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PFE Pfizer

Filed: 12 Aug 21, 4:01pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 4, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______


COMMISSION FILE NUMBER 1-3619

----

PFIZER INC.
(Exact name of registrant as specified in its charter)
Delaware13-5315170
(State of Incorporation)(I.R.S. Employer Identification No.)

235 East 42nd Street, New York, New York  10017
(Address of principal executive offices)  (zip code)
(212) 733-2323
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.05 par valuePFENew York Stock Exchange
0.250% Notes due 2022PFE22New York Stock Exchange
1.000% Notes due 2027PFE27New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesxNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesxNo

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

Large Accelerated filer x              Accelerated filer                 Non-accelerated filer            Smaller reporting company      Emerging growth company  

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

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

At August 9, 2021, 5,606,688,356 shares of the issuer’s voting common stock were outstanding.



TABLE OF CONTENTS
2


DEFINED TERMS

Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this Form 10-Q (defined below) refer to Pfizer Inc. and its subsidiaries. References to “Notes” in this Form 10-Q are to the notes to the condensed or consolidated financial statements in this Form 10-Q or our 2020 Form 10-K. We also have used several other terms in this Form 10-Q, most of which are explained or defined:
2020 Form 10-KAnnual Report on Form 10-K for the fiscal year ended December 31, 2020
ACIPAdvisory Committee on Immunization Practices
ALKanaplastic lymphoma kinase
Alliance revenuesRevenues from alliance agreements under which we co-promote products discovered or developed by other companies or us
AllogeneAllogene Therapeutics, Inc.
ArrayArray BioPharma Inc.
AstellasAstellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc.
ATTR-CMtransthyretin amyloid cardiomyopathy
BioNTechBioNTech SE
BLABiologics License Application
BMSBristol-Myers Squibb Company
BNT162b2Pfizer-BioNTech COVID-19 Vaccine
BODBoard of Directors
CDCU.S. Centers for Disease Control and Prevention
CMAconditional marketing authorization
Consumer Healthcare JVGSK Consumer Healthcare JV
COVID-19novel coronavirus disease of 2019
Developed EuropeIncludes the following markets: Western Europe, Scandinavian countries and Finland
Developed MarketsIncludes the following markets: U.S., Developed Europe, Japan, Canada, Australia, South Korea and New Zealand
Developed Rest of WorldIncludes the following markets: Japan, Canada, Australia, South Korea and New Zealand
EMAEuropean Medicines Agency
Emerging MarketsIncludes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Eastern Europe, Central Europe, the Middle East, Africa and Turkey
EPSearnings per share
EUEuropean Union
EUAemergency use authorization
Exchange ActSecurities Exchange Act of 1934, as amended
FDAU.S. Food and Drug Administration
Form 10-QQuarterly Report on Form 10-Q for the quarterly period ended July 4, 2021
GAAPGenerally Accepted Accounting Principles
GISTgastrointestinal stromal tumors
GSKGlaxoSmithKline plc
HospiraHospira, Inc.
IPR&Din-process research and development
IRSU.S. Internal Revenue Service
JVjoint venture
KingKing Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.)
LIBORLondon Interbank Offered Rate
LillyEli Lilly & Company
LOEloss of exclusivity
MCOmanaged care organization
mCRCmetastatic colorectal cancer
mCRPCmetastatic castration-resistant prostate cancer
mCSPCmetastatic castration-sensitive prostate cancer
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MeridianMeridian Medical Technologies, Inc.
MTMmark-to-market
MylanMylan N.V.
Mylan-Japan collaborationa pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan that terminated on December 21, 2020
3


MyovantMyovant Sciences Ltd.
nmCRPCnon-metastatic castration-resistant prostate cancer
NSCLCnon-small cell lung cancer
OPKOOPKO Health, Inc.
OTCover-the-counter
PBMpharmacy benefit manager
PDUFAPrescription Drug User Fee Act
PGSPfizer Global Supply
PharmaciaPharmacia Corporation
PsApsoriatic arthritis
QTDQuarter-to-date or three months ended
RArheumatoid arthritis
RCCrenal cell carcinoma
R&Dresearch and development
SandozSandoz, Inc., a division of Novartis AG
SECU.S. Securities and Exchange Commission
SI&Aselling, informational and administrative
UCulcerative colitis
U.K.United Kingdom
U.S.United States
Upjohn BusinessPfizer’s global, primarily off-patent branded and generics business, which includes a portfolio of 20 globally recognized solid oral dose brands, including Lipitor, Lyrica, Norvasc, Celebrex and Viagra, as well as a U.S.-based generics platform, Greenstone, that was spun-off on November 16, 2020 and combined with Mylan to create Viatris
ValnevaValneva SE
ViatrisViatris Inc.
YTDYear-to-date or six months ended
This Form 10-Q 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.
Some amounts in this Form 10-Q may not add due to rounding. All percentages have been calculated using unrounded amounts. All trademarks mentioned are the property of their owners.
The information contained on our website, our Facebook, YouTube and LinkedIn pages or our Twitter accounts, or any third-party website, is not incorporated by reference into this Form 10-Q.
4


PART I.  FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 Three Months EndedSix Months Ended
(MILLIONS, EXCEPT PER COMMON SHARE DATA)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Revenues$18,977 $9,864 $33,559 $19,947 
Costs and expenses:
Cost of sales(a)
7,049 1,826 11,259 3,766 
Selling, informational and administrative expenses(a)
2,928 2,659 5,712 5,200 
Research and development expenses(a)
2,459 2,078 4,473 3,750 
Amortization of intangible assets931 869 1,802 1,718 
Restructuring charges and certain acquisition-related costs(1)360 22 414 
(Gain) on completion of Consumer Healthcare JV transaction(6)
Other (income)/deductions––net(998)(955)(2,001)(764)
Income from continuing operations before provision for taxes on income6,609 3,026 12,291 5,868 
Provision for taxes on income1,043 422 1,849 782 
Income from continuing operations5,565 2,604 10,443 5,087 
Income from discontinued operations––net of tax24 893 32 1,774 
Net income before allocation to noncontrolling interests5,589 3,497 10,475 6,860 
Less: Net income attributable to noncontrolling interests26 35 17 
Net income attributable to Pfizer Inc. common shareholders$5,563 $3,489 $10,440 $6,843 
Earnings per common share––basic:
    
Income from continuing operations attributable to Pfizer Inc. common shareholders$0.99 $0.47 $1.86 $0.91 
Income from discontinued operations––net of tax0.16 0.01 0.32 
Net income attributable to Pfizer Inc. common shareholders$0.99 $0.63 $1.87 $1.23 
Earnings per common share––diluted:
    
Income from continuing operations attributable to Pfizer Inc. common shareholders$0.98 $0.46 $1.84 $0.90 
Income from discontinued operations––net of tax0.16 0.01 0.32 
Net income attributable to Pfizer Inc. common shareholders$0.98 $0.62 $1.84 $1.22 
Weighted-average shares––basic5,598 5,554 5,591 5,550 
Weighted-average shares––diluted5,678 5,619 5,670 5,616 
(a)Exclusive of amortization of intangible assets, except as disclosed in Note 9 in this Form 10-Q and Note 1L in our 2020 Form 10-K.
See Accompanying Notes.
5


PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Net income before allocation to noncontrolling interests$5,589 $3,497 $10,475 $6,860 
Foreign currency translation adjustments, net36 (173)501 (1,430)
Unrealized holding gains/(losses) on derivative financial instruments, net(248)213 (35)(288)
Reclassification adjustments for (gains)/losses included in net income(a)
(21)(186)238 (167)
 (270)27 203 (455)
Unrealized holding gains/(losses) on available-for-sale securities, net59 42 138 (9)
Reclassification adjustments for (gains)/losses included in net income(b)
61 44 (181)59 
 120 87 (43)50 
Reclassification adjustments related to amortization of prior service costs and other, net(39)(45)(79)(89)
Other(1)(5)
 (41)(40)(84)(85)
Other comprehensive income/(loss), before tax(155)(100)577 (1,920)
Tax provision/(benefit) on other comprehensive income/(loss)(63)87 21 (293)
Other comprehensive income/(loss) before allocation to noncontrolling interests$(92)$(187)$556 $(1,628)
Comprehensive income/(loss) before allocation to noncontrolling interests$5,498 $3,310 $11,031 $5,233 
Less: Comprehensive income/(loss) attributable to noncontrolling interests28 (4)38 
Comprehensive income/(loss) attributable to Pfizer Inc.$5,469 $3,314 $10,992 $5,228 
(a)Reclassified into Other (income)/deductions—net and Cost of sales. See Note 7E.
(b)Reclassified into Other (income)/deductions—net.
See Accompanying Notes.
6


PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(MILLIONS)July 4,
2021
December 31, 2020
(Unaudited)
Assets
Cash and cash equivalents$2,372 $1,784 
Short-term investments19,328 10,437 
Trade accounts receivable, less allowance for doubtful accounts: 2021—$500; 2020—$50810,587 7,930 
Inventories8,948 8,046 
Current tax assets3,761 3,264 
Other current assets3,818 3,605 
Total current assets48,814 35,067 
Equity-method investments16,608 16,856 
Long-term investments4,334 3,406 
Property, plant and equipment, less accumulated depreciation: 2021—$15,328; 2020—$14,81214,224 13,900 
Identifiable intangible assets27,323 28,471 
Goodwill49,867 49,577 
Noncurrent deferred tax assets and other noncurrent tax assets2,694 2,383 
Other noncurrent assets6,056 4,569 
Total assets$169,920 $154,229 
Liabilities and Equity  
Short-term borrowings, including current portion of long-term debt: 2021—$3,687; 2020—$2,002$3,888 $2,703 
Trade accounts payable4,327 4,309 
Dividends payable2,184 2,162 
Income taxes payable1,742 1,049 
Accrued compensation and related items2,015 3,058 
Deferred revenues4,291 1,113 
Other current liabilities17,217 11,527 
Total current liabilities35,664 25,920 
Long-term debt35,354 37,133 
Pension benefit obligations4,305 4,766 
Postretirement benefit obligations634 645 
Noncurrent deferred tax liabilities4,161 4,063 
Other taxes payable11,259 11,560 
Other noncurrent liabilities8,228 6,669 
Total liabilities99,605 90,756 
Commitments and Contingencies00
Common stock472 470 
Additional paid-in capital89,336 88,674 
Treasury stock(111,356)(110,988)
Retained earnings96,346 90,392 
Accumulated other comprehensive loss(4,758)(5,310)
Total Pfizer Inc. shareholders’ equity70,042 63,238 
Equity attributable to noncontrolling interests273 235 
Total equity70,315 63,473 
Total liabilities and equity$169,920 $154,229 
See Accompanying Notes.
7


PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
PFIZER INC. SHAREHOLDERS
Preferred StockCommon StockTreasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)SharesStated ValueSharesPar ValueAdd’l
Paid-In Capital
SharesCostRetained EarningsAccum. Other Comp.
Loss
Share-
holders’ Equity
Non-controlling interestsTotal Equity
Balance, April 4, 2021$9,445 $472 $89,002 (3,851)$(111,349)$95,158 $(4,664)$68,620 $245 $68,865 
Net income5,563 5,563 26 5,589 
Other comprehensive income/(loss), net of tax(94)(94)(92)
Cash dividends declared, per share: $0.78
Common stock(4,293)(4,293)(4,293)
Preferred stock— 
Noncontrolling interests— — 
Share-based payment transactions— 334 — (7)(76)251 251 
Purchases of common stock— — — 
Preferred stock conversions and redemptions— — — — — — 
Other— — — (7)(6)— (6)
Balance, July 4, 2021$9,450 $472 $89,336 (3,851)$(111,356)$96,346 $(4,758)$70,042 $273 $70,315 
PFIZER INC. SHAREHOLDERS
Preferred StockCommon StockTreasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)SharesStated ValueSharesPar ValueAdd’l
Paid-In Capital
SharesCostRetained EarningsAccum. Other Comp.
Loss
Share-
holders’ Equity
Non-controlling interestsTotal Equity
Balance, March 29, 2020417 $17 9,393 $470 $87,680 (3,841)$(111,010)$94,680 $(6,808)$65,028 $312 $65,341 
Net income3,489 3,489 3,497 
Other comprehensive income/(loss), net of tax(174)(174)(12)(187)
Cash dividends declared, per share: $0.76
Common stock(4,223)(4,223)(4,223)
Preferred stock— — 
Noncontrolling interests— (80)(80)
Share-based payment transactions— 221 — 222 222 
Purchases of common stock— — — 
Preferred stock conversions and redemptions(417)(17)(14)31 — 
Other— — — — — — 
Balance, June 28, 2020$9,394 $470 $87,886 (3,840)$(110,978)$93,946 $(6,983)$64,342 $228 $64,570 
See Accompanying Notes.
8



PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
PFIZER INC. SHAREHOLDERS
Preferred StockCommon StockTreasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)SharesStated ValueSharesPar ValueAdd’l
Paid-In Capital
SharesCostRetained EarningsAccum. Other Comp.
Loss
Share-
holders’ Equity
Non-controlling interestsTotal Equity
Balance, January 1, 2021$9,407 $470 $88,674 (3,840)$(110,988)$90,392 $(5,310)$63,238 $235 $63,473 
Net income10,440 10,440 35 10,475 
Other comprehensive income/(loss), net of tax552 552 556 
Cash dividends declared, per share: $0.78
Common stock(4,377)(4,377)(4,377)
Preferred stock— 
Noncontrolling interests— — 
Share-based payment transactions43 662 (11)(368)(76)221 221 
Purchases of common stock— — — 
Preferred stock conversions and redemptions— — — — — — 
Other— — — (33)(33)— (33)
Balance, July 4, 2021$9,450 $472 $89,336 (3,851)$(111,356)$96,346 $(4,758)$70,042 $273 $70,315 
PFIZER INC. SHAREHOLDERS
Preferred StockCommon StockTreasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)SharesStated ValueSharesPar ValueAdd’l
Paid-In Capital
SharesCostRetained EarningsAccum. Other Comp.
Loss
Share-
holders’ Equity
Non-controlling interestsTotal Equity
Balance, January 1, 2020431 $17 9,369 $468 $87,428 (3,835)$(110,801)$91,397 $(5,367)$63,143 $303 $63,447 
Net income6,843 6,843 17 6,860 
Other comprehensive income/(loss), net of tax(1,616)(1,616)(12)(1,628)
Cash dividends declared, per share: $0.76
Common stock(4,294)(4,294)(4,294)
Preferred stock— — 
Noncontrolling interests— (80)(80)
Share-based payment transactions25 473 (6)(208)266 266 
Purchases of common stock— — — 
Preferred stock conversions and redemptions(431)(17)(15)31 (1)(1)
Other— — — — — — 
Balance, June 28, 2020$9,394 $470 $87,886 (3,840)$(110,978)$93,946 $(6,983)$64,342 $228 $64,570 
See Accompanying Notes.
9


PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
Operating Activities  
Net income before allocation to noncontrolling interests$10,475 $6,860 
Income from discontinued operations—net of tax32 1,774 
Net income from continuing operations before allocation to noncontrolling interests10,443 5,087 
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:  
Depreciation and amortization2,554 2,365 
Asset write-offs and impairments77 58 
Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed(6)
Deferred taxes from continuing operations47 33 
Share-based compensation expense394 244 
Benefit plan contributions in excess of expense/income(779)(526)
Other adjustments, net(1,305)(370)
Other changes in assets and liabilities, net of acquisitions and divestitures4,398 (2,056)
Net cash provided by operating activities from continuing operations15,828 4,829 
Net cash provided by operating activities from discontinued operations1,860 
Net cash provided by operating activities15,837 6,688 
Investing Activities  
Purchases of property, plant and equipment(1,094)(906)
Purchases of short-term investments(15,982)(5,141)
Proceeds from redemptions/sales of short-term investments7,572 4,595 
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less(505)(537)
Purchases of long-term investments(100)(168)
Proceeds from redemptions/sales of long-term investments297 536 
Other investing activities, net(72)(9)
Net cash provided by/(used in) investing activities from continuing operations(9,884)(1,630)
Net cash provided by/(used in) investing activities from discontinued operations(11,452)
Net cash provided by/(used in) investing activities(9,884)(13,082)
Financing Activities  
Proceeds from short-term borrowings12,352 
Principal payments on short-term borrowings(13,166)
Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less(499)(2,314)
Proceeds from issuance of long-term debt5,194 
Principal payments on long-term debt(2,181)
Cash dividends paid(4,355)(4,216)
Other financing activities, net(509)(163)
Net cash provided by/(used in) financing activities from continuing operations(5,364)(4,493)
Net cash provided by/(used in) financing activities from discontinued operations11,452 
Net cash provided by/(used in) financing activities(5,364)6,959 
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents(70)
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents593 495 
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period1,825 1,350 
Cash and cash equivalents and restricted cash and cash equivalents, at end of period$2,418 $1,845 
Supplemental Cash Flow Information
Cash paid/(received) during the period for:  
Income taxes$2,188 $1,290 
Interest paid798 910 
Interest rate hedges(67)(66)
Non-cash transaction:
Right-of-use assets obtained in exchange for lease liabilities$1,204 $74 
See Accompanying Notes.
10


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

Note 1. Basis of Presentation and Significant Accounting Policies

A. Basis of Presentation

We prepared these condensed consolidated financial statements in conformity with U.S. GAAP, consistent in all material respects with those applied in our 2020 Form 10-K, except as disclosed in Note 1C. As permitted under the SEC requirements for interim reporting, certain footnotes or other financial information have been condensed or omitted.

These financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods presented. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2020 Form 10-K. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three and six months ended May 30, 2021 and May 24, 2020, and for U.S. subsidiaries is as of and for the three and six months ended July 4, 2021 and June 28, 2020.
Business development activities impacted financial results in the periods presented. See Note 1A in our 2020 Form 10-K, and Note 2. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. For additional information, see Note 2B in our 2020 Form 10-K. On December 21, 2020, which fell in Pfizer’s international first quarter of 2021, Pfizer and Viatris completed the termination of the Mylan-Japan collaboration pursuant to an agreement dated November 13, 2020 and we transferred related inventories and operations that were part of the Mylan-Japan collaboration to Viatris. As a result, the financial position and results of operations of the Upjohn Business and the Mylan-Japan collaboration are presented as discontinued operations. Prior-period information has been restated to reflect our current organization structure.
B. New Accounting Standard Adopted in 2021
On January 1, 2021, we adopted a new accounting standard for income tax that eliminates certain exceptions to the guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.
For information on new accounting standards adopted in 2020, see Note 1B in our 2020 Form 10-K.

C. Change in Accounting Principle

In the first quarter of 2021, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of our pension and postretirement plans (MTM Accounting). Under the prior policy, we deferred recognition of these gains and losses in Accumulated other comprehensive loss. The accumulated actuarial gains/losses outside of a “corridor” were then amortized into net periodic benefit costs over the average remaining service period or the average life expectancy of participants. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented, and as of January 1, 2020, resulted in a cumulative effect decrease to Retained earnings of $6.3 billion, with a corresponding offset to Accumulated other comprehensive loss. Each time a pension or postretirement plan is remeasured, the actuarial gain or loss is recognized immediately and classified as Other (income)/deductions––net.

We believe that MTM Accounting is a more preferable policy as it provides improved transparency of results and performance, better alignment with fair value accounting principles and a better reflection of current economic and interest rate trends on plan investments and assumptions and the actuarial impact of plan remeasurements.

11


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The impacts of the adjustments on our condensed consolidated financial statements are summarized as follows:
Three Months Ended
July 4, 2021June 28, 2020
(MILLIONS, EXCEPT PER COMMON SHARE DATA)Previous
Accounting
Principle
Impact of ChangeAs ReportedPrevious Accounting PrincipleImpact of ChangeAs Adjusted
Condensed Consolidated Statements of Income:
Other (income)/deductions––net$(916)$(82)$(998)$(873)$(82)$(955)
Income from continuing operations before provision for taxes on income6,527 82 6,609 2,944 82 3,026 
Provision for taxes on income1,025 18 1,043 396 26 422 
Income from discontinued operations––net of tax24 24 887 893 
Net income before allocation to noncontrolling interests5,526 63 5,589 3,434 62 3,497 
Net income attributable to Pfizer Inc. common shareholders5,500 63 5,563 3,426 62 3,489 
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders$0.98 $0.01 $0.99 $0.46 $0.01 $0.47 
Income from discontinued operations––net of tax0.16 0.16 
Net income attributable to Pfizer Inc. common shareholders0.98 0.01 0.99 0.62 0.01 0.63 
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders$0.97 $0.01 $0.98 $0.45 $0.01 $0.46 
Income from discontinued operations––net of tax0.16 0.16 
Net income attributable to Pfizer Inc. common shareholders0.97 0.01 0.98 0.61 0.01 0.62 
Condensed Consolidated Statements of Comprehensive Income:
Foreign currency translation adjustments, net$61 $(25)$36 $(242)$68 $(173)
Benefit plans: actuarial gains/(losses), net(2)(5)
Reclassification adjustments related to amortization74 (74)67 (67)
Reclassification adjustments related to settlements, net(3)13 (13)
Other(25)25 68 (68)
Tax provision/(benefit) on other comprehensive income/(loss)(4)(59)(63)113 (26)87 
Six Months Ended
July 4, 2021June 28, 2020
(MILLIONS, EXCEPT PER COMMON SHARE DATA)Previous
Accounting
Principle
Impact of ChangeAs ReportedPrevious Accounting PrincipleImpact of ChangeAs Adjusted
Condensed Consolidated Statements of Income:
Other (income)/deductions––net$(1,773)$(228)$(2,001)$(657)$(107)$(764)
Income from continuing operations before provision for taxes on income12,063 228 12,291 5,761 107 5,868 
Provision for taxes on income1,798 51 1,849 751 30 782 
Income from discontinued operations––net of tax32 32 1,835 (61)1,774 
Net income before allocation to noncontrolling interests10,298 177 10,475 6,845 16 6,860 
Net income attributable to Pfizer Inc. common shareholders10,263 177 10,440 6,828 16 6,843 
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders$1.83 $0.03 $1.86 $0.90 $0.01 $0.91 
Income from discontinued operations––net of tax0.01 0.01 0.33 (0.01)0.32 
Net income attributable to Pfizer Inc. common shareholders1.84 0.03 1.87 1.23 1.23 
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders$1.81 $0.03 $1.84 $0.89 $0.01 $0.90 
Income from discontinued operations––net of tax0.01 0.01 0.33 (0.01)0.32 
Net income attributable to Pfizer Inc. common shareholders1.81 0.03 1.84 1.22 1.22 
12


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Six Months Ended
July 4, 2021June 28, 2020
(MILLIONS)Previous
Accounting
Principle
Impact of ChangeAs ReportedPrevious Accounting PrincipleImpact of ChangeAs Adjusted
Condensed Consolidated Statements of Comprehensive Income:
Foreign currency translation adjustments, net$607 $(106)$501 $(1,513)$84 $(1,430)
Benefit plans: actuarial gains/(losses), net45 (45)(160)160 
Reclassification adjustments related to amortization148 (148)133 (133)
Reclassification adjustments related to settlements, net23 (23)66 (66)
Other(106)106 84 (84)
Tax provision/(benefit) on other comprehensive income/(loss)69 (47)21 (265)(28)(293)
Condensed Consolidated Statements of Cash Flows:
Deferred taxes from continuing operations$(4)$51 $47 $$30 $33 
Benefit plan contributions in excess of expense/income(551)(228)(779)(419)(107)(526)
July 4, 2021December 31, 2020
(MILLIONS)Previous Accounting PrincipleImpact of ChangeAs ReportedPrevious Accounting PrincipleImpact of ChangeAs Adjusted
Condensed Consolidated Balance Sheets:
Noncurrent deferred tax assets and other noncurrent tax assets$2,697 $(3)$2,694 $2,383 $$2,383 
Other noncurrent assets6,044 12 6,056 4,569 4,569 
Pension benefit obligations4,305 (1)4,305 4,766 4,766 
Retained earnings96,169 177 96,346 96,770 (6,378)90,392 
Accumulated other comprehensive loss(4,589)(168)(4,758)(11,688)6,378 (5,310)
D. Revenues and Trade Accounts Receivable
Customers––Our prescription pharmaceutical products are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. In the U.S., we primarily sell our vaccine products directly to the federal government, CDC, wholesalers, individual provider offices, retail pharmacies and integrated delivery networks. Outside the U.S., we primarily sell our vaccines to government and non-government institutions.
Deductions from Revenues––Our accruals for Medicare, Medicaid and related state program and performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts are as follows:
(MILLIONS)July 4,
2021
December 31, 2020
Reserve against Trade accounts receivable, less allowance for doubtful accounts
$959 $861 
Other current liabilities:
Accrued rebates3,301 3,017 
Other accruals443 436 
Other noncurrent liabilities384 399 
Total accrued rebates and other sales-related accruals$5,087 $4,712 
Trade Accounts Receivable––Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type (high risk versus low risk and government versus non-government), and fixed reserve percentages are established for each pool of trade accounts receivables.
In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. These credit risk indicators are monitored on a quarterly basis to determine whether there have been any changes in the economic environment that would indicate the established reserve percentages should be adjusted, and are considered on a regional basis to reflect more geographic-specific metrics. Additionally, write-offs and recoveries of customer receivables are tracked against collections on a quarterly basis to determine whether the reserve percentages remain appropriate. When management becomes aware of certain customer-specific factors that impact credit risk,
13


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
specific allowances for these known troubled accounts are recorded. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.
During the three and six months ended July 4, 2021 and June 28, 2020, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements. For additional information on our trade accounts receivable, see Note 1G in our 2020 Form 10-K.
Note 2. Discontinued Operations and Equity-Method Investment
A. Discontinued Operations
Upjohn Separation and Combination with Mylan
On November 16, 2020, we completed the spin-off and the combination of the Upjohn Business with Mylan to form Viatris. See Note 1A.
In connection with this transaction, Pfizer and Viatris entered into various agreements to effect the separation and combination to provide a framework for our relationship after the combination, including a separation and distribution agreement, interim operating models, including agency arrangements, manufacturing and supply agreements (MSAs), transition service agreements (TSAs), a tax matters agreement, and an employee matters agreement, among others. The interim agency operating model arrangements primarily include billings, collections and remittance of rebates that we are performing on a transitional basis on behalf of Viatris. Under the MSAs, Pfizer or Viatris, as the case may be, manufactures, labels and packages products for the other party. In the three and six months ended July 4, 2021, the amounts recorded under the above agreements were not material to our consolidated results of operations. Net amounts due from Viatris under the above agreements were approximately $434 million as of July 4, 2021 and $401 million as of December 31, 2020. The cash flows associated with the above agreements are included in Net cash provided by operating activities from continuing operations, except for a $277 million payment to Viatris made in the first quarter of 2021 pursuant to terms of the separation agreement, which is reported in Other financing activities, net, and was recorded as a payable to Viatris in Other current liabilities as of December 31, 2020. In addition, Pfizer and Mylan had pre-existing arms-length commercial agreements, which are continuing with Viatris and are not material to Pfizer’s consolidated financial statements.
The operating results of the Upjohn Business and the Mylan-Japan collaboration are reported as Income from discontinued operations––net of tax.
Components of Income from discontinued operations––net of tax:
Three Months Ended(a)
Six Months Ended(a)
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Revenues$$1,937 $27 $3,883 
Costs and expenses:
Cost of sales458 14 900 
Selling, informational and administrative expenses371 (2)703 
Research and development expenses54 105 
Amortization of intangible assets36 72 
Restructuring charges and certain acquisition-related costs17 
Other (income)/deductions––net71 
Pre-tax income/(loss) from discontinued operations(6)1,015 13 2,015 
Provision/(benefit) for taxes on income(30)122 (19)241 
Income from discontinued operations––net of tax$24 $893 $32 $1,774 
(a)In the second quarter of 2021, Income from discontinued operations—net of tax reflects post-closing adjustments directly related to our discontinued operations, including tax and benefits-related adjustments. In the first six months of 2021, Income from discontinued operations—net of tax also includes the operations of the Mylan-Japan collaboration, which terminated during Pfizer’s international first quarter of 2021, and a post-closing adjustment for a legal matter directly related to the discontinued Upjohn Business. In the three and six months ended June 28, 2020, Income from discontinued operations—net of tax relates to the Upjohn Business and the Mylan-Japan collaboration and includes the change in accounting principle in the first quarter of 2021 to MTM Accounting, which has been applied on a retrospective basis for all prior periods presented. See Note 1C.
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B. Equity-Method Investment
Formation of Consumer Healthcare JV

On July 31, 2019, we completed a transaction in which we and GSK combined our respective consumer healthcare businesses into a new JV that operates globally under the GSK Consumer Healthcare name. In exchange, we received a 32% equity stake in the new company and GSK owns the remaining 68%.
We are accounting for our interest in the Consumer Healthcare JV as an equity-method investment. The carrying value of our investment in the Consumer Healthcare JV is $16.4 billion as of July 4, 2021 and $16.7 billion as of December 31, 2020 and is reported as a private equity investment in Equity-method investments as of July 4, 2021 and December 31, 2020. The Consumer Healthcare JV is a foreign investee whose reporting currency is the U.K. pound, and therefore we translate its financial statements into U.S. dollars and recognize the impact of foreign currency translation adjustments in the carrying value of our investment and in other comprehensive income. The decrease in the value of our investment from December 31, 2020 is primarily due to dividends totaling approximately $274 million, as well as $200 million in pre-tax foreign currency translation adjustments (see Note 6), partially offset by our share of the JV’s earnings. We record our share of earnings from the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net. Our total share of the JV’s earnings generated in the first quarter of 2021, which we recorded in our operating results in the second quarter of 2021, was $148 million. Our total share of the JV’s earnings generated in the fourth quarter of 2020 and first quarter of 2021, which we recorded in our operating results in the first six months of 2021, was $218 million. Our total share of the JV’s earnings generated in the first quarter of 2020, which we recorded in our operating results in the second quarter of 2020, was $129 million. Our total share of the JV’s earnings generated in the fourth quarter of 2019 and first quarter of 2020, which we recorded in our operating results in the first six months of 2020, was $140 million. See Note 4. The total amortization and adjustment of basis differences resulting from the excess of the initial fair value of our investment over the underlying equity in the carrying value of the net assets of the JV is included in Other (income)/deductions––net and was not material to our results of operations in the periods presented. See Note 4.
Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three and six months ending March 31, 2021, the most recent period available, and for the three and six months ending March 31, 2020, is as follows:
Three Months EndedSix Months Ended
(MILLIONS)March 31,
2021
March 31,
2020
March 31,
2021
March 31,
2020
Net sales$3,180 $3,503 $6,275 $6,691 
Cost of sales(1,169)(1,394)(2,356)(3,205)
Gross profit$2,011 $2,109 $3,919 $3,486 
Income from continuing operations483 425 716 471 
Net income483 425 716 471 
Income attributable to shareholders461 405 682 441 
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
A. Transforming to a More Focused Company Program
With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We have undertaken efforts to ensure our cost base aligns appropriately with our new operating structure. While certain direct costs transferred to the Consumer Healthcare JV and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. In addition, we are taking steps to restructure our corporate enabling functions to appropriately support and drive the purpose of our business and R&D and PGS platform functions. The program costs discussed below are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.
We expect costs for this program, primarily related to corporate enabling functions, to total $1.6 billion on a pre-tax basis, with substantially all costs to be cash expenditures. Actions include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Also, as part of this program, we expect to incur costs related to manufacturing network optimization, including certain legacy cost-reduction initiatives, of $500 million, with approximately 20% of the costs to be non-cash. The costs for this effort include, among other things, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.
From the start of this program in the fourth quarter of 2019 through July 4, 2021, we incurred costs of $1.2 billion.
B. Key Activities
The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits, which are composed primarily of the Transforming to a More Focused Company program:
Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Restructuring charges/(credits):    
Employee terminations$(4)$345 $19 $355 
Asset impairments(8)(2)23 
Exit costs/(credits)(3)(3)
Restructuring charges/(credits)(a)
(5)338 14 379 
Transaction costs(b)
11 14 
Integration costs and other(c)
11 21 
Restructuring charges and certain acquisition-related costs(1)360 22 414 
Net periodic benefit costs recorded in Other (income)/deductions––net(d)
12 
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e):
    
Cost of sales31 41 10 
Selling, informational and administrative expenses16 16 
Research and development expenses(3)
Total additional depreciation––asset restructuring47 56 
Implementation costs recorded in our condensed consolidated statements of income as follows(f):
    
Cost of sales10 21 17 
Selling, informational and administrative expenses80 63 144 78 
Research and development expenses
Total implementation costs90 73 166 96 
Total costs associated with acquisitions and cost-reduction/productivity initiatives$140 $441 $256 $518 
(a)Primarily represents cost reduction initiatives.
(b)Represents external costs for banking, legal, accounting and other similar services.
(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs.
(d)Amounts for the three and six months ended June 28, 2020 include the impact of a change in accounting principle. See Note 1C.
(e)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
(f)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
The following summarizes the components and changes in restructuring accruals:
(MILLIONS)Employee
Termination
Costs
Asset
Impairment
Charges
Exit CostsAccrual
Balance, December 31, 2020(a)
$782 $$15 $798 
Provision19 (2)(3)14 
Utilization and other(b)
(215)(1)(215)
Balance, July 4, 2021(c)
$585 $$11 $596 
(a)Included in Other current liabilities ($628 million) and Other noncurrent liabilities ($169 million).
(b)Includes adjustments for foreign currency translation.
(c)Included in Other current liabilities ($473 million) and Other noncurrent liabilities ($123 million).
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4. Other (Income)/Deductions—Net
Components of Other (income)/deductions––net include:
 Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Interest income$(13)$(19)$(12)$(53)
Interest expense316 367 651 757 
Net interest expense303 348 639 704 
Royalty-related income(212)(191)(388)(310)
Net (gains)/losses on asset disposals(58)(98)
Net (gains)/losses recognized during the period on equity securities(a)
(800)(732)(1,200)(478)
Income from collaborations, out-licensing arrangements and sales of compound/product rights(b)
(21)(100)(252)(215)
Net periodic benefit costs/(credits) other than service costs(c)
(237)(191)(503)(294)
Certain legal matters, net(d)
369 14 420 22 
Consumer Healthcare JV equity method (income)/loss(e)
(140)(126)(202)(92)
Other, net(201)22 (417)(104)
Other (income)/deductions––net$(998)$(955)$(2,001)$(764)
(a)The gains in the second quarter and first six months of 2021 include, among other things, unrealized gains of $917 million and $1.0 billion, respectively, related to investments in BioNTech and Cerevel Therapeutics, LLC. The gains in the second quarter and first six months of 2020 included, among other things, unrealized gains of $568 million and $501 million, respectively, related to our investments in Allogene and BioNTech.
(b)The first six months of 2021 includes, among other things, $188 million of net collaboration income from BioNTech in the first quarter of 2021 related to the COVID-19 vaccine. The second quarter and first six months of 2020 mainly included, among other things, $40 million of milestone income from Puma Biotechnology, Inc. related to Neratinib regulatory approvals in the EU, and $30 million of milestone income from Lilly related to the first commercial sale in the U.S. of LOXO-292 for the treatment of RET fusion-positive NSCLC. The first six months of 2020 also included an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, Inc.
(c)Amounts include the impact of a change in accounting principle. See Notes 1C and 10.
(d)The second quarter and first six months of 2021 primarily include an amount to resolve a Multi-District Litigation relating to EpiPen pending against the Company in the U.S. District Court for the District of Kansas for $345 million, which remains subject to court approval. See Note 12A1.
(e)See Note 2B.
Note 5. Tax Matters
A. Taxes on Income from Continuing Operations
Our effective tax rate for continuing operations was 15.8% for the second quarter of 2021, compared to 14.0% for the second quarter of 2020, and was 15.0% for the first six months of 2021, compared to 13.3% for the first six months of 2020.
The higher effective tax rate for the second quarter and first six months of 2021, compared to the second quarter and first six months of 2020, was due to a change in the jurisdictional mix of earnings primarily related to BNT162b2.
We elected, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, to pay our initial estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings over eight years through 2026. The third annual installment of this liability was paid by its April 15, 2021 due date. The fourth annual installment is due April 15, 2022 and is reported in current Income taxes payable as of July 4, 2021. The remaining liability is reported in noncurrent Other taxes payable. 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.
B. Tax Contingencies

We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation.

The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued Revenue Agent’s Reports (RARs) for tax years 2011-2013 and 2014-2015. We are not in agreement with the RARs and are currently appealing certain disputed issues. Tax years 2016-2018 are currently under audit. Tax years 2019-2021 are open
17


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
but not under audit. All other tax years are closed. In addition to the open audit years in the U.S., we have open audit years in certain major international tax jurisdictions dating back to 2010.
For additional information, see Note 5D in our 2020 Form 10-K.
C. Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)
Components of Tax provision/(benefit) on other comprehensive income/(loss) include:
Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Foreign currency translation adjustments, net(a)
$(19)$70 $$(177)
Unrealized holding gains/(losses) on derivative financial instruments, net(51)51 (82)
Reclassification adjustments for (gains)/losses included in net income(35)35 (20)
(50)16 43 (102)
Unrealized holding gains/(losses) on available-for-sale securities, net17 (1)
Reclassification adjustments for (gains)/losses included in net income(23)
15 11 (5)
Reclassification adjustments related to amortization of prior service costs and other, net(8)(11)(17)(21)
Other(1)(1)
(8)(9)(18)(20)
Tax provision/(benefit) on other comprehensive income/(loss)$(63)$87 $21 $(293)
(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that we intend to hold indefinitely.
Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests
The following summarizes the changes, net of tax, in Accumulated other comprehensive loss:
 Net Unrealized Gains/(Losses)Benefit Plans 
(MILLIONS)Foreign Currency Translation AdjustmentsDerivative Financial InstrumentsAvailable-For-Sale SecuritiesPrior Service (Costs)/Credits and OtherAccumulated Other Comprehensive Income/(Loss)
Balance, December 31, 2020(a)
$(5,450)$(428)$116 $452 $(5,310)
Other comprehensive income/(loss)(b)
495 160 (37)(66)552 
Balance, July 4, 2021$(4,955)$(268)$79 $386 $(4,758)
(a)Amounts include the impact of a change in accounting principle. See Note 1C.
(b)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests. Foreign currency translation adjustments primarily include gains from the strengthening of the U.K. pound, Canadian dollar and euro against the U.S. dollar, and net gains related to the impact of our net investment hedging program, partially offset by net losses from foreign currency translation adjustments related to our equity-method investment in the Consumer Healthcare JV (see Note 2B).
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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 and Fair Value Hierarchy, using a Market Approach:
July 4, 2021December 31, 2020
(MILLIONS)TotalLevel 1Level 2TotalLevel 1Level 2
Financial assets:
Short-term investments
Classified as equity securities with readily determinable fair values:
Money market funds$2,284 $$2,284 $567 $$567 
Classified as available-for-sale debt securities:
Government and agency—non-U.S.12,448 12,448 7,719 7,719 
Government and agency—U.S.260 260 982 982 
Corporate and other1,317 1,317 1,008 1,008 
14,025 14,025 9,709 9,709 
Total short-term investments16,309 16,309 10,276 10,276 
Other current assets
Derivative assets:
Interest rate contracts18 18 
Foreign exchange contracts289 289 234 234 
Total other current assets290 290 251 251 
Long-term investments
Classified as equity securities with readily determinable fair values(a)
3,736 3,711 25 2,809 2,776 32 
Classified as available-for-sale debt securities:
Government and agency—non-U.S.
Government and agency—U.S.54 54 121 121 
Corporate and other
63 63 128 128 
Total long-term investments3,799 3,711 88 2,936 2,776 160 
Other noncurrent assets
Derivative assets:
Interest rate contracts23 23 117 117 
Foreign exchange contracts142 142 
Total derivative assets165 165 122 122 
Insurance contracts(b)
767 767 693 693 
Total other noncurrent assets931 931 814 814 
Total assets$21,330 $3,711 $17,618 $14,278 $2,776 $11,501 
Financial liabilities:
Other current liabilities
Derivative liabilities:
Foreign exchange contracts$308 $$308 $501 $$501 
Total other current liabilities308 308 501 501 
Other noncurrent liabilities
Derivative liabilities:
Foreign exchange contracts651 651 599 599 
Total other noncurrent liabilities651 651 599 599 
Total liabilities$959 $$959 $1,100 $$1,100 
(a)Long-term equity securities of $181 million as of July 4, 2021 and $190 million as of December 31, 2020 were held in restricted trusts for employee benefit plans.
(b)Includes life insurance policies held in restricted trusts for U.S. non-qualified employee benefit plans. The underlying invested assets in these contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net (see Note 4).
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
Carrying values and estimated fair values using a market approach:
July 4, 2021December 31, 2020
(MILLIONS)Carrying ValueEstimated Fair Value at Level 2Carrying ValueEstimated Fair Value at Level 2
Financial Liabilities
Long-term debt, excluding the current portion$35,354 $41,725 $37,133 $45,533 
The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of July 4, 2021 and December 31, 2020. The fair value measurements of our held-to-maturity debt securities and short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities are based on Level 3 inputs.
B. Investments
Total Short-Term, Long-Term and Equity-Method Investments
The following summarizes our investments by classification type:
(MILLIONS)July 4, 2021December 31, 2020
Short-term investments
Equity securities with readily determinable fair values(a)
$2,284 $567 
Available-for-sale debt securities14,025 9,709 
Held-to-maturity debt securities3,019 161 
Total Short-term investments$19,328 $10,437 
Long-term investments
Equity securities with readily determinable fair values$3,736 $2,809 
Available-for-sale debt securities63 128 
Held-to-maturity debt securities35 37 
Private equity securities at cost(b)
500 432 
Total Long-term investments$4,334 $3,406 
Equity-method investments16,608 16,856 
Total long-term investments and equity-method investments$20,942 $20,262 
Held-to-maturity cash equivalents$567 $89 
(a)As of July 4, 2021 and December 31, 2020, includes money market funds primarily invested in U.S. Treasury and government debt.
(b)Represent investments in the life sciences sector.
Debt Securities
At July 4, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows:
July 4, 2021December 31, 2020
Gross UnrealizedMaturities (in Years)Gross Unrealized
(MILLIONS)Amortized CostGainsLossesFair ValueWithin 1Over 1
to 5
Over 5Amortized CostGainsLossesFair Value
Available-for-sale debt securities
Government and agency––non-U.S.
$12,371 $122 $(35)$12,457 $12,448 $$$7,593 $136 $(4)$7,725 
Government and agency––U.S.314 (1)314 260 54 1,104 (1)1,103 
Corporate and other1,312 1,317 1,317 1,006 1,008 
Held-to-maturity debt securities
Time deposits and other914 914 884 19 11 283 283 
Government and agency––non-U.S.
2,706 2,706 2,701 
Total debt securities$17,618 $126 $(36)$17,709 $17,611 $86 $12 $9,991 $138 $(5)$10,124 
Any expected credit losses to these portfolios would be immaterial to our financial statements.
20


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Equity Securities
The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date:
Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Net (gains)/losses recognized during the period on equity securities(a)
(800)$(732)(1,200)$(478)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period24 (5)(18)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)
$(823)$(733)$(1,196)$(459)
(a)Reported in Other (income)/deductions––net. See Note 4.
(b)Included in net unrealized gains are observable price changes on equity securities without readily determinable fair values. As of July 4, 2021, there were cumulative impairments and downward adjustments of $93 million and upward adjustments of $98 million. Impairments, downward and upward adjustments were not significant in the second quarters and first six months of 2021 and 2020.
C. Short-Term Borrowings
Short-term borrowings include:
(MILLIONS)July 4,
2021
December 31, 2020
Commercial paper$100 $556 
Current portion of long-term debt, principal amount3,689 2,004 
Other short-term borrowings, principal amount(a)
101 145 
Total short-term borrowings, principal amount3,890 2,705 
Net unamortized discounts, premiums and debt issuance costs(2)(2)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted
$3,888 $2,703 
(a)Includes cash collateral. See Note 7F.
D. Long-Term Debt
The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt:
(MILLIONS)July 4,
2021
December 31, 2020
Total long-term debt, principal amount$34,038 $35,774 
Net fair value adjustments related to hedging and purchase accounting1,507 1,562 
Net unamortized discounts, premiums and debt issuance costs(196)(207)
Other long-term debt
Total long-term debt, carried at historical proceeds, as adjusted$35,354 $37,133 
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above)$3,687 $2,002 
E. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk

A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. We manage our foreign exchange risk principally through the use of derivative financial instruments and foreign currency debt. These financial instruments serve to mitigate the impact on net income as a result of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.

The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen and Canadian dollar. We hedge a portion of our forecasted intercompany inventory sales denominated in euro, Japanese yen, Canadian dollar, Chinese renminbi, U.K. pound and Australian dollar for up to two years.

21


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Interest Rate Risk
Our interest-bearing investments and borrowings are subject to interest rate risk. Depending on market conditions, we may change the profile of our outstanding debt or investments by entering into derivative financial instruments like interest rate swaps, either to hedge or offset the exposure to changes in the fair value of hedged items with fixed interest rates, or to convert variable rate debt or investments to fixed rates. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.
The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
July 4, 2021December 31, 2020
Fair ValueFair Value
(MILLIONS)NotionalAssetLiabilityNotionalAssetLiability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)
$24,630 $340 $846 $24,369 $145 $1,005 
Interest rate contracts1,000 24 1,950 135 
364 846 280 1,005 
Derivatives not designated as hedging instruments:
Foreign exchange contracts$17,085 91 113 $15,063 94 95 
Total$455 $959 $373 $1,100 
(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of July 4, 2021 and $5.0 billion as of December 31, 2020.
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations):
 
Gains/(Losses)
Recognized in OID
(a)
Gains/(Losses)
Recognized in OCI
(a)
Gains/(Losses)
Reclassified from
OCI into OID and COS(a)
Three Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)
$— $— $(258)$187 $13 $172 
Amount excluded from effectiveness testing and amortized into earnings(c)
— — 13 14 
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts26 — — — — 
Hedged item(26)(6)— — — — 
Derivative Financial Instruments in Net Investment Hedge Relationships:      
Foreign exchange contracts— — (144)
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c)
— — 36 29 26 42 
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
      
Foreign currency short-term borrowings— — (11)
Foreign currency long-term debt— — (8)(42)
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts(65)— — — — 
All other net(c)
— — 12 
 $(65)$$(230)$56 $47 $228 
22


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Gains/(Losses)
Recognized in OID(a)
Gains/(Losses)
Recognized in OCI(a)
Gains/(Losses)
Reclassified from
OCI into OID and COS(a)
Six Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Derivative Financial Instruments in Cash Flow Hedge Relationships:      
Foreign exchange contracts(b)
$— $— $(56)$(341)$(255)$126 
Amount excluded from effectiveness testing and amortized into earnings(c)
— — 21 42 18 41 
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts(1)392 — — — — 
Hedged item(392)— — — — 
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts— — 155 240 
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c)
— — 35 176 55 84 
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings— — 27 
Foreign currency long-term debt— — 48 
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts(23)(51)— — — — 
All other net(c)
— — 12 (1)
$(23)$(51)$230 $139 $(182)$251 
(a)OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income.
(b)The amounts reclassified from OCI into COS were:
a net loss of $31 million in the second quarter of 2021;
a net loss of $76 million in the first six months of 2021;
a net gain of $80 million in the second quarter of 2020; and
a net gain of $150 million in the first six months of 2020.
The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax loss of $128 million within the next 12 months into income. The maximum length of time over which we are hedging our exposure to the variability in future foreign exchange cash flows is approximately 22 years and relates to foreign currency debt.
(c)The amounts reclassified from OCI were reclassified into OID.
(d)Short-term borrowings and long-term debt include foreign currency borrowings which are used in net investment hedges. The short-term borrowings carrying value as of July 4, 2021 was $1.2 billion. The long-term debt carrying values as of July 4, 2021 and December 31, 2020 were $881 million and $2.1 billion, respectively.
The following summarizes cumulative basis adjustments for fair value hedges to our long-term debt:
July 4, 2021December 31, 2020
Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to
Carrying Amount
Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to
Carrying Amount
(MILLIONS)
Carrying Amount of Hedged Assets/Liabilities(a)
Active Hedging RelationshipsDiscontinued Hedging Relationships
Carrying Amount of Hedged Assets/Liabilities(a)
Active Hedging RelationshipsDiscontinued Hedging Relationships
Long-term debt$993 $23 $1,202 $2,016 $117 $1,149 
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.
23


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
F. Credit Risk
A significant portion of our trade accounts receivable balances are due from drug wholesalers. For additional information on our trade accounts receivables with significant customers, see Note 13B below and Note 17B in our 2020 Form 10-K.

As of July 4, 2021, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by Japan, Germany, U.K., Canada, France, Denmark, Australia and the Netherlands.

With respect to our derivative financial instrument agreements with financial institutions, we do not expect to incur a significant loss from failure of any counterparty. Derivative financial instruments are executed under International Swaps and Derivatives Association (ISDA) master agreements with credit-support annexes that contain zero threshold provisions requiring collateral to be exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk with any individual financial institution. As of July 4, 2021, the aggregate fair value of these derivative financial instruments that are in a net payable position was $618 million, for which we have posted collateral of $716 million with a corresponding amount reported in Short-term investments. As of July 4, 2021, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $35 million, for which we have received collateral of $25 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.
Note 8. Other Financial Information
A. Inventories
The following summarizes the components of Inventories:
(MILLIONS)July 4,
2021
December 31, 2020
Finished goods$3,702 $2,878 
Work-in-process4,388 4,430 
Raw materials and supplies859 738 
Inventories(a)
$8,948 $8,046 
Noncurrent inventories not included above(b)
$981 $890 
(a)The change from December 31, 2020 primarily reflects increases for certain products, including inventory build for new product launches (primarily BNT162b2), supply recovery and foreign exchange, partially offset by decreases due to market demand and network strategy.
(b)Included in Other noncurrent assets. There are no recoverability issues for these amounts.
B. Other Current Liabilities
Other current liabilities includes, among other things, amounts payable to BioNTech for the gross profit split for BNT162b2, which totaled $4.5 billion as of July 4, 2021 and $25 million as of December 31, 2020.
Note 9. Identifiable Intangible Assets
The following summarizes the components of Identifiable intangible assets:
July 4, 2021December 31, 2020
(MILLIONS)Gross
Carrying
Amount
Accumulated
Amortization
Identifiable
Intangible
Assets, less
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Identifiable
Intangible
Assets, less
Accumulated
Amortization
Finite-lived intangible assets
Developed technology rights(a)
$74,370 $(52,754)$21,616 $73,545 $(50,902)$22,643 
Brands922 (791)131 922 (774)148 
Licensing agreements and other2,290 (1,248)1,042 2,292 (1,186)1,106 
77,582 (54,793)22,789 76,759 (52,862)23,896 
Indefinite-lived intangible assets
Brands827 827 827 827 
IPR&D3,134 3,134 3,175 3,175 
Licensing agreements and other573 573 573 573 
4,535 4,535 4,575 4,575 
Identifiable intangible assets(b)
$82,116 $(54,793)$27,323 $81,334 $(52,862)$28,471 
(a)The increase in the gross carrying amount primarily reflects $500 million of capitalized BNT162b2 sales milestones to BioNTech.
(b)The decrease is primarily due to amortization, partially offset by the capitalization of the BNT162b2 milestones described above.
24


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Amortization
Total amortization of finite-lived intangible assets was $942 million for the second quarter of 2021 and $880 million for the second quarter of 2020, and $1.8 billion for the first six months of 2021 and $1.7 billion for the first six months of 2020.
Note 10. Pension and Postretirement Benefit Plans
As discussed in Note 1C, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of pension and postretirement plans. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented.
The following summarizes the components of net periodic benefit cost/(credit), including in 2020 costs/(credits) reported as part of discontinued operations:
 Pension Plans
 U.S.InternationalPostretirement
Plans
Three Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Service cost$$$33 $36 $$10 
Interest cost114 138 37 40 13 
Expected return on plan assets(261)(251)(82)(78)(10)(9)
Amortization of prior service credits(1)(1)(39)(43)
Curtailments(1)
Actuarial (gains)/losses(6)
Special termination benefits
Net periodic benefit cost/(credit) reported in income$(142)$(119)$(14)$(3)$(32)$(30)
 Pension Plans
 U.S.InternationalPostretirement
Plans
Six Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Service cost$$$66 $72 $18 $19 
Interest cost227 280 73 82 14 25 
Expected return on plan assets(521)(503)(164)(159)(20)(18)
Amortization of prior service credits(1)(2)(1)(1)(77)(86)
Curtailments(1)
Actuarial (gains)/losses(45)158 
Special termination benefits12 
Net periodic benefit cost/(credit) reported in income$(329)$(66)$(26)$(4)$(64)$(59)
The components of net periodic benefit cost/(credit) other than the service cost component are included in Other (income)/deductions––net (see Note 4).
For the six months ended July 4, 2021, we contributed $111 million, $217 million, and $31 million to our U.S. Pension Plans, International Pension Plans, and Postretirement Plans, respectively, from our general assets, which include direct employer benefit payments.
25


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 11. Earnings Per Common Share Attributable to Pfizer Inc. Common Shareholders
The following presents the detailed calculation of EPS:
 Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
EPS Numerator––Basic
Income from continuing operations attributable to Pfizer Inc.$5,539 $2,596 $10,408 $5,070 
Less: Preferred stock dividends––net of tax
Income from continuing operations attributable to Pfizer Inc. common shareholders5,539 2,596 10,408 5,070 
Income from discontinued operations––net of tax24 893 32 1,774 
Net income attributable to Pfizer Inc. common shareholders$5,563 $3,489 $10,440 $6,843 
EPS Numerator––Diluted    
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions$5,539 $2,596 $10,408 $5,070 
Income from discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions24 893 32 1,774 
Net income attributable to Pfizer Inc. common shareholders and assumed conversions$5,563 $3,489 $10,440 $6,843 
EPS Denominator    
Weighted-average number of common shares outstanding––Basic5,598 5,554 5,591 5,550 
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements80 65 79 66 
Weighted-average number of common shares outstanding––Diluted5,678 5,619 5,670 5,616 
Anti-dilutive common stock equivalents(a)
(a)These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
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. The following outlines our legal contingencies. For a discussion of our tax contingencies, see Note 5B.
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 asserted or unasserted matters, which can include acquisition-, licensing-, intellectual property-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter.
26


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 increased expenses and/or 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 matters, which could have a material adverse effect on our results of operations and/or our cash flows in the period in which the amounts are accrued or 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, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions that have been deemed reasonable by management, but 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. For proceedings under environmental laws to which a governmental authority is a party, we have adopted a disclosure threshold of $1 million in potential or actual governmental monetary sanctions.
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 to assess materiality, such as, among others, the amount of damages and the nature of other relief sought, if 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. Some of the matters discussed below include those which management believes that the likelihood of possible loss in excess of amounts accrued is remote.
A1. Legal Proceedings––Patent Litigation
We are involved in suits relating to our patents, including but not limited to, those discussed below. Most involve claims by generic drug manufacturers that patents covering our products (or those of our collaboration/licensing partners), 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 that are discussed below, patent rights to certain of our products or those of our collaboration/licensing partners are being challenged in various other jurisdictions. For example, some of our collaboration or licensing partners face challenges to the validity of their patent rights in non-U.S. 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. 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 U.S. In 2017, the Patent Trial and Appeal Board (PTAB) initiated proceedings, which remain pending, with respect to 2 of our pneumococcal vaccine patents. However, the PTAB declined to initiate proceedings as to two other pneumococcal vaccine patents; those 2 patents, and 1 other patent, are now being challenged in federal court in Delaware. Challenges to other pneumococcal vaccine patents remain pending outside the U.S. The invalidation of any of the patents in our pneumococcal portfolio could potentially allow a competitor’s vaccine into the marketplace. In the event
27


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
that any of the patents are found valid and infringed, a competitor’s vaccine might be prohibited from entering the market or a competitor might be required to pay us a royalty.
We are also subject to patent litigation pursuant to which one or more third parties seek 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 if we or one of our subsidiaries is found to have willfully infringed valid patent rights of a third party.
Actions In Which We Are The Plaintiff
EpiPen
In 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 (ANDA) 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.
Xeljanz (tofacitinib)
Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate ANDAs with the FDA seeking approval to market their generic versions of tofacitinib tablets in one or both of 5 mg and 10 mg dosage strengths, and in both immediate and extended release forms. To date, we have settled actions with several manufacturers on terms not material to us. The remaining actions continue in the U.S. District Court for the District of Delaware as described below.
In 2018, we brought a separate patent infringement action against Teva Pharmaceuticals USA, Inc. (Teva) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Teva in its ANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets.
In January 2021, we brought a separate patent-infringement action against Aurobindo Pharma Limited (Aurobindo) asserting the infringement and validity of the 2025 Patent and the 2023 Patent, which Aurobindo challenged in its ANDA seeking approval to market a generic version of tofacitinib 5 mg and 10 mg tablets.
Inlyta (axitinib)
In 2019, Glenmark Pharmaceuticals Limited (Glenmark) notified us that it had filed an ANDA with the FDA seeking approval to market a generic version of Inlyta. Glenmark asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In 2019, we filed suit against Glenmark in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.
Ibrance (palbociclib)
In 2019, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance. The companies assert the invalidity and non-infringement of 2 composition of matter patents, one of which expires in 2023 and one of which expires in 2027, as a result of a U.S. Patent Term Extension certificate issued in January 2021, and a method of use patent covering palbociclib, which expires in 2023. In 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. Beginning in September 2020, we received correspondence from several generic companies notifying us that they would seek approval to market generic versions of Ibrance. The generic companies assert the invalidity and non-infringement of our crystalline form patent which expires in 2034. Beginning in October 2020, we brought patent infringement actions against each of these generic companies in various federal courts, asserting the validity and infringement of the crystalline form patent.
Matter Involving Our Collaboration/Licensing Partners
Eliquis
In 2017, NaN generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed ANDAs seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the 3 patents listed in the Orange Book for Eliquis. NaN of the patents expired in December 2019 and the remaining patents currently are set to expire in 2026 and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. BMS and Pfizer filed patent-infringement actions against all generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031 patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all 3 patents. In August 2020, the U.S.
28


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
District Court for the District of Delaware ruled that both the 2026 patent and the 2031 patent are valid and infringed by the proposed generic products. In August and September 2020, the generic filers appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit. Prior to the August 2020 ruling, we and BMS settled with certain of the companies on terms not material to us, and we and BMS may settle with other generic companies in the future.
A2. Legal Proceedings––Product Litigation
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. Warner-Lambert was acquired by Pfizer in 2000 and is a wholly owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.
Numerous lawsuits against American Optical, Pfizer and certain of its previously owned subsidiaries are pending 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 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR in the Orange Book, enforcing certain patents for Effexor XR and entering into a litigation settlement agreement with a generic drug manufacturer with respect to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.
In 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 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. In 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
Beginning in 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain Pfizer affiliates, and, in most of the actions, Ranbaxy and certain Ranbaxy affiliates. 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 the U.S. District Court for the District of New Jersey.
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In September 2013 and 2014, the District Court dismissed with prejudice the claims of the 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 Court of Appeals. In 2017, the Court of Appeals reversed the District Court’s decisions and remanded the claims to the District Court.
Also, in 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.
EpiPen
Beginning in 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 former 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 2020, a similar lawsuit was filed in the U.S. District Court for the District of Kansas against Pfizer, King, Meridian and the Mylan entities on behalf of a purported U.S. nationwide class of direct purchaser plaintiffs who purchased EpiPen devices directly from the defendants (the 2020 Lawsuit). Plaintiffs in these actions generally allege, against Pfizer and/or its affiliates, that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal and various state antitrust laws. At least 1 lawsuit also alleges that Pfizer and/or Mylan violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs also filed various federal antitrust, state 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 2011. In 2017, all of these actions, except for the 2020 Lawsuit, were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation 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. In July 2021, Pfizer and plaintiffs filed a stipulation of settlement to resolve the Multi-District Litigation for $345 million. The settlement is subject to court approval, and the payment is being made in accordance with the terms of the settlement agreement. Separately, with respect to the 2020 Lawsuit, in July 2021, the District Court granted Pfizer’s motion to dismiss the direct purchaser complaint, without prejudice.
In July 2020, a new lawsuit was filed in the U.S. District Court for the District of Colorado on behalf of indirect purchasers. Plaintiff represents a putative U.S. nationwide class of persons or entities who paid for any portion of the end-user purchase price of certain refill or replacement EpiPens since 2010. Plaintiff alleges that Pfizer and Meridian misrepresented the shelf-life and expiration date of EpiPen, in violation of the federal RICO statute. Plaintiff seeks treble damages for alleged unnecessary replacement or refill purchases of EpiPens by members of the putative class. Pfizer and plaintiff reached an agreement to settle the action on terms not material to Pfizer, and in July 2021, filed a joint stipulation of dismissal with prejudice.
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 Pfizer involve Protonix and/or Nexium 24HR and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the District of New Jersey. As part of our Consumer Healthcare JV transaction with GSK, the JV has agreed to assume, and to indemnify Pfizer for, liabilities arising out of such litigation to the extent related to Nexium 24HR.
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 2016, the federal cases were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Eastern District of Louisiana.
Mississippi Attorney General Government Action
In 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and 8 other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to
30


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.
Array Securities Litigation
In 2017, 2 purported class actions were filed in the U.S. District Court for the District of Colorado alleging that Array, which we acquired in 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 2018, the actions were consolidated into a single proceeding. In March 2021, the parties reached an agreement in principle to resolve the litigation on terms not material to Pfizer, which is subject to final Court approval.
Zantac
A number of lawsuits have been filed against Pfizer in various federal and state courts alleging that plaintiffs developed various types of cancer, or face an increased risk of developing cancer, purportedly as a result of the ingestion of Zantac. The significant majority of these cases also name other defendants that have historically manufactured and/or sold Zantac. Pfizer has not sold Zantac since 2006, and only sold an OTC version of the product. Plaintiffs seek compensatory and punitive damages.
In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Southern District of Florida. Plaintiffs in the Multi-District Litigation have filed against Pfizer and many other defendants a master personal injury complaint, a consolidated consumer class action complaint alleging, among other things, claims under consumer protection statutes of all 50 states, and a medical monitoring complaint seeking to certify medical monitoring classes under the laws of 13 states. Plaintiffs previously had filed a consolidated third-party payor class action complaint alleging violation of the RICO statute and seeking reimbursement for payments made for the prescription version of Zantac, but the Multi-District Litigation court dismissed that complaint; Plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit. In addition, (i) Pfizer has received service of 2 Canadian class action complaints naming Pfizer and other defendants, and seeking compensatory and punitive damages for personal injury and economic loss, allegedly arising from the defendants’ sale of Zantac in Canada; and (ii) the State of New Mexico and the Mayor and City Council of Baltimore separately filed civil actions against Pfizer and many other defendants in state court, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions. In April 2021, a Judicial Council Coordinated Proceeding was created in the Superior Court of California in Alameda County to coordinate personal injury actions against Pfizer and other defendants filed in California state court.
A3. Legal Proceedings––Commercial and Other Matters
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 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 spin-off 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.
Environmental Matters
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 2011, Wyeth Holdings
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Corporation executed an Administrative Settlement Agreement and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPA with regard to the Bound Brook facility. In accordance with the 2011 Administrative Settlement Agreement, we completed construction of an interim remedy to address the discharge of impacted groundwater from the facility to the Raritan River. In 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 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 2 adjacent lagoons. In 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. The consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court in 2015. In 2018, the EPA issued a final remediation plan for the 2 adjacent lagoons, which is generally in accordance with one of the remedies evaluated in our focused feasibility study, and, in 2019, 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 lagoons.
We have accrued for the estimated costs of the site remedies for the Bound Brook facility.
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
In 2017, a number of U.S. 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 U.S. 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 2020, the District Court granted defendants’ motions to dismiss and dismissed all of plaintiffs’ claims. The plaintiffs are appealing the District Court’s decision.
Allergan Complaint for Indemnity
In 2019, Pfizer was named as a defendant in a complaint, along with King, filed by Allergan Finance LLC (Allergan) in the Supreme Court of the State of New York, asserting 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. This suit was voluntarily discontinued without prejudice in January 2021.
Breach of Contract––Xalkori/Lorbrena
We are a defendant in a breach of contract action brought by New York University (NYU) in the Supreme Court of the State of New York (Supreme Court). NYU alleges that it is entitled to royalties on Pfizer’s sales of Xalkori under the terms of a Research and License Agreement between NYU and Sugen, Inc. Sugen, Inc. was acquired by Pharmacia in August 1999, and Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer. The action was originally filed in 2013. In 2015, the Supreme Court dismissed the action and, in 2017, the New York State Appellate Division reversed the decision and remanded the proceedings to the Supreme Court. In January 2020, the Supreme Court denied both parties’ summary judgment motions.
In October 2020, NYU filed a separate breach of contract action against Pfizer alleging that it is entitled to royalties on sales of Lorbrena under the terms of the same NYU-Sugen, Inc. Research and Licensing Agreement.
A4. Legal Proceedings––Government Investigations
We are subject to extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. 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.
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 former Greenstone generics business. We believe this is related to an ongoing broader antitrust investigation of the generic pharmaceutical industry. We have produced records relating to this investigation.
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 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. In June 2020, the State Attorneys General filed a new complaint against a large number of companies, including Greenstone and Pfizer, making similar allegations, but concerning a new set of drugs. This complaint was transferred to the Multi-District Litigation in July 2020.
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 have produced records pursuant to the subpoena.
Government Inquiries 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. In August 2019, we received a HIPAA subpoena from the U.S. Attorney’s Office for the Eastern District of Missouri seeking similar records and information. We are producing records in response to these requests.
U.S. Department of Justice/SEC Inquiry relating to Russian Operations
In June 2019, we received an informal request from the U.S. Department of Justice’s Foreign Corrupt Practices Act (FCPA) Unit seeking documents relating to our operations in Russia. In September 2019, we received a similar request from the SEC’s FCPA Unit. We have produced records pursuant to these requests.
Docetaxel––Mississippi Attorney General Government Investigation
See Legal Proceedings––Product Litigation––Docetaxel––Mississippi Attorney General Government Investigation above for information regarding a government investigation related to Docetaxel marketing practices.
U.S. Department of Justice Inquiries relating to India Operations
In March 2020, we received an informal request from the U.S. Department of Justice's Consumer Protection Branch seeking documents relating to our manufacturing operations in India, including at our former facility located at Irrungattukottai in India. In April 2020, we received a similar request from the U.S. Attorney’s Office for the SDNY regarding a civil investigation concerning operations at our facilities in India. We are producing records pursuant to these requests.
U.S. Department of Justice/SEC Inquiry relating to China Operations
In June 2020, we received an informal request from the U.S. Department of Justice's FCPA Unit seeking documents relating to our operations in China. In August 2020, we received a similar request from the SEC’s FCPA Unit. We are producing records pursuant to these requests.
Zantac––State of New Mexico and Mayor and City Council of Baltimore Civil Actions
See Note 12A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Zantac above for information regarding civil actions separately filed by the State of New Mexico and the Mayor and City Council of Baltimore alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions.
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 July 4, 2021, the estimated fair value of these indemnification obligations was not significant.
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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In addition, in connection with our entry into certain agreements and other transactions, our counterparties may 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. In addition, in November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction and as previously disclosed, Viatris has agreed to assume, and to indemnify Pfizer for, liabilities arising out of certain matters.
We have also guaranteed the long-term debt of certain companies that we acquired and that now are subsidiaries of Pfizer. See Note 7D.
C. Contingent Consideration for Acquisitions
We may be required to make payments to sellers for certain prior business combinations that are contingent upon future events or outcomes. For additional information, see Note 1D in our 2020 Form 10-K.
Note 13. Product, Geographic and Other Revenue Information
A. Geographic Information
The following summarizes revenues by geographic area:
 Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
%
Change
July 4,
2021
June 28,
2020
%
Change
United States$7,593 $5,113 48 $15,190 $10,403 46 
Developed Europe4,577 1,864 *7,615 3,573 *
Developed Rest of World2,997 989 *4,120 1,908 *
Emerging Markets3,810 1,897 *6,634 4,063 63 
Revenues$18,977 $9,864 92 $33,559 $19,947 68 
* Indicates calculation not meaningful or results are equal to or greater than 100%.
We and our collaboration partner, BioNTech, have entered into agreements to supply pre-specified doses of BNT162b2 with multiple developed and emerging nations around the world and are continuing to deliver doses of BNT162b2 under such agreements. We currently sell the BNT162b2 vaccine directly to government and government sponsored customers. This includes supply agreements entered into in November 2020 and February and May 2021 with the European Commission (EC) on behalf of the different EU member states and certain other countries. Each EU member state submits its own BNT162b2 vaccine order to us and is responsible for payment pursuant to terms of the supply agreements negotiated by the EC.
B. Other Revenue Information
Significant Customers
For information on our significant wholesale customers, see Note 17B in our 2020 Form 10-K. Additionally, revenues from the U.S. government represented 12% and 14% of total revenues for the three and six months ended July 4, 2021, respectively, and primarily represent sales of BNT162b2. Accounts receivable from the U.S. government represented 9% of total trade accounts receivable as of July 4, 2021, and primarily relate to sales of BNT162b2.
Significant Product Revenues
The following provides detailed revenue information for several of our major products:
(MILLIONS)Three Months EndedSix Months Ended
PRODUCTPRIMARY INDICATION OR CLASSJuly 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
TOTAL REVENUES(a)
$18,977 $9,864 $33,559 $19,947 
Vaccines$9,234 $1,247 $14,127 $2,857 
BNT162b2 direct sales and alliance revenuesActive immunization to prevent COVID-197,838 11,300 
Prevnar 13/Prevenar 13Pneumococcal disease1,241 1,116 2,524 2,566 
FSME/IMMUN-TicoVacTick-borne encephalitis disease61 45 114 93 
NimenrixMeningococcal disease49 56 95 130 
All other VaccinesVarious46 30 94 68 
34


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(MILLIONS)Three Months EndedSix Months Ended
PRODUCTPRIMARY INDICATION OR CLASSJuly 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Oncology$3,145 $2,647 $6,007 $5,082 
IbranceHR-positive/HER2-negative metastatic breast cancer1,404 1,349 2,657 2,598 
Xtandi alliance revenuesmCRPC, nmCRPC, mCSPC303 266 570 475 
InlytaAdvanced RCC257 195 486 364 
SutentAdvanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor194 209 394 414 
BosulifPhiladelphia chromosome–positive chronic myelogenous leukemia136 113 259 213 
XalkoriALK-positive and ROS1-positive advanced NSCLC120 138 255 287 
Ruxience(b)
Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis120 11 218 19 
Zirabev(b)
Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer129 215 15 
Retacrit(b)
Anemia103 87 212 176 
LorbrenaALK-positive metastatic NSCLC66 46 126 88 
AromasinPost-menopausal early and advanced breast cancer51 39 103 72 
BesponsaRelapsed or refractory B-cell acute lymphoblastic leukemia45 46 95 90 
Braftovi
In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab), for the treatment of
BRAFV600E-mutant mCRC after prior therapy
42 36 89 74 
Mektovi
In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation
36 32 71 69 
All other OncologyVarious138 69 257 128 
Internal Medicine$2,403 $2,279 $4,997 $4,610 
Eliquis direct sales and alliance revenuesNonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism1,481 1,272 3,124 2,572 
Chantix/ChampixAn aid to smoking cessation treatment in adults 18 years of age or older184 235 401 505 
Premarin familySymptoms of menopause128 152 271 304 
ToviazOveractive bladder62 64 119 124 
BMP2Development of bone and cartilage66 57 115 127 
PristiqDepression42 43 101 84 
All other Internal MedicineVarious440 455 865 894 
Hospital(a)
$2,259 $1,863 $4,602 $3,951 
SulperazonBacterial infections141 102 334 289 
MedrolAnti-inflammatory glucocorticoid112 78 211 207 
ZaviceftaBacterial infections104 46 198 95 
VfendFungal infections72 75 153 149 
FragminTreatment/prevention of venous thromboembolism77 58 149 118 
EpiPenEpinephrine injection used in treatment of life-threatening allergic reactions80 75 147 160 
ZithromaxBacterial infections43 55 132 193 
ZyvoxBacterial infections48 55 103 125 
PrecedexSedation agent in surgery or intensive care42 114 97 156 
IVIg Products(c)
Various107 85 212 183 
Pfizer CentreOne(d)
Various437 224 827 376 
All other Anti-infectivesVarious425 321 823 717 
All other HospitalVarious569 574 1,217 1,183 
Inflammation & Immunology (I&I)$1,041 $1,149 $2,107 $2,127 
XeljanzRA, PsA, UC, active polyarticular course juvenile idiopathic arthritis586 635 1,124 1,086 
Enbrel (Outside the U.S. and Canada)RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis286 337 605 684 
35


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(MILLIONS)Three Months EndedSix Months Ended
PRODUCTPRIMARY INDICATION OR CLASSJuly 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Inflectra/Remsima(b)
Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis136 150 313 308 
All other I&IVarious33 26 65 48 
Rare Disease$895 $681 $1,720 $1,319 
Vyndaqel/VyndamaxATTR-cardiomyopathy and polyneuropathy501 277 953 508 
BeneFIXHemophilia B112 109 225 230 
GenotropinReplacement of human growth hormone109 106 189 209 
Refacto AF/XynthaHemophilia A77 91 165 181 
SomavertAcromegaly68 67 133 131 
All other Rare DiseaseVarious29 31 55 61 
Total Alliance revenues$1,880 $1,404 $3,650 $2,786 
Total Biosimilars(b)
$559 $289 $1,089 $578 
Total Sterile Injectable Pharmaceuticals(e)
$1,381 $1,233 $2,863 $2,634 
(a)On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. See Note 1A. Beginning in the fourth quarter of 2020, the results of our Meridian subsidiary, which was previously included in our former Upjohn operating segment, are reported in the Hospital therapeutic area for all periods presented.
(b)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Inflectra/Remsima, Ruxience, Zirabev and Retacrit.
(c)Intravenous immunoglobulin (IVIg) products include the revenues from Panzyga, Octagam and Cutaquig.
(d)Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, as well as revenues related to our manufacturing and supply agreements with former legacy Pfizer businesses/partnerships, including but not limited to, manufacturing and supply agreements with Viatris following the spin-off of the Upjohn Business.
(e)Total Sterile Injectable Pharmaceuticals represents the total of all branded and generic injectable products in the Hospital therapeutic area, including anti-infective sterile injectable pharmaceuticals.
Deferred Revenues
Our deferred revenues primarily relate to advance payments received or receivable in connection with contracts that we entered into during 2021 and 2020 with various government or government sponsored customers in international markets for supply of BNT162b2. The deferred revenues associated with the advance payments related to BNT162b2 total $4.3 billion as of July 4, 2021 and $957 million as of December 31, 2020 and are recorded in current liabilities. The increase in the BNT162b2 deferred revenues during the first six months of 2021 was the result of additional advance payments received as we entered into new or amended contracts or as we invoiced customers in advance of vaccine deliveries less amounts recognized in Revenues as we delivered doses to our customers. During the second quarter and first six months of 2021, we recognized revenue of $622 million and $814 million, respectively, that was included in the balance of BNT162b2 deferred revenues as of December 31, 2020. The BNT162b2 deferred revenues as of July 4, 2021 will be recognized in Revenues proportionately as we deliver doses of the vaccine to our customers and satisfy our performance obligation under the contracts, which we expect to occur within the next 12 months.
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ITEM 2. MANAGEMENTS’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Our Business and Strategy
Most of our revenues come from the manufacture and sale of biopharmaceutical products. With the formation of the Consumer Healthcare JV in 2019 and the completion of the spin-off and combination of our Upjohn Business with Mylan in November 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, sale and distribution of biopharmaceutical products worldwide. The financial results of the Upjohn Business and the Mylan-Japan collaboration are reflected as discontinued operations. Prior-period information has been restated to reflect our current organization structure. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 75% has been incurred since inception and through the second quarter of 2021. These charges include costs and expenses related to separation of legal entities and transaction costs.
For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2020 Form 10-K.
References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign exchange rate changes are part of our business, they are not within our control and since they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to evaluate our results.
Our Business Development Initiatives
We are committed to strategically capitalizing on growth opportunities by advancing our own product pipeline and maximizing the value of our existing products, as well as through various business development activities.
Our significant recent business development activities include:
Collaboration with Arvinas, Inc. (Arvinas)––In July 2021, we announced a global collaboration with Arvinas to develop and commercialize ARV-471, an investigational oral PROTAC® (PROteolysis TArgeting Chimera) estrogen receptor protein degrader. The estrogen receptor is a well-known disease driver in most breast cancers. ARV-471 is currently in a Phase 2 dose expansion clinical trial for the treatment of patients with estrogen receptor positive / human epidermal growth factor receptor 2 negative (ER+/HER2-) locally advanced or metastatic breast cancer. Under the terms of the collaboration agreement, we made an upfront payment to Arvinas of $650 million in July 2021. Separately, we will make a $350 million equity investment in Arvinas, receiving approximately 3.5 million newly issued shares of Arvinas common stock, priced at a 30% premium to the 30-day volume weighted average price on July 20, 2021, representing an equity ownership stake by Pfizer of approximately 7% as of July 20, 2021. Closing of the equity investment agreement is contingent on completion of review under antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S., and other customary closing conditions. Arvinas is also eligible to receive up to $400 million in approval milestones and up to $1 billion in commercial milestones. The companies will equally share worldwide development costs, commercialization expenses and profits.
Acquisition of Amplyx Pharmaceuticals, Inc. (Amplyx)––In April 2021, we announced that we acquired Amplyx, a privately-held company dedicated to the development of therapies for debilitating and life-threatening diseases that affect people with compromised immune systems. Amplyx’s lead compound, Fosmanogepix (APX001), is a novel investigational asset in Phase 2 development for the treatment of invasive fungal infections.
For a discussion of recent significant business development activities, see Note 2. For a description of the more significant recent transactions through February 25, 2021, the filing date of our 2020 Form 10-K, see Note 2 in our 2020 Form 10-K.

Our Second Quarter 2021 Performance

Revenues
Revenues increased $9.1 billion, or 92%, in the second quarter of 2021 to $19.0 billion from $9.9 billion in the second quarter of 2020, reflecting an operational increase of $8.5 billion, or 86%, as well as a favorable impact of foreign exchange of $637 million, or 6%. Excluding direct sales and alliance revenues of BNT162b2 of $7.8 billion, revenues increased 10% operationally, reflecting strong growth in Vyndaqel/Vyndamax, Eliquis, Prevnar 13/Prevenar 13, Inlyta, Xtandi, Biosimilars and the Hospital therapeutic area, partially offset by declines in Enbrel, Xeljanz and Chantix/Champix.
Revenues increased $13.6 billion, or 68%, in the first six months of 2021 to $33.6 billion from $19.9 billion in the first six months of 2020, reflecting an operational increase of $12.7 billion, or 64%, as well as the favorable impact of foreign exchange
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of $921 million, or 5%. Excluding direct sales and alliance revenues of BNT162b2 of $11.3 billion, revenues increased 9% operationally, reflecting strong growth in Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Biosimilars and the Hospital therapeutic area, partially offset by declines in Chantix/Champix, Enbrel and Prevnar 13/Prevenar 13.
See the Analysis of the Condensed Consolidated Statements of Income––Revenues by Geography and Revenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. For information regarding the primary indications or class of certain products, see Note 13B.
Income from continuing operations before provision for taxes on income
The increase of $3.6 billion in Income from continuing operations before provision for taxes on income in the second quarter of 2021, compared to the same period in 2020, was primarily attributable to higher revenues, lower Restructuring charges and certain acquisition-related costs, higher net gains on equity securities, higher net gains on asset disposals and lower interest expense, partially offset by higher Cost of sales, higher Research and development expenses, higher legal charges, higher Selling, informational and administrative expenses and lower income from collaborations.
The increase of $6.4 billion in Income from continuing operations before provision for taxes on income in the first six months of 2021, compared to the same period in 2020, was primarily attributable to higher revenues, higher net gains on equity securities, lower Restructuring charges and certain acquisition-related costs, higher net periodic benefit credits related to pension and postretirement plans, higher Consumer Healthcare JV equity method income, lower interest expense and higher net gains on asset disposals, partially offset by higher Cost of sales, higher Research and development expenses, higher Selling, informational and administrative expenses and higher legal charges.
See the Analysis of the Condensed Consolidated Statements of Income within this MD&A and Note 4 for additional information.
For information on our tax provision and effective tax rate, see the Provision for Taxes on Income section within MD&A and Note 5.
Our Operating Environment

We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below and in our 2020 Form 10-K.
Intellectual Property Rights and Collaboration/Licensing Rights
The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with manufacturers and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face significantly increased generic competition over the next few years. For example, the basic product patent for Chantix in the U.S. expired in November 2020. While multi-source generic competition for Chantix has not yet begun, it could commence at any time. Also, the basic product patent for Sutent in the U.S. will expire on August 15, 2021. While additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 2021 through 2025. Further, legal or regulatory action by various stakeholders or governments could potentially result in us not seeking intellectual property protection for or agreeing not to enforce or being restricted from enforcing intellectual property related to our products. For example, in May 2021, the Brazilian Supreme Court voted to invalidate Article 40 of Brazil’s Patent Law, which guaranteed a minimum 10-year patent term from patent grant, and to give retroactive effect to such decision. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to ensure appropriate patient access.

For additional information on patent rights we consider most significant in relation to our business as a whole, see the Item 1. Business––Patents and Other Intellectual Property Rights section of our 2020 Form 10-K. For a discussion of recent developments with respect to patent litigation, see Note 12A1.
Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures
The pricing of medicines and vaccines by pharmaceutical manufacturers and the cost of healthcare, which includes medicines, vaccines, medical services and hospital services, continues to be important to payers, governments, patients, and other stakeholders. Federal and state governments and private third-party payers in the U.S. continue to take action to manage the utilization of drugs and cost of drugs, including increasingly employing formularies to control costs by taking into account discounts in connection with decisions about formulary inclusion or favorable formulary placement. We consider a number of factors impacting the pricing of our medicines and vaccines. Within the U.S., we often engage with patients, doctors and healthcare plans. We also often provide significant discounts from the list price to insurers, including PBMs and MCOs. The price that patients pay in the U.S. for prescribed medicines and vaccines is ultimately set by healthcare providers and insurers.
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Governments globally may use a variety of measures to control costs, including proposing pricing reform or legislation, cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. In the U.S., we expect to see continued focus by Congress and the Biden Administration on regulating pricing resulting in legislative and regulatory efforts designed to control costs. We anticipate that these and similar initiatives will continue to increase pricing pressures globally. For additional information, see the Item 1. Business––Pricing Pressures and Managed Care Organizations and ––Government Regulation and Price Constraints sections in our 2020 Form 10-K.
Product Supply
We periodically encounter supply delays, including due to a voluntary recall of a product. In July 2021, Pfizer issued a voluntary recall in the U.S. for 12 lots of Chantix due to the presence of a nitrosamine, N-nitroso-varenicline, above the Pfizer-established acceptable daily intake level. Nitrosamines are impurities which are common in water and foods and everyone is exposed to some level of nitrosamines. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, have been evaluating the potential for the presence or formation of nitrosamines in pharmaceutical products. We are currently undertaking an evaluation of our entire portfolio. For information on risks related to product manufacturing, see the Item 1A. Risk Factors––Product Manufacturing, Sales and Marketing Risks section of our 2020 Form 10-K.
The Global Economic Environment
In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to the economic cycle. For additional information, please see the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our 2020 Form 10-K.
COVID-19 Pandemic

The continuation of the COVID-19 pandemic has impacted our business, operations and financial condition and results.
Our Response to COVID-19
We are committed to confronting the public health challenge posed by the pandemic by collaborating with industry partners, global regulators and academic institutions to develop potential approaches to prevent and treat COVID-19. We have made some important advances, including, among others:
COVID-19 Vaccine Development Program:
The FDA has authorized the distribution and use of BNT162b2 in the U.S. to help prevent COVID-19 for individuals 12 years of age and older under an EUA. BNT162b2 has not been approved or licensed by the FDA. The EUA authorizes distribution and use of this product subject to the conditions set forth in the EUA, and only for the duration of the declaration by the Department of Health & Human Services that circumstances exist justifying authorization of emergency use of drugs and biological products (such as BNT162b2) during the COVID-19 pandemic under Section 564 of the U.S. Federal Food, Drug and Cosmetic Act (the Declaration), or until revocation of the EUA by the FDA. The FDA has issued EUAs to certain other companies for products intended for the prevention or treatment of COVID-19 and may continue to do so during the duration of the Declaration. The FDA expects EUA holders to work towards submission of a BLA as soon as possible. In May 2021, we and BioNTech completed the rolling submission of the BLA seeking full approval for BNT162b2 in individuals 16 years and older. In July 2021, the FDA granted Priority Review designation for this BLA. The PDUFA goal date for this BLA is set for January 2022, but the FDA may potentially act sooner. BNT162b2 has been granted a CMA, EUA or temporary authorization in many other countries around the world. We continue to study vaccines to help prevent COVID-19, including evaluating pediatric and maternal indications for BNT162b2, assessing the short- and long-term efficacy of BNT162b2, studying vaccines to prevent COVID-19 caused by new and emerging variants and potentially developing booster doses or an updated vaccine as needed.
Based on current projections, we and BioNTech expect to manufacture in total up to 3 billion doses by the end of December 2021, subject to continuous process improvements, expansion at current facilities and adding new suppliers and contract manufacturers. The companies have entered into agreements to supply pre-specified doses of BNT162b2 with multiple developed and emerging nations around the world and are continuing to deliver doses of BNT162b2 to governments under such agreements. We also signed agreements with the U.S., the EU, Israel and Canada to supply BNT162b2 doses in 2022 and beyond and are currently negotiating similar potential agreements with multiple other countries.
As of July 28, 2021, based on the 2.1 billion doses that are expected to be delivered in 2021 under agreements that have been signed through mid-July 2021, we forecasted approximately $33.5 billion in revenues in 2021 from BNT162b2, with
39


gross profit to be split evenly with BioNTech. This forecast may be adjusted in the future as additional agreements are signed and as circumstances warrant, and does not include the additional 200 million doses we announced on July 23, 2021 that we will deliver to the U.S. Government, of which 110 million doses are expected to be delivered from October to December 2021. We anticipate that a significant amount of the remaining 2021 vaccine manufacturing capacity will be delivered to middle- and low-income countries where we price in line with income levels or at a not-for-profit price.
COVID-19 Protease Inhibitors:
In July 2021, we initiated a Phase 2/3 study to evaluate the efficacy, safety and tolerability of an investigational, novel oral antiviral therapeutic for COVID-19, PF-07321332, which is a SARS-CoV2-3CL protease inhibitor.
We also have completed a Phase 1b clinical trial for an intravenously administered investigational protease inhibitor for COVID-19, PF-07304814. Following recent communications with the FDA, we anticipate the initiation of a Phase 2/3 study of PF-07304814 in the third quarter of 2021.
Despite our significant investments and efforts, any of our ongoing development programs related to COVID-19 may not be successful as the risk of failure is significant, and there can be no certainty these efforts will yield a successful product or that costs will ultimately be recouped.
Impact of COVID-19 on Our Business and Operations
As part of our on-going monitoring and assessment, we have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration, severity and the global macroeconomic impact of the pandemic, as well as COVID-19 vaccine supply and contracts, which remain dynamic. Despite careful tracking and planning, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition and results due to the uncertainty of future developments. We are focused on all aspects of our business and are implementing measures aimed at mitigating issues where possible, including by using digital technology to assist in operations for our commercial, manufacturing, R&D and enabling functions globally.
As discussed in our 2020 Form 10-K, our business and operations were impacted in 2020 by the pandemic in various ways; those impacts have continued in 2021. For detail on the impact of the COVID-19 pandemic on our products, see the Analysis of the Condensed Consolidated Statements of Income—Revenues by Geography and Revenues—Selected Product Discussion sections within this MD&A. In 2021, we have continued not to see a significant disruption to our supply chain to date, and all of our manufacturing sites globally have continued to operate at or near normal levels. However, we are seeing an increase in overall demand in the industry for certain components and raw materials potentially constraining available supply, which could have a future impact on our business. We are continuing to monitor and implement mitigation strategies in an effort to reduce any potential impact.
We will continue to pursue efforts to maintain the continuity of our operations while monitoring for new developments related to the pandemic. Future developments could result in additional favorable or unfavorable impacts on our business, operations or financial condition and results. If we experience significant disruption in our manufacturing or supply chains or significant disruptions in clinical trials or other operations, or if demand for our products is significantly reduced as a result of the COVID-19 pandemic, we could experience a material adverse impact on our business, operations and financial condition and results.
For additional information, please see the Item 1A. Risk Factors—COVID-19 Pandemic section and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 2020 Form 10-K.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
For a description of our significant accounting policies, see Note 1 in our 2020 Form 10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1D); Fair Value (Note 1E); Revenues (Note 1G); Asset Impairments (Note 1L); Tax Assets and Liabilities and Income Tax Contingencies (Note 1P); Pension and Postretirement Benefit Plans (Note 1Q); and Legal and Environmental Contingencies (Note 1R).
For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions section within MD&A in our 2020 Form 10-K. See also Note 1C in our 2020 Form 10-K for a discussion about the risks associated with estimates and assumptions.
For a discussion of a recently adopted accounting standard, a change in accounting principle related to our pension and postretirement plans, and significant accounting policies, see Notes 1B, 1C and 1D.
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ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Revenues by Geography
The following presents worldwide revenues by geography:
Three Months Ended
 WorldwideU.S.InternationalWorld-wideU.S.Inter-national
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
% Change in Revenues
Total revenues$18,977 $9,864 $7,593 $5,113 $11,384 $4,751 92 48 *
Six Months Ended
WorldwideU.S.InternationalWorld-wideU.S.Inter-national
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
% Change in Revenues
Total revenues$33,559 $19,947 $15,190 $10,403 $18,369 $9,544 68 46 92 
* Calculation is not meaningful or results are equal to or greater than 100%.
Second Quarter of 2021 vs. Second Quarter of 2020
The following provides an analysis of the worldwide change in revenues by geographic areas in the second quarter of 2021:
Three Months Ended July 4, 2021
(MILLIONS)WorldwideU.S.International
Operational growth/(decline):
Growth from BNT162b2, Vyndaqel/Vyndamax, Eliquis, Prevnar 13/Prevenar 13, Inlyta, Xtandi, Ibrance, Biosimilars and the Hospital therapeutic area, partially offset by decline from Xeljanz. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis
$8,613 $2,515 $6,098 
Lower revenues for Enbrel and Chantix/Champix. The decrease for Enbrel internationally primarily reflects continued biosimilar competition in most developed Europe markets and Japan, which is expected to continue. The decrease in Chantix/Champix was driven by the U.S. and primarily reflects a negative impact on available supply related to the voluntary recall of certain lots of product following the discovery of the presence of a nitrosamine, N-nitroso-varenicline, above the Pfizer-established acceptable daily intake level and a hold on distribution of new product pending additional testing, as well as the negative impact of the COVID-19 pandemic resulting in a decline in patient visits to doctors for preventative health purposes and the loss of patent protection in the U.S. in November 2020(119)(41)(77)
Other operational factors, net(18)(24)
Operational growth/(decline), net8,476 2,480 5,996 
Favorable impact of foreign exchange637 — 637 
Revenues increase/(decrease)
$9,113 $2,480 $6,633 
Emerging markets revenues increased $1.9 billion, or 101%, in the second quarter of 2021 to $3.8 billion from $1.9 billion in the second quarter of 2020, reflecting an operational increase of $1.8 billion, or 94%, and a favorable impact from foreign exchange of approximately 7%. The operational increase in emerging markets was primarily driven by revenues from BNT162b2 and growth from Eliquis.
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First Six Months of 2021 vs. First Six Months of 2020
The following provides an analysis of the worldwide change in revenues by geographic areas in the first six months of 2021:
Six Months Ended July 4, 2021
(MILLIONS)WorldwideU.S.International
Operational growth/(decline):
Growth from BNT162b2, Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Xeljanz, Biosimilars and the Hospital therapeutic area, partially offset by decline from Prevnar 13/Prevenar 13, while Ibrance was flat. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis
$12,952 $4,899 $8,054 
Lower revenues for Chantix/Champix and Enbrel. The decrease in Chantix/Champix was driven by the U.S. and primarily reflects the negative impact of the COVID-19 pandemic resulting in a decline in patient visits to doctors for preventative health purposes and the loss of patent protection in the U.S. in November 2020, as well as a negative impact on available supply related to the voluntary recall of certain lots of product following the discovery of the presence of a nitrosamine, N-nitroso-varenicline, above the Pfizer-established acceptable daily intake level and a hold on distribution of new product pending additional testing. The decrease for Enbrel internationally primarily reflects continued biosimilar competition in most developed Europe markets and Japan, which is expected to continue(211)(87)(125)
Other operational factors, net(50)(25)(26)
Operational growth/(decline), net12,691 4,787 7,903 
Favorable impact of foreign exchange921 — 921 
Revenues increase/(decrease)
$13,612 $4,787 $8,825 
Emerging markets revenues increased $2.6 billion, or 63%, in the first six months of 2021 to $6.6 billion from $4.1 billion in the first six months of 2020, reflecting an operational increase of $2.5 billion, or 61%, and a favorable impact from foreign exchange of approximately 2%. The operational increase in emerging markets was primarily driven by revenues from BNT162b2 and growth from Eliquis.
Revenue Deductions
Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. These deductions represent estimates of related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period. Historically, adjustments to these estimates to reflect actual results or updated expectations, have not been material to our overall business and generally have been less than 1% of revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product revenue growth trends.
The following presents information about revenue deductions:
 Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Medicare rebates$182 $143 $371 $327 
Medicaid and related state program rebates306 283 652 580 
Performance-based contract rebates788 655 1,541 1,269 
Chargebacks1,518 1,033 2,949 2,064 
Sales allowances1,213 864 2,357 1,886 
Sales returns and cash discounts235 217 459 439 
Total$4,243 $3,194 $8,329 $6,565 
Revenue deductions are primarily a function of product sales volume, mix of products sold, contractual or legislative discounts and rebates.
For information on our accruals for revenue deductions, including the balance sheet classification of these accruals, see Note 1D.
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Revenues––Selected Product Discussion
(MILLIONS)Revenue% Change
ProductPeriodGlobal
Revenues
RegionJuly 4, 2021June 28, 2020TotalOper.Operational Results Commentary
BNT162b2(a)
QTD
$7,838

*
U.S.$2,034 $— *Driven by global uptake, following a CMA, EUA or temporary authorization.
Int’l.5,804 — **
Worldwide$7,838 $— **
YTD
$11,300

*
U.S.$4,072 $— *
Int’l.7,228 — **
Worldwide$11,300 $— **
EliquisQTD
$1,481

Up 13%

(operationally)
U.S.$831 $722 15 
QTD and YTD growth led by the U.S. and emerging markets, driven primarily by continued increased adoption in non-valvular atrial fibrillation and oral anti-coagulant market share gains.
YTD was also impacted by a favorable adjustment related to the Medicare “coverage gap” provision resulting from lower than previously expected discounts in prior periods.
Int’l.650 550 18 10 
Worldwide$1,481 $1,272 16 13 
YTD
$3,124

Up 19%

(operationally)
U.S.$1,812 $1,527 19 
Int’l.1,312 1,045 26 19 
Worldwide$3,124 $2,572 21 19 
IbranceQTD
$1,404

Up 2%
 
(operationally)
U.S.$862 $927 (7)
QTD growth driven by accelerating demand internationally as the delays in diagnosis and treatment initiations caused by COVID-19 show signs of recovery across several international markets, partially offset by a decline in the U.S., which despite maintaining a strong leadership position within the CDK 4/6 class with 73% share of first-line new patient starts, reflects an increase in the proportion of patients accessing Ibrance through our Patient Assistance Program.
YTD was flat as accelerating demand internationally was offset by a decline in the U.S., as described above.
Int’l.542 422 28 21 
Worldwide$1,404 $1,349 
YTD
$2,657

Flat

(operationally)
U.S.$1,656 $1,779 (7)
Int’l.1,002 819 22 16 
Worldwide$2,657 $2,598 
Prevnar 13/
Prevenar 13
QTD
$1,241

Up 9%

(operationally)
U.S.$642 $481 34 
QTD growth primarily resulting from:
U.S. growth in the pediatric indication, primarily due to higher levels of healthcare activity and wellness visits compared to the prior-year quarter, which was heavily impacted by COVID-19-related mobility restrictions and limitations, as well as favorable timing of government purchases, partially offset by lower year-over-year birth rates(b); and
U.S. growth in the adult indication, primarily due to higher levels of healthcare activity and wellness visits compared to the prior-year quarter, as described above, partially offset by the impact of a lower remaining eligible unvaccinated population,
This growth was partially offset by:
decline in developed Europe, reflecting significantly increased adult demand in the prior-year quarter in Germany and certain other markets resulting from greater vaccine awareness for respiratory illnesses due to the COVID-19 pandemic.

YTD decline primarily resulting from:
impact of the revised ACIP recommendation for the adult indication to shared clinical decision making, which means the decision to vaccinate should be made at the individual level between healthcare providers and their patients, as well as the continued impact of a lower remaining eligible adult population; and
decline in developed Europe, reflecting significantly increased adult demand in the prior-year in Germany and certain other markets resulting from greater vaccine awareness for respiratory illnesses due to the COVID-19 pandemic, partially offset by:
U.S. growth in the pediatric indication due to the factors discussed above.
Int’l.599 636 (6)(9)
Worldwide$1,241 $1,116 11 
YTD
$2,524

Down 3%

(operationally)
U.S.$1,280 $1,275 
Int’l.1,244 1,291 (4)(6)
Worldwide$2,524 $2,566 (2)(3)
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(MILLIONS)Revenue% Change
ProductPeriodGlobal
Revenues
RegionJuly 4, 2021June 28, 2020TotalOper.Operational Results Commentary
XeljanzQTD
$586

Down 9%

(operationally)
U.S.$390 $458 (15)
QTD decline driven by the U.S., despite 2% year-over-year growth in U.S. prescription volume, reflecting an unfavorable change in channel mix toward lower-priced channels and continued investments to improve formulary positioning and unlock access to additional patient lives, as well as a negative impact on new patient starts resulting from an ongoing review by the FDA of safety data from the post-marketing ORAL Surveillance study of Xeljanz in subjects with rheumatoid arthritis who were 50 years of age or older and had at least one additional cardiovascular risk factor. This decline was partially offset by operational growth internationally mainly driven by continued uptake in the UC indication in certain developed markets.
YTD growth reflects continued uptake in the RA and UC indications in certain international markets, partially offset by the U.S., as described above.
Int’l.195 177 10 
Worldwide$586 $635 (8)(9)
YTD
$1,124

Up 2%

(operationally)
U.S.$722 $744 (3)
Int’l.402 343 17 13 
Worldwide$1,124 $1,086 
Vyndaqel/
Vyndamax
QTD
$501

Up 77%

(operationally)
U.S.$225 $145 54 Primarily driven by continued strong uptake of the ATTR-CM indication in developed Europe, the U.S. and Japan.
Int’l.276 131 **
Worldwide$501 $277 81 77 
YTD
$953

Up 82%

(operationally)
U.S.$430 $272 58 
Int’l.523 236 **
Worldwide$953 $508 88 82 
XtandiQTD
$303

Up 14%

(operationally)
U.S.$303 $266 14 Primarily driven by strong demand across the mCRPC, nmCRPC and mCSPC indications.
Int’l.— — 
Worldwide$303 $266 14 14 
YTD
$570

Up 20%

(operationally)
U.S.$570 $475 20 
Int’l.— — 
Worldwide$570 $475 20 20 
InlytaQTD
$257

Up 29%

(operationally)
U.S.$155 $132 17 Primarily reflecting increased adoption in the U.S. and developed Europe of combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC.
Int’l.102 63 62 53 
Worldwide$257 $195 32 29 
YTD
$486

Up 31%

(operationally)
U.S.$296 $248 20 
Int’l.190 116 63 55 
Worldwide$486 $364 34 31 
BiosimilarsQTD
$559

Up 88%

(operationally)
U.S.$363 $161 *Primarily driven by recent oncology monoclonal antibody biosimilar launches globally and continued growth from Retacrit in the U.S.
Int’l.195 128 52 39 
Worldwide$559 $289 93 88 
YTD
$1,089

Up 83%

(operationally)
U.S.$691 $328 *
Int’l.398 250 59 47 
Worldwide$1,089 $578 88 83 
HospitalQTD
$2,259

Up 17%

(operationally)
U.S.$833 $830 Primarily driven by Pfizer CentreOne, our contract manufacturing operation, reflecting manufacturing of legacy Upjohn products for Viatris under manufacturing and supply agreements, certain BNT162b2 manufacturing activities performed on behalf of BioNTech and remdesivir for Gilead Sciences Inc., as well as growth from recent anti-infective product launches in international markets, partially offset by a decline in U.S. sales of certain sterile injectable products utilized in the intubation and mechanical ventilation of patients being treated for COVID-19 due to high demand for these products in the comparable periods.
Int’l.1,426 1,032 38 30 
Worldwide$2,259 $1,863 21 17 
YTD
$4,602

Up 13%

(operationally)
U.S.$1,738 $1,721 
Int’l.2,863 2,231 28 22 
Worldwide$4,602 $3,951 16 13 
(a)BNT162b2 includes direct sales and alliance revenues related to sales of the Pfizer-BioNTech COVID-19 vaccine, which are recorded within our Vaccines therapeutic area. It does not include revenues for certain BNT162b2 manufacturing activities performed on behalf of BioNTech related to the COVID-19 vaccine, which are included in the Pfizer CentreOne contract manufacturing operation within the Hospital area.
(b)The U.S. birth rate decline is 4% compared to 2020 levels, according to Demographic Intelligence.
*    Calculation is not meaningful or results are equal to or greater than 100%.
See the Item 1. BusinessPatents and Other Intellectual Property Rights section of our 2020 Form 10-K for information regarding the expiration of various patent rights, Note 12 for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above, and Note 13B for information regarding the primary indications or class of the selected products discussed.
44


Product Developments
A comprehensive update of Pfizer’s development pipeline was published as of July 28, 2021 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 provides information about significant marketing application-related regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan. The table below includes only approvals for products that have occurred in the last twelve months and does not include approvals that may have occurred prior to that time. The table includes filings with regulatory decisions pending (even if the filing occurred outside of the last twelve-month period).
PRODUCTDISEASE AREAAPPROVED/FILED*
U.S.EUJAPAN
PF-07302048 (COVID-19 Vaccine)(a)
Immunization to prevent COVID-19 (16 years of age and older)
EUA
Dec.
2020
CMA
Dec.
2020
Approved
Feb.
2021
Immunization to prevent COVID-19 (12-15 years of age)
EUA
May
 2021
CMA
May
 2021
Approved May
2021
Bavencio
(avelumab)(b)
First-line maintenance urothelial cancer

Approved
Jan.
2021
Approved
Feb.
2021
Nyvepria
(pegfilgrastim-apgf)
Neutropenia in patients undergoing cancer chemotherapy (biosimilar)

Approved
Nov.
2020
Braftovi (encorafenib)(c)
Second or third-line BRAFv600E-mutant mCRC (combination with Erbitux® (cetuximab))


Approved
Nov.
2020
Braftovi (encorafenib) and Mektovi (binimetinib)(c)
Second or third-line BRAFV600E-mutant mCRC (combination with Erbitux® (cetuximab))
Approved
Nov.
2020
Xtandi
(enzalutamide)(d)
mCSPC
Approved
April
2021

abrocitinib (PF-04965842)(e)
Atopic dermatitis
Filed
Oct.
2020
Filed
Oct.
2020
Filed
Dec.
2020
Infliximab Pfizer (infliximab)Ankylosing spondylitis (biosimilar)
Approved
Oct.
2020
Bevacizumab Pfizer (bevacizumab)NSCLC (biosimilar)
Approved
Sept.
2020
tanezumab(f)
Chronic pain due to moderate-to-severe osteoarthritis
Filed
March
 2020
Filed
March
 2020
Filed
Aug.
2020
Xeljanz
(tofacitinib)(e)
Ankylosing spondylitis
Filed
Aug.
2020
Filed
Feb.
2021
Myfembree
(relugolix fixed dose combination)(g)
Uterine fibroids (combination with estradiol and norethindrone acetate)
Approved
May
2021
Lorbrena
(lorlatinib)
First- line ALK-positive NSCLC
Approved
Mar.
2021
Filed
Feb.
2021
Filed
Dec.
2020
somatrogon
(PF-06836922)(h)
Pediatric growth hormone deficiency
Filed
Jan.
2021
Filed
Feb.
2021
Filed
Jan.
2021
Prevnar 20
(Vaccine)(i)
Immunization to prevent invasive and non-invasive pneumococcal infections (adults)
Approved
June
2021
Filed
 Feb.
2021
TicoVac
(Vaccine)
Immunization to prevent tick-borne encephalitis
Filed
 Feb.
2021
*For the U.S., the filing date is the date on which the FDA accepted our submission. For the EU, the filing date is the date on which the EMA validated our submission.
(a)Being developed in collaboration with BioNTech. In July 2021, the FDA granted Priority Review designation for the BLA for PF-07302048 or BNT162b2 to prevent COVID-19 in individuals 16 years of age and older. The PDUFA goal date for a decision by the FDA is in January 2022.
(b)Being developed in collaboration with Merck KGaA, Germany.
(c)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(d)Being developed in collaboration with Astellas.
(e)The FDA has notified the company that it will not meet the PDUFA goal dates for the New Drug Application for abrocitinib and the supplemental New Drug Application for Xeljanz/Xeljanz XR (tofacitinib). The FDA cited its ongoing review of Pfizer's post-marketing safety study, ORAL Surveillance, evaluating tofacitinib in rheumatoid arthritis patients, as a factor for the extensions.
(f)Being developed in collaboration with Lilly. In March 2021, the FDA Joint Arthritis Advisory Committee and Drug Safety and Risk Management Advisory Committee on tanezumab resulted in a 19:1 against vote on whether the proposed risk evaluation and mitigation strategy (REMS) for tanezumab will ensure benefits outweigh risks.
(g)Being developed in collaboration with Myovant.
(h)Being developed in collaboration with OPKO.
(i)The CDC’s ACIP is expected to meet in October 2021 to discuss and update recommendations on the safe and appropriate use of pneumococcal vaccines in adults.
45


The following provides information about additional indications and new drug candidates in late-stage development:
PRODUCT/CANDIDATEPROPOSED DISEASE AREA
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS
FOR IN-LINE AND IN-REGISTRATION PRODUCTS
Bavencio (avelumab)(a)
First-line NSCLC
Ibrance (palbociclib)(b)
ER+/HER2+ metastatic breast cancer
Xtandi (enzalutamide)(c)
Non-metastatic high-risk castration sensitive prostate cancer
Talzenna (talazoparib)Combination with Xtandi (enzalutamide) for first-line mCRPC
Combination with Xtandi (enzalutamide) for DNA Damage Repair (DDR)-deficient mCSPC
PF-06482077 (Vaccine)Invasive and non-invasive pneumococcal infections (pediatric)
somatrogon (PF-06836922)(d)
Adult growth hormone deficiency
tanezumab(e)
Cancer pain
Braftovi (encorafenib) and Erbitux® (cetuximab)(f)
First-line BRAFv600E-mutant mCRC
Relugolix fixed dose combination(g)
Combination with estradiol and norethindrone acetate for endometriosis
Combination with estradiol and norethindrone acetate for contraceptive efficacy
Braftovi (encorafenib) and Mektovi (binimetinib) and Keytruda® (pembrolizumab)(h)
BRAFv600E-mutant metastatic or unresectable locally advanced melanoma
PF-07302048/BNT162b2 (Pfizer/BioNTech COVID-19 vaccine)(i)
COVID-19 Infection (children 2 to 11 years of age)
COVID-19 Infection (infants 6 months to <24 months)
PF-07302048/BNT162b2 booster(i)
COVID-19 Infection
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENTaztreonam-avibactam
(PF-06947387)
Treatment of infections caused by Gram-negative bacteria
fidanacogene elaparvovec (PF-06838435)(j)
Hemophilia B
giroctocogene fitelparvovec
(PF-07055480)(k)
Hemophilia A
PF-06425090 (Vaccine)Primary clostridioides difficile infection
PF-06886992 (Vaccine)Serogroups meningococcal (adolescent and young adults)
PF-06928316 (Vaccine)Respiratory syncytial virus infection (maternal)
PF-07265803Dilated cardiomyopathy due to Lamin A/C gene mutation
ritlecitinib (PF-06651600)Alopecia areata
sasanlimab (PF-06801591)Combination with Bacillus Calmette-Guerin for non-muscle-invasive bladder cancer
fordadistrogene movaparvovec (PF-06939926)Duchenne muscular dystrophy
marstacimab (PF-06741086)Hemophilia
(a)Being developed in collaboration with Merck KGaA, Germany.
(b)Being developed in collaboration with the Alliance Foundation Trial.
(c)Being developed in collaboration with Astellas.
(d)Being developed in collaboration with OPKO.
(e)Being developed in collaboration with Lilly.
(f)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(g)Being developed in collaboration with Myovant.
(h)Keytruda® is a registered trademark of Merck Sharp & Dohme Corp.
(i)Being developed in collaboration with BioNTech.
(j)Being developed in collaboration with Spark Therapeutics, Inc.
(k)Being developed in collaboration with Sangamo Therapeutics, Inc.
For additional information about our R&D organization, see the Item 1. BusinessResearch and Development section of our 2020 Form 10-K.
46


COSTS AND EXPENSES
Costs and expenses follow:
Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
%
 Change
July 4,
2021
June 28,
2020
%
 Change
Cost of sales$7,049 $1,826 *$11,259 $3,766 *
Percentage of Revenues
37.1 %18.5 %33.6 %18.9 %
Selling, informational and administrative expenses2,928 2,659 10 5,712 5,200 10 
Research and development expenses2,459 2,078 18 4,473 3,750 19 
Amortization of intangible assets931 869 1,802 1,718 
Restructuring charges and certain acquisition-related costs(1)360 *22 414 (95)
Other (income)/deductions—net(998)(955)(2,001)(764)*
* Indicates calculation not meaningful or results are equal to or greater than 100%.
Cost of Sales
Cost of sales increased $5.2 billion in the second quarter and $7.5 billion in the first six months of 2021, primarily due to:
the impact of BNT162b2, which includes a charge for the 50% gross profit split with BioNTech and royalty expenses;
the unfavorable impact of foreign exchange and hedging activity on intercompany inventory; and
increased sales volumes of other products, driven mostly by Pfizer CentreOne.
The increase in Cost of sales as a percentage of revenues in the second quarter and in the first six months of 2021, compared to the same periods in 2020, was primarily due to all of the factors discussed above, partially offset by an increase in alliance revenues, which have no associated cost of sales.
Selling, Informational and Administrative Expenses
SI&A expenses increased $269 million in the second quarter of 2021, mostly due to:
increased product-related spending across multiple therapeutic categories and other costs associated with a return to more normal activity levels compared to the prior-year quarter; and
the unfavorable impact of foreign exchange,
partially offset by:
lower spending for corporate enabling functions; and
lower spending on Chantix following the loss of patent protection in the U.S. in November 2020.
SI&A expenses increased $511 million in the first six months of 2021, mostly due to:
increased product-related spending across multiple therapeutic categories and other costs associated with a return to more normal activity levels compared to the prior-year quarter;
an increase to expense resulting from the increase in our liability to be paid to participants of our supplemental savings plan;
the unfavorable impact of foreign exchange; and
costs related to BNT162b2, driven by a higher provision for healthcare reform fees based on sales,
partially offset by:
lower spending on Chantix following the loss of patent protection in the U.S. in November 2020.
Research and Development (R&D) Expenses
R&D expenses increased $381 million in the second quarter and $723 million in the first six months of 2021, primarily due to:
incremental investments across multiple therapeutic categories, including additional spending related to development of BNT162b2 and therapeutics to help treat COVID-19, as well as
a charge for IPR&D related to an asset acquisition completed in the second quarter of 2021,
partially offset by:
the non-recurrence of upfront payments to Valneva and BioNTech.
Amortization of Intangible Assets
Amortization of intangible assets increased $62 million in the second quarter and $85 million in the first six months of 2021, primarily as a result of amortization of capitalized BNT162b2 sales milestones to BioNTech.
47


Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
Transforming to a More Focused Company Program
For a description of our program, as well as the anticipated and actual costs, see Note 3. The program savings discussed below may be rounded and represent approximations. In connection with the costs primarily related to the corporate enabling functions initiatives, we expect gross cost savings of $1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, to be achieved primarily from 2021 through 2022. In connection with manufacturing network optimization, including legacy cost reduction initiatives, we expect net cost savings of $300 million to be achieved primarily from 2020 through 2022.
Certain qualifying costs for this program were recorded in the first two quarters of 2021 and 2020 and are reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income. See the Non-GAAP Financial Measure: Adjusted Income section of this MD&A.
In addition to this program, 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
Other income—net increased $43 million in the second quarter of 2021, mainly due to:
a favorable impact of foreign exchange;
higher transition services agreement income;
higher net gains on equity securities;
higher net gains on asset disposals;
lower interest expense; and
higher net periodic benefit credits other than service costs related to pension and postretirement plans,
partially offset by:
higher legal charges; and
lower income from collaborations.
Other income—net increased $1.2 billion in the first six months of 2021, mainly due to:
higher net gains on equity securities;
higher net periodic benefit credits other than service costs related to pension and postretirement plans;
higher transition services agreement income;
higher Consumer Healthcare JV equity method income;
lower interest expense;
higher net gains on asset disposals; and
higher royalty income,
partially offset by:
higher legal charges.
See Note 4 for additional information.
PROVISION FOR TAXES ON INCOME
 Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
%
Change
July 4,
2021
June 28,
2020
%
Change
Provision for taxes on income$1,043 $422 *$1,849 $782 *
Effective tax rate on continuing operations15.8 %14.0 %15.0 %13.3 % 
* Indicates 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, as well as details about discrete elements that impacted our tax provisions, see Note 5.
DISCONTINUED OPERATIONS
For information about our discontinued operations, see Note 2A.
48


NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME
Adjusted income is an alternative measure of performance used by management to evaluate our overall performance in conjunction with other performance measures. As such, we believe that investors’ understanding of our performance is enhanced by disclosing this measure. We use Adjusted income, certain components of Adjusted income and Adjusted diluted EPS to present the results of our major operations––the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide––prior to considering certain income statement elements as follows:
MeasureDefinitionIllustrative Use
Adjusted income
Net income attributable to Pfizer Inc. common shareholders(a) before the impact of purchase accounting for acquisitions, acquisition-related items, discontinued operations and certain significant items
Monthly managerial analysis of our operating results and our annual budgets are prepared using these non-GAAP measures
Senior management’s compensation is determined, in part, using these non-GAAP measures(b)
Adjusted cost of sales, Adjusted selling, informational and administrative expenses, Adjusted research and development expenses, Adjusted amortization of intangible assets and Adjusted other (income)/deductions––net
Cost of sales, Selling, informational and administrative expenses, Research and development expenses, Amortization of intangible assets and Other (income)/deductions––net (a), each before the impact of purchase accounting for acquisitions, acquisition-related items, discontinued operations and certain significant items, which are components of the Adjusted income measure
Adjusted diluted EPS
EPS attributable to Pfizer Inc. common shareholders––diluted(a) before the impact of purchase accounting for acquisitions, acquisition-related items, discontinued operations and certain significant items
(a)Most directly comparable GAAP measure.
(b)The short-term incentive plans for substantially all non-sales-force employees worldwide are funded from a pool based on our performance, measured in significant part by three metrics, one of which is Adjusted diluted EPS, which is derived from Adjusted income and accounts for 40% of the bonus pool funding. Additionally, the payout for Performance Share Awards is determined in part by Adjusted net income, which is derived from Adjusted income. Starting with the 2020 performance year and consistent with shareholder feedback received in 2019, the Compensation Committee of the BOD approved adding an R&D pipeline achievement factor to the existing short-term incentive financial metrics.
Adjusted income and its components and Adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, they may not be comparable to the calculation of similar measures of other companies and are presented solely to permit investors to more fully understand how management assesses performance. A limitation of these measures is that they provide a view of our operations without including all events during a period, and do not provide a comparable view of our performance to peers. These measures are not, and should not be viewed as, substitutes for their directly comparable GAAP measures of Net income attributable to Pfizer Inc. common shareholders, components of Net income attributable to Pfizer Inc. common shareholders and EPS attributable to Pfizer Inc. common shareholders—diluted, respectively. See the accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the second quarters and first six months of 2021 and 2020 below.
We also recognize that, as internal measures of performance, these measures have limitations, and we do not restrict our performance-management process solely to these measures. We also use other 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 our incentive compensation plans.
Purchase Accounting Adjustments
Adjusted income excludes certain significant purchase accounting impacts resulting from business combinations and net asset acquisitions. These impacts 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, amortization related to the increase in fair value of acquired debt, and the fair value changes for 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 Items
Adjusted income excludes acquisition-related items, which are comprised of transaction, integration, restructuring charges and additional depreciation costs for business combinations because these costs are unique to each transaction and represent costs
49


that were incurred to restructure and integrate businesses as a result of an acquisition. We have made no adjustments for resulting synergies.
Discontinued Operations
Adjusted income excludes the results of discontinued operations, as well as any related gains or losses on the disposal of such operations. We believe that this presentation is meaningful to investors because, while we review our therapeutic areas and product lines for strategic fit with our operations, we do not build or run our business with the intent to discontinue parts of our business. Restatements due to discontinued operations do not impact compensation or change the Adjusted income measure for the compensation in respect of the restated periods, but are presented for consistency across all periods.

Certain Significant Items
Adjusted income excludes certain significant items representing substantive and/or unusual items that are evaluated individually on a quantitative and qualitative basis. 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, although major non-acquisition-related cost-reduction programs are specific to an event or goal with a defined term, we may have subsequent programs based on reorganizations of the business, cost productivity or in response to LOE 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 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. For a non-inclusive list of certain significant items see Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income below.
Beginning in 2021, we exclude pension and postretirement actuarial remeasurement gains and losses from our measure of Adjusted income because of their inherent market volatility, which we do not control and cannot predict with any level of certainty and because we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business.
Also, see the Non-GAAP Financial Measure: Adjusted Income section of the MD&A of our 2020 Form 10-K for additional information.
Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items
 Three Months Ended July 4, 2021
(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$18,977 $— $— $— $— $18,977 
Cost of sales7,049 — — (57)6,997 
Selling, informational and administrative expenses2,928 (1)— — (135)2,792 
Research and development expenses2,459 — — (188)2,273 
Amortization of intangible assets931 (762)— — — 169 
Restructuring charges and certain acquisition-related costs(1)— (3)— — 
(Gain) on completion of Consumer Healthcare JV transaction — — — — — 
Other (income)/deductions––net(998)(37)— — 460 (575)
Income from continuing operations before provision for taxes on income6,609 793 — (83)7,321 
Provision for taxes on income(b)
1,043 167 — — 1,212 
Income from continuing operations5,565 625 — (84)6,110 
Income from discontinued operations––net of tax24 — — (24)— — 
Net income attributable to noncontrolling interests26 — — — — 26 
Net income attributable to Pfizer Inc. common shareholders5,563 625 (24)(84)6,084 
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted0.98 0.11 — — (0.01)1.07 
50


 Six Months Ended July 4, 2021
(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$33,559 $— $— $— $— $33,559 
Cost of sales11,259 11 — — (96)11,175 
Selling, informational and administrative expenses5,712 (1)— — (259)5,451 
Research and development expenses4,473 — — (190)4,286 
Amortization of intangible assets1,802 (1,525)— — — 277 
Restructuring charges and certain acquisition-related costs22 — (2)— (20)— 
(Gain) on completion of Consumer Healthcare JV transaction — — — — — 
Other (income)/deductions––net(2,001)16 — — 810 (1,175)
Income from continuing operations before provision for taxes on income12,291 1,497 — (244)13,546 
Provision for taxes on income(b)
1,849 354 — — (38)2,165 
Income from continuing operations10,443 1,143 — (206)11,381 
Income from discontinued operations––net of tax32 — — (32)— — 
Net income attributable to noncontrolling interests35 — — — — 35 
Net income attributable to Pfizer Inc. common shareholders10,440 1,143 (32)(206)11,346 
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted1.84 0.20 — (0.01)(0.04)2.00 
51


 Three Months Ended June 28, 2020
(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$9,864 $— $— $— $— $9,864 
Cost of sales1,826 — — (36)1,795 
Selling, informational and administrative expenses2,659 (1)— — (131)2,528 
Research and development expenses2,078 — — (238)1,841 
Amortization of intangible assets869 (798)— — — 71 
Restructuring charges and certain acquisition-related costs360 — (21)— (339)— 
(Gain) on completion of Consumer Healthcare JV transaction — — — — — 
Other (income)/deductions––net(955)(82)— — 595 (442)
Income from continuing operations before provision for taxes on income3,026 874 21 — 150 4,071 
Provision for taxes on income(b)
422 180 — (17)591 
Income from continuing operations2,604 694 16 — 167 3,481 
Income from discontinued operations––net of tax893 — — (893)— — 
Net income attributable to noncontrolling interests8 — — — — 
Net income attributable to Pfizer Inc. common shareholders3,489 694 16 (893)167 3,473 
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted0.62 0.12 — (0.16)0.03 0.62 
 Six Months Ended June 28, 2020
(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$19,947 $— $— $— $— $19,947 
Cost of sales3,766 — — (63)3,712 
Selling, informational and administrative expenses5,200 — — — (223)4,978 
Research and development expenses3,750 — — (239)3,514 
Amortization of intangible assets1,718 (1,576)— — — 142 
Restructuring charges and certain acquisition-related costs414 — (35)— (379)— 
(Gain) on completion of Consumer Healthcare JV transaction(6)— — — — 
Other (income)/deductions––net(764)(85)— — 145 (704)
Income from continuing operations before provision for taxes on income5,868 1,650 34 — 752 8,305 
Provision for taxes on income(b)
782 356 — 123 1,269 
Income from continuing operations5,087 1,294 26 — 629 7,036 
Income from discontinued operations––net of tax1,774 — — (1,774)— — 
Net income attributable to noncontrolling interests17 — — — — 17 
Net income attributable to Pfizer Inc. common shareholders6,843 1,294 26 (1,774)629 7,019 
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted1.22 0.23 — (0.32)0.11 1.25 
(a)For details of adjustments, see Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income.
(b)The effective tax rate on Non-GAAP Adjusted income was 16.6% in the second quarter of 2021, compared to 14.5% in the second quarter of 2020. The effective tax rate on Non-GAAP Adjusted income was 16.0% in the first six months of 2021, compared to 15.3% in the first six months of 2020. The increase was due to a change in the jurisdictional mix of earnings primarily related to BNT162b2.
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Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income
Three Months EndedSix Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
July 4,
2021
June 28,
2020
Purchase accounting adjustments  
Amortization, depreciation and other(a)
$799 $879 $1,508 $1,659 
Cost of sales(6)(5)(11)(9)
Total purchase accounting adjustments––pre-tax793 874 1,497 1,650 
Income taxes(b)
(167)(180)(354)(356)
Total purchase accounting adjustments––net of tax625 694 1,143 1,294 
Acquisition-related items   
Restructuring charges/(credits)(c)
— (1)(7)— 
Transaction costs(c)
— 11 — 14 
Integration costs and other(c)
11 21 
Total acquisition-related items––pre-tax21 34 
Income taxes(b)
(1)(5)— (8)
Total acquisition-related items––net of tax16 26 
Discontinued operations   
Income from discontinued operations––net of tax(d)
(24)(893)(32)(1,774)
Certain significant items   
Restructuring charges/(credits)––cost reduction initiatives(e)
(4)339 20 379 
Implementation costs and additional depreciation––asset restructuring(f)
137 79 222 102 
Net (gains)/losses on asset disposals(g)
(58)— (58)— 
Net (gains)/losses recognized during the period on equity securities(g)
(798)(696)(1,197)(501)
Certain legal matters, net(g)
363 14 374 22 
Business and legal entity alignment costs(h)
51 73 125 149 
Actuarial valuation and other pension and postretirement plan (gains)/losses(i)
(6)(33)76 
(Gain) on completion of Consumer Healthcare JV transaction(j)
— — — (6)
Other(k)
220 347 303 530 
Total certain significant items––pre-tax(83)150 (244)752 
Income taxes(b)
— 17 38 (123)
Total certain significant items––net of tax(84)167 (206)629 
Total purchase accounting adjustments, acquisition-related items, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc.$520 $(16)$906 $176 
(a)Included primarily in Amortization of intangible assets.
(b)Included in Provision for taxes on income. Includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying the applicable tax rate.
(c)Included in Restructuring charges and certain acquisition-related costs. See Note 3.
(d)Included in Income from discontinued operations––net of tax. See Note 2A.
(e)Includes 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 Note 3.
(f)Relates to our cost-reduction and productivity initiatives not related to acquisitions (see Note 3). For the second quarter of 2021, primarily included in Cost of sales ($41 million) and Selling, informational and administrative expenses ($96 million). For the first six months of 2021, primarily included in Cost of sales ($62 million) and Selling, informational and administrative expenses ($160 million). For the second quarter of 2020, primarily included in Cost of sales ($14 million) and Selling, informational and administrative expenses ($63 million). For the first six months of 2020, primarily included in Cost of sales ($27 million) and Selling, informational and administrative expenses ($78 million).
(g)Included in Other (income)/deductionsnet. See Note 4.
(h)Mainly represents costs for consulting, legal, tax and advisory services associated with the internal reorganization of legal entities. For the second quarter of 2021, primarily included in Cost of sales ($16 million) and Selling, informational and administrative expenses ($34 million), and for the first six months of 2021, primarily included in Cost of sales ($32 million) and Selling, informational and administrative expenses ($87 million). For the second quarter of 2020, primarily included in Cost of sales ($19 million) and Selling, informational and administrative expenses ($47 million), and for the first six months of 2020, primarily included in Cost of sales ($30 million), Selling, informational and administrative expenses ($108 million) and Research and development expenses ($11 million).
(i)Included in Other (income)/deductions––net. For the first six months of 2021, includes a $45 million interim actuarial remeasurement pre-tax gain and for the first six months of 2020, includes a $74 million interim actuarial remeasurement pre-tax loss. See Note 1C.
(j)Included in (Gain) on completion of Consumer Healthcare JV transaction. See Note 2B.
(k)For the second quarter of 2021, primarily included in Research and development expenses ($187 million) and Other (income)/deductions––net ($27 million). For the first six months of 2021, primarily included in Selling, informational and administrative expenses ($12 million), Research and development expenses ($185 million) and Other (income)/deductions––net ($104 million). For the second quarter of 2020, primarily included in Selling, informational and administrative expenses ($21 million), Research and development expenses ($229 million) and Other (income)/deductions––net ($93 million). For the first six months of 2020, primarily included in Selling, informational and administrative expenses ($37 million), Research and development expenses ($230 million) and Other (income)/deductions––net ($257 million). Among other things, the second quarter and first six months of 2021 include a charge of $186
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million for IPR&D related to an asset acquisition completed in the second quarter of 2021. Also, the second quarter of 2021, includes charges of $31 million and the first six months of 2021 includes charges of $81 million recorded in Other (income)/deductions––net, primarily representing our pro rata share of restructuring and business combination accounting charges recorded by the Consumer Healthcare JV. Among other things, the second quarter of 2020 included charges of $85 million and the first six months of 2020 included charges of $245 million recorded in Other (income)/deductions––net, primarily representing our pro rata share of restructuring and business combination accounting charges recorded by the Consumer Healthcare JV. The second quarter and first six months of 2020 also included upfront payments of $130 million to Valneva and $72 million to BioNTech, which were recorded to Research and development expenses.
ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows from Continuing Operations
 Six Months Ended
(MILLIONS)July 4,
2021
June 28,
2020
Drivers of change
Cash provided by/(used in):
Operating activities from continuing operations$15,828 $4,829 
The change is driven primarily by higher net income and advance payments in 2021 for BNT162b2 recorded in deferred revenue and the impact of timing of receipts and payments in the ordinary course of business, including an accrual for the gross profit split due to BioNTech, partially offset by a non-cash change in Other Adjustments, net, primarily resulting from an increase in unrealized gains on equity securities.
Investing activities from continuing operations$(9,884)$(1,630)The change is driven mainly by a $10.8 billion increase in purchases of short-term investments with original maturities of greater than three months, partially offset by a $3.0 billion increase in redemptions of short-term investments with original maturities of greater than three months.
Financing activities from continuing operations$(5,364)$(4,493)The change is driven mostly by a $5.2 billion decrease in proceeds from issuances of long-term debt, and a $277 million payment to Viatris in connection with the spin-off of the Upjohn Business, partially offset by a $2.2 billion reduction in principal repayments on long-term debt, a $1.8 billion decrease in payments on short-term borrowings with maturities of three months or less, and an $814 million net reduction in repayments of short-term borrowings with maturities of greater than three months.
Cash Flows from Discontinued Operations
Cash flows from discontinued operations primarily relate to our former Upjohn Business and the Mylan-Japan collaboration (see Note 2A). In 2020, investing and financing activities from discontinued operations primarily reflect investments in money market funds with proceeds from issuances of long-term debt.
ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK

We rely largely on operating cash flows, short-term investments or commercial paper borrowings and long-term debt to provide for our liquidity requirements. We strive to improve cash inflows through working capital efficiencies. 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. We have taken and will continue to take a conservative approach to our financial investments and monitoring of our liquidity position in response to market changes. Our debt investments consist primarily of high-quality, highly liquid, well-diversified available-for-sale debt securities.

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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 which, together with our available revolving credit facilities, are in excess of our commercial paper and other short-term borrowings. As of July 4, 2021, we had access to a $7 billion U.S. revolving credit facility expiring in 2025. In addition, our lenders have provided us an additional $395 million in lines of credit, of which $363 million expire within one year. Essentially all lines of credit were unused as of July 4, 2021.
Selected Measures of Liquidity and Capital Resources
The following presents certain relevant measures of our liquidity and capital resources:
(MILLIONS, EXCEPT RATIOS)July 4,
2021
December 31, 2020
Selected financial assets(a):
  
Cash and cash equivalents$2,372 $1,784 
Short-term investments19,328 10,437 
Long-term investments, excluding private equity securities at cost3,834 2,973 
 25,533 15,195 
Debt:  
Short-term borrowings, including current portion of long-term debt3,888 2,703 
Long-term debt35,354 37,133 
 39,242 39,835 
Selected net financial liabilities$(13,709)$(24,641)
Working capital(b)
$13,150 $9,147 
Ratio of current assets to current liabilities1.37:11.35:1
(a)See Note 7 for a description of certain assets held and for a description of credit risk related to our financial instruments held.
(b)The increase in working capital was primarily driven by an increase in short-term investments due to operating cash flow generation, partially offset by the timing of accruals, cash receipts and payments in the ordinary course of business and capital expenditures.
For information about the sources and uses of our funds, see the Analysis of the Condensed Consolidated Statements of Cash Flows section within MD&A.
For information about credit ratings, LIBOR, global economic conditions, and market risk, see the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk—Selected Measures of Liquidity and Capital Resources section within MD&A in our 2020 Form 10-K.
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 the transaction or that are related to events and activities. For more information on guarantees and indemnifications, see Note 12B.
Additionally, 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

At July 4, 2021, our remaining share-purchase authorization was approximately $5.3 billion, with no repurchases in the first six months of 2021. See Note 12 in our 2020 Form 10-K for more information on our publicly announced share-purchase plans.

Dividends on Common Stock
In June 2021, our BOD declared a dividend of $0.39 per share, payable on September 7, 2021, to shareholders of record at the close of business on July 30, 2021. Our current and projected dividends provide a return to shareholders while maintaining sufficient capital to invest in growing our business. Our dividends are not restricted by debt covenants. While the dividend level remains a decision of Pfizer’s BOD and will continue to be evaluated in the context of future business performance, we currently believe that we can support future annual dividend increases, barring significant unforeseen events.
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NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standard
See Note 1B.
Recently Issued Accounting Standard, Not Adopted as of July 4, 2021
Standard/DescriptionEffective DateEffect on the Financial Statements
Reference rate reform provides temporary optional expedients and exceptions to the guidance for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued after 2021 because of reference rate reform.
The new guidance provides the following optional expedients:
1.Simplify accounting analyses under current U.S. GAAP for contract modifications.
2.Simplify the assessment of hedge effectiveness and allow hedging relationships affected by reference rate reform to continue.
3.Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.
Elections can be adopted prospectively at any time through December 31, 2022.We are assessing the impact of the provisions of this new guidance on our consolidated financial statements.
FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains forward-looking statements. We also provide forward-looking statements in other materials we release to the public, as well as public oral statements. Given their forward-looking nature, these statements involve substantial risks, uncertainties and potentially inaccurate assumptions.
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,” “seek” and other words and terms of similar meaning or by using future dates.
We include forward-looking information in our discussion of the following, among other topics:
our anticipated operating and financial performance, reorganizations, business plans and prospects;
expectations for our product pipeline, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, clinical trial results and other developing data that become available, revenue contribution, growth, performance, timing of exclusivity and potential benefits;
strategic reviews, capital allocation objectives, dividends and share repurchases;
plans for and prospects of our acquisitions, dispositions and other business development activities, and our ability to successfully capitalize on these opportunities;
sales, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings;
expectations for impact of or changes to existing or new government regulations or laws;
our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war and other large-scale crises; and
manufacturing and product supply.
In particular, forward-looking information in this Form 10-Q includes statements relating to specific future actions and effects, including, among others, our efforts to respond to COVID-19, including our development of a vaccine to help prevent COVID-19 and our investigational protease inhibitors, the forecasted revenue contribution of BNT162b2 and the potential number of doses that we and BioNTech believe can be manufactured; our expectations regarding the impact of COVID-19 on our business; the expected impact of patent expiries and competition from generic manufacturers; the benefits expected from our business development transactions; our anticipated liquidity position; the anticipated costs and savings from certain of our initiatives, including our Transforming to a More Focused Company program; anticipated study starts; our planned capital spending; and the expectations for our quarterly dividend payments.
Given their nature, we cannot assure that any outcome expressed in these forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results and those anticipated, estimated, implied or projected. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the Item 1A. Risk Factors section in our 2020 Form 10-K.
Therefore, you are cautioned not to unduly rely on forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events
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or otherwise, except as required by applicable securities law. You are advised, however, to consult any further disclosures we make on related subjects.
Some of the factors that could cause actual results to differ are identified below, as well as those discussed in the Item 1A. Risk Factors section in our 2020 Form 10-K and within this MD&A. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. The occurrence of any of the risks identified below or in the Item 1A. Risk Factors section in our 2020 Form 10-K, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results of operations, or we may be required to increase our accruals for contingencies. It is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties:
Risks Related to Our Business, Industry and Operations, and Business Development:
the outcome of R&D activities, including, the ability to meet anticipated pre-clinical or clinical endpoints, commencement and/or completion dates for our pre-clinical or clinical trials, regulatory submission dates, and/or regulatory approval and/or launch dates; the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new pre-clinical or clinical data and further analyses of existing pre-clinical or clinical data; the risk that pre-clinical and clinical trial data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities; and whether and when additional data from our pipeline programs will be published in scientific journal publications and, if so, when and with what modifications and interpretations;
our ability to successfully address comments received from regulatory authorities such as the FDA or the EMA, or obtain approval for new products and indications from regulators on a timely basis or at all; regulatory decisions impacting labeling, product dosage, manufacturing processes, safety and/or other matters, including decisions relating to emerging developments regarding potential product impurities; the impact of recommendations by technical or advisory committees; and the timing of pricing approvals and product launches;
claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates, including claims and concerns that may arise from the outcome of post-approval clinical trials, which could impact marketing approval, product labeling, and/or availability or commercial potential, including uncertainties regarding the commercial or other impact of the results of the Xeljanz ORAL Surveillance (A3921133) study or any potential actions by regulatory authorities based on analysis of ORAL Surveillance or other data, including on other Janus kinase (JAK) inhibitors in our portfolio;
the success and impact 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 in the anticipated time frame or at all; the potential need for and impact of addit