Acquisitions and Divestitures

A. Acquisitions

Nexium Over-the-Counter Rights

On August 13, 2012, we announced that we entered into an agreement with AstraZeneca for the over-the-counter (OTC) rights for Nexium, a leading prescription drug currently approved to treat the symptoms of gastroesophageal reflux disease. Under the terms of the agreement, we acquired the exclusive global rights to market Nexium for the approved OTC indications. We made an upfront payment of $250 million to AstraZeneca, and AstraZeneca is eligible to receive milestone payments of up to $550 million based on product launches and level of sales as well as royalty payments based on sales. The upfront payment was expensed and included in Research and development expenses in our condensed consolidated statements of income. A marketing authorization application for OTC Nexium in a 20 mg tablet form was filed with the European Medicines Agency in June 2012. A new drug application filing for OTC Nexium in the U.S. in a 20 mg delayed-release capsule is targeted for the first half of 2013.

Alacer Corp.

On February 26, 2012, we completed our acquisition of Alacer Corp., a privately owned company that manufactures, markets and distributes Emergen-C, a line of effervescent, powdered drink mix vitamin supplements that is the largest-selling branded vitamin C line in the U.S. In connection with this consumer healthcare acquisition, we recorded $247 million in Identifiable intangible assets, consisting primarily of the Emergen-C indefinite-lived brand, $94 million in net deferred tax liabilities and $151 million in Goodwill. The allocation of the consideration transferred to the assets acquired and the liabilities assumed has been finalized.

Ferrosan Holding A/S

On December 1, 2011, we completed our acquisition of the consumer healthcare business of Ferrosan Holding A/S (Ferrosan), a Danish company engaged in the sale of science-based consumer healthcare products, including dietary supplements and lifestyle products, primarily in the Nordic region and the emerging markets of Russia and Central and Eastern Europe. Due to the fact that financial information included in our fiscal year 2011 consolidated financial statements for our subsidiaries operating outside the U.S. is as of and for the year ended November 30, this acquisition is reflected in our condensed consolidated financial statements beginning in the first fiscal quarter of 2012. Our acquisition of Ferrosan’s consumer healthcare business increases our presence in dietary supplements with a new set of brands and pipeline products. Also, we believe that the acquisition allows us to expand the marketing of Ferrosan’s brands through Pfizer’s global footprint and provide greater distribution and scale for certain Pfizer brands, such as Centrum and Caltrate, in Ferrosan’s key markets. In connection with this acquisition, we recorded $463 million in Identifiable intangible assets, consisting of indefinite-lived and finite-lived brands, $119 million in net deferred tax liabilities and $246 million in Goodwill. The allocation of the consideration transferred to the assets acquired and the liabilities assumed has not been finalized.

King Pharmaceuticals, Inc.

On January 31, 2011 (the acquisition date), we completed a tender offer for the outstanding shares of common stock of King at a purchase price of $14.25 per share in cash and acquired approximately 92.5% of the outstanding shares. On February 28, 2011, we acquired all of the remaining shares of King for $14.25 per share in cash. As a result, the total fair value of consideration transferred for King was approximately $3.6 billion in cash ($3.2 billion, net of cash acquired).

King’s principal businesses consist of a prescription pharmaceutical business focused on delivering new formulations of pain treatments designed to discourage common methods of misuse and abuse; the Meridian auto-injector business for emergency drug delivery, which develops and manufactures the EpiPen; an established products portfolio; and an animal health business that offers a variety of feed-additive products for a wide range of species.

The following table provides the assets acquired and liabilities assumed from King:



(MILLIONS OF DOLLARS)	Amounts Recognized as of Acquisition Date (Final)
Working capital, excluding inventories	$	155
Inventories	340
Property, plant and equipment	412
Identifiable intangible assets, excluding in-process research and development	1,806
In-process research and development	303
Net tax accounts	(328		)
All other long-term assets and liabilities, net	102
Total identifiable net assets	2,790
Goodwill^(a)	765
Net assets acquired/total consideration transferred	$	3,555


^(a)	Goodwill recorded as of the acquisition date totaled $720 million for our three biopharmaceutical operating segments and $45 million for our Animal Health operating segment. (Since the acquisition of King, we have revised our operating segments. See Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.)

As of the acquisition date, the fair value of accounts receivable approximated the book value acquired. The gross contractual amount receivable was $200 million, virtually all of which was expected to be collected.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition of King includes the following:


•	the expected synergies and other benefits that we believed would result from combining the operations of King with the operations of Pfizer;


•	any intangible assets that did not qualify for separate recognition, as well as future, yet unidentified projects and products; and


•	the value of the going-concern element of King’s existing businesses (the higher rate of return on the assembled collection of net assets versus if Pfizer had acquired all of the net assets separately).

Goodwill is not amortized and is not deductible for income tax purposes (see Note 9A. Goodwill and Other Intangible Assets: Goodwill for additional information).

The assets and liabilities arising from contingencies recognized as of the acquisition date are not significant to Pfizer’s condensed consolidated financial statements.

Revenues from King are included in Pfizer's condensed consolidated statements of income from the acquisition date, January 31, 2011, through Pfizer’s domestic and international quarter-ends and were $938 million in the first nine months of 2011. We are not able to provide the results of operations attributable to King in the first nine months of 2011 as those operations had been substantially integrated into the larger Pfizer operation shortly after the acquisition.

If the acquisition of King had occurred on January 1, 2011, the change to Pfizer’s Revenues, Income from continuing operations attributable to Pfizer Inc. common shareholders and Diluted earnings per share attributable to Pfizer Inc. common shareholders for the first nine months of 2011 would not have been significant.

B. Divestitures

On April 23, 2012, we announced that we entered into an agreement to sell our Nutrition business to Nestlé for $11.85 billion in cash. The transaction is expected to close in the next few months, assuming the receipt of the required regulatory clearances and satisfaction of other closing conditions. Beginning in the second quarter of 2012, we report the operating results of the Nutrition business as Discontinued operations––net of tax in the condensed consolidated statements of income for all periods presented. The transaction also includes the sale of certain prenatal multivitamins currently commercialized by the Pfizer Consumer Healthcare business unit. The operating results of this product line are also included in Discontinued operations––net of tax for all periods presented. In addition, the assets and liabilities associated with the discontinued operations are classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as appropriate, in the condensed consolidated balance sheets.

On August 1, 2011, we completed the sale of our Capsugel business for approximately $2.4 billion in cash. The operating results and the gain on the sale of this business are reported as Discontinued operations––net of tax in the condensed consolidated statements of income for the three and nine months ended October 2, 2011.

The following table provides the components of Discontinued operations—net of tax:



	Three Months Ended				Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2012		October 2, 2011		September 30, 2012		October 2, 2011
Revenues^(a)	$	564	$	699	$	1,665	$	2,068
Pre-tax income from discontinued operations	$	129	$	121	$	365	$	397
Provision for taxes on income^(b)	25		25		116		94
Income from discontinued operations––net of tax	104		96		249		303
Pre-tax gain on sale of discontinued operations	—		1,695		—		1,683
Provision for taxes on income^(c)	—		367		—		367
Gain on sale of discontinued operations––net of tax	—		1,328		—		1,316
Discontinued operations––net of tax^(a)	$	104	$	1,424	$	249	$	1,619


^(a)	Includes the Nutrition business for all periods presented and the Capsugel business for 2011 only.

^(b)

Includes deferred tax expense of $9 million and a deferred tax benefit of $10 million for the three months ended September 30, 2012 and October 2, 2011, respectively, and a deferred tax expense of $23 million and a deferred tax benefit of $17 million for the nine months ended September 30, 2012 and October 2, 2011, respectively. These deferred tax provisions include deferred income taxes related to investments in certain foreign subsidiaries resulting from our intention not to hold these subsidiaries permanently.


^(c)	Includes deferred tax expense of $162 million for the three and nine months ended October 2, 2011. These deferred tax provisions include deferred taxes on certain current-year funds earned outside the U.S. that will not be permanently reinvested overseas.

The following table provides the components of Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations:



(MILLIONS OF DOLLARS)	September 30, 2012		December 31, 2011
Accounts receivable, less allowance for doubtful accounts	$	523	$	550
Other current assets	433		419
Property, plant and equipment, less accumulated depreciation	1,046		1,118
Goodwill	492		498
Identifiable intangible assets, less accumulated amortization	2,652		2,648
Other noncurrent assets	125		84
Assets of discontinued operations and other assets held for sale	$	5,271	$	5,317

Current liabilities	$	554	$	385
Other liabilities	856		839
Liabilities of discontinued operations	$	1,410	$	1,224

The net cash flows of our discontinued operations for each of the categories of operating, investing and financing activities are not significant for any period presented.