Financial Review

Pfizer Inc. and Subsidiary Companies

EXHIBIT 13

Pfizer Inc. 2012 Financial Report

Financial Review

Pfizer Inc. and Subsidiary Companies

INTRODUCTION

Our Financial Review is provided to assist readers in understanding the results of operations, financial condition and cash flows of Pfizer Inc. (the Company). It should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements. The discussion in this Financial Review contains forward-looking statements that involve substantial risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, such as those discussed in Part 1, Item 1A, “Risk Factors” of our 2012 Annual Report on Form 10-K and in the “Forward-Looking Information and Factors That May Affect Future Results”, “Our Operating Environment” and “Our Strategy” sections of this Financial Review.

The Financial Review is organized as follows:

• Overview of Our Performance, Operating Environment, Strategy and Outlook. This section, beginning on page 2, provides information about the following: our business; our 2012 performance; our operating environment; our strategy; our business development initiatives, such as acquisitions, dispositions, licensing and collaborations; and our financial guidance for 2013.

• Significant Accounting Policies and Application of Critical Accounting Estimates. This section, beginning on page 10, discusses those accounting policies and estimates that we consider important in understanding Pfizer’s consolidated financial statements. For additional discussion of our accounting policies, see Notes to Consolidated Financial Statements—Note 1. Basis of Presentation and Significant Accounting Policies.

• Analysis of the Consolidated Statements of Income. This section begins on page 15, and consists of the following sections:

◦ Revenues. This sub-section, beginning on page 15, provides an analysis of our revenues and products for the three years ended December 31, 2012, including an overview of research and development expenses and important biopharmaceutical product developments.

◦ Costs and Expenses. This sub-section, beginning on page 28, provides a discussion about our costs and expenses.

◦ Provision for Taxes on Income. This sub-section, beginning on page 33, provides a discussion of items impacting our tax provisions.

◦ Discontinued Operations. This sub-section, on page 34, provides an analysis of the financial statement impact of our discontinued operations.

◦ Adjusted Income. This sub-section, beginning on page 34, provides a discussion of an alternative view of performance used by management.

• Analysis of the Consolidated Statements of Comprehensive Income. This section, on page 38, provides a discussion of changes in certain components of other comprehensive income.

• Analysis of the Consolidated Balance Sheets. This section, beginning on page 38, provides a discussion of changes in certain balance sheet accounts.

• Analysis of the Consolidated Statements of Cash Flows. This section, beginning on page 39, provides an analysis of our consolidated cash flows for the three years ended December 31, 2012.

• Analysis of Financial Condition, Liquidity and Capital Resources. This section, beginning on page 40, provides an analysis of selected measures of our liquidity and of our capital resources as of December 31, 2012 and December 31, 2011, as well as a discussion of our outstanding debt and other commitments that existed as of December 31, 2012. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future activities.

• New Accounting Standards. This section, on page 44, discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted.

• Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 44, provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements presented in this Financial Review relating to, among other things, our anticipated financial and operating performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans, and plans relating to share repurchases and dividends. Such forward-looking statements are based on management’s current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances. Also included in this section are discussions of Financial Risk Management and Legal Proceedings and Contingencies.

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OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business

Our mission is to apply science and our global resources to improve health and well-being at every stage of life. We strive to set the standard for quality, safety and value in the discovery, development and manufacturing of medicines for people and animals. Our diversified global healthcare portfolio includes human and animal biologic and small molecule medicines and vaccines, as well as many of the world’s best-known consumer products. Every day, we work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We also collaborate with healthcare providers, governments and local communities to support and expand access to reliable, affordable healthcare around the world. Our revenues are derived from the sale of our products, as well as through alliance agreements, under which we co-promote products discovered by other companies (Alliance revenues).

The majority of our revenues come from the manufacture and sale of biopharmaceutical products. The biopharmaceutical industry is highly competitive and we face a number of industry-specific challenges, which can significantly impact our results. These factors include, among others: the loss or expiration of intellectual property rights, the regulatory environment and pipeline productivity, pricing and access pressures, and increasing competition among branded products. (For more information about these challenges, see the “Our Operating Environment” section of this Financial Review.)

The financial information included in our consolidated financial statements for our subsidiaries operating outside the United States (U.S.) is as of and for the year ended November 30 for each year presented.

References to developed markets include the U.S., Western Europe, Japan, Canada, Australia, Scandinavia, South Korea, Finland and New Zealand; and references to Emerging Markets include the rest of the world, including, among other countries, China, Brazil, Mexico, Turkey, Russia and India.

On February 6, 2013, an initial public offering (IPO) of our subsidiary, Zoetis Inc. (Zoetis), was completed, pursuant to which we sold 99.015 million shares of Zoetis in exchange for the retirement of approximately $2.5 billion of Pfizer commercial paper issued on January 10, 2013. The IPO represented approximately 19.8% of the total outstanding Zoetis shares. On February 1, 2013, Zoetis shares began trading on the New York Stock Exchange under the symbol "ZTS." Prior to and in connection with the IPO, Zoetis completed a $3.65 billion senior notes offering and we transferred to Zoetis substantially all of the assets and liabilities of our Animal Health business. (For additional information, see Notes to Consolidated Financial Statements––Note 19A. Subsequent Events: Zoetis Debt Offering and Initial Public Offering.)

On November 30, 2012, we completed the sale of our Nutrition business to Nestlé for $11.85 billion in cash and recognized a gain of approximately $4.8 billion, net of tax, in Gain/(loss) on sale of discontinued operations––net of tax. The operating results of this business are reported as Income/(loss) from discontinued operations––net of tax in our consolidated statements of income for all periods presented. In addition, in our consolidated balance sheet as of December 31, 2011, the assets and liabilities associated with this discontinued operation are classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as appropriate. (For additional information, see Notes to Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures and see the “Our Business Development Initiatives” and “Discontinued Operations” sections of this Financial Review.)

On August 1, 2011, we completed the sale of our Capsugel business for approximately $2.4 billion in cash and recognized a gain of approximately $1.3 billion, net of tax, in Gain/(loss) on sale of discontinued operations––net of tax. The operating results of this business are reported as Income/(loss) from discontinued operations––net of tax in our consolidated statements of income for the years ended December 31, 2011 and December 31, 2010. (For additional information, see Notes to Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures and see the “Our Business Development Initiatives” and “Discontinued Operations” sections of this Financial Review.)

The assets, liabilities, operating results and cash flows of acquired businesses, such as King Pharmaceuticals, Inc. (King) (acquired on January 31, 2011), are included in our results on a prospective basis only commencing from the acquisition date. As such, our consolidated financial statements for the year ended December 31, 2011 reflect approximately 11 months of King’s U.S. operations and approximately 10 months of King’s international operations. (For additional information about these acquisitions, see Notes to Consolidated Financial Statements––Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions and see the “Our Business Development Initiatives” section of this Financial Review.)

Our 2012 Performance

Revenues decreased 10% in 2012 to $59.0 billion, compared to $65.3 billion in 2011, which reflects an operational decline of $4.8 billion or 8%, primarily the result of the loss of exclusivity of Lipitor in most major markets, including the U.S. on November 30, 2011 and most of developed Europe in March and May 2012, and the unfavorable impact of foreign exchange of $1.5 billion, or 2%. Lipitor and other product losses of exclusivity, as well as the final-year terms of our collaboration agreements in certain markets for Spiriva, negatively impacted revenues by approximately $7.7 billion, or 12%, in 2012 compared to 2011.

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The following table provides the significant impacts on revenues for 2012 as compared to 2011:

	2012 v. 2011
(MILLIONS OF DOLLARS)	Increase/ (Decrease)			% Change
Lipitor(a)	$	(5,629	)	(59	)
Geodon/Zeldox(a)	(669		)	(65	)
Xalatan/Xalacom(a)	(444		)	(36	)
Caduet(a)	(280		)	(52	)
Effexor	(253		)	(37	)
Zosyn/Tazocin	(152		)	(24	)
Aromasin(a)	(151		)	(42	)
Aricept(b)	(124		)	(28	)
Detrol/Detrol LA(a)	(122		)	(14	)
Celebrex	196			8
Lyrica	465			13
Alliance revenues(a)	(138		)	(4	)
All other biopharmaceutical products(c)	525			7
Animal Health products	115			3
Consumer Healthcare products	184			6

^(a)  Lipitor and Caduet lost exclusivity in the U.S. in November 2011 and various other major markets in 2011 and 2012. Xalatan lost exclusivity in the U.S. in March 2011 and in the majority of European markets in January 2012. Aromasin lost exclusivity in the U.S. in April 2011, in the majority of European markets in July 2011 and in Japan in November 2011. Geodon lost exclusivity in the U.S. in March 2012. Detrol immediate release (Detrol IR) lost exclusivity in the U.S. in June 2012. Detrol lost exclusivity in most European markets in September 2012. We lost exclusivity for Aricept 5mg and 10mg tablets, which are included in Alliance revenues, in the U.S. in November 2010 and in the majority of European markets in February 2012 and April 2012. Lower revenues for Spiriva in certain European countries, Canada and Australia reflect final-year terms of our collaboration agreements in those markets.

^(b)  Represents direct sales under license agreement with Eisai Co., Ltd.

^(c)  Includes the “All other” category included in the Revenues—Major Biopharmaceutical Products table presented in this Financial Review, which includes sales of generic atorvastatin.

Income from continuing operations was $9.5 billion in 2012 compared to $8.4 billion in 2011, primarily reflecting, among other items:

• a settlement with the U.S. Internal Revenue Service and the resolution of certain foreign tax audits in 2012, all of which related to multiple tax years, which resulted in a tax benefit of approximately $1.1 billion and $310 million, respectively, representing tax and interest (see further discussion in Notes to Consolidated Financial Statements––Note 5A. Tax Matters: Taxes on Income from Continuing Operations);

• purchase accounting charges that were approximately $1.8 billion (pre-tax) lower in 2012 than 2011;

• acquisition-related costs that were approximately $1.0 billion (pre-tax) lower in 2012 than 2011; and

• charges related to our non-acquisition related cost-reduction and productivity initiatives that were approximately $645 million (pre-tax) lower in 2012 than 2011,

partially offset by:

• the loss of exclusivity of Lipitor, as well as certain other products, resulting in lower revenues and associated expenses (see also "The Loss or Expiration of Intellectual Property Rights" section of this Financial Review);

• charges for certain legal matters that were approximately $1.4 billion (pre-tax) higher in 2012 than 2011 (see further discussion in the “Costs and Expenses––Other Deductions––Net” section of this Financial Review and Notes to Consolidated Financial Statements––Note 4. Other Deductions––Net); and

• charges in 2012 associated with the separation of Zoetis of $325 million (pre-tax) (see further discussion in the “Costs and Expenses––Selling, Informational and Administrative (SI&A) Expenses" and "Other Deductions––Net” sections of this Financial Review and Notes to Consolidated Financial Statements––Note 4. Other Deductions––Net).

Also, see the “Discontinued Operations” section of this Financial Review.

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Our Operating Environment

U.S. Healthcare Legislation

Principal Provisions Affecting Us

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the U.S. Healthcare Legislation, and also known as the Affordable Care Act), was enacted in the U.S. In June 2012, the U.S. Supreme Court upheld the constitutionality of the requirement in the U.S. Healthcare Legislation for Americans to have insurance (called the individual mandate) (for additional information, see the “Government Regulation and Price Constraints” section of our 2012 Annual Report on

Form 10-K). This legislation has resulted in both current and longer-term impacts on us, as discussed below.

Certain provisions of the U.S. Healthcare Legislation became effective in 2010 or in 2011, while other provisions will become effective on various dates. The principal provisions affecting us provide for the following:

• an increase, from 15.1% to 23.1%, in the minimum rebate on branded prescription drugs sold to Medicaid beneficiaries (effective January 1, 2010);

• extension of Medicaid prescription drug rebates to drugs dispensed to enrollees in certain Medicaid managed care organizations (effective March 23, 2010);

• expansion of the types of institutions eligible for the “Section 340B discounts” for outpatient drugs provided to hospitals serving a disproportionate share of low-income individuals and meeting the qualification criteria under Section 340B of the Public Health Service Act of 1944 (effective January 1, 2010);

• discounts on branded prescription drug sales to Medicare Part D participants who are in the Medicare “coverage gap,” also known as the “doughnut hole” (effective January 1, 2011); and

• a fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs (effective January 1, 2011, with the total fee to be paid each year by the pharmaceutical industry increasing annually through 2018).

Impacts to our 2012 Results

We recorded the following amounts in 2012 as a result of the U.S. Healthcare Legislation:

• $593 million recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and

• $336 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government referred to above.

Impacts to our 2011 Results

We recorded the following amounts in 2011 as a result of the U.S. Healthcare Legislation:

• $648 million recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and

• $248 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government referred to above.

Other Impacts

• Individual Mandate—The financial impact of U.S. healthcare reform may be affected by certain additional developments over the next few years, including pending implementation guidance relating to the U.S. Healthcare Legislation and certain healthcare reform proposals. In addition, the U.S. Healthcare Legislation requires that, except in certain circumstances, individuals obtain health insurance beginning in 2014, and it also provides for an expansion of Medicaid coverage in 2014. It is expected that, as a result of these provisions, there will be a substantial increase in the number of Americans with health insurance beginning in 2014, a significant portion of whom will be eligible for Medicaid. We anticipate that this will increase demand for pharmaceutical products overall. However, because of the substantial mandatory rebates we pay under the Medicaid program and because a significant percentage of the Americans who will be included in the coverage expansion are expected to be young, we do not anticipate that implementation of the coverage expansion will generate significant additional revenues for Pfizer. In June 2012, the U.S. Supreme Court upheld the constitutionality of all provisions of the U.S. Healthcare Legislation, with the exception of the provisions concerning Medicaid expansion; as a result of the Court's ruling regarding Medicaid, states can choose not to expand their Medicaid populations without losing federal funding for their existing Medicaid populations. The Congressional Budget Office estimates that the new state flexibility is likely to result in six million fewer new Medicaid enrollees than were initially expected to enroll as a result of the eligibility expansion and that half of these people are expected to gain coverage through Health Insurance Exchanges, and the remaining three million are likely to remain uninsured.

• Biotechnology Products—The U.S. Healthcare Legislation also created a framework for the approval of biosimilars (also known as follow-on biologics) following the expiration of 12 years of exclusivity for the innovator biologic, with a potential six-month pediatric extension. Under the U.S. Healthcare Legislation, biosimilars applications may not be submitted until four years after the approval of the reference,

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innovator biologic. The U.S. Food and Drug Administration (FDA) is responsible for implementation of the legislation, which will require the FDA to address such key topics as the type and extent of data needed to establish biosimilarity; the data required to achieve interchangeability compared to biosimilarity; the naming convention for biosimilars; the tracking and tracing of adverse events; and the acceptability of data using a non-U.S. licensed comparator to demonstrate biosimilarity and/or interchangeability with a U.S.-licensed reference product. The FDA has begun to address some of these issues with the February 2012 release of three draft guidance documents. Specifically, the FDA has clarified that biosimilar applicants may use a non-U.S. licensed comparator in certain studies to support a demonstration of biosimilarity to a U.S.-licensed reference product. If competitors are able to obtain marketing approval for biosimilars referencing our biotechnology products, our biotechnology products may become subject to competition from biosimilars, with attendant competitive pressure, and price reductions could follow. Expiration or successful challenge of applicable patent rights could trigger this competition, assuming any relevant exclusivity period has expired. As part of our business strategy, we are developing biosimilar medicines using our expertise in biologics and our regulatory, commercial and manufacturing strengths. As such, a better-defined biosimilars approval pathway will assist us in pursuing approval of our own biosimilar products in the U.S.

The Loss or Expiration of Intellectual Property Rights

As is inherent in the biopharmaceutical industry, the loss or expiration of intellectual property rights can have a significant adverse effect on our revenues. Many of our products have multiple patents that expire at varying dates, thereby strengthening our overall patent protection. However, once patent protection has expired or has been lost prior to the expiration date as a result of a legal challenge, we lose exclusivity on these products, and generic pharmaceutical manufacturers generally produce similar products and sell them for a lower price. This price competition can substantially decrease our revenues for products that lose exclusivity, often in a very short period of time. While small molecule products are impacted in such a manner, biologics currently have additional barriers to entry related to the manufacture of such products and, unlike small molecule generics, biosimilars are not necessarily identical to the reference products. Therefore, generic competition with respect to biologics may not be as significant. A number of our current products are expected to face significantly increased generic competition over the next few years.

Our financial results in 2012 and our financial guidance for 2013, as applicable, reflect the impact of the loss of exclusivity of various products and the expiration of certain alliance product contract rights discussed below (see the “Our Financial Guidance for 2013” section of this Financial Review). Specifically:

• Lipitor in the U.S.––We lost exclusivity for Lipitor in the U.S. in November 2011. The entry of multi-source generic competition in the U.S. began in May 2012, with attendant increased competitive pressures. Through the end of 2011, sales of Lipitor in the U.S. were reported in our Primary Care business unit. Beginning in 2012, sales of Lipitor in the U.S. were reported in our Established Products business unit.

Lipitor in international markets—Lipitor lost exclusivity in Japan in June 2011 (with generic competition occurring in November 2011), Australia in April 2012 and most of developed Europe in March 2012 and May 2012. In Europe, Japan and Australia, Lipitor now faces multi-source generic competition. In other international markets, Lipitor has lost exclusivity in certain countries and will lose exclusivity at various times in other countries.

Prior to loss of exclusivity, sales of Lipitor in each market except for those in Emerging Markets, are reported in our Primary Care business unit. Typically, as of the beginning of the fiscal year following loss of exclusivity in a market, sales of Lipitor in that market, except for those in Emerging Markets, are reported in our Established Products business unit. Sales of Lipitor in the U.S. and Japan have been reported in our Established Products business unit since January 1, 2012, and sales of Lipitor in developed Europe began to be reported in our Established Products business unit on January 1, 2013.

• Other recent loss of exclusivity impacts—In the U.S., we lost exclusivity for Vfend tablets in February 2011, for Xalatan in March 2011 and for Geodon in March 2012. The basic U.S. patent (including the six-month pediatric exclusivity period) for Protonix expired in January 2011. The basic patent for Vfend tablets in Brazil expired in January 2011. We lost exclusivity for Aromasin in the U.S. in April 2011, in the majority of European markets in July 2011 and in Japan in November 2011. We lost exclusivity for Xalatan and Xalacom in the majority of European markets in January 2012. We lost exclusivity for Aricept in the majority of European markets in February 2012 and April 2012. Caduet lost exclusivity in the U.S. in November 2011 and in the majority of European markets in March and May 2012. We lost exclusivity in the U.S. in September 2012 for Revatio tablet, and in June 2012 for Detrol IR. Detrol lost exclusivity in most European markets in September 2012.

In addition, we expect to lose exclusivity for various other products in various markets over the next few years. For additional information, including with regard to the expiration of the patents for various products in the U.S., European Union (EU) and Japan, see the “Patents and Intellectual Property Rights” section of our 2012 Annual Report on Form 10-K.

We will continue to aggressively defend our patent rights whenever we deem appropriate. For a discussion of certain recent developments with respect to patent litigation, see Notes to Consolidated Financial Statements—Note 17. Commitments and Contingencies.

In Alliance revenues, we expect to be negatively impacted by the following over the next few years:

• Aricept—Our rights to Aricept in Japan returned to Eisai Co., Ltd. in December 2012. We expect to lose exclusivity for the Aricept 23mg tablet in the U.S. in July 2013.

• Spiriva—Our collaboration with Boehringer Ingelheim (BI) for Spiriva expires on a country-by-country basis between 2012 and 2016, including the expiration in certain EU markets and Canada and Australia in 2012, which adversely impacted our 2012 results. We expect to experience a graduated decline in revenues from Spiriva through 2016.

• Enbrel—Our U.S. and Canada collaboration agreement with Amgen Inc. for Enbrel will expire in October 2013. While we are entitled to royalties for 36 months thereafter, we expect that those royalties will be significantly less than our current share of Enbrel profits from U.S. and Canada sales. Outside the U.S. and Canada, our exclusive rights to Enbrel continue in perpetuity.

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• Rebif—Our collaboration agreement with EMD Serono Inc. (Serono) to co-promote Rebif in the U.S. will expire either at the end of 2013 or the end of 2015, depending on the outcome of pending litigation between Pfizer and Serono concerning the interpretation of the agreement. We believe that we are entitled to a 24-month extension of the agreement to the end of 2015. Serono believes that we are not entitled to the extension and that the agreement will expire at the end of 2013. In October 2011, the Philadelphia Court of Common Pleas sustained our preliminary objections and dismissed Serono’s complaint, and Serono has appealed the decision to the Superior Court of Pennsylvania. For additional information, see Notes to Consolidated Financial Statements––Note 17. Commitments and Contingencies.

Pipeline Productivity and Regulatory Environment

The discovery and development of safe, effective new products, as well as the development of additional uses for existing products, are necessary for the continued strength of our businesses. We are confronted by increasing regulatory scrutiny of drug safety and efficacy, even as we continue to gather safety and other data on our products, before and after the products have been launched. Our product lines must be replenished over time in order to offset revenue losses when products lose their exclusivity, as well as to provide for revenue and earnings growth. We devote considerable resources to research and development (R&D) activities. These activities involve a high degree of risk and may take many years, and with respect to any specific research and development project, there can be no assurance that the development of any particular product candidate or new indication for an in-line product will achieve desired clinical endpoints and safety profile, will be approved by regulators or will be successful commercially. We continue to closely evaluate our global research and development function and pursue strategies intended to improve innovation and overall productivity in R&D by prioritizing areas that we believe have the greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas that we believe have the highest potential to deliver value in the near term and over time.

During the development of a product, we conduct clinical trials to provide data on the drug’s safety and efficacy to support the evaluation of its overall benefit-risk profile for a particular patient population. In addition, after a product has been approved and launched, we continue to monitor its safety as long as it is available to patients, and post-marketing trials may be conducted, including trials requested by regulators and trials that we do voluntarily to gain additional medical knowledge. For the entire life of the product, we collect safety data and report potential problems to the FDA. The FDA and regulatory authorities in other jurisdictions may evaluate potential safety concerns and take regulatory actions in response, such as updating a product’s labeling, restricting the use of a product, communicating new safety information to the public, or, in rare cases, removing a product from the market.

Pricing and Access Pressures

Governments, managed care organizations and other payer groups continue to seek increasing discounts on our products through a variety of means, such as leveraging their purchasing power, implementing price controls, and demanding price cuts (directly or by rebate actions). In particular, we continue to face widespread downward pressures on international pricing and reimbursement, particularly in developed European markets, Japan and in certain emerging markets, all of which have a large government share of pharmaceutical spending and are facing a difficult fiscal environment. Specific pricing pressures in 2012 included measures to reduce pharmaceutical prices and expenditures in Spain, Italy, France, Greece, Ireland, Portugal and Japan. Also, health insurers and benefit plans continue to limit access to certain of our medicines by imposing formulary restrictions in favor of the increased use of generics. In prior years, Presidential advisory groups tasked with reducing healthcare spending have recommended and legislative changes have been proposed that would allow the U.S. government to directly negotiate prices with pharmaceutical manufacturers on behalf of Medicare beneficiaries, which we expect would restrict access to and reimbursement for our products. There also continue to be legislative proposals to amend U.S. laws to allow the importation into the U.S. of prescription drugs from outside the U.S., which can be sold at prices that are regulated by the governments of various foreign countries. If importation of medicines is allowed, an increase in cross-border trade in medicines subject to foreign price controls in other countries could occur and negatively impact our revenues.

In August 2011, the federal Budget Control Act of 2011 (the Budget Control Act) was enacted in the U.S. The Budget Control Act includes provisions to raise the U.S. Treasury Department’s borrowing limit, known as the debt ceiling, and provisions to reduce the federal deficit by $2.4 trillion between 2012 and 2021. Deficit-reduction targets include $900 billion of discretionary spending reductions associated with the Department of Health and Human Services and various agencies charged with national security, but those discretionary spending reductions do not include programs such as Medicare and Medicaid or direct changes to pharmaceutical pricing, rebates or discounts. The Office of Management and Budget (OMB) is responsible for identifying the remaining $1.5 trillion of deficit reductions, which will be divided evenly between defense and non-defense spending. Under this OMB review process, Social Security, Medicaid, Veteran Benefits and certain other spending categories are excluded from consideration, but reductions in payments to Medicare providers may be made, although any such reductions are prohibited by law from exceeding 2% of the originally budgeted amount. Additionally, certain payments to Medicare Part D plans, such as low-income subsidy payments, are exempt from reduction. While we do not know the specific nature of the spending reductions under the Budget Control Act that will affect Medicare, we do not expect that those reductions will have a material adverse impact on our results of operations. However, any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, and/or any significant additional taxes or fees that may be imposed on us, as part of any broader deficit-reduction effort or legislative replacement for the Budget Control Act, could have an adverse impact on our results of operations.

Enforcement of the U.S. federal debt ceiling has been suspended through May 18, 2013. If the U.S. federal government fails to suspend enforcement of the debt ceiling beyond May 18, 2013 or to increase the debt ceiling and, as a result, is unable to satisfy its financial obligations, including under Medicare, Medicaid and other publicly funded or subsidized health programs, our results of operations could be adversely impacted.

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Competition Among Branded Products

Many of our products face competition in the form of branded products, which treat similar diseases or indications. These competitive pressures can have an adverse impact on our results of operations.

The Global Economic Environment

In addition to the industry-specific factors discussed above, we, like other businesses, continue to face the effects of the challenging economic environment, which have impacted our biopharmaceutical operations in the U.S. and Europe, including the countries that use the euro, affecting the performance of products such as Lyrica, Enbrel, Prevnar 13/Prevenar 13 and Celebrex, and in a number of emerging markets. We believe that patients, experiencing the effects of the challenging economic environment, including high unemployment levels, and increases in co-pays, sometimes switch to generic products, delay treatments, skip doses or use less effective treatments to reduce their costs. Challenging economic conditions in the U.S. also have increased the number of patients in the Medicaid program, under which sales of pharmaceuticals are subject to substantial rebates and, in many states, to formulary restrictions limiting access to brand-name drugs, including ours. In addition, we continue to experience pricing pressure in various markets around the world, including in developed European markets, Japan and in a number of emerging markets, with government-mandated reductions in prices for certain biopharmaceutical products and government-imposed access restrictions in certain countries.

Significant portions of our revenues and earnings are exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk in part through operational means, including managing same-currency revenues in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk also is managed through the use of derivative financial instruments and foreign currency debt. As we operate in multiple foreign currencies, including the euro, the Japanese yen, the U.K. pound, the Chinese renminbi, the Canadian dollar and approximately 100 other currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. If the U.S. dollar weakens against a specific foreign currency, our revenues will increase, having a positive impact, and our overall expenses will increase, having a negative impact, on net income. Likewise, if the U.S. dollar strengthens against a specific foreign currency, our revenues will decrease, having a negative impact, and our overall expenses will decrease, having a positive impact on net income. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.

Despite the challenging financial markets, Pfizer maintains a strong financial position. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have the ability to meet our liquidity needs for the foreseeable future. Our long-term debt is rated investment grade by both Standard & Poor’s (S&P) and Moody’s Investors Service. As market conditions change, we continue to monitor our liquidity position. We have taken and will continue to take a conservative approach to our financial investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, well-diversified, available-for-sale debt securities. For further discussion of our financial condition, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this Financial Review.

Our Strategy

We believe that our medicines provide significant value for both healthcare providers and patients, not only from the improved treatment of diseases but also from a reduction in other healthcare costs, such as emergency room or hospitalization costs, as well as improvements in health, wellness and productivity. We continue to actively engage in dialogues about the value of our products and how we can best work with patients, physicians and payers to prevent and treat disease and improve outcomes. We will work within the current legal and pricing structures, as well as continue to review our pricing arrangements and contracting methods with payers, to maximize access to patients and minimize any adverse impact on our revenues.

On November 30, 2012, we completed the sale of our Nutrition business to Nestlé. On February 6, 2013, we completed the sale of approximately 19.8% of our ownership stake in Zoetis through an initial public offering. We may in the future make a tax-free distribution to our shareholders of all or a portion of our remaining equity interest in Zoetis, which may include one or more distributions effected as a dividend to all Pfizer shareholders, one or more distributions in exchange for Pfizer shares or other securities, or any combination thereof. We will consider all alternatives to maximize the after-tax return for our shareholders, including a tax-free distribution to our shareholders.  If pursued, any disposition would be subject to various conditions, including receipt of any necessary regulatory or other approvals and the existence of satisfactory market conditions.

If we decide to fully separate Zoetis, then, following such separation, Pfizer will be a global biopharmaceutical company with an innovative core (our Primary Care, Specialty Care and Oncology units) and a value core (our Established Products unit) in developed markets, with different cost structures and operating drivers. Our Emerging Markets unit has a geographic focus that includes both the innovative and value cores in those markets. The innovative core includes a portfolio of innovative, largely patent-protected, in-line products and an R&D organization focused on continuing to build a robust pipeline of highly differentiated product candidates in areas of unmet medical needs. The value core includes a portfolio of products that have lost exclusivity or are approaching the loss of exclusivity that help meet the global need for less expensive, quality medicines. In addition, we have a complementary Consumer Healthcare business with several well-known brands.

In response to the challenging operating environment, we have taken and continue to take many steps to strengthen our Company and better position ourselves for the future. We believe in a comprehensive approach to our challenges—organizing our business to maximize research, development and commercial opportunities, improving the performance of our innovative core, making the right capital allocation decisions, and protecting our intellectual property.

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We continue to closely evaluate our global research and development function and pursue strategies intended to improve innovation and overall productivity in R&D by prioritizing areas that we believe have the greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas that we believe have the highest potential to deliver value in the near term and over time. To that end, our research primarily focuses on five high-priority areas that have a mix of small and large molecules—immunology and inflammation; oncology; cardiovascular and metabolic diseases; neuroscience and pain; and vaccines. In addition to reducing the number of disease areas of focus, we have realigned and reduced our research and development footprint and outsourced certain functions that do not drive competitive advantage for Pfizer. For additional information, see the “Our Financial Guidance for 2013” and “Costs and Expenses—Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” sections of this Financial Review.

While a significant portion of R&D is done internally, we continue to seek to expand our pipeline by entering into agreements with other companies to develop, license or acquire promising compounds, technologies or capabilities. Collaboration, alliance and license agreements and acquisitions allow us to capitalize on these compounds to expand our pipeline of potential future products. In addition, collaborations and alliances allow us to share risk and to access external scientific and technological expertise.

For information about our pending new drug applications (NDA) and supplemental filings, see the “Revenues—Product Developments—Biopharmaceutical” section of this Financial Review.

We continue to build on our broad portfolio of businesses through various business development transactions. See the “Our Business Development Initiatives” section of this Financial Review for information on our recent transactions and strategic investments that we believe complement our businesses.

We continue to aggressively defend our patent rights against increasingly aggressive infringement whenever appropriate (see Notes to Consolidated Financial Statements—Note 17. Commitments and Contingencies), and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to ensure appropriate patient access. In addition, we will continue to employ innovative approaches to prevent counterfeit pharmaceuticals from entering the supply chain and to achieve greater control over the distribution of our products, and we will continue to participate in the generics market for our products, whenever appropriate, once they lose exclusivity.

We remain focused on achieving an appropriate cost structure for the Company. For information regarding our cost-reduction and productivity initiatives, see the “Costs and Expenses—Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this Financial Review.

Our strategy also includes directly enhancing shareholder value through dividends and share repurchases. On December 17, 2012, our Board of Directors declared a first-quarter 2013 dividend of $0.24 per share, an increase from the $0.22 per-share quarterly dividend paid during 2012. Also, on November 30, 2012, a new $10 billion share repurchase plan, to be utilized over time, became effective.

Our Business Development Initiatives

We are committed to capitalizing on growth opportunities by advancing our own pipeline and maximizing the value of our in-line products, as well as through various forms of business development, which can include alliances, licenses, joint ventures, dispositions and acquisitions. We view our business development activity as an enabler of our strategies, and we seek to generate profitable revenue growth and enhance shareholder value by pursuing a disciplined, strategic and financial approach to evaluating business development opportunities. We are especially interested in opportunities in our five high-priority therapeutic areas—immunology and inflammation; oncology; cardiovascular and metabolic diseases; neuroscience and pain; and vaccines––and in emerging markets and established products. We assess our businesses and assets as part of our regular, ongoing portfolio review process and also continue to consider business development activities for our businesses.

The most significant recent transactions and events are described below.

• On February 6, 2013, an initial public offering of Zoetis was completed, pursuant to which we sold 99.015 million shares of Zoetis in exchange for the retirement of approximately $2.5 billion of Pfizer commercial paper issued on January 10, 2013. The IPO represented approximately 19.8% of the total outstanding Zoetis shares. For additional information, see Notes to Consolidated Financial Statements––Note 19A. Subsequent Events: Zoetis Debt Offering and Initial Public Offering.

• On November 30, 2012, we completed the sale of our Nutrition business to Nestlé for $11.85 billion in cash. For additional information, see Notes to Consolidated Financial Statements—Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures.

• On November 27, 2012, we completed our acquisition of NextWave Pharmaceuticals Incorporated (NextWave), a privately held, specialty pharmaceutical company. As a result of the acquisition, Pfizer now holds exclusive North American rights to Quillivant XR™ (methylphenidate hydrochloride), the first once-daily liquid medication approved in the U.S. for the treatment of ADHD. The total consideration for the acquisition was approximately $442 million. For additional information, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

• On October 31, 2012, our equity-method investee, ViiV Healthcare Limited (ViiV), acquired the remaining 50% of Shionogi-ViiV Healthcare LLC, its equity-method investee, from Shionogi & Co., Ltd. (Shionogi) in consideration for a 10% interest in ViiV (newly issued shares) and contingent consideration in the form of future royalties. For additional information, see Notes to Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Equity-Method Investments.

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• On September 6, 2012, Pfizer and Zhejiang Hisun Pharmaceuticals Co., Ltd., a leading Chinese pharmaceutical company, created a new company, Hisun Pfizer Pharmaceuticals Company Limited (HPP), to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets. HPP was established with registered capital of $250 million. For additional information, see Notes to Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Equity-Method Investments.

• On August 13, 2012, we announced that we entered into an agreement with AstraZeneca for the global over-the-counter (OTC) rights for Nexium, a leading prescription drug currently approved to treat the symptoms of gastroesophageal reflux disease. 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. A marketing authorization application for OTC Nexium in a 20mg 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 20mg delayed-release capsule is targeted for the first half of 2013. For additional information, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

• On March 12, 2012, Biocon and Pfizer announced the conclusion of their October 18, 2010 alliance to commercialize Biocon’s biosimilar versions of insulin and insulin analog products. The companies agreed that, due to the individual priorities for their respective biosimilars businesses, each company would move forward independently.

• On February 26, 2012, we completed our acquisition of Alacer Corp. (Alacer), a 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. For additional information, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

• 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. Our acquisition of Ferrosan’s consumer healthcare business strengthens our presence in dietary supplements with a new set of brands and pipeline products. For additional information, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

• On November 30, 2011, we completed our acquisition of Excaliard Pharmaceuticals, Inc. (Excaliard), a privately owned biopharmaceutical company. Excaliard‘s lead compound, EXC-001, a Phase 2 compound, is an antisense oligonucleotide designed to interrupt the process of skin fibrosis by inhibiting expression of connective tissue growth factor (CTGF). The total consideration for the acquisition was approximately $174 million. For additional information, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

• In October 2011, we entered into an agreement with GlycoMimetics, Inc. for their investigational compound GMI-1070. GMI-1070 is a pan-selectin antagonist currently in Phase 2 development for the treatment of vaso-occlusive crisis associated with sickle cell disease. GMI-1070 has received Orphan Drug and Fast Track status from the FDA. Under the terms of the agreement, Pfizer received an exclusive worldwide license to GMI-1070 for vaso-occlusive crisis associated with sickle cell disease and for other diseases for which the drug candidate may be developed. GlycoMimetics is responsible for completion of the ongoing Phase 2 trial under Pfizer’s oversight, and Pfizer is responsible for all further development and commercialization. GlycoMimetics is entitled to payments up to approximately $340 million, including an upfront payment as well as development, regulatory and commercial milestones. GlycoMimetics is also eligible for royalties on any sales.

• On September 20, 2011, we completed our cash tender offer for the outstanding shares of Icagen, Inc. (Icagen), resulting in an approximate 70% ownership of the outstanding shares of Icagen, a biopharmaceutical company focused on discovery, development and commercialization of novel, orally-administered small molecule drugs that modulate ion channel targets. On October 27, 2011, we acquired all of the remaining shares of Icagen. For additional information, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

• On August 1, 2011, we sold our Capsugel business for approximately $2.4 billion in cash. For additional information, see Notes to Consolidated Financial Statements—Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures.

• On January 31, 2011 (the acquisition date), we completed a tender offer for the outstanding shares of common stock of King and acquired approximately 92.5% of the outstanding shares for approximately $3.3 billion in cash. On February 28, 2011, we acquired the remaining shares of King for approximately $300 million 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). For additional information, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

• On November 8, 2010, we consummated our partnership to develop and commercialize generic medicines with Laboratório Teuto Brasileiro S.A. (Teuto) a leading generics company in Brazil. As part of the transaction, we acquired a 40% equity stake in Teuto, and entered into a series of commercial agreements. The partnership is enhancing our position in Brazil, a key emerging market, by providing access to Teuto’s portfolio of products. Through this partnership, we have access to significant distribution networks in rural and suburban areas in Brazil and the opportunity to register and commercialize Teuto’s products in various markets outside Brazil. For additional information, see also Notes to Consolidated Financial Statements—Note 2D. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Equity-Method Investments.

• On October 6, 2010, we completed our acquisition of FoldRx Pharmaceuticals, Inc. (FoldRx), a privately held drug discovery and clinical development company. FoldRx’s lead product candidate, Vyndaqel (tafamidis meglumine), was approved in the EU in November 2011 and our new drug application was accepted for review in the U.S. in February 2012. This product is a first-in-class oral therapy for the treatment of transthyretin familial amyloid polyneuropathy (TTR-FAP), a progressively fatal genetic neurodegenerative disease, for which

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liver transplant is the only treatment option currently available. Our acquisition of FoldRx has increased our presence in the growing rare medical disease market, which complements our Specialty Care unit. For additional information regarding Vyndaqel (tafamidis meglumine), see the “Product Developments—Biopharmaceutical” section of this Financial Review. The total consideration for the acquisition was approximately $400 million. For additional information about the acquisition, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

Our Financial Guidance for 2013

We forecast 2013 revenues of $56.2 billion to $58.2 billion, Reported diluted earnings per common share (EPS) of $1.50 to $1.65 and Adjusted diluted EPS of $2.20 to $2.30. The exchange rates assumed in connection with the 2013 financial guidance are as of mid-January 2013. For an understanding of Adjusted income and Adjusted diluted EPS (both non-GAAP financial measures), see the “Adjusted Income” section of this Financial Review.

The 2013 financial guidance reflects the benefit of a full-year contribution from Zoetis. We plan to update this guidance in April 2013 to reflect the impact of the recent initial public offering (IPO) of an approximate 19.8% ownership interest in Zoetis. For additional information on the IPO, see Notes to Consolidated Financial Statements—Note 19A. Subsequent Events: Zoetis Debt Offering and Initial Public Offering.

The following table provides a reconciliation of 2013 Adjusted income and Adjusted diluted EPS guidance to 2013 Reported net income attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:

	Full-Year 2013 Guidance
(BILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)	Net Income(a)	Diluted EPS(a)
Adjusted income/adjusted diluted EPS(b) guidance	~$15.4 - $16.1	~$2.20 - $2.30
Purchase accounting impacts of transactions completed as of December 31, 2012	(3.4)	(0.49)
Acquisition-related costs	(0.4 - 0.5)	(0.06 - 0.07)
Non-acquisition-related restructuring costs(c)	(0.5 - 0.8)	(0.8 - 0.12)
Costs associated with the separation of Zoetis(d)	(0.2)	(0.2)
Reported net income attributable to Pfizer Inc./diluted EPS guidance(d)	~$10.5 - $11.6	~$1.50 - $1.65

^(a)  Does not assume the completion of any business development transactions not completed as of December 31, 2012, including any one-time upfront payments associated with such transactions, and excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of December 31, 2012.

^(b)  For an understanding of Adjusted income and Adjusted diluted EPS, see the “Adjusted Income” section of this Financial Review.

^(c)  Includes amounts related to our initiatives to reduce R&D spending, including our realigned R&D footprint, and amounts related to other cost-reduction and productivity initiatives. In our reconciliation between Net income attributable to Pfizer Inc., as reported under principles generally accepted in the United States of America (U.S. GAAP), and Adjusted income, and in our reconciliation between diluted EPS, as reported under U.S. GAAP, and Adjusted diluted EPS, these amounts are categorized as Certain Significant Items (see the “Adjusted Income––Reconciliation” section of this Financial Review).

^(d)  Reported Diluted EPS guidance includes a $0.02 unfavorable impact for certain non-recurring costs that we expect to incur related to the separation of Zoetis, including new branding, the creation of a standalone infrastructure, site separation and certain legal registration and patent assignment costs.

Our 2013 financial guidance is subject to a number of factors and uncertainties—as described in the “Forward-Looking Information and Factors That May Affect Future Results”, “Our Operating Environment” and “Our Strategy” sections of this Financial Review and in Part I, Item 1A, “Risk Factors”, of our 2012 Annual Report on Form 10-K.

SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

For a description of our significant accounting policies, see Notes to Consolidated Financial Statements––Note 1. Basis of Presentation and Significant Accounting Policies.

Of these policies, the following are considered critical to an understanding of Pfizer’s Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments: (i) Acquisitions (Note 1D); (ii) Fair Value (Note 1E); (iii) Revenues (Note 1G); (iv) Asset Impairment Reviews (Note 1K); (v) Benefit Plans (Note 1P); and (vi) Contingencies, including Tax Contingencies (Note 1O) and Legal and Environmental Contingencies (Note 1Q).

Below are some of our critical accounting estimates. See also Estimates and Assumptions (Note 1C) for a discussion about the risks associated with estimates and assumptions.

Acquisitions and Fair Value

For a discussion about the application of Fair Value to our recent acquisitions, see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions.

For a discussion about the application of Fair Value to our investments, see Notes to Consolidated Financial Statements—Note 7A. Financial Instruments: Selected Financial Assets and Liabilities.

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For a discussion about the application of Fair Value to our benefit plan assets, see Notes to Consolidated Financial Statements––Note 11D. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Plan Assets.

For a discussion about the application of Fair Value to our asset impairment reviews, see “Asset Impairment Reviews” below.

Revenues

As is typical in the biopharmaceutical industry, our gross product sales are subject to a variety of deductions that are generally estimated and recorded in the same period that the revenues are recognized and primarily represent rebates and discounts to government agencies, wholesalers, distributors and managed care organizations with respect to our biopharmaceutical products. See also Notes to Consolidated Financial Statements––Note 1G. Basis of Presentation and Significant Accounting Policies: Revenues for a detailed description of the nature of our sales deductions and our procedures for estimating our obligations. For example,

• For Medicaid, Medicare and performance-based contract rebates, we use experience ratios, which may be adjusted to better match our current experience or our expected future experience.

• For contractual or legislatively mandated deductions outside the U.S., we use estimated allocation factors, based on historical payments and some third-party reports, to project the expected level of reimbursement.

• For chargebacks, we closely approximate actual as we settle these deductions generally within two to five weeks after incurring the liability.

• For sales returns, we perform calculations in each market that incorporate the following, as appropriate: local returns policies and practices; returns as a percentage of sales; an understanding of the reasons for past returns; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, such as loss of exclusivity, product recalls or a changing competitive environment.

• For sales incentives, we use our historical experience with similar incentives programs to predict customer behavior.

If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our future experience, our results could be materially affected. Although the amounts recorded for these sales deductions are heavily dependent on estimates and assumptions, historically, our adjustments to actual have not been material; on a quarterly basis, they generally have been less than 1.0% of biopharmaceutical net sales and can result in a net increase to income or a net decrease to income. The sensitivity of our estimates can vary by program, type of customer and geographic location. However, estimates associated with U.S. Medicaid and performance-based contract rebates are most at-risk for material adjustment because of the extensive time delay between the recording of the accrual and its ultimate settlement, an interval that can generally range up to one year. Because of this time lag, in any given quarter, our adjustments to actual can incorporate revisions of several prior quarters.

Asset Impairment Reviews

We review all of our long-lived assets, including goodwill and other intangible assets, for impairment indicators throughout the year and we perform impairment testing for goodwill and indefinite-lived assets annually and for all other long-lived assets whenever impairment indicators are present. When necessary, we record charges for impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets. Our impairment review processes are described in the Notes to Consolidated Financial Statements––Note 1K. Basis of Presentation and Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets.

Examples of events or circumstances that may be indicative of impairment include:

• A significant adverse change in legal factors or in the business climate that could affect the value of the asset. For example, a successful challenge of our patent rights would likely result in generic competition earlier than expected.

• A significant adverse change in the extent or manner in which an asset is used. For example, restrictions imposed by the FDA or other regulatory authorities could affect our ability to manufacture or sell a product.

• A projection or forecast that demonstrates losses or reduced profits associated with an asset. This could result, for example, from a change in a government reimbursement program that results in an inability to sustain projected product revenues and profitability. This also could result from the introduction of a competitor’s product that results in a significant loss of market share or the inability to achieve the previously projected revenue growth, as well as the lack of acceptance of a product by patients, physicians and payers. For in-process research and development (IPR&D) projects, this could result from, among other things, a change in outlook based on clinical trial data, a delay in the projected launch date or additional expenditures to commercialize the product.

Intangible Assets Other than Goodwill

As a result of our intangible asset impairment review work, we recognized a number of impairments of intangible assets other than goodwill.

We recorded the following intangible asset impairment charges in Other deductions––net:

• In 2012, $872 million, reflecting (i) $393 million of IPR&D assets, primarily related to compounds that targeted autoimmune and inflammatory diseases (full write-off) and, to a lesser extent, compounds related to pain treatment; (ii) $175 million related to our Consumer Healthcare indefinite-lived brand assets, primarily Robitussin, a cough suppressant; (iii) $279 million related to Developed Technology Rights, a charge comprised of impairments of various products, none of which individually exceeded $45 million; and (iv) $25 million of finite-lived brands. The intangible asset impairment charges for 2012 reflect, among other things, the impact of new scientific

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findings, updated commercial forecasts, changes in pricing, an increased competitive environment, litigation uncertainties regarding intellectual property and declining gross margins. The impairment charges in 2012 are associated with the following: Worldwide Research and Development ($303 million); Consumer Healthcare ($200 million); Primary Care ($135 million); Established Products ($83 million); Specialty Care ($56 million); Emerging Markets ($56 million) and Animal Health ($39 million).

• In 2011, $851 million, the majority of which relates to intangible assets that were acquired as part of our acquisition of Wyeth. These impairment charges reflect (i) $475 million of IPR&D assets, primarily related to two compounds for the treatment of certain autoimmune and inflammatory diseases; (ii) $193 million related to our biopharmaceutical indefinite-lived brand, Xanax; and (iii) $183 million related to Developed Technology Rights comprising the impairment of five assets. The intangible asset impairment charges for 2011 reflect, among other things, the impact of new scientific findings and an increased competitive environment. The impairment charges in 2011 are associated with the following: Worldwide Research and Development ($394 million); Established Products ($193 million); Specialty Care ($135 million); Primary Care ($56 million); Oncology ($56 million) and Animal Health ($17 million).

• In 2010, $1.8 billion, the majority of which relates to intangible assets that were acquired as part of our acquisition of Wyeth. These impairment charges reflect (i) $945 million of IPR&D assets, primarily Prevnar 13/Prevenar 13 Adult, a compound for the prevention of pneumococcal disease in adults age 50 and older, and Neratinib, a compound for the treatment of breast cancer; (ii) $292 million of indefinite-lived Brands, primarily related to Robitussin, a cough suppressant; and (iii) $540 million of Developed Technology Rights, primarily Thelin, a product that treated pulmonary hypertension, and Protonix, a product that treats erosive gastroesophageal reflux disease. These impairment charges, most of which occurred in the third quarter of 2010, reflect, among other things, the following: for IPR&D assets, the impact of changes to the development programs, the projected development and regulatory time-frames and the risk associated with these assets; for Brand assets, the current competitive environment and planned investment support; and, for Developed Technology Rights, in the case of Thelin, we voluntarily withdrew the product in regions where it was approved and discontinued all clinical studies worldwide, and for the others, an increased competitive environment. The impairment charges in 2010 are generally associated with the following: Specialty Care ($708 million); Oncology ($396 million); Consumer Healthcare ($292 million); Established Products ($182 million); Primary Care ($145 million); and Worldwide Research and Development ($54 million).

For a description of our accounting policy, see Notes to Consolidated Financial Statements––Note 1K. Basis of Presentation and Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets.

When we are required to determine the fair value of intangible assets other than goodwill, we use an income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We start with a forecast of all the expected net cash flows associated with the asset, which includes the application of a terminal value for indefinite-lived assets, and then we apply an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with in-process research and development assets, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

While all intangible assets other than goodwill can confront events and circumstances that can lead to impairment, in general, intangible assets other than goodwill that are most at risk of impairment include in-process research and development assets (approximately $700 million as of December 31, 2012) and newly acquired or recently impaired indefinite-lived brand assets (approximately $2.3 billion as of December 31, 2012). In-process research and development assets are high-risk assets, as research and development is an inherently risky activity. Newly acquired and recently impaired indefinite-lived assets are more vulnerable to impairment as the assets are recorded at fair value and are then subsequently measured at the lower of fair value or carrying value at the end of each reporting period. As such, immediately after acquisition or impairment, even small declines in the outlook for these assets can negatively impact our ability to recover the carrying value and can result in an impairment charge.

• Some of our indefinite-lived Consumer Healthcare brands, mainly Robitussin and Chapstick, have fair values that approximate their combined carrying value of about $900 million, which reflects impairment charges that were taken in the fourth quarter and first quarter of 2012. These assets continue to be at risk for future impairment. Any negative change in the undiscounted cash flows, discount rate and/or tax rate could result in an impairment charge. We re-considered and confirmed the classification of these assets as indefinite-lived. We will continue to closely monitor these assets.

• One of our indefinite-lived biopharmaceutical brands, Xanax, was written down to its fair value of $1.2 billion at the end of 2011. This asset continues to be at risk for future impairment. Any negative change in the undiscounted cash flows, discount rate and/or tax rate could result in an impairment charge. Xanax, which was launched in the mid-1980’s and acquired in 2003, must continue to remain competitive against its generic challengers or the associated asset may become impaired again. We re-considered and confirmed the classification of this asset as indefinite-lived. We will continue to closely monitor this asset.

Goodwill

As a result of our goodwill impairment review work, we concluded that none of our goodwill is impaired as of December 31, 2012, and we do not believe the risk of impairment is significant at this time.

For a description of our accounting policy, see Notes to Consolidated Financial Statements—Note 1K. Basis of Presentation and Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets.

When we are required to determine the fair value of a reporting unit, as appropriate for the individual reporting unit, we may use the market approach, the income approach or a weighted-average combination of both approaches.

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• The market approach is a historical approach to estimating fair value and relies primarily on external information. Within the market approach are two methods that we may use:

◦ Guideline public company method—this method employs market multiples derived from market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance.

◦ Guideline transaction method—this method relies on pricing multiples derived from transactions of significant interests in companies engaged in the same or similar lines of business and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance.

The market approach is only appropriate when the available external information is robust and deemed to be a reliable proxy for the specific reporting unit being valued; however, these assessments may prove to be incomplete or inaccurate. Some of the more significant estimates and assumptions inherent in this approach include: the selection of appropriate guideline companies and transactions and the determination of applicable premiums and discounts based on any differences in ownership percentages, ownership rights, business ownership forms or marketability between the reporting unit and the guideline companies and transactions.

• The income approach is a forward-looking approach to estimating fair value and relies primarily on internal forecasts. Within the income approach, the method that we use is the discounted cash flow method. We start with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then we apply a reporting unit-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of technological risk and competitive, legal and/or regulatory forces on the projections, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

Specifically:

• When we estimate the fair value of our five biopharmaceutical reporting units, we rely solely on the income approach. We use the income approach exclusively as many of our products are sold in multiple reporting units and as one reporting unit is geographic-based while the others are product and/or customer-based. Further, the projected cash flows from a single product may reside in up to three reporting units at different points in future years and the discounted cash flow method would reflect the movement of products among reporting units. As such, the use of the comparable guideline company method was not practical or reliable. However, on a limited basis and as deemed reasonable, we attempt to corroborate our outcomes with the market approach. For the income approach, we use the discounted cash flow method.

• When we estimate the fair value of our Consumer Healthcare reporting unit, we use a combination of approaches and methods. We use the income approach and the market approach, which we weight equally in our analysis. We weight them equally as we have equal confidence in the appropriateness of the approaches for this reporting unit. For the income approach, we use the discounted cash flow method and for the market approach, we use both the guideline public company method and the guideline transaction method, which we weight equally to arrive at our market approach value.

• When we estimate the fair value of our Animal Health reporting unit, we use the income approach, relying exclusively on the discounted cash flow method. We rely exclusively on the income approach as the discounted cash flow method provides a more reliable outlook of the business. However, on a limited basis and as deemed reasonable, we attempt to corroborate our outcomes with the market approach. (See also Notes to Consolidated Financial Statements––Note 19A. Subsequent Events: Zoetis Debt Offering and Initial Public Offering.)

While all reporting units can confront events and circumstances that can lead to impairment, we do not believe that the risk of goodwill impairment for any of our reporting units is significant at this time.

Our Consumer Healthcare reporting unit has the narrowest difference between fair value and book value. However, we estimate that it would take a significant negative change in the undiscounted cash flows, the discount rate and/or the market multiples in the consumer industry for the Consumer Healthcare reporting unit goodwill to be impaired. Our Consumer Healthcare reporting unit performance and consumer healthcare industry market multiples are highly correlated with the overall economy and our specific performance is also dependent on our and our competitors’ innovation and marketing effectiveness, and on regulatory developments affecting claims, formulations and ingredients of our products.

For all of our reporting units, there are a number of future events and factors that may impact future results and that could potentially have an impact on the outcome of subsequent goodwill impairment testing. For a list of these factors, see the “Forward-Looking Information and Factors That May Affect Future Results” section of this Financial Review.

Benefit Plans

The majority of our employees worldwide are covered by defined benefit pension plans, defined contribution plans or both. In the U.S., we have both qualified and supplemental (non-qualified) defined benefit plans, as well as other postretirement benefit plans, consisting primarily of healthcare and life insurance for retirees (see Notes to Consolidated Financial Statements—Note 1P. Basis of Presentation and Significant Accounting Policies: Pension and Postretirement Benefit Plans and Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans). Beginning on January 1, 2011, for employees hired in the U.S. and Puerto Rico after December 31, 2010, we no longer offer a defined benefit plan and, instead, offer an enhanced benefit under our defined contribution plan. In addition to the standard matching contribution by the Company, the enhanced benefit provides an automatic Company contribution for such eligible employees based on age

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and years of service. Also, on May 8, 2012, we announced to employees that as of January 1, 2018, Pfizer will transition its U.S. and Puerto Rico employees from its defined benefit plans to an enhanced defined contribution savings plan.

The accounting for benefit plans is highly dependent on actuarial estimates, assumptions and calculations, which result from a complex series of judgments about future events and uncertainties. The assumptions and actuarial estimates required to estimate the employee benefit obligations for the defined benefit and postretirement plans may include the discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality (life expectancy); expected return on assets; and healthcare cost trend rates.

Our assumptions reflect our historical experiences and our best judgment regarding future expectations that have been deemed reasonable by management. The judgments made in determining the costs of our benefit plans can materially impact our results of operations.

The following table provides the expected versus actual rate of return on plan assets and the discount rate used to determine the benefit obligations for the U.S. qualified pension plans:
	2012		2011		2010
Expected annual rate of return	8.5	%	8.5	%	8.5	%
Actual annual rate of return	12.7		3.4		10.8
Discount rate	4.3		5.1		5.9

The assumption for the expected rate of return on assets for our U.S. and international plans reflects our actual historical return experience and our long-term assessment of forward-looking return expectations by asset classes, which is used to develop a weighted-average expected return based on the implementation of our targeted asset allocation in our respective plans (see Notes to Consolidated Financial Statements—Note 11D. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Plan Assets for asset allocation ranges and actual asset allocations for 2012 and 2011). The expected return for our U.S. plans and the majority of our international plans is applied to the fair market value of plan assets at each year end. Holding all other assumptions constant, the effect of a 0.5 percentage-point decline in the return-on-assets assumption would increase our 2013 U.S. qualified pension plans’ pre-tax expense by approximately $60 million.

The discount rate used in calculating our U.S. defined benefit plan obligations as of December 31, 2012 is 4.3%, which represents a 0.8 percentage-point decrease from our December 31, 2011 rate of 5.1%. The discount rate for our U.S. defined benefit plans is determined annually and evaluated and modified to reflect at year-end the prevailing market rate of a portfolio of high-quality corporate bond investments rated AA or better that would provide the future cash flows needed to settle benefit obligations as they come due. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better, including where there is sufficient data, a yield curve approach. These rate determinations are made consistent with local requirements. Holding all other assumptions constant, the effect of a 0.1 percentage-point decrease in the discount rate assumption would increase our 2013 U.S. qualified pension plans’ pre-tax expense by approximately $26 million and increase the U.S. qualified pension plans’ projected benefit obligations as of December 31, 2012 by approximately $266 million.

Contingencies

For a discussion about income tax contingencies, see Notes to Consolidated Financial Statements—Note 5D. Tax Matters: Tax Contingencies.

For a discussion about legal and environmental contingencies, guarantees and indemnifications, see Notes to Consolidated Financial Statements—Note 17. Commitments and Contingencies. 

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ANALYSIS OF THE CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,									% Change
(MILLIONS OF DOLLARS)	2012			2011			2010			12/11		11/10
Revenues	$	58,986		$	65,259		$	65,165		(10	)%	—	%
Cost of sales	11,334			14,076			14,788			(19	)%	(5	)%
% of revenues	19.2		%	21.6		%	22.7		%
Selling, informational and administrative expenses	16,616			18,832			18,973			(12	)%	(1	)%
% of revenues	28.2		%	28.9		%	29.1		%
Research and development expenses	7,870			9,074			9,483			(13	)%	(4	)%
% of revenues	13.3		%	13.9		%	14.6		%
Amortization of intangible assets	5,175			5,544			5,364			(7	)%	3	%
% of revenues	8.8		%	8.5		%	8.2		%
Restructuring charges and certain acquisition-related costs	1,880			2,930			3,145			(36	)%	(7	)%
% of revenues	3.2		%	4.5		%	4.8		%
Other deductions—net	4,031			2,499			3,941			61	%	(37	)%
Income from continuing operations before provision for taxes on income	12,080			12,304			9,471			(2	)%	30	%
% of revenues	20.5		%	18.9		%	14.5		%
Provision for taxes on income	2,562			3,909			1,153			(34	)%	239	%
Effective tax rate	21.2		%	31.8		%	12.2		%
Plus: Discontinued operations—net of tax	5,080			1,654			(30		)	207	%	*
Less: Net income attributable to noncontrolling interests	28			40			31			(30	)%	29	%
Net income attributable to Pfizer Inc.	$	14,570		$	10,009		$	8,257		46	%	21	%
% of revenues	24.7		%	15.3		%	12.7		%

Percentages may reflect rounding adjustments.

* Calculation not meaningful.

Revenues-Overview

Total revenues were $59.0 billion in 2012, a decrease of 10% compared to 2011, due to:

• an operational decline of $4.8 billion, or 8%, primarily due to the loss of exclusivity of certain products, including Lipitor, in most major markets; and

• the unfavorable impact of foreign exchange, which decreased revenues by approximately $1.5 billion, or 2%.

Total revenues were $65.3 billion in 2011, relatively flat compared to 2010. Revenues were impacted by:

• the favorable impact of foreign exchange, which increased revenues by approximately $1.9 billion, or 3%; and

• the inclusion of revenues of $1.3 billion, or 2%, from our acquisition of King,

largely offset by:

• an operational decline of $2.9 billion, or 4%, primarily due to the loss of exclusivity of certain products.

Revenues in 2012 in comparison with 2011 were negatively impacted by product losses of exclusivity, most notably Lipitor in most major markets, as well as the final-year terms of our collaboration agreements in certain markets for Spiriva. Collectively, these factors negatively impacted revenues by approximately $7.7 billion, or 12%.

In 2012, Lyrica, Lipitor, Enbrel, Prevnar 13/Prevenar 13, Celebrex and Viagra each delivered at least $2 billion in revenues, while Norvasc, Zyvox, Sutent and the Premarin family each surpassed $1 billion in revenues. Lipitor lost exclusivity in Japan in June 2011 (with generic competition occurring in November 2011), the U.S. in November 2011 (with multi-source generic entry occurring in May 2012), Australia in April 2012 and most of developed Europe in March 2012 and May 2012.

In 2011, Lipitor, Lyrica, Enbrel, Prevnar 13/Prevenar 13 and Celebrex each delivered at least $2 billion in revenues, while Viagra, Norvasc, Zyvox, Xalatan/Xalacom (Xalatan lost exclusivity in the U.S. in March 2011), Sutent, Geodon/Zeldox, and the Premarin family each surpassed $1 billion in revenues.

In 2010, Lipitor, Enbrel, Lyrica, Prevnar 13/Prevenar 13 and Celebrex each delivered at least $2 billion in revenues, while Viagra, Xalatan/Xalacom, Effexor (Effexor XR lost exclusivity in the U.S. in July 2010), Norvasc, Prevnar/Prevenar (7-valent), Zyvox, Sutent, the Premarin family, Geodon/Zeldox and Detrol/Detrol LA each surpassed $1 billion in revenues.

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Revenues exceeded $500 million in each of 16 countries outside the U.S. in 2012 and 2011, and in each of 17 countries outside the U.S. in 2010. The U.S. and Japan were the only countries to contribute more than 10% of total revenue in 2012. The U.S. was the only country to contribute more than 10% of total revenues in 2011 and 2010.

Our policy relating to the supply of pharmaceutical inventory at domestic wholesalers, and in major international markets, is to generally maintain stocking levels under one month on average and to keep monthly levels consistent from year to year based on patterns of utilization. We historically have been able to closely monitor these customer stocking levels by purchasing information from our customers directly or by obtaining other third-party information. We believe our data sources to be directionally reliable but cannot verify their accuracy. Further, as we do not control this third-party data, we cannot be assured of continuing access. Unusual buying patterns and utilization are promptly investigated.

As is typical in the biopharmaceutical industry, our gross product sales are subject to a variety of deductions, that generally are estimated and recorded in the same period that the revenues are recognized and primarily represent rebates and discounts to government agencies, wholesalers, distributors and managed care organizations with respect to our pharmaceutical products. These deductions represent estimates of the related obligations and, as such, judgment and knowledge of market conditions and practice are required when estimating the impact of these sales deductions on gross sales for a reporting period. Historically, our adjustments to actual results have not been material to our overall business. On a quarterly basis, our adjustments to actual results generally have been less than 1% of biopharmaceutical net sales and can result in either a net increase or a net decrease in income. Product-specific rebate charges, however, can have a significant impact on year-over-year individual product growth trends.

The following table provides information about certain deductions from revenues:
	Year Ended December 31,
(BILLIONS OF DOLLARS)	2012		2011		2010
Medicaid and related state program rebates(a)	$	0.9	$	1.2	$	1.3
Medicare rebates(a)	0.7		1.4		1.3
Performance-based contract rebates(a), (b)	2.2		3.5		2.6
Chargebacks(c)	3.6		3.2		3.0
Sales allowances(d)	4.7		4.9		4.5
Total	$	12.1	$	14.2	$	12.7

^(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 managed care customers within the U.S., including health maintenance organizations and pharmacy benefit managers, who receive rebates based on the achievement of contracted performance terms and claims under these contracts.

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

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

The total rebates, chargebacks and sales allowances for 2012 were lower than 2011, primarily as a result of:

• the impact of decreased Medicaid, Medicare and performance-based contract rebates contracted for Lipitor and certain other products that have lost exclusivity;

• changes in product mix; and

• the impact on chargebacks of decreased sales for certain products that have lost exclusivity,

partially offset by, among other factors:

• an increase in chargebacks for our branded products as a result of increasing competitive pressures.

Our accruals for Medicaid rebates, Medicare rebates, performance-based contract rebates, sales allowances and chargebacks were $3.8 billion as of December 31, 2012 and $4.8 billion as of December 31, 2011, and substantially all are included in Other current liabilities in our Consolidated Balance Sheets. 

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Revenues by Segment and Geographic Area

The following table provides Worldwide revenues by operating segment, business unit and geographic area:
	Year Ended December 31,																		% Change
	Worldwide						U.S.						International						Worldwide				U.S.				International
(MILLIONS OF DOLLARS)	2012		2011(a)		2010		2012		2011(a)		2010		2012		2011(a)		2010		12/11		11/10		12/11		11/10		12/11		11/10
Biopharmaceutical revenues:
Primary Care Operating Segment	$	15,558	$	22,670	$	23,328	$	8,191	$	12,819	$	13,536	$	7,367	$	9,851	$	9,792	(31	)	(3	)	(36	)	(5	)	(25	)	1
Specialty Care	14,151		15,245		15,021		6,206		6,870		7,419		7,945		8,375		7,602		(7	)	1		(10	)	(7	)	(5	)	10
Oncology	1,310		1,323		1,414		573		391		506		737		932		908		(1	)	(6	)	47		(23	)	(21	)	3
SC&O Operating Segment	15,461		16,568		16,435		6,779		7,261		7,925		8,682		9,307		8,510		(7	)	1		(7	)	(8	)	(7	)	9
Emerging Markets	9,960		9,295		8,662		—		—		—		9,960		9,295		8,662		7		7		—		—		7		7
Established Products	10,235		9,214		10,098		4,738		3,627		4,501		5,497		5,587		5,597		11		(9	)	31		(19	)	(2	)	—
EP&EM Operating Segment	20,195		18,509		18,760		4,738		3,627		4,501		15,457		14,882		14,259		9		(1	)	31		(19	)	4		4
	51,214		57,747		58,523		19,708		23,707		25,962		31,506		34,040		32,561		(11	)	(1	)	(17	)	(9	)	(7	)	5
Other product  revenues:
Animal Health	4,299		4,184		3,575		1,771		1,648		1,382		2,528		2,536		2,193		3		17		7		19		—		16
Consumer Healthcare	3,212		3,028		2,748		1,526		1,490		1,408		1,686		1,538		1,340		6		10		2		6		10		15
Other operating segments	7,511		7,212		6,323		3,297		3,138		2,790		4,214		4,074		3,533		4		14		5		12		3		15
Other(b)	261		300		319		81		88		103		180		212		216		(13	)	(6	)	(8	)	(15	)	(15	)	(2	)
Total Revenues	$	58,986	$	65,259	$	65,165	$	23,086	$	26,933	$	28,855	$	35,900	$	38,326	$	36,310	(10	)	—		(14	)	(7	)	(6	)	6

^(a)  For 2011, includes King commencing on the acquisition date of January 31, 2011.

^(b)  Includes revenues generated primarily from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization.

Biopharmaceutical Revenues

Revenues from biopharmaceutical products contributed approximately 87% of our total revenues in 2012, 88% of our total revenues in 2011 and 90% of our total revenues in 2010.

We recorded direct product sales of more than $1 billion for each of 10 biopharmaceutical products in 2012, each of 12 biopharmaceutical products in 2011 and each of 15 biopharmaceutical products in 2010. These products represent 49% of our revenues from biopharmaceutical products in 2012, 56% of our revenues from biopharmaceutical products in 2011 and 60% of our revenues from biopharmaceutical products in 2010.

2012 v. 2011

Worldwide revenues from biopharmaceutical products in 2012 were $51.2 billion, a decrease of 11% compared to 2011, primarily due to:

• the decrease of $7.6 billion in operational revenues from Lipitor, Geodon, Xalatan, Caduet, Aromasin and Detrol, and lower Alliance revenues for Aricept, all due to loss of exclusivity in certain markets, and from lower Alliance revenues for Spiriva due to the final-year terms of our collaboration agreements in certain European countries, Canada and Australia; lower revenues for Effexor and Zosyn/Tazocin; and

• the unfavorable impact of foreign exchange of $1.3 billion, or 2%,

partially offset by:

• an increase in operational revenues in developed markets for certain biopharmaceutical products, particularly Lyrica, Celebrex, and Enbrel, and in revenues from emerging markets.

Geographically,

• in the U.S., revenues from biopharmaceutical products decreased 17% in 2012, compared to 2011, primarily reflecting lower revenues from Lipitor, Geodon, Caduet, Xalatan and Aromasin, all due to loss of exclusivity; lower Alliance revenues due to loss of exclusivity of Aricept 5mg and 10mg tablets in November 2010; and lower revenues from Effexor, Zosyn and Detrol/Detrol LA. The impact of these adverse factors was partially offset by the strong performance of certain other biopharmaceutical products, lower reductions related to rebates and the lower reduction in revenues related to the U.S. Healthcare Legislation.

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• in our international markets, revenues from biopharmaceutical products decreased 7% in 2012, compared to 2011, primarily due to the loss of exclusivity of Lipitor in most of developed Europe and the unfavorable impact of foreign exchange of 3%. Operationally, revenues decreased 4% in 2012, compared to 2011. In addition to Lipitor, the decrease in operational revenues was driven by Xalatan/Xalacom, Aricept and Aromasin, all due to loss of exclusivity in certain markets, as well as lower Alliance revenues, primarily due to the loss of exclusivity of Aricept in many major European markets, and lower revenues for Spiriva in certain European countries, Canada and Australia (reflecting the final-year terms of our Spiriva collaboration agreements relating to those countries), as well as lower revenues for Norvasc and Effexor. The impact of these adverse factors was partially offset by the strong operational growth of Lyrica, Prevnar 13/Prevenar 13 and Enbrel.

During 2012, international revenues from biopharmaceutical products represented 62% of total revenues from biopharmaceutical products, compared to 59% in 2011.

Primary Care Operating Segment

• Primary Care unit revenues decreased 31% in 2012 compared to 2011, reflecting lower operational revenues of 30%, primarily due to the losses of exclusivity of Lipitor in most major markets, as well as the resulting shift in the reporting of U.S. and Japan Lipitor revenues to the Established Products unit beginning January 1, 2012. These factors impacted Primary Care operational revenues by approximately $5.6 billion, or 25%, in 2012.

Collectively, the decline in worldwide revenues for Lipitor and for certain other Primary Care unit products that lost exclusivity in various markets in 2012 and 2011, as well as the resulting shift in the reporting of certain product revenues to the Established Products unit, reduced Primary Care unit revenues by $7.9 billion, or 35%, in comparison with 2011.

The impact of these declines was slightly offset by the strong operational growth of Lyrica in developed markets and Celebrex and Viagra in the U.S.

Specialty Care and Oncology Operating Segment

• Specialty Care unit revenues decreased 7% compared to 2011, due to lower operational revenues of 5%, as well as the adverse impact of foreign exchange. Operational revenues were negatively impacted by the decline in the Prevnar/Prevenar family in the U.S. and developed Europe, as the pediatric catch-up dose opportunity declined significantly in 2012 compared to 2011, with fewer children eligible to receive the catch-up dose. Additionally, utilization of Prevnar/Prevenar in older adults remains modest at this time.

Specialty Care unit revenues were also unfavorably impacted by the losses of exclusivity of Vfend and Xalatan in the U.S. in February and March 2011, respectively, and the resulting shift in the reporting of Vfend and Xalatan U.S. revenues to the Established Products unit beginning January 1, 2012, as well as the loss of exclusivity of Xalatan and Xalacom in the majority of European markets in January 2012, and Geodon in the U.S. in March 2012. Collectively, these developments reduced Specialty Care unit revenues by $1.1 billion, or 7%, in comparison with 2011.

Operational revenues were favorably impacted by the growth of Benefix, Rebif, ReFacto/Xyntha, Enbrel and Zyvox.

• Oncology unit revenues decreased 1%, compared to 2011, primarily due to the unfavorable impact of foreign exchange of 3%. Operational revenues were positively impacted by the launches of Inlyta and Xalkori in the U.S. and certain other developed markets, partially offset by the unfavorable impact of the loss of exclusivity of Aromasin in the majority of European markets in the second half of 2011 and the resulting shift in the reporting of such revenues to the Established Products unit beginning January 1, 2012. This loss of exclusivity reduced Oncology unit revenues by $229 million, or 17%, in comparison with 2011.

Operational revenues were also favorably impacted by the growth of Sutent, primarily in the U.S. and emerging markets.

Established Products and Emerging Markets Operating Segment

• Established Products unit revenues increased 11% compared to 2011, due to higher operational revenues of 13%, partially offset by a 2% unfavorable impact of foreign exchange. The increase in Established Products unit operational revenues in 2012 was mainly due to the shift in the reporting of branded Lipitor revenues in the U.S. and Japan from the Primary Care unit, totaling $1.4 billion, to the Established Products unit beginning January 1, 2012, as well as recent launches of generic versions of certain Pfizer branded primary care and specialty care products, and by contributions from the sales of the authorized generic version of Lipitor in the U.S. by Watson Pharmaceuticals, Inc. (Watson). The agreement with Watson was terminated by mutual consent in January 2013.

Operational revenues were unfavorably impacted by the entry of multi-source generic competition in the U.S. for donepezil (Aricept) in May 2011, as well as the continuing decline of revenues of certain products that previously lost exclusivity and the impact of ongoing pricing pressures, primarily in South Korea and developed Europe.

• Emerging Markets unit revenues increased 7% compared to 2011, due to higher operational revenues of 12%, partially offset by a 5% unfavorable impact of foreign exchange. The increase in Emerging Markets unit operational revenues in 2012 was primarily due to volume growth in China, Brazil and Russia, as a result of more targeted promotional efforts for key innovative and established products, including Lipitor, Norvasc and Lyrica.

Total revenues from established products in both the Established Products and Emerging Markets units were $14.4 billion, with $4.2 billion generated in emerging markets in 2012.

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2011 v. 2010

Worldwide revenues from biopharmaceutical products in 2011 were $57.7 billion, a decrease of 1% compared to 2010, primarily due to:

• the decrease of $4.7 billion in operational revenues from Lipitor, Effexor, Protonix, Xalatan, Caduet, Vfend, Aromasin and Zosyn/Tazocin, and lower Alliance revenues for Aricept, all due to loss of exclusivity in certain markets; and

• a reduction in revenues due to the U.S. Healthcare Legislation that was $359 million larger in 2011 than in 2010,

partially offset by:

• the solid performance of Lyrica, the Prevnar/Prevenar family and Enbrel;

• the inclusion of operational revenues from legacy King products of approximately $950 million, which favorably impacted biopharmaceutical revenues by 2%; and

• the favorable impact of foreign exchange of $1.7 billion, or 3%.

Geographically,

• in the U.S., revenues from biopharmaceutical products decreased 9% in 2011, compared to 2010, reflecting lower revenues from Lipitor, Protonix, Effexor, Zosyn, Xalatan, Vfend, Caduet and Aromasin, all due to loss of exclusivity, lower Alliance revenues due to loss of exclusivity of Aricept 5mg and 10mg tablets in November 2010 and lower revenues from Detrol/Detrol LA, as well as the reduction in revenues due to the U.S. Healthcare Legislation that was $359 million larger in 2011 than in 2010. The impact of these adverse factors was partially offset by the strong performance of certain other biopharmaceutical products and the addition of U.S. revenues from legacy King products of approximately $904 million in 2011.

• in our international markets, revenues from biopharmaceutical products increased 5% in 2011, compared to 2010, reflecting the favorable impact of foreign exchange of 6% in 2011, partially offset by a net operational decrease. Operationally, revenues were favorably impacted by increases in the Prevenar family, Lyrica, Enbrel, Celebrex and Alliance revenues and unfavorably impacted by declines in Lipitor, Effexor, Norvasc and Xalatan/Xalacom. International revenues from legacy King products were not significant to our international revenues in 2011.

During 2011, international revenues from biopharmaceutical products represented 59% of total revenues from biopharmaceutical products, compared to 56% in 2010.

Primary Care Operating Segment

• Primary Care unit revenues decreased 3% in 2011 compared to 2010, due to lower operational revenues of 6%, partially offset by the favorable impact of foreign exchange of 3%. Primary Care unit revenues were favorably impacted by higher revenues from certain patent-protected products, including Lyrica, Celebrex, Pristiq and Spiriva (in Alliance revenues), among others, as well as the addition of revenues from legacy King products of $404 million, or 2%, in 2011. Operational revenues in 2011 were negatively impacted by the loss of exclusivity of Lipitor and Caduet in the U.S. in November 2011, Lipitor in various other developed markets during 2010, as well as Aricept 5mg and 10mg tablets in the U.S. in November 2010. Taken together, these losses of exclusivity reduced Primary Care unit revenues by approximately $2.1 billion, or 9%, in comparison with 2010.

Specialty Care and Oncology Operating Segment

• Specialty Care unit revenues increased 1% compared to 2010, due to the favorable impact of foreign exchange of 3%, partially offset by lower operational revenues of 2%. Operational revenues were favorably impacted by strong growth in the Prevnar/Prevenar family and Enbrel, and unfavorably impacted by the loss of exclusivity of Vfend and Xalatan in the U.S. in February and March 2011, respectively. Collectively, these losses of exclusivity reduced Specialty Care unit revenues by $624 million, or 4%, in comparison with 2010.

• Oncology unit revenues decreased 6% compared to 2010, due to lower operational revenues of 10%, partially offset by the favorable impact of foreign exchange of 4%. The decrease in the Oncology unit operational revenues in 2011 was primarily due to the transfer of Aromasin’s U.S. business to the Established Products unit effective January 1, 2011, as a result of its loss of exclusivity in April 2011. This loss of exclusivity reduced Oncology unit revenues by $160 million, or 11%, in comparison with 2010.

Established Products and Emerging Markets Operating Segment

• Established Products unit revenues decreased 9% in 2011 compared to 2010, due to lower operational revenues of 13%, partially offset by a 4% favorable impact of foreign exchange. The decrease in Established Products unit operational revenues in 2011 was mainly due to the loss of exclusivity of Effexor XR, Protonix and Zosyn in the U.S. Taken together, these losses of exclusivity decreased Established Products unit revenues by $1.7 billion, or 17%, in comparison with 2010. These declines were partially offset by the addition of revenues from legacy King products of $546 million, or 5%, in 2011.

• Emerging Markets unit revenues increased 7% compared to 2010, due to higher operational revenues of 5%, as well as a 2% favorable impact of foreign exchange. The increase in Emerging Markets unit operational revenues in 2011 was due to growth in certain key innovative brands, primarily the Prevenar family, Lyrica, Enbrel, Celebrex, Vfend and Zyvox. These increases were partially offset by lower revenues from Lipitor, which lost exclusivity in Brazil in August 2010 and Mexico in December 2010, as well as the impact of price reductions for certain products in certain emerging market countries. These losses of exclusivity reduced Emerging Market unit revenues by $118 million, or 1%, in comparison with 2010.

Total revenues from established products in both the Established Products and Emerging Markets units were $13.0 billion, with $3.8 billion generated in emerging markets in 2011.

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Financial Review

Pfizer Inc. and Subsidiary Companies

Other Product Revenues

2012 v. 2011

Animal Health Operating Segment

• Animal Health unit revenues increased 3% in 2012, compared to 2011, reflecting higher operational revenues of 6%, partially offset by the unfavorable impact of foreign exchange of 3%. Operational revenues from Animal Health products were favorably impacted by the solid performance in both the livestock and companion animal portfolios.

Consumer Healthcare Operating Segment

• Consumer Healthcare unit revenues increased 6% in 2012, compared to 2011, reflecting higher operational revenues of 8%, partially offset by the unfavorable impact of foreign exchange of 2%. The operational revenue increase was primarily due to the addition of products from the acquisitions of the consumer healthcare business of Ferrosan in December 2011 and Alacer Corp. in February 2012.

2011 v. 2010

Animal Health Operating Segment

• Animal Health unit revenues increased 17% in 2011, compared to 2010, reflecting higher operational revenues of 14% and the favorable impact of foreign exchange of 3%. Operational revenues from Animal Health products were favorably impacted by approximately $329 million, or 9%, due to the addition of revenues from legacy King animal health products. Legacy Pfizer products grew 7% primarily driven by improving market conditions and resulting increased demand for products across the livestock business, as well as deeper market penetration in emerging markets. This was partially offset by the adverse impact of required product divestitures in 2010 related to the acquisition of Wyeth.

Consumer Healthcare Operating Segment

• Consumer Healthcare unit revenues increased 10% in 2011, compared to 2010, reflecting higher operational revenues of 8% and the favorable impact of foreign exchange of 2%. The operational revenue increase in 2011 was primarily driven by increased sales of core brands including Advil, Caltrate and Robitussin, as well as the temporary voluntary withdrawal of Centrum in Europe in the third quarter of 2010, which had an adverse impact on 2010 revenues. 

Revenues—Major Biopharmaceutical Products

The following table provides revenue information for several of our major biopharmaceutical products:
(MILLIONS OF DOLLARS)	PRIMARY INDICATIONS	Year Ended December 31,						% Change
PRODUCT		2012		2011		2010		12/11		11/10
Lyrica	Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	$	4,158	$	3,693	$	3,063	13		21
Lipitor	Reduction of LDL cholesterol	3,948		9,577		10,733		(59	)	(11	)
Enbrel (Outside the U.S. and Canada)	Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis	3,737		3,666		3,274		2		12
Prevnar 13/Prevenar 13	Vaccine for prevention of pneumococcal disease	3,718		3,657		2,416		2		51
Celebrex	Arthritis pain and inflammation, acute pain	2,719		2,523		2,374		8		6
Viagra	Erectile dysfunction	2,051		1,981		1,928		4		3
Norvasc	Hypertension	1,349		1,445		1,506		(7	)	(4	)
Zyvox	Bacterial infections	1,345		1,283		1,176		5		9
Sutent	Advanced and/or metastatic renal cell carcinoma (mRCC), refractory gastrointestinal stromal tumors (GIST) and advanced pancreatic neuroendocrine tumor	1,236		1,187		1,066		4		11
Premarin family	Menopause	1,073		1,013		1,040		6		(3	)
Genotropin	Replacement of human growth hormone	832		889		885		(6	)	—
Xalatan/Xalacom	Glaucoma and ocular hypertension	806		1,250		1,749		(36	)	(29	)
BeneFIX	Hemophilia	775		693		643		12		8
Detrol/Detrol LA	Overactive bladder	761		883		1,013		(14	)	(13	)
Vfend	Fungal infections	754		747		825		1		(9	)

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Financial Review

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Chantix/Champix	An aid to smoking cessation treatment	670	720	755	(7	)	(5	)
Pristiq	Depression	630	577	466	9		24
ReFacto AF/Xyntha	Hemophilia	584	506	404	15		25
Zoloft	Depression and certain anxiety disorders	541	573	532	(6	)	8
Revatio	Pulmonary arterial hypertension (PAH)	534	535	481	—		11
Medrol	Inflammation	523	510	455	3		12
Zosyn/Tazocin	Antibiotic	484	636	952	(24	)	(33	)
Zithromax/Zmax	Bacterial infections	435	453	415	(4	)	9
Effexor	Depression and certain anxiety disorders	425	678	1,718	(37	)	(61	)
Prevnar/Prevenar (7-valent)	Vaccine for prevention of pneumococcal disease	399	488	1,253	(18	)	(61	)
Fragmin	Anticoagulant	381	382	341	—		12
Relpax	Treat the symptoms of migraine headache	368	341	323	8		6
Rapamune	Immunosuppressant	346	372	388	(7	)	(4	)
Cardura	Hypertension/Benign prostatic hyperplasia	338	380	413	(11	)	(8	)
Tygacil	Antibiotic	335	298	324	12		(8	)
Aricept(a)	Alzheimer's disease	326	450	454	(28	)	(1	)
Xanax XR	Anxiety disorders	274	306	307	(10	)	—
BMP2	Development of bone and cartilage	263	340	400	(23	)	(15	)
Sulperazon	Antibiotic	262	218	213	20		2
Diflucan	Fungal infections	259	265	278	(2	)	(5	)
Caduet	Reduction of LDL cholesterol and hypertension	258	538	527	(52	)	2
Neurontin	Seizures	235	289	322	(19	)	(10	)
Dalacin/Cleocin	Antibiotic for bacterial infections	232	192	214	21		(10	)
Unasyn	Injectable antibacterial	228	231	244	(1	)	(5	)
Metaxalone/Skelaxin(b)	Muscle relaxant	223	203	—	10		*
Inspra	High blood pressure	214	195	157	10		24
Toviaz	Overactive bladder	207	187	137	11		36
Somavert	Acromegaly	197	183	157	8		17
Alliance revenues(c)	Various	3,492	3,630	4,084	(4	)	(11	)
All other(d)	Various	8,289	8,584	8,118	(3	)	6

^(a)  Represents direct sales under license agreement with Eisai Co., Ltd.

^(b)  Legacy King product. King’s operations are included in our financial statements commencing from the acquisition date of January 31, 2011. Therefore, our results for 2010 do not include King’s results of operations.

^(c)  Enbrel (in the U.S. and Canada), Spiriva, Rebif, Aricept and Exforge.

^(d)  Includes sales of generic atorvastatin.

* Calculation not meaningful.

Certain amounts and percentages may reflect rounding adjustments.

Biopharmaceutical—Selected Product Descriptions

• Lyrica is indicated for the management of post-herpetic neuralgia, neuropathic pain associated with diabetic peripheral neuropathy, the management of fibromyalgia, neuropathic pain due to spinal cord injury, and as adjunctive therapy for adult patients with partial onset seizures in the U.S. For certain countries outside the U.S., Lyrica is indicated for neuropathic pain (peripheral and central), the management of fibromyalgia, adjunctive treatment of epilepsy and general anxiety disorder. Lyrica recorded increases in worldwide revenues of 13% in 2012, compared to 2011. There was strong operational performance in international markets in 2012, including Japan, where Lyrica was launched in 2010 as the first product approved for the peripheral neuropathic pain (NeP) indication. Internationally, Lyrica revenues increased 14% in 2012, compared to 2011, with the growth due to a focus on enhancing the neuropathic pain diagnosis and treatment rates, the successful re-launch of the general anxiety disorder indication in the EU and physician education regarding neuropathic pain in Japan. Foreign exchange had an unfavorable impact on international revenues of 5% in 2012, compared to 2011. In the U.S., revenues increased 10% in 2012, compared to 2011. Notwithstanding these increases, U.S. revenues continue to be affected by increased competition from generic versions of competitive medicines, as well as managed care pricing and formulary pressures.

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Financial Review

Pfizer Inc. and Subsidiary Companies

• Lipitor, for the treatment of elevated LDL-cholesterol levels in the blood, recorded worldwide revenues of $3.9 billion, a decrease of 59%, in 2012, compared to 2011 due to:

◦ the impact of loss of exclusivity in Japan in June 2011 (with generic competition occurring in November 2011), the U.S. (with generic competition occurring in November 2011 and multi-source generic competition occurring in May 2012), Australia in April 2012 and most of developed Europe in March 2012 and May 2012;

▪ the continuing impact of an intensely competitive lipid-lowering market with competition from generics and branded products worldwide; and

▪ increased payer pressure worldwide, including the need for flexible rebate policies.

Geographically,

◦in the U.S., branded Lipitor revenues were $932 million, a decrease of 81% in 2012, compared to 2011; and

◦ in our international markets, branded Lipitor revenues were $3.0 billion, a decrease of 34% in 2012, compared to 2011. Foreign exchange had an unfavorable impact on international revenues of $70 million in 2012, compared to 2011.

See the “Our Operating Environment” section of this Financial Review for a discussion concerning losses of exclusivity for Lipitor in various markets.

• Enbrel, for the treatment of moderate-to-severe rheumatoid arthritis, polyarticular juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis and ankylosing spondylitis, a type of arthritis affecting the spine, recorded increases in worldwide revenues, excluding the U.S. and Canada, of 2% in 2012, compared to 2011, primarily due to the overall growth in the anti-tumor necrosis factor (TNF) biologic market, partially offset by the unfavorable impact of foreign exchange.

Under our co-promotion agreement with Amgen Inc. (Amgen), we co-promote Enbrel in the U.S. and Canada and share in the profits from Enbrel sales in those countries, which we include in Alliance revenues. Our co-promotion agreement with Amgen will expire in October 2013, and, subject to the terms of the agreement, we are entitled to a royalty stream for 36 months thereafter, which we expect will be significantly less than our current share of Enbrel profits from U.S. and Canadian sales. Following the end of the royalty period, we will not be entitled to any further revenues from Enbrel sales in the U.S. and Canada. Our exclusive rights to Enbrel outside the U.S. and Canada will not be affected by the expiration of the co-promotion agreement with Amgen.

• Prevnar 13/Prevenar 13 is our 13-valent pneumococcal conjugate vaccine for the prevention of various syndromes of pneumococcal disease in infants and young children and in adults 50 years of age and older. Prevnar 13/Prevenar 13 for use in infants and young children is marketed in the U.S. for the prevention of invasive pneumococcal disease caused by the 13 serotypes in Prevnar 13 and otitis media caused by the seven serotypes in Prevnar, and in the EU and many other international markets for the prevention of invasive pneumococcal disease, otitis media and pneumococcal pneumonia caused by the vaccine serotypes. In 2011, we received approval of Prevnar 13/Prevenar 13 for use in adults 50 years of age and older in the U.S. for the prevention of pneumococcal pneumonia and invasive pneumococcal disease caused by the 13 serotypes in Prevnar 13, and in the EU for the prevention of invasive pneumococcal disease caused by the vaccine serotypes. To date, Prevenar 13 for use in adults 50 years of age and older has been approved in over 55 countries. On January 25, 2013, the U.S. FDA granted approval for the expansion of Prevnar 13 for use in children ages 6 through 17 years for active immunization for the prevention of invasive disease caused by the 13 vaccine serotypes. EU approval for use in children 6 through 17 years of age was received on January 7, 2013. Worldwide revenues for Prevnar 13/Prevenar 13 increased 2% in 2012, compared to 2011. In the U.S., revenues for Prevnar 13 decreased 2% in 2012, compared to 2011. Developed Europe Prevenar 13 revenues also were lower in 2012, compared to 2011. Revenues in the U.S. and developed Europe declined as the pediatric catch-up dose commercial opportunity declined significantly in 2012 compared to 2011, with fewer children eligible to receive the catch-up dose. In addition, utilization in older adults is modest at this time.

We currently are conducting the Community-Acquired Pneumonia Immunization Trial in Adults (CAPiTA) to fulfill requirements in connection with the FDA’s approval of the Prevnar 13 adult indication under its accelerated approval program. CAPiTA is an efficacy trial involving subjects 65 years of age and older that is designed to evaluate whether Prevnar 13 is effective in preventing the first episode of community-acquired pneumonia caused by the serotypes contained in the vaccine. We estimate that this event-driven trial will be completed in 2013. At its regular meeting held on February 22, 2012, the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) indicated that it will defer voting on a recommendation for the routine use of Prevnar 13 in adults 50 years of age and older until the results of CAPiTA, as well as data on the impact of pediatric use of Prevnar 13 on the disease burden and serotype distribution among adults, are available. The rate of uptake for the use of Prevnar 13 in adults 50 years of age and older has been impacted by ACIP’s decision to defer voting on a recommendation for the routine use of Prevnar 13 in that population. At its regular meeting held on June 20, 2012, ACIP voted to recommend the use of Prevnar 13 for adults 19 years of age and older with immuno-compromising conditions such as HIV infections, cancer, advanced kidney disease and other immuno-compromising conditions. This recommendation is based on the disproportionate burden of invasive pneumococcal disease in this patient population.

• Celebrex, indicated for the treatment of the signs and symptoms of osteoarthritis and rheumatoid arthritis worldwide and for the management of acute pain in adults in the U.S., Japan and certain markets in the EU, recorded an increase in worldwide revenues of 8% in 2012, compared to 2011. Strong operational performance in the U.S. was primarily driven by price increases, as well as strong market growth, partially offset by continued share erosion due to ongoing generic pressures and higher rebates. However, Celebrex continued to slow the volume erosion due to strong Direct to Customer investment and field force promotion. Strong operational performance in international markets was driven by volume and share growth in Japan and emerging markets in the low back pain indication, partially offset by lower developed Europe revenues in 2012 compared to 2011. Celebrex is supported by continued educational and promotional efforts highlighting its efficacy and safety profile for appropriate patients.

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Financial Review

Pfizer Inc. and Subsidiary Companies

• Viagra isindicated for the treatment for erectile dysfunction. Viagra worldwide revenues increased 4% in 2012, compared to 2011, primarily due to the increase in U.S. revenues, partially offset by branded and generic competitive pressure in developed Europe, other developed markets and emerging markets. The increase in the U.S. more than offset the decrease in international markets due to operational factors and the adverse impact of foreign exchange.

• Norvasc, for treating hypertension, lost exclusivity in the U.S. and other major markets in 2007 and in Canada in 2009. Norvasc worldwide revenues decreased 7% in 2012, compared to 2011.

• Zyvox is the world’s best-selling branded agent among those used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide revenues increased 5% in 2012, compared to 2011, primarily due to growth in both developed and emerging markets.

• Sutent is indicated for the treatment of advanced renal cell carcinoma, including metastatic renal cell carcinoma (mRCC); gastrointestinal stromal tumors after disease progression on, or intolerance to, imatinib mesylate; and advanced pancreatic neuroendocrine tumor. Sutent worldwide revenues increased 4% in 2012, compared to 2011, due to strong operational performance driven in the U.S. by price increases and in other, non-European developed markets by volume growth due to targeted marketing efforts, and in emerging markets, by increased market share, partially offset by the unfavorable impact of foreign exchange. We continue to seek to drive operational revenue and prescription growth, supported by cost-effectiveness, efficacy and therapy management data. As of December 31, 2012, Sutent was the most prescribed oral mRCC therapy in the U.S.

• Our Premarin family of products helps women address moderate-to-severe menopausal symptoms. It recorded an increase in worldwide revenues of 6% in 2012, compared to 2011. U.S. revenues increased 7% in 2012, compared to 2011, primarily due to favorable wholesaler inventory levels, price increases in January and July 2012, favorable rebates and the launch of multichannel marketing support in 2012. Internationally, revenues decreased 2% compared to 2011. The decline was attributable to the unfavorable impact of foreign exchange of 7% offset by the increase in operational revenues of 5%.

• Genotropin, one of the world’s leading human growth hormones, is used in children for the treatment of short stature with growth hormone deficiency, Prader-Willi Syndrome, Turner Syndrome, Small for Gestational Age Syndrome, Idiopathic Short Stature (in the U.S. only) and Chronic Renal Insufficiency (outside the U.S. only), as well as in adults with growth hormone deficiency. Genotropin is supported by a broad platform of innovative injection-delivery devices and patient-support programs. Genotropin worldwide revenues decreased 6% compared to 2011.

• Xalabrands consists of Xalatan, a prostaglandin, which is a branded agent used to reduce elevated eye pressure in patients with open-angle glaucoma or ocular hypertension, and Xalacom, a fixed combination prostaglandin (Xalatan) and beta blocker (timolol) available outside the U.S. Xalatan/Xalacom worldwide revenues decreased 36% in 2012, compared to 2011. Lower revenues were due primarily to the loss of exclusivity in the U.S. in March 2011 and in the majority of European markets in January 2012.

• BeneFIX and ReFacto AF/Xyntha are hemophilia products using state-of-the-art manufacturing that assist patients with their lifelong bleeding disorders. BeneFIX is the only available recombinant factor IX product for the treatment of hemophilia B, while ReFacto AF/Xyntha is a recombinant factor VIII product for the treatment of hemophilia A. Both products are indicated for the control and prevention of bleeding in patients with these disorders and in some countries are also indicated for prophylaxis in certain situations, such as surgery. BeneFIX recorded an increase in worldwide revenues of 12% in 2012, compared to 2011, primarily as a result of increases in the U.S. due to a launch of the new 3000 International Unit vial and price increases. ReFacto AF/Xyntha recorded an increase in worldwide revenues of 15% in 2012, compared to 2011, driven by the successful transition of patients to Xyntha as a result of securing a government contract in Australia, continued patient conversion to Xyntha in the U.S., as well as the successful launch of the ReFacto AF dual chamber syringe in several European countries.

• Detrol/Detrol LA, a muscarinic receptor antagonist, is one of the leading branded medicines worldwide for overactive bladder. Detrol LA is an extended-release formulation taken once a day. Detrol/Detrol LA worldwide revenues decreased 14% in 2012, compared to 2011, primarily due to increased branded competition, a shift in promotional focus to our Toviaz product in most major markets and the loss of exclusivity for Detrol IR in the U.S. in June 2012. Generic competition for Detrol LA in the U.S. is expected in the first quarter of 2014.

• Vfend is a broad-spectrum agent for treating yeast and molds. Vfend worldwide revenues increased 1% in 2012, compared to 2011 primarily due to U.S. market growth attributable to a fungal meningitis outbreak and double-digit growth in Latin America and China, largely offset by the unfavorable impact of foreign exchange and supply constraints. International revenues increased 1% in 2012, compared to 2011. Revenues in the U.S. in 2012 increased 3% compared to the same period in 2011, primarily due to the aforementioned meningitis outbreak and lower Medicaid rebates in 2012 compared to 2011, partially offset by the loss of exclusivity of Vfend tablets and the launch of generic voriconazole (generic Vfend) in February 2011.

• Chantix/Champix is an aid to smoking-cessation treatment in adults 18 years of age and older. Chantix/Champix worldwide revenues decreased 7% in 2012, compared to 2011, primarily due to negative media exposure across several key markets and macro-economic decline, which decreased patient willingness to pay out of pocket. We are continuing our educational and promotional efforts, which are focused on addressing the significant health consequences of smoking highlighting the Chantix/Champix benefit-risk proposition, emphasizing the importance of the physician-patient dialogue in helping patients quit smoking and identifying alternative treatment-funding models.

• Pristiq is approved for the treatment of major depressive disorder in the U.S. and in various other countries. Pristiq has also been approved for treatment of moderate-to-severe vasomotor symptoms (VMS) associated with menopause in Thailand, Mexico, the Philippines and Ecuador. Pristiq recorded an increase in worldwide revenues of 9% in 2012, compared to 2011, primarily due to price increases, as well as market growth, partially offset by lower prescription share in the U.S.

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Financial Review

Pfizer Inc. and Subsidiary Companies

• Revatio is for the treatment of pulmonary arterial hypertension (PAH). Worldwide revenues remained relatively flat in 2012, compared to 2011. 2012 revenues were impacted by the unfavorable impact of foreign exchange, partially offset by an increased PAH awareness driving earlier diagnosis in the U.S. and EU. In the U.S., Revatio tablet lost exclusivity in September 2012, and Revatio intravenous injection will lose exclusivity in May 2013.

• Zosyn/Tazocin, our broad-spectrum intravenous antibiotic, faces generic global competition. U.S. exclusivity was lost in September 2009. Zosyn/Tazocin recorded a decrease in worldwide revenues of 24% in 2012, compared to 2011.

• Effexor, an antidepressant for treating adult patients with major depressive disorder, generalized anxiety disorder, social anxiety disorder and panic disorder, faces generic competition in most markets. It recorded a decrease in worldwide revenues of 37% in 2012, compared to 2011.

• Prevnar/Prevenar (7-valent), our 7-valent pneumococcal conjugate vaccine for preventing invasive, and, in certain international markets, non-invasive pneumococcal disease in infants and young children, recorded a decrease in worldwide revenues of 18% in 2012, compared to 2011. Many markets have transitioned from the use of Prevnar/Prevenar (7-valent) to Prevnar 13/Prevenar 13, resulting in lower revenues for Prevnar/Prevenar (7-valent). We expect this trend to continue.

• Caduet is a single-pill therapy combining Lipitor and Norvasc for the prevention of cardiovascular events. Caduet worldwide revenues decreased 52% in 2012, compared to 2011, primarily due to the loss of U.S. exclusivity in November 2011.

• Xalkori, for the treatment of patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) that is anaplastic lymphoma kinase (ALK)-positive as detected by an FDA-approved test, was approved by the FDA in August 2011. In developed markets, Xalkori has also been approved in Japan, South Korea, Canada and Switzerland, and it received conditional marketing authorization in the EU in October 2012. In addition, it has been filed or approved in more than 25 emerging markets, including China. Xalkori recorded worldwide revenues of $123 million in 2012, with 66% of those revenues generated in the U.S. market.

• Inlyta, for the treatment of patients with advanced renal cell carcinoma after failure of a prior systemic treatment, has been approved in the U.S., Switzerland, Japan, Canada, Australia, South Korea and the EU (exact indications vary by region). Inlyta recorded worldwide revenues of $100 million in 2012.

• Xeljanz (in the U.S.)was approved by the FDA in November 2012 for the treatment of adult patients with moderately to severely active rheumatoid arthritis who have had an inadequate response or intolerance to methotrexate, to be used as monotherapy or in combination with methotrexate or other nonbiologic disease-modifying antirheumatic drugs.

• Alliance revenues worldwide decreased 4% in 2012, compared to 2011, mainly due to the loss of exclusivity for Aricept 5mg and 10mg tablets in the U.S. in November 2010 and the entry of multi-source generic competition in the U.S. in May 2011, as well as the loss of exclusivity in many major European markets in February 2012, and lower revenues for Spiriva in certain European countries, Canada and Australia due to the expiration of our collaboration with BI in those countries, partially offset by the strong performance of Enbrel and Rebif in the U.S. We expect that the Aricept 23mg tablet will have exclusivity in the U.S. until July 2013. See the “The Loss or Expiration of Intellectual Property Rights” section of this Financial Review for a discussion regarding the expiration of various contract rights relating to Aricept, Spiriva, Enbrel and Rebif. Eliquis (apixaban) has been jointly developed and commercialized by Pfizer and Bristol-Myers Squibb (BMS). In 2012, Eliquis (apixaban) was approved to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation in the 27 countries of the EU, plus Iceland and Norway, Canada, Japan and the U.S., and it was launched for that indication in the U.S. in January 2013. The two companies share commercialization expenses and profit/losses equally on a global basis.

• Embeda—We met with the FDA in May 2012 to discuss our proposal for reintroduction of Embeda to the market. The required stability programs are underway, and we are working toward a submission with the FDA in the first half of 2013.

See Notes to Consolidated Financial Statements—Note 17. Commitments and Contingencies for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above.

Research and Development

Research and Development Operations

Innovation is critical to the success of our company and drug discovery and development is time-consuming, expensive and unpredictable, particularly for human health products. As a result, and also because we are predominately a human health company, the vast majority of our R&D spending is associated with human health products, compounds and activities.

24 2012 Financial Report

Financial Review

Pfizer Inc. and Subsidiary Companies

The following table provides additional information by operating segment about our research and development expenses (see also Notes to Consolidated Financial Statements––Note 18. Segment, Geographic and Other Revenue Information):
	Research and Development Expenses
	Year Ended December 31,						% Change
(MILLIONS OF DOLLARS)	2012		2011		2010		12/11		11/10
Primary Care(a)	$	1,009	$	1,307	$	1,473	(23	)	(11	)
Specialty Care and Oncology(a)	1,401		1,561		1,624		(10	)	(4	)
Established Products and Emerging Markets(a)	403		441		452		(9	)	(2	)
Other(a), (b)	693		425		428		63		(1	)
Worldwide Research and Development/Pfizer Medical(c)	2,835		3,337		3,709		(15	)	(10	)
Corporate and Other(d)	1,529		2,003		1,797		(24	)	11
Total Research and Development Expenses	$	7,870	$	9,074	$	9,483	(13	)	(4	)

^(a)  Our operating segments, in addition to their sales and marketing responsibilities, are responsible for certain development activities. Generally, these responsibilities relate to additional indications for in-line products and IPR&D projects that have achieved proof-of-concept. R&D spending may include upfront and milestone payments for intellectual property rights.

^(b)  Includes the Animal Health operating segment and the Consumer Healthcare operating segment. The increase in 2012 primarily relates to a $250 million payment to AstraZeneca to obtain the exclusive global over-the-counter rights to Nexium.

^(c)  Worldwide Research and Development is generally responsible for human health research projects until proof-of-concept is achieved, and then for transitioning those projects to the appropriate business unit for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. This organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects. Worldwide Research and Development is also responsible for all human-health-related regulatory submissions and interactions with regulatory agencies, including all safety event activities. Pfizer Medical is responsible for external affairs relating to all therapeutic areas, providing Pfizer-related medical information to healthcare providers, patients and other parties, and quality assurance and regulatory compliance activities, which include conducting clinical trial audits and readiness reviews. The decreases in 2012 compared to 2011 and in 2011 compared to 2010 result from cost savings associated with the R&D productivity initiative announced on February 1, 2011 (see the “Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this Financial Review).

^(d)  Corporate and other includes unallocated costs, primarily facility costs, information technology, share-based compensation, and restructuring related costs. The decrease in 2012 primarily results from cost savings associated with the R&D productivity initiative announced on February 1, 2011 and to a lesser extent from lower charges relating to implementing our cost-reduction and productivity initiatives(see the “Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this Financial Review).

Our human health R&D spending is conducted through a number of matrix organizations––Research Units, within our Worldwide Research and Development organization, are generally responsible for research assets (assets that have not yet achieved proof-of-concept); Business Units are generally responsible for development assets (assets that have achieved proof-of-concept); and science-based and other platform-services organizations.

We take a holistic approach to our human health R&D operations and manage the operations on a total-company basis through our matrix organizations described above. Specifically, a single committee, co-chaired by members of our R&D and commercial organizations, is accountable for aligning resources among all of our human health R&D projects and for ensuring that our company is focusing its R&D resources in the areas where we believe that we can be most successful and maximize our return on investment. We believe that this approach also serves to maximize accountability and flexibility.

Our Research Units are organized in a variety of ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources, within a Research Unit, between various projects as necessary because the workforce shares similar skills, expertise and/or focus.

Our platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based functions such as Pharmaceutical Sciences, Chemistry, Drug Safety, and Development Operations, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of development, allowing us to react quickly in response to evolving needs.

Generally, we do not disaggregate total R&D expense by development phase or by therapeutic area since, as described above, we do not manage a significant portion of our R&D operations by development phase or by therapeutic area. Further, as we are able to adjust a significant portion of our spending quickly, as conditions change, also as described above, we believe that any prior-period information about R&D expense by development phase or by therapeutic area would not necessarily be representative of future spending.

Product Developments—Biopharmaceutical

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

We continue to closely evaluate our global research and development function and pursue strategies intended to improve innovation and overall productivity in R&D by prioritizing areas that we believe have the greatest scientific and commercial promise, utilizing appropriate risk/return profiles and focusing on areas that we believe have the highest potential to deliver value in the near term and over time. To that end, our

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research primarily focuses on five high-priority areas that have a mix of small and large molecules—immunology and inflammation; oncology; cardiovascular and metabolic diseases; neuroscience and pain; and vaccines. In addition to reducing the number of disease areas of focus, we have realigned and reduced our research and development footprint and outsourced certain functions that do not drive competitive advantage for Pfizer.

Our development pipeline, which is updated quarterly, can be found at www.pfizer.com/pipeline. It includes an overview of our research and a list of compounds in development with targeted indication, phase of development and, for late-stage programs, mechanism of action. The information currently in our development pipeline is accurate as of February 28, 2013.

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

RECENT FDA APPROVALS
PRODUCT	INDICATION	DATE APPROVED
Eliquis (Apixaban)(a)	Prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation	December 2012
Xeljanz (Tofacitinib)	Treatment of moderate-to-severe active rheumatoid arthritis	November 2012
Bosulif (Bosutinib)	Treatment of previously treated chronic myelogenous leukemia	September 2012
Lyrica (Pregabalin) Capsules CV	Treatment of neuropathic pain due to spinal cord injury	June 2012
Elelyso (Taliglucerase Alfa)(b)	Treatment of adults with a confirmed diagnosis of type 1 Gaucher disease	May 2012
Inlyta (Axitinib)	Treatment of advanced renal cell carcinoma after failure of one prior systemic therapy	January 2012

^(a)  This indication for Eliquis (apixaban) was developed and is being commercialized in collaboration with BMS.

^(b)  In November 2009, we entered into a license and supply agreement with Protalix BioTherapeutics, which provides us exclusive worldwide rights, except in Israel, to develop and commercialize Elelyso (taliglucerase alpha) for the treatment of Gaucher disease.

PENDING U.S. NEW DRUG APPLICATIONS (NDA) AND SUPPLEMENTAL FILINGS
PRODUCT	INDICATION	DATE FILED*
Bazedoxifene-conjugated estrogens	Treatment of symptoms associated with menopause and osteoporosis	December 2012
Tafamidis meglumine(a)	Treatment of transthyretin familial amyloid polyneuropathy (TTR-FAP)	February 2012
Genotropin(b)	Replacement of human growth hormone deficiency (Mark VII multidose disposable device)	December 2009
Celebrex(c)	Chronic pain	October 2009
Remoxy(d)	Management of moderate-to-severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time	August 2008
Spiriva(e)	Respimat device for chronic obstructive pulmonary disease	January 2008
Viviant(f)	Osteoporosis treatment and prevention	August 2006

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

^(a)  In May 2012, the FDA's Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to the tafamidis NDA. The FDA has requested the completion of a second efficacy study and also has asked for additional information on the data within the current tafamidis NDA. We are continuing to work with the FDA to define a path forward.

^(b)  In April 2010, we received a “complete response” letter from the FDA for the Genotropin Mark VII multidose disposable device submission. In August 2010, we submitted our response to address the requests and recommendations included in the FDA letter. In April 2011, we received a second “complete response” letter from the FDA, requesting additional information. We are working to address the FDA's requests for additional information.

^(c)  In June 2010, we received a “complete response” letter from the FDA for the Celebrex chronic pain supplemental NDA. The supplemental NDA remains pending while we await the completion of ongoing studies to determine next steps.

^(d)  In 2005, King entered into an agreement with Pain Therapeutics, Inc. (PT) to develop and commercialize Remoxy. In August 2008, the FDA accepted the NDA for Remoxy that had been submitted by King and PT. In December 2008, the FDA issued a “complete response” letter. In March 2009, King exercised its right under the agreement with PT to assume sole control and responsibility for the development of Remoxy. In December 2010, King resubmitted the NDA for Remoxy with the FDA. In June 2011, we and PT announced that a “complete response” letter was received from the FDA with regard to the resubmission of the NDA. We have been working to address the issues raised in the letter, which primarily relate to manufacturing. We have analyzed the results from two, recently completed bioavailability studies, as well as data from other experiments that were conducted to optimize the formulation composition and analytical methods for Remoxy. While we have gained important insights from this work, in the fourth quarter of 2012 we initiated a confirmatory bioavailability study to assess the pharmacokinetic profile of modified Remoxy formulation compositions. Preliminary results from the initial phase of this study are undergoing analysis. We believe the results of this study will provide us with greater clarity as to whether or not we will be able to adequately address the questions raised in the “complete response” letter received from the FDA. We continue to target a late-March 2013 meeting with the FDA to discuss our plan to address the June 2011 “complete response" letter.

^(e)  Boehringer Ingelheim (BI), our alliance partner, holds the NDAs for Spiriva Handihaler and Spiriva Respimat. In September 2008, BI received a “complete response” letter from the FDA for the Spiriva Respimat submission. The FDA is seeking additional data, and we are coordinating with BI, which is working with the FDA to provide the additional information. A full response will be submitted to the FDA upon the completion of planned and ongoing studies.

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^(f)  Two “approvable” letters were received by Wyeth in April and December 2007 from the FDA for Viviant (bazedoxifene), for the prevention of post-menopausal osteoporosis, that set forth the additional requirements for approval. In May 2008, Wyeth received an “approvable” letter from the FDA for the treatment of post-menopausal osteoporosis. The FDA is seeking additional data, and we have been systematically working through these requirements and seeking to address the FDA's concerns. A full response will be provided to the FDA. In February 2008, the FDA advised Wyeth that it expects to convene an advisory committee to review the pending NDAs for both the treatment and prevention indications after we submit our response to the “approvable” letters. In April 2009, Wyeth received approval in the EU for CONBRIZA (the EU trade name for Viviant) for the treatment of post-menopausal osteoporosis in women at increased risk of fracture. Viviant was also approved in Japan in July 2010 for the treatment of post-menopausal osteoporosis and in South Korea in November 2011 for the treatment and prevention of post-menopausal osteoporosis.

REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
PRODUCT	DESCRIPTION OF EVENT	DATE APPROVED	DATE FILED*
Eliquis (Apixaban)(a)	Approval in Japan for prevention of ischemic stroke and systemic embolism in patients with nonvalvular atrial fibrillation	December 2012	—
Toviaz	Approval in Japan for treatment of overactive bladder	December 2012	—
Eliquis (Apixaban)(a)	Approval in the EU for prevention of stroke and systemic embolism in patients with nonvalvular atrial fibrillation	November 2012	—
Xalkori (Crizotinib)	Conditional marketing authorization in the EU for treatment of previously treated ALK-positive advanced non-small cell lung cancer	October 2012	—
Inlyta (Axitinib)	Approval in the EU for treatment of advanced renal cell carcinoma after failure of prior systemic treatment	September 2012	—
Sutent	Approval in Japan for treatment of pancreatic neuroendocrine tumor	August 2012	—
Bazedoxifene-conjugated estrogens	Application filed in the EU for treatment of symptoms associated with menopause and osteoporosis	—	July 2012
Prevenar 13 Infant	Application filed in Japan for prevention of invasive pneumococcal disease in infants and young children	—	July 2012
Lyrica (Pregabalin)	Approval in Japan for treatment of fibromyalgia	June 2012	—
Inlyta (Axitinib)	Approval in Japan for treatment of renal cell carcinoma not indicated for curative resection, metastatic renal cell carcinoma	June 2012	—
Xalkori (Crizotinib)	Approval in Japan for treatment of ALK-positive advanced non-small cell lung cancer	March 2012	—
Lyrica (Pregabalin)	Application filed in Japan for treatment of neuropathic pain: peripheral neuropathic pain, central neuropathic pain	—	March 2012
Tofacitinib	Application filed in Japan for treatment of rheumatoid arthritis	—	December 2011
Tofacitinib	Application filed in the EU for treatment of moderate-to-severe active rheumatoid arthritis	—	November 2011
Bosutinib(b)	Application filed in the EU for treatment of previously treated chronic myelogenous leukemia	—	August 2011

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

^(a)  This indication for Eliquis (apixaban) was developed and is being commercialized in collaboration with BMS.

^(b)  In January 2013, the EMA's Committee for Medicinal Products for Human Use (CHMP) issued an opinion recommending that bosutinib be granted conditional approval for treatment of previously treated chronic myelogenous leukemia. The initial application was for the treatment of newly diagnosed chronic myelogenous leukemia.

LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS
PRODUCT	INDICATION
Eliquis (Apixaban)	For the prevention and treatment of venous thromboembolism, which is being developed in collaboration with BMS
Inlyta (Axitinib)	Oral and selective inhibitor of vascular endothelial growth factor (VEGF) receptor 1, 2 & 3 for the treatment of adjuvant renal cell carcinoma (Asia only)
Lyrica (Pregabalin)	Peripheral neuropathic pain; CR (once-a-day) dosing
Sutent	Adjuvant renal cell carcinoma
Tofacitinib	A JAK kinase inhibitor for the treatment of psoriasis and ulcerative colitis
Xalkori (Crizotinib)	An oral ALK and c-Met inhibitor for the treatment of ALK-positive 1st and 2nd line (supports potential full approval in the U.S.) non-small cell lung cancer
Zithromax/chloroquine	Malaria

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NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT
CANDIDATE	INDICATION
ALO-02	A Mu-type opioid receptor agonist for the management of moderate-to-severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time
Dacomitinib	A pan-HER tyrosine kinase inhibitor for the treatment of previously treated advanced non-small cell lung cancer
Inotuzumab ozogamicin	An antibody drug conjugate, consisting of an anti-CD22 monotherapy antibody linked to a cytotoxic agent, calicheamycin, for the treatment of aggressive Non-Hodgkin's Lymphoma and acute lymphoblastic leukemia
MnB rLP2086 (PF-05212366)	A prophylactic vaccine for prevention of Neisseria meningitidis serogroup B invasive disease in adolescents and young adults (ages 11 - 25)
Palbociclib (PD-0332991)	An oral and selective reversible inhibitor of the CDK 4 and 6 kinases for the treatment of patients with ER positive, HER2 negative advanced breast cancer
Tanezumab(a)	An anti-nerve growth factor monoclonal antibody for the treatment of pain (on clinical hold)

^(a)  Following requests by the FDA in 2010, we suspended and subsequently terminated worldwide the osteoarthritis, chronic low back pain and painful diabetic peripheral neuropathy studies of tanezumab. The FDA's requests followed a small number of reports of osteoarthritis patients treated with tanezumab who experienced the worsening of osteoarthritis leading to total joint replacement and also reflected the FDA's concerns regarding the potential for such events in other patient populations. In December 2010, the FDA placed a clinical hold on all other anti-nerve growth factor therapies under clinical investigation in the U.S. Studies of tanezumab in cancer pain were allowed to continue. Extensive analyses were undertaken of all total joint replacements reported in studies of tanezumab. The results of these analyses and the conclusions drawn were provided to the FDA. On March 12, 2012, the FDA's Arthritis Advisory Committee met to discuss the future development of nerve growth factor inhibitors, including tanezumab. The Committee voted that there is a role for the ongoing development of nerve growth factor inhibitors in conditions such as osteoarthritis and for the management of pain associated with conditions other than osteoarthritis for which there are no agents with demonstrated analgesic effect. We submitted a Clinical Hold Complete Response to the FDA on July 31, 2012. On August 28, 2012, the FDA removed the clinical hold completely from the tanezumab program for all indications. On December 14, 2012, the FDA placed a new partial clinical hold on the development of nerve growth factor inhibitors, including tanezumab. The partial clinical hold was based on peripheral nervous system effects observed in animal studies conducted with nerve growth factor inhibitors by other companies. Current and future studies of tanezumab in cancer pain are not affected by this partial clinical hold. We intend to work with the FDA to determine the appropriate path forward.

Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the “Our Business Development Initiatives” section of this Financial Review.

COSTS AND EXPENSES

Cost of Sales

	Year Ended December 31,						% Change
(MILLIONS OF DOLLARS)	2012		2011		2010		12/11		11/10
Cost of sales	$	11,334	$	14,076	$	14,788	(19	)	(5	)

2012 v. 2011

Cost of sales decreased 19% in 2012, compared to 2011, primarily due to:

• lower purchase accounting charges, primarily reflecting the fair value adjustments to acquired inventory from Wyeth and King that was subsequently sold;

• lower costs related to our cost-reduction and productivity initiatives and acquisition-related costs, as well as the benefits generated from the ongoing productivity initiatives to streamline the manufacturing network;

• reduced manufacturing volumes related to products that lost exclusivity in various markets; and

• the favorable impact of foreign exchange of 3%,

partially offset by:

• an unfavorable shift in geographic, product and business mix due to products that lost exclusivity in various markets.

2011 v. 2010

Cost of sales decreased 5% in 2011, compared to 2010, primarily due to:

• lower purchase accounting charges, primarily reflecting the fair value adjustments to acquired inventory from Wyeth that was subsequently sold; and

• savings associated with our cost-reduction and productivity initiatives,

partially offset by:

• the addition of costs from legacy King’s operations;

• the Puerto Rico excise tax (for additional information, see the “Provision for Taxes on Income” section of this Financial Review);

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• a shift in geographic and business mix; and

• the unfavorable impact of foreign exchange of 2% in 2011.

Selling, Informational and Administrative (SI&A) Expenses

	Year Ended December 31,						% Change
(MILLIONS OF DOLLARS)	2012		2011		2010		12/11		11/10
Selling, informational and administrative expenses	$	16,616	$	18,832	$	18,973	(12	)	(1	)

2012 v. 2011

SI&A expenses decreased 12% in 2012, compared to 2011, primarily due to:

• savings generated from a reduction in the field force and a decrease in promotional spending, both partly in response to product losses of exclusivity;

• more streamlined corporate support functions; and

• the favorable impact of foreign exchange of 2%,

partially offset by:

• costs associated with the separation of Zoetis employees, net assets and operations from Pfizer.

2011 v. 2010

SI&A expenses were largely unchanged in 2011, compared to 2010, primarily due to:

• the fee provided for under the U.S. Healthcare Legislation beginning in 2011;

• the addition of legacy King operating costs; and

• the unfavorable impact of foreign exchange of 2%,

offset by:

• savings associated with our cost-reduction and productivity initiatives.

Research and Development (R&D) Expenses

	Year Ended December 31,						% Change
(MILLIONS OF DOLLARS)	2012		2011		2010		12/11		11/10
Research and development expenses	$	7,870	$	9,074	$	9,483	(13	)	(4	)