PFIZER INC - Quarter Report: 2020 June (Form 10-Q)

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

Amounts may not add due to rounding.

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(a)

Amounts in the second quarter of 2020 include losses from the weakening of certain major currencies against the U.S. dollar, partially offset by a gain of approximately $380 million pre-tax ($291 million after-tax) related to foreign currency translation adjustments and the impact of our net investment hedging program, both attributable to our equity method investment in the GSK Consumer Healthcare joint venture. Amounts in the first six months of 2020 include a loss of approximately $1.2 billion pre-tax ($902 million after-tax) related to foreign currency translation adjustments and the impact of our net investment hedging program, both attributable to our equity method investment in the GSK Consumer Healthcare joint venture and losses from the weakening of certain major currencies against the U.S. dollar, partially offset by the results of our net investment hedging program. For additional information on the GSK Consumer Healthcare joint venture, see Note 2B. Acquisition, Equity-Method Investment and Licensing Arrangements: Equity-Method Investment.

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

(c)	Reclassified into Other (income)/deductions—net.

Amounts may not add due to rounding.

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(a)	The balance as of June 28, 2020 reflects the Upjohn Inc. and Upjohn Finance B.V. debt issuances. For additional information see Note 7D. Financial Instruments: Long-Term Debt.

Amounts may not add due to rounding.

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(a)	On May 4, 2020, all outstanding shares of Pfizer’s Series A convertible perpetual preferred stock were converted into shares of Pfizer common stock. See Note 11. Equity for additional information.

(b)	The increase to Retained earnings represents the cumulative effect of the adoption of a new accounting standard in the first quarter of 2019 for leases. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2019 in our 2019 Financial Report.

Amounts may not add due to rounding.

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(a)	As a result of the enactment of the TCJA in December 2017, Pfizer’s Provision/(benefit) for taxes on income for the six months ended June 30, 2019 was favorably impacted by approximately $285 million, primarily as a result of additional guidance issued by the U.S. Department of Treasury.

(b)	Includes $11.4 billion of proceeds from the Upjohn long-term debt issuances in the second quarter of 2020, which are included in Restricted short-term investments in the condensed consolidated balance sheet. For additional information, see Notes 7A. Financial Instruments: Fair Value Measurements and Financial Instruments: 7D. Long-Term Debt).

Amounts may not add due to rounding.

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In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and

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

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(a)

In the second quarter and first six months of 2020, restructuring charges mainly represent employee termination costs associated with our Transforming to a More Focused Company cost reduction program. In the second quarter and first six months of 2019, restructuring credits mostly represent the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years. See Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies in our 2019 Financial Report.

•	For the second quarter of 2020, Biopharma ($12 million credit); Upjohn ($1 million credit); and Other ($352 million charge).

•	For the first six months of 2020, Biopharma ($9 million credit); Upjohn ($12 million charge); and Other ($393 million charge).

•	For the second quarter of 2019, Biopharma ($62 million credit); Upjohn ($9 million credit); and Other ($74 million credit).

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

(b)	Transaction costs represent external costs for banking, legal, accounting and other similar services.

(c)

Integration costs and other represent 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. In the second quarter and first six months of 2020, integration costs and other were mostly related to our acquisition of Array. In the second quarter and first six months of 2019, integration costs and other were primarily related to our acquisition of Hospira.

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

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

(a)	Included in Other current liabilities ($714 million) and Other noncurrent liabilities ($219 million).

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(b)	Includes adjustments for foreign currency translation.

(c)	Included in Other current liabilities ($625 million) and Other noncurrent liabilities ($326 million).

(a)

Interest income decreased in the second quarter and first six months of 2020, primarily driven by a lower investment balance and lower short-term interest rates. Interest expense decreased in the second quarter of 2020 mainly as a result of the retirement of higher-coupon debt and the issuance of new debt with a lower coupon than the debt outstanding for the comparative prior year period. Interest expense increased in the first six months of 2020, mainly as a result of an increased commercial paper balance due to the acquisition of Array.

(b)	Royalty-related income for the second quarter and first six months of 2019 included a one-time favorable resolution in the second quarter of 2019 of a legal dispute for $82 million.

(c)

The gains in the second quarter of 2020 include, among other things, unrealized gains of $508 million related to our investment in Allogene and unrealized gains of $61 million related to our investment in BioNTech. The gains in the first six months of 2020 include, among other things, unrealized gains of $374 million related to our investment in Allogene and unrealized gains of $127 million related to our investment in BioNTech. The gains in the first six months of 2019 included, among other things, unrealized gains of $104 million related to our investment in Cortexyme, Inc. For additional information on investments, see Note 7B.

(d)

Includes income from upfront and milestone payments from our collaboration partners and income from out-licensing arrangements and sales of compound/product rights. In the second quarter and first six months of 2020, mainly includes, 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 includes an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, Inc. In the first six months of 2019, primarily included $68 million in milestone income from Mylan Pharmaceuticals Inc. related to the FDA’s approval and launch of Wixela Inhub®, a generic of Advair Diskus®.

(e)	For additional information, see Note 10.

(f)

The first six months of 2019 included intangible asset impairment charges of: (i) $90 million related to WRDM IPR&D, for a pre-clinical stage asset from our acquisition of Bamboo for gene therapies for the potential treatment of patients with certain rare diseases, which was the result of a determination to not use certain Bamboo IPR&D acquired in future rare disease development, (ii) $40 million related to an Upjohn finite-lived developed technology right, acquired in connection with our acquisition of King, for government defense products and reflected, among other things, updated commercial forecasts including manufacturing cost assumptions, and (iii) $10 million related to a finite-lived developed technology right, acquired in connection with our acquisition of Anacor, for the treatment for toenail fungus marketed in the U.S. market only, associated with Biopharma and reflected, among other things, updated commercial forecasts. In addition, the first six months of 2019 included other asset impairments of $20 million.

(g)	In the second quarter and first six months of 2019, represents incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services.

(h)	Includes our share of the GSK Consumer Healthcare joint venture’s earnings and the amortization of basis differences, which resulted 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 joint venture. See Note 2B for additional information.

(i)

The second quarter of 2020 includes, among other things, dividend income of $76 million from our investment in ViiV, and charges of $86 million, reflecting the change in the fair value of contingent consideration. The first six months of 2020 includes, among other things, dividend income of $153 million from our investment in ViiV and charges of $99 million, reflecting the change in the fair value of contingent consideration. The second quarter of 2019 included, among other things, charges of $81 million, reflecting the change in the fair value of contingent consideration, dividend income of $76 million from our investment in ViiV, and $25 million of income from insurance recoveries related to Hurricane Maria. The first six months of 2019 included, among other things, dividend income of $140 million from our investment in ViiV and $50 million of income from insurance recoveries related to Hurricane Maria.

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•	the non-recurrence of the $1.4 billion tax benefit, representing taxes and interest, recorded in the second quarter of 2019 due to the favorable settlement of an IRS audit for multiple tax years (see Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies in our 2019 Financial Report); and

•	the non-recurrence of the tax benefit recorded in the first six months of 2019 as a result of additional guidance issued by the U.S. Department of Treasury related to the TCJA,

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

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

(a)

Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $12 million loss for the first six months of 2020. Includes after-tax losses of approximately $902 million related to foreign currency translation adjustments and the impact of our net investment hedging program, both attributable to our equity method investment in GSK Consumer Healthcare (see Note 2B), and losses from the weakening of certain major currencies against the U.S. dollar. These losses were partially offset by the results of our net investment hedging program.

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(a)	As of June 28, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.

(b)	As of June 28, 2020, long-term equity securities of $163 million and as of December 31, 2019, long-term equity securities of $176 million were held in restricted trusts for benefits attributable to various U.S. non-qualified employee benefit plans.

(c)

Other noncurrent assets include life insurance policies held in restricted trusts attributable to the funding of various U.S. non-qualified employee benefit plans. The underlying invested assets in these insurance contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions––net in the condensed consolidated statements of income (see Note 4).

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(a)	As of June 28, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.

(a)

As of June 28, 2020 and December 31, 2019, equity securities with readily determinable fair values included money market funds primarily invested in U.S. Treasury and government debt. As of June 28, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.

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(a)	Primarily issued by a diverse group of corporations.

(a)	The net gains on investments in equity securities are reported in Other (income)/deductions––net. For additional information, see Note 4.

(b)	Included in net unrealized gains are observable price changes on equity securities without readily determinable fair values. Since January 1, 2018, there were cumulative impairments and downward adjustments of $67 million and upward adjustments of $66 million. Impairments, downward and upward adjustments were not significant in the second quarter and the first six months of 2020 and 2019.

(a)	Other short-term borrowings primarily include cash collateral. For additional information, see Note 7E.

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(a)	The notes may be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest. The weighted-average effective interest rate for the notes at issuance was 2.11%.

(b)

In June 2020, Upjohn Inc. and Upjohn Finance B.V. completed privately placed debt offerings in connection with the previously announced proposed Reverse Morris Trust transaction that will ultimately combine Upjohn and Mylan to form a new company, Viatris. The notes may be redeemed by Upjohn Inc. and Upjohn Finance B.V., as applicable, at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest. The weighted-average effective interest rates at issuance were 2.95% for the $7.45 billion notes and 1.37% for the €3.60 billion notes. If the proposed transaction with Mylan does not close on or prior to February 1, 2021, or if, prior to such date, Upjohn Inc. and Mylan notify the trustee that the business combination agreement for the proposed transaction with Mylan is terminated, or the transaction will not otherwise be pursued, the notes must be redeemed at redemption prices equal to 101% of their respective principal amounts, plus accrued and unpaid interest. Pfizer has guaranteed these notes, and such guarantees will automatically and unconditionally terminate without the consent of holders of the notes upon the proposed distribution to Pfizer’s stockholders of all of the issued and outstanding shares of Upjohn Inc.’s common stock held by Pfizer (the Distribution). Upjohn Inc. has guaranteed the notes issued by Upjohn Finance B.V., and Upjohn Inc. will remain a guarantor of such notes post Distribution. Following the separation, Upjohn Inc. and Upjohn Finance B.V., as applicable, will remain the obligor. The proceeds from the financings will be used in part to fund a cash distribution from Upjohn Inc. to Pfizer immediately prior to the Distribution. In the interim, the $11.4 billion of proceeds are classified as Restricted short-term investments in the condensed consolidated balance sheet as of June 28, 2020 pursuant to the terms of the transaction agreements.

(a)	The notes may be redeemed by us at any time, in whole, or in part, at a redemption price plus accrued and unpaid interest.

(b)	The effective interest rate for the notes at issuance was 2.67%.

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(a)	As of June 28, 2020, $11.4 billion of proceeds from the Upjohn debt transactions are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.

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(a)	The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.2 billion as of June 28, 2020 and $5.9 billion as of December 31, 2019.

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(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)

For derivative financial instruments in cash flow hedge relationships, the gains and losses are included in Other comprehensive loss––Unrealized holding gains/(losses) on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the gains and losses are included in Other comprehensive loss––Foreign currency translation adjustments, net.

(c)	The amounts reclassified from OCI into COS were:

•	a net gain of $80 million in the second quarter of 2020;

•	a net gain of $150 million in the first six months of 2020;

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

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

(d)	The amounts reclassified from OCI were reclassified into OID.

(e)	Long-term debt includes foreign currency long-term borrowings with carrying values of $2.0 billion as of June 28, 2020, which are used as hedging instruments in net investment hedges.

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(a)	Carrying amounts exclude the cumulative amount of fair value hedging adjustments.

(a)	The change from December 31, 2019 reflects increases for certain products, including inventory build for new product launches, network strategy and market demand, partially offset by a decrease due to foreign exchange.

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

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(a)	The changes in the gross carrying amount of Developed technology rights and IPR&D primarily reflect the transfer of $1.4 billion from IPR&D to Developed technology rights to reflect the approval of Braftovi in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant metastatic colorectal cancer after prior therapy.

(b)	The changes in the gross carrying amount of Licensing agreements and other primarily reflect the transfer of $550 million from Indefinite-lived Licensing agreements and other to finite-lived Licensing agreements and other to reflect the approval in the U.S. of several products subject to out-licensing arrangements acquired from Array.

(c)	The decrease in Identifiable intangible assets, less accumulated amortization, is primarily due to amortization.

(a)	Primarily represents the impact of foreign exchange.

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(a)

Contributions expected to be made for 2020 are inclusive of amounts contributed during the six months ended June 28, 2020. The U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments. For the U.S. qualified plans, we plan to make a $1.25 billion voluntary contribution in the second half of 2020.

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(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.

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

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

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

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

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•	Antitrust Actions

•	Personal Injury Actions

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•	Personal Injury Actions

•	Mississippi Attorney General Government Action

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•	U.S. Department of Justice Antitrust Division Investigation

•	State Attorneys General Generics Antitrust Litigation

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

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

•	Other––the operating results of our Consumer Healthcare business, through July 31, 2019, and costs associated with other commercial activities not managed as part of Biopharma or Upjohn, including all strategy, business development, portfolio management and valuation capabilities, which previously had been reported in various parts of the organization.

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Corporate and Other Unallocated––the costs associated with corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance, and worldwide procurement), patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs. Corporate and Other Unallocated also includes our share of earnings from the GSK Consumer Healthcare joint venture and other charges related to the GSK Consumer Healthcare joint venture, primarily representing our pro-rata share of restructuring and business combination accounting charges recorded by the GSK Consumer Healthcare joint venture.

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Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and PP&E; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, representing substantive and/or unusual, and in some cases recurring, items (such as gains on the completion of joint venture transactions, restructuring charges, legal charges or gains and losses from equity securities) that

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(a)	Income from continuing operations before provision/(benefit) for taxes on income. Biopharma’s earnings include dividend income of $76 million in the second quarter of 2020 and $76 million in the second quarter of 2019, and $153 million in the first six months of 2020 and $140 million in the first six months of 2019 from our investment in ViiV. For additional information, see Note 4.

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

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(a)	Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland. Revenues denominated in euros were $1.7 billion in the second quarter of 2020 and $1.8 billion in the second quarter of 2019, and were $3.2 billion in the first six months of 2020 and $3.5 billion in the first six months of 2019.

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

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

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(a)

Beginning in 2020, Upjohn began managing our Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (Mylan-Japan). As a result, revenues associated with our Meridian subsidiary, except for product revenues for EpiPen sold in Canada, and Mylan-Japan, are reported in our Upjohn business beginning in the first quarter of 2020. We have reclassified revenues associated with our Meridian subsidiary and Mylan-Japan from the Hospital and Internal Medicine categories to the Upjohn business to conform 2019 product revenues to the current presentation.

(b)	Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Inflectra/Remsima and Retacrit.

(c)

Hospital is a business unit that commercializes our global portfolio of sterile injectable and anti-infective medicines. Hospital also includes Pfizer CentreOne(d). All other Hospital primarily includes revenues from legacy Sterile Injectables Pharmaceuticals (SIP) products (that are not anti-infective products) and, to a much lesser extent, solid oral dose products (that are not anti-infective products). SIP anti-infective products that are not individually listed above are recorded in “All other Anti-infectives”.

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

(e)	On July 31, 2019, Pfizer’s Consumer Healthcare business, an over-the-counter medicines business, was combined with GSK’s consumer healthcare business to form a new consumer healthcare joint venture. For additional information, see Note 2B.

(f)	Total Sterile Injectable Pharmaceuticals represents the total of all branded and generic injectable products in the Hospital business, including anti-infective sterile injectable pharmaceuticals.

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Agreement with Valneva SE––On April 30, 2020, we signed an agreement to co-develop and commercialize Valneva’s Lyme disease vaccine candidate VLA15, which is currently in Phase 2 clinical studies. In June 2020, Valneva announced that the antitrust-related condition precedent was met and, consequently, the agreement became effective. VLA15 is the only active Lyme disease vaccine program in clinical development today, and covers six serotypes that are prevalent in North America and Europe. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2C. Acquisition, Equity-Method Investment and Licensing Arrangements: Licensing Arrangements.

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Agreement with BioNTech SE––On April 9, 2020, we signed a global agreement with BioNTech to co-develop a potential first-in-class, mRNA-based coronavirus vaccine program, BNT162, aimed at preventing COVID-19 infection. The collaboration aims to rapidly advance multiple COVID-19 vaccine candidates into human clinical testing based on BioNTech’s proprietary mRNA vaccine platforms, with the objective of ensuring rapid worldwide access to the vaccine, if approved. The collaboration will leverage our broad expertise in vaccine R&D, regulatory capabilities, and global manufacturing and distribution network. We and BioNTech plan to jointly conduct clinical trials for the COVID-19 vaccine candidates initially in the U.S. and Europe across multiple sites. For additional information, including information regarding our COVID-19 vaccine development program, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment” and “Product Developments—Biopharmaceutical” sections of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 2C. Acquisition, Equity-Method Investment and Licensing Arrangements: Licensing Arrangements.

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Formation of a New Consumer Healthcare Joint Venture––On July 31, 2019, we completed the transaction in which we and GSK combined our respective consumer healthcare businesses into a new consumer healthcare joint venture that operates globally under the GSK Consumer Healthcare name. The joint venture develops and markets brands in the oral health, pain relief, respiratory, nutrition/gastro-intestinal and skin health categories and is one of the world’s leading over-the-counter healthcare companies. Our financial results, and our Consumer Healthcare segment’s operating results, for the second quarter of 2019 reflect three months of Consumer Healthcare segment operations and for the first six months of 2019 reflect six months of Consumer Healthcare segment operations, while financial results for the second quarter and first six months of 2020 do not reflect any contribution from the Consumer Healthcare business. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisition, Equity-Method Investment and Licensing Arrangements: Equity-Method Investment.

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Agreement to Combine Upjohn with Mylan N.V.––On July 29, 2019, we announced that we entered into a definitive agreement to combine Upjohn with Mylan, creating a new global pharmaceutical company, Viatris. Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, Upjohn is expected to be spun off to Pfizer’s shareholders and, immediately thereafter, combined with Mylan. Pfizer shareholders would own 57% of the combined new company, and former Mylan shareholders would own 43%. The transaction is expected to be tax free to Pfizer and Pfizer shareholders. The transaction was approved by Mylan’s shareholders in June 2020 and is anticipated to close in the fourth quarter of 2020, subject to customary closing conditions, including receipt of the remaining required regulatory approvals. In June 2020, Upjohn Inc. and Upjohn Finance B.V. (a wholly-owned subsidiary of Upjohn Inc.) completed privately placed debt offerings in connection with the transaction. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 7D. Financial Instruments: Long-Term Debt and the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 30% has been incurred since inception and through the first six months of 2020. Such charges include costs and expenses related to separation of legal entities and anticipated transaction costs.

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

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

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

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

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

(f)	See Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions—Net.

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•	We and The Pfizer Foundation announced the commitment of $40 million in medical and charitable cash grants to help combat the health effects of the COVID-19 pandemic in the U.S. and around the world. The Pfizer Foundation is a charitable organization established by Pfizer Inc. It is a separate legal entity from Pfizer Inc. with distinct legal restrictions.

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We confirmed a lead compound and analogues in our portfolio are potent inhibitors of the SARS-CoV-2 3C-like protease, based on the results of initial screening assays. In addition, preliminary data suggest the lead protease inhibitor shows antiviral activity against SARS-CoV-2, the virus that causes COVID-19. Consequently, we are continuing to perform pre-clinical confirmatory studies, including further anti-viral profiling and assessment of the suitability of the lead molecule for IV administration clinically. In July 2020, we published the chemical structure of a 3C-like (3CL) protease inhibitor and its in vitro activity against coronaviruses, including SARS-CoV-2. In parallel, we are also investing in materials with the aim of accelerating the start of a potential clinical study of the lead molecule to the third quarter of 2020, subject to positive completion of the pre-clinical confirmatory studies and regulatory approval.

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We entered into a global agreement with BioNTech to co-develop a potential first-in-class, mRNA-based coronavirus vaccine program, BNT162, aimed at preventing COVID-19 infection. As part of this co-development program, which we refer to as Project Lightspeed, we and BioNTech announced in July 2020 the start of a global (except for China) Phase 2/3 safety and efficacy clinical study to evaluate a single nucleoside-modified messenger RNA candidate. After extensive review of preclinical and clinical data from Phase 1/2 clinical trials, and in consultation with the FDA’s Center for Biologics Evaluation and Research and other global regulators, we and BioNTech chose to advance the BNT162b2 vaccine candidate into the Phase 2/3 study, at a 30 µg dose level in a 2 dose regimen. BNT162b2, which received Fast Track designation from the FDA in July 2020, encodes an optimized SARS-CoV-2 full length spike glycoprotein, which is the target of virus neutralizing antibodies. If the Phase 2/3 trial is successful, we and BioNTech expect to be ready to seek Emergency Use Authorization or some form of regulatory approval as early as October 2020. If authorization or approval is obtained, the companies currently aim to supply globally (excluding China) up to 100 million doses by the end of 2020 and approximately 1.3 billion doses by the end of 2021. Also in July and August 2020, we and BioNTech announced agreements with the following governments: (i) with the U.K. government for 30 million doses of BNT162, to be delivered in 2020 and 2021, subject to clinical success and regulatory approval or authorization; (ii) with the U.S. government, under which the U.S. government will pay $1.95 billion, in installments as vaccine quantities are delivered, for the first 100 million doses of BNT162, subject to regulatory approval or Emergency Use Authorization from the FDA, as well as the ability for the U.S. government to acquire up to an additional 500 million doses; (iii) with the government of Japan to supply 120 million doses of BNT162, subject to clinical success and regulatory approval, beginning in 2021; and (iv) with the government of Canada to supply BNT162, subject to clinical success and Health Canada approval, over the course of 2021. For additional information on our collaboration with BioNTech, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business Development Initiatives” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 2C. Acquisition, Equity-Method Investment and Licensing Arrangements: Licensing Arrangements.

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•

Our Colleagues. Our colleagues and customers have both experienced disruptions to the normal ways of working. At this time, our colleagues in most locations who are able to perform their job functions outside of our facilities continue to work remotely. Certain of our colleagues, primarily those in the Pfizer Global Supply and Worldwide Research and Development organizations, have roles for which their physical presence at our facilities is required to perform their job functions. These colleagues continue to report to work and are subject to strict protocols intended to reduce the risk of transmission, including social distancing, maintaining contact logs, increased cleaning and use of personal protective equipment as necessary.

•

Our Sales and Marketing. We have experienced an impact on our sales and marketing activities due to widespread restrictions on in-person meetings with healthcare professionals and the refocused attention of the medical community on fighting COVID-19. Access to prescribers for sales force colleagues during the second quarter of 2020 was mixed, with those in most international markets able to meet with healthcare professionals for most of the quarter, while those in the U.S. were unable to meet in-person with healthcare professionals for nearly all of the quarter. At this time, no U.S. sales force colleagues are meeting in-person with healthcare professionals due to COVID-19-related safety concerns. We are actively reviewing and assessing epidemiological data and our colleagues remain ready to resume in-person engagements with healthcare professionals on a location-by-location basis as soon as it is safe to do so.

•

Our Manufacturing and Supply Chain. Our manufacturing and supply chain professionals have been working continuously in an effort to ensure continued patient access to our medicines and vaccines. Across our plant network, we have implemented our preparedness plan to control site operations. To date, we have not seen a significant disruption in our supply chain, and all of our manufacturing sites around the world have continued to operate at or near normal levels. So far, we have been able to mitigate distribution issues that have arisen, including by using newly available excess capacity in commercial airplanes to transport inventory. In addition, we have taken steps to scale up manufacturing operations at risk to accelerate our ability to supply a potential novel treatment or potential vaccine for COVID-19 if we receive regulatory approval. We are also committed to offering any excess manufacturing capacity and to potentially shifting production in order to support others’ efforts to manufacture any lifesaving breakthroughs that may be developed to combat COVID-19.

•

Our Clinical Trials. After a brief pause to the recruitment portion of certain ongoing clinical studies and a delay to most new study starts, in late-April 2020 we restarted recruitment across the development portfolio, including new study starts. We continue to work closely with clinical trial sites to understand their needs and are performing remote monitoring, where appropriate, to oversee study conduct. In addition, processes to enable tele-health and home healthcare are being utilized where appropriate to continue the data collection process and support patient safety.

•

Our Products. Our portfolio of products comprises medicines and vaccines which may experience varying impacts from the COVID-19 pandemic. Some of our products, such as Eliquis and Ibrance, are medically necessary but also more reliant on maintenance therapy with continuing patients in addition to new patients. Certain other products, such as Vyndaqel/Vyndamax, Chantix/Champix and products used in certain elective surgeries, are more reliant on new patient starts and typically require doctor visits, including wellness visits. Other medicines have been identified as medically necessary for treatment in the pandemic, such as certain of our Hospital sterile injectable products. A large proportion of our portfolio comprises oral or self-injected medicines that do not require a visit to an infusion center or a physician’s office for administration, but vaccines and physician-administered medicines which do require office visits were impacted by COVID-19-related mobility restrictions or limitations during the second quarter of 2020. Specialty pharmacy channels, from which we derive a majority of our revenue, enable direct delivery of these specialty medicines to patients.

•	Our Financial Condition and Access to Capital Markets. Due to our significant operating cash flows, as well as our financial assets, access to capital markets and revolving credit agreements, we believe we have, and will maintain, the ability to meet liquidity needs for the foreseeable future.

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▪	Patient visits with physicians, vaccination rates and the number of elective surgical procedures will gradually increase from second-quarter 2020 levels, beginning in the third quarter of 2020;

▪	New-to-brand prescription trends for certain key products will gradually improve from second-quarter 2020 levels, beginning in the third quarter of 2020;

▪	Gradual improvement in access to U.S. healthcare professionals for sales force colleagues;

▪	Clinical trial enrollment, including new study starts, continues throughout the remainder of 2020;

▪	Pfizer’s manufacturing and supply chain activities continue to not be materially disrupted; and

▪	Pfizer’s investments in potential treatments and a potential vaccine for COVID-19 continue throughout 2020.

(a)	The 2020 financial guidance reflects the following:

•	Financial guidance for Total Company reflects a full-year 2020 contribution from Biopharma and Upjohn, the current construct of the company, and excludes any impact from the pending Upjohn combination with Mylan.

•	Does not assume the completion of any business development transactions not completed as of June 28, 2020, including any one-time upfront payments associated with such transactions.

•

Includes Pfizer’s pro rata share of the GSK Consumer Healthcare joint venture anticipated earnings, which is recorded in Adjusted other (income)/deductions on a one-quarter lag. Therefore, 2020 financial guidance for Adjusted other (income)/deductions and Adjusted diluted EPS reflects Pfizer’s share of the joint venture’s earnings that were generated in the fourth quarter of 2019 and in the first quarter of 2020 (recorded by Pfizer in the first six months of 2020) as well as Pfizer’s share of the joint venture’s projected earnings during the second and third quarters of 2020.

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

•

Exchange rates assumed are a blend of actual exchange rates in effect through second-quarter 2020 and mid-July 2020 rates for the remainder of the year. Financial guidance reflects the anticipated unfavorable impact of approximately $0.6 billion on revenues and approximately $0.05 on Adjusted diluted EPS as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2019.

•	Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately 5.6 billion shares, which assumes no share repurchases in 2020.

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

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(a)

The financial guidance for New Pfizer reflects a full-year 2020 view of the company assuming the pending Upjohn combination with Mylan was completed at the beginning of 2020 and reflects contributions from the Biopharma business as it is presently being managed, which excludes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019, but were moved to Upjohn in 2020. Financial guidance for New Pfizer also includes the full-year effect of the following items that assume the completion of the Upjohn combination with Mylan: (i) $12 billion of net proceeds from Upjohn to be retained by Pfizer, which Pfizer will use to repay its own existing indebtedness; and (ii) other transaction-related items, such as income from transition services agreements between Pfizer and Viatris. In addition, 2020 financial guidance for New Pfizer Adjusted IBT Margin and Adjusted diluted EPS reflects Pfizer’s share of the GSK Consumer Healthcare joint venture’s earnings that were generated in the fourth quarter of 2019 and in the first quarter of 2020 (recorded by Pfizer in the first six months of 2020), as well as Pfizer’s share of the GSK Consumer Healthcare joint venture’s projected earnings during the second and third quarters of 2020.

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

(c)

Adjusted income before tax margin (Adjusted IBT margin) is defined as revenue less the sum of Adjusted cost of sales, Adjusted SI&A expenses, Adjusted R&D expenses, Adjusted amortization of intangible assets and Adjusted other (income)/deductions as a percentage of revenue. Adjusted IBT margin is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the financial performance of New Pfizer. Adjusted IBT margin is not, and should not be viewed as, a substitute for U.S. GAAP income before tax margin.

(d)	Includes a $1.25 billion voluntary contribution to the U.S. qualified pension plans, planned for the second half of 2020.

(a)	Financial guidance for Upjohn reflects a full-year 2020 contribution from the Upjohn business as it is presently being managed, which includes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019 but were moved to Upjohn in 2020.

(b)

Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) is defined as reported U.S. GAAP net income, and its components, adjusted for interest expense, provision for taxes on income and depreciation and amortization, further adjusted to exclude purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as gains on the completion of joint venture transactions, restructuring charges, legal charges or net gains and losses on equity securities, but which management does not believe are reflective of ongoing core operations). Adjusted EBITDA is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the financial performance of Upjohn. Adjusted EBITDA as defined is not a measurement of financial performance under GAAP, and should not be considered as an alternative to net income or cash flow from operations determined in accordance with GAAP.

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

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(a)	For additional information about each operating segment, see the “Analysis of Operating Segment Information” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 14A. Segment, Geographic and Other Revenue Information: Segment Information.

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

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

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

(b)

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

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

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

(e)

For the three months ended June 28, 2020, associated with the following segments: Biopharma ($3.2 billion) and Upjohn ($1.1 billion). For the three months ended June 30, 2019, associated with the following segments: Biopharma ($3.0 billion), Upjohn ($1.9 billion) and Other ($0.2 billion). For the six months ended June 28, 2020, associated with the following segments: Biopharma ($6.6 billion) and Upjohn ($2.3 billion). For the six months ended June 30, 2019, associated with the following segments: Biopharma ($5.7 billion), Upjohn ($4.2 billion) and Other ($0.3 billion).

•	a decrease in Medicaid and Medicare rebates, driven by a significant decrease in Lyrica sales in the U.S. due to multi-source generic competition that began in July 2019; and

•	a decrease in sales returns and cash discounts, primarily due to the non-recurrence of a sales return reserve recorded for Lyrica in the prior year in advance of anticipated multi-source generic competition that began in the U.S. in July 2019.

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•	Ibrance (Biopharma):

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Eliquis alliance revenues and direct sales (Biopharma): Eliquis has been jointly developed and is commercialized by Pfizer and BMS. Pfizer funds between 50% and 60% of all development costs depending on the study. Profits and losses are shared equally on a global basis, except in certain countries where Pfizer commercializes Eliquis and pays BMS compensation based on a percentage of net sales. We have full commercialization rights in certain smaller markets. BMS supplies the product to us at cost plus a percentage of the net sales to end-customers in these markets. Eliquis is part of the Novel Oral Anticoagulant market; the agents in this class were developed as alternative treatment options to warfarin in appropriate patients.

•	Prevnar 13/Prevenar 13 (Biopharma):

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•	Xeljanz (Biopharma):

•	Lipitor (Upjohn):

•	Lyrica (Upjohn):

•	Enbrel (Biopharma, outside the U.S. and Canada):

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•	Vyndaqel/Vyndamax (Biopharma):

•	Chantix/Champix (Biopharma):

•

Xtandi alliance revenues (Biopharma): Xtandi is being developed and commercialized through a collaboration with Astellas. The two companies share equally in the gross profits (losses) related to U.S. net sales of Xtandi. Subject to certain exceptions, Pfizer and Astellas also share equally all Xtandi commercialization costs attributable to the U.S. market. Pfizer and Astellas also share certain development and other collaboration expenses, and Pfizer receives tiered royalties as a percentage of international Xtandi net sales (recorded in Other (income)/deductions—net).

•	Norvasc (Upjohn):

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•	Sutent (Biopharma):

•	Inlyta (Biopharma):

•	Inflectra/Remsima (Biopharma):

•	The Premarin family of products (Biopharma):

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•	Celebrex (Upjohn):

•	Sulperazon (Biopharma):

•	Xalkori (Biopharma):

•	Viagra (Upjohn):

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•	Alliance revenues (Biopharma):

(a)	Neulasta® is a registered U.S. trademark of Amgen Inc.

(b)	Erbitux® is a registered trademark of ImClone LLC.

(c)	Humira® is a registered trademark of AbbVie Biotechnology Ltd. Pfizer is working to make Abrilada available to U.S. patients as soon as feasible based on the terms of its agreement with AbbVie. Current plans are to launch Abrilada in 2023.

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*	The date set forth in this column is the date on which the FDA accepted our submission.

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

(a)	Erbitux® is a registered trademark of ImClone LLC.

(b)	MabThera® is a registered trademark of F. Hoffman-La Roche AG.

(c)	Humira® is a registered trademark of AbbVie Biotechnology Ltd. Pfizer does not currently plan to commercialize Amsparity in the EU due to unfavorable market conditions.

(d)	Neulasta® is a registered trademark of Amgen Inc.

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

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(a)

In May 2020, we accepted the recommendation of the independent Data Monitoring Committee to stop the Non-Intensive cohort of the Phase 3 clinical trial for BRIGHT AML 1019, as it is unlikely to show a statistically significant improvement in the primary endpoint of overall survival. No important new safety signals were observed in patients treated with glasdegib. A separate cohort of BRIGHT AML 1019 evaluates glasdegib in combination with intensive chemotherapy (cytarabine and daunorubicin) for the treatment of adult patients with previously untreated AML, and the cohort is ongoing and remains blinded.

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•	the favorable impact of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK; and

•	a favorable impact of foreign exchange,

•	the unfavorable impact of incremental costs incurred in response to the COVID-19 pandemic.

•	the favorable impact of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK;

•	lower spending on sales and marketing activities due to the impact of the COVID-19 pandemic;

•

a decrease in field force expense as well as advertising and promotion expenses, primarily related to Lipitor and Norvasc, due to the VBP program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019, as well as Lyrica in the U.S. due to generic competition that began in July 2019 and anticipated generic competition for Celebrex in Japan beginning in June 2020;

•	lower spending associated with corporate enabling functions; and

•	the favorable impact of foreign exchange,

•	legal entity restructuring, as well as separation costs associated with our planned Upjohn transaction with Mylan.

•	the favorable impact of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK;

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•

a reduction in field force expense as well as advertising and promotion expenses, primarily related to Lyrica in the U.S. due to generic competition that began in July 2019 and the anticipated generic competition for Celebrex in Japan that began in June 2020, as well as a decrease in Lipitor and Norvasc expenses due to the VBP program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019;

•	lower spending associated with corporate enabling functions;

•	lower spending on sales and marketing activities due to the impact of the COVID-19 pandemic;

•	a reduction to expense resulting from the decrease in our liability to be paid to participants of our supplemental savings plan;

•	lower investments across the Inflammation & Immunology portfolio; and

•	the favorable impact of foreign exchange,

•	legal entity restructuring, as well as separation costs associated with our planned Upjohn transaction with Mylan.

•	costs related to our collaboration agreement with BioNTech to co-develop a COVID-19 vaccine, including an upfront payment to BioNTech; and

•	an upfront payment to Valneva,

•	a net reduction of spending across our Oncology, Inflammation & Immunology, Rare Disease, Internal Medicine and Vaccines portfolios, as well as delays in program costs related to COVID-19.

•	costs related to our collaboration agreement with BioNTech to co-develop a COVID-19 vaccine, including an upfront payment to BioNTech;

•	an upfront payment to Valneva; and

•	increased investments towards building new capabilities and driving automation,

•	a decrease in the value of the portfolio performance share grants reflecting the decrease in the price of Pfizer’s common stock in the first half of 2020; and

•	a net reduction of spending across our Oncology, Inflammation & Immunology, Rare Disease, Internal Medicine and Vaccines portfolios, as well as delays in program costs related to COVID-19.

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(a)

Includes employee termination costs, asset impairments and other exit costs associated with business combinations. Credits for the second quarter and the first six months of 2019 were mostly due to the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple years. See Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies in our 2019 Financial Report.

(b)

Includes employee termination costs, asset impairments and other exit costs not associated with acquisitions. The charges for the second quarter and the first six months of 2020 primarily represent employee termination costs associated with our Transforming to a More Focused Company program. For the second quarter of 2019, the charges were composed of employee termination costs and exit costs, partially offset by lower asset write-downs, and for the first six months of 2019 were mostly related to employee termination costs and exit costs.

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

(d)

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

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

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

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

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(a)	For details of adjustments, see “Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income” below.

(b)

The effective tax rate on Non-GAAP Adjusted income was 14.4% in the second quarter of 2020, compared to 16.9% in the second quarter of 2019. The effective tax rate on Non-GAAP Adjusted income was 14.7% in the first six months of 2020, compared to 16.0% in the first six months of 2019. The decreases were primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.

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(a)	Included primarily in Amortization of intangible assets.

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

(c)

Included in Restructuring charges and certain acquisition-related costs. For additional information, see the “Costs and Expenses—Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

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

(e)

Included in Provision/(benefit) for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The second quarter and first six months of 2019 include the impact of the non-taxable reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years.

(f)	Included in Discontinued operations––net of tax.

(g)

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

(h)

Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For the three months ended June 28, 2020, primarily included in Cost of sales ($16 million) and Selling, informational and administrative expenses ($63 million). For the six months ended June 28, 2020, primarily included in Cost of sales ($31 million) and Selling, informational and administrative expenses ($78 million). For the three months ended June 30, 2019, included in Cost of sales ($24 million), Selling, informational and administrative expenses ($16 million) and Research and development expenses ($11 million). For the six months ended June 30, 2019, included in Cost of sales ($46 million), Selling, informational and administrative expenses ($25 million) and Research and development expenses ($18 million).

(i)	Included in Other (income)/deductions—net (see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).

(j)	For the three months ended June 28, 2020, primarily included in Cost of sales ($30 million) and Selling, informational and administrative expenses ($138 million), and for the six months ended June 28, 2020, primarily included in Cost of sales ($45 million) and Selling, informational and administrative

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(k)

For the three months ended June 28, 2020, primarily included in Selling, informational and administrative expenses ($21 million), Research and development expenses ($229 million) and Other (income)/deductions––net ($97 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 ($296 million). For the three months ended June 30, 2019, primarily included in Selling, informational and administrative expenses ($28 million) and Other (income)/deductions––net ($19 million). For the first six months of 2019, primarily included in Selling, informational and administrative expenses ($41 million), Research and development expenses ($11 million) and Other (income)/deductions––net ($43 million). Among other things, the second quarter of 2020 includes charges of $85 million and the first six months of 2020 includes 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 GSK Consumer Healthcare joint venture. The second quarter and first six months of 2020 also include upfront payments of $130 million to Valneva SE and $72 million to BioNTech SE, which were recorded to Research and development expenses.

(l)

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

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

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

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

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(i)

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

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

(iii)	Other—the operating results of our Consumer Healthcare business, through July 31, 2019, and costs associated with other commercial activities not managed as part of Biopharma or Upjohn, including all strategy, business development, portfolio management and valuation capabilities, which previously had been reported in various parts of the organization.

(iv)

Corporate and Other Unallocated––the costs associated with corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement), patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs. Corporate and Other Unallocated also includes our share of earnings from the GSK Consumer Healthcare joint venture and other charges related to the GSK Consumer Healthcare joint venture, primarily representing our pro-rata share of restructuring and business combination accounting charges recorded by the GSK Consumer Healthcare joint venture.

•	a $80 million net gain in the second quarter of 2020;

•	a $150 million net gain in the first six months of 2020;

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

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

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

(d)

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

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

•	Cost of sales as a percentage of Revenues decreased 0.9 percentage points, driven by a favorable change in product mix, which includes an increase in alliance revenue which has no associated cost of sales, and a favorable impact of foreign exchange, partially offset by an increase in royalty expenses based on the mix of products sold.

•	The decrease in Cost of sales of 1% was mainly driven by a favorable impact of foreign exchange, partially offset by an increase in royalty expense based on the mix of products sold, and an unfavorable change in product mix.

•	The decrease in Selling, informational and administrative expenses of 12% was mostly driven by lower spending on sales and marketing activities due to the impact of the COVID-19 pandemic, a favorable impact of foreign exchange, and lower investments across the Inflammation & Immunology portfolio, partially offset by additional investment in the Oncology portfolio in developed markets.

•	The increase in Research and development expenses of 8% was mainly related to increased medical spending, primarily for Rare Disease, Internal Medicine, and Hospital.

•	The favorable change in Other (income)/deductions––net includes, among other things, an increase in income from collaborations, out-licensing arrangements and sales of compound/product rights, partially offset by a decrease in royalty- related income mainly due to the non-recurrence of a one-time favorable resolution of a legal dispute in the second quarter of 2019.

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•	Cost of sales as a percentage of Revenues increased 6.7 percentage points, driven by lower Lyrica revenues, primarily in the U.S. due to multi-source generic competition that began in July 2019, partially offset by lower royalty expense for Lyrica due to its U.S. patent expiration.

•	The decrease in Cost of sales of 8% was mainly driven by a decrease in sales volume and lower royalty expense primarily due to the Lyrica patent expiration and multi-source generic competition that began in the U.S. in July 2019.

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Selling, informational and administrative expenses decreased 29% driven by a decrease in field force expense as well as advertising and promotion expenses, primarily related to Lipitor and Norvasc, due to the volume-based procurement (VBP) program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019, as well as Lyrica in the U.S. due to generic competition that began in July 2019 and anticipated generic competition for Celebrex in Japan beginning in June 2020.

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

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

•	Cost of sales as a percentage of Revenues decreased 0.6 percentage points, driven by a favorable change in product mix, which includes an increase in alliance revenue which has no associated cost of sales, partially offset by an increase in royalty expenses based on the mix of products sold.

•	The increase in Cost of sales of 3% was mainly driven by an increase in sales volumes for various products and an increase in royalty expenses based on the mix of products sold, partially offset by a favorable impact of foreign exchange.

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The decrease in Selling, informational and administrative expenses of 7% was mostly driven by lower spending on sales and marketing activities due to the impact of the COVID-19 pandemic, lower investments across the Inflammation & Immunology portfolio, a favorable impact of foreign exchange, and lower healthcare reform expenses, partially offset by additional investment in the Oncology portfolio in developed markets.

•	The increase in Research and development expenses of 10% was mainly related to increased medical spending, primarily for Oncology, Internal Medicine, and Rare Disease.

•	The favorable change in Other (income)/deductions––net includes, among other things, an increase in income from collaborations, out-licensing arrangements and sales of compound/product rights, partially offset by a decrease in royalty- related income mainly due to the non-recurrence of a one-time favorable resolution of a legal dispute in the second quarter of 2019.

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Cost of sales as a percentage of Revenues increased 7.3 percentage points, driven by lower Lyrica revenues, primarily in the U.S. due to multi-source generic competition that began in July 2019, lower Lipitor and Norvasc revenues due to the VBP program in China, which was initially implemented in March 2019 and expanded nationwide beginning in December 2019, and an unfavorable impact of foreign exchange, partially offset by lower royalty expense for Lyrica due to its U.S. patent expiration.

•	The decrease in Cost of sales of 8% was mainly driven by lower royalty expense and a decrease in sales volume primarily due to the Lyrica patent expiration and multi-source generic competition that began in the U.S. in July 2019.

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Selling, informational and administrative expenses decreased 22% driven by a reduction in field force expense as well as advertising and promotion expenses, primarily related to Lyrica in the U.S. due to generic competition that began in July 2019 and the anticipated generic competition for Celebrex in Japan that began in June 2020, as well as a decrease in Lipitor and Norvasc expenses due to the VBP program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019.

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

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•	an increase in equity method dividends received,

•	an increase in net unrealized gains on equity securities;

•	an increase in equity income; and

•	an increase in accreted interest on debt discount.

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a $16.7 billion increase in net purchases of short-term investments with original maturities of three months or less, largely due to the $11.4 billion of proceeds from the Upjohn long-term debt issuances in the second quarter of 2020, which were invested in money market funds (see Notes to Condensed Consolidated Financial Statements—Note 7D. Financial Instruments: Long-Term Debt and —Note 7A. Financial Instruments: Fair Value Measurements); and

•	a $1.4 billion decrease in proceeds from redemptions and sales of short-term investments.

•	an increase in issuances of long-term debt of $11.7 billion (see Notes to Condensed Consolidated Financial Statements—Note 7D. Financial Instruments: Long-Term Debt);

•	a decrease in purchases of common stock of $8.9 billion; and

•	lower repayments on long-term debt of $3.2 billion,

•	$3.1 billion net payments on short-term borrowings in the first six months of 2020, compared to $4.3 billion net proceeds raised from short-term borrowings in the first six months of 2019.

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

•	investments in our business;

•	dividend payments and potential increases in the dividend rate;

•	share repurchases;

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

•	paying down outstanding debt;

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•	contributions to our pension and postretirement plans; and

•	business-development activities.

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

(b)	The increase in working capital was primarily due to:

•	an increase mainly driven by operating cash flow generation and the long-term debt issuances discussed below, partially offset by debt repayment and capital expenditures; and

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

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

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completed a public offering of $1.25 billion aggregate principal amount of senior unsecured sustainability notes. The proceeds were initially used to repay outstanding commercial paper and subsequently will be used to help manage our environmental impact and support increased patient access to our medicines and vaccines, especially among underserved populations, and strengthen healthcare systems; and

•	repurchased at par all $1.065 billion principal amount outstanding of senior unsecured notes that were due in 2047 before the maturity date, which did not have a material impact on our condensed consolidated financial statements.

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the outcome of R&D activities, including, without limitation, 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, regulatory approval dates and/or launch dates, as well as the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new clinical data and further analyses of existing clinical data;

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the risk we may not be able to successfully address all of the comments received from regulatory authorities such as the FDA or the EMA, or obtain approval from regulators, which will depend on myriad factors, including such regulator making a determination as to whether a product’s benefits outweigh its known risks and a determination of the product’s efficacy; regulatory decisions impacting labeling, manufacturing processes, safety and/or other matters; and recommendations by technical or advisory committees, such as ACIP, that may impact the use of our vaccines;

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

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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 result in the loss of marketing approval, changes in product labeling, and/or new or increased concerns about the side effects or efficacy of, a product that could affect its availability or commercial potential, such as the update to the U.S. and EU prescribing information for Xeljanz;

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

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

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

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

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

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

•	difficulties or delays in manufacturing, sales or marketing, including delays caused by natural events, such as hurricanes; supply disruptions, shortages or stock-outs at our facilities; and legal or regulatory actions, such as

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the impact of public health outbreaks, epidemics or pandemics (such as the COVID-19 pandemic) on our business, operations and financial condition and results, including due to travel limitations and government-mandated work-from-home or shelter-in-place orders, manufacturing disruptions or delays, supply chain interruptions, including challenges related to reliance on third-party suppliers, disruptions to pipeline development and clinical trials, including difficulties or delays in enrollment of certain clinical trials, decreased product demand, including due to reduced numbers of in-person meetings with prescribers, patient visits with physicians, vaccinations and elective surgeries resulting in fewer new prescriptions or refills of existing prescriptions and reduced demand for products used in procedures, further reduced product demand as a result of increased unemployment, challenges presented by reallocating human capital, R&D, manufacturing and other resources to assist in responding to the pandemic without disruption to our operations, costs associated with the COVID-19 pandemic, including protocols intended to reduce the risk of transmission, increased supply chain costs and additional R&D costs incurred in our efforts to develop a potential vaccine and treatment for COVID-19, challenges related to our business development initiatives, including potential delays or disruptions related to regulatory approvals, including the anticipated combination of Upjohn with Mylan, interruptions or delays in the operations of certain regulatory authorities, which may delay the approvals of new products we are developing, potential label expansions for existing products and the launch of newly-approved products, potential increased cyber incidents such as phishing, social engineering and malware attacks, and other challenges presented by disruptions to our normal operations in response to the pandemic, as well as uncertainties regarding the duration and severity of the pandemic and its impacts and government or regulatory actions to contain the virus or control the supply of medicines, each of which may also amplify the impact of the other factors listed in this section;

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uncertainties related to our efforts to develop a potential treatment or vaccine for COVID-19, including uncertainties related to the risk that our development programs may not be successful, commercially viable or receive approval or Emergency Use Authorization from regulatory authorities, risks associated with preliminary data, including the possibility of unfavorable new preclinical or clinical trial data and further analyses of existing preclinical or clinical trial data that may be inconsistent with the data used for selection of the BNT162b2 vaccine candidate and dose level for the Phase 2/3 study, the risk that 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, whether and when data from the BNT162 mRNA vaccine program will be published in scientific journal publications and, if so, when and with what modifications, disruptions in the relationships between us and our collaboration partners or third-party suppliers, the risk that other companies may produce superior or competitive products, the risk that demand for any products may no longer exist, risks related to the availability of raw materials to manufacture any such products, the risk that we may not be able to recoup costs associated with our R&D and manufacturing efforts and risks associated with any changes in the way we approach or provide additional research funding for potential drug development related to COVID-19, the risk that we may not be able to create or scale up manufacturing capacity on a timely basis or have access to logistics or supply channels commensurate with global demand for any potential approved vaccine or product candidate, which would negatively impact our ability to supply the estimated numbers of doses of our vaccine candidate within the projected time periods indicated, and pricing and access challenges for such products, including in the U.S.;

•	trade buying patterns;

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

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

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

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

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U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, intellectual property, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; patient out-of-pocket costs for medicines, manufacturer prices and/or price increases that could result in new mandatory rebates and discounts or other pricing restrictions; general budget control actions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; revisions to reimbursement of biopharmaceuticals under

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

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

•	contingencies related to actual or alleged environmental contamination;

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

•	legal defense costs, insurance expenses and settlement costs;

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

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

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our ability to protect our patents and other intellectual property, both domestically and internationally, including against claims of invalidity that could result in loss of exclusivity, such as claims related to our Lyrica patents in Japan, and in response to any pressure, or legal or regulatory action by, various stakeholders or governments that could potentially result in us not seeking intellectual property protection for or agreeing not to enforce intellectual property related to our medicines, including potential vaccines and treatments for COVID-19;

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

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

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

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

•	uncertainties based on the formal change in relationship between the U.K. government and the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU, including the approval and supply of our products;

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

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

•	further clarifications and/or changes in interpretations of existing laws and regulations, or changes in laws and regulations, in the U.S. and other countries, including changes in U.S. generally accepted accounting principles;

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

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

•	growth in costs and expenses;

•	changes in our product, segment and geographic mix;

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

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

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

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the impact of, and risks and uncertainties related to, acquisitions and divestitures, such as the acquisition of Array, our transaction with GSK which combined our respective consumer healthcare businesses into a new consumer healthcare joint venture and our agreement to combine Upjohn with Mylan to create a new global pharmaceutical company, Viatris, including, among other things, risks related to the satisfaction of the conditions to closing to any pending transaction (including the failure to obtain any necessary shareholder and regulatory approvals) in the anticipated timeframe or at all and the possibility that such transaction does not close; the ability to realize the anticipated benefits of those transactions, including the possibility that the expected cost savings and/or accretion from certain of those transactions will not be realized or will not be realized within the expected time frame; the risk that the businesses will not be integrated successfully; negative effects of the announcement or the consummation of the transaction on the market price of Pfizer’s common stock, Pfizer’s credit ratings and/or Pfizer’s operating results; disruption from the transactions making it more difficult to maintain business and operational relationships; risks related to our ability to grow revenues for certain acquired products; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the transaction, other business effects, including the effects of industry, market, economic, political or regulatory conditions, future exchange and interest rates, changes in tax and other laws, regulations, rates and policies, future business combinations or disposals; competitive developments; and as it relates to the Consumer Healthcare JV with GSK, the possibility that a future separation of the joint venture as an independent company via a demerger of GSK’s equity interest to GSK’s shareholders and a listing of the joint venture on the U.K. equity market may not occur; and

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the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, including the reorganization of our commercial operations in 2019, as well as any other corporate strategic initiatives, and cost-reduction and productivity initiatives, each of which requires upfront costs but may fail to yield anticipated benefits and may result in unexpected costs or organizational disruption.

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(a)	For additional information, see the Notes to Consolidated Financial Statements––Note 12. Equity in our 2019 Financial Report, which is

(b)

These columns represent (i) 73,616 shares of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of awards under our long-term incentive programs and (ii) the open market purchase by the trustee of 6,521 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance share awards and who deferred receipt of such awards.

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