Market Overview

PFIZER REPORTS FIRST-QUARTER 2017 RESULTS

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Pfizer Inc. (NYSE:PFE) reported financial results for first-quarter 2017
and reaffirmed its 2017 financial guidance.

On June 24, 2016, Pfizer acquired Anacor Pharmaceuticals, Inc. (Anacor).
Therefore, financial results for first-quarter 2017 reflect three months
of legacy Anacor operations, which were immaterial.

On September 28, 2016, Pfizer acquired Medivation, Inc. (Medivation).
Therefore, financial results for first-quarter 2017 reflect three months
of legacy Medivation operations.

On February 3, 2017, Pfizer completed the sale of its global infusion
therapy net assets, Hospira Infusion Systems (HIS). Therefore, financial
results for first-quarter 2017 reflect approximately one month of legacy
HIS domestic operations and approximately two months of legacy HIS
international operations, while financial results for first-quarter 2016
reflect three months of legacy HIS global operations.(3)

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.(4) Results for the
first quarter of 2017 and 2016 are summarized below.

OVERALL RESULTS
                   

  ($ in millions, except
  per share amounts)

First-Quarter
2017     2016       Change  

  Revenues

$   12,779 $   13,005 (2%)

  Reported Net Income(1)

3,121 3,038 3%

  Reported Diluted EPS(1)

0.51 0.49 6%

  Adjusted Income(2)

4,192 4,177

  Adjusted Diluted EPS(2)

              0.69           0.67         3%  
 
REVENUES
                     

  ($ in millions)

First-Quarter
2017 2016   % Change  
          Total     Oper.  

  Innovative Health

  7,415   7,033 5% 6%

  Essential Health

    5,364           5,972         (10%)     (9%)  
Total Company $   12,779       $   13,005         (2%)     (1%)  
 

  Excluding HIS revenues from all periods:

  Total Company

$ 12,682 $ 12,702 1%
Essential Health             5,267           5,668         (7%)     (6%)  
 
 

2017 FINANCIAL GUIDANCE(5)

Pfizer's reaffirmed 2017 financial guidance is presented below:

Revenues     $52.0 to $54.0 billion  
Adjusted Cost of Sales(2) as a Percentage of Revenues     20.0% to 21.0%  
Adjusted SI&A Expenses(2)     $13.7 to $14.7 billion  
Adjusted R&D Expenses(2)     $7.5 to $8.0 billion  
Adjusted Other (Income)/Deductions(2)     Approximately $100 million of deductions  
Effective Tax Rate on Adjusted Income(2)     Approximately 23.0%  
Adjusted Diluted EPS(2)     $2.50 to $2.60  
   

CAPITAL ALLOCATION

  • During first-quarter 2017, Pfizer returned $6.9 billion directly to
    shareholders, through a combination of:
    • a $1.9 billion dividend payment, or $0.32 per share of common
      stock; and
    • a $5.0 billion accelerated share repurchase agreement executed in
      February 2017.
  • As of May 2, 2017, Pfizer's remaining share repurchase authorization
    was approximately $6.4 billion.

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, "I was pleased
with our first-quarter 2017 financial performance, which was in line
with our expectations, and it reinforces our confidence in the business
going forward. I believe each of our businesses is well positioned
within their individual markets with strong portfolios, highly skilled
and accomplished leadership and focused strategies. Innovative Health's
core franchises -- Prevnar 13, Lyrica, Ibrance, Eliquis, Xeljanz and
Xtandi -- have strong leadership positions in their respective
therapeutic categories and are complemented by new product launches,
including Eucrisa and Bavencio, as well as meaningful pipeline progress.
Essential Health's growth opportunities -- Sterile Injectables,
Biosimilars and Emerging Markets -- continue to perform in line with our
expectations while we refine the business and position it for potential
sustainable revenue growth.

"Finally, we will continue to allocate our capital to initiatives that
we believe will maximize value creation," Mr. Read concluded.

Frank D'Amelio, Executive Vice President, Business Operations and Chief
Financial Officer, stated, "Today we are reaffirming our 2017 financial
guidance, reflecting our performance to date as well as our confidence
in the business going forward. Excluding the negative impacts of the
divestiture of HIS and foreign exchange, the midpoints of our 2017
revenue and Adjusted diluted EPS(2) guidance ranges reflect
4% and 10% operational growth, respectively."

QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter 2017 vs. First-Quarter
2016)

First-quarter 2017 revenues totaled $12.8 billion, a decline of $226
million, or 2% compared to the prior-year quarter, reflecting an
operational decline of $110 million, or 1%, and the unfavorable impact
of foreign exchange of $116 million, or 1%.

Excluding the revenues for HIS in both periods and the unfavorable
impact of foreign exchange, first-quarter 2017 revenues increased by $97
million, or 1%. First-quarter 2017 revenues excluding the net impact of
acquisitions and divestitures completed in 2016 and 2017 were flat
operationally compared to first-quarter 2016.

Of note, there was one less selling day in the U.S. and two fewer
selling days in international markets during first-quarter 2017 compared
to first-quarter 2016, resulting in a negative impact on first-quarter
2017 revenues of approximately $300 million compared to the prior-year
quarter. Full-year 2017 will have one less U.S. selling day and one less
international selling day compared to full-year 2016.

Innovative Health Highlights

  • IH revenues increased 6% operationally in first-quarter 2017, driven
    by continued growth from key brands including Ibrance and Eliquis
    globally, the addition of Xtandi revenues in the U.S. resulting from
    the September 2016 acquisition of Medivation, as well as Lyrica and
    Xeljanz, both primarily in the U.S. Global Ibrance revenue increased
    59% operationally while global operational revenue growth for Eliquis
    and Xeljanz was 52% and 27%, respectively.
  • Global Prevnar 13/Prevenar 13 revenues declined 7% operationally. In
    the U.S., Prevnar 13 revenues decreased 9% primarily due to the
    continued decline in revenues for the Adult indication due to a
    smaller remaining "catch up" opportunity compared to the prior-year
    quarter, partially offset by the favorable impact from the timing of
    government purchases for the pediatric indication. Prevenar 13
    revenues in international markets decreased 4% operationally,
    primarily due to the unfavorable timing of government purchases in
    certain emerging markets for the pediatric indication, partially
    offset by modest growth of the Adult indication in certain developed
    Europe markets.
  • First-quarter 2017 operational growth was also negatively impacted by
    lower revenues for Enbrel in most developed Europe markets, primarily
    due to continued biosimilar competition, as well as by Viagra in the
    U.S. primarily due to lower market demand.

Essential Health Highlights

  • First-quarter 2017 EH revenues declined 9% operationally, primarily
    resulting from a 23% operational decline from Peri-LOE Products,
    including Pristiq in the U.S., which lost marketing exclusivity in the
    U.S. in March 2017, Lyrica in most developed Europe markets and Zyvox
    in developed Europe and in the U.S., a 68% decline in HIS revenues,
    reflecting its February 3, 2017 divestiture, and a 5% operational
    decline from Legacy Established Products (LEP). These declines were
    partially offset by 3% operational growth from the Sterile Injectable
    Pharmaceuticals (SIP) portfolio and 62% operational growth from
    Biosimilars, primarily driven by Inflectra in certain developed Europe
    markets and in the U.S. EH revenues excluding the performance of HIS
    in both periods declined 6% operationally.
  • Developed markets revenues declined 14% operationally, negatively
    impacted by a 34% operational decline from Peri-LOE Products, a 72%
    operational decline in HIS revenues and a 9% operational decline from
    the LEP portfolio, partially offset by 62% operational growth from
    Biosimilars. Excluding the performance of HIS in both periods, EH
    revenues in developed markets declined 10% operationally.
  • Revenues in emerging markets grew 5% operationally, primarily driven
    by 21% operational growth from the SIP portfolio. Excluding the
    performance of HIS in both periods, EH revenues in emerging markets
    grew 6% operationally.

GAAP Reported(1) Income Statement Highlights

SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(1)
           

($ in millions)
(Favorable)/Unfavorable

First-Quarter
2017 2016   % Change  
      Total   Oper.  
Cost of Sales(1) $   2,470 $   2,851

  (13%)  

  (12%)  

Percent of Revenues 19.3 % 21.9 % N/A N/A
SI&A Expenses(1) 3,308 3,385 (2%) (2%)
R&D Expenses(1)     1,708         1,731       (1%)   (1%)  
Total $   7,486     $   7,967       (6%)   (5%)  
 

Other
(Income)/Deductions––net(1)

($1 ) $ 330 * *

Effective Tax Rate on
Reported Income(1)

        20.8 %       14.4 %            
 

* Indicates calculation not meaningful.

 

Adjusted(2) Income Statement Highlights

SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)
           

($ in millions)
(Favorable)/Unfavorable

 

First-Quarter
2017 2016   % Change  
      Total   Oper.  
Adjusted Cost of Sales(2) $   2,434 $   2,565 (5%) (4%)
Percent of Revenues 19.1 % 19.7 %

N/A

N/A
Adjusted SI&A Expenses(2) 3,288 3,368 (2%) (2%)
Adjusted R&D Expenses(2)     1,705         1,723       (1%)    
Total $   7,428     $   7,656       (3%)   (2%)  
 

Adjusted Other
(Income)/Deductions––net(2)

($88 ) ($149 )

  (41%)  

  (63%)  

Effective Tax Rate on
Adjusted Income(2)

        22.3 %       23.4 %            
 

The diluted weighted-average shares outstanding used to calculate
Reported(1) and Adjusted(2) diluted EPS declined
by 133 million shares compared to the prior-year quarter due to Pfizer's
share repurchase program, reflecting the impact of a $5 billion
accelerated share repurchase agreement executed in March 2016 and
completed in June 2016 and another $5 billion accelerated share
repurchase agreement executed in February 2017.

A full reconciliation of Reported(1) to Adjusted(2)
financial measures and associated footnotes can be found starting on
page 18 of the press release located at the hyperlink below.

RECENT NOTABLE DEVELOPMENTS (Since January 31, 2017)

Product Developments

  • Bavencio (avelumab)
    • In March 2017, EMD Serono Inc. (EMD Serono), the biopharmaceutical
      business of Merck KGaA, Darmstadt, Germany, in the U.S. and
      Canada, and Pfizer announced that the U.S. Food and Drug
      Administration (FDA) approved Bavencio Injection 20 mg/mL, for
      intravenous use, for the treatment of adults and pediatric
      patients 12 years and older with metastatic Merkel cell carcinoma
      (mMCC). This indication is approved under accelerated approval
      based on tumor response and duration of response. Continued
      approval for this indication may be contingent upon verification
      and description of clinical benefit in confirmatory trials.
      Bavencio, a human anti-PD-L1 antibody, is the first FDA-approved
      therapy for patients with mMCC, a rare and aggressive skin cancer.
    • In February 2017, EMD Serono and Pfizer announced that the FDA
      accepted for Priority Review EMD Serono's Biologics License
      Application (BLA) for avelumab as a treatment for patients with
      locally advanced or metastatic urothelial carcinoma with disease
      progression on or after platinum-based therapy. The FDA has set a
      Prescription Drug User Fee Act (PDUFA) target action date of
      August 27, 2017 for avelumab in this indication.
  • Eliquis (apixaban) -- In March 2017, Bristol-Myers Squibb
    Company and Pfizer announced findings from a real-world data analysis
    of the U.S. Medicare database comparing the risk of stroke or systemic
    embolism and rate of major bleeding among patients with non-valvular
    atrial fibrillation who were treated with direct oral anticoagulants
    versus warfarin. In the analysis, titled Effectiveness and Safety
    of Apixaban, Dabigatran, and Rivaroxaban Compared to Warfarin among
    Non-Valvular Atrial Fibrillation Patients in the U.S. Medicare
    Population
    , Eliquis was associated with a significantly lower risk
    of stroke or systemic embolism and lower rate of major bleeding
    compared to warfarin. These data, which supplement results from
    randomized trials, were presented at the American College of
    Cardiology's 66th Annual Scientific Session.
  • Ibrance (palbociclib) -- In March 2017, Pfizer announced that
    the FDA approved a supplemental New Drug Application for Ibrance,
    based on the results from the confirmatory Phase 3 trial, PALOMA-2.
    The FDA action converts the accelerated approval of Ibrance to regular
    approval and broadens the range of anti-hormonal therapy that may be
    administered with Ibrance. Ibrance now is indicated in combination
    with an aromatase inhibitor, expanding on its earlier indication in
    combination with letrozole, as initial endocrine based therapy for
    postmenopausal women with hormone receptor-positive, human epidermal
    growth factor receptor 2-negative advanced or metastatic breast cancer.
  • Inflectra (infliximab-dyyb) -- In February 2017, Pfizer and
    Celltrion Healthcare announced that data presented at the 12th
    Congress of the European Crohn's and Colitis Organisation showed that
    for patients with moderate-to-severe Crohn's disease (CD), treatment
    with Inflectra has similar efficacy and safety to treatment with
    Remicade®(6), its reference product. The randomized 54-week
    clinical trial in 214 patients met its primary endpoint demonstrating
    that, at six weeks, Inflectra was similar to Remicade®(6)
    in the treatment of CD thereby meeting the criterion for
    non-inferiority. Further results on the longer-term safety and
    efficacy of Inflectra from this ongoing 54-week study in CD are
    expected later this year. The study is also examining the treatment
    response and safety profile in patients when switched from Remicade®(6)
    to Inflectra, and from Inflectra to Remicade®(6).
  • Trumenba (Meningococcal Serogroup B Bivalent Recombinant
    Lipoprotein vaccine)
    -- In March 2017, Pfizer announced that the
    Committee for Medicinal Products for Human Use (CHMP) of the European
    Medicines Agency (EMA) has adopted a positive opinion recommending
    that Trumenba be granted marketing authorization in the European Union
    (EU) for active immunization of individuals 10 years and older to
    prevent invasive meningococcal disease caused by Neisseria
    meningitidis
    serogroup B. The CHMP's opinion will now be reviewed
    by the European Commission (EC), which has the authority to approve
    medicines for the EU.
  • Xeljanz (tofacitinib)
    • In March 2017, Pfizer announced that the EC approved Xeljanz 5 mg
      twice daily (BID) oral tablets in combination with methotrexate
      (MTX) for the treatment of moderate to severe active rheumatoid
      arthritis (RA) in adult patients who have responded inadequately
      to, or who are intolerant to one or more disease-modifying
      antirheumatic drugs (DMARDs). Xeljanz can be given as monotherapy
      in case of intolerance to MTX or when treatment with MTX is
      inappropriate.
    • In March 2017, Pfizer announced that the Chinese Food and Drug
      Administration approved Xeljanz 5 mg BID in China for the
      treatment of adult patients with moderately to severely active RA
      who have had an inadequate response or intolerance to MTX. Xeljanz
      may be used in combination with MTX or other non-biologic DMARDs.
    • In February 2017, Pfizer announced top-line results from ORAL
      Strategy, a Phase 3B/4 study of Xeljanz 5 mg BID in the treatment
      of moderate to severe RA. ORAL Strategy is the first trial to
      compare a JAK inhibitor as monotherapy or in combination with MTX
      versus adalimumab (Humira®(7)) plus MTX in MTX
      inadequate responders using ACR50 at Month 6 as the primary
      endpoint. There were three comparisons, which found:
      • Xeljanz 5 mg plus MTX met its primary endpoint in
        demonstrating non-inferiority versus Humira®(7)
        plus MTX; and
      • Xeljanz 5 mg monotherapy did not meet its primary endpoint of
        non-inferiority versus Humira®(7) plus MTX or
        versus Xeljanz plus MTX.

        The safety findings were
        consistent with the known adverse events and serious adverse
        events profile for Xeljanz.
  • Zavicefta (ceftazidime-avibactam)
    • In April 2017, Pfizer presented positive results of the REPROVE
      study (randomized, multi-center study of ceftazidime-avibactam
      versus meropenem in adults with nosocomial pneumonia including
      ventilator associated pneumonia) that showed that patients
      diagnosed with hospital-acquired pneumonia, treated with
      Zavicefta, a novel combination antibiotic for the treatment of
      certain known or suspected Gram-negative bacterial infections, or
      Meropenem (meropenem for injection), a broad spectrum carbapenem
      antibiotic currently considered the standard of care, experienced
      comparable rates of clinical cure at test-of-cure 21-25 days after
      randomization. Clinical cure was the primary endpoint of the study
      and defined as a complete resolution of all signs and symptoms of
      infection. In addition, patients treated with Zavicefta and
      Meropenem experienced comparable rates of tolerability consistent
      with the known profile of ceftazidime alone. In December 2016,
      Pfizer completed the acquisition of the development and
      commercialization rights to AstraZeneca's small molecule
      anti-infective business, primarily outside the U.S., including the
      commercialization and development rights to Zavicefta outside
      North America.
    • In March 2017, Pfizer announced that Zavicefta is now available in
      the U.K. and Germany. Pfizer expects to launch Zavicefta in
      additional markets outside the U.S. throughout 2017 and 2018.

Pipeline Developments

A comprehensive update of Pfizer's development pipeline was published
today and is now available at http://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.

  • Ertugliflozin (PF-04971729) -- In March 2017, Merck, known as
    MSD outside the U.S. and Canada, and Pfizer, announced that the FDA
    has accepted for review three New Drug Applications (NDAs) for
    medicines containing ertugliflozin, an investigational SGLT2 inhibitor
    in development to help improve glycemic control in adults with type 2
    diabetes: one for monotherapy, one for the fixed-dose combination of
    ertugliflozin and Januvia®(8) (sitagliptin), and one for
    the fixed-dose combination of ertugliflozin and metformin. The PDUFA
    action date from the FDA is in December 2017 for the three NDAs.
    Additionally, in February 2017, the EMA validated for review three
    Marketing Authorization Applications for ertugliflozin monotherapy and
    the two fixed-dose combination products.
  • Inotuzumab Ozogamicin
    • In April 2017, Pfizer announced that the CHMP of the EMA adopted a
      positive opinion recommending approval of Besponsa (inotuzumab
      ozogamicin) in the EU as monotherapy for the treatment of adults
      with relapsed or refractory CD22-positive B-cell precursor
      Philadelphia chromosome negative (Ph-) acute lymphoblastic
      leukemia (ALL) and Philadelphia chromosome positive (Ph+) ALL, who
      have previously failed treatment with at least one tyrosine kinase
      inhibitor. The CHMP's opinion will now be reviewed by the EC. If
      approved, Besponsa will be the first antibody drug conjugate
      available for patients with this type of leukemia.
    • In February 2017, Pfizer announced that a BLA for inotuzumab
      ozogamicin was accepted for filing and granted Priority Review by
      the FDA. Inotuzumab ozogamicin is being evaluated for the
      treatment of adult patients with relapsed or refractory B-cell
      precursor ALL. The PDUFA goal date for a decision by the FDA is in
      August 2017.
  • Lorlatinib (PF-06463922) -- Pfizer announced in April 2017 that
    its investigational next-generation anaplastic lymphoma kinase
    (ALK)/ROS1 tyrosine kinase inhibitor, lorlatinib, was granted
    Breakthrough Therapy designation from the FDA for the treatment of
    patients with ALK-positive metastatic non-small cell lung cancer
    (NSCLC), previously treated with one or more ALK inhibitors. The
    Breakthrough Therapy designation is supported by the efficacy and
    safety data of an ongoing Phase 1/2 clinical trial of lorlatinib,
    which includes patients with ALK-positive NSCLC who were previously
    treated with one or more ALK inhibitors.
  • PF-06425090 (Clostridium difficile (C. difficile)
    vaccine candidate)
    -- In March 2017, Pfizer initiated a
    randomized, placebo-controlled, observer-blinded Phase 3 study to
    evaluate the efficacy, safety and tolerability of its investigational C.
    difficile
    vaccine in adults aged 50 and over, who are at risk of
    developing C. difficile infection (CDI). The CLOVER (Clostridium
    difficile
    Vaccine Efficacy Trial) study will assess whether
    PF-06425090 prevents CDI, and whether it is safe and well tolerated.
    Each patient will receive three doses of PF-06425090 or placebo and be
    followed for up to three years after vaccination. The trial is
    expected to enroll nearly 16,000 patients.

Corporate Developments

  • In February 2017, Pfizer announced that it entered into an accelerated
    share repurchase agreement with Citibank N.A. (Citibank) to repurchase
    $5 billion of Pfizer's common stock. Pursuant to the terms of the
    agreement, on February 6, 2017, Pfizer paid $5 billion to Citibank and
    received an initial delivery of approximately 126 million shares of
    Pfizer common stock from Citibank. At settlement of the agreement,
    which is expected to occur during or prior to the third quarter of
    2017, Citibank may be required to deliver additional shares of common
    stock to Pfizer, or, under certain circumstances, Pfizer may be
    required to deliver shares of its common stock or may elect to make a
    cash payment to Citibank, with the number of shares to be delivered or
    the amount of such payment based on the volume-weighted average price
    of Pfizer's common stock during the term of the transaction.
  • In February 2017, Pfizer completed the sale of HIS to ICU Medical,
    Inc. (ICU Medical) for up to approximately $900 million, composed of
    cash and contingent cash consideration, ICU Medical common stock and
    seller financing.

Please find Pfizer's press release and associated financial tables,
including reconciliations of certain GAAP reported to non-GAAP adjusted
information, at the following hyperlink:

https://s21.q4cdn.com/317678438/files/doc_financials/Quarterly/2017/Q1_2017_Earnings_Press_Release.pdf

(Note: If clicking on the above link does not open up a new web page,
you may need to cut and paste the above URL into your browser's address
bar.)

For additional details, see the associated financial schedules and
product revenue tables attached to the press release located at the
hyperlink referred to above and the attached disclosure notice.

(1)   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. GAAP. Reported diluted earnings per share (EPS) is defined as
reported diluted EPS attributable to Pfizer Inc. common shareholders
in accordance with U.S. GAAP.
 
(2)

Adjusted income and its components and Adjusted diluted EPS are
defined as reported U.S. GAAP net income(1) and its
components and reported diluted EPS(1) excluding
purchase accounting adjustments, acquisition-related costs,
discontinued operations and certain significant items (some of
which may recur, such as restructuring or legal charges, 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 2016 Financial Report, which was filed as Exhibit 13
to Pfizer's Annual Report on Form 10-K for the fiscal year ended
December 31, 2016, 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, vaccines and consumer healthcare
(OTC) products––prior to considering certain income statement
elements. See the accompanying reconciliations of certain GAAP
Reported to Non-GAAP Adjusted information for the first quarter of
2017 and 2016. 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.

 
(3) 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 first-quarter for U.S. subsidiaries reflects
the three months ending on April 2, 2017 and April 3, 2016 while
Pfizer's first-quarter for subsidiaries operating outside the U.S.
reflects the three months ending on February 26, 2017 and February
28, 2016.
 
(4) 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 business; therefore, Pfizer believes
presenting operational variances provides useful information to
evaluate the results of its business.
 
(5)

The 2017 financial guidance reflects the following:

  • 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 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.
  • Does not assume the completion of any business development
    transactions not completed as of April 2, 2017, including any
    one-time upfront payments associated with such transactions.
  • Exchange rates assumed are a blend of the actual exchange rates
    in effect through first-quarter 2017 and mid-April 2017 exchange
    rates for the remainder of the year.
  • 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.
  • Reflects the anticipated negative impact of $0.5 billion on
    revenues and $0.03 on Adjusted diluted EPS(2) as a
    result of unfavorable changes in foreign exchange rates relative
    to the U.S. dollar compared to foreign exchange rates from 2016.
  • Guidance for Adjusted diluted EPS(2) assumes diluted
    weighted-average shares outstanding of between 6.0 to 6.1
    billion shares, which reflects the impact of the $5 billion
    accelerated share repurchase agreement executed in February 2017.
(6) Remicade® is a registered U.S. trademark of Janssen
Biotech, Inc.
 
(7) Humira® is a registered U.S. trademark of Abbvie
Biotechnology Ltd.
 
(8) Januvia® is a registered trademark of Merck Sharp & Dohme
Corp., a subsidiary of Merck & Co., Inc.
 

DISCLOSURE NOTICE: Except where otherwise noted, the information
contained in this earnings release and the related attachments is as of
May 2, 2017. We assume no obligation to update any forward-looking
statements contained in this earnings release and the related
attachments as a result of new information or future events or
developments.

This earnings release and the related attachments contain
forward-looking statements about our anticipated future operating and
financial performance, business plans and prospects, in-line products
and product candidates, strategic reviews, capital allocation,
business-development plans, the benefits expected from our acquisitions
of Hospira, Inc. (Hospira), Anacor Pharmaceuticals, Inc. (Anacor),
Medivation, Inc. (Medivation) and AstraZeneca's small molecule
anti-infectives business and plans relating to share repurchases and
dividends, among other things, that involve substantial risks and
uncertainties. You can identify these statements by the fact that they
use future dates or use words such as "will," "may," "could," "likely,"
"ongoing," "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe," "target," "forecast," "goal," "objective," "aim" and
other words and terms of similar meaning. Among the factors that could
cause actual results to differ materially from past results and future
plans and projected future results are the following:

  • the outcome of research and development activities, including, without
    limitation, the ability to meet anticipated pre-clinical and clinical
    trial commencement and completion dates, regulatory submission and
    approval dates, and launch dates for product candidates, as well as
    the possibility of unfavorable pre-clinical and clinical trial
    results, including unfavorable new clinical data and additional
    analyses of existing clinical data;
  • decisions by regulatory authorities regarding whether and when to
    approve our drug applications, which will depend on the assessment by
    such regulatory authorities of the benefit-risk profile suggested by
    the totality of the efficacy and safety information submitted;
    decisions by regulatory authorities regarding labeling, ingredients
    and other matters that could affect the availability or commercial
    potential of our products; and uncertainties regarding our ability to
    address the comments in complete response letters received by us with
    respect to certain of our drug applications to the satisfaction of the
    FDA;
  • the speed with which regulatory authorizations, pricing approvals and
    product launches may be achieved;
  • the outcome of post-approval clinical trials, which could result in
    the loss of marketing approval for a product or changes in the
    labeling for, and/or increased or new concerns about the safety or
    efficacy of, a product that could affect its availability or
    commercial potential;
  • risks associated with interim data, including the risk that final
    results of studies for which interim data have been provided and/or
    additional clinical trials may be different from (including less
    favorable than) the interim data results and may not support further
    clinical development of the applicable product candidate or indication;
  • the success of external business-development activities, including the
    ability to satisfy the conditions to closing of announced transactions
    in the anticipated time frame or at all;
  • competitive developments, including the impact on our competitive
    position of new product entrants, in-line branded products, generic
    products, private label products, biosimilars and product candidates
    that treat diseases and conditions similar to those treated by our
    in-line drugs and drug candidates;
  • the implementation by the FDA and regulatory authorities in certain
    other countries of an abbreviated legal pathway to approve biosimilar
    products, which could subject our biologic products to competition
    from biosimilar products, with attendant competitive pressures, after
    the expiration of any applicable exclusivity period and patent rights;
  • risks related to our ability to develop and launch biosimilars,
    including risks associated with "at risk" launches, defined as the
    marketing of a product by Pfizer before the final resolution of
    litigation (including any appeals) brought by a third party alleging
    that such marketing would infringe one or more patents owned or
    controlled by the third party;
  • the ability to meet competition from generic, branded and biosimilar
    products after the loss or expiration of patent protection for our
    products or competitor products;
  • the ability to successfully market both new and existing products
    domestically and internationally;
  • difficulties or delays in manufacturing, including possible legal or
    regulatory actions, such as warning letters, suspension of
    manufacturing, seizure of product, injunctions or voluntary recall of
    a product;
  • trade buying patterns;
  • the impact of existing and future legislation and regulatory
    provisions on product exclusivity;
  • trends toward managed care and healthcare cost containment, and our
    ability to obtain or maintain timely or adequate pricing or formulary
    placement for our products;
  • the impact of any significant spending reductions or cost controls
    affecting Medicare, Medicaid or other publicly funded or subsidized
    health programs or changes in the tax treatment of employer-sponsored
    health insurance that may be implemented, and/or any significant
    additional taxes or fees that may be imposed on the pharmaceutical
    industry as part of any broad deficit-reduction effort;
  • the impact of any U.S. healthcare reform or legislation, including any
    repeal, substantial modification or invalidation of any or all of the
    provisions of the U.S. Patient Protection and Affordable Care Act, as
    amended by the Health Care and Education Reconciliation Act;
  • U.S. federal or state legislation or regulatory action and/or policy
    efforts affecting, among other things, pharmaceutical product pricing,
    reimbursement or access, including under Medicaid, Medicare and other
    publicly funded or subsidized health programs; patient out-of-pocket
    costs for medicines, manufacturer prices and/or price increases that
    could result in new mandatory rebates and discounts or other pricing
    restrictions; the importation of prescription drugs from outside the
    U.S. at prices that are regulated by governments of various foreign
    countries; restrictions on direct-to-consumer advertising; limitations
    on interactions with healthcare professionals; or the use of
    comparative effectiveness methodologies that could be implemented in a
    manner that focuses primarily on the cost differences and minimizes
    the therapeutic differences among pharmaceutical products and
    restricts access to innovative medicines; as well as pricing pressures
    for our products as a result of highly competitive insurance markets;
  • legislation or regulatory action in markets outside the U.S. affecting
    pharmaceutical product pricing, reimbursement or access, including, in
    particular, continued government-mandated reductions in prices and
    access restrictions for certain biopharmaceutical products to control
    costs in those markets;
  • the exposure of our operations outside the U.S. to possible capital
    and exchange controls, expropriation and other restrictive government
    actions, changes in intellectual property legal protections and
    remedies, as well as political unrest, unstable governments and legal
    systems and inter-governmental disputes;
  • contingencies related to actual or alleged environmental contamination;
  • claims and concerns that may arise regarding the safety or efficacy of
    in-line products and product candidates;
  • any significant breakdown, infiltration or interruption of our
    information technology systems and infrastructure;
  • legal defense costs, insurance expenses and settlement costs;
  • the risk of an adverse decision or settlement and the adequacy of
    reserves related to legal proceedings, including patent litigation,
    product liability and other product-related litigation, including
    personal injury, consumer, off-label promotion, securities, antitrust
    and breach of contract claims, commercial, environmental, government
    investigations, employment and other legal proceedings, including
    various means for resolving asbestos litigation, as well as tax issues;
  • our ability to protect our patents and other intellectual property,
    both domestically and internationally;
  • interest rate and foreign currency exchange rate fluctuations,
    including the impact of possible currency devaluations in countries
    experiencing high inflation rates and the volatility following the
    United Kingdom (U.K.) referendum in which voters approved the exit
    from the EU;
  • governmental laws and regulations affecting domestic and foreign
    operations, including, without limitation, tax obligations and changes
    affecting the tax treatment by the U.S. of income earned outside the
    U.S. that may result from pending and possible future proposals;
  • any significant issues involving our largest wholesale distributors,
    which account for a substantial portion of our revenues;
  • the possible impact of the increased presence of counterfeit medicines
    in the pharmaceutical supply chain on our revenues and on patient
    confidence in the integrity of our medicines;
  • the end result of any negotiations between the U.K. government and the
    EU regarding the terms of the U.K.'s exit from the EU, which could
    have implications on our research, commercial and general business
    operations in the U.K. and the EU;
  • any significant issues that may arise related to the outsourcing of
    certain operational and staff functions to third parties, including
    with regard to quality, timeliness and compliance with applicable
    legal requirements and industry standards;
  • any significant issues that may arise related to our joint ventures
    and other third-party business arrangements;
  • changes in U.S. generally accepted accounting principles;
  • changes in interpretations of existing laws and regulations, or
    changes in laws and regulations, in the U.S. and other countries;
  • uncertainties related to general economic, political, business,
    industry, regulatory and market conditions including, without
    limitation, uncertainties related to the impact on us, our customers,
    suppliers and lenders and counterparties to our foreign-exchange and
    interest-rate agreements of challenging global economic conditions and
    recent and possible future changes in global financial markets; and
    the related risk that our allowance for doubtful accounts may not be
    adequate;
  • any changes in business, political and economic conditions due to
    actual or threatened terrorist activity in the U.S. and other parts of
    the world, and related U.S. military action overseas;
  • growth in costs and expenses;
  • changes in our product, segment and geographic mix;
  • the impact of purchase accounting adjustments, acquisition-related
    costs, discontinued operations and certain significant items;
  • the impact of acquisitions, divestitures, restructurings, internal
    reorganizations, product recalls, withdrawals and other unusual items,
    including our ability to realize the projected benefits of our
    cost-reduction and productivity initiatives and of the internal
    separation of our commercial operations into our current operating
    structure;
  • the risk of an impairment charge related to our intangible assets,
    goodwill or equity-method investments;
  • risks related to internal control over financial reporting; and
  • risks and uncertainties related to our recent acquisitions of Hospira,
    Anacor, Medivation and AstraZeneca's small molecule anti-infectives
    business, including, among other things, the ability to realize the
    anticipated benefits of those acquisitions, including the possibility
    that expected cost savings related to the acquisition of Hospira and
    accretion related to the acquisitions of Hospira, Anacor and
    Medivation will not be realized or will not be realized within the
    expected time frame; the risk that the businesses will not be
    integrated successfully; disruption from the transactions making it
    more difficult to maintain business and operational relationships;
    significant transaction costs; and unknown liabilities.

We cannot guarantee that any forward-looking statement will be realized.
Achievement of anticipated results is subject to substantial risks,
uncertainties and inaccurate assumptions. Should known or unknown risks
or uncertainties materialize or should underlying assumptions prove
inaccurate, actual results could vary materially from past results and
those anticipated, estimated or projected. Investors should bear this in
mind as they consider forward-looking statements, and are cautioned not
to put undue reliance on forward-looking statements. A further list and
description of risks, uncertainties and other matters can be found in
our Annual Report on Form 10-K for the fiscal year ended December 31,
2016 and in our subsequent reports on Form 10-Q, in each case including
in the sections thereof captioned "Forward-Looking Information and
Factors That May Affect Future Results" and "Item 1A. Risk Factors", and
in our subsequent reports on Form 8-K.

The operating segment information provided in this earnings release and
the related attachments does not purport to represent the revenues,
costs and income from continuing operations before provision for taxes
on income that each of our operating segments would have recorded had
each segment operated as a standalone company during the periods
presented.

This earnings release may include discussion of certain clinical studies
relating to various in-line products and/or product candidates. These
studies typically are part of a larger body of clinical data relating to
such products or product candidates, and the discussion herein should be
considered in the context of the larger body of data. In addition,
clinical trial data are subject to differing interpretations, and, even
when we view data as sufficient to support the safety and/or
effectiveness of a product candidate or a new indication for an in-line
product, regulatory authorities may not share our views and may require
additional data or may deny approval altogether.

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