EXHIBIT 13

Pfizer Inc. 2014 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 2014 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:

ñ	Overview of Our Performance, Operating Environment, Strategy and Outlook	Beginning on page 2
	This section provides information about the following: our business; our 2014 performance; our operating environment; our strategy; our business development initiatives, such as acquisitions, dispositions, licensing and collaborations; and our financial guidance for 2015.
ñ	Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions	Beginning on page 12
	This section discusses those accounting policies and estimates that we consider important in understanding our 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.
ñ	Analysis of the Consolidated Statements of Income	Beginning on page 16
	This section consists of the following sub-sections:
	○  Revenues and Product Developments	Beginning on page 20
	This sub-section provides an analysis of our revenues and products for the three years ended December 31, 2014, including an overview of our important biopharmaceutical product developments.
	○ Costs and Expenses	Beginning on page 26
	This sub-section provides a discussion about our costs and expenses.
	○ Provision for Taxes on Income	Beginning on page 28
	This sub-section provides a discussion of items impacting our tax provisions.
	○ Discontinued Operations	Beginning on page 29
	This sub-section provides an analysis of the financial statement impact of our discontinued operations.
	○ Adjusted Income	Beginning on page 29
	This sub-section provides a discussion of an alternative view of performance used by management.
ñ	Analysis of Operating Segment Information	Beginning on page 36
	This section provides a discussion of the performance of each of our operating segments.
ñ	Analysis of the Consolidated Statements of Comprehensive Income	Beginning on page 41
	This section provides a discussion of changes in certain components of other comprehensive income.
ñ	Analysis of the Consolidated Balance Sheets	Beginning on page 42
	This section provides a discussion of changes in certain balance sheet accounts.
ñ	Analysis of the Consolidated Statements of Cash Flows	Beginning on page 43
	This section provides an analysis of our consolidated cash flows for the three years ended December 31, 2014.
ñ	Analysis of Financial Condition, Liquidity and Capital Resources	Beginning on page 45
	This section provides an analysis of selected measures of our liquidity and of our capital resources as of December 31, 2014 and December 31, 2013, as well as a discussion of our outstanding debt and other commitments that existed as of December 31, 2014. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future activities.
ñ	New Accounting Standards	Beginning on page 49
	This section discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted.
ñ	Forward-Looking Information and Factors That May Affect Future Results	Beginning on page 50
	This section 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 operating and financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, plans relating to share repurchases and dividends and business development plans. 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, including tax matters.

Certain amounts in our Financial Review may not add due to rounding. All percentages have been calculated using unrounded amounts.

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OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business

We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development and manufacture of healthcare products. Our global portfolio includes medicines and vaccines, as well as many of the world’s best-known consumer healthcare products. We work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We 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 and, to a much lesser extent, from 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 highly regulated. As a result, we face a number of industry-specific factors and challenges which can significantly impact our results. These factors include, among others: the loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights, healthcare legislation, pipeline productivity, the regulatory environment and pricing and access pressures, and competition among branded products. We also face challenges as a result of the global economic environment. For additional information about these factors and 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 in this Financial Review include the U.S., Western Europe, Japan, Canada, Australia, Scandinavia, South Korea, Finland and New Zealand; and references to Emerging Markets in this Financial Review include the rest of the world, including, among other countries, China, Brazil, Mexico, Russia, India and Turkey.

On February 5, 2015, we announced that we have entered into a definitive merger agreement under which we agreed to acquire Hospira, Inc. (Hospira), the world’s leading provider of injectable drugs and infusion technologies and a global leader in biosimilars, for $90 per share in cash, for a total enterprise value of approximately $17 billion. We expect to finance the transaction through a combination of existing cash and new debt, with approximately two-thirds of the value financed from cash and one-third from debt. The transaction is subject to customary closing conditions, including regulatory approvals in several jurisdictions and the approval of Hospira's shareholders, and is expected to close in the second half of 2015.

On June 24, 2013, we completed the full disposition of our Animal Health business, Zoetis Inc.(Zoetis), and recognized a gain of approximately $10.3 billion, net of tax, in Gain on disposal of discontinued operations––net of tax in our consolidated statement of income for the year ended December 31, 2013. The operating results of this business through June 24, 2013, the date of disposal, are reported as Income from discontinued operations––net of tax in our consolidated statements of income.

On November 30, 2012, we completed the sale of our Nutrition business to Nestlé and recognized a gain of approximately $4.8 billion, net of tax, in Gain on disposal of discontinued operations––net of tax in our consolidated statement of income for the year ended December 31, 2012. The operating results of this business through November 30, 2012, the date of disposal, are reported as Income from discontinued operations––net of tax in our consolidated statements of income.

For additional information about our divestitures, see Notes to Consolidated Financial Statements––Note 2D. Acquisitions, Licensing Agreements, Collaborative Arrangements, Divestitures, and Equity-Method Investments: Divestitures and see the “Our Business Development Initiatives”, “Discontinued Operations” and “Analysis of Financial Condition, Liquidity and Capital Resources” sections of this Financial Review.

Our 2014 Performance

Revenues––2014

Revenues in 2014 were $49.6 billion, a decrease of 4% compared to 2013, which reflects an operational decrease of $1.1 billion, or 2%, and the unfavorable impact of foreign exchange of $912 million, or 2%. See the "Analysis of the Consolidated Statements of Income––Revenues––Overview" section below for more information, including a discussion of key drivers of our revenue performance.

Income from Continuing Operations––2014

Income from continuing operations in 2014 was $9.1 billion, compared to $11.4 billion in 2013, primarily reflecting, among other items, in addition to the lower revenues described above:

• higher research and development expenses (up $1.7 billion) (see also the “Costs and Expenses––Research and Development (R&D) Expenses” section of this Financial Review);

• the non-recurrence in 2014 of the patent litigation settlement income of $1.3 billion in 2013 (see also the “Costs and Expenses––Other (Income)/Deductions–Net” section of this Financial Review and Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

• higher legal charges (up $958 million) (see the “Costs and Expenses––Other (Income)/Deductions––Net” section of this Financial Review and Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net); and

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• the non-recurrence in 2014 of the gain associated with the transfer of certain product rights to our joint venture with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China in 2013 ($459 million) (see also the “Our Business Development Initiatives” and “Costs and Expenses––Other (Income)/Deductions––Net” sections of this Financial Review and Notes to Consolidated Financial Statements––Note 2E. Acquisitions, Licensing Agreements, Collaborative Arrangements, Divestitures, and Equity-Method Investments: Equity-Method Investments, and Note 4. Other (Income)/Deductions––Net),

partially offset by:

• a lower effective tax rate (down 1.9 percentage points to 25.5%) (see also the “Provision for Taxes on Income” section of this Financial Review and Notes to Consolidated Financial Statements––Note 5. Tax Matters);

• lower restructuring charges and certain acquisition-related costs (down $932 million) (see also the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this Financial Review and Notes to Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives);

• higher royalty-related income (up $479 million) (see also the “Costs and Expenses––Other (Income)/Deductions––Net” section of this Financial Review and Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

• lower asset impairments (down $409 million) (see also the “Costs and Expenses––Other (Income)/Deductions––Net” section of this Financial Review and Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

• an estimated loss recorded in 2013 associated with an option to acquire the remaining interest in Laboratório Teuto Brasileiro S.A. (Teuto) of approximately $223 million and income recorded in 2014 of approximately $55 million, reflecting a decline in the estimated loss from the aforementioned option (see also the “Costs and Expenses––Other (Income)/Deductions––Net” section of this Financial Review and Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net); and

• lower selling, informational and administrative expenses (see the “Costs and Expenses––Selling, Informational and Administrative (SI&A) Expenses" section of this Financial Review) .

See also the “Discontinued Operations” section of this MD&A.

Our Operating Environment

Industry-Specific Challenges

Intellectual Property Rights and Collaboration/Licensing Rights

The loss or expiration of intellectual property rights and the expiration of co-promotion and licensing 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. The date at which generic competition commences may be different from the date that the patent or regulatory exclusivity expires. However, when generic competition does commence, the resulting price competition can substantially decrease our revenues for the impacted products, often in a very short period of time.

Our biotechnology products, including BeneFIX, ReFacto, Xyntha and Enbrel (we market Enbrel outside the U.S. and Canada), may face competition in the future from biosimilars (also referred to as follow-on biologics). If competitors are able to obtain marketing approval for biosimilars that reference our biotechnology products, our products may become subject to competition from these 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. However, biosimilar manufacturing is complex, and biosimilars are not generic versions of the reference products. Therefore, at least initially upon approval of a biosimilar competitor, biosimilar competition with respect to biologics may not be as significant as generic competition with respect to small molecule drugs.

We have lost exclusivity for a number of our products in certain markets and have lost collaboration rights with respect to a number of our alliance products in certain markets, and we expect certain products and alliance products to face significantly increased generic competition over the next few years.

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Specifically:

Recent Losses and Expected Losses of Product Exclusivity

The following table provides information about certain of our products recently experiencing, or expected to experience in 2015, patent expirations or loss of regulatory exclusivity, showing, by product, the key dates or expected key dates, the markets impacted and the revenues associated with those products in those markets:
(MILLIONS OF DOLLARS)			Product Revenues in Markets Impacted
Products	Key Dates(a)	Markets Impacted	Year Ended December 31,
			2014		2013		2012
Xalatan and Xalacom	January 2012	Major European markets	$	127	$	161	$	275
Aricept	February 2012	Major European markets	28		47		139
Geodon	March 2012	U.S.	24		84		214
Revatio tablet	September 2012	U.S.	51		67		312
Detrol IR and Detrol LA(b)	September 2012 January 2014	Major European markets U.S.	87		428		605
Lyrica	February 2013	Canada	32		101		206
Viagra	June 2013 (Europe) May 2014 (Japan/Australia)	Major European markets Japan and Australia	146		354		472
Rapamune	January 2014	U.S.	202		201		185
Inspra(c)	March 2014	Major European markets	160		150		131
Lyrica(d)	July 2014	Major European markets	1,634		1,458		1,319
Celebrex(e)	November 2014 (Europe) December 2014 (U.S.)	Major European markets U.S.	1,872		2,084		1,906
Zyvox(f)	First half of 2015	U.S.	680		688		665
Enbrel	August 2015 (Europe) September 2015 (Japan)	Major European markets Japan	2,832		2,776		2,727

^(a)  Unless stated otherwise, "Key Dates" indicate patent-based expiration dates.

^(b)  In January 2014, generic versions of Detrol LA became available in the U.S. pursuant to a settlement agreement.

^(c)  In March 2014, regulatory exclusivity for Inspra expired in most major European markets, allowing generic companies to submit applications for marketing authorizations for their generic products.

^(d)  In July 2014, regulatory exclusivity for Lyrica expired in the EU, allowing generic companies to submit applications for marketing authorizations for their generic products.

^(e)  In December 2014, generic versions of Celebrex became available pursuant to settlement agreements licensing the reissue patent to several of the generic manufacturers involved in the ongoing litigation with respect to Celebrex.

^(f)  Pursuant to terms of a settlement agreement, certain formulations of Zyvox became subject to generic competition in the U.S. in January 2015. We expect certain other formulations of Zyvox will become subject to generic competition in the U.S. in the first half of 2015.

Recent and Expected Losses of Collaboration Rights

The following table provides information about certain of our alliance revenue products that have experienced or that are expected to experience losses of collaboration rights, showing, by product, the date of the loss of the collaboration rights, the markets impacted and the alliance revenues associated with those products in those markets:
(MILLIONS OF DOLLARS)			Alliance Revenues in Markets Impacted
Products	Date of Loss of Collaboration Rights	Markets Impacted	Year Ended December 31,
			2014		2013		2012
Spiriva(a)	April 2014 (U.S.), between 2012 and 2016 (Japan, certain European countries, Australia, Canada and South Korea)	U.S., Japan, certain European countries, Australia, Canada and South Korea	$	168	$	659	$	1,143
Aricept(b)	December 2012 (Japan), July 2013 (U.S.)	Japan and U.S.	—		47
Enbrel(c)	October 2013	U.S. and Canada	3		1,400		1,500
Rebif(d)	End of 2015	U.S.	415		401		399

^(a)  Spiriva—Our collaboration with Boehringer Ingelheim for Spiriva expires on a country-by-country basis between 2012 and 2016. On April 29, 2014, our alliance in the U.S. came to an end.

^(b)  Aricept—Our rights to Aricept in Japan returned to Eisai Co., Ltd. in December 2012. Date shown for U.S. is the date the Aricept 23mg tablet lost exclusivity in the U.S., which was July 2013. 2012 alliance revenues for Aricept have not been approved for disclosure by Eisai Co., Ltd. and therefore are not reflected in the table above.

^(c)  Enbrel—The U.S. and Canada co-promotion term of our collaboration agreement with Amgen Inc. for Enbrel expired on October 31, 2013. While we are entitled to royalties for 36 months thereafter, those royalties have been and are expected to continue to be significantly less than our share of Enbrel profits from U.S. and Canada sales prior to the expiration. In addition, while our share of the profits from this co-promotion agreement previously was included in Revenues, our royalties after October 31, 2013 are and will be included in Other (income)/deductions––net, in our consolidated statements of income. Outside the U.S. and Canada, we continue to have the exclusive rights to market Enbrel.

^(d)  Rebif—Our collaboration agreement with EMD Serono Inc. to co-promote Rebif in the U.S. will expire at the end of 2015.

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In addition, we expect to lose exclusivity for various other products in various markets over the next few years. For additional information, see the “Patents and Other Intellectual Property Rights” section in Part I, Item 1, “Business”, of our 2014 Annual Report on Form 10-K.

Our financial results in 2014 and our 2015 financial guidance, respectively, reflect the impact and projected impact of the loss of exclusivity of various products and the expiration of certain alliance product contract rights discussed above. For additional information about our 2015 financial guidance, see the “Our Financial Guidance for 2015” section of this Financial Review.

We will continue to aggressively defend our patent rights whenever we deem appropriate. For more detailed information about our significant products, see the discussion in the “Revenues––Major Biopharmaceutical Products” and “Revenues––Selected Product Descriptions” sections of this Financial Review. For a discussion of certain recent developments with respect to patent litigation, see Notes to Consolidated Financial Statements––Note 17A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation.

Regulatory Environment/Pricing and Access––U.S. Healthcare Legislation

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 or ACA), was enacted in the U.S. For additional information, see the “Government Regulation and Price Constraints” section in Part I, Item 1, "Business", of our 2014 Annual Report on Form 10-K.

Impacts on our 2014 Results

We recorded the following amounts in 2014 as a result of the U.S. Healthcare Legislation:

• $631 million recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and

• $362 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government. 2014 includes a $215 million charge to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014 by the U.S. Internal Revenue Service (IRS). The charge in 2014 also reflected a favorable true-up associated with the final 2013 invoice received from the federal government, which reflected a lower share than that of the initial 2013 invoice.

The final regulations did not change the payment schedule for the Branded Prescription Drug Fee; accordingly there was no cash flow impact in 2014 from the $215 million charge.

Impacts on our 2013 Results

We recorded the following amounts in 2013 as a result of the U.S. Healthcare Legislation:

• $458 million recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and

• $280 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government.

Impacts on our 2012 Results

We recorded the following amounts in2012 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.

Other Impacts

• Expansion of Healthcare Coverage— The ACA included a coverage expansion that took effect in 2014. For additional information on the coverage expansion under the ACA and its impact on Pfizer's revenues, see the “Government Regulation and Price Constraints—In the United States—Healthcare Reform” section in Part I, Item 1 "Business", of our 2014 Annual Report on Form 10-K.

• 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. For additional information on the biosimilar approval pathway, the FDA's guidance documents and competition from biosimilar manufacturers, see the "Patents and Intellectual Property—Biotechnology Products“ and "Government Regulation and Price Constraints—In the United States—Biosimilars” sections in Part I, Item 1 "Business", of our 2014 Annual Report on Form 10-K.

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Regulatory Environment/Pricing and Access––Government and Other Payer Group 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). We are exposed to negative pricing pressures in various markets around the world. The U.S. has highly competitive insurance markets. Europe, Japan, China, Canada, South Korea and some other international markets have governments that provide healthcare at low direct cost to consumers and regulate pharmaceutical prices or patient reimbursement levels to control costs for the government-sponsored healthcare system, and have government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets, particularly under recent global economic pressures. 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 legislative changes 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.

Specifically, in the U.S., the following government activities have potential impacts on our financial results:

• Sustainable Growth Rate Replacement—The Medicare physician payment formula known as the Sustainable Growth Rate (SGR) is routinely overridden by Congressional action because it would lead to dramatic decreases in physician payment. The current legislative relief expires in March 2015. Congress issued a bi-partisan proposal to repeal the SGR and replace it with a new payment model. This form of SGR replacement is estimated by the Congressional Budget Office to cost the federal government approximately $144 billion over 10 years. The source of those funds has yet to be determined, but could include additional taxes on and/or rebate requirements applicable to the pharmaceutical industry, including Pfizer.

• Deficit Reduction—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 broad deficit-reduction effort could have an adverse impact on our results of operations.

The ACA, which expanded the role of the U.S. government as a healthcare payer, is accelerating changes in the U.S. healthcare marketplace, and the potential for additional pricing and access pressures continues to be significant. Many of these developments may impact drug utilization, in particular branded drug utilization. Some employers, seeking to avoid the tax on high-cost health insurance in the ACA to be imposed in 2018, are already scaling back healthcare benefits. Some health plans and pharmacy benefit managers are seeking greater pricing predictability from pharmaceutical manufacturers in contractual negotiations. Other health plans and pharmacy benefit managers are increasing their focus on spending on specialty medicines by implementing co-insurance in place of a flat co-payment. Because co-insurance passes on a percentage of a drug’s cost to the patient, this shift has the potential to significantly increase patient out-of-pocket costs.

Overall, there is increasing pressure on U.S. providers to deliver healthcare at a lower cost and to ensure that those expenditures deliver demonstrated value in terms of health outcomes. Longer term, we are seeing a shift in focus away from fee-for-service payments towards outcomes-based payments and risk-sharing arrangements that reward providers for cost reductions. These new payment models can, at times, lead to lower prices for, and restricted access to, new medicines. At the same time, these models can also expand utilization by encouraging physicians to screen, diagnose and focus on outcomes.

In response to the evolving U.S. and global healthcare spending landscape, we are continuing to work with health authorities, health technology assessment and quality measurement bodies and major U.S. payers throughout the product-development process to better understand how these entities value our compounds and products. Further, we are seeking to develop stronger internal capabilities focused on demonstrating the value of the medicines that we discover or develop, register and manufacture, by recognizing patterns of usage of our medicines and competitor medicines along with patterns of healthcare costs.

Regulatory Environment––Pipeline Productivity

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 have encountered 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 earnings growth. We devote considerable resources to R&D activities. These activities involve a high degree of risk and may take many years, and with respect to any specific R&D 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 strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D to achieve a sustainable pipeline that will 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 and other regulatory authorities. The FDA and regulatory authorities in other jurisdictions may evaluate potential safety concerns related to a product or a class of products 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.

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Competition Among Branded Products

Many of our prescription pharmaceutical products face competition in the form of branded or generic drugs that treat similar diseases or indications. For additional information, see the “Competition" section in Part I, Item 1, “Business”, of our 2014 Annual Report on Form 10-K.

The Global Economic Environment

In addition to industry-specific factors discussed above, we, like other businesses, are exposed to the economic cycle, which impacts our biopharmaceutical operations globally.

• We believe that patients, who are experiencing increases in co-pays and restrictions on access to medicines as payers seek to control costs, sometimes switch to generic products, delay treatments, skip doses or use less effective treatments. We are exposed to negative pricing pressure in various markets around the world. The U.S. has highly competitive insurance markets, and Europe, Japan, China, Canada, South Korea and a number of other international markets have government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs for the government-sponsored healthcare system, particularly under recent global pressures. Furthermore, some government agencies and third-party payers use health technology assessments in ways that, at times, lead to restricted access to and lower prices for new medicines.

• We continue to monitor developments regarding government and government agency receivables in several European markets where economic conditions remain challenging and uncertain. For further information about our Accounts Receivable, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this Financial Review.

• Significant portions of our revenues and earnings, as well as our substantial international net assets, 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 Chinese renminbi, the U.K. pound, 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 were to weaken against another currency, assuming all other variables remained constant, our revenues would increase, having a positive impact on earnings, and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.

The impact of possible currency devaluations in countries experiencing high inflation rates or significant exchange fluctuations, including Venezuela, can impact our results and financial guidance. For further information about our exposure to foreign currency risk, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this Financial Review.

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, and will maintain, the ability to meet our liquidity needs for the foreseeable future. Our long-term debt is rated high quality 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 about our financial condition, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this Financial Review.

These and other industry-wide factors that may affect our businesses should be considered along with information presented in the “Forward-Looking Information and Factors That May Affect Future Results” section of this Financial Review and in Part I, Item 1A, “Risk Factors,” of our 2014 Annual Report on Form 10-K.

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 continue to 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. We remain firmly committed to fulfilling our company's purpose of innovating to bring therapies to patients that significantly improve their lives. By doing so, we expect to create value for the patients we serve and for our shareholders.

Commercial Operations

At the beginning of our fiscal year 2014, we began managing our commercial operations through a new global commercial structure consisting of two distinct businesses: an Innovative Products business and an Established Products business. The Innovative Products business is composed of two operating segments, each of which is led by a single manager––the Global Innovative Pharmaceutical segment (GIP) and the Global Vaccines, Oncology and Consumer Healthcare segment (VOC). The Established Products business consists of the Global Established Pharmaceutical segment (GEP), which is led by a single manager. Each operating segment has responsibility for its commercial activities and for certain in-process research and development (IPR&D) projects for new investigational products and additional indications for in-line products that generally have achieved proof of concept. Each business has a geographic footprint across developed and emerging markets.

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Some additional information about each product grouping follows:

• Global Innovative Pharmaceutical segment––GIP is focused on developing, registering and commercializing novel, value-creating medicines that significantly improve patients’ lives. These therapeutic areas include inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women’s/men’s health and include leading brands, such as Xeljanz, Eliquis and Lyrica (U.S. and Japan). GIP has a pipeline of medicines in inflammation, cardiovascular/metabolic disease, neuroscience and pain, and rare diseases.

• Global Vaccines, Oncology and Consumer Healthcare segment––VOC focuses on the development and commercialization of vaccines and products for oncology and consumer healthcare. Consumer Healthcare manufactures and markets several well known, over-the-counter (OTC) products. Each of the three businesses in VOC operates as a separate, global business with distinct specialization in terms of the science and market approach necessary to deliver value to consumers and patients.

• Global Established Pharmaceutical segment––GEP includes the brands that have lost market exclusivity and, generally, the mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets and, to a much smaller extent, generic pharmaceuticals. Additionally, GEP includes our sterile injectable products and biosimilar development portfolio.

We expect that the GIP and VOC biopharmaceutical portfolios of innovative, largely patent-protected, in-line products will be sustained by ongoing investments to develop promising assets and targeted business development in areas of focus to ensure a pipeline of highly-differentiated product candidates in areas of unmet medical need. The assets managed by these groups are science-driven, highly differentiated and generally require a high-level of engagement with healthcare providers and consumers.

GEP is expected to generate strong consistent cash flow by providing patients around the world with access to effective, lower-cost, high-value treatments. GEP leverages our biologic development, regulatory and manufacturing expertise to seek to advance its biosimilar development portfolio. GEP may also engage in targeted business development to further enable its commercial strategies.

Prior-period information has been restated to conform to the current management structure. For additional information about our operating structure, see Notes to Consolidated Financial Statements––Note 18. Segment, Geographic and Other Revenue Information: Segment Information.

For additional information about the 2014 performance of each of our operating segments, see the “Analysis of Operating Segment Information” section of this Financial Review.

Research Operations

We continue to strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D to achieve a sustainable pipeline that will deliver value in the near term and over time. Our R&D priorities include delivering a pipeline of differentiated therapies with the greatest scientific and commercial promise, innovating new capabilities that can position Pfizer for long-term leadership and creating new models for biomedical collaboration that will expedite the pace of innovation and productivity. To that end, our research primarily focuses on six high-priority areas that have a mix of small molecules and large molecules––immunology and inflammation; cardiovascular and metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases. Another area of focus is biosimilars.

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 additional information about R&D by operating segment, see the “Analysis of Operating Segment Information” section of this Financial Review. For additional information about our pending new drug applications and supplemental filings, see the “Analysis of the Consolidated Statements of Income––Product Developments” section of this Financial Review. For additional information about recent transactions and strategic investments that we believe have the potential to advance our pipeline and maximize the value of our in-line products, see the “Our Business Development Initiatives” section of this Financial Review.

Business Development

We continue to build on our broad portfolio of businesses and to expand our R&D pipeline through various business development transactions. For additional information about recent transactions and strategic investments that we believe have the potential to advance our pipeline, enhance our product portfolio and maximize the value of our in-line products, see the “Our Business Development Initiatives” section of this Financial Review.

Intellectual Property Rights

We continue to aggressively defend our patent rights against increasingly aggressive infringement whenever appropriate, 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 designed 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. For additional information about our current efforts to enforce our intellectual property rights, see Notes to Consolidated Financial Statements––Note 17A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation.

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Capital Allocation and Expense Management

We seek to maintain a strong balance sheet and robust liquidity so that we continue to have the financial resources necessary to take advantage of prudent commercial, research and business development opportunities and to directly enhance shareholder value through dividends and share repurchases. For additional information about our financial condition, liquidity, capital resources, share repurchases and dividends, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this Financial Review.

We remain focused on achieving an appropriate cost structure for the Company. For additional information about 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 and Notes to Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

On October 23, 2014, we announced that our Board of Directors had authorized a new $11 billion share-purchase plan. Also, on December 15, 2014, our Board of Directors declared a first-quarter 2015 dividend of $0.28 per share, an increase from the $0.26 per-share quarterly dividend paid during 2014.

On February 9, 2015, we entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. to repurchase $5 billion of our common stock. This agreement was entered into pursuant to our previously announced share repurchase authorization. For additional information, see Notes to Consolidated Financial Statements––Note 19. Subsequent Events.

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 earnings 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 high-priority therapeutic areas—immunology and inflammation; cardiovascular and metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases––and in emerging markets and established products, including biosimilars. 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. For additional information, see Notes to Consolidated Financial Statements––Note 2. Acquisitions, Licensing Agreements, Collaborative Arrangements, Divestitures, and Equity-Method Investments.

The more significant recent transactions and events are described below.

• Agreement to Acquire Hospira, Inc. (Hospira)––On February 5, 2015, we announced that we have entered into a definitive merger agreement under which we agreed to acquire Hospira, the world’s leading provider of injectable drugs and infusion technologies and a global leader in biosimilars, for $90 per share in cash, for a total enterprise value of approximately $17 billion. We expect to finance the transaction through a combination of existing cash and new debt, with approximately two-thirds of the value financed from cash and one-third from debt. The transaction is subject to customary closing conditions, including regulatory approvals in several jurisdictions and the approval of Hospira's shareholders, and is expected to close in the second half of 2015.

• Collaboration with OPKO Health, Inc. (OPKO)––On December 13, 2014, we entered into a collaborative agreement with OPKO to develop and commercialize OPKO’s long-acting human growth hormone (hGH-CTP) for the treatment of growth hormone deficiency (GHD) in adults and children, as well as for the treatment of growth failure in children born small for gestational age (SGA) who fail to show catch-up growth by two years of age. hGH-CTP has the potential to reduce the required dosing frequency of human growth hormone to a single weekly injection from the current standard of one injection per day. The transaction closed on January 28, 2015, upon termination of the Hart-Scott-Rodino waiting period. In February 2015, we made an upfront payment of $295 million to OPKO and OPKO is eligible to receive up to an additional $275 million upon the achievement of certain regulatory milestones. We have received the exclusive license to commercialize hGH-CTP worldwide. In addition, OPKO is eligible to receive initial tiered royalty payments associated with the commercialization of hGH-CTP for Adult GHD, which is subject to regulatory approval. Upon the launch of hGH-CTP for Pediatric GHD, which is subject to regulatory approval, the royalties will transition to tiered gross profit sharing for both hGH-CTP and our product, Genotropin. OPKO will lead the clinical activities and will be responsible for funding the development programs for the key indications, which includes Adult and Pediatric GHD and Pediatric SGA. We will be responsible for all development costs for additional indications as well as all post-marketing studies. In addition, we will fund the commercialization activities for all indications and lead the manufacturing activities covered by the global development plan.

• Acquisition of Marketed Vaccines Business of Baxter International Inc. (Baxter)––On December 1, 2014 (which falls in the first fiscal quarter of 2015 for our international operations), we completed the acquisition of Baxter's portfolio of marketed vaccines for $635 million. The portfolio that was acquired consists of NeisVac-C and FSME-IMMUN/TicoVac. NeisVac-C is a vaccine that helps protect against meningitis caused by group C meningococcal meningitis and FSME-IMMUN/TicoVac is a vaccine that helps protect against tick-borne encephalitis. We also acquired a portion of Baxter’s facility in Orth, Austria, where these vaccines are manufactured.

• Collaboration with Merck KGaA––On November 17, 2014, we entered into a collaborative agreement with Merck KGaA, to jointly develop and commercialize avelumab, an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer. We and Merck KGaA will explore the therapeutic potential of this novel anti-PD-L1 antibody as a single agent as well as in various combinations with our and Merck KGaA’s broad portfolio of approved and investigational oncology therapies. Both companies will collaborate on up to 20 high priority immuno-oncology clinical development programs expected to commence in 2015. These clinical development programs include up to six trials (Phase 2 or 3) that could be pivotal for potential product registrations. We and Merck KGaA will also combine resources and expertise to advance Pfizer’s anti-PD-1 antibody into Phase 1 trials. Under the terms of the agreement, we made an upfront payment of $850 million to Merck KGaA and Merck KGaA is eligible to receive regulatory and commercial milestone payments of up to approximately $2.0 billion. Both companies will jointly fund all development and commercialization costs, and split

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equally any profits generated from selling any anti-PD-L1 or anti-PD-1 products from this collaboration. Also, as part of the agreement, we gave Merck KGaA certain co-promotion rights for Xalkori in the U.S. and several other key markets. In 2014, we recorded $1.2 billion of Research and development expenses associated with this collaborative arrangement, composed of the $850 million upfront cash payment as well as an additional amount of $309 million, reflecting the estimated fair value of the co-promotion rights given to Merck KGaA.

• Acquisition of InnoPharma, Inc. (InnoPharma)––On September 24, 2014, we completed our acquisition of InnoPharma, a privately-held pharmaceutical development company, for an upfront cash payment of $225 million and contingent consideration of up to $135 million.

• License from Cellectis SA (Cellectis)––On June 18, 2014, we entered into a global arrangement with Cellectis to develop Chimeric Antigen Receptor T-cell immunotherapies in the field of oncology directed at select cellular surface antigen targets. In August 2014, we made an upfront payment of $80 million to Cellectis, which was recorded in Research and development expenses. We will also fund research and development costs associated with 15 Pfizer-selected targets and, for the benefit of Cellectis, a portion of the research and development costs associated with four Cellectis-selected targets within the arrangement. Cellectis is eligible to receive development, regulatory and commercial milestone payments of up to $185 million per product that results from the Pfizer-selected targets. Cellectis is also eligible to receive tiered royalties on net sales of any products that are commercialized by Pfizer.

• Investment in ViiV Healthcare Limited (ViiV)––On January 21, 2014, the European Commission approved Tivicay (dolutegravir), a product for the treatment of HIV-1 infection, developed by ViiV, an equity-method investee. This approval, in accordance with the agreement between GlaxoSmithKline plc and Pfizer, triggered a reduction in our equity interest in ViiV from 12.6% to 11.7% and an increase in GlaxoSmithKline plc’s equity interest in ViiV from 77.4% to 78.3%, effective April 1, 2014. As a result, in 2014, we recognized a loss of approximately $30 million in Other (income)/deductions––net. We continue to account for our investment in ViiV under the equity method due to the significant influence that we continue to have through our board representation and minority veto rights.

• Collaboration with Eli Lilly & Company (Lilly)––In October 2013, we entered into a collaboration agreement with Lilly to jointly develop and globally commercialize Pfizer's tanezumab, which provides that Pfizer and Lilly will equally share product-development expenses as well as potential revenues and certain product-related costs. The tanezumab program currently is subject to a partial clinical hold by the FDA pending review of additional nonclinical data. Under the agreement with Lilly, we are eligible to receive certain payments from Lilly upon the achievement of specified clinical, regulatory and commercial milestones, including an upfront payment of $200 million that is contingent upon the parties continuing in the collaboration after receipt of the FDA’s response to the submission of the nonclinical data. Both Pfizer and Lilly have the right to terminate the agreement under certain conditions.

• Divestiture of Zoetis––On June 24, 2013, we completed the full disposition of Zoetis. The full disposition was completed through a series of steps, including, in the first quarter of 2013, the formation of Zoetis and an initial public offering (IPO) of an approximate 19.8% interest in Zoetis and, in the second quarter of 2013, an exchange offer for the remaining 80.2% interest.

• Collaboration with Merck & Co., Inc. (Merck)––On April 29, 2013, we announced that we entered into a worldwide (except Japan) collaboration agreement with Merck for the development and commercialization of Pfizer's ertugliflozin (PF-04971729), an investigational oral sodium glucose cotransporter (SGLT2) inhibitor currently in Phase 3 development for the treatment of type 2 diabetes.

• Investment in Hisun Pfizer Pharmaceuticals Company Limited (Hisun Pfizer)––On September 6, 2012, we and Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun), a leading pharmaceutical company in China, formed a new company, Hisun Pfizer, to develop, manufacture, market and sell pharmaceutical products, primarily branded generic products, predominately in China. In the first quarter of 2013, we and Hisun contributed certain assets to Hisun Pfizer. Hisun Pfizer is 49% owned by Pfizer and 51% owned by Hisun. Our contributions constituted a business, as defined by U.S. GAAP, and in 2013, we recognized a pre-tax gain of approximately $459 million in Other (income)/deductions––net.

• License of Nexium OTC Rights––In August 2012, we entered into an agreement with AstraZeneca PLC (AstraZeneca) for the exclusive, global, over-the-counter (OTC) rights for Nexium, a leading prescription drug approved to treat the symptoms of gastroesophageal reflux disease. In connection with this Consumer Healthcare licensing agreement, we made an upfront payment of $250 million to AstraZeneca, which was recorded in Research and development expenses in our consolidated statement of income for the year ended December 31, 2012. On May 27, 2014, we launched Nexium 24HR in the U.S., and on July 11, 2014, we paid AstraZeneca a related $200 million product launch milestone payment; and on August 1, 2014, we launched Nexium Control in Europe, and on September 15, 2014, we paid AstraZeneca a related $50 million product launch milestone payment. These post-approval milestone payments were recorded in Identifiable intangible assets, less accumulated amortization in the consolidated balance sheet and will be amortized over the estimated useful life of the Nexium brand. AstraZeneca is eligible to receive additional milestone payments of up to $300 million, based on product launches outside the U.S. and level of worldwide sales as well as royalty payments, based on worldwide sales.

• Divestiture of Nutrition Business––On November 30, 2012, we completed the sale of our Nutrition business to Nestlé for $11.85 billion in cash.

• Acquisition of NextWave Pharmaceuticals Incorporated (NextWave)––On November 27, 2012, we completed our acquisition of NextWave, a privately-held, specialty pharmaceutical company. As a result of the acquisition, we hold exclusive North American rights to Quillivant XR™ (methylphenidate hydrochloride), the first once-daily liquid medication approved in the U.S. for the treatment of attention deficit hyperactivity disorder.

• Acquisition of Alacer Corp. (Alacer)––On February 26, 2012, we completed our acquisition of Alacer, a company that manufactured, marketed and distributed Emergen-C, a line of effervescent, powdered drink mix vitamin supplements.

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Our Financial Guidance for 2015

The following table provides our financial guidance for full year 2015(a), (b):
Reported revenues	$44.5 to $46.5 billion
Adjusted cost of sales as a percentage of reported revenues	18.5% to 19.5%
Adjusted selling, informational and administrative expenses	$12.8 to $13.8 billion
Adjusted research and development expenses	$6.9 to $7.4 billion
Adjusted other (income)/deductions	Approximately ($500 million) of income
Effective tax rate on adjusted income	Approximately 25.0%
Reported diluted Earnings per Share (EPS)	$1.37 to $1.52
Adjusted diluted EPS	$2.00 to $2.10

The following table provides a reconciliation of 2015 Adjusted income and Adjusted diluted EPS guidance to the 2015 Reported net income attributable to Pfizer Inc. and Reported diluted EPS attributable to Pfizer Inc. common shareholders guidance:
	Full-Year 2015 Guidance(a), (b)
(BILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)	Net Income	Diluted EPS
Adjusted income/diluted EPS guidance	$12.4 - $13.0	$2.00 - $2.10
Purchase accounting impacts of transactions completed as of December 31, 2014	(2.5)	(0.41)
Restructuring and implementation costs	(0.8) - (1.1)	(0.13) - (0.18)
Business and legal entity alignment costs	(0.3)	(0.04)
Reported net income attributable to Pfizer Inc./diluted EPS guidance	$8.5 - $9.4	$1.37 - $1.52

^(a)  The 2015 financial guidance reflects the following:

• Our guidance for reported revenues reflects the anticipated negative impact of $3.5 billion due to recent and expected product losses of exclusivity as well as $2.8 billion as a result of recent adverse changes in essentially all foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2014, partially offset by anticipated revenue growth from certain other products.

• Guidance for adjusted R&D expensesreflects the $295 million upfront payment made to OPKO in February 2015. See “Our Business Development Initiatives” above.

• Our reported and adjusted diluted EPS guidance reflects: (i) a $0.17 unfavorable impact as a result of adverse changes in foreign exchange rates from 2014; (ii) a $0.03 reduction for the upfront payment associated with the transaction with OPKO; (iii) planned share repurchases totaling approximately $6 billion in 2015, including $1 billion of our shares repurchased through February 27, 2015 and our $5 billion accelerated share repurchase program announced on February 9, 2015; and (iv) assumed diluted weighted-average shares outstanding of approximately 6.2 billion shares, which is inclusive of these share repurchase transactions.

• Does not assume the completion of any business-development transactions not completed as of December 31, 2014, including any one-time upfront payments associated with such transactions, except for the $295 million upfront payment made to OPKO in February 2015. Our 2015 financial guidance does not reflect any impact from our proposed acquisition of Hospira. We expect that transaction to close during the second half of 2015.

• Excludes the potential effects of the resolution of litigation-related matters.

• Exchange rates assumed are as of mid-January 2015. Excludes the impact of a potential devaluation of the Venezuelan bolivar or any other currency.

• Guidance for the effective tax rate on adjusted income does not assume renewal of the U.S. research and development (R&D) tax credit. The renewal of the U.S. R&D tax credit is not anticipated to have a material impact on the effective tax rate on adjusted income.

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

For additional information about our actual and anticipated costs and cost savings associated with our cost-reduction initiatives and our new global commercial structure, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this Financial Review and Notes to Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.

Our 2015 financial guidance is subject to a number of factors and uncertainties—as described in the “Our Operating Environment”, “Our Strategy” and “Forward-Looking Information and Factors That May Affect Future Results” sections of this Financial Review and Part I, Item 1A, “Risk Factors,” of our 2014 Annual Report on Form 10-K.

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SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

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 our consolidated financial statements as they require the application of the most subjective and the most complex judgments: (i) Acquisitions (Note 1D); (ii) Fair Value (Note 1E); (iii) Revenues (Note 1G); (iv) Asset Impairments (Note 1K); (v) Pension and Postretirement Benefit Plans (Note 1P); and (vi) Contingencies, including Tax Contingencies (Note 1O) and Legal and Environmental Contingencies (Note 1Q).

Following is a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements. 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, Licensing Agreements, Collaborative Arrangements, Divestitures, 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.

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

Our gross product revenues 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, chargebacks and sales allowances to government agencies, wholesalers/distributors and managed care organizations with respect to our pharmaceutical products.

Those deductions represent estimates of rebates and discounts related to gross sales for the reporting period and, as such, knowledge and judgment of market conditions and practice are required when estimating the impact of these revenue deductions on gross sales for a reporting period. Historically, our adjustments of estimates, to reflect actual results or updated expectations, have not been material to our overall business. On a quarterly basis, our adjustments of estimates to reflect actual results generally have been less than 1% of biopharmaceutical revenues, and have resulted in either a net increase or a net decrease in revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product growth trends. 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. The sensitivity of our estimates can vary by program, type of customer and geographic location. However, estimates associated with U.S. Medicare, 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 for impairment indicators throughout the year. We perform impairment testing for indefinite-lived intangible assets and goodwill at least 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 indicates 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.

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Identifiable Intangible Assets

As a result of our identifiable intangible asset impairment review work, we recognized a number of impairments of identifiable intangible assets for the years ended December 31, 2014, 2013 and 2012. See Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions—Net.

When we are required to determine the fair value of intangible assets other than goodwill, we use an income approach, specifically 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 IPR&D 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 face events and circumstances that can lead to impairment, in general, intangible assets other than goodwill that are most at risk of impairment include IPR&D assets (approximately $387 million as of December 31, 2014) and newly acquired or recently impaired indefinite-lived brand assets (approximately $300 million as of December 31, 2014). IPR&D 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.

Goodwill

As a result of our goodwill impairment review work, we concluded that none of our goodwill was impaired as of December 31, 2014, and we do not believe the risk of impairment is significant at this time.

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

• 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.

• 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.

Specifically:

• When we estimate the fair value of our four biopharmaceutical reporting units, we rely solely on the income approach. We use the income approach exclusively as the use of the comparable guideline company method is not practical or reliable. 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.

Our Consumer Healthcare reporting unit has the narrowest difference between estimated fair value and estimated book value. However, we believe 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

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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 and Part I. Item 1A "Risk Factors" in our 2014 Annual Report on Form 10-K.

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 Internal Revenue Code qualified and supplemental (non-qualified) defined benefit plans and defined contribution plans, as well as other postretirement benefit plans consisting primarily of medical insurance for retirees.

The accounting for benefit plans is highly dependent on actuarial estimates, assumptions and calculations, which can 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 include the discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality (life expectancy); and healthcare cost trend rates.

As of December 31, 2014, our Pension benefit obligations, net and our Postretirement benefit obligations, net increased, in the aggregate, by approximately $3.0 billion compared to December 31, 2013. The increase reflects, among other things, a decrease in our discount rate assumptions, used in the measurement of the plan obligations, as well as the impact of a change to the postretirement medical benefit plan and revised mortality assumptions (see below).

In the fourth quarter of 2014, we approved a change, effective January 1, 2016, to the postretirement medical plan to transfer certain plan participants to a retiree drug coverage program eligible for a Medicare Part D plan subsidy (Employer Group Waiver Plan). This change resulted in a decrease to the postretirement benefit obligation of approximately $600 million as of December 31, 2014.

On October 27, 2014, the Society of Actuaries (SOA) issued a new mortality table, called the SOA RP-2014 mortality table. The new SOA mortality table was created using data from 2006 and applying updated estimates of projected mortality rate improvements. The updated mortality rate projections assume that the high mortality rate improvements observed in the early 2000s will not continue, but will normalize to an ultimate improvement rate of 1.00% over a twenty-year period. In estimating our U.S. plan-specific mortality assumptions, we are using the same data and methodology used by the SOA, except that we project that the mortality rate improvements will normalize to an ultimate improvement rate of 0.75%, which is more closely aligned with the scale used by the United States Social Security Administration, and that the rate will normalize over a ten-year period. The projected benefit obligation (for defined benefit pension plans), and the accumulated postretirement benefit obligation (for postretirement plans), increased by approximately $580 million as a result of the revised mortality assumptions.

Our assumptions reflect our historical experiences and our 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 weighted-average discount rate used to measure the benefit obligations for our U.S. qualified pension plans and our international pension plans(a):
	2014		2013		2012
U.S. Qualified Pension Plans
Expected annual rate of return on plan assets	8.3	%	8.5	%	8.5	%
Actual annual rate of return on plan assets	6.8		11.3		12.7
Discount rate used to measure the plan obligations	4.2		5.2		4.3
International Pension Plans
Expected annual rate of return on plan assets	5.5		5.8		5.6
Actual annual rate of return on plan assets	13.2		13.1		9.6
Discount rate used to measure the plan obligations	3.0		3.9		3.8

^(a)  For detailed assumptions associated with our benefit plans, see Notes to Consolidated Financial Statements—Note 11B. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Actuarial Assumptions.

Expected Annual Rate of Return on Plan Assets

The assumptions for the expected annual rate of return on all of our plan assets reflect 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.

The expected annual rate of return on plan assets for our U.S. plans and the majority of our international plans is applied to the fair value of plan assets at each year-end and the resulting amount is reflected in our net periodic benefit costs in the following year. In January 2015, Pfizer made a voluntary contribution of approximately $1.0 billion to plan assets. In 2015, this contribution will be included in the plan asset balance for purposes of determining the expected rate of return on plan assets.

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The following table illustrates the sensitivity of net periodic benefit costs to a 50 basis point decline in our assumption for the expected annual rate of return on plan assets, holding all other assumptions constant (in millions, pre-tax):
	Change	Increase in 2015 Net Periodic Benefit Costs
Assumption
Expected annual rate of return on plan assets	50 basis point decline	$109

The actual return on plan assets resulted in an increase in our aggregate plan assets of approximately $1.9 billion during 2014.

Discount Rate Used to Measure Plan Obligations

The weighted-average discount rate used to measure the plan obligations for our U.S. defined benefit plans is determined at least annually and evaluated and modified, as required, to reflect the prevailing market rate of a portfolio of high-quality fixed income investments, rated AA/Aa or better, that reflect the rates at which the pension benefits could be effectively settled. The discount rate used to measure the plan obligations for our international plans is determined at least annually by reference to investment grade corporate bonds, rated AA/Aa or better, including, when there are sufficient data, a yield-curve approach. These discount rate determinations are made in consideration of local requirements.

The measurement of the plan obligations at the end of the year will affect the amount of service cost, interest cost and amortization expense reflected in our net periodic benefit costs in the following year.

The following table illustrates the sensitivity of net periodic benefit costs and benefit obligations to a 10 basis point decline in our assumption for the discount rate, holding all other assumptions constant (in millions, pre-tax):
	Change	2015 Net Periodic Benefit Costs	2014 Benefit Obligations
Assumption		Increase	Increase
Discount rate	10 basis point decline	$36	$480

The change in the discount rates used in measuring our plan obligations as of December 31, 2014 resulted in an increase in the measurement of our aggregate plan obligations by approximately $4.3 billion.

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)	2014			2013			2012			14/13		13/12
Revenues	$	49,605		$	51,584		$	54,657		(4	)	(6	)
Cost of sales	9,577			9,586			9,821			—		(2	)
% of revenues	19.3		%	18.6		%	18.0		%
Selling, informational and administrative expenses	14,097			14,355			15,171			(2	)	(5	)
% of revenues	28.4		%	27.8		%	27.8		%
Research and development expenses	8,393			6,678			7,482			26		(11	)
% of revenues	16.9		%	12.9		%	13.7		%
Amortization of intangible assets	4,039			4,599			5,109			(12	)	(10	)
% of revenues	8.1		%	8.9		%	9.3		%
Restructuring charges and certain acquisition-related costs	250			1,182			1,810			(79	)	(35	)
% of revenues	0.5		%	2.3		%	3.3		%
Other (income)/deductions—net	1,009			(532		)	4,022			*		*
Income from continuing operations before provision for taxes on income	12,240			15,716			11,242			(22	)	40
% of revenues	24.7		%	30.5		%	20.6		%
Provision for taxes on income	3,120			4,306			2,221			(28	)	94
Effective tax rate	25.5		%	27.4		%	19.8		%
Income from continuing operations	9,119			11,410			9,021			(20	)	26
% of revenues	18.4		%	22.1		%	16.5		%
Discontinued operations—net of tax	48			10,662			5,577			(100	)	91
Net income before allocation to noncontrolling interests	9,168			22,072			14,598			(58	)	51
% of revenues	18.5		%	42.8		%	26.7		%
Less: Net income attributable to noncontrolling interests	32			69			28			(53	)	146
Net income attributable to Pfizer Inc.	$	9,135		$	22,003		$	14,570		(58	)	51
% of revenues	18.4		%	42.7		%	26.7		%

Certain amounts and percentages may reflect rounding adjustments.

* Calculation not meaningful.

Revenues—Overview

Total revenues were $49.6 billion in 2014, a decrease of 4% compared to 2013, which reflects an operational decrease of $1.1 billion, or 2%, and unfavorable foreign exchange of $912 million, or 2%, in 2014 compared to 2013. The operational decrease was primarily the result of:

• the expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada (approximately $1.4 billion);

• the loss of exclusivity and subsequent multi-source generic competition for Detrol LA, Celebrex and Geodon in the U.S., Viagra in most major European markets, and Aricept and Lyrica in Canada (aggregate decline of approximately $937 million) and certain other products(approximately $300 million);

• the continued erosion of branded Lipitor in the U.S. and most other developed markets due to generic competition and the operational decline of certain products, including Norvasc, Effexor, atorvastatin, Metaxalone, Zosyn/Tazocin, Ziprasidone, Genotropin, Tygacil, Centrum, Advil and Vfend (approximately $938 million); and

• the ongoing termination of the Spiriva collaboration in certain countries (approximately $490 million),

partially offset by:

• the operational growth of certain products in certain developed markets, including Lyrica, Prevnar, Eliquis, Xeljanz, Xalkori, Inlyta and Nexium 24HR in the U.S. as a result of its May 2014 launch, among others (approximately $1.8 billion); and

• a 7% operational increase in revenues in emerging markets (approximately $900 million), including strong operational growth from Prevenar as well as from Lipitor, primarily in China, and from Enbrel, primarily in Latin America.

Total revenues were $51.6 billion in 2013, a decrease of 6% compared to 2012, which reflects an operational decrease of $1.9 billion, or 4%, and unfavorable foreign exchange of approximately $1.2 billion, or 2%, in 2013 compared to 2012.

The operational decrease was primarily the result of:

• the continued erosion of branded Lipitor in the U.S., developed Europe and certain other developed markets (approximately $1.7 billion);

• the loss of exclusivity for Geodon in March 2012 in the U.S. (approximately $130 million) and other product losses of exclusivity (approximately $1.3 billion in the aggregate, none individually significant);

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• the ongoing expiration of the Spiriva collaboration in certain countries (approximately $475 million);

• decreased government purchases of the Prevnar family of products and Enbrel in certain emerging markets (approximately $160 million); and

• lower revenues from generic atorvastatin (approximately $145 million),

partially offset by:

• the growth of certain products, including Lyrica, Inlyta, Celebrex and Xalkori in developed markets and Xeljanz in the U.S. (approximately $1.1 billion);

• the overall growth in the rest of emerging markets (approximately $751 million), excluding the aforementioned decrease in the government purchases of the Prevnar family of products and Enbrel;

• the overall growth in the Consumer Healthcare business unit (approximately $153 million); and

• revenues from the transitional manufacturing and supply agreements with Zoetis (approximately $132 million).

See the “Intellectual Property Rights and Collaboration/Licensing Rights” section of this Financial Report for information about (i) recent losses of product exclusivity impacting product revenues, (ii) recent and expected losses of collaboration rights impacting alliance revenues and (iii) losses and expected losses of product exclusivity in 2015.

In addition, we expect to lose exclusivity for various other products in various markets over the next few years. For additional information, see the “Patents and Other Intellectual Property Rights” section in Part I, Item 1, “Business”, of our 2014 Annual Report on Form 10-K.

Revenues exceeded $500 million in each of 13, 12 and 14 countries outside the U.S. in 2014, 2013 and 2012, respectively. The U.S. is our largest national market, comprising 38% of total revenues in 2014 and 39% of total revenues in both 2013 and 2012. Japan is our second-largest national market, with approximately 9%, 10% and 12% of total revenues in 2014, 2013 and 2012, respectively.

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.

Our gross product revenues 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, chargebacks and sales allowances to government agencies, wholesalers/distributors and managed care organizations with respect to our pharmaceutical products. Those deductions represent estimates of rebates and discounts related to gross sales for the reporting period and, as such, knowledge and judgment of market conditions and practice are required when estimating the impact of these revenue deductions on gross sales for a reporting period. Historically, our adjustments of estimates, to reflect actual results or updated expectations, have not been material to our overall business. On a quarterly basis, our adjustments of estimates to reflect actual results generally have been less than 1% of biopharmaceutical revenues, and have resulted in either a net increase or a net decrease in revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product growth trends. 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. The sensitivity of our estimates can vary by program, type of customer and geographic location. However, estimates associated with U.S. Medicare, 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.

The following table provides information about deductions from revenues:
	Year Ended December 31,
(MILLIONS OF DOLLARS)	2014		2013		2012
Medicare rebates(a)	$	1,077	$	887	$	741
Medicaid and related state program rebates(a)	779		508		853
Performance-based contract rebates(a), (b)	2,219		2,117		1,852
Chargebacks(c)	3,755		3,569		3,648
Sales allowances(d)	4,547		4,395		4,525
Sales returns and cash discounts	1,279		1,225		1,263
Total(e)	$	13,656	$	12,701	$	12,882

^(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. Outside the U.S., performance-based contract rebates include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or sales milestones.

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

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

^(e)  For 2014, associated with the following segments: GIP ($3.3 billion); VOC ($1.2 billion); and GEP ($9.1 billion). For 2013, associated with the following segments: GIP ($2.8 billion); VOC ($1.0 billion); and GEP ($8.9 billion). For 2012, associated with the following segments: GIP ($2.2 billion); VOC ($1.0 billion); and GEP ($9.6 billion).

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The total deductions from revenues for 2014 increased compared to 2013, primarily as a result of:

• an increase in Medicare rebates due to higher volume of sales in the Medicare patient population;

• an increase in Medicaid and related state program rebates, primarily as a result of a change in our estimates of sales related to these programs;

• an increase in performance-based contract rebates as a result of contract arrangements and incentives, primarily in Europe;

• an increase in chargebacks for certain branded products as well as products that have lost exclusivity; and

• an increase in sales allowances primarily in Asia and Europe.

Our accruals for Medicaid and related state program rebates, Medicare rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts totaled $3.4 billion as of December 31, 2014, of which approximately $2.0 billion is included in Other current liabilities, $300 million is included in Other noncurrent liabilities and approximately $1.1 billion is included against Accounts receivable, less allowance for doubtful accounts, in our consolidated balance sheet.Our accruals for Medicaid and related state program rebates, Medicare rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts totaled$3.3 billion as of December 31, 2013, of which approximately $2.1 billion is included in Other current liabilities, $234 million is included in Other noncurrent liabilities and approximately $1.0 billion is included against Accounts receivable, less allowance for doubtful accounts, in our consolidated balance sheet.

Revenues by Segment and Geographic Area

The following table provides worldwide revenues by operating segment and geographic area:
	Year Ended December 31,																		% Change
	Worldwide						U.S.						International						Worldwide				U.S.				International
(MILLIONS OF DOLLARS)	2014		2013		2012		2014		2013		2012		2014		2013		2012		14/13		13/12		14/13		13/12		14/13		13/12
Operating Segments(a):
GIP	$	13,861	$	14,317	$	13,756	$	6,243	$	6,810	$	6,429	$	7,619	$	7,507	$	7,327	(3	)	4		(8	)	6		1		2
VOC	10,144		9,285		8,991		4,715		4,122		3,987		5,428		5,163		5,005		9		3		14		3		5		3
GEP	25,149		27,619		31,678		7,903		9,217		10,818		17,245		18,400		20,860		(9	)	(13	)	(14	)	(15	)	(6	)	(12	)
	49,154		51,221		54,426		18,861		20,149		21,234		30,292		31,070		33,192		(4	)	(6	)	(6	)	(5	)	(3	)	(6	)
Other(b)	451		364		231		212		124		79		239		240		152		24		58		71		57		—		58
Total revenues	$	49,605	$	51,584	$	54,657	$	19,073	$	20,274	$	21,313	$	30,531	$	31,310	$	33,344	(4	)	(6	)	(6	)	(5	)	(2	)	(6	)
Biopharmaceutical	$	45,708	$	47,878	$	51,214	$	17,164	$	18,570	$	19,708	$	28,544	$	29,308	$	31,506	(5	)	(7	)	(8	)	(6	)	(3	)	(7	)

^(a)  GIP = the Global Innovative Pharmaceutical segment; VOC = the Global Vaccines, Oncology and Consumer Healthcare segment; and GEP = the Global Established Pharmaceutical segment.

^(b)  Primarily includes revenues generated from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and also includes, in 2014 and 2013, revenues related to our transitional manufacturing and supply agreements with Zoetis.

Biopharmaceutical Revenues

Revenues from biopharmaceutical products contributed approximately 92% of our total revenues in 2014, 93% of our total revenues in 2013 and 94% of our total revenues in 2012.

We recorded direct product sales of more than $1 billion for each of 10 biopharmaceutical products in 2014, 2013 and 2012. These products represent 54% of our revenues from biopharmaceutical products in 2014, 51% of our revenues from biopharmaceutical products in 2013 and 50%of our revenues from biopharmaceutical products in 2012.

2014 v. 2013

Worldwide revenues from biopharmaceutical products in 2014 were $45.7 billion, a decrease of 5% compared to 2013. In addition to the operational factors noted in the Revenues—Overview section of this Analysis of the Consolidated Statements of Income, foreign exchange unfavorably impacted biopharmaceutical revenues by $857 million, or 2%.

Geographically,

• in the U.S., biopharmaceutical revenues decreased$1.4 billion, or 8%, in 2014, compared to 2013, reflecting, among other things:

◦ lower Alliance revenues, primarily due to Enbrel, reflecting the expiration of the co-promotion term of the collaboration agreement in October 2013 (approximately $1.3 billion in 2014), and Spiriva, reflecting the final-year terms, and termination on April 29, 2014, of the co-promotion collaboration, which, per the terms of the collaboration agreement, resulted in a decline of our share of Spiriva revenue (approximately $395 million in 2014); and

◦ lower revenues from Detrol LA due to loss of exclusivity (approximately $321 million in 2014), Celebrex due to loss of exclusivity in December 2014 (approximately $198 million), and lower revenues from Lipitor (approximately $191 million in 2014),

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partially offset by:

◦ the strong performance of Lyrica (approximately $352 million in 2014) as well as the growth of Prevnar, Xeljanz, Eliquis, Xalkori and Inlyta (collectively, approximately $760 million in 2014).

• in our international markets, biopharmaceutical revenues decreased$764 million, or 3%, in 2014, compared to 2013, primarily due to the unfavorable impact of foreign exchange of approximately $857 million in 2014, or 3%. Operationally, revenues increased slightly by $93 million, in 2014 compared to 2013 reflecting, among other things:

◦ higher revenues for Lipitor in China, Lyrica in developed markets, Enbrel outside Canada, and the performance of recently launched products Eliquis, Xalkori, and Inlyta (collectively, up approximately $941 million in 2014); and

◦ the operational growth of Prevenar and Xeljanz (approximately $228 million in 2014),

partially offset by:

◦ the operational decline of certain products, including Norvasc, Zithromax, Xalabrands, Detrol, Effexor and Chantix/Champix, in developed international markets, and Sutent in China (collectively, approximately $320 million in 2014);

◦ lower revenues as a result of the loss of exclusivity and subsequent multi-source generic competition for Viagra in most major European markets and Lyrica in Canada (collectively, approximately $248 million in 2014);

◦ lower Alliance revenues (approximately $218 million in 2014, excluding Eliquis), primarily due to the expiration of the co-promotion term of the collaboration agreement for Enbrel in Canada, the ongoing termination of the Spiriva collaboration agreement in certain countries, the loss of exclusivity for Aricept in Canada and the termination of the co-promotion agreement for Aricept in Japan in December 2012; and

◦ the continued erosion of branded Lipitor in most international developed markets (approximately $197 million in 2014).

During 2014, international biopharmaceutical revenues represented 62% of total biopharmaceutical revenues, compared to 61% in 2013.

2013 v. 2012

Worldwide revenues from biopharmaceutical products in 2013 were $47.9 billion, a decrease of 7% compared to 2012. In addition to the operational factors noted in the Revenues—Overview section of this Analysis of the Consolidated Statements of Income, foreign exchange unfavorably impacted biopharmaceutical revenues by $1.2 billion, or 3%.

Geographically,

• in the U.S., revenues from biopharmaceutical products decreased 6% in 2013, compared to 2012, reflecting, among other things:

◦ lower revenues from Lipitor, Revatio and Geodon, all due to loss of exclusivity (down approximately $875 million in 2013);

◦ lower Alliance revenues from Spiriva, reflecting the final-year terms of our Spiriva co-promotion agreement in the U.S. (down approximately $320 million in 2013), and Enbrel, reflecting the expiration of the co-promotion term of the collaboration agreement in the U.S. and Canada in October 2013 (down approximately $82 million);

◦ lower revenues from generic atorvastatin (down approximately $145 million in 2013);

◦ lower revenues from Prevnar, due to decreased government purchases (down approximately $84 million in 2013); and

◦ lower revenues from Zosyn (down approximately $45 million in 2013),

partially offset by:

◦ the strong performance of certain other biopharmaceutical products, including Lyrica, Celebrex, Xeljanz, Inlyta and Xalkori (up approximately $715 million in 2013).

• in our international markets, revenues from biopharmaceutical products decreased 7% in 2013, compared to 2012. Operationally, revenues decreased 3% in 2013, compared to 2012, reflecting, among other things:

◦ lower revenues for Lipitor and Xalatan/Xalacom (down approximately $1.4 billion in 2013) due to the loss of exclusivity of Lipitor in developed Europe, Japan and Australia, and Xalatan/Xalacom in the majority of European markets and in Australia; lower revenues for Viagra (down approximately $108 million in 2013) primarily due to loss of exclusivity in most major markets in Europe; and lower revenues for Aricept (direct sales) (down approximately $88 million in 2013) due to the loss of exclusivity in certain markets; and

◦ lower Alliance revenues (down approximately $493 million in 2013), primarily due to the loss of exclusivity of Aricept in many major European markets, the return of our rights to Aricept in Japan to Eisai Co., Ltd., and lower revenues for Spiriva in certain European countries, Canada and Australia (where the Spiriva collaboration has terminated),

partially offset by:

◦ higher revenues for Lyrica, and new product growth from Inlyta and Xalkori (collectively, approximately $506 million in 2013).

The unfavorable impact of foreign exchange on international biopharmaceutical revenues of 4% in 2013 also contributed to the decrease in revenues from biopharmaceutical products in our international markets.

During 2013, international revenues from biopharmaceutical products represented 61% of total revenues from biopharmaceutical products, compared to 62% in 2012.

For additional information about operating segment revenues, see the “Analysis of Operating Segment Information” section of this Financial Review.

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Revenues—Major Biopharmaceutical Products

The following table provides revenue information for several of our major biopharmaceutical products:
(MILLIONS OF DOLLARS)			Year Ended December 31,						% Change
PRODUCT	PRIMARY INDICATIONS	Business(a)	2014		2013		2012		14/13		13/12
Lyrica(b)	Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury	GEP/GIP	$	5,168	$	4,595	$	4,158	12		11
Prevnar family	Vaccines for prevention of pneumococcal disease	V	4,464		3,974		4,117		12		(3	)
Enbrel (Outside the U.S. and Canada)	Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis	GIP	3,850		3,774		3,737		2		1
Celebrex	Arthritis pain and inflammation, acute pain	GEP	2,699		2,918		2,719		(8	)	7
Lipitor	Reduction of LDL cholesterol	GEP	2,061		2,315		3,948		(11	)	(41	)
Viagra(c)	Erectile dysfunction	GEP/GIP	1,685		1,881		2,051		(10	)	(8	)
Zyvox	Bacterial infections	GEP	1,352		1,353		1,345		—		1
Sutent	Advanced and/or metastatic renal cell carcinoma (mRCC), refractory gastrointestinal stromal tumors (GIST) and advanced pancreatic neuroendocrine tumor	O	1,174		1,204		1,236		(2	)	(3	)
Norvasc	Hypertension	GEP	1,112		1,229		1,349		(10	)	(9	)
Premarin family	Symptoms of menopause	GEP	1,076		1,092		1,073		(1	)	2
BeneFIX	Hemophilia	GIP	856		832		775		3		7
Vfend	Fungal infections	GEP	756		775		754		(2	)	3
Pristiq	Depression	GEP	737		698		630		6		11
Genotropin	Replacement of human growth hormone	GIP	723		772		832		(6	)	(7	)
Chantix/Champix	An aid to smoking cessation treatment	GIP	647		648		670		—		(3	)
Refacto AF/Xyntha	Hemophilia	GIP	631		602		584		5		3
Xalatan/Xalacom	Glaucoma and ocular hypertension	GEP	495		589		806		(16	)	(27	)
Medrol	Inflammation	GEP	443		464		523		(5	)	(11	)
Xalkori	Anaplastic lymphoma kinase positive non-small cell lung cancer	O	438		282		123		55		129
Zoloft	Depression and certain anxiety disorders	GEP	423		469		541		(10	)	(13	)
Inlyta	Advanced renal cell carcinoma (RCC)	O	410		319		100		28		*
Relpax	Treats the symptoms of migraine headache	GEP	382		359		368		6		(2	)
Fragmin	Anticoagulant	GEP	364		359		381		2		(6	)
Sulperazon	Antibiotic	GEP	354		309		262		15		18
Effexor	Depression and certain anxiety disorders	GEP	344		440		425		(22	)	4
Rapamune	Prevention of organ rejection in kidney transplantation	GIP	339		350		346		(3	)	1
Tygacil	Antibiotic	GEP	323		358		335		(10	)	7
Zithromax/Zmax	Bacterial infections	GEP	314		387		435		(19	)	(11	)
Xeljanz	Rheumatoid arthritis	GIP	308		114		6		170		*
Zosyn/Tazocin	Antibiotic	GEP	303		395		484		(23	)	(18	)
EpiPen	Epinephrine injection used in treatment of life-threatening allergic reactions	GEP	294		273		263		8		4
Toviaz	Overactive bladder	GIP	288		236		207		22		14
Revatio	Pulmonary arterial hypertension (PAH)	GEP	276		307		534		(10	)	(43	)
Cardura	Hypertension/Benign prostatic hyperplasia	GEP	263		296		338		(11	)	(12	)
Xanax/Xanax XR	Anxiety disorders	GEP	253		276		274		(8	)	1
Inspra	High blood pressure	GEP	233		233		214		—		9
Somavert	Acromegaly	GIP	229		217		197		6		10
BMP2	Development of bone and cartilage	GIP	228		209		263		9		(21	)
Diflucan	Fungal infections	GEP	220		242		259		(9	)	(7	)
Neurontin	Seizures	GEP	210		216		235		(3	)	(8	)
Unasyn	Injectable antibacterial	GEP	207		212		228		(3	)	(7	)
Detrol/Detrol LA	Overactive bladder	GEP	201		562		761		(64	)	(26	)
Depo-Provera	Contraceptive	GEP	201		191		148		2		29
Protonix/Pantoprazole	Short-term treatment of erosive esophagitis associated with gastroesophageal reflux disease (GERD)	GEP	198		185		188		7		(2	)
Dalacin/Cleocin	Respiratory tract infections	GEP	184		199		232		(8	)	(14	)
Caduet	Reduction of LDL cholesterol and hypertension	GEP	180		223		258		(19	)	(14	)
Alliance revenues(d)	Various	GEP/GIP	957		2,628		3,492		(64	)	(25	)
All other biopharmaceutical(e)	Various	GIP/GEP/V/O	6,854		7,317		8,010		(6	)	(9	)
All other GIP(e)		GIP	469		540		332		(13	)	63

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All other GEP(e)	GEP	6,175	6,614	7,442	(7	)	(11	)
All other V/O(e)	V/O	211	164	236	29		(31	)

^(a)  Indicates the business to which the revenues relate. GIP = the Global Innovative Pharmaceutical segment; V = the Global Vaccines business; O = the Global Oncology business; and GEP = the Global Established Pharmaceutical segment.

^(b)  Lyrica revenues from all of Europe are included in GEP. All other Lyrica revenues are included in GIP.

^(c)  Viagra revenues from the U.S. and Canada are included in GIP. All other Viagra revenues are included in GEP.

^(d)  Includes Enbrel (GIP, in the U.S. and Canada through October 31, 2013), Spiriva (GEP), Rebif (GIP), Aricept (GEP) and Eliquis (GIP).

^(e)  All other GIP, All other GEP and All other V/O are subsets of All other biopharmaceutical revenues.

* Calculation not meaningful.

Biopharmaceutical—Selected Product Descriptions

• Lyrica (GIP/GEP) is indicated in the U.S. for three neuropathic pain conditions, fibromyalgia and adjunctive therapy for adult patients with partial onset seizures. In certain countries outside the U.S., indications include neuropathic pain (peripheral and central), fibromyalgia, adjunctive treatment of epilepsy and generalized anxiety disorder. Worldwide operational revenues for Lyrica increased 14% in 2014 compared to 2013. Foreign exchange had a unfavorable impact on worldwide revenues of 2% in 2014, compared to 2013.

In the U.S., revenues increased 18% in 2014 compared to 2013, driven by price increases as well as increased investment in effective direct-to-consumer advertising combined with strong field force performance and the recent promotional launch of new data demonstrating efficacy in treating fibromyalgia patients receiving antidepressants for their co-morbid depression, despite continued competition from generic versions of competitive medicines.

Internationally, Lyrica operational revenues increased 11% in 2014, compared to 2013, with the growth due to a focus on enhancing diagnosis and treatment rates of neuropathic back pain, and expediting the identification and appropriate treatment of generalized anxiety disorder in the EU, physician education regarding neuropathic pain and fibromyalgia in Japan and an effective direct-to-consumer campaign to increase awareness in Japan. In addition, growth was driven by gaining reimbursement in Australia and an effective multi-channel direct-to-consumer campaign driving an increase in visits to physicians. Foreign exchange had a unfavorable impact on international revenues of 3% in 2014, compared to 2013.

Worldwide revenues from Lyrica in our GIP segment increased 15% operationally in 2014, and in our GEP segment, revenues from Lyrica increased 11% operationally in 2014, compared to 2013.

• Prevnar family of products (V) consists of Prevnar 13/Prevenar 13 and Prevenar (7-valent),our pneumococcal conjugate vaccines for the prevention of various syndromes of pneumococcal disease. Overall, worldwide operational revenues for the Prevnar family of products increased 14% in 2014 compared to 2013. Foreign exchange had a unfavorable impact on worldwide revenues of 2% in 2014, compared to 2013.

In the U.S., revenues for Prevnar 13 increased 19% in 2014, compared to 2013, mainly due to government purchasing patterns and price increases, and increased demand, primarily driven by additional market penetration for Prevnar 13 in adults.

Internationally, operational revenues for the Prevenar family of products increased 10% in 2014, compared to 2013, primarily reflecting increased shipments associated with the Global Alliance for Vaccines and Immunization as well as the timing of government purchases and the favorable impact of Pfizer's inclusion in additional national immunization programs, both in various emerging markets. Foreign exchange had an unfavorable impact on international revenues of 4% in 2014, compared to 2013.

In August 2014, the U.S. Centers for Disease Control and Prevention's (CDC) Advisory Committee on Immunization Practices (ACIP) held an ad-hoc meeting to vote on the expanded use of Prevnar 13 in older adults. The ACIP voted to recommend Prevnar 13 for routine use to help protect adults aged 65 years and older against pneumococcal disease, which includes pneumonia caused by the 13 pneumococcal serotypes included in the vaccine.

These ACIP recommendations were subsequently approved by the directors at the CDC and U.S. Department of Health and Human Services, and were published in the Morbidity and Mortality Weekly Report (MMWR) in September 2014 by the CDC. As with other vaccines, the CDC regularly monitors the impact of vaccination and reviews the recommendations; in this case, however, the CDC announced formally that it will conduct this review in 2018. Currently, we are working with a number of U.S. investigators to monitor the proportion of community-acquired pneumonia caused by the serotypes included in Prevnar 13 and continue to observe trends.

On June 20, 2014, Prevenar 13 was approved in Japan for adults 65 years of age and older for the prevention of pneumococcal disease caused by 13 S. pneumoniae serotypes covered by the vaccine.

• Enbrel (GIP, outside the U.S. and Canada), for the treatment of moderate-to-severe rheumatoid arthritis, polyarticular juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis, ankylosing spondylitis, a type of arthritis affecting the spine, and nonradiographic axial spondyloarthritis, recorded an increase in worldwide operational revenues, excluding the U.S. and Canada, of 4% in 2014, compared to 2013. Results were favorably impacted by continued market leadership in rheumatoid arthritis. Foreign exchange had a unfavorable impact of 2% in 2014, compared to 2013.

The co-promotion term of the collaboration agreement with Amgen Inc. (Amgen), under which we co-promoted Enbrel in the U.S. and Canada and shared in the profits from Enbrel sales in those countries, and which we included in Alliance revenues through October 31, 2013, expired on that date and, subject to the terms of the agreement, we are entitled to a royalty stream for 36 months thereafter, which has been and is expected to continue to be significantly less than our share of Enbrel profits from U.S. and Canadian sales prior to the expiration. Following the end of the royalty period, we are not 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 term.

• Celebrex (GEP), 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 other markets, recorded a decrease in worldwide operational revenues

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of 6% in 2014, compared to 2013, primarily driven by share erosion due to generic competition and loss of exclusivity in the U.S. (December 2014) and in Developed Europe (November 2014), partially offset by strong demand from the lower back pain indication in Japan. Foreign exchange had a unfavorable impact of 2% in 2014, compared to 2013.

In the U.S., revenues decreased 10% in 2014 compared to 2013, primarily driven by share erosion due to generic competition, loss of exclusivity and reductions of inventory in the channel, partially offset by price increases.

Internationally, Celebrex operational revenues increased 2% in 2014 compared to 2013. Operational performance in international markets in 2014, compared to 2013, was driven by growth in Japan (strong performance in the low back pain and osteoarthritis indications), South Korea (maintaining share despite competition), and in emerging markets, partially offset by lower revenues in the developed markets in Europe due to loss of exclusivity and price reductions as governments continue to address their budget deficits. Foreign exchange had an unfavorable impact on international revenues of 4% in 2014, compared to 2013.

• Lipitor (GEP) is for the treatment of elevated LDL-cholesterol levels in the blood. Lipitor has lost exclusivity and faces generic competition in all major developed markets. Branded Lipitor recorded worldwide revenues of $2.1 billion, or an operational decrease of 9% in 2014, compared to 2013, primarily due to the impact of loss of exclusivity in developed markets and brand erosion due to generic and branded products competition and increased payer pressure worldwide, partially offset by strong volume growth in China resulting from reallocation of field force and promotional efforts.

In the U.S., revenues decreased 44% in 2014 compared to 2013.

In our international markets, operational revenues decreased 1% in 2014, compared to 2013, primarily due to loss of exclusivity in developed markets and brand erosion due to generic and branded product competition and increased payer pressure worldwide, partially offset by strong volume growth in China. Foreign exchange had an unfavorable impact on international revenues of 2% in 2014, compared to 2013.

• Viagra (GEP/GIP) isindicated for the treatment for erectile dysfunction. Viagra worldwide operational revenues decreased 9% in 2014, compared to 2013, primarily due to a decrease in international revenues. International (GEP) operational revenues decreased 24% in 2014, compared to 2013, primarily due to the entry of generics in developed Europe. Loss of exclusivity for Viagra in major European markets occurred in late-June 2013. Foreign exchange had an unfavorable impact on international revenues of 3% in 2014, compared to 2013. Revenues in the U.S. (GIP) increased 1% in 2014 compared to 2013.

• Zyvox (GEP) is among the world’s best-selling branded agents used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide operational revenues increased 1% in 2014, compared to 2013, due to favorable U.S. pricing and solid growth in Latin America and Africa/Middle East. Foreign exchange had an unfavorable impact of 1% in 2014, compared to 2013.

• Sutent (O) 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 operational revenues decreased 1% in 2014, compared to 2013, primarily due to competitive pressure in developed markets, market challenges in China as well as timing of purchases in emerging markets, partially offset by price increases in the U.S. and increased market share in Japan and Latin America. Foreign exchange had an unfavorable impact of 1% in 2014, compared to 2013.

• Norvasc (GEP) is indicated for the treatment of hypertension. Norvasc worldwide operational revenues decreased 6% in 2014 compared to 2013, and reflects, among other factors, generic erosion in Japan, partially offset by strong volume growth in China. Foreign exchange had an unfavorable impact of 4% in 2014, compared to 2013.

• Our Premarin family of products (GEP) helps women address moderate-to-severe menopausal symptoms. Premarin worldwide operational revenues decreased 1% in 2014 compared to 2013. Revenues in the U.S. were unfavorably impacted by prescription volume declines for Premarin Family Oral brands, partially offset by increased marketing support, directing sales force efforts to select physicians and price increases.

• BeneFIX and ReFacto AF/Xyntha (GIP) are hemophilia products using state-of-the-art manufacturing that assist patients with their lifelong bleeding disorders. BeneFIX worldwide operational revenues increased 3% in 2014, compared to 2013, primarily due to increased consumption and patient demand in several EU countries.

ReFacto AF/Xyntha recorded a 5% increase in worldwide operational revenues in 2014, compared to 2013, as a result of continued competitive patient conversions and hospital utilization in the U.S. and government purchases in Middle Eastern countries.

• Pristiq (GEP) 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 operational revenues of 7% in 2014, compared to 2013, primarily due to prescription growth in the emerging markets, Spain, Canada and Australia, as well as favorable pricing in the U.S. Foreign exchange had an unfavorable impact on international revenues of 8% in 2014, compared to 2013.

• Chantix/Champix (GIP) is an aid to smoking-cessation treatment in adults 18 years of age and older. Worldwide operational revenues increased 1% in 2014 compared to 2013. Revenues in the U.S. increased 10% in 2014, compared to 2013, primarily due to price increases, partially offset by competition from OTC competitors, and a movement by smokers to e-cigarettes. International operational revenues decreased 8% in 2014, compared to 2013, primarily due to overall market decline across several key markets as a result of a challenging macro-economic environment, strong competitive pressure from aggressive Nicotine Replacement Therapy (NRT) consumer promotion and the widespread availability of e-cigarettes and use of prescription medication, as well as the lingering impact from previous negative media exposure. Foreign exchange had an unfavorable impact on international revenues of 4% in 2014, compared to 2013.

• Xalkori (O), for the treatment of patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) that is anaplastic lymphoma kinase (ALK)-positive, is now approved in 82 countries, including the U.S., EU (conditional), Japan, South Korea, Canada,

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Australia and Switzerland, as well as in many emerging markets, including China, Russia, Mexico, India and Turkey. Xalkori recorded worldwide revenues of $438 million in 2014, an operational increase of 56%, compared to 2013 as a result of (i) an increase in diagnostic rates for the ALK gene abnormality, which has led to more patients being treated, extending duration of therapy, increasing market share, and increasing the number of prescriptions and (ii) price increases in the U.S. Foreign exchange had a 1% unfavorable impact in 2014, compared to 2013.

• Inlyta (O), for the treatment of patients with advanced renal cell carcinoma (RCC) after failure of a prior systemic treatment, is now approved in 77 countries, including the U.S., EU, Switzerland, Japan, Canada, Australia and South Korea (exact indications vary by region). Inlyta recorded worldwide revenues of $410 million in 2014, an operational increase of 32%, compared to 2013, due to recent launches and share uptake. International operational revenues increased 41% in 2014, compared to 2013, primarily due to strong growth in developed markets in Europe, where a large proportion of oncologists are prescribing Inlyta. Foreign exchange had an unfavorable impact on international revenues of 6% in 2014, compared to 2013.

• Xeljanz (GIP) was first approved in the U.S. in November 2012 for the treatment of adult patients with moderate to severe active rheumatoid arthritis and is now approved for use as a second-line therapy (after traditional disease-modifying antirheumatic drugs) in more than 35 markets including the U.S., Japan, Australia, Canada, Switzerland and Brazil. In 2014, Xeljanz experienced significant growth with tripling approvals and the number of market introductions compared to 2013. Xeljanz recorded worldwide revenues of $308 million in 2014, virtually all in the U.S., primarily driven by the FDA approval for a label update in February 2014 to include data on radiographic progression, which strengthens the clinical profile of Xeljanz as well as positive consumer awareness. Foreign exchange had a 2% unfavorable impact in 2014, compared to 2013.

Alliance revenues (GEP/GIP) worldwide operational revenues decreased 63% in 2014, compared to 2013, mainly due to:

◦ the expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada in October 2013, which resulted in a decrease in operational revenues of $1.4 billion in 2014, compared to 2013. (While Enbrel alliance revenues declined $1.4 billion in 2014, we received royalty income from Enbrel in the U.S. and Canada of $531 million in 2014, an operational increase of approximately $440 million, which is recorded in Other (income)/deductions—net in the consolidated statements on income. See Notes to Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net.);

◦ the expiration or near-term expiration of the co-promotion collaboration for Spiriva (GEP) in Japan, the U.S. (where the collaboration expired in April 2014), certain European countries, Australia, Canada and South Korea, which resulted in an operational decrease in Pfizer's share of Spiriva revenues of $490 million in 2014, compared to 2013; and

◦ the loss of exclusivity for Aricept in Canada in December 2013 and the termination of the co-promotion agreement in Japan in December 2012, which resulted in an operational decrease in Pfizer's share of Aricept revenues of approximately $137 million in 2014, compared to 2013,

partially offset by

◦ an increase of $266 million for Eliquis worldwide revenues.

• Eliquis (apixaban) (GIP) is being jointly developed and commercialized by Pfizer and Bristol-Myers Squibb (BMS). Eliquis is part of the Novel Oral Anticoagulant (NOAC) market; the agents in this class were developed as alternatives to warfarin in appropriate patients with certain conditions. In 2012, Eliquis (apixaban) was approved to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation (NVAF) in the U.S., Europe and Japan. Since then, the NVAF indication has been launched in the majority of markets around the world. In addition, Eliquis is approved in the U.S. and Europe for the treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE), and for the reduction in the risk of recurrent DVT and PE following initial therapy as well as for the prophylaxis of DVT, which may lead to PE, in patients who have undergone hip or knee replacement surgery. The two companies share commercialization expenses and profit/losses equally on a global basis. While Eliquis was the third entrant in this market, we believe it has a differentiated product profile and continue to invest in medical education and peer-to-peer programs to assist physicians in understanding the data, and in direct-to-consumer advertising in the U.S.

• Embeda (GIP)—In November 2013, we announced that the FDA had approved a prior approval supplement for an update to the Embeda manufacturing process. This update addressed the pre-specified stability requirement that led to the voluntary recall of Embeda from the market in March 2011. In October 2014, the FDA approved an updated label for Embeda extended release capsules, for oral use, to include abuse-deterrence study data. Embeda is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. Embeda became available in the U.S. in February 2015.

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.

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 strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D to achieve a sustainable pipeline that will deliver value in the near term and over time. Our R&D priorities include delivering a pipeline of differentiated therapies with the greatest scientific and commercial promise, innovating new capabilities that can position Pfizer for long-term leadership and creating new models for biomedical collaboration that will expedite the pace of innovation and productivity. To that end, our research primarily focuses on six high-priority areas that have a mix of small molecules and large molecules—immunology and inflammation; cardiovascular and metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases. Another area of focus is biosimilars.

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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 as of February 27, 2015.

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
Ibrance (Palbociclib)	An oral and selective reversible inhibitor of the CDK 4 and 6 kinases for the first-line treatment of patients with estrogen receptor-positive (ER+), human epidermal growth factor receptor 2-negative (HER2-) advanced breast cancer	February 2015
Trumenba (MnB rLP2086) (PF-05212366)	A prophylactic vaccine for active immunization to prevent invasive disease caused by Neisseria meningitidis serogroup B in individuals 10 through 25 years of age	October 2014
Eliquis (Apixaban)(a)	Treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE), and for the reduction in the risk of recurrent DVT and PE	August 2014
Eliquis (Apixaban)(a)	Prevention of DVT, which may lead to PE, in adult patients who have undergone hip or knee replacement surgery	March 2014

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

PENDING U.S. NEW DRUG APPLICATIONS (NDA) AND SUPPLEMENTAL FILINGS
PRODUCT	INDICATION	DATE FILED*
ALO-02	A Mu-type opioid receptor agonist for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate	February 2015
Xeljanz (Tofacitinib)	Treatment of adult patients with moderate to severe chronic plaque psoriasis	February 2015
Tafamidis meglumine(a)	Treatment of transthyretin familial amyloid polyneuropathy (TTR-FAP)	February 2012
Celebrex (Celecoxib)(b)	Chronic pain	October 2009
Remoxy (Oxycodone Hydrochloride)(c)	Management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate	August 2008
Viviant (Bazedoxifene)(d)	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 continue to work with the FDA to define a path forward.

^(b)  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 the PRECISION trial, anticipated in 2016, which will inform our next steps. There are no additional granted patents related to this potential approval. The PRECISION trial is designed to assess the relative long-term cardiovascular safety of Celebrex compared to prescription doses of ibuprofen and naproxen in the treatment of arthritis pain.

^(c)  In October 2014, we concluded an internal review of the top-line results of five recently completed clinical studies required to address the “complete response” letter received in June 2011 from the FDA with respect to Remoxy, and we notified Pain Therapeutics (PT) that we have decided to discontinue our agreement to develop and commercialize Remoxy. We will work together for an orderly transition of Remoxy to PT until the scheduled termination date in April 2015.

^(d)  NDAs for Viviant (bazedoxifene) for treatment and prevention of post-menopausal osteoporosis remain pending before the FDA. In February 2008, the FDA advised it expected to convene an advisory committee pending responses to the “approvable letters” received in December 2007 and May 2008 with respect to the NDAs. In view of the approval of Duavee (conjugated estrogens/bazedoxifene), we continue to assess next steps for Viviant.

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REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
PRODUCT	DESCRIPTION OF EVENT	DATE APPROVED	DATE FILED*
Xalkori (Crizotinib)	Application filed in the EU for first line treatment of ALK-positive non-small cell lung cancer	—	January 2015
Duavive (Conjugated Estrogens/Bazedoxifene)	Approval in the EU for treatment of estrogen deficiency symptoms in postmenopausal women with a uterus (with at least 12 months since the last menses) for whom treatment with progestin-containing therapy is not appropriate	December 2014	—
Effexor SR (Venlafaxine HCl)	Application filed in Japan for treatment of depression/depressed state	—	December 2014
Bosulif (Bosutinib)	Approval in Japan for treatment of previously treated chronic myelogenous leukemia	September 2014	—
Eliquis (Apixaban)(a)	Approval in the EU for treatment of DVT and PE, and prevention of recurrent DVT and PE in adults	July 2014	—
Prevenar 13 Adult	Approval in Japan for prevention of pneumococcal disease caused by Streptococcus pneumoniae serotypes (1, 3, 4, 5, 6A, 6B, 7F, 9V, 14, 18C, 19A, 19F and 23F) in adults 65 years of age and older	June 2014	__

^*  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.

LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS
PRODUCT	INDICATION
Bosulif (Bosutinib)	First-line treatment for patients with chronic phase Philadelphia chromosome positive chronic myelogenous leukemia, which is being developed in collaboration with Avillion Group
Inlyta (Axitinib)	Adjuvant treatment of renal cell carcinoma, which is being developed in collaboration with SFJ Pharmaceuticals Group
Ibrance (Palbociclib)	An oral and selective reversible inhibitor of the CDK 4 and 6 kinases for the first-line treatment of patients with estrogen receptor-positive (ER+), human epidermal growth factor receptor 2-negative (HER2-) advanced breast cancer (ex-U.S.), as well as for the treatment of recurrent advanced breast cancer and, in collaboration with the German Breast Group, high-risk early breast cancer
Lyrica (Pregabalin)	Peripheral neuropathic pain; CR (once-a-day) dosing
Sutent (Sunitinib)	Adjuvant treatment of renal cell carcinoma
Tofacitinib(a)	Treatment of psoriasis (ex-US), ulcerative colitis, psoriatic arthritis, and QD MR (once-a-day) dosing
Vyndaqel (Tafamidis meglumine)	Adult symptomatic transthyretin cardiomyopathy

^(a)  Tofacitinib QD is currently conducting pivotal Phase 1 studies with registrational intent.

NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT
CANDIDATE	INDICATION
Bococizumab (RN316) (PF-04950615)	A monoclonal antibody that inhibits PCSK9 for the treatment of hyperlipidemia and prevention of cardiovascular events
Dacomitinib	A pan-HER tyrosine kinase inhibitor for the first-line treatment of patients with advanced non-small cell lung cancer with EGFR activating mutations, which is being developed in collaboration with SFJ Pharmaceuticals Group
Ertugliflozin (PF-04971729)	An oral SGLT2 inhibitor for the treatment of type 2 diabetes, which is being developed in collaboration with Merck & Co., Inc.
Inotuzumab ozogamicin	An antibody drug conjugate, consisting of an anti-CD22 monotherapy antibody linked to a cytotoxic agent, calicheamycin, for the treatment of acute lymphoblastic leukemia
Trumenba (MnB rLP2086) (PF-05212366)	A prophylactic vaccine for active immunization to prevent invasive disease caused by Neisseria meningitidis serogroup B in individuals 10 through 25 years of age (ex-U.S.)
PF-06836922	A long-acting hGH-CTP for the treatment of growth hormone deficiency (GHD) in adults, which is being developed in collaboration with OPKO Health, Inc.
PF-06438179(a)	A potential biosimilar to Remicade® (infliximab)
PF-05280014(b)	A potential biosimilar to Herceptin®(trastuzumab)
PF-05280586(c)	A potential biosimilar to Rituxan®(rituximab)
Tanezumab(d)	An anti-nerve growth factor monoclonal antibody for the treatment of pain (on partial clinical hold)

^(a)  Remicade® is a registered trademark of Janssen Biotech, Inc.

^(b)  Herceptin® is a registered trademark of Genentech, Inc.

^(c)  Rituxan® is a registered trademark of Biogen Idec, Inc.

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Financial Review

Pfizer Inc. and Subsidiary Companies

^(d)  The tanezumab program is under a partial clinical hold by the FDA pending review of additional nonclinical data. Subject to the removal of the partial clinical hold, we are planning to continue development of tanezumab in 2015 for the treatment of osteoarthritis, chronic low back pain and cancer pain. In October 2013, we entered into a collaboration agreement with Eli Lilly and Company to jointly develop and globally commercialize tanezumab for those indications.

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)	2014			2013			2012			14/13	13/12
Cost of sales	$	9,577		$	9,586		$	9,821		—	(2	)
As a percentage of Revenues	19.3		%	18.6		%	18.0		%

2014 v. 2013

Cost of sales increased as a percentage of revenues in 2014, compared to the same period in 2013. These increases are primarily due to the impact of losses of exclusivity and unfavorable changes in product mix, resulting from, among other things, the loss of Enbrel alliance revenue after October 31, 2013, when the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada expired, and the loss of Spiriva alliance revenue in the U.S. as of April 29, 2014. Cost of sales in 2014 were relatively flat compared to 2013 as the unfavorable impact due to the changes in product mix discussed above was largely offset by favorable foreign exchange of 3%.

2013 v. 2012

Cost of sales decreased 2% in 2013, compared to 2012, primarily due to the favorable impact of foreign exchange of 4%, which more than offset the unfavorable impact of a shift in product mix due to the loss of exclusivity of certain products in various markets.

Selling, Informational and Administrative (SI&A) Expenses

	Year Ended December 31,									% Change
(MILLIONS OF DOLLARS)	2014			2013			2012			14/13		13/12
Selling, informational and administrative expenses	$	14,097		$	14,355		$	15,171		(2	)	(5	)
As a percentage of Revenues	28.4		%	27.8		%	27.8		%

2014 v. 2013

SI&A expenses decreased 2% in 2014, compared to 2013, primarily due to:

• lower expenses for field force and marketing expenses, reflecting the benefits of cost-reduction and productivity initiatives, partly in response to product losses of exclusivity;

• a reduction related to a true-up of the 2013 fee payable to the federal government under the U.S. Healthcare Legislation based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs; and

• the favorable impact of foreign exchange of 1%,

partially offset by:

• increased investments in recently launched products and certain in-line products, as well as the launch and pre-launch marketing expenses for Trumenba (meningitis B vaccine) and Ibrance (palbociclib); and

• a $215 million charge to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014 by the U.S. Internal Revenue Service (IRS).

2013 v. 2012

SI&A expenses decreased 5% in 2013, compared to 2012, primarily due to:

• savings generated from a reduction in marketing functions, partly in response to product losses of exclusivity and more streamlined corporate support functions; and

• the favorable impact of foreign exchange of 1%,

partially offset by:

• increased spending in support of several new product launches.

26 2014 Financial Report

Financial Review

Pfizer Inc. and Subsidiary Companies

Research and Development (R&D) Expenses

	Year Ended December 31,									% Change
(MILLIONS OF DOLLARS)	2014			2013			2012			14/13	13/12
Research and development expenses	$	8,393		$	6,678		$	7,482		26	(11	)
As a percentage of Revenues	16.9		%	12.9		%	13.7		%

2014 v. 2013

R&D expenses increased 26% in 2014, compared to 2013, primarily due to:

• a charge associated with a collaborative arrangement with Merck KGaA, announced in November 2014, to jointly develop and commercialize an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer. The charge includes an $850 million upfront cash payment as well as an additional amount of $309 million, reflecting the estimated fair value of certain co-promotion rights for Xalkori given to Merck KGaA (for further discussion, see the "Our Business Development Initiatives" section of this Financial Review); and

• costs associated with ongoing Phase 3 programs for certain new drug candidates, including our PCSK9 inhibitor, and ertugliflozin (in collaboration with Merck), investments in Ibrance (palbociclib) and our vaccines portfolio, including Trumenba, as well as potential new indications for previously approved products, especially for Xeljanz.

2013 v. 2012

R&D expenses decreased 11% in 2013, compared to 2012, primarily due to:

• the non-recurrence of a $250 million payment to AstraZeneca in 2012 to obtain the exclusive, global, OTC rights to Nexium; and

• lower charges related to implementing our cost-reduction and productivity initiatives.

See also the “Analysis of Operating Segment Information” section of this Financial Review.

Description of Research and Development Operations

Innovation is critical to the success of our company and drug discovery and development is time-consuming, expensive and unpredictable.

Our 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 (for technical support and other services). For additional information by operating segment, see the "Analysis of Operating Segment Information" section of this MD&A.

We take a holistic approach to our 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 R&D projects and for seeking to ensure 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 a