PFIZER INC - Quarter Report: 2020 March (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 first quarter of 2020 include a loss of approximately $1.6 billion pre-tax ($1.2 billion after-tax) related to foreign currency translation adjustments attributable to our equity method investment in the GSK Consumer Healthcare joint venture (see Note 2B), partially offset by the results of our net investment hedging program.

(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.

Amounts may not add due to rounding.

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Amounts may not add due to rounding.

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(a)	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 for taxes on income for the three months ended March 31, 2019 was favorably impacted by approximately $131 million, primarily as a result of additional guidance issued by the U.S. Department of Treasury.

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 first quarter of 2020, restructuring charges mainly represent asset write-downs and employee termination costs associated with cost reduction initiatives. In the first quarter of 2019, restructuring charges were primarily associated with cost reduction initiatives and mainly represent asset write-downs, partially offset by the reversal of previously recorded accruals for employee termination costs and asset impairments related to our acquisition of Hospira.

•	Biopharma ($2 million charge); Upjohn ($13 million charge); and Other ($41 million charge).

•	Biopharma ($13 million charge); Upjohn ($13 million credit); and Other ($10 million charge).

(b)	Transaction costs represent external costs for banking, legal, accounting and other similar services. In the first quarter of 2020, transaction costs relate to our acquisition of Array.

(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 first quarter of 2020, integration costs and other were mostly related to our acquisition of Array. In the first quarter 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.

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

(b)	Includes adjustments for foreign currency translation.

(c)	Included in Other current liabilities ($532 million) and Other noncurrent liabilities ($182 million).

(a)	Interest income decreased in the first quarter of 2020, primarily driven by a lower investment balance and lower short-term interest rates. Interest expense increased in the first quarter of 2020, mainly as a result of an increased commercial paper balance due to the acquisition of Array.

(b)	The losses in the first quarter of 2020, include, among other things, unrealized losses of $134 million related to our investment in Allogene. The gains in the first quarter of 2019 included, among other things, unrealized gains of $43 million related to our investment in Allogene. For additional information on investments, see Note 7B.

(c)

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 first quarter of 2020, mainly includes, among other things, an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, Inc. In the first quarter of 2019, primarily included $60 million in milestone income from Mylan Pharmaceuticals Inc. related to the FDA’s approval and launch of Wixela Inhub®, a generic of Advair Diskus®.

(d)	For additional information, see Note 10.

(e)

In the first quarter of 2019, primarily included intangible asset impairment charges of $130 million composed 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 and (ii) $40 million related to a Biopharma developed technology right, acquired in connection with our acquisition of King, for government defense products and reflects, among other things, updated commercial forecasts including manufacturing cost assumptions. In addition, the first quarter of 2019 included other asset impairments of $20 million.

(f)	In the first quarter 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.

(g)	See Note 2B for additional information.

(h)	The first quarter of 2020 includes, among other things, dividend income of $77 million from our investment in ViiV. The first quarter of 2019 included, among other things, credits of $72 million, reflecting the change in the fair value of contingent consideration, and dividend income of $64 million from our investment in ViiV.

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

•	a decrease in tax benefits associated with the resolution of certain tax positions pertaining to prior years,

•	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)	Includes after-tax losses of approximately $1.2 billion related to foreign currency translation adjustments attributable to our equity method investment in GSK Consumer Healthcare (see Note 2B), partially offset by the results of our net investment hedging program.

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(a)	As of March 29, 2020, long-term equity securities of $155 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.

(b)

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 consolidated statements of income (see Note 4).

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(a)	As of March 29, 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.

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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)/losses are observable price changes on equity securities without readily determinable fair values. Since January 1, 2018, there were cumulative impairments and downward adjustments of $58 million and upward adjustments of $60 million. Impairments, downward and upward adjustments were not significant in the first quarter of 2020 and 2019.

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

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(a)	Fixed rate 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)	The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.3 billion as of March 29, 2020 and $5.9 billion as of December 31, 2019.

(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 income/(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 income/(loss)––Foreign currency translation adjustments, net.

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(c)

The amounts reclassified from OCI into COS were a net gain of $70 million in the first quarter of 2020 and a net gain of $44 million in the first quarter of 2019. The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $220 million within the next 12 months into Cost of sales. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $1.8 billion U.K. pound debt maturing in 2043.

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

(e)	Long-term debt includes foreign currency long-term borrowings with carrying values of $1.9 billion as of March 29, 2020, which are used as hedging instruments in net investment hedges.

(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, market demand and network strategy, 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 decrease in Identifiable intangible assets, less accumulated amortization, is primarily due to amortization.

(a)	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 three months ended March 29, 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

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•	Mississippi Attorney General Government Investigation

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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 platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance, and worldwide procurement), patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs.

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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 are evaluated on an individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities.

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(a)	Income from continuing operations before provision for taxes on income. Biopharma’s earnings include dividend income of $77 million in the first quarter of 2020 and $64 million in the first quarter 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.

(a)	Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland. Revenues denominated in euros were $1.5 billion in the first quarter of 2020 and $1.7 billion in the first quarter 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 develop and commercialize Valneva’s Lyme disease vaccine candidate VLA15, which is currently in Phase 2 clinical studies. 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. The program was granted Fast Track designation by the FDA in July 2017 and Valneva expects to report the first Phase 2 results in mid-2020. Valneva and Pfizer will work closely together throughout the development of VLA15. Valneva is eligible to receive a total of $308 million in cash payments consisting of a $130 million upfront payment, $35 million in development milestones and $143 million in early commercialization milestones. Under the terms of the agreement, Valneva will fund 30% of all development costs through completion of the development program, and in return we will pay Valneva tiered royalties. We will lead late-stage development and have sole control over commercialization.

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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 research and development, 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. In late April 2020, Pfizer and BioNTech announced that the German regulatory authority, the Paul-Ehrlich-Institut, approved the Phase 1/2 clinical trial and the first patients were dosed with a BNT162 vaccine candidate shortly thereafter. In addition, Pfizer and BioNTech received regulatory approval to begin a Phase 1/2 clinical trial for BNT162 in the U.S., and announced in May 2020 that the first patients in the U.S. have been dosed with a BNT162 vaccine candidate. In connection with the agreement, we will pay BioNTech an upfront cash payment of $72 million and we made an equity investment of $113 million. BioNTech is eligible to receive potential future milestone payments of up to $563 million for a total consideration of $748 million. While Pfizer and BioNTech will share development costs equally if the vaccine is approved and successfully commercialized, Pfizer will be responsible for all of the development costs until commercialization of the vaccine. Thereafter, BioNTech would repay Pfizer its 50 percent share of these development costs through reductions in gross profit sharing and milestone payments to BioNTech over time. BioNTech and Pfizer will also work jointly to commercialize the vaccine worldwide (excluding China, which is subject to a separate collaboration between BioNTech and Fosun Pharma) if development is successful and regulatory approval is obtained.

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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 is a category leader in pain relief, respiratory and vitamins, minerals and supplements, and therapeutic oral health and is the largest global OTC consumer healthcare business. Our financial results, and our Consumer Healthcare segment’s operating results, for the first quarter of 2019 reflect three months of Consumer Healthcare segment operations while financial results for the first quarter 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 and Equity-Method Investment: 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 or split 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 is now anticipated to close in the second half of 2020, subject to Mylan shareholder approval and satisfaction of other customary closing conditions, including receipt of regulatory approvals. We expect to incur costs of approximately $500 million in connection with fully separating Upjohn, inclusive of $260 million incurred since inception and through first quarter of 2020. Such charges will 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––Amortization of Intangible Assets” section of this MD&A.

(d)	See the 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

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We confirmed a lead compound and analogues to be 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. Consequently, we will continue 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 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. In late April 2020, we and BioNTech announced that the German regulatory authority, the Paul-Ehrlich-Institut, approved the Phase 1/2 clinical trial and the first patients were dosed with a BNT162 vaccine candidate shortly thereafter. In addition, Pfizer and BioNTech received regulatory approval to begin a Phase 1/2 clinical trial for BNT162 in the U.S., and announced in May 2020 that the first patients in the U.S. have been dosed with a BNT162 vaccine candidate. 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.

•	We are also evaluating existing Pfizer medicines, which are the subject of novel research projects for investigation in COVID-19 patients.

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Our Colleagues. Our colleagues and customers have both had 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 are working remotely. Certain of our colleagues, primarily those in the Pfizer Global Supply, Worldwide Research and Development, and Global Product Development organizations, have roles whose physical presence at our facilities is required to perform their job function. These colleagues continue to report to work but 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.

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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 first quarter of 2020 was mixed, with those in China unable 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 starting in the second half of March.

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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 commercial air capacity to transport inventory. We continue to monitor for actions by governments that could result in disruptions to supply movements.

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Our Clinical Trials. In late March 2020, we paused the recruitment portion of certain ongoing global interventional clinical studies and delayed most new study starts. We took this action in the interests of public health, so that clinical site partners and we could concentrate on care for patients in ongoing clinical trials and to avoid adding to the demands on the healthcare system during the peak of the COVID-19 crisis.

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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 and Chantix/Champix as well as products used in certain elective surgeries, are more reliant on new patient starts and typically require doctor visits, and some 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 is

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•	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, vaccinations and elective surgical procedures will rebound starting in the second half of 2020 and align more closely with historical levels;

▪	New-to-brand prescription trends for certain key products and vaccination rates will resume on a similar trajectory to what was seen in 2019, beginning in the second half of 2020;

▪	Access to prescribers for sales force colleagues is restored in the second half of 2020;

▪	Clinical trial enrollment, including new study starts, will fully resume in the second half of 2020;

▪	Pfizer’s manufacturing and supply chain activities are not materially disrupted; and

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

▪	Guidance range for revenues was reaffirmed at $48.5 to $50.5 billion, absorbing a $0.6 billion unfavorable impact from changes in foreign exchange rates in relation to the U.S. dollar since mid-January 2020, primarily the weakening of the Brazilian real, the euro, the Mexican peso and the Chinese yuan.

▪	Guidance range for Adjusted cost of sales as a percentage of revenues was lowered by 40 basis points to a range of 19.5% to 20.5%, primarily to reflect the favorable impact of product mix and other efficiencies.

▪	Guidance range for Adjusted SI&A expenses was lowered by $500 million to a range of $11.5 to $12.5 billion, primarily to reflect incremental cost-savings opportunities, primarily reductions in indirect SI&A spend associated with corporate enabling functions, as well as actual and anticipated COVID-19-related spending reductions.

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Guidance range for Adjusted R&D expenses was increased by $500 million to a range of $8.6 to $9.0 billion, solely to reflect incremental investments Pfizer anticipates making in 2020 to combat the COVID-19 pandemic, including development of potential anti-viral treatments and a potential vaccine, as well as the evaluation of existing Pfizer medicines, which are the subject of novel research projects for investigation in COVID-19 patients.

▪	Guidance range for Adjusted diluted EPS was reaffirmed at $2.82 to $2.92, absorbing a $0.04 unfavorable impact from changes in foreign exchange rates since mid-January 2020.

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(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 March 29, 2020, including any one-time upfront payments associated with such transactions.

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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 (recorded by Pfizer in the first quarter of 2020) as well as Pfizer’s share of the joint venture’s projected earnings during the first three 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.

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Exchange rates assumed are a blend of actual exchange rates in effect through first-quarter 2020 and mid-April 2020 rates for the remainder of the year. Financial guidance reflects the anticipated unfavorable impact of approximately $0.9 billion on revenues and approximately $0.06 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.

(a)

New Pfizer revenue guidance absorbs a $500 million unfavorable impact from changes in foreign exchange rates since mid-January 2020. The financial guidance for New Pfizer also reflects a full-year 2020 pro forma view of the company assuming the pending Upjohn combination with Mylan was completed at the beginning of 2020. Therefore, New Pfizer 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 earnings generated by the GSK Consumer Healthcare joint venture in the fourth quarter of 2019 (recorded by Pfizer in the first quarter of 2020) as well as Pfizer’s share of the GSK Consumer Healthcare joint venture’s projected earnings during the first three 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.

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(a)

Upjohn revenue guidance absorbs a $100 million unfavorable impact from changes in foreign exchange rates since mid-January 2020. 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 13A. Segment, Geographic and Other Revenue Information: Segment Information.

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(a)	Certain key brands represent Eliquis, Ibrance 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)	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 March 29, 2020, associated with the following segments: Biopharma ($3.4 billion) and Upjohn ($1.2 billion). For the three months ended March 31, 2019, associated with the following segments: Biopharma ($2.7 billion), Upjohn ($2.2 billion) and Other ($0.2 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 chargebacks, primarily related to Upjohn products, including Lyrica and Viagra.

•	Prevnar 13/Prevenar 13 (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.

•	Ibrance (Biopharma):

•	Xeljanz (Biopharma):

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•	Lipitor (Upjohn):

•	Lyrica (Upjohn):

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

•	Chantix/Champix (Biopharma):

•	Vyndaqel/Vyndamax (Biopharma):

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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).

•	Sutent (Biopharma):

•	Norvasc (Upjohn):

•	Sulperazon (Biopharma):

•	Inlyta (Biopharma):

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•	Inflectra/Remsima (Biopharma):

•	Celebrex (Upjohn):

•	The Premarin family of products (Biopharma):

•	Xalkori (Biopharma):

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•	Viagra (Upjohn):

•	Alliance revenues (Biopharma):

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

(b)	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.

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

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

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

(a)	Being reviewed by the FDA under its Real-Time Oncology Review pilot program.

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

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

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

(b)	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.

(c)	Erbitux® is a registered trademark of ImClone LLC. In April 2020, the EMA’s CHMP adopted a positive opinion recommending the approval of Braftovi (encorafenib) in combination with Erbitux® (cetuximab), for the treatment of adult patients with metastatic CRC with a BRAF V600E mutation, who have received prior systemic therapy.

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

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

(f)	Avastin® is a registered trademark of Genentech, Inc.

(g)	In April 2020, the EMA’s CHMP adopted a positive opinion recommending the approval of Daurismo (glasdegib) in combination with low-dose cytarabine, for the treatment of newly diagnosed de novo or secondary AML in adult patients who are not candidates for standard induction chemotherapy.

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

•	the net increase in sales volumes for various products within our product portfolio; and

•	an unfavorable change in product mix, primarily driven by higher revenues from Hospital products, which carry a higher cost to produce.

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

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

•	lower investments across the Inflammation & Immunology portfolio,

•	separation costs associated with our planned Upjohn transaction with Mylan; and

•	additional Biopharma investment in emerging markets.

•	increased spending on our Inflammation & Immunology, Vaccines and Rare Disease portfolios, primarily due to several Phase 3 programs and early stage investments; and

•	increased investments towards building new capabilities and driving automation,

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•	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 quarter of 2020; and

•	decreased spending on our Oncology portfolio, as certain programs near completion.

(a)	Includes employee termination costs, asset impairments and other exit costs associated with business combinations. Credits in the first quarter of 2019 are due to the reversal of previously recorded accruals.

(b)	Includes employee termination costs, asset impairments and other exit costs not associated with acquisitions. For the first quarter of 2020, the charges were mostly related to asset write downs and employee termination costs. For the first quarter of 2019, the charges were primarily related to asset write downs.

(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.

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(a)	Included primarily in Amortization of intangible assets.

(b)	Included in Provision 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. Restructuring credits for the three months ended March 31, 2019 were due to the reversal of previously recorded accruals. Transaction costs represent external costs for banking, legal, accounting and other similar services. 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. 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 months ended March 31, 2019. Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions.

(e)	Included in Provision 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.

(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 March 29, 2020, primarily included in Cost of sales ($15 million) and Selling, informational and administrative expenses ($15 million). For the three months ended March 31, 2019, primarily included in Cost of sales ($22 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 March 29, 2020, primarily included in Cost of sales ($15 million) and Selling, informational and administrative expenses ($98 million) and represents separation costs associated with our planned Upjohn transaction with Mylan, and mainly includes consulting, legal, tax and advisory services. For the three months ended March 31, 2019, included in Other (income)/deductions––net and represents incremental costs associated with the

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(k)

For the three months ended March 29, 2020, primarily included in Selling, informational and administrative expenses ($17 million) and Other (income)/deductions––net ($199 million). For the three months ended March 31, 2019, primarily included in Selling, informational and administrative expenses ($18 million) and Other (income)/deductions––net ($24 million). The first quarter of 2020 includes, among other things, charges of $160 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.

(l)

Included in Provision 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 first quarter of 2019 was favorably impacted primarily by the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017.

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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.

(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 platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement), patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs.

•	a $70 million net gain in the first quarter of 2020; and

•	a $44 million net gain in the first quarter 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 Eliquis, Ibrance 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 was relatively flat.

•	The increase in Cost of sales of 8% was mainly driven by an increase in sales volumes for various products within our product portfolio, an unfavorable change in product mix, and an increase in royalty expenses based on the mix of products sold.

•

The decrease in Selling, informational and administrative expenses of 2% was mostly driven by lower investments across the Inflammation & Immunology portfolio, lower healthcare reform expenses, and a favorable impact of foreign exchange, partially offset by additional investment in emerging markets, the Oncology portfolio in developed markets, and for marketing and promotional expenses associated with the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019.

•	The increase in Research and development expenses of 13% 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 royalty-related income, an increase in income from collaborations, out-licensing arrangements and sales of compound/product rights, and an increase in dividend income from our investment in ViiV.

•

Cost of sales as a percentage of Revenues increased 7.9 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 the patent expiration.

•	The decrease in Cost of sales of 7% was mainly driven by lower royalty expense and a decrease in sales volume due to the Lyrica patent expiration and multi-source generic competition that began in July 2019, as well as decreases in sales volumes

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Selling, informational and administrative expenses decreased 15% 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 the patent expiration, as well as a decrease in Lipitor and Norvasc expenses due to the VBP program in China, which was initially implemented in March 2019 and expanded nationwide beginning in December 2019, partially offset by expenses for enabling functions that provide autonomy and position Upjohn to operate as a stand-alone division.

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

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

•	lower repayments on long-term debt of $0.8 billion;

•	lower issuances of long-term debt of $3.7 billion (see Notes to Condensed Consolidated Financial Statements—Note 7D. Financial Instruments: Long-Term Debt).

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

•	investments in our business;

•	dividend payments and potential increases in the dividend rate;

•	share repurchases;

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

•	paying down outstanding debt;

•	contributions to our pension and postretirement plans; and

•	business-development activities.

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

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

•	an increase in cash and cash equivalents mainly driven by operating cash flow generation and cash from the long-term debt issuance 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.

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

•	completed a public offering of $1.25 billion aggregate principal amount of senior unsecured notes. The proceeds 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 all $1.065 billion principal amount outstanding of senior unsecured notes that were due 2047 before the maturity date at par, 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;

•

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;

•

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;

•

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;

•

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 warning letters, suspension of manufacturing, seizure of product, injunctions, debarment, recall of a product, delays or denials of product approvals, import bans or denial of import certifications;

•	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 and delays, supply chain interruptions, including

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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 from regulatory authorities, 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 approved vaccine or product candidate 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;

•

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

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

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

•	contingencies related to actual or alleged environmental contamination;

•	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;

•

our ability to protect our patents and other intellectual property, both domestically and internationally, including in response to any pressure, or legal or regulatory action by, various stakeholders or governments that potentially results 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;

•

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

•	any changes in business, political and economic conditions due to actual or threatened terrorist activity 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;

•

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

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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) 5,826,709 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 6,447 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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