seeking approval to market a generic version of tofacitinib 5 mg tablets. ~~Of the three patents that are the subject~~In November 2018, we settled all of the lawsuit, one covers the active ingredient and expires in December 2025, the second covers an enantiomer of tofacitinib and expires in 2022, and the third covers a polymorphic form of tofacitinib and expires in 2023. Three other patents for Xeljanz expiring in December 2020 haveour claims against MicroLabs on terms not ~~been challenged by MicroLabs.~~material to Pfizer.

Separately, also in February 2017, we brought a patent-infringement action against Sun Pharmaceutical Industries Ltd. (Sun Ltd.) in the U.S. District Court for the District of Delaware asserting the infringement and validity of our patent covering a polymorphic form of tofacitinib, expiring in 2023, that was challenged by Sun ~~Pharmaceutical Industries~~ Ltd. in its abbreviated new drug application seeking approval to market a generic version of tofacitinib 11 mg extended release tablets. In November 2017, we brought an additional patent-infringement action against Sun ~~Pharmaceuticals Industries~~ Ltd. in the U.S. District Court for the District of Delaware asserting the infringement and validity of another patent challenged by Sun ~~Pharmaceuticals Industries Ltd,~~Ltd., which covers the active ingredient and expires in December 2025. In October 2018, we brought a third patent infringement action against Sun Ltd. in the U.S. District Court for the District of Delaware asserting the infringement and validity of our patent covering the extended release formulation of tofacitinib, which expires in 2034. In March and April 2019, the actions against Sun Ltd. were dismissed by mutual agreement of the parties.

In March 2017, we brought a patent-infringement action against Zydus Pharmaceuticals (USA) Inc. and Cadila Healthcare Ltd. (collectively, Zydus) in the U.S. District Court for the District of Delaware asserting the infringement and validity of three patents: the ~~same~~patent covering the active ingredient expiring in December 2025, the patent covering an enantiomer of tofacitinib

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~three patents that are~~expiring in 2022, and the ~~subject~~patent covering a polymorphic form of ~~the action against MicroLabs,~~tofacitinib expiring in 2023, which Zydus challenged in its abbreviated new drug application seeking approval to market a generic version of tofacitinib 5 mg tablets.

Also, in March 2017, we brought separate actions in the U.S. District Court for the District of Delaware against Prinston Pharmaceutical Inc., Zhejiang Huahai Pharmaceutical Co., Ltd., Huahai US Inc. and Solco Healthcare US, LLC (collectively, Prinston) and against Breckenridge Pharmaceutical Inc., Pensa Pharma S.A. and Laboratorios Del Dr. Esteve, S.A. (collectively, Breckenridge) on the two patents expiring in 2022 and 2023, respectively, that were challenged by Prinston and Breckenridge in their respective abbreviated new drug applications seeking approval to market generic versions of tofacitinib 5 mg tablets. In October 2017, we brought an additional patent-infringement action against Breckenridge in the U.S. District Court for the District of Delaware asserting the infringement and validity of four additional patents challenged by Breckenridge, three of which expire in December 2020 and one of which expires in December 2025. In March 2018, we brought another patent infringement action against Prinston in the U.S. District Court for the District of Delaware asserting the infringement and validity of an additional patent, which had been subsequently challenged by Prinston and which expires in December 2025. In May 2018, we settled all of our claims against Breckenridge on terms not material to Pfizer. In January 2019, we settled all of our claims against Prinston on terms not material to Pfizer.

In December 2018, we brought a separate patent infringement action against Teva Pharmaceuticals USA, Inc. (Teva) in the U.S. District Court for the District of Delaware asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Teva in its abbreviated new drug application seeking approval to market a generic version of tofacitinib 11 mg extended release tablets.

In March 2019, we brought a separate patent infringement action against Ajanta Pharma Ltd. and Ajanta Pharma USA Inc. (collectively, Ajanta) in the U.S. District Court for the District of Delaware asserting the infringement and validity of two patents: the patent covering the active ingredient that expires in December 2025 and the patent covering a polymorphic form of tofacitinib that expires in 2023, each of which Ajanta challenged in its abbreviated new drug application seeking approval to market a generic version of tofacitinib 5 mg tablets.

Inlyta (axitinib)

In April 2018, Apotex Inc. notified us that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Inlyta. Apotex Inc. asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In May 2018, we filed suit against Apotex Inc. in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.

Kerydin (tavaborole)

In September 2018, several generic companies notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Kerydin. The generic companiesassert the invalidity and non-infringement of methods of use and formulation patents for tavaborole that expire in 2026 and 2027, including pediatric exclusivity. In October 2018, Anacor, our wholly-owned subsidiary, filed infringement lawsuits against each of the generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia.

Ibrance (palbociclib)

In March 2019, several generic companies notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Ibrance. The generic companies assert the invalidity and non-infringement of two composition of matter patents and a method of use patent covering palbociclib, each of which expire in 2023. In April 2019, we brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies.

Matters Involving Our Collaboration/Licensing Partners

Xtandi (enzalutamide)

In December 2016, Medivation and Medivation Prostate Therapeutics, Inc. (collectively, the Medivation Group); Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc. (collectively, Astellas); and The Regents of the University of California filed patent-infringement suits in the U.S. District Court for the District of Delaware against Actavis Laboratories FL, Inc. and Actavis LLC (collectively, Actavis); Zydus; and Apotex Inc. and Apotex Corp. (collectively, Apotex) in connection with those companies’ respective abbreviated new drug applications filed with the FDA for approval to market generic versions of enzalutamide. The generic manufacturers are challenging patents, which expire as early as 2026, covering enzalutamide and treatments for prostate cancer. In May 2017, the Medivation Group filed a patent-infringement suit against Roxane Laboratories Inc. (Roxane) in the same court in connection with Roxane’s abbreviated new drug application with the FDA for approval to market a generic version of enzalutamide. In ~~June~~2018 and ~~July 2018,~~early 2019, we settled all ~~of our~~pending claims against ~~Actavis and Apotex, respectively,~~the various generic

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challengers on terms not material to ~~Pfizer.~~

~~Inlyta (axitinib)~~

~~In April 2018, Apotex Inc. notified us that it had filed an abbreviated new drug application~~Pfizer, with the ~~FDA seeking approval to market a generic version~~exception of ~~Inlyta. Apotex Inc. asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In May 2018, we filed suit~~our claims against ~~Apotex Inc.~~Aurobindo, which remain pending in the U.S. District Court for the District of ~~Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.~~

~~Kerydin (tavaborole)~~

In September 2018, several generic companies notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Kerydin. The generic companiesassert the invalidity and non-infringement of methods of use and formulation patents for tavaborole that expire in 2026 and 2027, including pediatric exclusivity. In October 2018, Anacor, our wholly-owned subsidiary, ~~filed infringement lawsuits against each of the generic filers in the U.S. District Court for the District of~~ Delaware.

~~Matters Involving Our Collaboration/Licensing Partners~~

~~Toviaz (fesoterodine)––Inter-Partes Reviews~~

In January 2016, Mylan Pharmaceuticals and Mylan Laboratories (collectively, Mylan) filed petitions with the U.S. Patent and Trademark Office requesting inter partes reviews of five of the patents covering fesoterodine, the active ingredient in Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019 and a patent covering salts of fesoterodine that expires in 2022. The patents are owned by UCB Pharma GmbH, and we have an exclusive, worldwide license to market Toviaz from UCB Pharma GmbH. In July 2016, the Patent Trial and Appeal Board agreed to institute inter partes reviews of all five patents. Amerigen Pharmaceuticals Limited (Amerigen), Alembic Pharmaceuticals Limited and Torrent Pharmaceuticals Limited joined the inter partes reviews. In July 2017, the U.S. Patent and Trademark Office issued decisions upholding all five patents. In September 2017, Mylan and Amerigen appealed the U.S. Patent and Trademark Office decisions to the U.S. Court of Appeals for the Federal Circuit. ~~In January 2018, Mylan withdrew its appeal. Amerigen’s appeal of the decision upholding the patent covering salts of fesoterodine that expires in 2022 is the only pending appeal.~~

Eliquis

In February, March, and April 2017, twenty-five generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed abbreviated new drug applications seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the three patents listed in the Orange Book for Eliquis. The patents currently are set to expire in 2019, 2026, and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. In April 2017, BMS and Pfizer filed patent-infringement actions against all generic filers in the U.S. District Court for the District of

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Delaware and the U.S. District Court for the District of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031 patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all three patents. We and BMS have settled with certain of the generic companies on terms not material to Pfizer, and we and BMS may settle with other generic companies in the future.

Actions In Which We Are The Defendant

Inflectra (infliximab-dyyb)

In March 2015, Janssen and New York University, together, brought a patent-infringement action in the U.S. District Court for the District of Massachusetts against Hospira, Celltrion Healthcare Co. Ltd. and Celltrion Inc. alleging that infliximab-dyyb, to be marketed by Hospira in the U.S. under the brand name Inflectra, would infringe six patents relating to infliximab, its manufacture and use. Claims with respect to four of the patents were dismissed by the plaintiffs, leaving two patents at issue: the infliximab antibody patent and a patent relating to cell culture media. In January 2018, the antibody patent was declared invalid by the Court of Appeals for the Federal Circuit. In July 2018, the U.S. District Court for the District of Massachusetts granted defendants’ motion for summary judgment and ruled that the patent relating to cell culture media was not infringed.

~~Bavencio (avelumab)~~

~~In July 2017, BMS, E.R. Squibb & Sons LLC, Ono Pharmaceutical Co. Ltd., and Tasuku Honjo brought a patent-infringement action in~~ Janssen appealed the District Court’s decision to the U.S. ~~District~~ Court of Appeals for the District of Delaware against Pfizer, Merck KGaA, and EMD Serono, Inc., alleging that Bavencio (avelumab) infringes one patent relating to methods for treating tumors with anti-PD-L1 antibodies, which expires in 2023.Federal Circuit.

A2. Legal Proceedings––Product Litigation

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

Asbestos

Between 1967 and 1982, Warner-Lambert owned American Optical Corporation (American Optical), which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. As of ~~September~~June 30, ~~2018,~~2019, approximately ~~56,880~~46,400 claims naming American Optical and numerous other defendants were pending in various federal and state courts seeking damages for alleged personal injury from exposure to asbestos and other allegedly hazardous materials. Warner-Lambert was acquired by Pfizer in 2000 and is a ~~wholly-owned~~wholly owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.

Numerous lawsuits are pending against Pfizer in various federal and state courts seeking damages for alleged personal injury from exposure to products allegedly containing asbestos and other allegedly hazardous materials sold by Pfizer and certain of its previously owned subsidiaries.

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

Effexor

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

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in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.

In October 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement, but declined to dismiss the other direct purchaser plaintiff claims. In January 2015, the District Court entered partial final

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judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. In August 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded the claims to the District Court.

Lipitor

Antitrust Actions

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

In September 2013 and 2014, the District Court dismissed with prejudice the claims by direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the U.S. Court of Appeals for the Third Circuit. In August 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded the claims to the District Court.

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

Personal Injury Actions

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

In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Lipitor (Atorvastatin Calcium) Marketing, Sales Practices and Products Liability Litigation (No. II) MDL-2502) in the U.S. District Court for the District of South Carolina. Since 2016, certain cases in the Multi-District Litigation were remanded to certain state courts. In January 2017, the District Court granted our motion for summary judgment, dismissing substantially all of the remaining cases pending in the Multi-District Litigation. In January 2017, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Fourth Circuit. In June 2018, the U.S. Court of Appeals for the Fourth Circuit affirmed the District Court’s decision.

Viagra

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

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

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coordinated pre-trial proceedings to the Multi-District Litigation (In re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation, MDL-2691).

Intravenous Solutions

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represent a class consisting of all persons and entities in the U.S. who directly purchased intravenous saline solution sold by any of the defendants from January 1, 2013 until the time the defendants’ allegedly unlawful conduct ceases. Plaintiffs allege that the defendants’ conduct restricts output and artificially fixes, raises, maintains and/or stabilizes the prices of intravenous saline solution sold throughout the U.S. in violation of federal antitrust laws. Plaintiffs seek treble damages (for themselves and on behalf of the putative classes) and an injunction against defendants for alleged price overcharges for intravenous saline solution in the U.S. since January 1, 2013. All of these actions have been consolidated in the U.S. District Court for the Northern District of Illinois. In July 2018, the District Court granted defendants’ motions to dismiss the consolidated amended complaint without prejudice. Plaintiffs filed a second amended complaint in September 2018. On February 3, 2017, we completed the sale of our global infusion systems net assets, HIS, which includes intravenous saline solution, to ICU Medical. The litigation is the subject of cross-claims for indemnification by both Pfizer and ICU Medical under the purchase agreement.

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

Hormone Therapy Consumer Class Action

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

~~Eliquis~~

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

~~In February 2017, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In Re: Eliquis (Apixaban) Products Liability Litigation MDL-2754~~) in the U.S. District Court for the Southern District of New York. In July 2017, the District Court dismissed substantially all of the actions that were pending in the Multi-District Litigation. In August 2017, certain plaintiffs appealed the District Court’s dismissal to the U.S. Court of Appeals for the Second Circuit. Additional cases continue to be transferred to the Multi-District Litigation.

EpiPen

Beginning in February 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan, ~~N.V.,~~ and Mylan ~~N.V.~~ Chief Executive Officer, Heather Bresch. The plaintiffs in these actions seek to represent U.S. nationwide classes comprising persons or entities who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. In August 2017, a similar lawsuit brought in the U.S. District Court for the District of New Jersey on behalf of a purported class of direct purchaser plaintiffs against Pfizer, King, Meridian and Mylan was voluntarily dismissed without prejudice. Against Pfizer and/or its affiliates, plaintiffs generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal antitrust laws and various state antitrust or consumer protection laws. At least one lawsuit also alleges that Pfizer and/or Mylan ~~N.V.~~ violated the federal Racketeer Influenced and Corrupt Organizations Act. Plaintiffs also filed various consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan ~~Pharmaceuticals~~and/or its affiliates regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2009. In August 2017, the actions were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation (In re: EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, MDL-2785) in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan ~~N.V.~~ and/or its affiliates to which Pfizer, King and Meridian are not parties.

Nexium 24HR and Protonix

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August 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re: Proton-Pump Inhibitor Products Liability Litigation (No. II)) in the U.S. District Court for the District of New Jersey.

Docetaxel

Personal Injury Actions

A number of lawsuits have been filed against Hospira and Pfizer in various federal and state courts alleging that plaintiffs who were treated with Docetaxel developed permanent hair loss. The significant majority of the cases also name other defendants, including the manufacturer of the branded product, Taxotere. Plaintiffs seek compensatory and punitive damages.

In October 2016, the federal cases were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re Taxotere (Docetaxel) Products Liability Litigation, MDL-2740) in the U.S. District Court for the Eastern District of Louisiana.

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Mississippi Attorney General Government Investigation

In October 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and eight other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.

Adalimumab Biosimilars

Beginning in March 2019, purported class actions relating to Humira and adalimumab biosimilars were filed in the United States District Court for the Northern District of Illinois against AbbVie Inc. (AbbVie), certain affiliates of AbbVie, and other pharmaceutical manufacturers. Pfizer is a named defendant in three of the actions. The plaintiffs seek to represent nationwide and multi-state classes consisting of persons and/or entities who are indirect purchasers of Humira from January 1, 2017 until the allegedly unlawful antitrust effects cease. Against Pfizer, the plaintiffs generally allege that Pfizer’s and AbbVie’s 2018 licensing agreements, resolving all global intellectual property matters for Pfizer’s proposed adalimumab biosimilar, delayed market entry of Pfizer’s biosimilar product in the U.S. in violation of federal antitrust laws, various state antitrust or consumer protection laws, and unjust enrichment laws. Plaintiffs seek injunctive relief and treble damages for alleged overcharges for Humira since 2017.

Array Securities Litigation

In November 2017, two purported class actions were filed in the U.S. District Court for the District of Colorado alleging that Array, which we acquired in July 2019 and is our wholly owned subsidiary, and certain of its former officers violated federal securities laws in connection with certain disclosures made, or omitted, by Array regarding the NRAS-mutant melanoma program. In March 2018, the actions were consolidated into a single proceeding.

A3. Legal Proceedings––Commercial and Other Matters

Average Wholesale Price Litigation

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

~~Monsanto-Related Matters~~Intravenous Solutions

Beginning in November 2016, purported class actions were filed in the U.S. District Court for the Northern District of Illinois against Hospira, Hospira Worldwide, Inc. and certain other defendants relating to intravenous saline solution. Plaintiffs seek to represent a class consisting of all persons and entities in the U.S. who directly purchased intravenous saline solution sold by any of the defendants from January 1, 2013 until the time the defendants’ allegedly unlawful conduct ceases. Plaintiffs allege that the defendants’ conduct restricts output and artificially fixes, raises, maintains and/or stabilizes the prices of intravenous saline solution sold throughout the U.S. in violation of federal antitrust laws. Plaintiffs seek treble damages (for themselves and on behalf of the putative classes) and an injunction against defendants for alleged price overcharges for intravenous saline solution in the U.S. since January 1, 2013. All of these actions have been consolidated in the U.S. District Court for the Northern District of Illinois. In ~~1997, Monsanto Company (Former Monsanto) contributed~~July 2018, the District Court granted defendants’ motions to dismiss the consolidated amended complaint without prejudice. Plaintiffs filed a second amended complaint in September 2018. On February 3, 2017, we completed the sale of our global infusion systems net assets, HIS, which includes intravenous saline solution, to ICU Medical. The litigation is the subject of cross-claims for indemnification by both Pfizer and ICU Medical under the purchase agreement.

Hormone Therapy Consumer Class Action

EpiPen

Beginning in February 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan, and Mylan Chief Executive Officer, Heather Bresch. The plaintiffs in these actions seek to represent U.S. nationwide classes comprising persons or entities who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. In August 2017, a similar lawsuit brought in the U.S. District Court for the District of New Jersey on behalf of a purported class of direct purchaser plaintiffs against Pfizer, King, Meridian and Mylan was voluntarily dismissed without prejudice. Against Pfizer and/or its affiliates, plaintiffs generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal antitrust laws and various state antitrust or consumer protection laws. At least one lawsuit also alleges that Pfizer and/or Mylan violated the federal Racketeer Influenced and Corrupt Organizations Act. Plaintiffs also filed various consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan and/or its affiliates regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2009. In August 2017, the actions were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation (In re: EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, MDL-2785) in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan and/or its affiliates to which Pfizer, King and Meridian are not parties.

Nexium 24HR and Protonix

A number of individual and multi-plaintiff lawsuits have been filed against Pfizer, certain ~~chemical manufacturing operations~~of its subsidiaries and/or other pharmaceutical manufacturers in various federal and ~~facilities~~state courts alleging that the plaintiffs developed kidney-related injuries purportedly as a result of the ingestion of certain proton pump inhibitors. The cases against us involve Nexium 24HR and/or Protonix and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In August 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a ~~newly formed corporation, Solutia Inc. (Solutia),~~Multi-District Litigation (In re: Proton-Pump Inhibitor Products Liability Litigation (No. II)) in the U.S. District Court for the District of New Jersey.

Docetaxel

Personal Injury Actions

A number of lawsuits have been filed against Hospira and ~~spun off~~Pfizer in various federal and state courts alleging that plaintiffs who were treated with Docetaxel developed permanent hair loss. The significant majority of the ~~shares~~cases also name other defendants, including the manufacturer of ~~Solutia.~~ the branded product, Taxotere. Plaintiffs seek compensatory and punitive damages.

In ~~2000, Former Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia. Pharmacia then~~October 2016, the federal cases were transferred ~~its agricultural operations~~for coordinated pre-trial proceedings to a ~~newly created subsidiary, named Monsanto Company (New Monsanto)~~Multi-District Litigation (In re Taxotere (Docetaxel) Products Liability Litigation, ~~which it spun off~~MDL-2740) in ~~a two-stage process that was completed in 2002. Pharmacia was acquired by Pfizer in 2003 and is a wholly-owned subsidiary of Pfizer.~~

In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia in connection with various claims and litigation arising out of, or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.

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

~~Environmental Matters~~

In 2009, we submitted to the U.S. Environmental Protection Agency (EPA) a corrective measures study report with regard to Pharmacia’s discontinued industrial chemical facility in North Haven, Connecticut. In September 2010, our corrective measures study report was approved by the EPA, and we commenced construction of the site remedy in late 2011 under an Updated Administrative Order on Consent with the EPA.Louisiana.

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Also, in 2009, we submitted a revised site-wide feasibility study with regard to Wyeth Holdings Corporation’s (formerly, American Cynamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. Mississippi Attorney General Government Investigation

In ~~July 2011, Wyeth Holdings Corporation finalized an Administrative Settlement Agreement with~~October 2018, the ~~EPA and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPA with regard to the Bound Brook facility. In May 2012, we completed construction~~Attorney General of an interim remedy to address the discharge of impacted groundwater from that facility to the Raritan River. In September 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area, which is generally in accordance with one of the remedies evaluated in our revised site-wide feasibility study. In March 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for two adjacent lagoons. In September 2015, the U.S., on behalf of the EPA,Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and ~~consent decree~~eight other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to warn about a risk of permanent hair loss in violation of the ~~federal~~Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.

Adalimumab Biosimilars

Beginning in March 2019, purported class actions relating to Humira and adalimumab biosimilars were filed in the United States District Court for the Northern District of ~~New Jersey that allows Wyeth Holdings LLC to complete the design~~Illinois against AbbVie Inc. (AbbVie), certain affiliates of AbbVie, and to implement the remedy for the main plant area. In December 2015, the consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court. We have accrued for the estimated costsother pharmaceutical manufacturers. Pfizer is a named defendant in three of the ~~site remedies~~actions. The plaintiffs seek to represent nationwide and multi-state classes consisting of persons and/or entities who are indirect purchasers of Humira from January 1, 2017 until the allegedly unlawful antitrust effects cease. Against Pfizer, the plaintiffs generally allege that Pfizer’s and AbbVie’s 2018 licensing agreements, resolving all global intellectual property matters for Pfizer’s proposed adalimumab biosimilar, delayed market entry of Pfizer’s biosimilar product in the ~~North Haven~~U.S. in violation of federal antitrust laws, various state antitrust or consumer protection laws, and ~~Bound Brook facilities. In September 2018, the EPA issued a final remediation plan~~unjust enrichment laws. Plaintiffs seek injunctive relief and treble damages for ~~the two adjacent lagoons, which is generally in accordance with one of the remedies evaluated in our focused feasibility study.~~alleged overcharges for Humira since 2017.

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

~~Contracts with Iraqi Ministry of Health~~Array Securities Litigation

In ~~October~~November 2017, a number of United States service members, civilians, and their families brought a complaint in the Federal District Court for the District of Columbia against a number of pharmaceutical and medical devices companies, including Pfizer and certain of its subsidiaries, alleging that the defendants violated the United States Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health, and seeks monetary relief. In July 2018, the U.S. Department of Justice requested documents related to this matter, which are being provided.

~~Allergan Complaint for Indemnity~~

~~In August 2018, Pfizer was named as a defendant in a third-party complaint for indemnity, along with King Pharmaceuticals LLC, a Pfizer subsidiary (King),~~two purported class actions were filed ~~by Allergan Finance LLC (Allergan) in a Multi-District Litigation (In re National Prescription Opiate Litigation MDL 2804~~) in the U.S. District Court for the ~~Northern~~ District of ~~Ohio. The lawsuit asserts claims for indemnity related to Kadian,~~Colorado alleging that Array, which ~~was~~we acquired in July 2019 and is our wholly owned ~~for~~subsidiary, and certain of its former officers violated federal securities laws in connection with certain disclosures made, or omitted, by Array regarding the NRAS-mutant melanoma program. In March 2018, the actions were consolidated into a ~~short period by King in 2008, prior to Pfizer's acquisition of King in 2010.~~single proceeding.

~~A4.~~A3. Legal Proceedings––~~Government Investigations~~Commercial and Other Matters

Average Wholesale Price Litigation

~~Like~~Pfizer, certain of its subsidiaries and other pharmaceutical ~~companies, we are subject~~manufacturers were sued in various state courts by a number of states alleging that the defendants provided average wholesale price (AWP) information for certain of their products that was higher than the actual average prices at which those products were sold. The AWP is used to ~~extensive regulation by government agencies~~ determine reimbursement levels under Medicare Part B and Medicaid and in many private-sector insurance policies and medical plans. All but one of those actions have been resolved through settlement, dismissal or final judgment. The plaintiff state, Illinois,in the ~~U.S.,~~one remaining action, claims that the alleged spread between the AWPs at which purchasers were reimbursed and the actual sale prices was promoted by the defendants as an incentive to purchase certain of their products. The actionalleges, among other ~~developed markets~~ things, fraudand ~~multiple emerging markets in which we operate. As a result, we have interactions with government agencies on an ongoing basis. Criminal charges,~~violation of the state’s unfair trade practices and ~~substantial fines and/or~~consumer protection statutes and seeks monetary and other relief, including civil penalties as well as limitations on our ability to conduct business in applicable jurisdictions, could result from government investigations. In addition, in a qui tam lawsuit in which the government declines to intervene, the relator may still pursue a suit for the recovery of civil damages and ~~penalties on behalf of the government. Among the investigations by government agencies are the matters discussed below.~~treble damages.

~~Phenytoin Sodium Capsules~~

In 2012, Pfizer sold the U.K. Marketing Authorisation for phenytoin sodium capsules to a third party, but retained the right to supply the finished product to that third party. In May 2013, the U.K. Competition & Markets Authority (CMA) informed us that it had launched an investigation into the supply of phenytoin sodium capsules in the U.K. market. In August 2015, the CMA issued a Statement of Objections alleging that Pfizer and Pfizer Limited, a U.K. subsidiary, engaged in conduct that violates U.K. and EU antitrust laws. In December 2016, the CMA imposed a £84.2 million fine on Pfizer and Pfizer Limited. Pfizer appealed the CMA decision to The Competition Appeal Tribunal in February 2017. On June 7, 2018, the Competition Appeal Tribunal overturned the CMA decision as well as the associated fine. On June 28, 2018, the CMA sought permission to appeal the Competition Appeal Tribunal’s judgment.

~~Greenstone Investigations~~

Since July 2017, the U.S. Department of Justice’s Antitrust Division has been investigating our Greenstone generics business. We believe this is related to an ongoing antitrust investigation of the generic pharmaceutical industry. The government has been obtaining information from Greenstone. In April 2018, Greenstone received requests for information from the Antitrust Department of the Connecticut Office of the Attorney General. We have been providing information pursuant to these requests.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Subpoena relating to Manufacturing of Quillivant XR~~

In October 2018, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York seeking records relating to our relationship with another drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We will be producing records pursuant to the subpoena.

Intravenous Solutions

~~See~~ ~~Note 12A2.~~Beginning in November 2016, purported class actions were filed in the U.S. District Court for the Northern District of Illinois against Hospira, Hospira Worldwide, Inc. and certain other defendants relating to intravenous saline solution. Plaintiffs seek to represent a class consisting of all persons and entities in the U.S. who directly purchased intravenous saline solution sold by any of the defendants from January 1, 2013 until the time the defendants’ allegedly unlawful conduct ceases. Plaintiffs allege that the defendants’ conduct restricts output and artificially fixes, raises, maintains and/or stabilizes the prices of intravenous saline solution sold throughout the U.S. in violation of federal antitrust laws. Plaintiffs seek treble damages (for themselves and on behalf of the putative classes) and an injunction against defendants for alleged price overcharges for intravenous saline solution in the U.S. since January 1, 2013. All of these actions have been consolidated in the U.S. District Court for the Northern District of Illinois. In July 2018, the District Court granted defendants’ motions to dismiss the consolidated amended complaint without prejudice. Plaintiffs filed a second amended complaint in September 2018. On February 3, 2017, we completed the sale of our global infusion systems net assets, HIS, which includes intravenous saline solution, to ICU Medical. The litigation is the subject of cross-claims for indemnification by both Pfizer and ICU Medical under the purchase agreement.

Hormone Therapy Consumer Class Action

EpiPen

Beginning in February 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan, and Mylan Chief Executive Officer, Heather Bresch. The plaintiffs in these actions seek to represent U.S. nationwide classes comprising persons or entities who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. In August 2017, a similar lawsuit brought in the U.S. District Court for the District of New Jersey on behalf of a purported class of direct purchaser plaintiffs against Pfizer, King, Meridian and Mylan was voluntarily dismissed without prejudice. Against Pfizer and/or its affiliates, plaintiffs generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal antitrust laws and various state antitrust or consumer protection laws. At least one lawsuit also alleges that Pfizer and/or Mylan violated the federal Racketeer Influenced and Corrupt Organizations Act. Plaintiffs also filed various consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan and/or its affiliates regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2009. In August 2017, the actions were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation (In re: EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, MDL-2785) in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan and/or its affiliates to which Pfizer, King and Meridian are not parties.

Nexium 24HR and Protonix

A number of individual and multi-plaintiff lawsuits have been filed against Pfizer, certain of its subsidiaries and/or other pharmaceutical manufacturers in various federal and state courts alleging that the plaintiffs developed kidney-related injuries purportedly as a result of the ingestion of certain proton pump inhibitors. The cases against us involve Nexium 24HR and/or Protonix and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In August 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re: Proton-Pump Inhibitor Products Liability Litigation (No. II)) in the U.S. District Court for the District of New Jersey.

Docetaxel

Personal Injury Actions

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Mississippi Attorney General Government Investigation

Adalimumab Biosimilars

Array Securities Litigation

A3. Legal ~~Proceedings~~Proceedings–––~~Product~~Commercial and Other Matters

Average Wholesale Price Litigation––~~Intravenous Solutions~~ ~~above~~

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

Monsanto-Related Matters

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

In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to ~~sales~~Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia in connection with various claims and litigation arising out of, ~~intravenous solution products.~~or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.

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

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(UNAUDITED)

Environmental Matters

Also, in 2009, we submitted a revised site-wide feasibility study with regard to Wyeth Holdings Corporation’s (formerly, American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. In July 2011, Wyeth Holdings Corporation finalized an Administrative Settlement Agreement with the EPA and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPA with regard to the Bound Brook facility. In May 2012, we completed construction of an interim remedy to address the discharge of impacted groundwater from that facility to the Raritan River. In September 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area, which is generally in accordance with one of the remedies evaluated in our revised site-wide feasibility study. In March 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for two adjacent lagoons. In September 2015, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey that allows Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. In December 2015, the consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court. In September 2018, the EPA issued a final remediation plan for the two adjacent lagoons, which is generally in accordance with one of the remedies evaluated in our focused feasibility study. We have accrued for the estimated costs of the site remedies for the North Haven and Bound Brook facilities.

Contracts with Iraqi Ministry of Health

In October 2017, a number of United States service members, civilians, and their families brought a complaint in the U.S. District Court for the District of Columbia against a number of pharmaceutical and medical devices companies, including Pfizer and certain of its subsidiaries, alleging that the defendants violated the United States Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health, and seeks monetary relief. In July 2018, the U.S. Department of Justice requested documents related to this matter, which are being provided.

Allergan Complaint for Indemnity

In August 2018, Pfizer was named as a defendant in a third-party complaint for indemnity, along with King, filed by Allergan Finance LLC (Allergan) in a Multi-District Litigation (In re National Prescription Opiate Litigation MDL 2804) in the U.S. District Court for the Northern District of Ohio. The lawsuit asserted claims for indemnity related to Kadian, which was owned for a short period by King in 2008, prior to Pfizer's acquisition of King in 2010. In December 2018, the District Court dismissed the lawsuit. In February 2019, Allergan filed a similar complaint in the Supreme Court of the State of New York, asserting claims for indemnity related to Kadian.

A4. Legal Proceedings––Government Investigations

Like other pharmaceutical companies, we are subject to extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. As a result, we have interactions with government agencies on an ongoing basis. Criminal charges, substantial fines and/or civil penalties, limitations on our ability to conduct business in applicable jurisdictions, corporate integrity or deferred prosecution agreements, as well as reputational harm and increased public interest in the matter could result from government investigations in the U.S. and other jurisdictions in which we do business. In addition, in a qui tam lawsuit in which the government declines to intervene, the relator may still pursue a suit for the recovery of civil damages and penalties on behalf of the government. Among the investigations by government agencies are the matters discussed below.

Phenytoin Sodium Capsules

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(UNAUDITED)

Pfizer appealed the CMA decision to The Competition Appeal Tribunal in February 2017. On June 7, 2018, the Competition Appeal Tribunal overturned the CMA decision as well as the associated fine. The CMA appealed the judgment to the Court of Appeal.

Greenstone Investigations

U.S. Department of Justice Antitrust Division Investigation

Since July 2017, the U.S. Department of Justice's Antitrust Division has been investigating our Greenstone generics business. We believe this is related to an ongoing broader antitrust investigation of the generic pharmaceutical industry. The government has been obtaining information from Greenstone.

State Attorneys General Generics Antitrust Litigation

In April 2018, Greenstone received requests for information from the Antitrust Department of the Connecticut Office of the Attorney General. In May 2019, Attorneys General of more than 40 states plus the District of Columbia and Puerto Rico filed a complaint against a number of pharmaceutical companies, including Greenstone and Pfizer. The matter has been consolidated with a Multi-District Litigation (In re: Generic Pharmaceuticals Pricing Antitrust Litigation MDL No. 2724) in the Eastern District of Pennsylvania. As to Greenstone and Pfizer, the complaint alleges anticompetitive conduct in violation of federal and state antitrust laws and state consumer protection laws.

Subpoena relating to Manufacturing of Quillivant XR

In October 2018, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York (SDNY) seeking records relating to our relationship with another drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We are producing records pursuant to the subpoena.

Civil Investigative Demand relating to Meridian Medical Technologies

In February 2019, we received a civil investigative demand from the U.S. Attorney’s Office for the SDNY. The civil investigative demand seeks records and information related to alleged quality issues involving the manufacture of auto-injectors at our Meridian site. We are producing records in response to this civil investigative demand.

Contracts with Iraqi Ministry of Health

See Note 12A3.Contingencies and Certain Commitments: Legal Proceedings––Commercial and Other Matters––Contracts with Iraqi Ministry of Health above for information regarding U.S. government investigations related to contracts with the Iraqi Ministry of Health.

Docetaxel––Mississippi Attorney General Government Investigation

See Note 12A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Docetaxel––Mississippi Attorney General Government Investigation above for information regarding a government investigation related to Docetaxel marketing practices.

~~A5. Legal Proceedings--Matters Resolved During the First Nine Months of 2018~~

~~During 2018, certain matters, including the matters discussed below, were resolved or were the subject of definitive settlement agreements or settlement agreements-in-principle.~~

~~Celebrex~~

Beginning in July 2014, purported class actions were filed in the U.S. District Court for the Eastern District of Virginia against Pfizer and certain subsidiaries of Pfizer relating to Celebrex. The plaintiffs sought to represent U.S. nationwide or multi-state classes consisting of persons or entities who directly purchased from the defendants, or indirectly purchased or reimbursed patients for some or all of the purchase price of, Celebrex or generic Celebrex from May 31, 2014 until the cessation of the defendants’ allegedly unlawful conduct. The plaintiffs alleged delay in the launch of generic Celebrex in violation of federal antitrust laws or certain state antitrust, consumer protection and various other laws as a result of Pfizer fraudulently obtaining and improperly listing a patent on Celebrex, engaging in sham litigation and prolonging the impact of sham litigation through settlement activity that further delayed generic entry. Each of the actions sought treble damages on behalf of the putative class for alleged price overcharges for Celebrex since May 31, 2014. In December 2014, the District Court granted the parties’ joint motions to consolidate the direct purchaser and end-payer cases, and all such cases were consolidated as of March 2015. In October 2014 and March 2015, we filed motions to dismiss the direct purchasers’ and end-payers’ amended complaints, respectively. In November 2015, the District Court denied in part and granted in part our motion to dismiss the direct purchasers’ amended complaint. In February 2016, the District Court denied in part and granted in part our motion to dismiss the end-payers’ amended complaint, and in August 2016, the District Court dismissed substantially all of the end-payers’ remaining claims. In February 2017, the District Court dismissed with prejudice all of the end-payers’ claims. In March 2017, the end-payers appealed the District Court’s order dismissing their claims with prejudice to the U.S. Court of Appeals for the Fourth Circuit. In August 2017, the District Court granted the direct purchasers’ motion for class certification. In November 2017, Pfizer and the direct purchasers entered into an agreement to resolve the direct purchasers’ class action for $94 million. In April 2018, the court approved the agreement. In November 2017, Pfizer and the end-payers entered into an agreement to resolve the claims of the end-payer plaintiffs on terms not material to Pfizer.

~~Subpoenas relating to Copayment Assistance Organizations~~

In December 2015 and July 2016, Pfizer received subpoenas from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to the Patient Access Network Foundation and other 501(c)(3) organizations that provide financial assistance to Medicare patients. In May 2018, Pfizer entered into a civil settlement to resolve the matter. Pfizer paid $23.85 million to the United States, and entered into a five-year Corporate Integrity Agreement with the Office of the Inspector General of the Department of Health and Human Services.

~~Civil Investigative Demand relating to Pharmacy Benefit Managers~~

In March 2016, Pfizer received a Civil Investigative Demand from the U.S. Attorney’s Office for the Southern District of New York (SDNY) related to Pfizer’s contractual relationships with pharmacy benefit managers with respect to certain pharmaceutical products over the period from January 1, 2006 to the present. We have provided information to the government in response to this Civil Investigative Demand. In July 2018, Pfizer was served with a qui tam complaint that appears to be related to the SDNY investigation. The complaint was unsealed following the government’s decision not to intervene in the case.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

B. Guarantees and Indemnifications

In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities prior to or following a transaction. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of ~~September~~June 30, ~~2018,~~2019, the estimated fair value of these indemnification obligations was not significant.

In addition, in connection with our entry into certain agreements, our counterparties agree to indemnify us. For example, our collaboration agreement with EMD Serono, Inc. to co-promote Rebif in the U.S. expired at the end of 2015 and included certain indemnity provisions. Patent litigation brought by Biogen Idec MA Inc. against EMD Serono Inc. and Pfizer is pending in the U.S. District Court for the District of New Jersey and the United States Court of Appeals for the Federal Circuit. EMD Serono Inc. has acknowledged that it is obligated to satisfy any award of damages.

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

C. Certain Commitments

~~Accelerated share repurchase agreement~~––On ~~March 12, 2018,~~February 7, 2019, we entered into an accelerated share repurchase agreement with ~~Citibank~~GS&Co. to repurchase ~~$4.0~~approximately $6.8 billion of our common stock. Pursuant to the terms of the agreement, on ~~March 14, 2018,~~February 12, 2019, we paid ~~$4.0~~approximately $6.8 billion to ~~Citibank~~GS&Co. and received an initial delivery of approximately 87130 million shares of our common stock from ~~Citibank at a price of $36.61 per share,~~GS&Co., which represented, based on the closing price of our common stock on the NYSE on ~~March 12, 2018,~~February 7, 2019, approximately 80% of the notional amount of the accelerated share repurchase agreement. On ~~September 5, 2018,~~August 1, 2019, the accelerated share repurchase agreement with ~~Citibank~~GS&Co. was completed, which, per the terms of the agreement, resulted in ~~Citibank~~GS&Co. owing us a certain number

PFIZER INC. AND SUBSIDIARY COMPANIES

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(UNAUDITED)

of shares of Pfizer common stock. Pursuant to the agreement’s settlement terms, we received an additional 2133.5 million shares of our common stock from ~~Citibank~~GS&Co. on ~~September 7, 2018.~~August 5, 2019. The average price paid for all of the shares delivered under the accelerated share repurchase agreement was ~~$36.86~~$41.42 per share. The common stock received is included in Treasury ~~stock~~.stock. This agreement was entered into pursuant to our previously announced share repurchase authorization. After giving effect to the accelerated share repurchase agreement ~~as well as~~and other share repurchases through ~~September~~June 30, ~~2018~~,2019, our remaining share-purchase authorization was approximately ~~$9.2~~$5.3 billion at ~~September~~on June 30, ~~2018~~.

~~Corporate headquarters lease agreement~~––In April 2018, we entered an agreement to lease space in an office building in the Hudson Yards neighborhood of New York City. We will relocate our global headquarters to this property with occupancy expected beginning in 2022. Our future minimum rental commitment under this 20-year lease is approximately $1.7 billion. In July 2018, we completed the sale of our current headquarters at 219 and 235 East 42nd Street. We also agreed to lease these properties from the buyer while we complete our relocation.

2019.

Note 13.Segment, Geographic and Other Revenue Information

A. Segment Information

WeAt the beginning of our 2019 fiscal year, we began to manage our commercial operations through ~~two~~a new global structure consisting of three distinct business segments: Pfizer ~~Innovative Health (IH)~~Biopharmaceuticals Group (Biopharma), Upjohn and ~~Pfizer Essential Health (EH)~~through July 31, 2019, Pfizer’s Consumer Healthcare business (Consumer Healthcare). The IHBiopharma, Upjohn and EHConsumer Healthcare segments are each led by a single manager. Each operating segment has responsibility for its commercial activities. Upjohn and Consumer Healthcare are responsible for their own R&D activities while Biopharma receives its R&D services from GPD and ~~for certain~~WRDM. These services include IPR&D projects for new investigational products and additional indications for in-line ~~products that generally have achieved proof-of-concept.~~products. Each business has a geographic footprint across developed and emerging markets. Our chief operating decision maker uses the revenues and earnings of the ~~two~~three operating segments, among other factors, for performance evaluation and resource allocation.

Biopharma and Upjohn are the only reportable segments. We ~~regularly review~~have revised prior-period information (Revenues and Earnings, as defined by management) to conform to the current management structure. As our ~~segments and~~operations were not managed under the ~~approach used by management for performance evaluation and resource allocation. In July 2018, we announced that we will reorganize our commercial operations effective at~~new structure until the beginning of ~~our~~fiscal 2019, ~~fiscal year. We will organize the company into three businesses: a science-based Innovative Medicines business, which will include all~~certain costs and expenses could not be directly attributed to one of the ~~current Pfizer Innovative Health medicines and vaccines business units as well as biosimilars and~~new operating segments. As a new hospital business unit for anti-infectives and sterile injectables; an off-patent branded and generic Established Medicines business operating with substantial autonomy within Pfizer; and a Consumer Healthcare business. We are currently evaluating the impact toresult, our operating ~~segments~~segment results for the second quarter and ~~other costs and activities based on how the businesses will be managed in 2019.~~

~~As described in~~ ~~Note 1A, the February 3, 2017 sale~~first six months of ~~HIS impacted our results of operations in 2017.~~2018 include allocations, which management believes are reasonable.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Operating Segments



Some additional information about our Biopharma and Upjohn business segments ~~as of September 30, 2018~~ follows:
	Pfizer Biopharmaceuticals Group
~~IH focuses on developing~~Biopharma is a science-based innovative medicines business that includes six business units – Oncology, Inflammation & Immunology, Rare Disease, Hospital, Vaccines and ~~commercializing novel, value-creating~~Internal Medicine. The new Hospital unit commercializes our global portfolio of sterile injectable and anti-infective medicines and ~~vaccines~~includes Pfizer’s contract manufacturing operation, Pfizer CentreOne. At the beginning of our 2019 fiscal year, we also incorporated our biosimilar portfolio into our Oncology and Inflammation & Immunology business units and certain legacy established products into the Internal Medicine business unit. Each business unit is committed to delivering breakthroughs that ~~significantly improve~~change patients’ ~~lives,~~lives.		Upjohn is a global, primarily off-patent branded and generic established medicines business, which includes 20 primarily off-patent solid oral dose legacy brands, as well as ~~products for consumer healthcare.~~ ~~Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare disease and consumer healthcare.~~	~~EH includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded and~~certain generic ~~sterile injectable products, biosimilars, and select branded products including anti-infectives. EH also includes an R&D organization, as well as our contract manufacturing business.~~ ~~Through February 2, 2017, EH also included HIS.~~ medicines.
~~Leading brands~~Select products include: - Prevnar 13/Prevenar 13 - ~~Xeljanz~~ Ibrance - Eliquis - ~~Lyrica~~ ~~(U.S., Japan and certain other markets)~~ Xeljanz - Enbrel (outside the U.S. and Canada) - ~~Ibrance~~ Chantix/Champix - ~~Xtandi~~ Sutent - ~~Several OTC consumer healthcare products (e.g.,~~ ~~Advil~~ ~~and~~ ~~Centrum~~)Xtandi		~~Leading brands~~Select products include: - Lyrica - Lipitor - Norvasc - ~~Norvasc~~ ~~- Lyrica~~ ~~(Europe, Russia, Turkey, Israel and Central Asia countries)~~ - Celebrex - Viagra*Viagra - ~~Inflectra/Remsima~~ - ~~Sulperazon~~ - ~~Several other sterile injectable products~~Certain generic medicines


*	Viagra lost exclusivity in the U.S. in December 2017. Beginning in 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, are reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, beginning in 2018, total Viagra worldwide revenues are reported in EH.

~~The following organizational change impacted our operating segments in 2018:~~

~~Effective~~PFIZER INC. AND SUBSIDIARY COMPANIES

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(UNAUDITED)

On July 29, 2019, which fell in the ~~first~~third fiscal quarter of ~~2018, certain costs~~2019, we announced that we entered into a definitive agreement to combine Upjohn with Mylan, creating a new global pharmaceutical company. For additional information, see Note 1A.

Pfizer’s Consumer Healthcare segment is an over-the-counter medicines business, which on July 31, 2019 was combined with GSK’s consumer healthcare business to form a new consumer healthcare joint venture. See Note 2 for Pfizer’s StratCO group, which were previously reported in the operating results of our operating segments and Corporate, are reported in Other Unallocated. StratCO costs primarily include headcount costs, vendor costs and data costs largely in support of Pfizer’s commercial operations. The majority of the StratCO costs reflect additional amounts that our operating segments would have incurred had each segment operated as a standalone company during the periods presented. The reporting change was made to streamline accountability and speed decision making. In the third quarter of 2017, we reclassified approximately $125 million of costs from IH, approximately $36 million of costs from EH and approximately $19 million of costs from Corporate to Other unallocated costs to conform to the current period presentation. In the first nine months of 2017, we reclassified approximately $344 million of costs from IH, approximately $114 million of costs from EH and approximately $40 million of costs from Corporate to Other unallocated costs to conform to the current period presentation.information.

Other Costs and Business Activities

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

~~WRD,~~WRDM––the R&D and Medical expenses managed by our WRDM organization, which is generally responsible for research projects for our ~~IH business~~Biopharma portfolio until proof-of-concept is achieved and then for transitioning those projects to ~~the IH segment via~~ the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The ~~WRD~~WRDM organization also has responsibility for certain science-based and other platform-services organizations, which provide end-to-end technical expertise and other services to the various R&D projects, as well as the Worldwide Medical and Safety group, which ensures that Pfizer provides all stakeholders––including ~~EH R&D projects. WRD is also responsible for facilitating all regulatory submissions~~patients, healthcare providers, pharmacists, payers and ~~interactions~~ health authorities––with ~~regulatory agencies, including all safety-event activities.~~complete and up-to-date information on the risks and benefits associated with Pfizer products so that they can make appropriate decisions on how and when to use Pfizer’s medicines.

GPD––the costs associated with our GPD organization, which is generally responsible for ~~the clinical development of assets that are in~~ clinical trials ~~for our WRD and Innovative portfolios.~~from WRDM in the Biopharma portfolio, including late stage portfolio spend. GPD also provides technical support and other services to Pfizer R&D projects. GPD is responsible for facilitating all regulatory submissions and interactions with regulatory agencies.

Other––the operating results of our Consumer Healthcare business, and costs associated with other commercial activities not managed as part of Biopharma or Upjohn, including all strategy, business development, portfolio management and valuation capabilities, which previously had been reported in various parts of the organization.

Corporate ~~representing~~and Other Unallocated––the costs associated with platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance, and worldwide procurement), ~~the provision of medical information to healthcare providers, patients~~patient advocacy activities and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations, as well as certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2018, certain costs for StratCO, which were previously reported in the operating results of our operating segments and Corporate, are reported in Other Unallocated. For additional information, see note below on Other unallocated costs.

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Other unallocated costs, representing~~investments, as well as overhead expenses associated with our manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs (which include manufacturing variances associated with production). In connection with the StratCO reporting change, in the third quarter of 2017, we reclassified approximately $125 million of costs from IH, approximately $36 million of costs from EH and approximately $19 million of costs from Corporate to Other unallocated costs to conform to the current period presentation. In the first nine months of 2017, we reclassified approximately $344 million of costs from IH, approximately $114 million of costs from EH and approximately $40 million of costs from Corporate to Other unallocated costs to conform to the current period presentation.costs.

Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and PP&E; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, representing substantive and/or unusual, and in some cases recurring, items (such as restructuring charges, legal charges or ~~legal charges)~~net gains and losses on investments in equity securities) that are evaluated on an individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities.

Segment Assets

We manage our assets on a total company basis, not by operating segment, as many of our operating assets are shared ~~(such as our plant network assets)~~ or commingled (such as accounts receivable, as many of our customers are served by ~~both~~multiple operating segments). Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were approximately ~~$168~~$156 billion as of ~~September~~June 30, ~~2018~~2019 and ~~$172~~$159 billion as of December 31, ~~2017~~2018.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Selected Income Statement Information

The following table provides selected income statement information by reportable segment:
Three Months Ended
Revenues
Earnings^(a)
(MILLIONS OF DOLLARS) September 30,
2018
October 1,
2017
September 30,
2018
October 1,
2017
Reportable Segments:
IH^(b)
$ 8,471
$ 8,118
$ 5,388
$ 5,000
EH^(b)
4,826
5,050
2,527
2,801
Total reportable segments 13,298
13,168
7,915
7,801
Other business activities^{(c), (d)}
—
—
(736 ) (759 )
Reconciling Items:

Corporate^{(b), (d)}
—
—
(1,337 ) (1,363 )
Purchase accounting adjustments^(d)
—
—
(1,309 ) (1,154 )
Acquisition-related costs^(d)
—
—
(112 ) (155 )
Certain significant items^(e)
—
—
213
(449 )
Other unallocated^{(b), (d)}
—
—
(457 ) (335 )
$ 13,298
$ 13,168

$ 4,177
$ 3,585

Nine Months Ended
Revenues
Earnings^(a)
(MILLIONS OF DOLLARS) September 30,
2018
October 1,
2017
September 30,
2018
October 1,
2017
Reportable Segments:
IH^(b)
$ 24,573
$ 23,204
$ 15,419
$ 14,534
EH^(b)
15,097
15,639
8,133
8,672
Total reportable segments 39,670
38,843
23,552
23,206
Other business activities^{(c), (d)}
—
—
(2,130 ) (2,205 )
Reconciling Items:
Corporate^{(b), (d)}
—
—
(3,633 ) (3,908 )
Purchase accounting adjustments^(d)
—
—
(3,665 ) (3,527 )
Acquisition-related costs^(d)
—
—
(221 ) (347 )
Certain significant items^(e)
—
—
(8 ) (797 )
Other unallocated^{(b), (d)}
—
—
(1,064 ) (1,070 )
$ 39,670
$ 38,843
$ 12,831
$ 11,351

~~PFIZER INC. AND SUBSIDIARY COMPANIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~



The following table provides selected income statement information by reportable segment:
	Three Months Ended
	Revenues				Earnings^(a)
(MILLIONS OF DOLLARS)	June 30, 2019		July 1, 2018		June 30, 2019			July 1, 2018
Reportable Segments:
Biopharma	$	9,595	$	9,434	$	6,093		$	5,958
Upjohn	2,807		3,147		1,951			2,222
Total reportable segments	12,402		12,581		8,044			8,181
Other business activities	—		—		(1,193		)	(1,119		)
Reconciling Items:
Corporate and other unallocated	862		886		(1,399		)	(1,576		)
Purchase accounting adjustments	—		—		(1,178		)	(1,134		)
Acquisition-related costs	—		—		176			(62		)
Certain significant items^(b)	—		—		(309		)	237
	$	13,264	$	13,466	$	4,141		$	4,527

	Six Months Ended
	Revenues				Earnings^(a)
(MILLIONS OF DOLLARS)	June 30, 2019		July 1, 2018		June 30, 2019			July 1, 2018
Reportable Segments:
Biopharma	$	18,779	$	18,315	$	11,981		$	11,781
Upjohn	5,882		6,267		4,225			4,391
Total reportable segments	24,661		24,582		16,206			16,172
Other business activities	—		—		(2,306		)	(2,307		)
Reconciling Items:
Corporate and other unallocated	1,721		1,791		(2,676		)	(2,900		)
Purchase accounting adjustments	—		—		(2,217		)	(2,355		)
Acquisition-related costs	—		—		148			(110		)
Certain significant items^(b)	—		—		(691		)	154
	$	26,382	$	26,373	$	8,463		$	8,654

^(a)

Income from continuing operations before ~~provision~~provision/(benefit) for taxes on ~~income. IH’s~~income. Biopharma’s earnings include dividend income of ~~$91 million and $54~~$76 million in the ~~third~~second quarter of ~~2018~~2019 and ~~2017~~$76 million in the second quarter of 2018, ~~respectively,~~ and ~~$226 million and $211~~$140 million in the first ~~nine~~six months of ~~2018~~2019 and ~~2017, respectively,~~$135 million in the first six months of 2018 from our investment in ViiV. For additional information, see Note 4.

^(b)

In connection with the StratCO reporting change, in the third quarter of 2017, we reclassified approximately $125 million of costs from IH, approximately $36 million of costs from EH and approximately $19 million of costs from Corporate to Other unallocated costs to conform to the current period presentation. In the first nine months of 2017, we reclassified approximately $344 million of costs from IH, approximately $114 million of costs from EH and approximately $40 million of costs from Corporate to Other unallocated costs to conform to the current period presentation.


^(c)	~~Other business activities includes the costs managed by our WRD and GPD organizations.~~


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


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

For Earnings in the ~~third~~second quarter of ~~2018~~2019, certain significant items includes: (i) restructuring ~~credits~~charges and implementation costs associated with our cost-reduction ~~initiatives~~initiatives that are not associated with an acquisition of ~~$35~~$113 million, (ii) ~~net~~ charges for certain legal matters of ~~$37~~$15 million,, (iii) ~~income~~certain asset impairment charges of $2$10 million, ~~representing an adjustment to amounts previously recorded to write down~~(iv) charges for business and legal entity alignment of $141 million, (v) net gains recognized during the ~~HIS net assets to fair value less costs to sell~~period on investments in equity securities of $25 million and ~~(iv)~~(vi) other ~~income~~charges of ~~$282 million, which includes, among other things, a non-cash $343 million pre-tax gain in~~ ~~Other (income)/deductions––net~~ associated with our transaction with Bain Capital to create a new biopharmaceutical company, Cerevel, to continue development of a portfolio of clinical and preclinical stage neuroscience assets primarily targeting disorders of the central nervous system.$56 million. For additional information, see ~~Note 2B,~~ Note 3 and Note 4.

For Earnings in the ~~third~~second quarter of ~~2017~~2018, certain significant items includes: (i) restructuring credits and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of ~~$55~~$42 million, (ii) a net credit for certain legal matters of $88 million, (iii) certain asset impairment charges of $31 million, (iv) charges for business and legal entity alignment of $1 million, (v) net gains recognized during the period on investments in equity securities of $257 million and (vi) other charges of $35 million, which includes, among other things, a non-cash $50 million pre-tax gain in Other (income)/deductions––net as a result of the contribution of our allogeneic CAR T cell therapy development program assets in connection with our contribution agreement entered into with Allogene. For additional information, see Note 3 and Note 4.

For Earnings in the first six months of 2019, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $170 million, (ii) charges for certain legal matters of ~~$183~~$9 million, (iii) ~~income of $12 million, representing an adjustment to amounts previously recorded to write down the HIS net assets to fair value less costs to sell, (iv)~~ certain asset impairment charges of ~~$127~~$149 million, ~~(v)~~(iv) charges for business and legal entity alignment of ~~$16~~$264 million, (v) net gains recognized during the period on investments in equity securities of $136 million, (vi) net losses on early retirement of debt of $138 million and ~~(vi)~~(vii) other charges of $81 million, which includes, among other things, $55 million in inventory losses, overhead costs related to the period in which our Puerto Rico plants were not operational, and incremental costs, all of which resulted from hurricanes in Puerto Rico and are included in ~~Cost of sales~~.$97 million. For additional information, see ~~Note 2B~~, Note 3 andNote 4.4.

For Earnings in the first ~~nine~~six months of 2018, certain significant items includes: (i) restructuring credits and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of ~~$127~~$93 million, (ii) net credits for certain legal matters of ~~$70~~$107 million, (iii) ~~income of $1 million, representing an adjustment to amounts previously recorded to write down the HIS net assets to fair value less costs to sell, (iv)~~ certain asset impairment charges of $31 million, ~~(v)~~(iv) charges for business and legal entity alignment of $4 million, (v) net gains recognized during the period on investments in equity securities of $375 million, (vi) net losses on early retirement of debt of $3 million and ~~(vi)~~(vii) other ~~income~~charges of ~~$84~~$197 million, which includes, among other things, a non-cash ~~$343~~$50 million pre-tax gain in Other (income)/deductions––net ~~associated~~as a result of the contribution of our allogeneic CAR T cell therapy development program assets in connection with our ~~transaction~~contribution agreement entered into with ~~Bain Capital to create a new biopharmaceutical company, Cerevel, to continue development of a portfolio of clinical~~Allogene, and ~~preclinical stage neuroscience assets primarily targeting disorders of the central nervous system,~~ a $119 million charge, in the aggregate, in Selling, ~~information~~informational and administrative expenses, for a special, one-time bonus paid to virtually all Pfizer colleagues, excluding executives, which was one of several actions taken by us after evaluating the expected positive net impact of the December 2017 enactment of the ~~TCJA on us, and a $50 million pre-tax gain in~~ ~~Other (income)/deductions––net~~ ~~as a result of the contribution of our allogeneic chimeric antigen receptor T cell therapy development program assets in connection with our contribution agreement entered into with Allogene.~~TCJA. For additional information, see ~~Note 2B~~, Note 3 and Note 4.

~~For Earnings in the first nine months of~~ ~~2017~~, certain significant items includes: (i) restructuring credits and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $133 million, (ii) charges for certain legal matters of $191 million, (iii) charges of $52 million, representing adjustments to amounts previously recorded to write-down the HIS net assets to fair value less costs to sell, (iv) certain asset impairment charges of $127 million, (v) charges for business and legal entity alignment of $54 million and (v) other charges of $239 million, which include, among other things, $55 million in inventory losses, overhead costs related to the period in which our Puerto Rico plants were not operational, and incremental costs, all of which resulted from hurricanes in Puerto Rico and are included in ~~Cost of sales~~, and a net loss of $30 million related to the sale of our 40% ownership investment in Teuto, including the extinguishment of a put option for the then remaining 60% ownership interest, which is included in ~~Other (income)/deductions––net. For additional information, see~~ ~~Note 2B~~, ~~Note 3~~ ~~and~~ ~~Note 4~~.

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

B. Geographic Information

~~As described in~~ ~~Note 1A, the February 3, 2017 sale of HIS impacted our results of operations in 2017.~~

																									The following table provides revenues by geographic area:
	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(MILLIONS OF DOLLARS)	September 30, 2018		October 1, 2017		% Change		September 30, 2018		October 1, 2017		% Change		June 30, 2019		July 1, 2018		% Change		June 30, 2019		July 1, 2018		% Change
U.S.	$	6,361	$	6,534	(3	)	$	18,861	$	19,516	(3	)	$	6,335	$	6,225	2		$	12,510	$	12,500	—
Developed Europe^(a)	2,231		2,163		3		6,657		6,309		6		2,228		2,334		(5	)	4,315		4,426		(3	)
Developed Rest of World^(b)	1,640		1,632		1		4,795		4,797		—		1,639		1,694		(3	)	3,174		3,155		1
Emerging Markets^(c)	3,066		2,839		8		9,358		8,222		14		3,062		3,214		(5	)	6,383		6,292		1
Revenues	$	13,298	$	13,168	1		$	39,670	$	38,843	2		$	13,264	$	13,466	(2	)	$	26,382	$	26,373	—

The following table provides the components of the condensed consolidated statements of income:
Three Months Ended Nine Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA) September 30,
2018
October 1,
2017

%
Change

September 30,
2018
October 1,
2017

%
Change

Revenues $ 13,298
$ 13,168
1
$ 39,670
$ 38,843
2

Cost of sales^(a)
2,694
2,844
(5 ) 8,173
7,972
3
% of revenues 20.3 % 21.6 %
20.6 % 20.5 %

Selling, informational and administrative expenses^(a)
3,494
3,504
—
10,448
10,249
2
% of revenues 26.3 % 26.6 %
26.3 % 26.4 %

Research and development expenses^(a)
2,008
1,865
8
5,549
5,367
3
% of revenues 15.1 % 14.2 %
14.0 % 13.8 %

Amortization of intangible assets 1,253
1,177
6
3,640
3,571
2
% of revenues 9.4 % 8.9 %
9.2 % 9.2 %

Restructuring charges and certain acquisition-related costs 85
114
(26 ) 172
267
(36 )
% of revenues 0.6 % 0.9 %
0.4 % 0.7 %

Other (income)/deductions––net (414 ) 79
*
(1,143 ) 65
*
Income from continuing operations before provision for taxes on income 4,177
3,585
17
12,831
11,351
13
% of revenues 31.4 % 27.2 %
32.3 % 29.2 %

Provision for taxes on income 66
727
(91 ) 1,270
2,287
(44 )
Effective tax rate 1.6 % 20.3 %
9.9 % 20.1 %

Income from continuing operations 4,111
2,858
44
11,562
9,064
28
% of revenues 30.9 % 21.7 %
29.1 % 23.3 %

Discontinued operations––net of tax 11
—
*
10
1
*

Net income before allocation to noncontrolling interests 4,122
2,858
44
11,571
9,066
28
% of revenues 31.0 % 21.7 %
29.2 % 23.3 %

Less: Net income attributable to noncontrolling interests 8
18
(53 ) 25
32
(22 )
Net income attributable to Pfizer Inc. $ 4,114
$ 2,840
45
$ 11,546
$ 9,034
28
% of revenues 30.9 % 21.6 %
29.1 % 23.3 %

Earnings per common share––basic:

Income from continuing operations attributable to Pfizer Inc. common shareholders $ 0.70
$ 0.48
46
$ 1.96
$ 1.51
29
Net income attributable to Pfizer Inc. common shareholders $ 0.70
$ 0.48
47
$ 1.96
$ 1.51
29

Earnings per common share––diluted:

Income from continuing operations attributable to Pfizer Inc. common shareholders $ 0.69
$ 0.47
46
$ 1.92
$ 1.49
29
Net income attributable to Pfizer Inc. common shareholders $ 0.69
$ 0.47
46
$ 1.92
$ 1.49
29

Cash dividends paid per common share $ 0.34
$ 0.32
6
$ 1.02
$ 0.96
6

* Calculation not meaningful or results are equal to or greater than 100%.


^(a)	~~Excludes amortization of intangible assets, except as disclosed in Notes to Condensed Consolidated Financial Statements––Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets.~~

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business

We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development and manufacture of healthcare ~~products. Our global portfolio includes~~products, including innovative medicines and vaccines, as well as, through July 31, 2019, many of the world’s best-known consumer healthcare products. We work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We collaborate with healthcare providers, governments and local communities to support and expand access to reliable, affordable healthcare around the world. Our revenues are derived from the sale of our products and, to a much lesser extent, from alliance agreements, under which we co-promote products discovered or developed by other companies or us (Alliance revenues).

WeAt the beginning of our 2019 fiscal year, we began to manage our commercial operations through ~~two distinct~~a new global structure consisting of three business ~~segments:~~ segments––Pfizer ~~Innovative Health (IH)~~Biopharmaceuticals Group (Biopharma), Upjohn and ~~Pfizer Essential Health (EH).~~through July 31, 2019, Consumer Healthcare. Biopharma and Upjohn are the only reportable segments. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2. Assets and Liabilities Held for SaleandNote 13A. Segment, Geographic and Other Revenue Information: Segment Information and the “Our Strategy––Commercial Operations” section of this MD&A ~~below, including a discussion of our plans to reorganize our operations into three businesses effective at the beginning of fiscal 2019.~~below.

In October 2018, we announced our Board of Directors unanimously elected Dr. Albert Bourla, Pfizer Chief Operating Officer, to succeed Ian Read as Chief Executive Officer effective January 1, 2019. Ian Read will transition from his current role as Chairman and Chief Executive Officer to Executive Chairman of Pfizer’s Board of Directors.

The majority of our revenues come from the manufacture and sale of biopharmaceutical products. As explained more fully in our ~~2017~~2018 Form 10-K, the biopharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. These factors include, among others: the loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights, the ability to replenish innovative biopharmaceutical products, healthcare legislation, pipeline productivity, the regulatory environment, pricing and access pressures and competition. We also face challenges as a result of the global economic environment. For additional information about these factors and challenges, see the “Our Operating Environment” and “The Global Economic Environment” sections of this MD&A and of our ~~2017~~2018 Financial Report and Part I, Item 1A, “Risk Factors” of our ~~2017~~2018 Form ~~10-K and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.~~10-K.

The financial information included in our condensed consolidated financial statements for our subsidiaries operating outside the U.S. is as of and for the three and ~~nine~~six months ended ~~August~~May 26, ~~2018~~2019 and ~~August~~May 27, ~~2017.~~2018. The financial information included in our condensed consolidated financial statements for U.S. subsidiaries is as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~October~~July 1, ~~2017~~2018.



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

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

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

~~On December 22, 2017, the U.S. enacted~~Our significant changes to U.S. tax law following the passage and signing of the TCJA. The TCJA is complex and significantly changes the U.S. corporate income tax system by, among other things, reducing the U.S. Federal corporate tax rate from 35% to 21%, transitioning U.S. international taxation from a worldwide tax system to a territorial tax system and imposing a repatriation tax on deemed repatriated accumulated post-1986 earnings of foreign subsidiaries. For information on estimates and assumptions in connection with the TCJA, see Notes to Condensed Consolidated Financial Statements––~~Note 5A. Tax Matters: Taxes on Income from Continuing Operations.~~

We continue to review strategic options for our Consumer Healthcare business. We remain disciplined regarding our capital allocation, and at this time we have not received an acceptable offer for the sale of this business. We will continue our

management of this strong business as we explore other alternatives, which could include everything from a full or partial separation of the business to ultimately deciding to retain the business. We continue to expect that any decision regarding strategic alternatives for our Consumer Healthcare business will be made during the fourth quarter of 2018.

~~Our other significant~~recent business development activities include:

•

Formation of a New Consumer Healthcare Joint Venture––On July 31, 2019, which fell in the third fiscal quarter of 2019, we closed the transaction in which we and GSK combined our respective consumer healthcare businesses into a new consumer healthcare joint venture that operates globally under the GSK Consumer Healthcare name. The joint venture is a category leader in pain relief, respiratory and vitamins, minerals and supplements, and therapeutic oral health and is the largest global OTC consumer healthcare business. In exchange for contributing our Consumer Healthcare business, we received a 32% equity stake in the new companyand GSK owns the remaining 68%. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2. Assets and Liabilities Held for Saleand the “Our Strategy––Commercial Operations” section of this MD&A below.

•

Acquisition of Array BioPharma Inc.––On July 30, 2019, which fell in the third fiscal quarter of 2019, we acquired Array, a commercial stage biopharmaceutical company focused on the discovery, development and commercialization of targeted small molecule medicines to treat cancer and other diseases of high unmet need, for $48 per share in cash, for a total enterprise value of approximately $11.4 billion. We financed the majority of the transaction with debt and the balance with existing cash.

•

Agreement to Combine Upjohn with Mylan––On July 29, 2019, which fell in the third fiscal quarter of 2019, we announced that we entered into a definitive agreement to combine Upjohn with Mylan, creating a new global pharmaceutical company. Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, Upjohn is expected to be spun off or split off to Pfizer’s shareholders and simultaneously combined with Mylan. Pfizer shareholders would own

~~On February 3, 2017, we completed the sale~~57% of Pfizer’s global infusion systems net assets, HIS, to ICU Medical for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing.At closing, we received 3.2 million newly issued shares of ICU Medical common stock, which we initially valued at approximately $428 million (a portion of which we sold in August 2018), a promissory note in the amount of $75 million and net cash of approximately $200 million before customary adjustments for net working capital. In addition, we are entitled to receive a contingent amount of up to an additional $225 million in cash based on ICU Medical’s achievement of certain cumulative performance targets for the combined new company, ~~through December 31, 2019.~~and Mylan shareholders would own 43%. The ~~operating results~~transaction is expected to be tax free to Pfizer and Pfizer shareholders. The transaction is anticipated to close in mid-2020, subject to Mylan shareholder approval and customary closing conditions, including receipt of HIS are included in our condensed consolidated statement of income and EH’s operating results through February 2, 2017 and, therefore, our financial results, and EH’s operating results, for the third quarter of 2017 do not reflect any contribution from HIS global operations, while our financial results, and EH’s operating results, for the first nine months of 2017 reflect approximately one month of HIS domestic operations and approximately two months of HIS international operations. Our financial results, and EH’s operating results, for 2018 do not reflect any contribution from HIS global operations.regulatory approvals.

•

Acquisition of Therachon Holding AG––On July 1, 2019, which fell in the third fiscal quarter of 2019, we acquired all the remaining shares of Therachon, a privately-held clinical-stage biotechnology company focused on rare diseases, with assets in development for the treatment of achondroplasia, a genetic condition and the most common form of short-limb dwarfism, for $340 million upfront, plus potential milestone payments of up to $470 million. In 2018, Pfizer acquired 3% of Therachon’s outstanding shares.

On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S. for $1,040 million, composed of cash and contingent consideration. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of this business, and, in accordance with our international reporting period, our financial results, EH’s operating results, and cash flows for the third quarter and first nine months of 2017 reflect approximately three months and eight months, respectively, of the small molecule anti-infectives business acquired from AstraZeneca. Our financial results, EH’s operating results, and cash flows for the third quarter and first nine months of 2018 reflect three months and nine months, respectively, of the small molecule anti-infective business acquired from AstraZeneca.

For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2. ~~Acquisition, Divestitures, Licensing Arrangements, Collaborative Arrangements~~Assets and ~~Privately~~Liabilities Held ~~Investment~~for Sale and the “Our ~~Strategy” and “Our~~Strategy––Our Business Development Initiatives” sections of this MD&A below.

~~Impact of Hurricanes in Puerto Rico~~

We have manufacturing and commercial operations in Puerto Rico, which were impacted by the hurricanes toward the end of the third quarter in 2017. While our three manufacturing sites sustained some damage and became inoperable due to issues impacting Puerto Rico overall, all three sites have resumed operations and remediation activities will continue through the remainder of the year. Given prior inoperability along with ongoing remediation of our sites, there could be certain product shortages in the coming months. Our commercial sales offices in Puerto Rico have been operational since October 2017.

Product Manufacturing

We periodically encounter difficulties or delays in manufacturing, including due to suspension of manufacturing or voluntary recall of a product, or legal or regulatory actions such as warning letters. For example, Hospira’s manufacturing facility in McPherson, Kansas is currently under the FDA inspection status of Official Action Indicated (OAI). As a result of this status, the FDA may refuse to grant premarket approval of applications and/or the FDA may refuse to grant export certificates related to products manufactured at our McPherson site until the site status is upgraded, which upgrade would be based on a re-inspection by the FDA. Future FDA inspections and regulatory activities will further assess the adequacy and sustainability of corrections implemented at the site. Communication with the FDA on the status of the McPherson site is ongoing. For additional information regarding the FDA inspection of the McPherson site, see Part I, Item 1A, “Risk Factors––Product Manufacturing, Sales and Marketing Risks” of our 2018 Form 10-K. Also, in March 2019, we received a warning letter from the FDA communicating the FDA’s view that certain violations of cGMP regulations exist at Pfizer’s Irungattukottai (IKKT) manufacturing facility in Chennai, India. The warning letter is related to the FDA’s March-April 2018 inspection of the IKKT facility. Following this inspection, Pfizer paused production at the IKKT facility and initiated implementation of a comprehensive corrective and preventive action plan to address the issues noted by the FDA. Due to long-term loss of product demand, Pfizer announced in January 2019 its intention to exit the IKKT facility and subsequently the site has been closed.

The product shortages we have been experiencing within our ~~Essential Health~~ portfolio are primarily for products from the legacy Hospira portfolio and are largely driven by capacity constraints, technical issues and supplier quality concerns. We continue to remediate issues at legacy Hospira facilities manufacturing sterile ~~injectables within our Essential Health portfolio.~~injectables. Any continuing product shortage interruption at these manufacturing facilities could negatively impact our financial results, specifically in our ~~SIP~~Hospital portfolio. We continue to make progress on our comprehensive remediation plan to upgrade and modernize these facilities, and we expect our supply issues to be ~~significantly~~substantially improved by the end of 2019.

Our Second Quarter 2019 Performance

~~Our~~ ~~2018~~ ~~Performance~~

Revenues

Revenues in the ~~third~~second quarter of ~~2018~~ ~~increased $130~~2019 decreased $203 million, or 1%2%, compared to the same period in ~~2017~~2018, which reflects an operational increase of ~~$243~~$324 million, or 2%, ~~partially~~more than offset by the unfavorable impact of foreign exchange of ~~$113~~$527 million, or 1%4%. Revenues in the first ~~nine~~six months of ~~2018~~ ~~increased $827 million, or 2%,~~2019 were relatively flat compared to the same period in ~~2017~~2018, ~~which reflects a favorable~~and reflect an unfavorable impact of foreign exchange of ~~$693~~$980 million, or 2%4%, and an operational increase of ~~$134~~$989 million.

The following provides an analysis of the changes in revenues for the ~~third~~second quarter and first ~~nine~~six months of ~~2018~~2019:

(MILLIONS OF DOLLARS) Three Months
Nine Months
Revenues, for the three and nine months ended October 1, 2017
$ 13,168
$ 38,843

Operational growth/(decline):
Continued growth from key brands^(a) and from recently launched products^(b), as well as growth from Biosimilars^(c)
768
2,172
Declines from the SIP portfolio (primarily in the U.S.), the Peri-LOE Products portfolio (excluding Viagra EH^(d⁾, which was impacted by the shift in the reporting of U.S. and Canada Viagra revenues to EH), total Viagra^(d) (primarily in the U.S.), Enbrel (driven by declines in most developed Europe markets) and the LEP portfolio (primarily in developed markets)
(508 ) (1,971 )
Disposition-related impact of the February 2017 sale of HIS^(e)
—
(97 )
Other operational factors, net (18 ) 29
Operational growth, net 243
134

Operational revenues 13,410
38,977
(Unfavorable)/favorable impact of foreign exchange (113 ) 693
Revenues, for the three and nine months ended September 30, 2018
$ 13,298
$ 39,670



(MILLIONS OF DOLLARS)	Three Months			Six Months
Revenues, for the three and six months ended July 1, 2018	$	13,466		$	26,373

Operational growth/(decline):
Continued growth from certain key brands^(a)	675			1,400
Volume-driven growth from Celebrex and Effexor, primarily in Japan, and higher revenues for Biosimilars primarily in the U.S.	69			124
(Decline)/growth from Lipitor and Norvasc, primarily in China	(131		)	73
Declines from Viagra and Pfizer’s authorized generic for Viagra in the U.S.; the Hospital business; Enbrel internationally; certain rare disease products^(b); Lyrica; Prevnar 13/Prevenar 13 in the second quarter of 2019; and, in the six months ended June 30, 2019, Greenstone, Upjohn’s solid oral dose generics subsidiary	(355		)	(592		)
Growth/(decline) from Consumer Healthcare	8			(11		)
Other operational factors, net	58			(5		)
Operational growth, net	324			989

Operational revenues	13,791			27,361
Unfavorable impact of foreign exchange	(527		)	(980		)
Revenues, for the three and six months ended June 30, 2019	$	13,264		$	26,382


^(a)	Key brands represent Ibrance, Eliquis ~~Ibrance,~~and Xeljanz ~~Prevnar 13/Prevenar 13 and Xtandi,~~ as well as, for the first ~~nine~~six months of ~~2018, Chantix/Champix.~~2019, Prevnar 13/Prevenar 13.


^(b)	~~Growth from recently launched~~Certain rare disease products include ~~Eucrisa in~~ the ~~U.S., as well as Besponsa~~hemophilia franchises (BeneFIX and ~~Bavencio, primarily in the U.S.~~Refacto AF/Xyntha) and ~~developed Europe.~~


^(c)	~~Growth from Biosimilars, primarily from Inflectra in certain channels in the U.S., as well as in developed Europe.~~

^(d)

Viagra lost exclusivity in the U.S. in December 2017. Beginning in 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, are reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, beginning in 2018, total Viagra revenues are reported in EH. Total Viagra revenues in 2017 represent the aggregate of worldwide revenues from Viagra IH and Viagra EH.


^(e)	Impact on financial results for the sale of HIS in February 2017. The first nine months of 2018 do not reflect any contribution from HIS global operations, compared to approximately one month of HIS domestic operations and approximately two months of HIS international operations in the same period in 2017.Genotropin.

For worldwide revenues and by geography, for selected products, see the discussion in the “Analysis of the Condensed Consolidated Statements of Income–~~–Revenues and Product Developments–~~–Revenues––Selected Product Discussion” section of this MD&A. For additional information regarding the primary indications or class of certain products, see Notes to Condensed Consolidated Financial Statements––Note 13C. Segment, Geographic and Other Revenue Information: Other Revenue Information.

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

Income from Continuing Operations Before ~~Provision~~Provision/(Benefit) for Taxes on Income

The following provides an analysis of the ~~increase~~decrease in Income from continuing operations before ~~provision~~provision/(benefit) for taxes on income for the ~~third~~second quarter and first ~~nine~~six months of ~~2018~~2019:

(MILLIONS OF DOLLARS) Three Months
Nine Months
Income from continuing operations before provision for taxes on income, for the three and nine months ended October 1, 2017
$ 3,585
$ 11,351
Favorable change in revenues 130
827
Favorable/(unfavorable) changes:

Higher net gains recognized during the period on investments in equity securities^(a)
49
349
Impact of net periodic benefit costs/(credits) other than service costs^(a)
93
313
Higher income from collaborations, out-licensing arrangements and sales of compound/product rights^(a)
61
292
Impact of certain legal matters, net^(a)
146
264
Lower certain asset impairments^(a)
131
103
Impact of Cost of sales^(b)
149
(202 )
Impact of Selling, information and administrative expenses^(c)
10
(198 )
Higher Research and development expenses^(d)
(144 ) (182 )
Higher Amortization of intangible assets^(e)
(76 ) (69 )
All other items, net 43

(17 )
Income from continuing operations before provision for taxes on income, for the three and nine months ended September 30, 2018
$ 4,177

$ 12,831



(MILLIONS OF DOLLARS)	Three Months			Six Months
Income from continuing operations before provision/(benefit) for taxes on income, for the three and six months ended July 1, 2018	$	4,527		$	8,654
Favorable/(unfavorable) change in revenues	(203		)	9
Favorable/(unfavorable) changes:
Lower Cost of sales^(a)	340			470
Lower Restructuring charges and certain acquisition-related costs^(b)	160			157
(Unfavorable)/favorable change in the fair value of contingent consideration^(c)	(58		)	125
Lower Selling, information and administrative expenses^(d)	31			104
Higher royalty-related income^(c)	110			103
Income from insurance recoveries related to Hurricane Maria^(c)	25			50
Higher business and legal entity alignment costs^(c)	(137		)	(252		)
Lower net gains recognized during the period on investments in equity-securities ^(c)	(221		)	(228		)
Lower income from collaborations, out-licensing arrangements and sales of compound/product rights^(c)	(153		)	(212		)
Higher net interest expense^(c)	(85		)	(147		)
Higher net losses on early retirement of debt^(c)	—			(134		)
Unfavorable change in certain legal matters, net^(c)	(103		)	(127		)
(Higher)/lower asset impairment charges^(c)	30			(120		)
Unfavorable impact of net periodic benefit credits other than service costs^(c)	(33		)	(75		)
Non-recurrence of gain on the contribution of Pfizer’s CAR T assets^(c)	(50		)	(50		)
All other items, net	(39		)	137
Income from continuing operations before provision/(benefit) for taxes on income, for the three and six months ended June 30, 2019	$	4,141		$	8,463


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


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


^(b)	See the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A.


^(c)	See the “Costs and Expenses––See the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions—Net.


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


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


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

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

Our Operating Environment

Industry-Specific Challenges

Intellectual Property Rights and Collaboration/Licensing Rights

The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with ~~generic~~ manufacturers and the expiration of co-promotion and licensing rights can have a significant adverse effect on our revenues. Many of our branded products have multiple patents that expire at varying dates, thereby strengthening our overall patent protection. However, once patent protection has expired or has been lost prior to the expiration date as a result of a legal challenge, we typically lose exclusivity on these products, and generic and biosimilar pharmaceutical manufacturers generally produce similar products and sell them for a lower price. The date at which generic competition commences may be different from the date that the patent or regulatory exclusivity expires. However, when generic competition does commence, the resulting price competition can substantially decrease our revenues for the impacted products, often in a very short period of time. Also, if one of our patents is found to be invalid by judicial, court or administrative proceedings, such as inter partesreview, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts, generic or competitive products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio were challenged in inter partes review and post-grant review proceedings in the U.S. The Patent Trial and Appeal Board refused to initiate proceedings as to two patents. In June 2018, the Patent Trial and Appeal Board ruled on ~~one~~another patent, holding that one claim was valid and that all other claims were invalid. The party challenging that patent has appealed the decision. In March and June 2019, an

additional patent was found invalid in separate proceedings by the Patent Trial and Appeal Board. We have appealed. Challenges to other patents remain pending ~~before~~in jurisdictions outside the U.S. ~~Patent and Trademark Office.~~ The invalidation of ~~these~~all of the patents in our pneumococcal portfolio could potentially allow a competitor pneumococcal vaccine into the marketplace. In the event that any of the patents are found valid and infringed, a competitor pneumococcal vaccine might be prohibited from entering the market or required to pay Pfizer a royalty.

AsA number of our current products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years. For example, as a result of a patent litigation settlement, Teva Pharmaceuticals USA, Inc. launched a generic version of Viagra in the U.S. in December 2017. Patent expiries will continue over several years, with Lyrica (a product in our Upjohn business) losing patent protection in the U.S. in June 2019. We expect the impact of reduced revenues due to patent expiries will be significant in 2019 and 2020, then moderating downward to a much lower level from 2021 through 2025.

Our biologic products, including BeneFIX, ReFacto, Xyntha, Bavencio, Prevnar 13/Prevenar 13 and Enbrel (we market Enbrel outside the U.S. and Canada), may face in the future, or already face, competition from biosimilars (also referred to as follow-on biologics). If competitors are able to obtain marketing approval for biosimilars referencing our biologic products, our biologic products may become subject to competition from these biosimilars, with attendant competitive pressure, and price reductions could follow. For example, Enbrel faces ongoing biosimilar competition in most developed Europe markets. The expiration or successful challenge of applicable patent rights could trigger this competition, assuming any relevant regulatory exclusivity period has expired.

See the “Intellectual Property Rights and Collaboration/Licensing Rights” section of our ~~2017~~2018 Financial Report for additional information about ~~(i)~~ recent losses and expected losses of product exclusivity in the U.S., Europe and/or Japan impacting product ~~revenues and (ii) recent losses of collaboration~~revenues.

For additional information, including the patent rights ~~impacting alliance revenues.~~

~~We lost or expect~~we consider most significant in relation to ~~lose exclusivity for various other products~~our business as a whole, together with the year in ~~various markets over the next few years, including, among others, the expiration of~~which the basic product patent ~~for Lyrica in the U.S. in December 2018. Pfizer is currently pursuing a six-month patent-term extension for pediatric exclusivity for Lyrica in the U.S. with the FDA.~~

~~For additional information,~~expires, see the “Patents and Other Intellectual Property Rights” section in Part I, Item 1, “Business” of our ~~2017~~2018 Form 10-K.

We will continue to ~~aggressively~~vigorously defend our patent rights whenever we deem appropriate. For a discussion of certain recent developments with respect to patent litigation, see Notes to Condensed Consolidated Financial Statements––Note 12A1. Contingencies and Certain Commitments: Legal Proceedings––Patent Litigation.

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

In March 2010, the ACA was enacted in the U.S. For additional information, see the “Government Regulation and Price Constraints” section in Part I, Item 1, “Business” of our ~~2017~~2018 Form 10-K.

																	We recorded the following amounts as a result of the U.S. Healthcare Legislation:
	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
(MILLIONS OF DOLLARS)	September 30, 2018		October 1, 2017		September 30, 2018		October 1, 2017		June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Reduction to Revenues, related to the Medicare “coverage gap” discount provision	$	217	$	157	$	435	$	296	$	154	$	117	$	289	$	218
Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes), based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs. The first nine months of 2018 also reflected a favorable true-up associated with the updated 2017 invoice received from the federal government, which reflected a lower expense than what was previously estimated for invoiced periods.	43		87		118		218
Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes), based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs. The first six months of 2018 also reflected a favorable true-up associated with the updated 2017 invoice received from the federal government, which reflected a lower expense than what was previously estimated for invoiced periods.									70		73		121		75

Product Developments—Biopharmaceutical

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

We continue to strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D to achieve a sustainable pipeline that will deliver value in the near term and over time.

For additional information about our R&D organization, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook—Our Strategy—Organizing for Growth” and “—Description of Research and Development Operations” sections of this MD&A.

A comprehensive update of Pfizer’s development pipeline was published as of ~~October 30, 2018~~July 29, 2019 and is available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of our research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.

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



RECENT FDA APPROVALS
PRODUCT	INDICATION	DATE APPROVED
Ruxience™ (rituximab-pvvr)^(a)	A biosimilar to Rituxan^® (rituximab) for the treatment of adult patients with non-Hodgkin’s lymphoma, chronic lymphocytic leukemia, and granulomatosis with polyangiitis and microscopic polyangiitis	July 2019
Zirabev (bevacizumab-bvzr)^(b)	A biosimilar to Avastin^® (bevacizumab) for the treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer	June 2019
Bavencio (avelumab)	Bavencio (avelumab) in combination with Inlyta (axitinib) for the first-line treatment of patients with advanced renal cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany	May 2019
Vyndaqel (tafamidis meglumine)	Treatment of the cardiomyopathy of wild-type or hereditary transthyretin-mediated amyloidosis (ATTR-CM) in adults to reduce cardiovascular mortality and cardiovascular-related hospitalization	May 2019
Vyndamax (tafamidis)	Treatment of the cardiomyopathy of wild-type or hereditary ATTR-CM in adults to reduce cardiovascular mortality and cardiovascular-related hospitalization	May 2019
Trazimera (trastuzumab-qyyp)^(c)	A biosimilar to Herceptin^® (trastuzumab) for all eligible indications of the reference product	March 2019
Daurismo (glasdegib)	Treatment of newly-diagnosed acute myeloid leukemia in adult patients who are 75 years or older or who have comorbidities that preclude use of intensive induction chemotherapy	November 2018
Lorbrena (lorlatinib)	Treatment of patients with ALK-positive metastatic NSCLC whose disease has progressed on crizotinib and at least one other ALK inhibitor for metastatic disease; or whose disease has progressed on alectinib or ceritinib as the first ALK inhibitor therapy for metastatic disease	November 2018
Talzenna (talazoparib)	Treatment of adult patients with deleterious or suspected deleterious germline BRCA-mutated (~~gBRCAm~~)(gBRCAm) human epidermal growth factor receptor 2 (HER2)-negative locally advanced or metastatic breast cancer	October 2018
Vizimpro (dacomitinib)	First-line treatment of patients with metastatic non-small cell lung cancer with epidermal growth factor receptor exon 19 deletion or exon 21 L858R substitution mutations as detected by an FDA-approved test, which is being developed in collaboration with SFJ	September 2018
~~Nivestym (filgrastim-aafi)~~^(a)	~~A biosimilar to Neupogen® (filgrastim) for all eligible indications of the reference product~~	~~July 2018~~
~~Xtandi (enzalutamide)~~	~~Treatment of men with non-metastatic castration-resistant prostate cancer, which is being developed through a collaboration with Astellas~~	~~July 2018~~
~~Xeljanz (tofacitinib)~~	~~Treatment of adult patients with moderately to severely active ulcerative colitis~~	~~May 2018~~
~~Retacrit (epoetin alfa-epbx)~~^(b)	~~A biosimilar to Epogen® and Procrit® (epoetin alfa) for all indications of the reference product~~	~~May 2018~~
~~Steglatro (ertugliflozin)~~	~~An adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus, which is being developed in collaboration with Merck~~	~~December 2017~~
~~Segluromet (ertugliflozin and metformin)~~	An adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus who are not adequately controlled on a regimen containing ertugliflozin or metformin, or in patients who are already treated with both ertugliflozin and metformin, which is being developed in collaboration with Merck	~~December 2017~~
~~Steglujan (ertugliflozin and sitagliptin)~~	An adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus when treatment with both ertugliflozin and sitagliptin is appropriate, which is being developed in collaboration with Merck	~~December 2017~~
~~Bosulif (bosutinib)~~	~~Treatment of adult patients with newly-diagnosed chronic phase Philadelphia chromosome-positive Ph+ CML, which is being developed in collaboration with Avillion~~	~~December 2017~~
~~Xeljanz (tofacitinib) and Xeljanz XR~~	Xeljanz 5 mg twice daily and Xeljanz XR extended release 11 mg once daily for the treatment of adult patients with active psoriatic arthritis who have had an inadequate response or intolerance to methotrexate or other disease-modifying antirheumatic drugs	~~December 2017~~
~~Sutent (sunitinib)~~	~~Adjuvant treatment in adult patients at high risk of recurrent renal cell carcinoma following nephrectomy (surgical removal of the cancerous kidney)~~	~~November 2017~~


^(a)	~~Neupogen®~~ Rituxan^® is a registered trademark of ~~Amgen~~Biogen MA Inc.


^(b)	~~Epogen®~~ Avastin^® is a registered ~~U.S.~~ trademark of ~~Amgen~~Genentech, Inc.~~; Procrit®~~


^(c)	Herceptin^® is a registered ~~U.S.~~ trademark of ~~J&J.~~Genentech, Inc.



PENDING U.S. NDAs AND SUPPLEMENTAL FILINGS
PRODUCT	PROPOSED INDICATION	DATE FILED*
~~PF-05280586~~PF-06410293^(a)	A potential biosimilar to ~~Rituxan® (rituximab)~~Humira^® (adalimumab)	~~September 2018~~January 2019
~~PF-06439535~~Vyndaqel (tafamidis meglumine)^(b)	~~A potential biosimilar to Avastin® (bevacizumab)~~	~~August 2018~~
~~glasdegib~~	~~Treatment of adult patients with previously untreated acute myeloid leukemia in combination with low-dose cytarabine, a type of chemotherapy~~	~~June 2018~~
~~PF-05280014~~^(c)	~~A potential biosimilar to Herceptin® (trastuzumab)~~	~~August 2017~~
~~tafamidis meglumine~~^(d)	Treatment of transthyretin familial amyloid polyneuropathy	February 2012


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


^(a)	~~Rituxan~~Humira^® is a registered trademark of ~~Biogen MA Inc.~~AbbVie Biotechnology Ltd.


^(b)	~~Avastin~~^® ~~is a registered trademark of Genentech, Inc.~~

^(c)

~~Herceptin~~^® is a registered trademark of Genentech, Inc. In April 2018, we received a “complete response” letter from the FDA with respect to our biologics license application (BLA) for PF-05280014, our proposed biosimilar to trastuzumab, which was submitted for all indications of the reference product. The FDA highlighted the need for additional technical information, which does not relate to safety or clinical data submitted in the application. In October 2018, the FDA acknowledged for review our BLA resubmission.

^(d)

In May 2012, the FDA’s Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to ~~the~~this tafamidis NDA. The FDA has requested the completion of a second efficacy study, and also has asked for additional information on the data within the current tafamidis NDA. Pfizer has completed study B3461028, a global Phase 3 study to support ~~a potential~~the new indication inof transthyretin amyloid cardiomyopathy, which includes patients with wild type and variant transthyretin. ~~This study has achieved its primary endpoint, and we~~We are working with the FDA to identify next steps.



REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
PRODUCT	DESCRIPTION OF EVENT	DATE APPROVED	DATE FILED*
Bosulif (bosutinib)	Application filed in Japan for the treatment of chronic myelogenous leukemia (CML), which is being developed in collaboration with Avillion	—	July 2019
Xtandi (enzalutamide)	Application filed in the EU for the treatment of metastatic hormone-sensitive prostate cancer, which is being developed through a collaboration with Astellas	—	July 2019
Talzenna (talazoparib)	Application approved in the EU for monotherapy for the treatment of adult patients with germline breast cancer susceptibility gene (gBRCA)1/2-mutations, who have human epidermal growth factor receptor 2-negative (HER2-) locally advanced or metastatic breast cancer	June 2019	—
Daurismo (glasdegib)	Application filed in the EU for treatment of newly-diagnosed acute myeloid leukemia in adult patients who are 75 years or older or who have co-morbidities that preclude use of intensive induction chemotherapy	—	May 2019
Lorviqua (lorlatinib)	Application approved in the EU as monotherapy, for the treatment of adult patients with ALK- positive advanced non-small cell lung cancer whose disease has progressed after: • alectinib or ceritinib as the first ALK tyrosine kinase inhibitor (TKI) therapy; or • crizotinib and at least one other ALK TKI	May 2019	—
Vizimpro (dacomitinib)	Application approved in the EU as monotherapy for the first-line treatment of adult patients with locally advanced or metastatic non-small cell lung cancer with EGFR activating mutations, which is being developed in collaboration with SFJ	April 2019	—
Bavencio (avelumab)	Application filed in the EU for Bavencio (avelumab) in combination with Inlyta (axitinib) for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany	—	March 2019
Vyndaqel (tafamidis meglumine)	Application ~~filed~~approved in Japan for treatment of transthyretin amyloid cardiomyopathy ~~(ATTR-CM)~~	March 2019	—
Zirabev^(a)	Application approved in the EU for a biosimilar to Avastin^® (bevacizumab) for the treatment of metastatic carcinoma of the colon or rectum, metastatic breast cancer, unresectable advanced, metastatic or recurrent NSCLC, advanced and/or metastatic renal cell cancer and persistent, recurrent, or metastatic carcinoma of the cervix	February 2019	—
Vyndaqel (tafamidis free acid)	Application filed in the EU for the treatment of adults with transthyretin amyloid cardiomyopathy	—	January 2019
Bavencio (avelumab)	Application filed in Japan for Bavencio (avelumab) in combination with Inlyta (axitinib) for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany	—	January 2019
Vizimpro (dacomitinib)	Application approved in Japan for the treatment of patients with locally advanced or metastatic non-small cell lung cancer with EGFR mutations, which is being developed in collaboration with SFJ	January 2019	—
PF-06410293^(b)	Application filed in the EU for a potential biosimilar to Humira^® (adalimumab)	—	November 2018
Xtandi (enzalutamide)	Application approved in the EU for treatment of adult men with high-risk non-metastatic castration-resistant prostate cancer, which is being developed through a collaboration with Astellas	October 2018	—
Trastuzumab BS for ~~I.V.~~IV Infusion 60mg/150mg “Pfizer”^(a)(c)	Application approved in Japan for a biosimilar to ~~Herceptin®~~Herceptin^® (trastuzumab)	September 2018	—
Lorbrena (lorlatinib)	Application approved in Japan for the treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitor	September 2018	—
PF-05280586^(b)(d)	Application filed in the EU for a potential biosimilar to ~~Rituxan®~~Rituxan^® (rituximab)	—	August ~~2018~~
~~Xeljanz (tofacitinib)~~	Application approved in the EU for the treatment of adult patients with moderately to severely active ulcerative colitis who have had an inadequate response, lost response, or were intolerant to either conventional therapy or a biologic agent	~~July 2018~~	—
~~Trazimera~~^(a)	Application approved in the EU for a biosimilar to Herceptin® (trastuzumab) for the treatment of human epidermal growth factor (HER2) overexpressing breast cancer and HER2 overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma	~~July 2018~~	—
~~Infliximab BS for I.V. Infusion 100mg “Pfizer”~~^(c)	~~Application approved in Japan for a biosimilar to Remicade® (infliximab)~~	~~July 2018~~	—
~~Xeljanz (tofacitinib)~~	Application approved in the EU for Xeljanz in combination with methotrexate for the treatment of active psoriatic arthritis in adult patients who have had an inadequate response or who have been intolerant to a prior disease-modifying antirheumatic drug therapy	~~June 2018~~	—
~~talazoparib~~	~~Application filed in the EU for the treatment of patients with germline BRCA-mutated advanced breast cancer~~	—	~~June 2018~~
~~Xeljanz (tofacitinib)~~	~~Application approved in Japan for the treatment of ulcerative colitis~~	~~May 2018~~	—
~~dacomitinib~~	Application filed in Japan for the treatment of patients with locally advanced or metastatic non-small cell lung cancer with epidermal growth factor receptor (EGFR) mutations, which is being developed in collaboration with SFJ	—	~~May~~ 2018
crisaborole	Application filed in the EU for the treatment of mild-to-moderate atopic dermatitis	—	May 2018
~~Mylotarg (gemtuzumab ozogamicin)~~	~~Application approved in the EU for treatment of patients age 15 years and above with previously untreated, de novo, CD33-positive acute myeloid leukemia, except acute promyelocytic leukemia~~	~~April 2018~~	—
~~Bosulif (bosutinib)~~	Application approved in the EU for the treatment of adults with newly diagnosed chronic phase Philadelphia chromosome-positive chronic myelogenous leukemia (Ph+ CML), which is being developed in collaboration with Avillion	~~April 2018~~	—
~~dacomitinib~~	Application filed in the EU for the first-line treatment of patients with locally advanced or metastatic non-small cell lung cancer with EGFR activating mutations, which is being developed in collaboration with SFJ	—	~~March 2018~~
~~Steglatro (ertugliflozin)~~	~~Approval in the EU as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus:~~ • ~~as monotherapy in patients for whom the use of metformin is considered inappropriate due to intolerance or contraindications; and~~ • ~~in addition to other medicinal products for the treatment of diabetes, which is being developed in collaboration with Merck~~	~~March 2018~~	—
~~Segluromet (ertugliflozin and metformin)~~	~~Approval in the EU as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus:~~ • ~~in patients not adequately controlled on their maximally tolerated dose of metformin alone;~~ • ~~in patients on their maximally tolerated doses of metformin in addition to other medicinal products for the treatment of diabetes; and~~ • ~~in patients already being treated with the combination of ertugliflozin and metformin as separate tablets, which is being developed in collaboration with Merck~~	~~March 2018~~	—
~~Steglujan (ertugliflozin and sitagliptin)~~	~~Approval in the EU as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus:~~ • ~~when metformin and/or a sulphonylurea (SU) and one of the monocomponents of Steglujan do not provide adequate glycaemic control; and~~ • ~~in patients already being treated with the combination of ertugliflozin and sitagliptin as separate tablets, which is being developed in collaboration with Merck~~	~~March 2018~~	—
~~PF-06439535~~^(d)	~~Application filed in the EU for a potential biosimilar to Avastin® (bevacizumab)~~	—	~~March 2018~~
Xeljanz (tofacitinib)	Application filed in the EU for modified release 11mg tablet for ~~rheumatoid arthritis~~RA	—	March 2018
~~lorlatinib (PF-06463922)~~	~~Application filed in the EU for the treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitors~~	—	~~February 2018~~
~~Besponsa (inotuzumab ozogamicin)~~	~~Approval in Japan for the treatment of relapsed or refractory CD 22- positive acute lymphoblastic leukemia~~	~~January 2018~~	—


*	For applications in the EU, the dates set forth in this column are the dates on which the EMA validated our submissions.


^(a)	~~Herceptin~~Avastin^® is a registered trademark of Genentech, Inc.


^(b)	~~Rituxan~~Humira^® is a registered trademark of AbbVie Biotechnology Ltd.


^(c)	Herceptin^® is a registered trademark of Genentech, Inc.


^(d)	Rituxan^® is a registered trademark of Biogen MA Inc.

^(c)

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


^(d)	~~Avastin® is a registered trademark of Genentech, Inc.~~



LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS
PRODUCT	PROPOSED INDICATION
~~Bavencio (avelumab)~~	~~A monoclonal antibody that inhibits PD-L1, in combination with Inlyta (axitinib), a tyrosine kinase inhibitor,~~ ~~for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with~~ ~~Merck KGaA, Germany~~
~~Bavencio (avelumab)~~	A monoclonal antibody that inhibits PD-L1, in combination with talazoparib in patients with previously untreated advanced ovarian cancer, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (avelumab)	A monoclonal antibody that inhibits PD-L1 for the first-line treatment of stage IIIb/IV non-small cell lung cancer, which is being ~~developed in collaboration with Merck KGaA, Germany~~
~~Bavencio (avelumab)~~^(a)	A monoclonal antibody that inhibits PD-L1 for treatment of stage IIIb/IV non-small cell lung cancer that has progressed after a platinum-containing doublet, which is being developed in collaboration with Merck KGaA, Germany
~~Bavencio (avelumab)~~	~~A monoclonal antibody that inhibits PD-L1 for treatment of platinum-resistant/refractory ovarian cancer,~~ ~~which is being developed in collaboration with Merck KGaA, Germany~~
~~Bavencio (avelumab)~~	~~A monoclonal antibody that inhibits PD-L1 for the first-line treatment of ovarian cancer, which is being~~ developed in collaboration with Merck KGaA, Germany
Bavencio (avelumab)	A monoclonal antibody that inhibits PD-L1 for maintenance treatment, in the first-line setting, for patients with urothelial cancer, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (avelumab)	A monoclonal antibody that inhibits PD-L1 for maintenance treatment of advanced or metastatic gastric/ gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
Bavencio (avelumab)	A monoclonal antibody that inhibits PD-L1 for treatment of locally advanced squamous cell carcinoma of the head and neck, which is being developed in collaboration with Merck KGaA, Germany
Braftovi (encorafenib) and Mektovi (binimetinib)	Second-or-third-line treatment of BRAF-mutant mCRC
Daurismo (glasdegib)	A smoothened inhibitor, in combination with azacitidine, for the treatment of acute myeloid leukemia
Ibrance (palbociclib)	Treatment of HER2+ advanced breast cancer, in collaboration with the Alliance Foundation Trials, LLC
Ibrance (palbociclib)	Treatment of high-risk early breast cancer, in collaboration with the German Breast Group
Ibrance (palbociclib)	Treatment of HR+ early breast cancer, in collaboration with the Alliance Foundation Trials, LLC, and the Austrian Breast Colorectal Cancer Study Group
Lorbrena (lorlatinib)	A next generation ALK/ROS1 tyrosine kinase inhibitor for the first-line treatment of patients with ALK-positive advanced non-small cell lung cancer
Xeljanz (tofacitinib)	Treatment of ankylosing spondylitis
Xtandi (enzalutamide)	Treatment of non-metastatic ~~high risk~~ hormone-sensitive prostate cancer, which is being developed through a collaboration with Astellas
Xtandi (enzalutamide)	Treatment of metastatic hormone-sensitive prostate cancer, which is being developed through a collaboration with Astellas (U.S.)
~~Vyndaqel (tafamidis meglumine)~~Talzenna (talazoparib)	~~Adult symptomatic transthyretin cardiomyopathy (ex-Japan)~~An oral PARP inhibitor, in combination with Xtandi (enzalutamide), for the treatment of metastatic castration-resistant prostate cancer

^(a)

In February 2019, the company took steps to transition rheumatoid arthritis study patients who were on tofacitinib 10 mg twice daily to tofacitinib 5 mg twice daily in the FDA post-marketing requirement study A3921133, a study performed in patients considered to be at high risk for certain side effects. This action was taken as the result of notification from the tofacitinib Rheumatology Data Safety Monitoring Board of a safety signal regarding the tofacitinib 10 mg twice daily treatment arm in study A3921133. The 5 mg twice daily dose is the FDA approved dose in the U.S. for adult patients with moderate to severe rheumatoid arthritis. In July 2019, the FDA updated the U.S. prescribing information for Xeljanz to include two additional boxed warnings as well as changes to the indication and dosing for UC. These updates were based on the FDA’s review of data from the post-marketing requirement RA study A3921133. In addition, the EU product labeling (SmPC) for Xeljanz was updated in July 2019. This update is provisional, pending the outcome of the EMA’s risk/benefit review of Xeljanz, which is expected to take several months. Following the conclusion of that review, the current SmPC may be revised again, or confirmed.

In February 2018, we and our partner Merck KGaA, Darmstadt, Germany, announced that the Bavencio Phase 3 trial in second-line NSCLC did not meet its pre-specified primary endpoint. We are continuing to further evaluate the detailed results.



NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT
CANDIDATE	PROPOSED INDICATION
~~glasdegib (PF-0444913)~~aztreonam-avibactam (PF-06947387)	A ~~smoothened~~beta lactam/beta lactamase inhibitor for the treatment of ~~acute myeloid leukemia~~
~~lorlatinib (PF-06463922)~~	~~A next generation ALK/ROS1 tyrosine kinase inhibitor for the first-line treatment of~~ patients with ~~ALK-positive advanced non-small cell lung cancer~~infections caused by Gram-negative bacteria, including those that produce metallo-beta-lactamases, for which there are limited or no treatment options
fidanacogene elaparvovec (PF-06838435)	An investigational gene therapy for the treatment of hemophilia B
PF-06482077	A 20-Valent pneumococcal conjugate vaccine for the prevention of invasive pneumococcal disease and pneumonia caused by Streptococcus pneumoniae serotypes covered by the vaccine in adults 18 years of age and older
PF-06651600	A selective dual Janus kinase 3 (JAK3) and Tyrosine kinase Expressed in hepatocellular Carcinoma (TEC) family inhibitor for the treatment of patients with moderate to severe alopecia areata
PF-04965842	A Janus kinase 1 (JAK1) inhibitor for the treatment of moderate-to-severe atopic dermatitis
PF-06425090	A prophylactic vaccine for active immunization to prevent clostridium difficile ~~colitis~~disease
~~PF-06410293~~^(a) PF-06802861	~~A potential biosimilar to Humira® (adalimumab)~~
~~rivipansel (GMI-1070)~~	~~A pan-selectin~~An oral inhibitor of p38 mitogen-activated protein kinase for the treatment of patients with symptomatic dilated cardiomyopathy due to a Lamin A/C gene mutation
rivipansel (GMI-1070)^(a)	A triple selectin inhibitor, with highest potency for E-selectin for the treatment of acute vaso-occlusive ~~crisis in hospitalized individuals~~crises associated with sickle cell disease in patients aged 6 years and above, which was licensed from GlycoMimetics Inc.
somatrogon (PF-06836922)	A long-acting hGH-CTP for the treatment of growth hormone deficiency in children, which is being developed in collaboration with OPKO
somatrogon (PF-06836922)	A long-acting hGH-CTP for the treatment of growth hormone deficiency in adults, which is being developed in collaboration with OPKO
~~talazoparib (MDV3800)~~	~~An oral PARP inhibitor for the treatment of metastatic castration-resistant prostate cancer~~
tanezumab	An anti-nerve growth factor monoclonal antibody for the treatment of pain, which is being developed in collaboration with Lilly

^(a)

~~Humira~~^® isIn August 2019, we announced that the rivipansel (GMI-1070) Phase 3 Rivipansel (GMI-1070): Evaluating Safety, Efficacy and Time to Discharge (RESET) pivotal study did not meet its primary or key secondary efficacy endpoints. The objective of the trial was to evaluate the efficacy and safety of rivipansel in patients aged six and older with sickle cell disease who were hospitalized for a ~~registered trademark~~vaso-occlusive crisis and required treatment with IV opioids. The primary endpoint was time to readiness-for-discharge and the key secondary efficacy endpoints were time-to-discharge, cumulative IV opioid consumption, and time to discontinuation of ~~AbbVie Biotechnology Ltd.~~IV opioids. Detailed analyses of the RESET study, including additional data on efficacy and safety endpoints, which are not available at this time, will be submitted for presentation at a future scientific meeting. We are awaiting additional data to determine next steps.

Additional product-related programs are in various stages of discovery and development. ~~Also, see the discussion in the “Our Strategy––Our Business Development Initiatives” section of this MD&A.~~

~~COSTS AND EXPENSES~~

Costs and Expenses

The changes in expenses below reflect, among other things, the favorable impact of the February 2017 sale of HIS. The operating results of HIS are included in our operating results through February 2, 2017 and, therefore, operating results for the third quarter of ~~2017~~ ~~do not reflect any contribution from HIS global operations, while the first nine months of~~ ~~2017~~ ~~reflect approximately one month of HIS domestic operations and approximately two months of HIS international operations. Our operating results for 2018 do not reflect any HIS global operations.~~

Cost of Sales


	Three Months Ended								Nine Months Ended							Three Months Ended								Six Months Ended
(MILLIONS OF DOLLARS)	September 30, 2018			October 1, 2017			% Change		September 30, 2018			October 1, 2017			% Change	June 30, 2019			July 1, 2018			% Change		June 30, 2019			July 1, 2018			% Change
Cost of sales	$	2,694		$	2,844		(5	)	$	8,173		$	7,972		3	$	2,576		$	2,916		(12	)	$	5,009		$	5,479		(9	)
As a percentage of Revenues	20.3		%	21.6		%			20.6		%	20.5		%		19.4		%	21.7		%			19.0		%	20.8		%

Cost of sales decreased 5%$340 million, or 12%, in the ~~third~~second quarter of ~~2018~~2019, compared to the same period in ~~2017~~2018, primarily due to:

the favorable impact of foreign exchange of ~~$212 million~~$176 million; and

the favorable impact of hedging activity on intercompany inventory of ~~$18 million;~~$91 million.

~~lower volumes driven by the SIP portfolio, primarily due to legacy Hospira product shortages in the U.S., as well as generic competition in developed markets; and~~

~~the non-recurrence of $55 million in inventory losses, overhead costs, and incremental costs related to the period in 2017 during which our Puerto Rico plants were not operational due to hurricanes,~~

~~partially offset by:~~

~~increased sales volumes for various key products within our product portfolio;~~

~~higher costs across the SIP portfolio, as a result of the complexity of high quality product manufacture across the legacy Hospira plants; and~~

~~an increase in royalty expenses based on the mix of products sold.~~

Cost of sales ~~increased~~3%decreased$470 million, or 9%, in the first ~~nine~~six months of ~~2018,~~ 2019, compared to the same period in ~~2017~~2018, primarily due to:

the ~~unfavorable~~favorable impact of foreign exchange of ~~$157 million~~$388 million; and

the ~~unfavorable~~favorable impact of hedging activity on intercompany inventory of ~~$114 million;~~

~~increased sales volumes for various key products within our product portfolio; and~~

~~an increase in royalty expenses based on the mix of products sold,~~$164 million,

partially offset by:

~~lower volumes driven by the SIP portfolio, primarily due to legacy Hospira~~an unfavorable change in product ~~shortages in the U.S., as well as generic competition in developed markets;~~mix.

the non-recurrence of $55 million in inventory losses, overhead costs, and incremental costs related to the period in 2017 during which our Puerto Rico plants were not operational due to hurricanes; and

~~the non-recurrence of charges related to a product recall that occurred in 2017.~~

The decrease in Cost of sales as a percentage of revenues in the ~~third~~second quarter of ~~2018~~ and the ~~slight increase in~~ ~~Cost of sales~~ ~~as a percentage of revenues for the~~ first ~~nine~~six months of ~~2018~~2019, compared to the same periods in ~~2017~~2018, was primarily due to all of the factors discussed above, as well as an increase in alliance revenues, which have no associated cost of ~~sales.~~sales, and, for the first six months of 2019, a favorable change in product mix.

Selling, Informational and Administrative (SI&A) Expenses


	Three Months Ended							Nine Months Ended							Three Months Ended								Six Months Ended
(MILLIONS OF DOLLARS)	September 30, 2018			October 1, 2017			% Change	September 30, 2018			October 1, 2017			% Change	June 30, 2019			July 1, 2018			% Change		June 30, 2019			July 1, 2018			% Change
Selling, informational and administrative expenses	$	3,494		$	3,504		—	$	10,448		$	10,249		2	$	3,511		$	3,542		(1	)	$	6,850		$	6,954		(1	)
As a percentage of Revenues	26.3		%	26.6		%		26.3		%	26.4		%		26.5		%	26.3		%			26.0		%	26.4		%

~~The decrease in~~ ~~Cost of sales~~ ~~of 9% was primarily driven by~~ the favorable impact of foreign exchange of $176 million; and

the favorable impact of hedging activity on intercompany inventory of $91 million.

Cost of sales decreased$470 million, or 9%, in the first six months of 2019, compared to the same period in 2018, primarily due to:

the favorable impact of foreign exchange of $388 million; and

the favorable impact of hedging activity on intercompany inventory of $164 million,

partially offset byby:

an unfavorable change in product mix.

The decrease in Cost of sales as a percentage of revenues in the second quarter and the first six months of 2019, compared to the same periods in 2018, was primarily due to all of the factors discussed above, as well as an increase in alliance revenues, which have no associated cost of sales, ~~volumes~~and, for ~~various key products within our~~the first six months of 2019, a favorable change in product ~~portfolio~~mix.

Selling, Informational and ~~an increase in royalty expenses based on the mix of products sold.~~Administrative (SI&A) Expenses



	Three Months Ended								Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			% Change		June 30, 2019			July 1, 2018			% Change
Selling, informational and administrative expenses	$	3,511		$	3,542		(1	)	$	6,850		$	6,954		(1	)
As a percentage of Revenues	26.5		%	26.3		%			26.0		%	26.4		%

~~The increase~~SI&A expenses decreased $31 million, or 1%, in ~~Selling, informational~~the second quarter of 2019, compared to the same period in 2018, primarily due to:

the favorable impact of foreign exchange of $118 million; and ~~administrative~~

lower advertising, promotional and field force expenses in developed markets, primarily related to Lyrica in the U.S.,

partially offset by:

additional investment across several of ~~5% was~~our products, primarily ~~driven by~~ Xeljanz and Chantix/Champix, and to support the Vyndaqel launches; and

additional investments in China.

SI&A expenses decreased $104 million, or 1%, in the first six months of 2019, compared to the same period in 2018, primarily due to:

the favorable impact of foreign exchange of $206 million;

lower advertising, promotional and field force expenses in developed markets, primarily related to Lyrica in the U.S.; and

the non-recurrence of a special, one-time bonus paid to virtually all Pfizer colleagues, excluding executives, of $119 million, in the aggregate, in the first quarter of 2018,

partially offset by:

additional investment across several of our key products, primarily Xeljanz ~~Eucrisa, Eliquis~~ and ~~Prevnar 13/Prevenar 13 (pediatric indication), partially offset by lower~~Chantix/Champix, and to support the Vyndaqel launches;

additional investments in China across key brands; and

the non-recurrence of a favorable true-up of healthcare reform expenses in the first quarter of 2018.

Research and Development (R&D) Expenses



	Three Months Ended							Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			% Change	June 30, 2019			July 1, 2018			% Change
Research and development expenses	$	1,842		$	1,797		2	$	3,544		$	3,540		—
As a percentage of Revenues	13.9		%	13.3		%		13.4		%	13.4		%

R&D expenses increased $44 million, or 2%, in the second quarter of 2019, compared to the same period in 2018, and increased $4 million in the first six months of 2019, compared to the same period in 2018 primarily due to:

increased spending on our Inflammation & Immunology and Rare Disease portfolios due to several phase 3 programs and

investment in gene therapy; and

increased investments towards building new capabilities and driving automation,

partially offset by:

decreased spending across the Oncology, Vaccines and Internal Medicine portfolios, as ~~a result of a true up of a prior year amount, and~~ select programs have reached completion;

the favorable impact of foreign ~~exchange.~~exchange; and

the discontinuance of the Staphylococcus aureus vaccine trial.

For additional information on Cost of sales, SI&A and R&D expenses by operating segment, see the “Analysis of Operating Segment Information” section of this MD&A.

Amortization of Intangible Assets



	Three Months Ended								Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			% Change		June 30, 2019			July 1, 2018			% Change
Amortization of intangible assets	$	1,184		$	1,191		(1	)	$	2,367		$	2,387		(1	)
As a percentage of Revenues	8.9		%	8.8		%			9.0		%	9.1		%

~~The increase in~~ ~~Research~~See also Notes to Condensed Consolidated Financial Statements—Note 9A. Identifiable Intangible Assets and ~~developmentexpenses~~ ~~of 10% primarily reflects:~~Goodwill: Identifiable Intangible Assets.

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



	Three Months Ended								Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			% Change		June 30, 2019			July 1, 2018			% Change
Restructuring credits—acquisition-related costs^(a)	$	(206	)	$	(11	)	*		$	(214	)	$	(19	)	*
Restructuring charges/(credits)—cost reduction initiatives^(b)	62			(13		)	*		81			(14		)	*
Restructuring credits	(144		)	(24		)	*		(134		)	(33		)	*
Integration costs^(c)	29			68			(58	)	64			120			(47	)
Restructuring charges and certain acquisition-related costs	(115		)	44			*		(69		)	87			*
Net periodic benefit costs	4			29			(87	)	10			61			(83	)
Additional depreciation—asset restructuring	10			13			(27	)	23			31			(26	)
Total implementation costs	42			44			(3	)	69			82			(16	)
Costs associated with acquisitions and cost-reduction/productivity initiatives^(d)	$	(59	)	$	131		*		$	32		$	262		(88	)
* Calculation not meaningful or results are equal to or greater than 100%.

◦

^(a)

~~increased~~

Restructuring credits––acquisition-related costs include employee termination costs, asset impairments and other exit costs associated with business combinations. Credits for the second quarter and the first six months of 2019 were mostly due to the reversal of certain accruals related to our ~~rare disease portfolio;~~acquisition of Wyeth upon the effective favorable settlement of a U.S. IRS audit for multiple tax years. See Notes to Condensed Consolidated Financial Statements—Note 5B. Tax Contingencies. Credits for the second quarter of 2018 were primarily due to the reversal of previously recorded accruals for employee termination costs related to our acquisition of Hospira and credits for the first six months of 2018 were mainly due to the reversal of previously recorded accruals for exit and employee termination costs related to our acquisition of Hospira.

◦

^(b)

~~increased~~

Restructuring charges/(credits)––cost reduction initiatives relate to employee termination costs, asset impairments and other exit costs not associated with ~~our Phase 3 clinical trial~~acquisitions. For the second quarter of 2019, the charges were composed of employee termination costs and exit costs, partially offset by lower asset write downs, and for the first six months of 2019, the charges were mostly related to ~~our JAK1 inhibitor (which was initiated in December 2017);~~employee termination costs and exit costs. For the second quarter of 2018, the credits were mostly related to the reversal of previously recorded accruals for employee termination costs and, for the first six months of 2018, the credits were mainly related to the reversal of previously recorded accruals for employee termination costs and lower asset write downs, partially offset by exit costs.


^(c)	For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

◦

^(d)

~~increased~~

Comprises Restructuring charges and certain acquisition-related costs ~~across the Oncology portfolio, including~~ as well as costs associated with ~~Bavencio studies,~~our cost-reduction/productivity initiatives included in Cost of sales, Research and development expenses,Selling, informational and administrative expenses and/or Other (income)/deductions––net as appropriate. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

~~partially offset by:~~2017-2019 Initiatives and Organizing for Growth

During 2018, as we reviewed our business opportunities and challenges and the way in which we think about our business operations, we determined that at the start of our 2019 fiscal year, we would begin operating under our new commercial structure, which reorganized our operations into three businesses––Biopharma,a science-based innovative medicines business; Upjohn, a global, primarily off-patent branded and generic established medicines business; and through July 31, 2019, a Consumer Healthcare business. To operate effectively in this structure and position ourselves for future growth, we are focused on creating a simpler, more efficient operating structure within each business as well as the functions that support them. Beginning in the fourth quarter of 2018, we reviewed previously planned initiatives and new initiatives to ensure that there was alignment around our new structure and have combined the 2017-2019 initiatives with our current Organizing for Growth initiatives to form one cohesive plan. For the combined programs, to achieve targeted savings of approximately $1.9 billion, we expect to incur approximately $2.0 billion in costs over the three-year period 2017-2019, and approximately $500 million beyond 2019, primarily on manufacturing activities. Of the total $2.5 billion, we expect approximately 55% to be related to manufacturing operations, and we expect approximately 20% of the charges to be non-cash. We expect anticipated savings through 2020 associated with the Organizing for Growth initiatives of approximately $500 million will be reinvested in our R&D pipeline and in selling and marketing to support our current and recently launched products and indications. For additional information about these programs and expected and actual total costs, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

In addition to these major initiatives, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products.

Other (Income)/Deductions—Net



	Three Months Ended						Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019		July 1, 2018			% Change	June 30, 2019		July 1, 2018			% Change
Other (income)/deductions––net	$	126	$	(551	)	*	$	218	$	(728	)	*
* Calculation not meaningful or results are equal to or greater than 100%.

For information about the components of Other (income)/deductions—net, see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net.

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

Provision/(Benefit) for Taxes on Income



	Three Months Ended							Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			% Change	June 30, 2019			July 1, 2018			% Change
Provision/(benefit) for taxes on income	$	(915	)	$	648		*	$	(481	)	$	1,204		*
Effective tax rate on continuing operations	(22.1		)%	14.3		%		(5.7		)%	13.9		%
* Calculation not meaningful or results are equal to or greater than 100%.

For information about our effective tax rate and the events and circumstances contributing to the changes between periods, see Notes to Condensed Consolidated Financial Statements—Note 5. Tax Matters.

Non-GAAP Financial Measure (Adjusted Income)

General Description of Non-GAAP Financial Measure (Adjusted Income)

Adjusted income is an alternative view of performance used by management. We measure the performance of the overall Company on this basis in conjunction with other performance metrics. Because Adjusted income is an important internal measurement for Pfizer, we believe that investors’ understanding of our performance is enhanced by disclosing this

performance measure. We report Adjusted income, certain components of Adjusted income, and Adjusted diluted earnings per share in order to portray the results of our major operations––the discovery, development, manufacture, marketing and sale of prescription medicines, vaccines and, through July 31, 2019, consumer healthcare (OTC) products––prior to considering certain income statement elements. We have defined Adjusted income as Net income attributable to Pfizer Inc. before the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and certain significant items, which are described below. Also, see the “Non-GAAP Financial Measure (Adjusted Income)––General Description of Non-GAAP Financial Measure (Adjusted Income)” section of our 2018 Financial Report for additional information. Similarly, we have defined the Adjusted income components as Cost of sales, Selling, informational and administrative expenses, Research and development expenses, Amortization of intangible assets and Other (income)/deductions––net each before the impact of purchase accounting for acquisitions, acquisition-related costs and certain significant items. We have defined Adjusted diluted earnings per share as Earnings per common share attributable to Pfizer Inc.––dilutedbefore the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and certain significant items. The Adjusted income measure, the Adjusted income component measures and the Adjusted diluted earnings per share measure are not, and should not be viewed as, substitutes for U.S. GAAP net income, U.S. GAAP net income components or U.S. GAAP diluted earnings per share.

The following are examples of how the Adjusted income and Adjusted diluted earnings per share measures are utilized:

senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income and Adjusted diluted earnings per share basis;

our annual budgets are prepared on an Adjusted income and Adjusted diluted earnings per share basis; and

senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures.

See the “Non-GAAP Financial Measure (Adjusted Income)––General Description of Non-GAAP Financial Measure (Adjusted Income)” section of our 2018 Financial Report for additional information.

Adjusted income and its components and Adjusted diluted earnings per share are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, Adjusted income and its components (unlike U.S. GAAP net income and its components) and Adjusted diluted earnings per share (unlike U.S. GAAP diluted earnings per share) may not be comparable to the calculation of similar measures of other companies. Adjusted income and its components and Adjusted diluted earnings per share are presented solely to permit investors to more fully understand how management assesses performance.

We also recognize that, as internal measures of performance, the Adjusted income and its components and Adjusted diluted earnings per share measures have limitations, and we do not restrict our performance-management process solely to these metrics. A limitation of these measures is that they provide a view of our operations without including all events during a period, such as the effects of an acquisition or amortization of purchased intangibles, and do not provide a comparable view of our performance to other companies in the biopharmaceutical industry. We also use other specifically tailored tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, total shareholder return, both on an absolute basis and relative to a publicly-traded pharmaceutical index, plays a significant role in determining payouts under certain of Pfizer’s long-term incentive compensation plans.

See the accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the second quarter and first six months of 2019 and 2018 below.

Purchase Accounting Adjustments

Adjusted income is calculated prior to considering certain significant purchase accounting impacts resulting from business combinations and net asset acquisitions. These impacts, primarily associated with Wyeth (acquired in 2009), Hospira (acquired in 2015), Anacor (acquired in June 2016) and Medivation (acquired in September 2016), can include the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, amortization related to the increase in fair value of the acquired finite-lived intangible assets, and to a much lesser extent, depreciation related to the increase/decrease in fair value of the acquired fixed assets (primarily manufacturing facilities), amortization related to the increase in fair value of acquired debt, and the fair value changes associated with contingent consideration. Therefore, the Adjusted income measure includes the revenues earned upon the sale of the acquired products without considering the acquisition cost of those products.

Acquisition-Related Costs

Adjusted income is calculated prior to considering transaction, integration, restructuring and additional depreciation costs associated with business combinations because these costs are unique to each transaction and represent costs that were incurred

to restructure and integrate two businesses as a result of the acquisition decision. For additional clarity, only transaction costs, additional depreciation and restructuring and integration activities that are associated with a business combination or a net-asset acquisition are included in acquisition-related costs. We have made no adjustments for the resulting synergies.

Discontinued Operations

Adjusted income is calculated prior to considering the results of operations included in discontinued operations, as well as any related gains or losses on the disposal of such operations.

Certain Significant Items

Adjusted income is calculated prior to considering certain significant items. Certain significant items represent substantive and/or unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspects of their nature. Certain significant items may be highly variable and difficult to predict. Furthermore, in some cases it is reasonably possible that they could reoccur in future periods. For example, major non-acquisition-related cost-reduction programs stand on their own as they are specific to an event or goal with a defined term, but we may have subsequent programs based on reorganizations of the business, cost productivity or in response to loss of exclusivity or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of litigation matters at acquired companies that were inestimable, not probable or unresolved at the date of acquisition. Unusual items may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be a major non-acquisition-related restructuring charge and associated implementation costs; amounts related to certain disposals of businesses, products or facilities that do not qualify as discontinued operations under U.S. GAAP; certain intangible asset impairments; adjustments related to the resolution of certain tax positions; the impact of adopting certain significant, event-driven tax legislation, such as the TCJA discussed in Notes to Condensed Consolidated Financial Statements—Note 5A. Tax Matters: Taxes on Income from Continuing Operations;or charges related to certain legal matters, such as certain of those discussed in Notes to Condensed Consolidated Financial Statements—Note 12A. Contingencies and Certain Commitments: Legal Proceedings, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Normal, ongoing defense costs of the Company or settlements of and accruals for legal matters made in the normal course of our business would not be considered certain significant items.

Beginning in 2019, we exclude the net gains and losses on investments in equity securities from our measure of Adjusted income because of their inherent volatility, which we do not control and cannot predict with any level of certainty and because we do not believe that including these gains and losses assists investors in understanding our business or is reflective of our core operations and business. We have revised Adjusted income and Adjusted diluted EPS for the second quarter and first six months of 2018 to conform with our 2019 presentation.

Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items



	Three Months Ended June 30, 2019
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported			Purchase Accounting Adjustments^(a)			Acquisition-Related Items^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	13,264		$	—		$	—		$	—	$	—		$	13,264
Cost of sales	2,576			6			—			—		(26		)	2,556
Selling, informational and administrative expenses	3,511			1			(1		)	—		(47		)	3,464
Research and development expenses	1,842			1			—			—		(18		)	1,825
Amortization of intangible assets	1,184			(1,117		)	—			—		—			67
Restructuring charges and certain acquisition-related costs	(115		)	—			177			—		(62		)	—
Other (income)/deductions––net	126			(70		)	—			—		(156		)	(100		)
Income from continuing operations before provision/(benefit) for taxes on income	4,141			1,178			(176		)	—		309			5,452
Provision/(benefit) for taxes on income^(b)	(915		)	222			6			—		1,610			923
Income from continuing operations	5,056			957			(182		)	—		(1,301		)	4,529
Discontinued operations––net of tax	—			—			—			—		—			—
Net income attributable to noncontrolling interests	10			—			—			—		—			10
Net income attributable to Pfizer Inc. common shareholders	5,046			957			(182		)	—		(1,301		)	4,520
Earnings per common share attributable to Pfizer Inc.––diluted	0.89			0.17			(0.03		)	—		(0.23		)	0.80



	Six Months Ended June 30, 2019
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported			Purchase Accounting Adjustments^(a)			Acquisition-Related Items^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	26,382		$	—		$	—		$	—	$	—		$	26,382
Cost of sales	5,009			10			—			—		(48		)	4,971
Selling, informational and administrative expenses	6,850			1			(2		)	—		(74		)	6,775
Research and development expenses	3,544			3			—			—		(29		)	3,518
Amortization of intangible assets	2,367			(2,237		)	—			—		—			130
Restructuring charges and certain acquisition-related costs	(69		)	—			150			—		(81		)	—
Other (income)/deductions––net	218			6			—			—		(459		)	(235		)
Income from continuing operations before provision/(benefit) for taxes on income	8,463			2,217			(148		)	—		691			11,223
Provision/(benefit) for taxes on income^(b)	(481		)	446			11			—		1,822			1,797
Income from continuing operations	8,945			1,771			(159		)	—		(1,131		)	9,426
Discontinued operations––net of tax	—			—			—			—		—			—
Net income attributable to noncontrolling interests	15			—			—			—		—			15
Net income attributable to Pfizer Inc. common shareholders	8,929			1,771			(159		)	—		(1,131		)	9,410
Earnings per common share attributable to Pfizer Inc.––diluted	1.56			0.31			(0.03		)	—		(0.20		)	1.65

See end of tables for notes ^(a) and ^(b).



	Three Months Ended July 1, 2018
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported			Purchase Accounting Adjustments^(a)			Acquisition-Related Items^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	13,466		$	—		$	—		$	—	$	—		$	13,466
Cost of sales	2,916			(2		)	(3		)	—		(35		)	2,876
Selling, informational and administrative expenses	3,542			—			—			—		(35		)	3,507
Research and development expenses	1,797			1			—			—		(9		)	1,789
Amortization of intangible assets	1,191			(1,121		)	—			—		—			70
Restructuring charges and certain acquisition-related costs	44			—			(57		)	—		13			—
Other (income)/deductions––net	(551		)	(12		)	(2		)	—		303			(262		)
Income from continuing operations before provision/(benefit) for taxes on income	4,527			1,134			62			—		(237		)	5,485
Provision/(benefit) for taxes on income^(b)	648			233			11			—		(6		)	886
Income from continuing operations	3,879			901			51			—		(231		)	4,600
Discontinued operations––net of tax	—			—			—			—		—			—
Net income attributable to noncontrolling interests	7			—			—			—		—			7
Net income attributable to Pfizer Inc. common shareholders	3,872			901			51			—		(231		)	4,593
Earnings per common share attributable to Pfizer Inc.––diluted	0.65			0.15			0.01			—		(0.04		)	0.77



	Six Months Ended July 1, 2018
IN MILLIONS, EXCEPT PER COMMON SHARE DATA	GAAP Reported			Purchase Accounting Adjustments^(a)			Acquisition-Related Items^(a)			Discontinued Operations^(a)		Certain Significant Items^(a)			Non-GAAP Adjusted
Revenues	$	26,373		$	—		$	—		$	—	$	—		$	26,373
Cost of sales	5,479			(3		)	(6		)	—		(58		)	5,413
Selling, informational and administrative expenses	6,954			1			—			—		(161		)	6,793
Research and development expenses	3,540			2			—			—		(14		)	3,528
Amortization of intangible assets	2,387			(2,246		)	—			—		—			141
Restructuring charges and certain acquisition-related costs	87			—			(102		)	—		14			—
Other (income)/deductions––net	(728		)	(109		)	(2		)	—		373			(466		)
Income from continuing operations before provision/(benefit) for taxes on income	8,654			2,355			110			—		(154		)	10,965
Provision/(benefit) for taxes on income^(b)	1,204			472			19			—		106			1,801
Income from continuing operations	7,450			1,883			91			—		(260		)	9,164
Discontinued operations––net of tax	(1		)	—			—			1		—			—
Net income attributable to noncontrolling interests	16			—			—			—		—			16
Net income attributable to Pfizer Inc. common shareholders	7,432			1,883			91			1		(260		)	9,147
Earnings per common share attributable to Pfizer Inc.––diluted	1.24			0.31			0.02			—		(0.04		)	1.52


◦ ^(a)	~~lower costs due to the completion~~For details of ~~certain tanezumab studies.~~

~~The favorable change in~~ ~~Other (income)/deductions––net~~ ~~primarily reflects:~~


◦	~~a $36 million increase~~adjustments, see “Details of Income Statement Items Included in ~~dividend income~~GAAP Reported but Excluded from ~~our investment in ViiV;~~Non-GAAP Adjusted Income” below.

◦

^(b)

The effective tax rate on Non-GAAP Adjusted income was 16.9% in the second quarter of 2019, compared to 16.1% in the second quarter of 2018. The increase was primarily due to a ~~$33 million increase~~decrease in tax benefits associated with the resolution of certain tax positions pertaining to prior years primarily with foreign tax authorities, partially offset by the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business. The effective tax rate on Non-GAAP Adjusted income ~~from collaborations, out-licensing arrangements and sales~~was 16.0% in the first six months of ~~compound/product rights; and~~2019, compared to 16.4% in the first six months of 2018. The decrease was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, partially offset by the decrease in tax benefits associated with the resolution of certain tax positions pertaining to prior years primarily with foreign tax authorities.

Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income



	Three Months Ended						Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Purchase accounting adjustments
Amortization, depreciation and other^(a)	$	1,185		$	1,132		$	2,227		$	2,352
Cost of sales	(6		)	2			(10		)	3
Total purchase accounting adjustments––pre-tax	1,178			1,134			2,217			2,355
Income taxes^(b)	(222		)	(233		)	(446		)	(472		)
Total purchase accounting adjustments––net of tax	957			901			1,771			1,883
Acquisition-related items
Restructuring credits^(c)	(206		)	(11		)	(214		)	(19		)
Integration costs^(c)	29			68			64			120
Net periodic benefit costs other than service costs	—			2			—			2
Additional depreciation––asset restructuring^(d)	1			3			2			6
Total acquisition-related items––pre-tax	(176		)	62			(148		)	110
Income taxes^(e)	(6		)	(11		)	(11		)	(19		)
Total acquisition-related items––net of tax	(182		)	51			(159		)	91
Discontinued operations
Total discontinued operations––net of tax, attributable to Pfizer Inc.^(f)	—			—			—			1
Certain significant items
Restructuring charges/(credits)––cost reduction initiatives^(g)	62			(13		)	81			(14		)
Implementation costs and additional depreciation––asset restructuring^(h)	51			54			89			107
Certain legal matters, net⁽ⁱ⁾	15			(88		)	9			(107		)
Certain asset impairments⁽ⁱ⁾	10			31			149			31
Business and legal entity alignment costs⁽ⁱ⁾	141			1			264			4
Net gains recognized during the period on investments in equity securities⁽ⁱ⁾	(25		)	(257		)	(136		)	(375		)
Net losses on early retirement of debt⁽ⁱ⁾	—			—			138			3
Other^(j)	56			35			97			197
Total certain significant items––pre-tax	309			(237		)	691			(154		)
Income taxes^(k)	(1,610		)	6			(1,822		)	(106		)
Total certain significant items––net of tax	(1,301		)	(231		)	(1,131		)	(260		)
Total purchase accounting adjustments, acquisition-related items, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc.	$	(526	)	$	721		$	481		$	1,715


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


◦ ^(b)	Included in Provision/(benefit) for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate.

^(c)

Included in Restructuring charges and certain acquisition-related costs and includes employee termination costs, asset impairments and other exit costs associated with business combinations. Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. For additional information, See the “Costs and Expenses—Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.


^(d)	Included in Selling, informational and administrative expenses for the three and six months ended June 30, 2019 and in Cost of sales for the three and six months ended July 1, 2018. Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions.

^(e)


^(f)	Included in ~~Xtandi royalty income.~~Discontinued operations––net of tax.

^(g)

Amounts relate to employee termination costs, asset impairments and other exit costs not associated with acquisitions, which are included in Restructuring charges and certain acquisition-related costs (See the “Costs and Expenses—Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).

^(h)

Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For the three months ended June 30, 2019, included in Cost of sales ($24 million), Selling, informational and administrative expenses ($16 million) and Research and development expenses ($11 million). For the six months ended June 30, 2019, included in Cost of sales ($46 million), Selling, informational and administrative expenses ($25 million) and Research and development expenses ($18 million). For the three months ended July 1, 2018, included in Cost of sales ($30 million), Selling, informational and administrative expenses ($16 million) and Research and development expenses ($7 million). For the six months ended July 1, 2018,

~~Essential Health~~included in Cost of sales ($61 million), Selling, informational and administrative expenses ($34 million) and Research and development expenses ($13 million).


⁽ⁱ⁾	Included in Other (income)/deductions—net except for business and legal entity alignment costs that are primarily included in Other (income)/deductions—net (see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).

^(j)

For the three months ended June 30, 2019, included in Cost of sales ($2 million), Selling, informational and administrative expenses ($28 million), Research and development expenses ($6 million) and Other (income)/deductions––net ($19 million). For the six months ended June 30, 2019, included in Cost of sales ($3 million), Selling, informational and administrative expenses ($41 million), Research and development expenses ($11 million) and Other (income)/deductions––net ($43 million). For the three months ended July 1, 2018, primarily included in Cost of sales ($4 million), Selling, informational and administrative expenses ($18 million) and Other (income)/deductions––net ($10 million). For the six months ended July 1, 2018, primarily included in Cost of sales ($3 million income), Selling, informational and administrative expenses ($128 million) and Other (income)/deductions––net ($70 million). The three and six months ended July 1, 2018 include, among other things, a non-cash $50 million pre-tax gain in Other (income)/deductions––net as a result of the contribution of our allogeneic CAR T therapy development program assets in connection with our asset contribution agreement entered into with Allogene, and the six months ended July 1, 2018 also includes a $119 million charge, in the aggregate, in Selling, informational and administrative expenses for a special, one-time bonus paid to virtually all Pfizer colleagues, excluding executives, which was one of several actions taken by us after evaluating the expected positive net impact of the December 2017 enactment of the legislation commonly referred to as the TCJA.

^(k)

Included in Provision/(benefit) for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate.The three and six months ended June 30, 2019 were favorably impacted primarily by a benefit recorded of approximately $1.4 billion, representing tax and interest, resulting from the favorable settlement of a U.S. IRS audit for multiple tax years, as well as the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the TCJA. The first six months of 2018 were favorably impacted by the December 2017 enactment of the TCJA, primarily related to certain tax initiatives associated with the lower U.S. tax rate as a result of the TCJA.

Analysis of Operating Segment Information

The following tables and associated notes provide additional information about the performance of each of our two reportable operating segments—Biopharma and Upjohn. For additional information about each operating segment, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook—Our Strategy—Organizing for Growth” and “—Commercial Operations” sections of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 13. Segment, Geographic and Other Revenue Information.



The following tables provide revenue and cost information by reportable operating segment and a reconciliation of that information to our condensed consolidated statements of income:
	Second Quarter of 2019
(MILLIONS OF DOLLARS)	Biopharma^(a)			Upjohn^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
Revenues	$	9,595		$	2,807		$	862		$	13,264		$	—		$	13,264
Cost of sales	1,859			424			273			2,556			20			2,576
% of revenue	19.4		%	15.1		%	*			19.3		%	*			19.4		%
Selling, informational and administrative expenses	1,696			374			1,394			3,464			48			3,511
Research and development expenses	202			58			1,565			1,825			16			1,842
Amortization of intangible assets	67			—			—			67			1,117			1,184
Restructuring charges and certain acquisition-related costs	—			—			—			—			(115		)	(115		)
Other (income)/deductions––net	(323		)	1			222			(100		)	226			126
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	6,093			1,951			(2,592		)	5,452			(1,311		)	4,141



	Six Months Ended June 30, 2019
(MILLIONS OF DOLLARS)	Biopharma^(a)			Upjohn^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
Revenues	$	18,779		$	5,882		$	1,721		$	26,382		$	—		$	26,382
Cost of sales	3,619			843			510			4,971			38			5,009
% of revenue	19.3		%	14.3		%	*			18.8		%	*			19.0		%
Selling, informational and administrative expenses	3,219			703			2,853			6,775			75			6,850
Research and development expenses	367			112			3,039			3,518			26			3,544
Amortization of intangible assets	129			—			—			130			2,237			2,367
Restructuring charges and certain acquisition-related costs	—			—			—			—			(69		)	(69		)
Other (income)/deductions––net	(536		)	(1		)	302			(235		)	453			218
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	11,981			4,225			(4,983		)	11,223			(2,760		)	8,463

See end of tables for notes (a) through (d).



	Second Quarter of 2018
(MILLIONS OF DOLLARS)	Biopharma^(a)			Upjohn^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
Revenues	$	9,434		$	3,147		$	886		$	13,466		$	—		$	13,466
Cost of sales	1,893			509			475			2,876			40			2,916
% of revenue	20.1		%	16.2		%	*			21.4		%	*			21.7		%
Selling, informational and administrative expenses	1,683			364			1,460			3,507			35			3,542
Research and development expenses	206			54			1,529			1,789			8			1,797
Amortization of intangible assets	52			—			18			70			1,121			1,191
Restructuring charges and certain acquisition-related costs	—			—			—			—			44			44
Other (income)/deductions––net	(358		)	(2		)	99			(262		)	(289		)	(551		)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	5,958			2,222			(2,695		)	5,485			(959		)	4,527



	Six Months Ended July 1, 2018
(MILLIONS OF DOLLARS)	Biopharma^(a)			Upjohn^(a)			Other^(b)			Non-GAAP Adjusted^(c)			Reconciling Items^(d)			GAAP Reported
Revenues	$	18,315		$	6,267		$	1,791		$	26,373		$	—		$	26,373
Cost of sales	3,568			978			867			5,413			67			5,479
% of revenue	19.5		%	15.6		%	*			20.5		%	*			20.8		%
Selling, informational and administrative expenses	3,139			800			2,855			6,793			161			6,954
Research and development expenses	368			106			3,054			3,528			13			3,540
Amortization of intangible assets	111			—			29			141			2,246			2,387
Restructuring charges and certain acquisition-related costs	—			—			—			—			87			87
Other (income)/deductions––net	(652		)	(8		)	194			(466		)	(262		)	(728		)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	11,781			4,391			(5,207		)	10,965			(2,311		)	8,654


*	Indicates calculation not meaningful or result is equal to or greater than 100%.


^(a)	Amounts represent the revenues and costs managed by each of the Biopharma and Upjohn reportable operating segments for the periods presented. The expenses generally include only those costs directly attributable to the operating segment.


^(b)	Other comprises the revenues and costs included in our Adjusted income components (see footnote (c) below) that are managed outside Biopharma and Upjohn and includes the following:



	Second Quarter of 2019
	Other Business Activities
(MILLIONS OF DOLLARS)	WRDM⁽ⁱ⁾			GPD⁽ⁱⁱ⁾			Other⁽ⁱⁱⁱ⁾			Corporate and Other Unallocated^(iv)			Total
Revenues	$	—		$	—		$	862		$	—		$	862
Cost of sales	—			1			276			(3		)	273
Selling, informational and administrative expenses	29			—			407			958			1,394
Research and development expenses	548			764			32			221			1,565
Amortization of intangible assets	—			—			—			—			—
Restructuring charges and certain acquisition-related costs	—			—			—			—			—
Other (income)/deductions––net	(1		)	1			(1		)	224			222
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	(576		)	(765		)	148			(1,399		)	(2,592		)



	Six Months Ended June 30, 2019
	Other Business Activities
(MILLIONS OF DOLLARS)	WRDM⁽ⁱ⁾			GPD⁽ⁱⁱ⁾			Other⁽ⁱⁱⁱ⁾		Corporate and Other Unallocated^(iv)			Total
Revenues	$	—		$	—		$	1,721	$	—		$	1,721
Cost of sales	—			1			550		(42		)	510
Selling, informational and administrative expenses	50			—			795		2,008			2,853
Research and development expenses	1,080			1,490			63		406			3,039
Amortization of intangible assets	—			—			—		—			—
Restructuring charges and certain acquisition-related costs	—			—			—		—			—
Other (income)/deductions––net	(2		)	—			—		304			302
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	(1,128		)	(1,491		)	313		(2,676		)	(4,983		)



	Second Quarter of 2018
	Other Business Activities
(MILLIONS OF DOLLARS)	WRDM⁽ⁱ⁾			GPD⁽ⁱⁱ⁾			Other⁽ⁱⁱⁱ⁾			Corporate and Other Unallocated^(iv)			Total
Revenues	$	—		$	—		$	886		$	—		$	886
Cost of sales	—			(3		)	291			187			475
Selling, informational and administrative expenses	36			—			427			998			1,460
Research and development expenses	551			750			46			182			1,529
Amortization of intangible assets	—			—			12			7			18
Restructuring charges and certain acquisition-related costs	—			—			—			—			—
Other (income)/deductions––net	(100		)	(1		)	(3		)	203			99
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	(486		)	(746		)	113			(1,576		)	(2,695		)



	Six Months Ended July 1, 2018
	Other Business Activities
(MILLIONS OF DOLLARS)	WRDM⁽ⁱ⁾			GPD⁽ⁱⁱ⁾			Other⁽ⁱⁱⁱ⁾			Corporate and Other Unallocated^(iv)			Total
Revenues	$	—		$	—		$	1,791		$	—		$	1,791
Cost of sales	—			(3		)	589			281			867
Selling, informational and administrative expenses	63			—			834			1,958			2,855
Research and development expenses	1,099			1,512			89			354			3,054
Amortization of intangible assets	—			—			23			7			29
Restructuring charges and certain acquisition-related costs	—			—			—			—			—
Other (income)/deductions––net	(104		)	(1		)	(1		)	300			194
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	(1,058		)	(1,508		)	258			(2,900		)	(5,207		)

⁽ⁱ⁾

WRDM—the R&D and Medical expenses managed by our WRDM organization, which is generally responsible for research projects for our Biopharma portfolio until proof-of-concept is achieved and then for transitioning those projects to the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRDM organization also has responsibility for certain science-based and other platform-services organizations, which provide end-to-end technical expertise and other services to the various R&D projects, as well as the Worldwide Medical and Safety group, which ensures that Pfizer provides all stakeholders––including patients, healthcare providers, pharmacists, payers and health authorities––with complete and up-to-date information on the risks and benefits associated with Pfizer products so that they can make appropriate decisions on how and when to use Pfizer’s medicines.


⁽ⁱⁱ⁾	GPD––the costs associated with our GPD organization, which is generally responsible for clinical trials from WRDM in the Biopharma portfolio, including late stage portfolio spend. GPD also provides technical support and other services to Pfizer R&D projects. GPD is responsible for facilitating all regulatory submissions and interactions with regulatory agencies.


⁽ⁱⁱⁱ⁾	Other—the operating results of our Consumer Healthcare business, and costs associated with other commercial activities not managed as part of Biopharma or Upjohn, including all strategy, business development, portfolio management and valuation capabilities, which previously had been reported in various parts of the organization.

^(iv)

Corporate and Other Unallocated––the costs associated with platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement), patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our

manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs.

We recognized the following amounts as an offset to Cost of sales primarily related to euro-denominated forward-exchange contracts designated as cash flow hedges of a portion of our foreign exchange-denominated forecasted intercompany inventory sales:


•	a $59 million gain in the second quarter of 2019;


•	a $103 million gain in the first six months of 2019;

a $32 million loss in the second quarter of 2018; and

a $61 million loss in the first six months of 2018.

For additional information, see Notes to Condensed Consolidated Financial Statements––Note 7E. Financial Instruments: Derivative Financial Instruments and Hedging Activities.

For information purposes only, the following tables present reconciliations of the Biopharma segment operating results and Upjohn segment operating results to Biopharma and Upjohn operating results including estimated Other costs generally associated with the Biopharma and Upjohn operating segments. While we do not manage our segments or have performance goals under such an allocated manner, we believe that some investors may find this information useful in their analyses.

The estimated Other costs generally associated with our operating segments do not purport to reflect the additional amounts that each of our operating segments would have incurred had each segment operated as a standalone company during the periods presented.

For information purposes only, for the first six months of 2019, we estimate that Other costs attributable to our Biopharma and Upjohn segments, as described above, for combined WRDM, GPD and other business activities costs are $2.9 billion, and combined Corporate and Other Unallocated costs are $2.2 billion, which excludes income and costs associated with our Consumer Healthcare business. The combined Corporate and Other Unallocated costs also exclude (i) net interest-related expense not attributable to an operating segment included in Corporate (approximately $633 million for the first six months of 2019 in Other (income)/deductions––net); and (ii) net income from investments and other assets not attributable to an operating segment included in Corporate (approximately $112 million for the first six months of 2019 in Other(income)/deductions––net). The remaining costs have been attributed to our Biopharma and Upjohn operating segments, as follows:



	Six Months Ended June 30, 2019
				Estimated Other Costs Associated with Biopharma⁽ⁱⁱ⁾
(MILLIONS OF DOLLARS)	Biopharma Non-GAAP Adjusted^{(i), (iii)}			Estimated WRDM/ GPD/Other Business Activities⁽ⁱⁱ⁾			Estimated Corporate/Other Unallocated⁽ⁱⁱ⁾			Biopharma with Estimated Other Costs Associated with Biopharma Non-GAAP Adjusted^(ii), ⁽ⁱⁱⁱ⁾
Revenues	$	18,779		$	—		$	—		$	18,779
Cost of sales	3,619			1			(35		)	3,585
Selling, informational and administrative expenses	3,219			261			1,452			4,932
Research and development expenses	367			2,574			388			3,329
Amortization of intangible assets	129			—			—			129
Restructuring charges and certain acquisition-related costs	—			—			—			—
Other (income)/deductions––net	(536		)	—			(173		)	(709		)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	11,981			(2,836		)	(1,632		)	7,513



	Six Months Ended June 30, 2019
				Estimated Other Costs Associated with Upjohn⁽ⁱⁱ⁾
(MILLIONS OF DOLLARS)	Upjohn Non-GAAP Adjusted^{(i), (iii)}			Estimated WRDM/ GPD/Other Business Activities⁽ⁱⁱ⁾			Estimated Corporate/Other Unallocated⁽ⁱⁱ⁾			Upjohn with Estimated Other Costs Associated with Upjohn Non-GAAP Adjusted^{(ii), (iii)}
Revenues	$	5,882		$	—		$	—		$	5,882
Cost of sales	843			—			(15		)	828
Selling, informational and administrative expenses	703			17			432			1,152
Research and development expenses	112			1			9			122
Amortization of intangible assets	—			—			—			—
Restructuring charges and certain acquisition-related costs	—			—			—			—
Other (income)/deductions––net	(1		)	—			(28		)	(29		)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income	4,225			(18		)	(398		)	3,809


⁽ⁱ⁾	Amount represents the revenues and costs managed by the operating segments. The expenses generally include only those costs directly attributable to the operating segment. See note (a) above for more information.


⁽ⁱⁱ⁾	Represents costs not assessed to an operating segment, as business unit (segment) management does not manage these costs. For a description of these other costs and business activities, see note (b) above.

•

WRDM/GPD/Other Business Activities––The information provided for WRDM, GPD and Other Business Activities was substantially all derived from our estimates of the costs incurred in connection with the R&D projects associated with the Biopharma and Upjohn operating segments as well as specific identification and estimates of costs incurred in connection with activities associated with the Biopharma and Upjohn operating segments.

•

Corporate/Other Unallocated––The information provided for Corporate and Other Unallocated was derived mainly using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from research and development and manufacturing costs, and, to a lesser extent, specific identification and estimates. Management believes that the allocations of Corporate and Other Unallocated costs are reasonable.

The estimated Other costs generally associated with our Biopharma and Upjohn operating segments do not purport to reflect the additional amounts that each of the operating segments would have incurred had each segment operated as a standalone company during the period presented.


⁽ⁱⁱⁱ⁾	See note (c) below for an explanation of our Non-GAAP Adjusted financial measure.


^(c)	See the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A for a definition of these “Adjusted Income” components.

^(d)

Includes costs associated with (i) purchase accounting adjustments; (ii) acquisition-related costs; and (iii) certain significant items, which are substantive and/or unusual, and in some cases recurring, items (such as restructuring charges, legal charges or net gains and losses on investment in equity securities), that are evaluated on an individual basis by management. For additional information about these reconciling items and/or our Non-GAAP adjusted measure of performance, see the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A.

Second Quarter of 2019 vs. Second Quarter of 2018

Biopharma Operating Segment

Revenues

EH Biopharma Revenues ~~decreased $223~~ increased $160 million, or 4%2%, to ~~$4.8~~$9.6 billion, reflecting an operational ~~decrease~~increase of ~~$183~~$551 million, or 4%6%, ~~and~~partially offset by the unfavorable impact of foreign exchange of ~~$40~~$390 million, or 1%4%.

~~The following provides an analysis of the decrease in EH worldwide~~ ~~Revenues~~:

(MILLIONS OF DOLLARS)

EH Revenues, for the three months ended October 1, 2017

$ 5,050

Operational growth/(decline):

Decline from the Peri-LOE Products portfolio, driven by lower revenues in developed markets (excluding Viagra EH), primarily due to expected declines in Lyrica in developed Europe
(125 )
Decline in the LEP portfolio primarily driven by lower revenues in developed markets (121 )
Decline from the SIP portfolio, driven by lower revenues in developed markets, primarily due to continued legacy Hospira product shortages in the U.S. (28 )
Positive impact of Viagra, mostly driven by the shift in the reporting of U.S. and Canada Viagra revenues from IH to EH at the beginning of 2018 (due to the loss of exclusivity of Viagra in the U.S. in December 2017), partially offset by lower revenues in emerging markets and developed Europe markets (previously reported in EH) 37
Growth from Biosimilars, primarily from Inflectra in certain channels in the U.S., as well as in developed Europe
56
Other operational factors, net (2 )
Operational decline, net
(183 )

Unfavorable impact of foreign exchange
(40 )
EH Revenues decrease

(223 )
EH Revenues, for the three months ended September 30, 2018

$ 4,826

Total EH revenues from emerging markets increased $149 million, or 9%, to $1.9 billion from $1.7 billion, reflecting 11% operational growth, primarily driven by 11% operational growth from the LEP portfolio and 14% operational growth from the SIP portfolio, partially offset by a 2% operational decline from the Peri-LOE Products portfolio. Foreign exchange had an unfavorable impact of 3% on total EH revenues from emerging markets.

~~Costs and Expenses~~

~~Cost of sales~~ ~~as a percentage of~~ ~~Revenues~~ ~~increased 0.6 percentage points, primarily due to:~~


◦	~~higher sales volumes of Inflectra in the U.S. and developed Europe, which carry higher product costs; and~~


◦	~~lower sales volumes and margins as a result of product losses of exclusivity and generic competition in developed markets,~~

~~partially offset by:~~


◦	~~the favorable impact of foreign exchange; and~~


◦	~~lower sales volumes in the SIP portfolio, which carries a higher cost to produce, in developed markets, primarily due to continued legacy Hospira product shortages in the U.S.~~

~~The decrease in~~ ~~Cost of sales~~ ~~of 2% was primarily due to:~~


◦	~~the favorable impact of foreign exchange; and~~


◦	~~lower sales volumes driven by product losses of exclusivity and generic competition in developed markets,~~

~~partially offset by:~~

◦~~higher sales volumes of Inflectra in the U.S. and developed Europe, which carry higher product costs; and~~


◦	~~higher costs across the SIP portfolio, as a result of the complexity of high quality product manufacturing across the legacy Hospira plants.~~

~~Selling, informational and administrativeexpenses~~ ~~decreased 4%~~ mainly due to lower general and administrative expenses, as well as lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and the favorable impact of foreign exchange, partially offset by additional investments in China.

~~Research and developmentexpenses~~ ~~decreased 10%~~ ~~primarily due to decreased spending for biosimilars as several programs have reached completion.~~

~~The unfavorable change in~~ ~~Other (income)/deductions––net~~primarily reflects the non-recurrence of income from resolution of a contract disagreement, the unfavorable impact of foreign exchange and the non-recurrence of a gain on the redemption of an acquired bond in 2017, partially offset by an increase in income from collaborations, out-licensing arrangements and sales of compound/product rights.

~~First Nine Months of~~ ~~2018~~ ~~vs. First Nine Months of~~ ~~2017~~

~~Innovative Health Operating Segment~~

~~Revenues~~

IH ~~Revenues~~ ~~increased $1.4 billion, or 6%, to $24.6 billion, reflecting an operational increase of $1.0 billion, or 4%, and the favorable impact of foreign exchange of $342 million, or 2%.~~

The following provides an analysis of the increase in IHBiopharma worldwide Revenues:

(MILLIONS OF DOLLARS)
IH Revenues, for the nine months ended October 1, 2017
$ 23,204

Operational growth/(decline):
Continued growth from certain key brands^(a)
1,835
Growth from recently launched products, including Eucrisa in the U.S., as well as Besponsa and Bavencio, primarily in the U.S. and developed Europe 172
Negative impact of the loss of exclusivity of Viagra in the U.S. in December 2017 and the resulting shift in the reporting of U.S. and Canada Viagra revenues from IH to EH at the beginning of 2018 (711 )
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition (279 )
Other operational factors, net 11
Operational growth, net 1,028

Favorable impact of foreign exchange 342
IH Revenues increase
1,370
IH Revenues, for the nine months ended September 30, 2018
$ 24,573



(MILLIONS OF DOLLARS)
Biopharma Revenues, for the three months ended July 1, 2018	$	9,434

Operational growth/(decline):
Continued worldwide growth from certain key brands^(a)	675
Growth from Biosimilars, primarily in the U.S.	38
Lower revenues for Enbrel internationally, reflecting continued biosimilar competition in most developed Europe markets	(87		)
Lower revenues for the Hospital products business, primarily reflecting declines in developed markets, mostly due to the continued expected negative impact from generic competition for products that have previously lost marketing exclusivity as well as product supply shortages	(86		)
Lower revenues for certain rare disease products, including the hemophilia franchises (Refacto AF/Xyntha and BeneFIX), primarily due to competitive pressures, and Genotropin in developed markets, mainly due to unfavorable channel mix	(43		)
Lower revenues for Prevnar 13 in the U.S., primarily reflecting lower government purchases for the pediatric indication as well as continued decline in revenues for the adult indication due to a declining “catch up” opportunity compared to the prior year quarter. International revenues increased mostly due to higher volumes reflecting continued uptake following the second quarter 2017 launch in China, as well as higher volumes resulting from increased shipments associated with Gavi, the Vaccine Alliance, partially offset by the unfavorable impact of timing associated with government purchases for the pediatric indication in certain emerging markets	(38		)
Other operational factors, net	92
Operational growth, net	551
Unfavorable impact of foreign exchange	(390		)
Biopharma Revenues increase	160
Biopharma Revenues, for the three months ended June 30, 2019	$	9,595


^(a)	Certain key brands represent Ibrance, Eliquis ~~Ibrance, Xeljanz, Prevnar 13/Prevenar 13, Xtandi~~ and ~~Chantix/Champix.~~Xeljanz. See the “Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion” section of this MD&A for product analysis ~~information.~~information.

Total IHBiopharma revenues from emerging markets increased ~~$456~~$31 million, or ~~15%~~2%, to ~~$3.6~~$2.0 billion from ~~$3.1~~$1.9 billion, reflecting ~~a 16%~~12% operational ~~increase.~~growth. Foreign exchange had an unfavorable impact of 1%10% on ~~Total IH~~total Biopharma revenues from emerging markets.

~~Costs and Expenses~~

~~Cost of sales~~ ~~as a percentage of~~ ~~Revenues~~ ~~decreased 0.1 percentage points, primarily driven by the favorable impact of foreign exchange, partially offset by an unfavorable change in product mix.~~ The ~~unfavorable product mix, which includes the unfavorable impact of the reclassification of Viagra IH to EH in 2018, is partially offset by an~~operational increase in ~~alliance revenues, which have no associated cost of sales.~~

~~The increase in~~ ~~Cost of sales~~ ~~of 5%~~emerging markets was primarily driven by ~~an increase in sales volumes for various key products within our product portfolio,~~Ibrance, Eliquis and ~~an increase in royalty expenses based on the mix of products sold, partially offset by the favorable impact of foreign exchange.~~

Prevenar 13.

~~The increase in~~ ~~Selling, informational~~Costs and ~~administrativeexpenses~~ of 8% was primarily driven by additional investment across several of our key products, primarily Xeljanz, Eucrisa, Ibrance, Prevnar 13/Prevenar 13 (pediatric indication) and Eliquis, partially offset by lower healthcare reform expenses as a result of a true up of a prior year amount and decreased investment in Enbrel due to loss of exclusivity across developed Europe.

~~The increase in~~ ~~Research and developmentexpenses~~ ~~of 11% primarily reflects:~~

Expenses

◦

•

~~increased costs~~Cost of sales as a percentage of Revenues decreased 1 percentage point primarily driven by a favorable change in product mix, which includes an increase in alliance revenue which has no associated ~~with our Phase 3 clinical trials related to our JAK1 inhibitor (which was initiated in December 2017) and the~~ ~~C. difficile~~ ~~vaccine program (which was initiated in March 2017);~~cost of sales.

◦•

~~increased costs across~~

The decrease in Cost of sales of 2% was mainly driven by the ~~Oncology portfolio, including costs associated with Bavencio studies;~~favorable impact of foreign exchange, partially offset by an unfavorable change in product mix, an increase in royalty expenses based on the mix of products sold and an increase in sales volumes for various products within our product portfolio.


◦•	~~increased costs for~~ The increase in Selling, informational and administrativeexpenses of 1% was mostly driven by additional investment across several of our ~~rare disease portfolio,~~products, primarily Chantix/Champix as well as to support the Vyndaqel launches, partially offset by the favorable impact of foreign exchange.

~~partially offset by:~~


◦ •	~~lower costs due to the completion of certain clinical studies, including tanezumab~~ Research and ~~Lyrica.~~developmentexpenseswere relatively flat.

~~The favorable change in~~ ~~Other (income)/deductions––net~~ ~~primarily reflects:~~


◦•	~~a $188~~ The unfavorable change in Other (income)/deductions––net primarily reflects an $86 million ~~increase~~decrease in income from collaborations, out-licensing arrangements and sales of compound/product ~~rights;~~


◦	~~a $45 million~~rights, partially offset by an increase in ~~Xtandi royalty income; and~~


◦	royalty-related income mainly due to a ~~$14 million increase~~one-time favorable resolution in ~~dividend income from our investment in ViiV.~~the second quarter of 2019 of a legal dispute for $82 million.

~~Essential Health~~Upjohn Operating Segment

Revenues

EH Upjohn Revenues decreased ~~$542~~$339 million, or 3%11%, to ~~$15.1~~$2.8 billion, reflecting an operational decrease of ~~$894~~$235 million, or 6%7%, ~~partially offset by~~and the ~~favorable~~unfavorable impact of foreign exchange of ~~$352~~$105 million, or 2%3%.

The following provides an analysis of the decrease in EHUpjohn worldwide Revenues:

(MILLIONS OF DOLLARS)
EH Revenues, for the nine months ended October 1, 2017
$ 15,639

Operational growth/(decline):
Decline from the Peri-LOE Products portfolio, driven by lower revenues in developed markets (excluding Viagra EH), primarily due to expected declines in Lyrica in developed Europe and Pristiq in the U.S. due to generic competition (463 )
Decline from the SIP portfolio, driven by lower revenues in developed markets, primarily due to continued legacy Hospira product shortages in the U.S. (419 )
Decline in the LEP portfolio primarily driven by lower revenues in developed markets (314 )
Impact on financial results for the sale of HIS in February 2017. The first nine months of 2018 do not reflect any contribution from HIS global operations, compared to approximately one month of HIS domestic operations and approximately two months of HIS international operations in the same period in 2017 (97 )
Positive impact of Viagra, mostly driven by the shift in the reporting of U.S. and Canada Viagra revenues from IH to EH at the beginning of 2018 (due to the loss of exclusivity of Viagra in the U.S. in December 2017), partially offset by lower revenues in developed Europe markets (previously reported in EH) 216
Growth from Biosimilars, primarily from Inflectra in certain channels in the U.S., as well as in developed Europe 165
Other operational factors, net 19
Operational decline, net (894 )

Favorable impact of foreign exchange 352
EH Revenues decrease
(542 )
EH Revenues, for the nine months ended September 30, 2018
$ 15,097



(MILLIONS OF DOLLARS)
Upjohn Revenues, for the three months ended July 1, 2018	$	3,147

Operational growth/(decline):
Decline from Lipitor and Norvasc, primarily in China, driven by the March 2019 government implementation of a volume-based procurement program in certain cities	(131		)
Lower revenues for Viagra and Upjohn's authorized generic for Viagra in the U.S. resulting from increased generic competition following Viagra's December 2017 patent expiration	(70		)
Lower worldwide revenues for Lyrica, primarily in the U.S., reflecting wholesaler destocking in advance of anticipated multi-source generic competition expected to begin on July 1, 2019 (which instead began on July 19, 2019), and in developed Europe, reflecting continued generic competition	(31		)
Volume-driven growth from Celebrex and Effexor, primarily in Japan	31
Other operational factors, net	(34		)
Operational decline, net	(235		)
Unfavorable impact of foreign exchange	(105		)
Upjohn Revenues decrease	(339		)
Upjohn Revenues, for the three months ended June 30, 2019	$	2,807

Total EHUpjohn revenues from emerging markets ~~increased $680~~decreased $177 million, or ~~13%~~17%, to ~~$5.8~~$851 million from $1.0 billion, reflecting an 11% operational decline. Foreign exchange had an unfavorable impact of 6% on total Upjohn revenues from ~~$5.1 billion,~~emerging markets. The operational decrease in emerging markets was primarily driven by ~~11% operational growth from the LEP portfolio~~Lipitor and 13% operational growth from the SIP portfolio, partially offset by a 2% operational decline from the Peri-LOE Products portfolio. Foreign exchange had a favorable impact of 2% on total EH revenues from emerging markets.Norvasc.

Costs and Expenses

The changes in EH expenses below reflect, among other things, the favorable impact of the February 2017 sale of HIS. The operating results of HIS are included in EH’s operating results through February 2, 2017 and, therefore, operating results for EH for the first nine months of ~~2017~~ include approximately one month of HIS domestic operations and approximately two months of HIS international operations. Operating results for EH for the first nine months of 2018 do not reflect any contribution from HIS global operations.

~~Cost of sales~~ ~~as a percentage of~~ ~~Revenues~~ ~~increased 1.8 percentage points, primarily due to:~~

◦•

~~higher~~

Cost of sales ~~volume~~as a percentage of ~~Inflectra~~Revenues decreased 1.1 percentage points and Cost of sales as compared to the prior year period decreased 17% driven by a decrease in royalty expense, the ~~U.S.~~favorable impact of foreign exchange and ~~developed Europe, and higher Pfizer CentreOne sales volumes, both of which carry higher~~lower atorvastatin active product ~~costs;~~ingredients import duties in China.

◦•

~~lower sales volumes~~

Selling, informational and ~~margins as~~administrativeexpenses increased 3% mostly driven by non-recurrence of a ~~result~~one-time general and administrative expense reversal in the second quarter of ~~product losses of exclusivity~~2018, partially offset by a reduction in field force and ~~generic competition~~advertising and promotion expenses in developed ~~markets;~~markets, primarily related to Lyrica in the U.S., and the favorable impact of foreign exchange.


◦•	~~the unfavorable impact of foreign exchange,~~ Research and developmentexpenses and Other (income)/deductions––netwere relatively unchanged.

~~partially offset by:~~Consumer Healthcare Operating Segment


◦	~~lower sales volumes in the SIP portfolio, which carries a higher cost to produce, in developed markets, primarily due to continued legacy Hospira product shortages in the U.S.; and~~


◦	~~the non-recurrence of charges related to a product recall that occurred in 2017.~~

~~The~~Consumer Healthcare Revenues decreased $23 million, or 3%, to $862 million, reflecting an operational increase in ~~Cost~~ of ~~sales~~ ~~of 3% was primarily due to:~~


◦	~~higher sales volumes of Inflectra in the U.S. and developed Europe, and higher Pfizer CentreOne sales volumes, both of which carry higher product costs; and~~


◦	~~the unfavorable impact of foreign exchange,~~

~~partially offset by:~~


◦	~~lower sales volumes driven by product losses of exclusivity and generic competition in developed markets; and~~


◦	~~the non-recurrence of charges related to a product recall that occurred in 2017.~~

~~Selling, informational and administrativeexpenses~~ decreased 9% mainly due to lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and lower general and administrative expenses, partially offset by additional investments in China and the unfavorable impact of foreign exchange.

~~Research and developmentexpenses~~ ~~decreased 10%~~$8 million, or 1%, ~~primarily~~ ~~due to decreased spending for biosimilars as several programs have reached completion.~~

~~The unfavorable change in~~ ~~Other (income)/deductions––net~~ ~~primarily reflects the non-recurrence of income from resolution of a contract disagreement, the non-recurrence of a gain on the redemption of an acquired bond in 2017~~ and the unfavorable impact of foreign exchange of $32 million, or 4%.

First Six Months of 2019 vs. First Six Months of 2018

Biopharma Operating Segment

Revenues

Biopharma Revenues increased $464 million, or 3%, to $18.8 billion, reflecting an operational increase of $1.2 billion, or 6%, and an unfavorable impact of foreign exchange of $724 million, or 4%.

The following provides an analysis of the increase in Biopharma worldwide Revenues:



(MILLIONS OF DOLLARS)
Biopharma Revenues, for the six months ended July 1, 2018	$	18,315

Operational growth/(decline):
Continued worldwide growth from certain key brands^(a)	1,400
Growth from Biosimilars, primarily in the U.S.	51
Lower revenues for the Hospital products business, primarily reflecting declines in developed markets, mostly due to the continued expected negative impact from generic competition for products that have previously lost marketing exclusivity as well as product supply shortages	(157		)
Lower revenues for Enbrel internationally, reflecting continued biosimilar competition in most developed Europe markets	(101		)
Lower revenues for certain rare disease products, including the hemophilia franchises (Refacto AF/Xyntha and BeneFIX) primarily due to competitive pressures, and Genotropin in developed markets, primarily due to unfavorable channel mix	(95		)
Other operational factors, net	91
Operational growth, net	1,188
Unfavorable impact of foreign exchange	(724		)
Biopharma Revenues increase	464
Biopharma Revenues, for the six months ended June 30, 2019	$	18,779


^(a)	Certain key brands represent Ibrance, Eliquis, Xeljanz and Prevnar/Prevenar 13. See the “Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion” section of this MD&A for product analysis information.

Total Biopharma revenues from emerging markets increased $114 million, or 3%, to $3.9 billion from $3.8 billion, reflecting 13% operational growth. Foreign exchange had unfavorable impact of 10% on total Biopharma revenues from emerging markets. The operational increase in emerging markets was primarily driven by Prevenar 13, Ibrance and Eliquis.

Costs and Expenses


•	Cost of sales as a percentage of Revenues was relatively flat.


•	The increase in Cost of sales of 1% was mainly driven by an unfavorable change in product mix, an increase in sales volumes for various products within the Biopharma product portfolio, and an increase in royalty expenses based on the mix of products sold, partially offset by the favorable impact of foreign exchange.


•	The increase in Selling, informational and administrativeexpenses of 3% was mostly driven by additional investment across several of our products, primarily Xeljanz and Chantix/Champix and to support the Vyndaqel launches, as well as the non-recurrence of a favorable true-up of healthcare reform expenses in the first quarter of 2018, partially offset by the favorable impact of foreign exchange.


•	Research and developmentexpenses were relatively flat.


•	The unfavorable change in Other (income)/deductions––net primarily reflects a $205 million decrease in income from collaborations, out-licensing arrangements and sales of compound/product rights, partially offset by an increase in royalty-related income mainly due to a one-time favorable resolution in the second quarter of 2019 of a legal dispute for$82 million.

Upjohn Operating Segment

Revenues

Upjohn Revenues decreased $385 million, or 6%, to $5.9 billion, reflecting an operational decrease of $188 million, or 3%, and the unfavorable impact of foreign exchange of $196 million, or 3%.

The following provides an analysis of the decrease in Upjohn worldwide Revenues:



(MILLIONS OF DOLLARS)
Upjohn Revenues, for the six months ended July 1, 2018	$	6,267

Operational growth/(decline):
Lower revenues for Viagra and Upjohn's authorized generic for Viagra in the U.S. resulting from increased generic competition following Viagra's December 2017 patent expiration	(167		)
Lower worldwide revenues for Lyrica, primarily in the U.S., reflecting wholesaler destocking in advance of anticipated multi-source generic competition expected to begin on July 1, 2019 (which instead began on July 19, 2019), and in developed Europe, reflecting continued generic competition	(49		)
Lower revenues for Greenstone, Upjohn's authorized generic subsidiary, primarily due to continued industry-wide pricing challenges in the U.S., excluding revenues for Upjohn's authorized generic for Viagra in the U.S.	(22		)
Volume-driven growth from Celebrex and Effexor, primarily in Japan	73
Growth from Lipitor and Norvasc, primarily in emerging markets, driven by strong, volume-driven operational growth in China in the first fiscal quarter of 2019, partially offset by declines driven by the March 2019 government implementation of a volume-based procurement program in certain cities in the second quarter of 2019	73
Other operational factors, net	(96		)
Operational decline, net	(188		)
Unfavorable impact of foreign exchange	(196		)
Upjohn Revenues decrease	(385		)
Upjohn Revenues, for the six months ended June 30, 2019	$	5,882

Total Upjohn revenues from emerging markets were relatively flat at $2.0 billion, reflecting 6% operational growth offset by anthe unfavorable impact of foreign exchange of 7% on total Upjohn revenues from emerging markets. The operational increase in ~~income from collaborations, out-licensing arrangements~~emerging markets was primarily driven by Lipitor, Norvasc and Celebrex.

Costs and Expenses


•	Cost of salesas a percentage of Revenues decreased 1.3 percentage points and Cost of sales as compared to the prior year period decreased 14%, primarily due to the favorable impact of foreign exchange, lower royalty expense and lower atorvastatin active product ingredients import duties in China.

•

Selling, informational and administrativeexpenses decreased 12% driven by a reduction in field force and advertising and promotion expenses in developed markets, primarily related to Lyrica in the U.S., as well as the favorable impact of foreign exchange, partially offset by non-recurrence of a one-time general and administrative expense reversal in the second quarter of 2018 and investments in China across key brands.


•	Research and developmentexpenses and Other (income)/deductions––net were relatively unchanged.

Consumer Healthcare Operating Segment

Consumer Healthcare Revenues decreased $70 million, or 4%, to $1,721 million, reflecting an operational decrease of ~~compound/product rights.~~

$11 million, or 1%, and the unfavorable impact of foreign exchange of $60 million, or 3%.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Changes in the components of Accumulated other comprehensive loss for the ~~third~~second quarter and first ~~nine~~six months of~~2018~~2019 reflect the following:

~~For~~ ~~Foreign currency translation adjustments, net,the third quarter of 2018 primarily reflects the strengthening of the U.S. dollar against the Chinese renminbi, U.K. pound and Australian dollar, and for the first nine months of~~ ~~2018, primarily reflects the strengthening of the U.S. dollar against the U.K. pound, Turkish lira and Brazilian real, partially offset by the weakening of the U.S. dollar against the Japanese yen.~~

~~For~~ ~~Unrealized holding gains/(losses) on derivative financial instruments, net~~ ~~and~~ ~~Unrealized holding gains/(losses) on available-for-sale securities, net,~~ ~~reflects the impact of fair value re-measurements and the reclassification of amounts into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies––Adoption of New Accounting Standards~~ ~~and Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments~~.

~~For~~ ~~Benefit plans: actuarial gains/(losses), net,~~ ~~the third quarter of~~ ~~2018~~ ~~primarily reflects (i) the amortization of changes in the pension benefit obligation previously recognized in~~ ~~Other comprehensive income,~~ ~~(ii) the favorable impact of foreign exchange, (iii) settlement activity and (iv) an $8 million reduction in the plan liability due to an interim re-measurement. For the first nine months of~~ ~~2018, primarily reflects (i) the amortization of changes in the pension benefit obligation previously recognized in~~ ~~Other comprehensive income~~, (ii) a $92 million reduction in the plan liability due to an interim re-measurement, (iii) settlement activity and (iv) the favorable impact of foreign exchange. For additional information, see Notes to Condensed Consolidated Financial Statements—~~Note 10.Pension and Postretirement Benefit Plans~~.

~~For~~ ~~Benefit plans: prior service costs and other, net, the third quarter and the first nine months of~~ ~~2018~~ ~~reflect the reclassification into income of amounts related to (i) amortization of changes in prior service costs and credits previously recognized in~~ ~~Other comprehensive income~~ ~~and (ii) curtailment activity. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans~~.

~~For~~ ~~Tax provision/(benefit) on other comprehensive income/(loss),~~ ~~the first nine months of~~ ~~2018~~ ~~reflect the reclassification of the stranded tax amounts related to the TCJA from AOCI to~~ ~~Retained earnings,~~ ~~which was recorded in the first quarter of 2018. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies––Adoption of New Accounting Standards~~ ~~and Notes to Condensed Consolidated Financial Statements—Note 5D.Tax Matters:~~ ~~Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)~~.

•

For Foreign currency translation adjustments, net, the second quarter of2019 primarily reflects the strengthening of the U.S. dollar against the euro, British pound, and Australian dollar; and for the first six months of 2019, mainly reflects the strengthening of the U.S. dollar against the Australian dollar and the euro, partially offset by the weakening of the U.S. dollar against the Japanese yen.


•	For Unrealized holding gains/(losses) on derivative financial instruments, net and Unrealized holding gains/(losses) on available-for-sale securities, net, reflects the impact of fair value re-measurements and the reclassification of amounts into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.


•	For Benefit plans: actuarial gains/(losses), net, mainly reflects the amortization of changes in the pension benefit obligation previously recognized in Other comprehensive income and the unfavorable impact of foreign exchange. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10.Pension and Postretirement Benefit Plans.


•	For Benefit plans: prior service costs and other, net, reflects the reclassification into income of amounts related to amortization of changes in prior service costs and credits previously recognized in Other comprehensive income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.

ANALYSIS OF THE CONDENSED CONSOLIDATED BALANCE SHEETS

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

For information about events and circumstances impacting our tax-related accounts, see Notes to Condensed Consolidated Financial Statements—Note 5. Tax Matters.

For a description of changes in Total Equity, see the consolidated statements of equity.

For information related to changes in Accumulated other comprehensive loss, see the “Analysis of the Condensed Consolidated Statements of Comprehensive Income” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests.

The changes in our asset and liability accounts as of ~~September~~June 30, ~~2018,~~2019, compared to December 31, ~~2017~~2018, generally reflect, ~~among other things,~~and the following explanations exclude, fluctuations in foreign currency exchange rates, ~~as well as~~ the impact of the adoption of new accounting standards in the first quarter of ~~2018~~. ~~The following explanations exclude the impact of foreign exchange~~2019 and ~~the impact of the adoption of new accounting standards in the first quarter of 2018~~our Consumer Healthcare business joint venture with GSK (see Notes to Condensed Consolidated Financial Statements—

Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards and Note 2. Assets and Liabilities Held for Sale for additional information).

~~For~~ ~~Trade accounts receivable, less allowance for doubtful accounts,~~ ~~the change reflects the timing of sales and collections in the normal course of business.~~

~~For~~ ~~Inventories,~~ the change reflects the increases for certain products to meet targeted levels in the normal course of business, including inventory build for supply recovery, network strategy and new product launches.

~~For~~ ~~Other current assets,~~ the change reflects an increase in receivables associated with derivative financial instruments, partially offset by the receipt of a milestone payment related to the first marketing authorization for ertugliflozin (see Notes to Condensed Consolidated Financial Statements—~~Note 2D.~~ ~~Acquisition, Divestitures, Licensing Arrangements, Collaborative Arrangements and Privately Held Investment: Collaborative Arrangements~~).

~~For~~ ~~PP&E~~,~~the change primarily reflects capital additions in the normal course of business, partially offset by depreciation during the period.~~

~~For~~ ~~Identifiable intangible assets, less accumulated amortization~~, the change primarily reflects amortization for the period, partially offset by an intangible asset recorded in connection with the EU approval of Mylotarg (see Notes to Condensed Consolidated Financial Statements—~~Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets).~~

~~For~~ ~~Trade accounts payable,~~ ~~the change reflects the timing of purchases and payments in the normal course of business.~~

~~For~~ ~~Other current liabilities, the change reflects a decrease in liabilities associated with:~~


◦•	~~payments~~ For Trade accounts receivable, less allowance for ~~contingent consideration obligations;~~doubtful accounts, the change reflects the timing of sales and collections in the normal course of business.


◦•	~~payments~~ For Inventories, the change reflects the increases for certain products to ~~settle certain legal~~meet targeted levels in the normal course of business, including inventory build for supply recovery and ~~product liability obligations;~~market demand.


◦•	~~payments for restructuring activities;~~ For PP&E,the change primarily reflects capital additions in the normal course of business, partially offset by depreciation during the period.

◦•

~~payments~~For Identifiable intangible assets, less accumulated amortization, the change primarily reflects amortization for the ~~current portion of obligations recorded in connection with the U.S. approval of Bosulif,~~period and ~~the EU and U.S. approvals of Besponsa~~intangible asset impairment charges (see Notes to Condensed Consolidated Financial Statements—Note ~~7E. Financial Instruments:~~4. Other ~~Noncurrent Liabilities); and~~(Income)/Deductions—Net), partially offset by additions for the period.


◦•	~~payables related to~~ For Other noncurrent assets, the change reflects a net increase in assets in the normal course of business, and an increase in receivables associated with derivative ~~financial instruments,~~instruments.

~~partially offset by increases related to:~~


•	For Trade accounts payable, the change reflects the timing of purchases and payments in the normal course of business.


•	For Accrued compensation and related items, the decrease reflects normal bonus payments made to employees and the timing of payments in the normal course of business.


•	For Other current liabilities, the change reflects a decrease in liabilities associated with:


◦	payments and accruals in the normal course of business;


◦	payments for restructuring activities; and


◦	~~reclassifications from noncurrent liabilities.~~payments for contingent consideration obligations,

~~For~~ ~~Pension benefit obligations, net, the decrease primarily reflects a voluntary pension contribution, direct employer benefit payments, and an interim re-measurement in a U.S. non-qualified plan.~~

~~For~~ ~~Other noncurrent liabilities, the change reflects an increase in liabilities associated with:~~

partially offset by:


◦	an increase in sales returns reserve recorded for Lyrica in the U.S. in the second quarter of 2019 in advance of anticipated multi-source generic competition that was expected to begin on July 1, 2019 but instead began on July 19, 2019; and


◦	an increase due to reclassifications from noncurrent to current.


•	For Pension benefit obligations, net, the change reflects voluntary pension contributions and direct employer benefit payments.


•	For Other noncurrent liabilities, the change reflects a decrease in liabilities associated with:


◦	a decrease in payables associated with derivative financial instruments;

◦

~~an increase~~a decrease in restructuring liabilities ~~associated with~~related to the ~~sale-leaseback~~reversal of certain accruals related to our ~~New York headquarters~~acquisition of Wyeth upon the effective favorable settlement of a U.S. IRS audit for multiple tax years (see Notes to Condensed Consolidated Financial Statements—Note ~~12C.~~5B. Tax Contingencies ~~and Certain Commitments: Certain Commitments~~ ~~for additional information)~~); and


◦	a ~~change in the fair value of contingent consideration (see Notes~~decrease due to ~~Condensed Consolidated Financial Statements—Note 4~~. ~~Other (Income)/Deductions—Net~~), reclassifications from noncurrent to current,

partially offset by:


◦	~~reclassifications~~an increase in accruals in the normal course of business.


•	For Treasury stock, the change reflects $6.8 billion paid to ~~current liabilities.~~GS&Co. in February 2019 pursuant to the terms of an accelerated share repurchase agreement as well as open market share repurchases. See Notes to Condensed Consolidated Financial Statements—Note 12C. Contingencies and Certain Commitments: Certain Commitments for additional information.

~~For~~ ~~Treasury stock,~~ the change reflects $4.0 billion paid to Citibank in March 2018 pursuant to the terms of an accelerated share repurchase agreement as well as open market share repurchases. See Notes to Condensed Consolidated Financial Statements—~~Note 12C. Contingencies and Certain Commitments: Certain Commitments~~ ~~for additional information.~~

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended							Six Months Ended
(MILLIONS OF DOLLARS)	September 30, 2018			October 1, 2017			% Change	June 30, 2019			July 1, 2018			% Change
Cash provided by/(used in):
Operating activities	$	11,089		$	9,713		14	$	4,309		$	5,830		(26	)
Investing activities	5,289			19			*	5,648			8,193			(31	)
Financing activities	(14,034		)	(9,607		)	46	(9,318		)	(12,628		)	(26	)
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents	(116		)	67			*	(28		)	(15		)	83
Net increase in Cash and cash equivalents and restricted cash and cash equivalents	$	2,227		$	193		*	$	612		$	1,381		(56	)
* Calculation not meaningful or results are equal to or greater than 100%.

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

Operating Activities

Our net cash provided by operating activities was ~~$11.1~~$4.3 billion in the first ~~nine~~six months of ~~2018~~2019, compared to ~~$9.7~~$5.8 billion in the same period in ~~2017~~2018. The ~~increase~~decrease in net cash provided by operating activities ~~reflects an increase in net cash generated from net income. The net cash generated~~ reflects the timing of receipts from customers and payments to vendors in the ordinary course of ~~business.~~business, partially offset by an increase in net income and a decrease in benefit plan contributions.

In the first ~~nine~~six months of ~~2018~~2019, the change in the line item Other adjustments, net primarily reflects, among other items:

a reduction in net unrealized ~~net~~ gains on equity ~~securities resulting from~~ securities; and

the ~~adoption~~non-recurrence of ~~a new accounting standard on January 1, 2018 related to financial assets and liabilities (see Notes to Condensed Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards~~);

a non-cash gain associated with our transaction with Bain Capital to create a new biopharmaceutical company to continue development of a portfolio of clinical and preclinical stage neuroscience assets (see Notes to Condensed Consolidated Financial Statements––~~Note 2B.~~ ~~Acquisition, Divestitures, Licensing Arrangements, Collaborative Arrangements and Privately Held Investment~~: ~~Divestitures); and~~

a non-cash gain on the contribution of Pfizer’s allogeneic CAR T developmental program assets, in connection with our contribution agreement with Allogene ~~(see Notes to Condensed Consolidated Financial Statements—Note 2B.~~ ~~Acquisition, Divestitures, Licensing Arrangements, Collaborative Arrangements and Privately Held Investment: Divestitures~~),

in 2018,

partially offset by:

net ~~losses~~gains on foreign exchange contracts hedging a portion of our forecasted intercompany inventory sales (that fixes the cost of inventory sold later to customers)~~; and~~.

~~a decrease in gains on the sale of property, plant and equipment.~~

In the ~~first nine months~~condensed consolidated statements of ~~2018~~ ~~and~~ ~~2017~~,cash flows, the line item Other changes in assets and liabilities, net of acquisitions and divestitures is presented excluding the effects of changes in foreign currency exchange rates, as these changes do not reflect actual cash inflows or outflows, and excluding any other significant non-cash movements. Accordingly, the amounts shown will not necessarily agree with the changes in the assets and liabilities that are presented in our condensed consolidated balance sheets. In the first six months of 2019 and 2018, the line item Other changes in assets and liabilities, net of acquisitions and divestitures, primarily reflects changes, in the normal course of business, in trade accounts receivable, inventories, other current assets, other noncurrent assets, trade accounts payable, accrued compensation, ~~and~~ other current and noncurrent ~~liabilities.~~liabilities, as well as the adjustment necessary to reflect the non-cash nature of a favorable settlement of a U.S. IRS audit for multiple tax years (see Notes to Condensed Consolidated Financial Statements––Note 5A. Tax Matters: Taxes on Income from Continuing Operations).

For additional information about changes in other assets and liabilities account balances, see the “Analysis of the Condensed Consolidated Balance Sheets” in this MD&A.

Investing Activities

Our net cash provided by investing activities was ~~$5.3~~$5.6 billion in the first ~~nine~~six months of ~~2018~~2019, compared to net cash provided by investing activities of ~~$19 million~~$8.2 billion in the same period in ~~2017~~2018. The ~~increase~~decrease in net cash provided by investing activities was primarily attributable ~~to:~~

~~an increase~~to a decrease in net proceeds generated from the sale of investments of ~~$4.5~~$2.2 billion in ~~2018~~the first six months of 2019 for cash ~~needs; and~~

needs.

a decrease in cash used for acquisitions, net of cash acquired of $1.0 billion due to the acquisition of the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business and substantially all of the remaining consideration for the Medivation acquisition in ~~2017~~ ~~(see Notes to Condensed Consolidated Financial Statements—Note 2A.~~

~~Acquisition, Divestitures, Licensing Arrangements, Collaborative Arrangements and Privately Held Investment: Acquisition~~).

Financing Activities

Our net cash used inby financing activities was ~~$14.0~~$9.3 billion in the first ~~nine~~six months of ~~2018~~2019, compared to ~~$9.6~~$12.6 billion in the same period in ~~2017~~2018. The ~~increase~~decrease in net cash used in financing activities was primarily attributable to:


•	the issuance of long-term debt of $4.9 billion in the first six months of 2019, with no corresponding issuance of debt in the first six months of 2018 (see Notes to Condensed Consolidated Financial Statements––Note 7D. Financial Instruments: Long-Term Debt); and


•	$4.3 billion net proceeds raised from short-term borrowings in the first six months of 2019, compared to net proceeds of $0.9 billion in the first six months of 2018,

~~$3.2 billion less proceeds raised from short-term borrowings in the first nine months of~~ ~~2018, compared to the first nine months of~~ ~~2017; and~~

partially offset by:

higher purchases of common stock of ~~$2.2 billion,~~$2.8 billion;

~~partially offset by:~~

~~lower~~higher repayments on long-term debt of ~~$1.4 billion.~~$2.3 billion; and

lower proceeds from the exercise of stock options of $226 million.

ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We rely largely on operating cash flows, short-term investments, short-term commercial paper borrowings and long-term debt to provide for our liquidity requirements. We continue our efforts to improve cash inflows through working capital efficiencies. We target specific areas of focus including accounts receivable, inventories, accounts payable, and other working capital, which allows us to optimize our operating cash flows. Due to our significant operating cash flows as well as our financial assets, access to capital markets and available lines of credit and revolving credit agreements, we believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future, which include:

the working capital requirements of our operations, including our R&D activities;

investments in our business;

dividend payments and potential increases in the dividend rate;

share repurchases;

the cash requirements associated with our cost-reduction/productivity initiatives;

paying down outstanding debt;

contributions to our pension and postretirement plans; and

business-development activities.

Our long-term debt is rated high-quality by both S&P and Moody’s. See the “Credit Ratings” section below. As market conditions change, we continue to monitor our liquidity position. We have taken and will continue to take a conservative approach to our financial investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, well-diversified available-for-sale debt securities.

Selected Measures of Liquidity and Capital Resources

													The following table provides certain relevant measures of our liquidity and capital resources:
(MILLIONS OF DOLLARS, EXCEPT RATIOS AND PER COMMON SHARE DATA)	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Selected financial assets:
Selected financial assets^(a):
Cash and cash equivalents^(a)	$	3,559		$	1,342		$	1,784		$	1,139
Short-term investments^(a)	13,680			18,650			11,128			17,694
Long-term investments^(a)	6,444			7,015			2,905			2,767
	23,684			27,007			15,817			21,600
Debt:
Short-term borrowings, including current portion of long-term debt	7,385			9,953			10,507			8,831
Long-term debt	33,652			33,538			36,168			32,909
	41,037			43,491			46,675			41,740
Selected net financial liabilities^(b)	$	(17,353	)	$	(16,484	)	$	(30,857	)	$	(20,140	)

Working capital^(c)	$	12,569		$	10,714		$	15,043		$	18,068
Ratio of current assets to current liabilities	1.43:1			1.35:1			1.47:1			1.57:1
Total Pfizer Inc. shareholders’ equity per common share^(d)	$	12.21		$	11.93		$	10.71		$	11.09


^(a)	See Notes to Condensed Consolidated Financial Statements––Note 7. Financial Instruments for a description of certain assets held and for a description of credit risk related to our financial instruments held.

^(b)

The increase in selected net financial liabilities was primarily driven by the decrease in short-term investments used for cash needs ~~partially offset by~~and the ~~repayment of~~net increase in long-term debt. We retain a strong financial liquidity position as a result of our net cash provided by operating activities, our high-quality financial asset portfolio and access to capital markets. For additional information, see the “Credit Ratings” section of this MD&A.

financial asset portfolio and access to capital markets. Both Moody’s and S&P rating agencies maintained our strong investment-grade corporate debt rating subsequent to the acquisitions of Medivation and Anacor. For additional information, see the “Credit Ratings” section of this MD&A.


^(c)	The ~~increase~~decrease in working capital was primarily due to:


•	a decrease in Short-term investments mainly driven by the financing requirements for share repurchase activities, dividend payments, capital expenditures and debt repayment, partially offset by operating cash flow generation, cash from employee stock option exercises and the long-term debt issuance;

an increase in short-term borrowings as a result of the issuance of commercial paper; and

the net impact of foreign currency exchange,

partially offset by:

the timing of accruals, cash receipts and payments in the ordinary course of business;

~~a decrease in short-term borrowings as a result of repayments of commercial paper;~~ and

an increase in inventory related to increases for certain products to meet targeted levels in the normal course of business, including inventory build for supply recovery ~~network strategy~~ and ~~new product launches,~~

~~partially offset by:~~

~~a decrease in Short-term investments~~ mainly driven by the financing requirements for share repurchase activities, dividend payments, capital expenditures and debt repayment, partially offset by operating cash flow generation, cash from employee stock option exercises and reclassification of long-term to short-term investments;

an increase in income taxes payable related to the timing of accruals in certain major markets in the ordinary course of business and the reclassification of the first federal installment of transition tax previously recorded in noncurrent liabilities; and

~~the net impact of foreign currency exchange.~~market demand.


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

~~On September 7, 2018,~~In March 2019, we completed a public offering of $5.0 billion aggregate principal amount of senior unsecured notes (see Notes to Condensed Consolidated Financial ~~Statements–~~Statements––Note ~~7D.Financial~~7D. Financial Instruments: Long-Term Debt).

On October 6, 2016, we announced that we entered into a definitive agreement under which ICU Medical agreed to acquire all of our global infusion systems net assets, HIS. The revised transaction closed on February 3, 2017. At closing, we received 3.2 million newly issued shares of ICU Medical common stock (as originally agreed). In August 2018, we sold 700,000 shares of ICU Medical common stock. We continue to hold 2.5 million shares of ICU Medical common stock. The lock-up period under the shareholder agreement that we entered into with ICU Medical in connection with these shares expired on August 3, 2018 and the shares are registrable upon our request subject to the terms thereof. Given that the shares were received in connection with our divestiture of the HIS business, and that our business model is generally not to invest in equities, we are evaluating our options to monetize the shares subject to market conditions and other relevant factors.

For additional information about the sources and uses of our funds, see the “Analysis of the Condensed Consolidated Balance Sheets” and the “Analysis of the Condensed Consolidated Statements of Cash Flows” sections of this MD&A.

Domestic and International Selected Financial Assets

Many of our operations are conducted outside the U.S., and significant portions of our selected financial assets are held internationally. The amount of funds held in U.S. tax jurisdictions can fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons, such as business-development activities. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and international cash flows (both inflows and outflows). ~~Given the recent~~The changes in tax law under the TCJA, which includes transitioning U.S. international taxation from a worldwide tax system to a territorial tax system, in the fourth quarter of 2017, we recorded an estimated repatriation tax on deemed repatriated accumulated post-1986 earnings of foreign subsidiaries for which we plan to elect payment over eight years through 2026. These changes will also allow us to more easily access our selected financial assets globally. ~~As a result of the enactment of the TCJA, in 2018 we repatriated the~~The majority of our cash we held internationally as of year-end ~~2017.~~2017 was repatriated in 2018.

Agreement to Combine Upjohn with Mylan

In connection with the recently-announced agreement to combine Upjohn with Mylan discussed in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business”and “––Our Strategy––Our Business Development Initiatives” sections of this MD&A, Upjohn will incur $12 billion of debt prior to the closing of the transaction. Immediately prior to the separation, Upjohn will make a cash distribution of $12 billion to Pfizer, which will be funded by the proceeds of such debt. Following the separation, Upjohn will remain the obligor with respect to the debt.

Credit Ratings

Two major corporate debt-rating organizations, Moody’s and S&P, assign ratings to our short-term and long-term debt. A security rating is not a recommendation to buy, sell or hold securities and the rating is subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.

In June 2019, S&P placed Pfizer on “CreditWatch Negative” following the announcement of Pfizer’s intention to acquire Array, with the expectation that the CreditWatch placement would be resolved with a one-notch downgrade of Pfizer’s debt rating to ‘AA-’ upon the consummation of the transaction. In July 2019, we announced that we entered into a definitive agreement to combine Upjohn with Mylan, which resulted in actions from both Moody’s and S&P. Moody’s placed Pfizer’s long-term rating under review for downgrade (limited to one-notch, or ‘A2’ upon close of the Mylan transaction) while S&P lowered Pfizer’s rating to ‘AA-’ (as a result of the Array transaction) and confirmed it will still remain on CreditWatch Negative (with the expectation the rating will be lowered one additional notch to ‘A+’ upon close of the Mylan transaction).



The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured long-term debt:
NAME OF RATING AGENCY	Pfizer Commercial Paper	Pfizer Long-Term Debt	Outlook/Watch	Date of Last Rating Change
NAME OF RATING AGENCY	Rating	Rating	Outlook/Watch	Date of Last Rating Change
Moody’s^(a)	P-1	A1	Under Review for Downgrade	October 2009
S&P^(b)	A-1+	AAAA-	~~October 2009~~CreditWatch Negative	July 2019


^(a)	~~In September 2016, Moody’s updated their credit outlook from negative outlook to stable.~~


^(b)	~~In April 2016, S&P updated their credit outlook from negative watch to stable.~~

Debt Capacity––Lines of Credit

We have available lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We typically maintain cash and cash equivalent balances and short-term investments in excess of our commercial paper and other short-term borrowings. As of ~~September~~June 30, ~~2018,~~ 2019,we had access to ~~$7.6~~a $7.0 billion of lines of credit, of which $571 million expire within one year. Of these lines of credit, $7.6 billion were unused, of which our lenders have committed to loan us $7.1 billion at our request, primarily under ourU.S. revolving credit facility expiring in ~~2022, and~~2023, which may be used to support our commercial paper borrowings. In addition to the U.S. revolving credit facility, our lenders have provided us an additional $536 million lines of credit, of which $508 million expire within one year. Of these total lines of credit, $7.5 billion were unused as of June 30, 2019. In connection with the recently-announced agreement to combine Upjohn with Mylan discussed in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business” and “––Our Strategy––Our Business Development Initiatives” sections of this MD&A, Upjohn entered into a $12 billion fully underwritten bridge facility. This bridge facility is fully committed financing that is expected to terminate upon the issuance of $12 billion of debt by Upjohn prior to the transaction close.

LIBOR

From time to time, we issue variable rate debt based on LIBOR, or undertake interest rate swaps that contain a variable element based on LIBOR. Banks currently reporting information used to set LIBOR will stop doing so after 2021. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. We are monitoring their efforts, and we will likely amend contracts to accommodate any replacement rate where it is not already provided.

Global Economic Conditions––General

The global economic environment has not had, nor do we anticipate it will have, a material impact on our liquidity or capital resources. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future. We monitor our liquidity position continuously in the face of evolving economic conditions. For additional information see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment––The Global Economic Environment” section in this MD&A.

Global Economic Conditions––Venezuela Operations

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

~~We used the Venezuelan bolivar soberano rate of 60.27 as our best estimate to revalue our Venezuelan bolivar denominated net monetary assets. The current DICOM rate is about 64.89.~~ Future actions by the Venezuelan government in response to economic uncertainties could impact the recoverability of our investment in Venezuela, which could result in an impairment charge and, under extreme circumstances, could impact our ability to continue to operate in the country in the same manner as we have historically. ~~We have in Venezuela a few net monetary assets and $46 million of non-monetary assets, and $11 million of deferred foreign exchange losses reported in the balance sheet in~~ ~~Accumulated other comprehensive loss––Foreign currency translation adjustments~~ ~~at August 26, 2018, our international quarter-end.~~The impact to Pfizer is not considered material.

Global Economic Conditions––Argentina Operations

Our Argentina operations function in a hyperinflationary economy. The impact to Pfizer is not considered material.

Off-Balance Sheet Arrangements

In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with a transaction or that are related to events and activities prior to or following a transaction. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we may be required to reimburse the loss. These indemnification obligations generally are subject to various restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of ~~September~~June 30, ~~2018,~~2019, the estimated fair value of our indemnity obligations was not significant.

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

Share-Purchase Plans and Accelerated Share Repurchase Agreements

Our December ~~2015 $11~~2017 $10 billion share repurchase program was exhausted in the ~~third~~first quarter of ~~2018.~~2019.

In December ~~2017,~~2018, the Board of Directors authorized ~~an additional~~a new $10 billion share repurchase program to be utilized over time (the 2018 program) and share repurchases commenced thereunder in the ~~third~~first quarter of ~~2018 (the 2017 program).~~2019.

On ~~March 12, 2018,~~February 7, 2019, we entered into an accelerated share repurchase agreement with ~~Citibank~~GS&Co. to repurchase ~~$4.0~~approximately $6.8 billion of our common stock. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 1212C. Contingencies and Certain Commitments: Certain Commitments and “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities” in Part II, Item 2 of this Quarterly Report on Form 10-Q.

																	The following table provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced share purchase plans, including our accelerated share repurchase agreements:
	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
(SHARES IN MILLIONS, DOLLARS IN BILLIONS)	September 30, 2018^(a)		October 1, 2017		September 30, 2018^(a)		October 1, 2017^(b)		June 30, 2019		July 1, 2018		June 30, 2019⁽^a)		July 1, 2018^(b)
Shares of common stock purchased	47		—		192		150		—		—		180		145
Cost of purchase	$	1.1	$	—	$	7.2	$	5.0	$	—	$	—	$	8.9	$	6.1

NEW ACCOUNTING STANDARDS

Recently Adopted Accounting Standards

See Notes to Condensed Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant AccountingPolicies: Adoption of New Accounting Standards.



Recently Issued Accounting Standards, Not Adopted as of ~~September~~June 30, ~~2018~~2019
Standard/Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
~~In February 2016, the FASB issued new guidance on accounting for~~ ~~leases~~. The new ASU provides guidance for both lessee and lessor accounting models. Among other things, the new guidance requires that a right of use asset and a lease liability be recognized for leases with a duration of greater than one year. Since its issuance, the FASB has issued several ASUs, including amending the guidance to offer an additional transition method.	~~January 1, 2019. Earlier application is permitted.~~	We have made substantial progress in completing our review of the impact of this new guidance. We anticipate recognition of approximately $2 billion of additional assets and corresponding liabilities on our balance sheet. We have also assessed the potential impact of embedded leases on our consolidated financial statements, given our manufacturing outsourcing, service arrangements and other agreements. In connection with this guidance we are currently designing new global processes and technological solutions to provide the appropriate financial accounting and disclosure data. We continue to monitor changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our conclusions.
~~In March 2017, the FASB issued new guidance that shortens the~~ ~~amortization period for certain callable debt securities held at a premium. The new guidance requires the premium to be amortized to the earliest call date.~~	January 1, 2019. Early application is permitted, including in interim periods, so long as any adjustments are reflected as of the beginning of the fiscal year that includes the interim period in which the guidance is applied.	~~We do not have any investments with features subject to this standard and do not expect this new guidance to have a material impact on our consolidated financial statements.~~
~~In July 2017, the FASB issued new guidance on accounting for~~ ~~certain financial instruments with characteristics of liabilities and equity,~~ ~~and accounting for certain financial instruments with~~ ~~down round features~~ (a feature in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument).	~~January 1, 2019. Earlier application is permitted.~~	~~We do not have any financial instruments with features subject to this standard and do not expect this new guidance to have a material impact on our consolidated financial statements.~~
~~In June 2018, the FASB issued new guidance to simplify the accounting for~~ ~~share-based payments to nonemployees~~ by aligning it with the accounting for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date.	~~January 1, 2019. Early adoption is permitted, including in interim periods.~~	~~We do not have any share-based awards issued to nonemployees and do not expect this new guidance to have a material impact on our consolidated financial statements.~~



~~Standard/Description~~	~~Effective Date~~	~~Effect on the Financial Statements or Other Significant Matters~~
In June 2016, the FASB issued new guidance on accounting for credit losses of financial instruments. The new guidance replaces the probable initial recognition threshold for incurred loss estimates in current GAAP with a methodology that reflects expected credit loss estimates.	January 1, 2020. Earlier application is permitted as of fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.	We are assessing the impact of the provisions of this new guidance on our consolidated financial statements. This standard includes our financial instruments, such as accounts receivable, and investments that are generally of high credit quality. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The new guidance requires us to identify, analyze, document and support new methodologies for quantifying expected credit loss estimates for our financial instruments, using information such as historical experience and current economic ~~environmental~~ conditions, plus the use of reasonable supportable forecast information.
In January 2017, the FASB issued new guidance for goodwill impairment testing. The new guidance eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit.	January 1, 2020. Earlier application is permitted.	We do not expect this new guidance to have a material impact on our consolidated financial statements.
In August 2018, the FASB issued new guidance related to customers’ accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract. The new guidance aligns the requirements for capitalizing implementation costs in such arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance can be adopted either prospectively or retrospectively.	January 1, 2020. Earlier application is permitted.	We are assessing the impact of the provisions of this new guidance on our consolidated financial statements. We do not expect this new guidance to have a material impact on our consolidated financial statements.
In November 2018, the FASB issued new guidance clarifying the interaction between the accounting guidance for collaboration agreements and revenue from contracts with customers.	January 1, 2020. Earlier application is permitted	We ~~are assessing~~have assessed the impact of the provisions of this new guidance and do not expect it will have a material impact on our consolidated financial statements.

FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This report and other written or oral statements that we make from time to time contain forward-looking statements. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “will,” “may,” “could,” “likely,” “ongoing,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “assume,” “target,” “forecast,” “guidance,” “goal,” “objective,” ~~“aim”~~“aim,” “seek” and other words and terms of similar meaning or by using future dates in connection with any discussion of, among other things, our anticipated operating and financial performance, business plans and prospects, expectations for in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, revenue contribution, growth, performance, timing of exclusivity and potential benefits, ~~of Pfizer’s products and product candidates,~~ strategic reviews, capital allocation objectives, business-development plans, benefits anticipated from the ~~benefits expected from our plans to organize~~reorganization of our commercial operations into three businesses, which became effective at the beginning of ~~the company's~~our 2019 fiscal year, our acquisitions and other business development activities, our ability to successfully capitalize on growth opportunities or prospects, manufacturing and product supply and plans relating to share repurchases and dividends. In particular, these include statements relating to future actions, business plans and prospects, our acquisitions and other business development activities, ~~the disposition of the HIS net assets,~~ prospective products or product approvals, our product pipeline, future performance or results of current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, plans relating to share repurchases and dividends, government regulation and financial results, including, in particular, the anticipated progress in remediation efforts at certain of our Hospira manufacturing facilities and the expectations related to our supply issues set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business––Product Manufacturing” section of this MD&A, the benefits expected from the reorganization of our ~~plans to organize our company~~commercial operations into three businesses, which became effective at the beginning of our 2019 fiscal year and our expectations regarding growth set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Strategy––Organizing for Growth” section of this MD&A, the ~~anticipated timeframe for any decision regarding strategic alternatives for Pfizer Consumer Healthcare~~expected timing and benefits of our recently-announced agreement to combine Upjohn with Mylan to create a new global pharmaceutical company set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our ~~Business”~~Business,” and “––Our Strategy––Our Business Development Initiatives” sections of this MD&A, the anticipated costs related to our preparations for Brexit set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment––The Global Economic Environment” section of this MD&A, our anticipated liquidity position set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment––The Global Economic Environment” and the “Analysis of Financial Condition, Liquidity and Capital Resources” sections of this MD&A, our plans for increasing investment in the U.S. set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Strategy––Capital Allocation and Expense Management––Increasing Investment in the U.S.” section of this MD&A, the financial guidance set forth in the ~~“Our~~“Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Financial Guidance for ~~2018~~2019” section of this MD&A, the expected financial profile for Pfizer upon the completion of our recently-announced agreement to combine Upjohn with Mylan set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Preliminary Financial Profile Upon the Completion of the Proposed Combination of Upjohn with Mylan” section of this MD&A, the anticipated costs and ~~cost~~ savings ~~including~~ from our ~~acquisition of Hospira~~2017-2019 initiatives and our ~~cost-reduction/productivity initiatives~~Organizing for Growth initiative, set forth in the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and in Notes to Condensed Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives, the benefits expected from our business development transactions and the contributions that we expect to make from our general assets to ~~our~~the company’s pension and postretirement plans during ~~2018~~2019 set forth in Notes to Condensed Consolidated Financial Statements––Note 10. Pension and Postretirement Benefit Plans. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

the outcome of ~~research and development~~R&D activities, including, without limitation, the ability to meet anticipated pre-clinical ~~and~~or clinical ~~trial~~endpoints, commencement ~~and~~and/or completion dates for our pre-clinical or clinical trials, regulatory submission ~~and~~dates, regulatory approval dates ~~and~~and/or launch dates, ~~for product candidates,~~ as well as the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new clinical data and ~~additional~~further analyses of existing clinical data;

~~decisions by regulatory authorities regarding whether and when~~the risk we may not be able to ~~approve our drug applications, which will depend on the assessment by such regulatory authorities~~successfully address all of the benefit-risk profile suggested by the totality of the efficacy and safety information submitted; decisions by regulatory authorities regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products; uncertainties regarding our ability to address the comments received ~~by us~~ from regulatory authorities such as the FDA ~~and~~or the EMA, ~~with respect~~or obtain approval from regulators, which will depend on myriad factors, including such regulator making a determination as to ~~certain~~whether a product’s benefits outweigh its known risks and a determination of ~~our drug applications to~~ the ~~satisfaction of those authorities;~~product’s efficacy; regulatory decisions impacting labeling, manufacturing processes, safety and/or other matters; and recommendations by technical or advisory committees, such as ACIP, that may impact the use of our vaccines;

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

the outcome of post-approval clinical trials, which could result in the loss of marketing approval, ~~for a product or~~ changes in ~~the~~product labeling, ~~for,~~ and/or ~~increased~~new or ~~new~~increased concerns about the ~~safety~~side effects or efficacy of, a product that could affect its availability or commercial ~~potential;~~

~~risks associated with preliminary, early stage or interim data, including~~potential, such as the ~~risk that final results of studies~~update to the U.S. prescribing information for which preliminary, early stage or interim data have been provided and/or additional clinical trials may be different from (including less favorable than) the preliminary, early stage or interim data resultsXeljanz and ~~may not support further clinical development of the applicable product candidate or indication;~~Xeljanz extended release;

the success of external business-development activities, including the ability to identify and execute on potential business development opportunities, the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all, the ability to realize the anticipated benefits of any such transactions, and the potential need to obtain additional equity or debt financing to pursue these opportunities, which could result in increased leverage and impact our credit ratings;

competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;

the implementation by the FDA and regulatory authorities in certain ~~other~~ countries of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products, with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;

risks related to our ability to develop and launch biosimilars, including risks associated with “at risk” launches, defined as the marketing of a product by Pfizer before the final resolution of litigation (including any appeals) brought by a third party alleging that such marketing would infringe one or more patents owned or controlled by the third party, and access challenges for our biosimilar products where our product may not receive appropriate formulary access or remains in a disadvantaged position relative to the innovator product;

the ability to meet competition from generic, branded and biosimilar products after the loss or expiration of patent protection for our products or competitor products;

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

difficulties or delays in manufacturing, including delays caused by natural events, such as hurricanes; supply shortages at our facilities; and legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, ~~debarment,~~ injunctions, ordebarment, voluntary recall of a ~~product;~~product or failure to secure product approvals;

trade buying patterns;

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

trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or favorable formulary placement for our products;

the impact of any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs or changes in the tax treatment of employer-sponsored health insurance that may be implemented;

the impact of any U.S. healthcare reform or legislation, including any replacement, repeal, modification or invalidation of some or all of the provisions of the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act;

U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, intellectual property, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; patient out-of-pocket costs for medicines, manufacturer prices and/or price increases that could result in new mandatory rebates and discounts or other pricing restrictions; general budget control actions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; revisions to reimbursement of biopharmaceuticals under government programs; restrictions on U.S. direct-to-consumer advertising; limitations on interactions with healthcare professionals; or the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines; as well as pricing pressures for our products as a result of highly competitive insurance markets;

legislation or regulatory action in markets outside the U.S., including China, affecting pharmaceutical product pricing, intellectual property, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;

the exposure of our operations outside the U.S. to possible capital and exchange controls, economic conditions, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest, unstable governments and legal systems and inter-governmental disputes;

contingencies related to actual or alleged environmental contamination;

claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates;

any significant breakdown, infiltration or interruption of our information technology systems and infrastructure;

legal defense costs, insurance expenses and settlement costs;

the risk of an adverse decision or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, such as claims that our patents are invalid and/or do not cover the product of the generic drug manufacturer or where one or more third parties seeks damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities, product liability and other product-related litigation, including personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, commercial, environmental, government investigations, employment and other legal proceedings, including various means for resolving asbestos litigation, as well as tax issues;

the risk that our currently pending or future patent applications may not result in issued patents, or be granted on a timely basis, or any patent-term extensions that we seek may not be granted on a timely basis, if at all;

our ability to protect our patents and other intellectual property, both domestically and internationally;

interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;

governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending and possible future proposals, including further clarifications and/or interpretations of the ~~recently passed TCJA;~~TCJA enacted in 2017;

any significant issues involving our largest wholesale distributors, which account for a substantial portion of our revenues;

the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;

the end result of any negotiations between the U.K. government and the EU regarding the terms of the U.K.’s exit from the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU, including the approval and supply of our products;

any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timeliness and compliance with applicable legal or regulatory requirements and industry standards;

any significant issues that may arise related to our joint ventures and other third-party business arrangements;

changes in U.S. generally accepted accounting principles;

further clarifications and/or changes in interpretations of existing laws and regulations, or changes in laws and regulations, in the U.S. and other countries;

uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets; the related risk that our allowance for doubtful accounts may not be adequate; and the risks related to volatility of our income due to changes in the market value of equity investments;

any changes in business, political and economic conditions due to actual or threatened terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas;

growth in costs and expenses;

changes in our product, segment and geographic mix;

the impact of purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items;

the impact of acquisitions, divestitures, restructurings and internal reorganizations, including ~~our plans to organize~~the reorganization of our commercial operations into three businesses, which became effective at the beginning of the company’s 2019 fiscal year, the transaction with GSK to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture and our recently-announced agreement to combine Upjohn with Mylan, as well as any other corporate strategic initiatives, and cost-reduction and productivity initiatives, each of which requires upfront costs but may fail to yield anticipated benefits and may result in unexpected costs or organizational disruption;

the impact of product recalls, withdrawals and other unusual items;

the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;

risks related to internal control over financial reporting;

risks and uncertainties related to ~~our~~ acquisitions, such as the acquisition of ~~Hospira, Anacor, Medivation and AstraZeneca’s small molecule anti-infectives business,~~Array, including, among other things, the ability to realize the anticipated benefits of those acquisitions, including the possibility that the expected cost savings and/or accretion ~~related to the~~from certain of those acquisitions ~~of Hospira, Anacor and Medivation~~ will not be realized or will not be realized within the expected time frame; the risk that the businesses will not be integrated successfully; disruption from the transactions making it more difficult to maintain business and operational relationships; risks related to our ability to grow revenues for ~~Xtandi;~~certain acquired products; significant transaction costs; and unknown liabilities;

risks and uncertainties related to our transaction with GSK, which combined our respective consumer healthcare businesses into a new consumer healthcare joint venture, including, among other things, risks related to the ability to realize the anticipated benefits of the transaction, including the possibility that the expected benefits and cost synergies from the transaction will not be realized or will not be realized within the expected time period, the risk that the businesses will not be integrated successfully, the possibility that a future separation of the joint venture may not occur, disruption from the transaction making it more difficult to maintain business and operational relationships, negative effects of the transaction on the market price of Pfizer’s common stock and on Pfizer’s operating results, significant transaction costs, unknown liabilities, the risk of litigation and/or regulatory actions related to the transaction, other business effects, including the effects of industry, market, economic, political or regulatory conditions, future exchange and interest rates, changes in tax and other laws, regulations, rates and policies, future business combinations or disposals and competitive developments; and

risks and uncertainties related to our ~~evaluation of strategic alternatives for our Consumer Healthcare business,~~recently-announced agreement to combine Upjohn with Mylan to create a new global pharmaceutical company, including, among other things, risks related to the satisfaction of the conditions to closing the transaction (including the failure to obtain necessary shareholder and regulatory approvals) in the anticipated timeframe or at all and the possibility that the transaction does not close, risks related to the ability to realize the anticipated benefits of ~~any strategic alternatives we may pursue for our Consumer Healthcare business;~~ the ~~potential for disruption to our business and diversion of management’s attention from other aspects of our business;~~transaction, including the possibility that ~~such strategic alternatives~~the expected benefits and cost synergies of the combined company from the proposed transaction will not be ~~completed~~realized or will not be realized within the expected time period, the risk that the businesses will not be integrated successfully, disruption from the transaction making it more difficult to maintain business and operational relationships, negative effects of the announcement or the consummation of the proposed transaction on ~~terms that are advantageous~~the market price of Pfizer’s common stock, Pfizer’s credit ratings and/or on Pfizer’s or the combined company’s operating results, significant transaction costs, unknown liabilities, the risk of litigation and/or regulatory actions related to ~~Pfizer;~~ the ~~possibility that we may be unable to realize a higher value for Pfizer Consumer Healthcare through strategic alternatives;~~proposed transaction, other business effects, including the effects of industry, market, economic, political or regulatory conditions, future exchange and ~~unknown liabilities.~~interest rates, changes in tax and other laws, regulations, rates and policies, future business combinations or disposals and competitive developments.

We cannot guarantee that any forward-looking statement will be realized. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements, and are cautioned not to put undue reliance on forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. You are advised, however, to consult any further disclosures we make on related subjects.

~~Our~~ ~~2017~~Additional discussion regarding certain risks, uncertainties and assumptions described above, as well as other material risks to our business, is included under the heading entitled “Risk Factors” in Part I, Item 1A. of our 2018 Form ~~10-K listed various important factors that~~10-K. These risks could cause actual results to differ materially from past and projected future results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. ~~Readers can find them in Part I, Item 1A, of that filing under the heading “Risk Factors.”~~ We incorporate that section of ~~that~~the 2018 Form 10-K in this filing and investors should refer to it. ~~Reference is also made to Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q.~~ You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

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

This report includes discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data. In addition, clinical trial data are subject to differing

interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.

~~Financial Risk Management~~

~~Interest Rate Risk~~

~~With respect to our investments, we strive to maintain a predominantly floating–rate basis position, but our strategy may change based on prevailing market conditions.~~

We currently borrow primarily on a long-term, fixed-rate basis. Historically, we strove to borrow primarily on a floating-rate basis; but in recent years we borrowed on a long-term, fixed-rate basis. From time to time, depending on market conditions, we will change the profile of our outstanding debt by entering into derivative financial instruments like interest rate swaps.

Legal Proceedings and Contingencies

Information with respect to legal proceedings and contingencies required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 12A. Contingencies and Certain Commitments: Legal Proceedings in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is incorporated by reference from the discussion under the heading Financial Risk Management in our ~~2017~~2018 Financial ~~Report and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.~~

Report.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.

During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 12A. Contingencies and Certain Commitments: Legal Proceedings in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Tax Matters

Additional information with respect to tax matters required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note ~~5C.~~5B. Tax Matters: Tax Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.

We account for income tax contingencies using a benefit recognition model. If our initial assessment fails to result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to “more likely than not”; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. We regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase or decrease the technical merits of a position relative to the “more-likely-than-not” standard.

Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.

Item 1A. Risk Factors

~~The~~We refer to the “Our Operating Environment” and “Forward-Looking Information and Factors That May Affect Future Results” sections of the MD&A of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors”, of our ~~2017~~2018 Form ~~10-K are incorporated by reference herein. We are including~~10-K. There have been no material changes from the ~~following risk factor which should be read in conjunction with our description of~~ risk factors discussed in Part I, Item 1A, “Risk Factors” of our ~~2017~~2018 Form 10-K.

~~MARKET FLUCTUATIONS IN OUR EQUITY INVESTMENTS~~

In the first quarter of 2018, we adopted a new accounting standard whereby certain equity investments are measured at fair value with changes in fair value now recognized in net income. We expect the adoption of this new accounting standard may increase the volatility of our income in future periods due to changes in the fair value of equity investments. For additional information, see Notes to Condensed Consolidated Financial Statements––~~Note 1B~~. ~~Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards~~.

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

The following table provides certain information with respect to our purchases of shares of the Company’s common stock during the ~~third~~second fiscal quarter of ~~2018~~2019:

Issuer Purchases of Equity Securities^(a)

Period
Total Number of
Shares Purchased^(a)(b)

Average Price
Paid per Share^(a)(b)

Total Number of Shares Purchased as Part of Publicly Announced Plan^(a)

Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan^(a)

July 2, 2018 through July 29, 2018 7,765
$ 36.43
—
$ 10,292,715,228
July 30, 2018 through August 26, 2018 10,626
$ 40.45
—
$ 10,292,715,228
August 27, 2018 through September 30, 2018 46,671,505
$ 40.36
46,652,993
$ 9,187,715,502
Total 46,689,896
$ 40.36
46,652,993



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)
April 1, 2019 through April 28, 2019	36,804	$	42.50	—	$	5,292,881,709
April 29, 2019 through May 26, 2019	47,184	$	39.68	—	$	5,292,881,709
May 27, 2019 through June 30, 2019	32,081	$	42.09	—	$	5,292,881,709
Total	116,069	$	41.24	—

^(a)

Our December ~~2015 $11~~2017 $10 billion share repurchase program was exhausted in the ~~third~~first quarter of ~~2018.~~2019. In December ~~2017,~~2018, the Board of Directors authorized ~~an additional~~a new $10 billion share repurchase program to be utilized over time (the 2018 program) and share repurchases commenced thereunder in the ~~third~~first quarter of ~~2018 (the 2017 program).~~2019. On ~~March 12, 2018,~~February 7, 2019, we entered into an accelerated share repurchase agreement with ~~Citibank~~GS&Co. to repurchase ~~$4.0~~approximately $6.8 billion of our common ~~stock and on September 5, 2018, the accelerated share repurchase agreement with Citibank was completed.~~stock. For additional information, see the Notes to Condensed Consolidated Financial Statements––Note ~~12.~~12C. Contingencies and Certain Commitments: Certain Commitments. At ~~September~~June 30, ~~2018,~~2019, our remaining share-purchase authorization under the ~~2017~~2018 program was approximately ~~$9.2~~$5.3 billion.

^(b)

~~In addition to the amounts purchased under our share repurchase program, including amounts purchased under the accelerated share repurchase agreement with Citibank, these~~These columns represent (i) ~~32,041~~111,118 shares of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of awards under our long-term incentive programs and (ii) the open market purchase by the trustee of ~~4,862~~4,951 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance share awards and who deferred receipt of such awards.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit 10.1	-	Amendment No. 36 to the Pfizer Supplemental Savings ~~Plan.~~Plan
Exhibit 15	-	Accountants’ Acknowledgment.
Exhibit 31.1	-	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	-	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	-	Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	-	Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101:
EX-101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
EX-101.SCH EX-101.CAL EX-101.LAB EX-101.PRE EX-101.DEF		Inline XBRL Taxonomy Extension Schema Inline XBRL Taxonomy Extension Calculation Linkbase Inline XBRL Taxonomy Extension Label Linkbase Inline XBRL Taxonomy Extension Presentation Linkbase Inline XBRL Taxonomy Extension Definition Document
Exhibit 104		Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

SIGNATURE

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



		Pfizer Inc.
		(Registrant)


Dated:	~~November~~August 8, ~~2018~~2019	/s/ Loretta V. Cangialosi
		Loretta V. Cangialosi, Senior Vice President and Controller (Principal Accounting Officer and Duly Authorized Officer)

~~119~~111



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



Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.05 par value	PFE	New York Stock Exchange
0.000% Notes due 2020	PFE20A	New York Stock Exchange
0.250% Notes due 2022	PFE22	New York Stock Exchange
1.000% Notes due 2027	PFE27	New York Stock Exchange



~~YES~~ X Yes	~~NO ___~~x	No	☐



~~YES~~ X Yes	~~NO ___~~x	No	☐



~~2017~~2018 Financial Report	Financial Report for the fiscal year ended December 31, ~~2017,~~2018, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018
~~2017~~2018 Form 10-K	Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018
ACA (Also referred to as U.S. Healthcare Legislation)	U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
ACIP	Advisory Committee on Immunization Practices
ALK	anaplastic lymphoma kinase
Alliance revenues	Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us
Allogene	Allogene Therapeutics, Inc.
~~AMPA~~	~~α-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid~~
Anacor	Anacor Pharmaceuticals, Inc.
AOCI	Accumulated Other Comprehensive Income
Array	Array BioPharma Inc.
Astellas	Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc.
~~ASU~~Bamboo	~~Accounting Standards Update~~Bamboo Therapeutics, Inc.
~~ATM-AVI~~Biopharma	~~aztreonam-avibactam~~
~~Avillion~~	~~Avillion LLP~~
~~Bain Capital~~	~~Bain Capital Private Equity and Bain Capital Life Sciences~~
~~Biogen~~	~~Biogen Inc.~~Pfizer Biopharmaceuticals Group
BMS	Bristol-Myers Squibb Company
BRCA	BReast CAncer susceptibility gene
CAR T	chimeric antigen receptor T cell
CDC	U.S. Centers for Disease Control and Prevention
~~Cellectis~~cGMP	~~Cellectis S.A.~~
~~Cerevel~~	~~Cerevel Therapeutics, LLC~~
~~CIAS~~	~~cognitive impairment associated with schizophrenia~~current Good Manufacturing Practices
Citibank	Citibank, N.A.
~~CML~~	~~chronic myelogenous leukemia~~
Developed Markets	U.S., Western Europe, Japan, Canada, ~~Australia,~~ South Korea, Australia, Scandinavian countries, Finland and New Zealand
~~EEA~~EGFR	~~European Economic Area~~epidermal growth factor receptor
EH	Essential Health
EMA	European Medicines Agency
Emerging Markets	Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Eastern Europe, ~~Africa,~~ the Middle East, Africa, Central Europe and Turkey
EPS	earnings per share
EU	European Union
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FDA	U.S. Food and Drug Administration
GAAP	Generally Accepted Accounting Principles
GIST	gastrointestinal stromal tumors
GPD	Global Product Development organization
~~HER2-~~GSK	~~human epidermal growth factor receptor 2-negative~~GlaxoSmithKline plc
GS&Co.	Goldman, Sachs & Co. LLC
hGH-CTP	human growth hormone
HIS	Hospira Infusion Systems
Hisun Pfizer	Hisun Pfizer Pharmaceuticals Company Limited
Hospira	Hospira, Inc.
HR+	hormone receptor-positive
ICU Medical	ICU Medical, Inc.
IH	Innovative Health
IPR&D	in-process research and development
IRS	U.S. Internal Revenue Service



PART I. FINANCIAL INFORMATION	Page

Item 1.
Financial Statements

Condensed Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~October~~July 1, ~~2017~~2018	5

Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~October~~ July 1, ~~2017~~2018	6

Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	7

Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2019 and July 1, 2018	8

Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~October~~July 1, ~~2017~~2018	810

Notes to Condensed Consolidated Financial Statements	911

Review Report of Independent Registered Public Accounting Firm	5446

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	5547

Item 3.
Quantitative and Qualitative Disclosures About Market Risk	~~115~~107

Item 4.
Controls and Procedures	~~115~~107

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings	~~116~~108

Item 1A.
Risk Factors	~~116~~108

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	~~117~~109

Item 3.
Defaults Upon Senior Securities	~~117~~109

Item 4.
Mine Safety Disclosures	~~117~~109

Item 5.
Other Information	~~117~~109

Item 6.
Exhibits	~~118~~110

Signature	~~119~~111



IV	intravenous
Janssen	Janssen Biotech Inc.
J&J	Johnson & Johnson
King	King Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.)
LDL	low density lipoprotein



LEP	Legacy Established Products
LIBOR	London Interbank Offered Rate
Lilly	Eli Lilly & Company
LOE	loss of exclusivity
MCC	Merkel ~~Cell Carcinoma~~cell carcinoma
MCO	~~Managed Care Organization~~managed care organization
mCRC	metastatic colorectal cancer
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Medivation	Medivation LLC (formerly Medivation, Inc.)
Merck	Merck & Co., Inc.
Meridian	Meridian Medical Technologies, Inc.
Moody’s	Moody’s Investors Service
Mylan	Mylan N.V.
NDA	new drug application
~~NovaQuest~~	~~NovaQuest Co-Investment Fund V, L.P.~~
NSCLC	non-small cell lung cancer
NYSE	New York Stock Exchange
OPKO	OPKO Health, Inc.
OTC	over-the-counter
PARP	poly ADP ribose polymerase
PBM	~~Pharmacy Benefit Manager~~pharmacy benefit manager
Pharmacia	Pharmacia Corporation
PP&E	~~Property,~~property, plant & equipment
PsA	psoriatic arthritis
Quarterly Report on Form 10-Q	Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~June 30, ~~2018~~2019
RA	rheumatoid arthritis
RCC	renal cell carcinoma
R&D	research and development
~~RPI~~ROU	~~RPI Finance Trust~~right of use
Sandoz	Sandoz, Inc., a division of Novartis AG
SEC	U.S. Securities and Exchange Commission
~~Servier~~	~~Les Laboratoires Servier SAS~~
SFJ	SFJ Pharmaceuticals Group
Shire	Shire International GmbH
SI&A	~~Selling,~~selling, informational and administrative
~~SIP~~	~~Sterile Injectable Pharmaceuticals~~
S&P	Standard and Poor’s
~~StratCO~~	~~Strategy and Commercial Operations~~
~~Tax Cuts and Jobs Act or~~ TCJA	~~Legislation~~legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017
~~Teuto~~Therachon	~~Laboratório Teuto Brasileiro S.A.~~Therachon Holding AG
UC	ulcerative colitis
U.K.	United Kingdom
U.S.	United States
ViiV	ViiV Healthcare Limited
~~WRD~~WRDM	Worldwide Research, Development and ~~Development~~Medical


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


^(a)	Reclassified into Other (income)/deductions—net and Cost of sales in the condensed consolidated statements of income. For additional information on amounts reclassified into Cost of sales, see Note ~~7F.~~7E. Financial Instruments: Derivative Financial Instruments and Hedging Activities.



	PFIZER INC. SHAREHOLDERS
	Preferred Stock				Common Stock						Treasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)	Shares		Stated Value		Shares	Par Value		Add’l Paid-In Capital			Shares		Cost			Retained Earnings			Accum. Other Comp. Loss			Share- holders’ Equity			Non-controlling interests			Total Equity
Balance, March 31, 2019	466		$	19	9,358	$	468	$	86,635		(3,801	)	$	(110,781	)	$	93,388		$	(10,923	)	$	58,806		$	352		$	59,158
Net income																5,046						5,046			10			5,056
Other comprehensive income/(loss), net of tax																			(613		)	(613		)	3			(610		)
Cash dividends declared:
Common stock																(3,994		)				(3,994		)				(3,994		)
Preferred stock																—						—						—
Noncontrolling interests																						—			(8		)	(8		)
Share-based payment transactions					5	—		329			—		(6		)							324						324
Purchases of common stock											—		—									—						—
Preferred stock conversions and redemptions	(8	)	—					(1		)	—		—									(1		)				(1		)
Other								—			—		—			—			—			—			—			—
Balance, June 30, 2019	458		$	18	9,363	$	468	$	86,963		(3,801	)	$	(110,786	)	$	94,440		$	(11,535	)	$	59,568		$	357		$	59,924

	PFIZER INC. SHAREHOLDERS
	Preferred Stock				Common Stock						Treasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)	Shares		Stated Value		Shares	Par Value		Add’l Paid-In Capital			Shares		Cost			Retained Earnings			Accum. Other Comp. Loss			Share- holders’ Equity			Non-controlling interests			Total Equity
Balance April 1, 2018	513		$	21	9,299	$	465	$	84,599		(3,437	)	$	(95,460	)	$	89,961		$	(9,402	)	$	70,184		$	358		$	70,541
Net income																3,872						3,872			7			3,879
Other comprehensive income/(loss), net of tax																			(602		)	(602		)	(11		)	(613		)
Cash dividends declared:
Common stock																(3,970		)				(3,970		)				(3,970		)
Preferred stock																—						—						—
Noncontrolling interests																						—			(7		)	(7		)
Share-based payment transactions					4	—		300			—		(4		)							297						297
Purchases of common stock											—		—									—						—
Preferred stock conversions and redemptions	(11	)	—					(1		)	—		—									(1		)				(1		)
Other								—			—		—			(2		)	—			(2		)	—			(2		)
Balance, July 1, 2018	502		$	20	9,303	$	465	$	84,898		(3,438	)	$	(95,463	)	$	89,860		$	(10,003	)	$	69,778		$	346		$	70,124



Adopting the standard related to leases impacted our prior period condensed consolidated balance sheet as follows:
(MILLIONS OF DOLLARS)	As Previously Reported Balance at December 31, 2018		Effect of Change Higher/(Lower)			Balance at January 1, 2019
Other current assets	$	2,461	$	(1	)	$	2,460
Noncurrent deferred tax assets and other noncurrent tax assets	1,924		(11		)	1,913
Other noncurrent assets	2,799		1,351			4,149
Other current liabilities	10,753		258			11,011
Other noncurrent liabilities	5,850		1,060			6,910
Retained earnings	89,554		20			89,574



Adoption of the standard related to pension and postretirement benefit costs impacted our prior period condensed consolidated statements of income as follows:
	Three Months Ended October 1, 2017
(MILLIONS OF DOLLARS)	As Previously Reported			Effect of Change Higher/(Lower)			As Restated
Cost of sales	$	2,847		$	(3	)	$	2,844
Selling, informational and administrative expenses	3,500			4			3,504
Research and development expenses	1,859			6			1,865
Restructuring charges and certain acquisition-related costs	149			(35		)	114
Other (income)/deductions––net	51			28			79
Income from continuing operations before provision for taxes on income	3,585			—			3,585

	Nine Months Ended October 1, 2017
(MILLIONS OF DOLLARS)	As Previously Reported			Effect of Change Higher/(Lower)			As Restated
Cost of sales	$	7,980		$	(9	)	$	7,972
Selling, informational and administrative expenses	10,233			16			10,249
Research and development expenses	5,346			21			5,367
Restructuring charges and certain acquisition-related costs	377			(110		)	267
Other (income)/deductions––net	(16		)	81			65
Income from continuing operations before provision for taxes on income	11,351			—			11,351



Adoption of the standards impacted our condensed consolidated balance sheet as follows:
				Effect of New Accounting Standards Higher/(Lower)
(MILLIONS OF DOLLARS)	As Previously Reported Balance at December 31, 2017			Revenues			Financial Assets and Liabilities			Income Tax Accounting			Reclassification of Certain Tax Effects from AOCI			Balance at January 1, 2018
Trade accounts receivable	$	8,221		$	13		$	—		$	—		$	—		$	8,234
Inventories	7,578			(11		)	—			—			—			7,567
Current tax assets	3,050			(11		)	—			(3		)	—			3,036
Noncurrent deferred tax assets and other noncurrent tax assets	1,855			(17		)	—			—			—			1,838
Other noncurrent assets	3,227			—			—			(204		)	—			3,023
Other current liabilities	11,115			(123		)	—			—			—			10,992
Noncurrent deferred tax liabilities	3,900			106			—			(18		)	—			3,988
Other noncurrent liabilities	6,149			(459		)	—			—			—			5,690
Retained earnings	85,291			450			419			(189		)	495			86,466
Accumulated other comprehensive loss	(9,321		)	—			(419		)	—			(495		)	(10,235		)



Adoption of the standards related to the classification of certain transactions in the statement of cash flows and the presentation of restricted cash in the statement of cash flows impacted our condensed consolidated statement of cash flows as follows:
	Nine Months Ended October 1, 2017
				Effect of New Accounting Standards Inflow/(Outflow)
(MILLIONS OF DOLLARS)	As Previously Reported			Cash Flow Classification			Restricted Cash			As Restated
Operating Activities
Other adjustments, net	$	(561	)	$	(43	)	$	—		$	(604	)
Other changes in assets and liabilities, net of acquisitions and divestitures	(3,644		)	—			28			(3,616		)
Investing Activities
Proceeds from redemptions/sales of short-term investments	5,783			—			(5		)	5,778
Proceeds from redemptions/sales of long-term investments	2,417			—			(14		)	2,403
Financing Activities
Principal payments on short-term borrowings	(7,691		)	33			—			(7,659		)
Net proceeds from short-term borrowings with original maturities of three months or less	555			10			—			566
Net increase in cash and cash equivalents and restricted cash and cash equivalents	184			—			9			193
Cash and cash equivalents and restricted cash and cash equivalents, beginning	2,595			—			70			2,666
Cash and cash equivalents and restricted cash and cash equivalents, ending	2,779			—			79			2,858



~~YES ____~~Yes	NO X ☐	No	x



The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:
(MILLIONS OF DOLLARS)	September 30, 2018		December 31, 2017
Cash and cash equivalents	$	3,559	$	1,342
Restricted cash and cash equivalents in Short-term investments	40		—
Restricted cash and cash equivalents in Long-term investments	59		—
Restricted cash and cash equivalents in Other current assets	—		14
Restricted cash and cash equivalents in Other noncurrent assets	—		75
Total cash and cash equivalents and restricted cash and cash equivalents shown in the condensed consolidated balance sheets	$	3,658	$	1,431

									The following table provides information about the balance sheet classification of these accruals:
(MILLIONS OF DOLLARS)	September 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018
Reserve against Trade accounts receivable, less allowance for doubtful accounts	$	1,297	$	1,352	$	1,226	$	1,288

Other current liabilities:
Accrued rebates	3,235		2,674		3,256		3,208
Other accruals	641		512		620		531

Other noncurrent liabilities	374		385		472		399
Total accrued rebates and other accruals	$	5,548	$	4,923	$	5,574	$	5,426



For operating leases, the ROU assets and liabilities are presented in our condensed consolidated balance sheet as follows:
(MILLIONS OF DOLLARS)	Balance Sheet Classification	Balance at June 30, 2019
ROU assets	Other noncurrent assets	$	1,273
Lease liabilities (short-term)	Other current liabilities	263
Lease liabilities (long-term)	Other noncurrent liabilities	1,026



Our total lease costs are as follows:
	Three Months Ended			Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			June 30, 2019
Operating lease cost	$	100		$	200
Variable lease cost	59			118
Sublease income	(11		)	(21		)
Total lease cost	$	148		$	297



Other supplemental information includes the following:
(MILLIONS OF DOLLARS)	Weighted-Average Remaining Contractual Lease Term (Years) as of June 30, 2019	Weighted-Average Discount Rate as of June 30, 2019		Six Months Ended June 30, 2019
Operating leases	7.1	3.7	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases				$	156
ROU assets obtained in exchange for new operating lease liabilities				$	122



The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the condensed consolidated balance sheet as of June 30, 2019:
(MILLIONS OF DOLLARS)
Period	Operating Lease Liabilities
Next one year^(a)	$	302
1-2 years	254
2-3 years	216
3-4 years	171
4-5 years	122
Thereafter	419
Total undiscounted lease payments	1,483
Less: Imputed interest	195
Present Value of Minimum Lease Payments	1,288
Less: Current portion	263
Noncurrent portion	$	1,026


^(a)	Reflects lease payments due within 12 months subsequent to the balance sheet date.



As of December 31, 2018, the future minimum rental commitments under non-cancelable operating leases follow:
(MILLIONS OF DOLLARS)	2019		2020		2021		2022		2023		After 2023
Lease commitments	$	300	$	252	$	210	$	267	$	248	$	2,040



The amounts associated with the Consumer Healthcare business, as well as other assets classified as held for sale consisted of the following:
(MILLIONS OF DOLLARS)	June 30, 2019		December 31, 2018
Assets Held for Sale
Cash and cash equivalents	$	53	$	32
Trade accounts receivable, less allowance for doubtful accounts	555		532
Inventories	580		538
Other current assets	56		56
PP&E	714		675
Identifiable intangible assets, less accumulated amortization	5,753		5,763
Goodwill	1,965		1,972
Noncurrent deferred tax assets and other noncurrent tax assets	55		54
Other noncurrent assets	91		57
Total Consumer Healthcare assets held for sale	9,821		9,678
Other assets held for sale^(a)	56		46
Assets held for sale	$	9,877	$	9,725

Liabilities Held for Sale

Trade accounts payable	$	348	$	406
Income taxes payable	63		39
Accrued compensation and related items	79		93
Other current liabilities	334		353
Pension benefit obligations, net	41		39
Postretirement benefit obligations, net	34		33
Noncurrent deferred tax liabilities	1,036		870
Other noncurrent liabilities	74		56
Total Consumer Healthcare liabilities held for sale	$	2,009	$	1,890


^(a)	~~The asset impairment charges for the three and nine months ended October 1, 2017 are largely associated with our acquisitions of Hospira and Medivation.~~


•	For the first six months of 2019, Biopharma ($48 million credit); Upjohn ($22 million credit); and Other ($63 million credit).


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



The following table provides the components of and changes in our restructuring accruals:
(MILLIONS OF DOLLARS)	Employee Termination Costs			Asset Impairment Charges		Exit Costs			Accrual
Balance, December 31, 2018^(a)	$	1,203		$	—	$	49		$	1,252
Provision/(credit)^(b)	(167		)	—		34			(134		)
Utilization and other^(c)	(303		)	—		(18		)	(321		)
Balance, June 30, 2019^(d)	$	733		$	—	$	64		$	797


^(a)	Included in Other current liabilities ($~~643~~823 million) and Other noncurrent liabilities ($~~462~~428 million).


^(b)	Includes the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of a U.S. IRS audit for multiple tax years. See Note 5B for additional information.


^(c)(d)	Included in Other current liabilities ($~~397~~593 million) and Other noncurrent liabilities ($~~399~~204 million).



The following table provides additional information about the intangible asset that was impaired during 2018 in Other (income)/deductions:
	Fair Value^(a)								Nine Months Ended September 30, 2018
(MILLIONS OF DOLLARS)	Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––Developed technology right, finite-lived^(b)	$	35	$	—	$	—	$	35	$	31



The following table represents our investments by classification type:
(MILLIONS OF DOLLARS)	June 30, 2019		December 31, 2018
Short-term investments
Equity securities	$	4,753	$	1,600
Available-for-sale debt securities	5,027		15,091
Held-to-maturity debt securities	1,347		1,003
Total Short-term investments	$	11,128	$	17,694

Long-term investments
Equity securities	$	1,425	$	1,223
Trading equity funds securities	53		50
Available-for-sale debt securities	430		491
Held-to-maturity debt securities	47		59
Private equity investments at cost, as adjusted, or equity method	951		944
Total Long-term investments	$	2,905	$	2,767
Held-to-maturity cash equivalents	$	163	$	199



At June 30, 2019, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt and equity securities at June 30, 2019 and December 31, 2018 is as follows, including, as of June 30, 2019, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	June 30, 2019																	December 31, 2018
			Gross Unrealized							Maturities (in Years)										Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Total		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	3,056	$	9	$	(7	)	$	3,059	$	3,014	$	45	$	—	$	3,059	$	9,754	$	7	$	(58	)	$	9,703
Corporate and other^(a)	2,409		1		(12		)	2,398		2,013		382		3		2,398		5,905		—		(27		)	5,878
Held-to-maturity debt securities
Time deposits and other	693		—		—			693		646		10		37		693		668		—		—			668
Government and agency––non-U.S.	865		—		—			865		864		—		—		865		592		—		—			592
Total debt securities	$	7,023	$	10	$	(19	)	$	7,014	$	6,537	$	437	$	40	$	7,014	$	16,920	$	8	$	(85	)	$	16,842



The following table presents the net unrealized (gains) and losses for the period that relate to equity securities still held at the reporting date, calculated as follows:
	Three Months Ended						Six Months Ended
(MILLIONS OF DOLLARS)	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Net gains recognized during the period on investments in equity securities^(a)	$	(36	)	$	(257	)	$	(147	)	$	(375	)
Less: Net gains recognized during the period on equity securities sold during the period	(6		)	(27		)	(10		)	(46		)
Net unrealized gains during the reporting period on equity securities still held at the reporting date	$	(31	)	$	(230	)	$	(137	)	$	(328	)