EX-99 2 pfe-06282020xex99.htm EXHIBIT 99 Exhibit
Exhibit 99


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PFIZER REPORTS SECOND-QUARTER 2020 RESULTS
Second-Quarter 2020 Revenues of $11.8 Billion, Reflecting 9% Operational Decline; Excluding the Impact from Consumer Healthcare(1), Revenues Declined 3% Operationally
6% Operational Growth from Biopharma, Primarily Driven by Vyndaqel/Vyndamax, Eliquis, Ibrance, Inlyta and Xtandi
31% Operational Decline from Upjohn, Primarily Due to U.S. Loss of Exclusivity of Lyrica in 2019, Partially Offset by 17% Operational Growth in China, Primarily Due to Lipitor and Norvasc
Second-Quarter 2020 Reported Diluted EPS(2) of $0.61, Adjusted Diluted EPS(3) of $0.78
Raised Midpoint of 2020 Financial Guidance for Revenues by $0.1 Billion to $48.6 to $50.6 Billion and Adjusted Diluted EPS(3) by $0.03 to $2.85 to $2.95; Reaffirmed All Other 2020 Financial Guidance Components
Initiated Four Different Registration-Enabling Vaccine Candidate Programs Since May 2020, Including for Pneumococcal 20-Valent in Infants, Meningococcal Pentavalent, Respiratory Syncytial Virus and for COVID-19, Which Started Dosing Patients in the U.S. Yesterday
NEW YORK, NY, Tuesday, July 28, 2020 – Pfizer Inc. (NYSE: PFE) reported financial results for second-quarter 2020, increased its 2020 financial guidance for revenues and Adjusted diluted EPS(3) and reaffirmed all other components of its 2020 financial guidance, which continues to reflect actual and anticipated business impacts from the novel coronavirus disease of 2019 (COVID-19) pandemic.
Results for the second quarter and the first six months of 2020 and 2019(4) are summarized below.
OVERALL RESULTS
 
 
 
 
 
 
 
 
 
($ in millions, except
per share amounts)
Second-Quarter
 
 
Six Months
 
2020
2019
Change
 
 
2020
2019
Change
Revenues
$ 11,801

$ 13,264

(11%)
 
 
$ 23,829

$ 26,382

(10%)
Reported Net Income(2)
3,426

5,046

(32%)
 
 
6,828

8,929

(24%)
Reported Diluted EPS(2)
0.61

0.89

(31%)
 
 
1.22

1.56

(22%)
Adjusted Income(3)
4,403

4,520

(3%)
 
 
8,917

9,410

(5%)
Adjusted Diluted EPS(3)
0.78

0.80

(2%)
 
 
1.59

1.65

(4%)
 
 
 
 
 
 
 
 
 
REVENUES
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
Second-Quarter
 
 
Six Months
 
2020
2019
% Change
 
 
2020
2019
% Change
 
Total
Oper.
 
 
Total
Oper.
Biopharma
$ 9,795

$ 9,432

4%
6%
 
 
$ 19,802

$ 18,477

7%
9%
Upjohn
2,006

2,970

(32%)
(31%)
 
 
4,027

6,184

(35%)
(34%)
Consumer Healthcare(1)

862

(100%)
(100%)
 
 

1,721

(100%)
(100%)
Total Company
$ 11,801

$ 13,264

(11%)
(9%)
 
 
$ 23,829

$ 26,382

(10%)
(8%)
 
 
 
 
 
 
 
 
 
 
 

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Beginning in 2020, Upjohn began managing Pfizer’s Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan N.V. (Mylan) for generic drugs in Japan (Mylan-Japan). To facilitate comparison across periods, revenues and expenses associated with Meridian and Mylan-Japan are reported in Pfizer’s Upjohn business in all periods presented.
Acquisitions and other business development activities completed in 2019 and in the first half of 2020 impacted financial results in the periods presented(1). Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange(5).
IMPACT OF COVID-19 ON BUSINESS ACTIVITIES AND FINANCIAL RESULTS
As a result of the COVID-19 pandemic, Pfizer continues to take proactive steps intended to protect the health and safety of colleagues, to maintain supply of Pfizer medicines and vaccines to patients and to continue to advance Pfizer’s pipeline.
Colleague Health and Safety
At this time, Pfizer colleagues in most locations who are able to perform their job functions outside of a Pfizer facility continue to work remotely. Certain Pfizer colleagues, primarily those in the Pfizer Global Supply and Worldwide Research and Development organizations, have roles whose physical presence at Pfizer facilities is required to perform their job functions. These colleagues continue to report to work and are subject to strict protocols intended to reduce the risk of transmission, including social distancing, maintaining contact logs, increased cleaning and use of personal protective equipment as necessary.
Manufacturing
To date, Pfizer has not seen a significant disruption in its supply chain, and all of its manufacturing sites around the world have continued to operate at or near normal levels. In addition, Pfizer has taken steps to scale up manufacturing operations at risk to accelerate its ability to supply a potential novel treatment or vaccine for COVID-19.
Clinical Trials
After a brief pause to the recruitment portion of certain ongoing clinical studies and a delay to most new study starts, in late-April 2020, Pfizer restarted recruitment across the development portfolio, including new study starts. Pfizer continues to work closely with clinical trial sites to understand their needs and is performing remote monitoring where appropriate to oversee study conduct. In addition, processes to enable tele-health and home healthcare are being utilized where appropriate to continue the data collection process and support patient safety.

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Sales and Marketing
Pfizer has experienced an impact on its sales and marketing activities due to widespread restrictions on in-person meetings with healthcare professionals and the refocused attention of the medical community on fighting COVID-19. Access to prescribers for sales force colleagues during second-quarter 2020 was mixed, with those in most international markets able to meet with healthcare professionals for most of the quarter, while those in the U.S. were unable to meet in-person with doctors for nearly all of the quarter. At this time, no U.S. sales force colleagues are meeting in-person with healthcare professionals due to COVID-19-related safety concerns. Pfizer is actively reviewing and assessing epidemiological data and colleagues remain ready to resume in-person engagements with healthcare professionals on a location-by-location basis as soon as it is safe to do so.
As a result of the lower number of in-person meetings with prescribers and restrictions on patient movements due to government-mandated work-from-home or shelter-in-place policies, the rate of new prescriptions for certain products and of vaccination rates for most vaccines slowed in certain markets, including the U.S., which negatively impacted second-quarter 2020 financial results. These declines were partially offset by certain Pfizer medicines and vaccines that saw increased demand in certain markets compared to the prior-year quarter, including Prevenar 13 for streptococcus pneumoniae in adults in international markets as well as certain sterile injectable products utilized in the intubation and ongoing treatment of mechanically-ventilated COVID-19 patients.
Financial Condition and Access to Capital Markets
Due to Pfizer’s significant operating cash flows, as well as its financial assets, access to capital markets and revolving credit agreements, Pfizer believes it has, and will maintain, the ability to meet liquidity needs for the foreseeable future.
Pfizer will continue to pursue efforts to maintain the continuity of its operations while monitoring for new developments related to the COVID-19 pandemic, which are unpredictable. Future COVID-19 developments could result in additional favorable or unfavorable impacts on Pfizer’s business, operations or financial condition.
2020 FINANCIAL GUIDANCE(6) 
Pfizer increased its 2020 financial guidance for Total Company(7) and New Pfizer(8) revenues and Adjusted diluted EPS(3) and reaffirmed all other financial guidance components.
Financial guidance reflects management’s current expectations for operational performance, foreign exchange rates as well as various COVID-19-related uncertainties, primarily those related to the severity, duration and global macroeconomic impact of the pandemic. Key guidance assumptions regarding these uncertainties broadly reflect an ongoing, gradual global recovery from the first-half 2020 macroeconomic and healthcare impacts of the COVID-19 pandemic. Specific COVID-19-related assumptions include:

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Patient visits with physicians, vaccination rates and the number of elective surgical procedures will gradually increase from second-quarter 2020 levels, beginning in third-quarter 2020;
New-to-brand prescription trends for certain key products will gradually improve from second-quarter 2020 levels, beginning in third-quarter 2020;
Gradual improvement in access to U.S. healthcare professionals for sales force colleagues;
Clinical trial enrollment, including new study starts, continues throughout the remainder of 2020;
Pfizer’s manufacturing and supply chain activities continue to not be materially disrupted; and
Pfizer’s investments in potential treatments and a potential vaccine for COVID-19 continue throughout 2020. However, updated financial guidance does not include any revenues from a potential COVID-19 vaccine.
Based on results to date and these assumptions for the remainder of the year, Pfizer increased its 2020 financial guidance for Total Company(7) and New Pfizer(8) revenues and Adjusted diluted EPS(3) and reaffirmed all other financial guidance components. Total Company(7) financial guidance reflects a full year of revenue and expense contributions from Biopharma and Upjohn and is presented below.
 
 
Revenues
$48.6 to $50.6 billion
(previously $48.5 to $50.5 billion)
Adjusted Cost of Sales(3) as a Percentage of Revenues
19.5% to 20.5%
Adjusted SI&A Expenses(3)
$11.5 to $12.5 billion
Adjusted R&D Expenses(3)
$8.6 to $9.0 billion
Adjusted Other (Income)/Deductions(3)
Approximately $800 million of income
Effective Tax Rate on Adjusted Income(3)
Approximately 15.0%
Adjusted Diluted EPS(3)
$2.85 to $2.95
(previously $2.82 to $2.92)
 
 
Financial guidance for Adjusted diluted EPS(3) continues to assume no share repurchases in 2020.

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2020 Financial Guidance for New Pfizer(8) 
Pfizer’s updated 2020 financial guidance for New Pfizer(8) is presented below. New Pfizer(8) financial guidance reflects the Biopharma business as it is presently being managed and assumes the pending Upjohn combination with Mylan was completed at the beginning of 2020.
 
 
Revenues
$40.8 to $42.4 billion
(previously $40.7 to $42.3 billion)
Adjusted IBT Margin(9)
Approximately 37.0%
Adjusted Diluted EPS(3)
$2.28 to $2.38
(previously $2.25 to $2.35)
Operating Cash Flow
$10.0 to $11.0 billion
 
 
2020 Financial Guidance for Upjohn(10) 
Pfizer’s reaffirmed 2020 financial guidance for Upjohn(10) is presented below. Upjohn(10) financial guidance reflects a full-year 2020 contribution from the Upjohn business as it is presently being managed.
 
 
Revenues
$8.0 to $8.5 billion
Adjusted EBITDA(11)
$3.8 to $4.2 billion
 
 
CAPITAL ALLOCATION
During the first six months of 2020, Pfizer paid $4.2 billion of dividends, composed of dividends of $0.38 per share of common stock in each of the first and second quarters of 2020.
No share repurchases have been completed to date in 2020. As of July 28, 2020, Pfizer’s remaining share repurchase authorization was $5.3 billion. No share repurchases are currently planned in 2020.
The second-quarter 2020 diluted weighted-average shares used to calculate earnings per common share was 5,619 million shares, a reduction of 53 million shares compared to second-quarter 2019.

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EXECUTIVE COMMENTARY
Dr. Albert Bourla, Pfizer’s Chairman and Chief Executive Officer, stated, “We remain fully committed to confronting the public health challenge posed by the COVID-19 pandemic by collaborating with industry partners and academic institutions to develop potential approaches to prevent and treat COVID-19. Our researchers and scientists have made important progress toward developing an effective vaccine though significant additional work remains. I want to thank all of our R&D colleagues who continue to work tirelessly to find a potential vaccine and treatments that could bring an end to this pandemic. I would also like to acknowledge the remarkable job that our manufacturing team has done throughout this crisis to ensure our medicines continue to reach patients in need.
“Our strong performance in the first half of the year highlights the resiliency of our business even during the most challenging times. The Biopharma business grew 9% operationally in the first six months of the year, driven by strong performances from many key brands. Upjohn faced the expected headwind of generic competition for Lyrica in the U.S. that was partially offset by strong performance in China in second-quarter 2020. We continue to progress toward a successful close of our transaction with Mylan, now expected in the fourth quarter of 2020,” Dr. Bourla concluded.
Frank D’Amelio, Chief Financial Officer and Executive Vice President, Business Operations and Global Supply, stated, “We raised the midpoint of our 2020 financial guidance range for revenues and Adjusted diluted EPS(3) for Total Company(7) and for New Pfizer(8) while reaffirming the ranges for all other financial guidance components. While our near-term outlook has greater macroeconomic uncertainty than usual due to COVID-19, we are confident that the long-term outlook for our businesses remains solid. Overall, I was pleased with our financial performance in second-quarter 2020, which demonstrated the durability of our business despite the challenges that the COVID-19 pandemic has presented.
“Despite the ongoing impact of COVID-19, 2020 is still expected to be a transformational year for Pfizer. Following the pending close of the Upjohn-Mylan transaction, now expected in fourth-quarter 2020, New Pfizer will be positioned to deliver revenue and Adjusted diluted EPS(3) growth that is expected to be among the industry leaders. New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends,” Mr. D’Amelio concluded.

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QUARTERLY FINANCIAL HIGHLIGHTS (Second-Quarter 2020 vs. Second-Quarter 2019)
Second-quarter 2020 revenues totaled $11.8 billion, a decrease of $1.5 billion, or 11%, compared to the prior-year quarter, reflecting an operational decline of $1.2 billion, or 9%, as well as the unfavorable impact of foreign exchange of $277 million, or 2%. Excluding the impact of Consumer Healthcare(1), revenues declined 3% operationally compared to the prior-year quarter.
Impact of COVID-19 on Second-Quarter 2020 Revenues
Second-quarter 2020 revenues included an estimated net unfavorable impact of approximately $500 million, or 4%, due to COVID-19, primarily reflecting unfavorable disruptions to wellness visits for pediatric and adult patients in the U.S. and lower demand for certain products in China, partially offset by increased U.S. demand for certain sterile injectable products as well as increased adult demand for Prevenar 13 in certain international markets.
Biopharma Revenue Highlights
Second-quarter 2020 Biopharma revenues totaled $9.8 billion, up 6% operationally, primarily driven by:
Vyndaqel/Vyndamax global revenues of $277 million, driven by:
the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for the treatment of transthyretin amyloid cardiomyopathy (ATTR-CM); and
140% operational growth in international markets, primarily driven by the March 2019 launch of the ATTR-CM indication in Japan and the February 2020 approval of the ATTR-CM indication in the European Union;
Eliquis globally, up 19% operationally, primarily driven by continued increased adoption in non-valvular atrial fibrillation as well as oral anti-coagulant market share gains. Second-quarter 2020 U.S. growth was unfavorably impacted by a lower net price and COVID-19-related wholesaler buying patterns;
Ibrance in the U.S., up 11%, primarily driven by increased cyclin-dependent kinase (CDK) class penetration and Ibrance’s continued CDK market share leadership in metastatic breast cancer;
Prevenar 13 internationally, up 18% operationally, primarily reflecting significantly increased adult uptake in Germany and certain other markets resulting from greater vaccine awareness for respiratory illnesses, including specifically pneumococcal disease, due to the COVID-19 pandemic, as well as continued strong pediatric uptake in China;
the Hospital business in the U.S., up 13%, primarily driven by increased demand for certain sterile injectable products utilized in the intubation and ongoing treatment of mechanically-ventilated COVID-19 patients as well as continued growth from Panzyga following its November 2018 U.S. launch;

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Inlyta in the U.S., up 120%, primarily reflecting increased demand resulting from the second-quarter 2019 U.S. Food and Drug Administration (FDA) approvals for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced renal cell carcinoma; and
Xtandi in the U.S., up 32%, primarily driven by continued strong demand in the metastatic and non-metastatic castration-resistant prostate cancer indications as well as the metastatic castration-sensitive prostate cancer indication, which was approved in the U.S. in December 2019,
partially offset primarily by lower revenues for:
Prevnar 13 in the U.S., down 22%, primarily reflecting the expected unfavorable impact of disruptions to wellness visits for pediatric and adult patients due to COVID-19-related mobility restrictions or limitations, partially offset by the favorable impact of timing associated with government purchases for the pediatric indication, compared to the prior-year quarter;
the Hospital business in emerging markets, down 14% operationally, primarily driven by lower demand for certain anti-infective products in China due to lower infection rates driven by fewer elective surgical procedures, shorter in-patient hospital stays and improved infection control compared to the prior-year quarter;
Enbrel internationally, down 16% operationally, primarily reflecting continued biosimilar competition in most developed Europe markets as well as in Japan and Brazil;
Chantix in the U.S., down 21%, primarily reflecting expected lower demand resulting from reduced doctor visits, including wellness visits when Chantix is typically prescribed, due to COVID-19-related mobility restrictions or limitations; and
Ibrance in developed Europe, down 10% operationally, primarily reflecting continued strong demand, more than offset by pricing pressures in certain markets.
Upjohn Revenue Highlights
Second-quarter 2020 Upjohn revenues totaled $2.0 billion, down 31% operationally, primarily driven by the expected significant volume declines for Lyrica in the U.S. due to multi-source generic competition that began in July 2019. Excluding the impact of Lyrica in the U.S., Upjohn revenues declined 6% operationally.
Second-quarter 2020 Upjohn revenues in China grew 17% operationally, primarily driven by Lipitor and Norvasc. First-half 2020 Upjohn revenues in China declined 21% operationally.

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GAAP Reported(2) Income Statement Highlights
SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(2) 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
Second-Quarter
 
 
Six Months
 
2020
2019
% Change
 
 
2020
2019
% Change
 
Total
Oper.
 
 
Total
Oper.
Cost of Sales(2)
$ 2,281

$ 2,576

(11%)
(6%)
 
 
$ 4,658

$ 5,009

(7%)
(5%)
Percent of Revenues
19.3
%
19.4
%
N/A
N/A
 
 
19.5
%
19.0
%
N/A
N/A
SI&A Expenses(2)
 3,030

 3,511

(14%)
(12%)
 
 
 5,903

 6,850

(14%)
(13%)
R&D Expenses(2)
 2,132

 1,842

16%
16%
 
 
 3,856

 3,544

9%
9%
Total
$ 7,443

$ 7,929

(6%)
(3%)
 
 
$ 14,417

$ 15,403

(6%)
(5%)
 
 
 
 
 
 
 
 
 
 
 
Other (Income)/Deductions––net(2)
($862
)
$126

*
*
 
 
($641
)
$218

*
*
Effective Tax Rate on Reported Income(2)
13.1
%
(22.1
%)
 
 
 
 
12.7
%
(5.7
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
* Indicates calculation not meaningful.
Second-quarter 2020 Cost of Sales(2), SI&A Expenses(2) and R&D Expenses(2) were favorably impacted primarily by the July 31, 2019 completion of the Consumer Healthcare JV transaction with GSK(1). Additionally, the decline in SI&A Expenses(2) was primarily driven by decreased sales and marketing activities due to the COVID-19 pandemic compared with the prior-year quarter and, to a lesser extent, lower spending associated with corporate enabling functions. Second-quarter 2020 R&D Expenses(2) increased primarily due to upfront payments associated with two R&D agreements executed during the quarter.
Pfizer recorded higher other income––net(2) in second-quarter 2020 compared with other deductions––net(2) in the prior-year quarter, primarily driven by:
higher net gains on equity securities;
lower business and legal entity alignment costs; and
income from the Consumer Healthcare joint venture(1).
Pfizer’s effective tax rate on Reported income(2) for second-quarter 2020 compared to the prior-year quarter was negatively impacted primarily by the non-recurrence of a tax benefit recorded in second-quarter 2019 related to the settlement of a U.S. Internal Revenue Service audit for multiple tax years.

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Adjusted(3) Income Statement Highlights
SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(3) 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
Second-Quarter
 
 
Six Months
 
2020
2019
% Change
 
 
2020
2019
% Change
 
Total
Oper.
 
 
Total
Oper.
Adjusted Cost of Sales(3)
$ 2,236

$ 2,556

(13%)
(7%)
 
 
$ 4,586

$ 4,971

(8%)
(5%)
Percent of Revenues
18.9
%
19.3
%
N/A
N/A
 
 
19.2
%
18.8
%
N/A
N/A
Adjusted SI&A Expenses(3)
 2,808

 3,464

(19%)
(17%)
 
 
 5,553

 6,775

(18%)
(17%)
Adjusted R&D Expenses(3)
 1,895

 1,825

4%
4%
 
 
 3,622

 3,518

3%
3%
Total
$ 6,939

$ 7,845

(12%)
(9%)
 
 
$ 13,761

$ 15,264

(10%)
(8%)
 
 
 
 
 
 
 
 
 
 
 
Adjusted Other (Income)/Deductions––net(3)
($361
)
($100
)
*
*
 
 
($547
)
($235
)
*
*
Effective Tax Rate on Adjusted Income(3)
14.4
%
16.9
%
 
 
 
 
14.7
%
16.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
* Indicates calculation is greater than 100%.
Second-quarter 2020 diluted weighted-average shares outstanding used to calculate Reported(2) and Adjusted(3) diluted EPS declined by 53 million shares compared to the prior-year quarter primarily due to Pfizer’s share repurchase program, reflecting the impact of share repurchases during 2019, partially offset by shares issued for employee compensation programs.
A full reconciliation of Reported(2) to Adjusted(3) financial measures and associated footnotes can be found starting on page 26 of this press release.
RECENT NOTABLE DEVELOPMENTS (Since April 28, 2020)
Product Developments
Bavencio (avelumab)
In June 2020, EMD Serono, the biopharmaceutical business of Merck KGaA, Darmstadt, Germany in the U.S. and Canada, and Pfizer announced that the FDA approved the supplemental biologics license application for Bavencio for the maintenance treatment of patients with locally advanced or metastatic urothelial carcinoma (UC) that has not progressed with first-line platinum-containing chemotherapy.
In June 2020, EMD Serono and Pfizer announced that the European Medicines Agency (EMA) has validated for review the Type II variation application for Bavencio for first-line maintenance treatment of patients with locally advanced or metastatic UC. With this validation, the application is complete, and the EMA will now begin the review procedure. In addition, in May 2020, a supplemental new drug application was accepted by Japan’s Ministry of Health, Labour and Welfare for Bavencio as a first-line maintenance therapy for locally advanced or metastatic UC.

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Daurismo (glasdegib) -- In June 2020, Pfizer announced that the European Commission approved Daurismo, a Hedgehog pathway inhibitor, in combination with low-dose cytarabine, a type of chemotherapy, for the treatment of newly diagnosed (de novo or secondary) acute myeloid leukemia in adult patients who are not candidates for standard chemotherapy.
Ibrance (palbociclib) -- In May 2020, Pfizer announced that following a preplanned efficacy and futility analysis, the independent Data Monitoring Committee of the collaborative Phase 3 early breast cancer PALbociclib CoLlaborative Adjuvant Study (PALLAS) determined that the trial is unlikely to show a statistically significant improvement in the primary endpoint of invasive disease-free survival. No unexpected new safety signals were observed in patients receiving Ibrance. Ibrance is also being studied in patients with high-risk early breast cancer and results from the collaborative PENELOPE-B trial are expected later this year.
Lyrica (pregabalin) -- In July 2020, the Japan Patent Office recognized the validity of certain amended claims of the patent covering Lyrica. Upjohn believes these claims cover the Lyrica approved indications in Japan, and plans to take the appropriate legal and regulatory steps to preserve the ability to exclusively provide the product to patients and physicians in the country through patent expiry. If these steps are successful, Upjohn anticipates maintaining marketing exclusivity for Lyrica in Japan through the patent’s expiration date in July 2022, with generic forms of pregabalin becoming available no earlier than December 2022.
Nyvepria (pegfilgrastim-apgf) -- In June 2020, Pfizer announced FDA approval for Nyvepria, a biosimilar to Neulasta®(12). Nyvepria is indicated to decrease the incidence of infection, as manifested by febrile neutropenia, in patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with a clinically significant incidence of febrile neutropenia. Pfizer expects to launch Nyvepria in the U.S. later this year.
Steglatro (ertugliflozin) -- In June 2020, Merck & Co., Inc., known as MSD outside the U.S. and Canada, and Pfizer announced the presentation of results from the Phase 3 VERTIS CV cardiovascular (CV) outcomes trial that evaluated Steglatro, an oral sodium-glucose cotransporter 2 inhibitor, versus placebo, added to background standard of care treatment, in more than 8,200 patients with type 2 diabetes and atherosclerotic CV disease across 531 centers in 34 countries. The study met the primary endpoint of non-inferiority on major adverse CV events, which is composed of a composite of CV death, nonfatal myocardial infarction or nonfatal stroke, compared to placebo. The safety profile of Steglatro was consistent with that reported in previous studies. The results of the VERTIS CV trial were presented at the American Diabetes Association’s virtual 80th Scientific Sessions.
Xtandi (enzalutamide) -- In May 2020, Astellas Pharma Inc. and Pfizer announced final results from the OS analysis of the Phase 3 PROSPER trial, which evaluated Xtandi plus androgen deprivation therapy (ADT)

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versus placebo plus ADT in men with non-metastatic castration-resistant prostate cancer. In the trial, Xtandi plus ADT reduced the risk of death by 27% compared to placebo plus ADT. The median OS was 67.0 months for men who received Xtandi plus ADT compared to 56.3 months with placebo plus ADT. OS was a key secondary endpoint of the trial. These data were simultaneously published online in the New England Journal of Medicine and presented during the virtual scientific program of the 2020 American Society of Clinical Oncology Annual Meeting.
Pipeline Developments
A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
Abrocitinib (PF-04965842) -- In June 2020, Pfizer announced positive top-line results from the Phase 3 JADE TEEN study of abrocitinib, an investigational oral once-daily Janus kinase 1 inhibitor, in patients 12 to under-18 years of age with moderate to severe atopic dermatitis who were also on background topical therapy. Results showed that the percentage of patients achieving each co-primary efficacy endpoint at Week 12 was statistically significantly higher with both doses of abrocitinib than with placebo. The safety profile seen with abrocitinib was consistent with previous studies. Full results from JADE TEEN will be submitted for presentation at a future scientific meeting and publication in a medical journal.
BNT162 COVID-19 Vaccine Development Program
Clinical Updates:
In July 2020, Pfizer and BioNTech SE (BioNTech) announced the start of a global (except for China) Phase 2/3 safety and efficacy clinical study to evaluate a single nucleoside-modified messenger RNA (modRNA) candidate from their BNT162 mRNA-based vaccine program, against SARS-CoV-2. After extensive review of preclinical and clinical data from Phase 1/2 clinical trials, and in consultation with the FDA’s Center for Biologics Evaluation and Research and other global regulators, Pfizer and BioNTech have chosen to advance their BNT162b2 vaccine candidate into the Phase 2/3 study, at a 30 µg dose level in a 2 dose regimen. BNT162b2 encodes an optimized SARS-CoV-2 full length spike glycoprotein, which is the target of virus neutralizing antibodies.
Preliminary clinical Phase 1/2 data from nearly 120 patients demonstrated a favorable overall tolerability profile for BNT162b2, as compared to BNT162b1, with generally mild to moderate and transient (1-2 days) systemic events, such as fever, fatigue and chills and no serious adverse events. The 30 µg dose regimen elicited neutralizing geometric mean titers (GMTs) generally

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similar to the GMTs that were elicited by the BNT162b1 vaccine candidate. BNT162b2 vaccinated human participants also displayed a favorable breadth of epitopes recognized in T cell responses specific to the SARS-CoV-2 antigen, as compared to the BNT162b1 vaccine candidate.
The Phase 2/3 study is an event driven trial that is planned to enroll up to 30,000 participants between 18 and 85 years of age. The companies plan to enroll a diverse population, including participants in areas where there is significant expected SAR-CoV-2 transmission. The Phase 2/3 trial is designed as a 1:1 vaccine candidate to placebo, randomized, observer-blinded study to obtain safety, immune response, and efficacy data needed for regulatory review. The trial’s primary endpoints will be prevention of COVID-19 in those who have not been infected by SARS-CoV-2 prior to immunization, and prevention of COVID-19 regardless of whether participants have previously been infected by SARS-CoV-2. Secondary endpoints include prevention of severe COVID-19 in those groups. The study also will explore prevention of infection by SARS-CoV-2, the virus that causes COVID-19. The primary efficacy analysis will be an event-driven analysis based on the number of participants with symptomatic COVID-19 disease. The trial design allows for interim analyses and unblinded reviews by an independent external Data Monitoring Committee.
If the Phase 2/3 trial is successful, Pfizer and BioNTech expect to be ready to seek Emergency Use Authorization or some form of regulatory approval as early as October 2020. If authorization or approval is obtained, the companies currently aim to supply globally up to 100 million doses by the end of 2020 and approximately 1.3 billion doses by the end of 2021.
Commercial Updates:
In July 2020, Pfizer and BioNTech announced an agreement with the U.S. Department of Health and Human Services and the Department of Defense, under which the U.S. government will pay the companies $1.95 billion upon the receipt of the first 100 million doses of BNT162, subject to regulatory approval or emergency use authorization from the FDA and successful manufacture and delivery of the vaccine by Pfizer. The U.S. government can acquire up to 500 million additional doses.
In July 2020, Pfizer and BioNTech announced an agreement with the United Kingdom for 30 million doses of BNT162, to be delivered in 2020 and 2021, subject to clinical success and regulatory approval or authorization.
Regulatory Updates:
In July 2020, Pfizer and BioNTech announced that the two most advanced investigational vaccine candidates in the BNT162 mRNA-based vaccine program (BNT162b1 and BNT162b2) received Fast Track designation from the FDA.

- 13 -




Giroctocogene fitelparvovec (SB-525, PF-07055480) -- In June 2020, Pfizer and Sangamo Therapeutics, Inc. (Sangamo) announced updated follow-up data from the Phase 1/2 Alta study of giroctocogene fitelparvovec, an investigational gene therapy for patients with severe hemophilia A. All five patients with severe hemophilia A who received the 3e13 vg/kg dose showed sustained factor VIII (FVIII) activity levels, with a median of 64.2% via chromogenic assay (patient-level geometric means after week 9 post-infusion). No patients experienced bleeding events or required FVIII infusions. The FVIII activity levels reflect measurements up to 61 weeks, the extent of follow-up for the longest-treated patient in the cohort. Giroctocogene fitelparvovec was generally well tolerated. As previously reported, one patient in the 3e13 vg/kg dose cohort had a treatment-related serious adverse event of hypotension (grade 3) and fever (grade 2), with symptoms of headache and tachycardia, which occurred six hours post-infusion with giroctocogene fitelparvovec, and which fully resolved within 24 hours. No other treatment-related serious adverse events were reported. Among the five patients in the 3e13 vg/kg dose cohort, four received corticosteroids for liver enzyme (alanine aminotransferase, ALT) elevations. Three patients had subsequent ALT elevations that responded to corticosteroids. All episodes of ALT elevations fully resolved with oral corticosteroids. These data were presented as a late-breaking oral abstract at the World Federation of Hemophilia 2020 World Congress. Pfizer and Sangamo plan to present further follow-up data from the Alta study when all five patients in the 3e13 vg/kg dose cohort have been followed for at least one year.
PF-06482077 (20-Valent Pneumococcal Polysaccharide Conjugate Vaccine candidate)
In June 2020, Pfizer announced the initiation of two Phase 3 clinical trials (NCT04382326 and NCT04379713) evaluating a four-dose series in infants starting at 2 months of age. Both studies will expand the data on the safety and tolerability of the investigational vaccine in infants and include a control group of Prevnar 13 (Pneumococcal 13-valent Conjugate Vaccine [Diphtheria CRM197 Protein]). Study NCT04382326 has the goal of determining immunologic noninferiority between PF-06482077 and Prevnar 13, a critical requirement for vaccine licensure.
In May 2020, Pfizer announced positive top-line results from a second Phase 3 study (NCT03828617), which described the safety and evaluated the consistency of immune responses elicited across three different lots of PF-06482077 in adults 18 through 49 years of age not previously vaccinated against pneumococcal disease. Responses elicited by PF-06482077 for all 20 serotypes were equivalent across all three lots, meeting the primary immunogenicity objective of the study. The safety profile for PF-06482077 was similar to the Prevnar 13 control group. This clinical lot consistency study is expected to satisfy licensure requirements for manufacturing consistency by the FDA, and other countries’ regulatory agencies. Pfizer will seek to present and publish outcomes from this clinical trial at a future date once safety and immunogenicity data have been fully analyzed.

- 14 -




PF-06882961 (Oral glucagon-like peptide-1 receptor agonist (GLP-1RA)) -- In June 2020, Pfizer presented results from a Phase 1 study evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of multiple doses of PF-06882961, an investigational, orally-administered, small molecule GLP-1RA, at the American Diabetes Association’s virtual 80th Scientific Sessions. The study found that PF-06882961 was associated with robust glycemic efficacy and encouraging reductions in HbA1c compared to placebo at 28 days of treatment in clinical trial participants with type 2 diabetes. In addition, early signals of weight loss were observed in participants receiving PF-06882961 70 mg twice-daily (BID) and 120 mg BID at day 28. In the study, PF-06882961 demonstrated a safety and tolerability profile consistent with the GLP-1RA class. Pfizer has recently initiated a Phase 2 study of PF-06882961 in type 2 diabetes and aims to initiate a Phase 2 study in obesity in second-half 2020.
PF-06886992 (Pentavalent (ABCWY) Meningococcal Vaccine candidate) -- In June 2020, Pfizer announced the initiation of one Phase 3 clinical trial  (NCT04440163) in adolescents and young adults to assess the safety, tolerability, and immunogenicity of PF-06886992 compared to licensed meningococcal vaccines, with the goal of determining immunologic noninferiority.
PF-06928316 (Respiratory Syncytial Virus (RSV) Vaccine candidate) -- In June 2020, Pfizer announced the initiation of one Phase 3 clinical trial  (NCT04424316) in pregnant women to evaluate the safety and efficacy of PF-06928316 in infants born to immunized pregnant women as compared to placebo.
PF-06939926 (Duchenne muscular dystrophy (DMD) gene therapy) -- In May 2020, Pfizer announced updated Phase 1b clinical data on PF-06939926, an investigational gene therapy being developed to treat DMD. The preliminary data from 9 ambulatory boys with DMD, aged 6 to 12 (mean age: 8 years) indicate that the intravenous administration of PF-06939926 was well-tolerated during the infusion period, with encouraging efficacy and manageable safety events, even when considering those adverse events that were more severe in nature. The treatment provided durable and statistically significant improvements across multiple efficacy-related endpoints measured at 12 months post-infusion, including sustained levels of mini-dystrophin expression and improvements on the North Star Ambulatory Assessment rating scale, which is a validated measure of muscle function. Three serious adverse events were reported, two of which reflected likely complement activation. While these two serious adverse events were severe in nature, all three events fully resolved within 2 weeks, providing encouragement that close monitoring and early intervention can help mitigate the effects of complement activation. This new dataset, which includes updated 12-month results on safety, dystrophin expression, and exploratory functional endpoints for 3 additional boys, was presented for the first time during a virtual oral session at the American Society of Gene & Cell Therapy Annual Meeting. Based on the encouraging preliminary efficacy data and manageable safety events from this Phase 1b study, Pfizer is planning to begin dosing patients in a Phase 3 study using a commercial-scale manufacturing process in the second half of 2020, pending regulatory approval.

- 15 -




Tanezumab (PF-04383119) -- Pfizer and Eli Lilly and Company initially disclosed in March 2020 that in its acceptance letter for the biologics license application (BLA) for tanezumab, the FDA stated that it was planning to hold an Advisory Committee meeting to discuss the application. In subsequent discussions, the FDA indicated that an Advisory Committee meeting is not anticipated, though a decision to hold an Advisory Committee meeting remains at the discretion of the FDA. The FDA’s review of the BLA is ongoing and the Prescription User Fee Act date for a decision from the FDA is in December 2020.
Corporate Developments
In June 2020, Mylan announced that its shareholders overwhelmingly voted to approve the proposed transaction combining Mylan and Upjohn, a division of Pfizer, at Mylan’s extraordinary general meeting of shareholders. Approximately 99.6% of votes cast were voted in favor of the combination. The transaction is subject to customary closing conditions, including receipt of the remaining required regulatory approvals. Pfizer and Mylan expect the transaction to be completed in fourth-quarter 2020.
In June 2020, Upjohn Inc., a wholly-owned subsidiary of Pfizer and Upjohn Finance B.V., a wholly-owned subsidiary of Upjohn, as well as Pfizer and Mylan announced the successful private offering of $7.45 billion aggregate principal amount of Upjohn’s senior, U.S. dollar-denominated notes and of €3.60 billion aggregate principal amount of Upjohn Finance B.V.’s senior, euro-denominated notes. The notes were offered in connection with the previously announced proposed Reverse Morris Trust transaction that will ultimately combine Upjohn and Mylan to form a new company, Viatris. Immediately prior to the Upjohn separation, and as partial consideration for Pfizer’s contribution of Upjohn to Viatris, Pfizer will receive a payment of $12 billion, which will be fully funded by the net proceeds from these offerings together with the net proceeds from other previously announced financing transactions.
In May 2020, Pfizer announced that it would be holding its rescheduled Investor Day on Monday, September 14, 2020 at 9:00 a.m. EDT. Pfizer had postponed its Investor Day, originally scheduled for March 31, 2020, due to health and safety concerns around the COVID-19 pandemic. Since this announcement, Pfizer has determined that holding an in-person event in September 2020 is not practicable given continued COVID-19 health and safety concerns so the event will instead be held virtually over two days: Monday, September 14, 2020 and Tuesday, September 15, 2020. Additional details for the event will be provided via press release at a future date.
In April 2020, Pfizer and Valneva SE (Valneva) announced an agreement to co-develop and commercialize Valneva’s Lyme disease vaccine candidate VLA15, which is currently in Phase 2 clinical studies. VLA15 is the only active Lyme disease vaccine program in clinical development today, and covers six serotypes that are prevalent in North America and Europe. Valneva and Pfizer will work closely together throughout the development of VLA15. Under terms of the agreement, Valneva is eligible to receive a total of $308 million of cash payments consisting of a $130 million upfront payment, $35 million in development milestones and

- 16 -




$143 million in early commercialization milestones. Valneva will fund 30% of all development costs through completion of the development program, and in return Pfizer will pay Valneva tiered royalties. Pfizer will lead late-stage development and have sole control over commercialization. In June 2020, Valneva announced that the antitrust-related condition precedent was met and, consequently, the agreement became effective.

- 17 -




For additional details, see the attached financial schedules, product revenue tables and disclosure notice.
(1)
The following acquisitions and other business development activity impacted financial results for the periods presented:
On June 8, 2020, Valneva SE (Valneva) announced that the antitrust-related condition precedent was met and, consequently, the agreement between Valneva and Pfizer that was previously announced in April 2020 became effective. Under terms of the agreement, the companies will co-develop and commercialize Valneva’s Lyme disease vaccine candidate VLA15, which is currently in Phase 2 clinical studies. In connection with the agreement, Pfizer paid Valneva an upfront cash payment of $130 million in second-quarter 2020.
On April 9, 2020, Pfizer signed a global agreement with BioNTech to co-develop a potential first-in-class, mRNA-based coronavirus vaccine program, BNT162, aimed at preventing COVID-19 infection. In connection with the agreement, Pfizer paid BioNTech an upfront cash payment of $72 million in second-quarter 2020. Pfizer also made an equity investment of $113 million in BioNTech common stock.
On July 31, 2019, Pfizer and GlaxoSmithKline plc (GSK) completed a transaction that combined the two companies’ respective consumer healthcare businesses into a joint venture (JV), operating under the GSK Consumer Healthcare name. In exchange for contributing its Consumer Healthcare business to the JV, Pfizer received a 32% equity stake in the JV and GSK owns the remaining 68% of the JV. Upon the closing of the transaction, Pfizer deconsolidated its Consumer Healthcare business and began recording its share of earnings from the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Therefore, Pfizer recorded its share of the JV’s earnings generated in first-quarter 2020 in its second-quarter 2020 operating results. Likewise, Pfizer recorded its share of the JV’s earnings generated in fourth-quarter 2019 and first-quarter 2020 in its operating results for the first six months of 2020.
On July 30, 2019, Pfizer announced the successful completion of its acquisition of Array BioPharma Inc. (Array). Array’s portfolio included two approved products, Braftovi (encorafenib) and Mektovi (binimetinib).
On July 1, 2019, Pfizer announced the successful completion of its acquisition of the privately held clinical-stage biotechnology company, Therachon Holding AG.
(2)
Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income is defined as net income attributable to Pfizer Inc. in accordance with U.S.

- 18 -




GAAP. Reported diluted earnings per share (EPS) is defined as diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
(3)
Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income(2) and its components and reported diluted EPS(2) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as gains on the completion of joint venture transactions, restructuring charges, legal charges or gains and losses from equity securities, but which management does not believe are reflective of ongoing core operations). Adjusted cost of sales, Adjusted selling, informational and administrative (SI&A) expenses, Adjusted research and development (R&D) expenses and Adjusted other (income)/deductions are income statement line items prepared on the same basis as, and therefore components of, the overall Adjusted income measure. As described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2019 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, management uses Adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. Because Adjusted income is an important internal measurement for Pfizer, management believes that investors’ understanding of our performance is enhanced by disclosing this performance measure. Pfizer reports Adjusted income, certain components of Adjusted income, and Adjusted diluted EPS in order to portray the results of the company’s major operations––the discovery, development, manufacture, marketing and sale of prescription medicines and vaccines––prior to considering certain income statement elements. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the second quarter and first six months of 2020 and 2019. The Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.
(4)
Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s second quarter and first six months for U.S. subsidiaries reflects the three and six months ending on June 28, 2020 and June 30, 2019 while Pfizer’s second quarter and first six months for subsidiaries operating outside the U.S. reflects the three and six months ending on May 24, 2020 and May 26, 2019.
(5)
References to operational variances in this press release pertain to period-over-period growth rates that exclude the impact of foreign exchange. The operational variances are determined by multiplying or dividing, as appropriate, the current period U.S. dollar results by the current period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control. Exchange rate changes, however, can mask positive or negative trends in the

- 19 -




business; therefore, Pfizer believes presenting operational variances provides useful information in evaluating the results of its business.
(6)
Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, acquisition-related expenses, gains and losses from equity securities and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
In addition to the assumptions outlined in the 2020 Financial Guidance section of this press release, the 2020 financial guidance for Total Company(7) reflects the following:
Includes a full-year 2020 contribution from Biopharma and Upjohn, the current construct of the company, and excludes any impact from the pending Upjohn combination with Mylan.
Does not assume the completion of any business development transactions not completed as of June 28, 2020, including any one-time upfront payments associated with such transactions.
Includes Pfizer’s pro rata share of the Consumer Healthcare JV(1) anticipated earnings, which is recorded in Adjusted other (income)/deductions(3) on a one-quarter lag.
Reflects an anticipated negative revenue impact of $2.4 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.
Exchange rates assumed are a blend of actual exchange rates in effect through second-quarter 2020 and mid-July 2020 rates for the remainder of the year. Financial guidance reflects the anticipated unfavorable impact of approximately $0.6 billion on revenues and approximately $0.05 on Adjusted diluted EPS(3) as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2019.
Guidance for Adjusted diluted EPS(3) assumes diluted weighted-average shares outstanding of approximately 5.6 billion shares, which assumes no share repurchases in 2020.
(7)
Financial guidance for Total Company reflects a full-year 2020 contribution from Biopharma and Upjohn, the current construct of the company, and excludes any impact from the pending Upjohn combination with Mylan.

- 20 -




(8)
New Pfizer reflects contributions from the Biopharma business as it is presently being managed, which excludes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019 but were moved to Upjohn in 2020. Financial guidance for New Pfizer also includes the full-year effect of the following items that assume the completion of the Upjohn combination with Mylan:
$12 billion of net proceeds from Upjohn to be retained by Pfizer, which Pfizer will use to repay its own existing indebtedness; and
other transaction-related items, such as income from transition services agreements between Pfizer and Viatris.
2020 financial guidance for New Pfizer Adjusted IBT Margin(9) and Adjusted diluted EPS(3) reflects Pfizer’s share of the earnings generated by the Consumer Healthcare JV(1) in fourth-quarter 2019 (recorded by Pfizer in first-quarter 2020) and first-quarter 2020 (recorded by Pfizer in second-quarter 2020), as well as Pfizer’s share of the JV’s projected earnings during second-quarter 2020 and third-quarter 2020 (to be recorded by Pfizer in third-quarter 2020 and fourth-quarter 2020, respectively).
Financial guidance for New Pfizer operating cash flow includes a $1.25 billion voluntary contribution to the U.S. qualified pension plans, planned for the second half of 2020.
(9)
Adjusted income(3) before tax margin (Adjusted IBT margin) is defined as revenue less the sum of Adjusted cost of sales(3), Adjusted SI&A expenses(3), Adjusted R&D expenses(3), Adjusted amortization of intangible assets(3) and Adjusted other (income)/deductions(3) as a percentage of revenue. Adjusted IBT margin is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the financial performance of New Pfizer(8). Adjusted IBT margin is not, and should not be viewed as, a substitute for U.S. GAAP income before tax margin.
(10)
Financial guidance for Upjohn reflects a full-year 2020 contribution from the Upjohn business as it is presently being managed, which includes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019 but were moved to Upjohn in 2020.
(11)
Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) is defined as reported U.S. GAAP net income(2), and its components, adjusted for interest expense, provision for taxes on income and depreciation and amortization, further adjusted to exclude purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as gains on the completion of joint venture transactions, restructuring charges, legal charges or gains and losses from equity securities, but which management does not believe are reflective of ongoing core

- 21 -




operations). Adjusted EBITDA is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the financial performance of Upjohn. Adjusted EBITDA as defined is not a measurement of financial performance under GAAP, and should not be considered as an alternative to net income(2) or cash flow from operations determined in accordance with GAAP.
(12)
Neulasta® (pegfilgrastim) is a registered trademark of Amgen, Inc.
Contacts:
Media
 
Investors
 
 
Amy Rose
212.733.7410
Chuck Triano
212.733.3901
 
 
 
Ryan Crowe
212.733.8160
 
 
 
Bryan Dunn
212.733.8917

- 22 -


PFIZER INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME(1) 
(UNAUDITED)
(millions, except per common share data)


 
 
Second-Quarter
 
% Incr. /
 
Six Months
 
% Incr. /
 
 
2020

 
2019

 
(Decr.)
 
2020

 
2019

 
(Decr.)
Revenues
 
$
11,801

 
$
13,264

 
(11)
 
$
23,829

 
$
26,382

 
(10)
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales (2), (3)
 
2,281

 
2,576

 
(11)
 
4,658

 
5,009

 
(7)
Selling, informational and administrative expenses(2), (3)
 
3,030

 
3,511

 
(14)
 
5,903

 
6,850

 
(14)
Research and development expenses(2), (3)
 
2,132

 
1,842

 
16
 
3,856

 
3,544

 
9
Amortization of intangible assets(3)
 
905

 
1,184

 
(24)
 
1,790

 
2,367

 
(24)
Restructuring charges and certain acquisition-related costs(4)
 
362

 
(115
)
 
*
 
431

 
(69
)
 
*
(Gain) on completion of Consumer Healthcare JV transaction
 

 

 
 
(6
)
 

 
*
Other (income)/deductions––net(5)
 
(862
)
 
126

 
*
 
(641
)
 
218

 
*
Income from continuing operations before provision/(benefit) for taxes on income
 
3,953

 
4,141

 
(5)
 
7,838

 
8,463

 
(7)
Provision/(benefit) for taxes on income(6)
 
519

 
(915
)
 
*
 
993

 
(481
)
 
*
Income from continuing operations
 
3,434

 
5,056

 
(32)
 
6,845

 
8,945

 
(23)
Discontinued operations––net of tax
 

 

 
 

 

 
Net income before allocation to noncontrolling interests
 
3,434

 
5,056

 
(32)
 
6,845

 
8,945

 
(23)
Less: Net income attributable to noncontrolling interests
 
8

 
10

 
(19)
 
17

 
15

 
10
Net income attributable to Pfizer Inc.
 
$
3,426

 
$
5,046

 
(32)
 
$
6,828

 
$
8,929

 
(24)
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share––basic:
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations attributable to Pfizer Inc. common shareholders
 
$
0.62

 
$
0.91

 
(32)
 
$
1.23

 
$
1.59

 
(23)
Discontinued operations––net of tax
 

 

 
 

 

 
Net income attributable to Pfizer Inc. common shareholders
 
$
0.62

 
$
0.91

 
(32)
 
$
1.23

 
$
1.59

 
(23)
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share––diluted:
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations attributable to Pfizer Inc. common shareholders
 
$
0.61

 
$
0.89

 
(31)
 
$
1.22

 
$
1.56

 
(22)
Discontinued operations––net of tax
 

 

 
 

 

 
Net income attributable to Pfizer Inc. common shareholders
 
$
0.61

 
$
0.89

 
(31)
 
$
1.22

 
$
1.56

 
(22)
Weighted-average shares used to calculate earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
5,554

 
5,562

 
 
 
5,550

 
5,598

 
 
Diluted
 
5,619

 
5,672

 
 
 
5,616

 
5,711

 
 
*
Indicates calculation not meaningful or result is equal to or greater than 100%.
See end of tables for notes (1) through (6).
Amounts may not add due to rounding. All percentages have been calculated using unrounded amounts.


- 23 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(1)
The financial statements present the three and six months ended June 28, 2020 and June 30, 2019. Subsidiaries operating outside the U.S. are included for the three and six months ended May 24, 2020 and May 26, 2019.
The financial results for the three and six months ended June 28, 2020 are not necessarily indicative of the results that ultimately could be achieved for the full year.
The Array BioPharma Inc. and Therachon Holding AG acquisitions and the contribution of our Consumer Healthcare business to the GSK Consumer Healthcare joint venture that were completed in 2019, as well as other business development activities in the first six months of 2020, impacted our results of operations in the periods presented. Our financial results, and our Consumer Healthcare segment’s operating results, for the second quarter of 2019 reflect three months of Consumer Healthcare segment operations and for the first six months of 2019 reflect six months of Consumer Healthcare segment operations while financial results for the second quarter and first six months of 2020 do not reflect any contribution from the Consumer Healthcare business. We record our share of earnings from the GSK Consumer Healthcare joint venture on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Therefore, our operating results for the second quarter of 2020 include our share of the joint venture’s earnings/losses generated in the first quarter of 2020, and our operating results for the first six months of 2020 include our share of the joint venture’s earnings/losses generated in the fourth quarter of 2019 and the first quarter of 2020. See footnote (5) below.
Certain amounts in the consolidated statements of income and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.
(2)
Exclusive of amortization of intangible assets, except as discussed in footnote (3) below.
(3)
Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets, as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.
(4)
Restructuring charges and certain acquisition-related costs include the following:
 
 
Second-Quarter
 
Six Months
(MILLIONS OF DOLLARS)
 
2020


2019

 
2020

 
2019

Restructuring credits––acquisition-related costs(a)
 
$
(1
)
 
$
(206
)
 
$

 
$
(214
)
Restructuring charges––cost reduction initiatives(b)
 
341

 
62

 
396

 
81

Restructuring charges/(credits)
 
340

 
(144
)
 
396

 
(134
)
Transaction costs(c)
 
11

 

 
14

 

Integration costs and other(d)
 
11

 
29

 
21

 
64

Restructuring charges and certain acquisition-related costs
 
$
362

 
$
(115
)
 
$
431

 
$
(69
)
(a)
Includes employee termination costs, asset impairments and other exit costs associated with business combinations. Credits for the second quarter and the first six months of 2019 were mostly due to the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of a U.S. Internal Revenue Service (IRS) audit for multiple years. See footnote (6) below.
(b)
Includes employee termination costs, asset impairments and other exit costs not associated with acquisitions. The charges for the second quarter and the first six months of 2020 primarily represent employee termination costs associated with our Transforming to a More Focused Company program.
(c)
Transaction costs represent external costs for banking, legal, accounting and other similar services.
(d)
Integration costs and other represent external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs.

- 24 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(5)
Other (income)/deductions––net includes the following:
 

Second-Quarter

Six Months
(MILLIONS OF DOLLARS)

2020


2019


2020


2019

Interest income

$
(19
)

$
(59
)

$
(53
)

$
(125
)
Interest expense

372


389


762


750

Net interest expense

353


330


709


625

Royalty-related income(a)

(191
)

(231
)

(311
)

(320
)
Net (gains)/losses on asset disposals

1




2


(1
)
Net gains recognized during the period on equity securities(b)

(732
)

(36
)

(478
)

(147
)
Income from collaborations, out-licensing arrangements and sales of compound/product rights

(100
)

(22
)

(215
)

(104
)
Net periodic benefit credits other than service costs

(108
)

(51
)

(175
)

(91
)
Certain legal matters, net

17


15


26


19

Certain asset impairments



10




160

Business and legal entity alignment costs(c)



137




256

Net losses on early retirement of debt







138

GSK Consumer Healthcare JV equity method (income)/loss(d)
 
(126
)
 

 
(92
)
 

Other, net(e)

25


(27
)

(107
)

(318
)
Other (income)/deductions––net

$
(862
)

$
126


$
(641
)

$
218

(a)
Royalty-related income for the second quarter and first six months of 2019 included a one-time favorable resolution in the second quarter of 2019 of a legal dispute for $82 million.
(b)
The gains in the second quarter of 2020 include, among other things, unrealized gains of $508 million related to our investment in Allogene Therapeutics, Inc. (Allogene) and unrealized gains of $61 million related to our investment in BioNTech SE. The gains in the first six months of 2020 include, among other things, unrealized gains of $374 million related to our investment in Allogene and unrealized gains of $127 million related to our investment in BioNTech SE. The gains in the first six months of 2019 included, among other things, unrealized gains of $104 million related to our investment in Cortexyme, Inc.
(c)
In the second quarter and first six months of 2019, represents incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services.
(d)
For additional information, see footnote (1) above.
(e)
The second quarter of 2020 includes, among other things, dividend income of $76 million from our investment in ViiV Healthcare Limited (ViiV) and charges of $86 million, reflecting the change in the fair value of contingent consideration. For the first six months of 2020, includes, among other things, dividend income of $153 million from our investment in ViiV and charges of $99 million, reflecting the change in the fair value of contingent consideration. The second quarter of 2019 included, among other things, charges of $81 million, reflecting the change in the fair value of contingent consideration, dividend income of $76 million from our investment in ViiV and $25 million of income from insurance recoveries related to Hurricane Maria. The first six months of 2019 included, among other things, dividend income of $140 million from our investment in ViiV and $50 million of income from insurance recoveries related to Hurricane Maria.
(6)
The increase in the effective tax rate for the second quarter and first six months of 2020, compared to the second quarter and first six months of 2019, was primarily due to the non-recurrence of the $1.4 billion tax benefit, representing taxes and interest, recorded in the second quarter of 2019 due to the favorable settlement of a U.S. IRS audit for multiple tax years and the non-recurrence of the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (TCJA), partially offset by the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.


- 25 -


PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION(1) 
CERTAIN LINE ITEMS - (UNAUDITED)
(millions of dollars, except per common share data)

 
 
Second-Quarter 2020
 
 
GAAP Reported
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(2)
 
Discontinued Operations
 
Certain Significant Items(3)
 
Non-GAAP Adjusted(4)
Revenues
 
$
11,801

 
$

 
$

 
$

 
$

 
$
11,801

Cost of sales(5), (6)
 
2,281

 
5

 

 

 
(49
)
 
2,236

Selling, informational and administrative expenses(5), (6)
 
3,030

 
(1
)
 

 

 
(221
)
 
2,808

Research and development expenses (5), (6)
 
2,132

 
1

 

 

 
(238
)
 
1,895

Amortization of intangible assets(6)
 
905

 
(834
)
 

 

 

 
71

Restructuring charges and certain acquisition-related costs
 
362

 

 
(21
)
 

 
(341
)
 

(Gain) on completion of Consumer Healthcare JV transaction
 

 

 

 

 

 

Other (income)/deductions––net(7)
 
(862
)
 
(82
)
 

 

 
582

 
(361
)
Income from continuing operations before provision/(benefit) for taxes on income
 
3,953

 
910

 
21

 

 
268

 
5,152

Provision/(benefit) for taxes on income
 
519

 
187

 
5

 

 
30

 
741

Income from continuing operations
 
3,434

 
723

 
16

 

 
238

 
4,411

Discontinued operations––net of tax
 

 

 

 

 

 

Net income attributable to noncontrolling interests
 
8

 

 

 

 

 
8

Net income attributable to Pfizer Inc.
 
3,426

 
723

 
16

 

 
238

 
4,403

Earnings per common share attributable to Pfizer Inc.––diluted
 
0.61

 
0.13

 

 

 
0.04

 
0.78

 
 
Six Months Ended June 28, 2020
 
 
GAAP Reported
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(2)
 
Discontinued Operations
 
Certain Significant Items(3)
 
Non-GAAP Adjusted(4)
Revenues
 
$
23,829

 
$

 
$

 
$

 
$

 
$
23,829

Cost of sales(5), (6)
 
4,658

 
9

 

 

 
(81
)
 
4,586

Selling, informational and administrative expenses(5), (6)
 
5,903

 

 

 

 
(351
)
 
5,553

Research and development expenses (5), (6)
 
3,856

 
3

 

 

 
(236
)
 
3,622

Amortization of intangible assets(6)
 
1,790

 
(1,648
)
 

 

 

 
142

Restructuring charges and certain acquisition-related costs
 
431

 

 
(35
)
 

 
(396
)
 

(Gain) on completion of Consumer Healthcare JV transaction
 
(6
)
 

 

 

 
6

 

Other (income)/deductions––net(7)
 
(641
)
 
(85
)
 

 

 
179

 
(547
)
Income from continuing operations before provision/(benefit) for taxes on income
 
7,838

 
1,722

 
34

 

 
879

 
10,474

Provision/(benefit) for taxes on income
 
993

 
367

 
8

 

 
170

 
1,539

Income from continuing operations
 
6,845

 
1,355

 
26

 

 
709

 
8,934

Discontinued operations––net of tax
 

 

 

 

 

 

Net income attributable to noncontrolling interests
 
17

 

 

 

 

 
17

Net income attributable to Pfizer Inc.
 
6,828

 
1,355

 
26

 

 
709

 
8,917

Earnings per common share attributable to Pfizer Inc.––diluted
 
1.22

 
0.24

 

 

 
0.13

 
1.59

See end of tables for notes (1) through (7).
Amounts may not add due to rounding.

- 26 -


PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION(1) 
CERTAIN LINE ITEMS - (UNAUDITED)
(millions of dollars, except per common share data)

 
 
Second-Quarter 2019
 
 
GAAP Reported
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(2)
 
Discontinued Operations
 
Certain Significant Items(3)
 
Non-GAAP Adjusted(4)
Revenues
 
$
13,264

 
$

 
$

 
$

 
$

 
$
13,264

Cost of sales(5), (6)
 
2,576

 
6

 

 

 
(26
)
 
2,556

Selling, informational and administrative expenses(5), (6)
 
3,511

 
1

 
(1
)
 

 
(47
)
 
3,464

Research and development expenses(5), (6)
 
1,842

 
1

 

 

 
(18
)
 
1,825

Amortization of intangible assets(6)
 
1,184

 
(1,117
)
 

 

 

 
67

Restructuring charges and certain acquisition-related costs
 
(115
)
 

 
177

 

 
(62
)
 

(Gain) on completion of Consumer Healthcare JV transaction
 

 

 

 

 

 

Other (income)/deductions––net(7)
 
126

 
(70
)
 

 

 
(156
)
 
(100
)
Income from continuing operations before provision/(benefit) for taxes on income
 
4,141

 
1,178

 
(176
)
 

 
309

 
5,452

Provision/(benefit) for taxes on income
 
(915
)
 
222

 
6

 

 
1,610

 
923

Income from continuing operations
 
5,056

 
957

 
(182
)
 

 
(1,301
)
 
4,529

Discontinued operations––net of tax
 

 

 

 

 

 

Net income attributable to noncontrolling interests
 
10

 

 

 

 

 
10

Net income attributable to Pfizer Inc.
 
5,046

 
957

 
(182
)
 

 
(1,301
)
 
4,520

Earnings per common share attributable to Pfizer Inc.––diluted
 
0.89

 
0.17

 
(0.03
)
 

 
(0.23
)
 
0.80

 
 
Six Months Ended June 30, 2019
 
 
GAAP Reported
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(2)
 
Discontinued Operations
 
Certain Significant Items(3)
 
Non-GAAP Adjusted(4)
Revenues
 
$
26,382

 
$

 
$

 
$

 
$

 
$
26,382

Cost of sales(5), (6)
 
5,009

 
10

 

 

 
(48
)
 
4,971

Selling, informational and administrative expenses(5), (6)
 
6,850

 
1

 
(2
)
 

 
(74
)
 
6,775

Research and development expenses(5), (6)
 
3,544

 
3

 

 

 
(29
)
 
3,518

Amortization of intangible assets(6)
 
2,367

 
(2,237
)
 

 

 

 
130

Restructuring charges and certain acquisition-related costs
 
(69
)
 

 
150

 

 
(81
)
 

(Gain) on completion of Consumer Healthcare JV transaction
 

 

 

 

 

 

Other (income)/deductions––net(7)
 
218

 
6

 

 

 
(459
)
 
(235
)
Income from continuing operations before provision/(benefit) for taxes on income
 
8,463

 
2,217

 
(148
)
 

 
691

 
11,223

Provision/(benefit) for taxes on income
 
(481
)
 
446

 
11

 

 
1,822

 
1,797

Income from continuing operations
 
8,945

 
1,771

 
(159
)
 

 
(1,131
)
 
9,426

Discontinued operations––net of tax
 

 

 

 

 

 

Net income attributable to noncontrolling interests
 
15

 

 

 

 

 
15

Net income attributable to Pfizer Inc.
 
8,929

 
1,771

 
(159
)
 

 
(1,131
)
 
9,410

Earnings per common share attributable to Pfizer Inc.––diluted
 
1.56

 
0.31

 
(0.03
)
 

 
(0.20
)
 
1.65

See end of tables for notes (1) through (7).
Amounts may not add due to rounding.

- 27 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

(1)
The Array BioPharma Inc. and Therachon Holding AG acquisitions and the contribution of our Consumer Healthcare business to the GSK Consumer Healthcare joint venture that were completed in 2019, as well as other business development activities in the first six months of 2020, impacted our results of operations in the periods presented. Our financial results, and our Consumer Healthcare segment’s operating results, for the second quarter of 2019 reflect three months of Consumer Healthcare segment operations and for the first six months of 2019 reflect six months of Consumer Healthcare segment operations while financial results for the second quarter and first six months of 2020 do not reflect any contribution from the Consumer Healthcare business. We record our share of earnings from the GSK Consumer Healthcare joint venture on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Therefore, our operating results for the second quarter of 2020 include our share of the joint venture’s earnings/losses generated in the first quarter of 2020, and our operating results for the first six months of 2020 include our share of the joint venture’s earnings/losses generated in the fourth quarter of 2019 and the first quarter of 2020. For the non-GAAP measure of Adjusted Earnings (see footnote (4) below), charges primarily related to our pro rata share of restructuring and business combination accounting charges recorded by the Consumer Healthcare joint venture have been excluded from the measure.
Certain amounts in the reconciliation of GAAP reported to Non-GAAP adjusted information and associated notes may not add due to rounding.
The financial statements present the three and six months ended June 28, 2020 and June 30, 2019. Subsidiaries operating outside the U.S. are included for the three and six months ended May 24, 2020 and May 26, 2019.
(2)
Acquisition-related items include the following:
 
 
Second-Quarter
 
Six Months
(MILLIONS OF DOLLARS)
 
2020

 
2019

 
2020

 
2019

Restructuring credits(a)
 
$
(1
)
 
$
(206
)
 
$

 
$
(214
)
Transaction costs(b)
 
11

 

 
14

 

Integration costs and other(c)
 
11

 
29

 
21

 
64

Additional depreciation––asset restructuring(d)
 

 
1

 

 
2

Total acquisition-related items––pre-tax
 
21

 
(176
)
 
34

 
(148
)
Income taxes(e)
 
(5
)
 
(6
)
 
(8
)
 
(11
)
Total acquisition-related items––net of tax
 
$
16

 
$
(182
)
 
$
26

 
$
(159
)
(a)
Includes employee termination costs, asset impairments and other exit costs associated with business combinations. Credits for the second quarter and the first six months of 2019 were mostly due to the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of a U.S. Internal Revenue Service (IRS) audit for multiple years. All of these items are included in Restructuring charges and certain acquisition-related costs.
(b)
Transaction costs represent external costs for banking, legal, accounting and other similar services. All of these items are included in Restructuring charges and certain acquisition-related costs.
(c)
Integration costs and other represent external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. All of these costs and charges are included in Restructuring charges and certain acquisition-related costs.
(d)
Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions. In the second quarter and first six months of 2019, included in Selling, informational and administrative expenses.
(e)
Included in Provision/(benefit) for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The second quarter and first six months of 2019 include the impact of the non-taxable reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years. See footnote (3) (f) below.

- 28 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

(3)
Certain significant items include the following:
 
 
Second-Quarter
 
Six Months
(MILLIONS OF DOLLARS)
 
2020

 
2019

 
2020

 
2019

Restructuring charges––cost reduction initiatives(a)
 
$
341

 
$
62

 
$
396

 
$
81

Implementation costs and additional depreciation––asset restructuring(b)
 
82

 
51

 
106

 
89

Net gains recognized during the period on equity securities(c)
 
(696
)
 
(25
)
 
(501
)
 
(136
)
Certain legal matters, net(c)
 
17

 
15

 
26

 
9

Certain asset impairments(c)
 

 
10

 

 
149

Business and legal entity alignment costs(d)
 
174

 
141

 
289

 
264

Net losses on early retirement of debt(c)
 

 

 

 
138

Other(e)
 
350

 
56

 
563

 
97

Total certain significant items––pre-tax
 
268

 
309

 
879

 
691

Income taxes(f)
 
(30
)
 
(1,610
)
 
(170
)
 
(1,822
)
Total certain significant items––net of tax
 
$
238

 
$
(1,301
)
 
$
709

 
$
(1,131
)
(a)
Includes employee termination costs, asset impairments and other exit costs not associated with acquisitions, which are included in Restructuring charges and certain acquisition-related costs. The charges for the second quarter and the first six months of 2020 primarily represent employee termination costs associated with our Transforming to a More Focused Company program.
(b)
Relates to our cost-reduction and productivity initiatives not related to acquisitions. Primarily included in Cost of sales ($16 million) and Selling, informational and administrative expenses ($63 million) for the second quarter of 2020. Primarily included in Cost of sales ($31 million) and Selling, informational and administrative expenses ($78 million) for the first six months of 2020. Included in Cost of sales ($24 million), Selling, informational and administrative expenses ($16 million) and Research and development expenses ($11 million) for the second quarter of 2019. Included in Cost of sales ($46 million), Selling, informational and administrative expenses ($25 million) and Research and development expenses ($18 million) for the first six months of 2019.
(c)
Included in Other (income)/deductions––net. See Note (5) to Consolidated Statements of Income above.
(d)
In the second quarter of 2020, primarily included in Cost of sales ($30 million) and Selling, informational and administrative expenses ($138 million) and for the first six months of 2020, primarily included in Cost of sales ($45 million) and Selling, informational and administrative expenses ($235 million) and primarily represents separation costs associated with our planned Upjohn transaction with Mylan, and mainly includes consulting, legal, tax and advisory services. In the second quarter and first six months of 2019, primarily included in Other (income)/deductions––net and represented incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily included consulting, legal, tax and advisory services.
(e)
For the second quarter of 2020, primarily included in Selling, informational and administrative expenses ($21 million), Research and development expenses ($229 million) and Other (income)/deductions––net ($97 million). For the first six months of 2020, primarily included in Selling, informational and administrative expenses ($37 million), Research and development expenses ($230 million) and Other (income)/deductions––net ($296 million). For the second quarter of 2019, primarily included in Selling, informational and administrative expenses ($28 million) and Other (income)/deductions––net ($19 million). For the first six months of 2019, primarily included in Selling, informational and administrative expenses ($41 million), Research and development expenses ($11 million) and Other (income)/deductions––net ($43 million). Among other things, the second quarter of 2020 includes charges of $85 million and the first six months of 2020 includes charges of $245 million recorded in Other (income)/deductions––net, primarily representing our pro rata share of restructuring and business combination accounting charges recorded by the GSK Consumer Healthcare joint venture. See footnote (1) above. The second quarter and first six months of 2020 also include upfront payments of $130 million to Valneva SE and $72 million to BioNTech SE, which were recorded to Research and development expenses.
(f)
Included in Provision/(benefit) for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The second quarter and first six months of 2019 were favorably impacted primarily by a benefit recorded of approximately $1.4 billion, representing tax and interest, resulting from the favorable settlement of an IRS audit for multiple tax years, as well as the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the U.S. Tax Cuts and Jobs Act of 2017.

- 29 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

(4)
Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement (as described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2019 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019), Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
(5)
Exclusive of amortization of intangible assets, except as discussed in footnote (6) below.
(6)
Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.
(7)
Non-GAAP Adjusted Other (income)/deductions––net includes the following:
 
 
Second-Quarter
 
Six Months
(MILLIONS OF DOLLARS)
 
2020

 
2019

 
2020

 
2019

Interest income
 
$
(19
)
 
$
(59
)
 
$
(53
)
 
$
(125
)
Interest expense
 
378

 
395

 
774

 
761

Net interest expense
 
359

 
336

 
720

 
636

Royalty-related income
 
(191
)
 
(231
)
 
(311
)
 
(320
)
Net (gains)/losses on asset disposals
 
1




2


(1
)
Net (gains)/losses recognized during the period on equity securities
 
(36
)
 
(11
)
 
23

 
(11
)
Income from collaborations, out-licensing arrangements and sales of compound/product rights
 
(100
)
 
(22
)
 
(215
)
 
(104
)
Net periodic benefit credits other than service costs
 
(116
)
 
(55
)
 
(218
)
 
(101
)
Certain legal matters, net
 

 

 

 
10

Certain asset impairments
 

 

 

 
11

GSK Consumer Healthcare JV equity method (income)/loss
 
(211
)
 

 
(337
)
 

Other, net
 
(67
)
 
(118
)
 
(212
)
 
(356
)
Non-GAAP Adjusted Other (income)/deductions––net
 
$
(361
)
 
$
(100
)
 
$
(547
)
 
$
(235
)
For additional information regarding the adjustments, see the accompanying reconciliations. See Note (5) to Consolidated Statements of Income for the second quarter and first six months of 2020 and 2019 above for additional information on the components comprising GAAP reported Other (income)/deductions––net. For additional information on certain significant items excluded from GAAP reported Other (income)/deductions––net in calculating Non-GAAP Adjusted Other (income)/deductions––net, refer to footnote (3) above.

- 30 -

PFIZER INC. AND SUBSIDIARY COMPANIES
OPERATING SEGMENT INFORMATION(1) - (UNAUDITED)
(millions of dollars)

The following tables provide revenue and cost information by reportable operating segment and a reconciliation of that information to our consolidated statements of income:
 
 
Second-Quarter 2020
 
 
Biopharma(2)
 
Upjohn(2)
 
Other(3)
 
Non-GAAP Adjusted(4)
 
Reconciling Items(5)
 
GAAP Reported
Revenues
 
$
9,795

 
$
2,006

 
$

 
$
11,801

 
$

 
$
11,801

Cost of sales
 
1,713

 
506

 
17

 
2,236

 
44

 
2,281

% of revenue
 
17.5
%
 
25.2
%
 
*

 
18.9
%
 
*

 
19.3
%
Selling, informational and administrative expenses
 
1,488

 
273

 
1,047

 
2,808

 
222

 
3,030

Research and development expenses
 
216

 
56

 
1,623

 
1,895

 
237

 
2,132

Amortization of intangible assets
 
71

 

 

 
71

 
834

 
905

Restructuring charges and certain acquisition-related costs
 

 

 

 

 
362

 
362

(Gain) on completion of Consumer Healthcare JV transaction
 

 

 

 

 

 

Other (income)/deductions––net
 
(342
)
 
2

 
(21
)
 
(361
)
 
(501
)
 
(862
)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
 
6,650

 
1,168

 
(2,666
)
 
5,152

 
(1,199
)
 
3,953

 
 
 
Six Months Ended June 28, 2020
 
 
Biopharma(2)
 
Upjohn(2)
 
Other(3)
 
Non-GAAP Adjusted(4)
 
Reconciling Items(5)
 
GAAP Reported
Revenues
 
$
19,802

 
$
4,027

 
$

 
$
23,829

 
$

 
$
23,829

Cost of sales
 
3,488

 
1,003

 
95

 
4,586

 
73

 
4,658

% of revenue
 
17.6
%
 
24.9
%
 
*

 
19.2
%
 
*

 
19.5
%
Selling, informational and administrative expenses
 
2,980

 
560

 
2,013

 
5,553

 
350

 
5,903

Research and development expenses
 
401

 
110

 
3,110

 
3,622

 
234

 
3,856

Amortization of intangible assets
 
141

 

 

 
142

 
1,648

 
1,790

Restructuring charges and certain acquisition-related costs
 

 

 

 

 
431

 
431

(Gain) on completion of Consumer Healthcare JV transaction
 

 

 

 

 
(6
)
 
(6
)
Other (income)/deductions––net
 
(588
)
 
(5
)
 
45

 
(547
)
 
(94
)
 
(641
)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
 
13,379

 
2,359

 
(5,264
)
 
10,474

 
(2,635
)
 
7,838

 
 
Second-Quarter 2019
 
 
Biopharma(2)
 
Upjohn(2)
 
Other(3)
 
Non-GAAP Adjusted(4)
 
Reconciling Items(5)
 
<