Market Overview

PFIZER REPORTS THIRD-QUARTER 2017 RESULTS

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  • Third-Quarter 2017 Revenues of $13.2 Billion, Reflecting 1%
    Operational Growth; Unfavorably Impacted by $281 Million, or 2%, Due
    to the February 2017 Divestiture of Hospira Infusion Systems (HIS)
  • Third-Quarter 2017 Reported Diluted EPS(1) of $0.47,
    Adjusted Diluted EPS(2) of $0.67
  • Narrowed Certain 2017 Financial Guidance Ranges; Raised Midpoint of
    Adjusted Diluted EPS(2) Guidance Range by $0.03 to a Range
    of $2.58 to $2.62

Pfizer Inc. (NYSE:PFE) reported financial results for third-quarter
2017 and narrowed certain 2017 financial guidance ranges.

Results for the third quarter and first nine months of 2017 and 2016(3)
are summarized below.

 
OVERALL RESULTS
                         
($ in millions, except

per share amounts)

Third-Quarter Nine Months
2017   2016   Change 2017   2016   Change
Revenues $   13,168 $   13,045 1% $   38,843 $   39,196 (1%)
Reported Net Income(1) 2,840 1,355 * 9,034 6,440 40%
Reported Diluted EPS(1) 0.47 0.22 * 1.49 1.04 43%
Adjusted Income(2) 4,059 3,761 8% 12,313 11,867 4%
Adjusted Diluted EPS(2)                   0.67         0.61     10%         2.03         1.92     6%
 
REVENUES
                     
($ in millions) Third-Quarter Nine Months
2017 2016 % Change 2017 2016 % Change
    Total   Oper.     Total   Oper.
Innovative Health $   8,118 $   7,332 11% 11% $   23,204 $   21,471 8% 9%
Essential Health     5,050         5,712     (12%)   (11%)     15,639         17,725     (12%)   (11%)
Total Company $   13,168     $   13,045     1%   1% $   38,843     $   39,196     (1%)  
 
Excluding HIS revenues from all periods:
Total Company $ 13,168 $ 12,764 3% 4% $ 38,746 $ 38,317 1% 2%
Essential Health           5,050         5,432     (7%)   (6%)         15,543         16,846     (8%)   (6%)
 

Acquisitions and divestitures completed in 2016 and in the first nine
months of 2017 impacted financial results in the periods presented.(4)
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)

2017 FINANCIAL GUIDANCE(6)

Pfizer's updated 2017 financial guidance is presented below:

         
Revenues       $52.4 to $53.1 billion
      (previously $52.0 to $54.0 billion)
Adjusted Cost of Sales(2) as a Percentage of Revenues 20.0% to 20.5%
      (previously 20.0% to 21.0%)
Adjusted SI&A Expenses(2) $14.0 to $14.5 billion
      (previously $13.7 to $14.7 billion)
Adjusted R&D Expenses(2) $7.5 to $7.8 billion
      (previously $7.5 to $8.0 billion)
Adjusted Other (Income)/Deductions(2) Approximately $500 million of income
      (previously approximately $200 million of income)
Effective Tax Rate on Adjusted Income(2)       Approximately 23.0%
Adjusted Diluted EPS(2) $2.58 to $2.62
      (previously $2.54 to $2.60)
 

CAPITAL ALLOCATION

  • During the first nine months of 2017, Pfizer returned $10.8 billion
    directly to shareholders, through a combination of:
    • $5.8 billion of dividend payments, composed of a dividend of $0.32
      per share of common stock in each of the first, second and third
      quarters of 2017; and
    • a $5.0 billion accelerated share repurchase agreement executed in
      February 2017 and completed in May 2017, which resulted in a
      reduction of approximately 150 million shares of Pfizer's
      outstanding common stock.
  • As of October 31, 2017, Pfizer's remaining share repurchase
    authorization was approximately $6.4 billion.

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, "We reported
solid third-quarter 2017 financial results and raised the midpoint of
the range for our 2017 Adjusted diluted EPS(2) guidance.
Innovative Health revenues grew 11% operationally, primarily driven by
the performance of our key growth drivers, notably Ibrance, Eliquis,
Xtandi and Xeljanz, all of which are products that are early in their
patent-protected lifecycle in attractive therapeutic areas. While
Essential Health revenues remained challenged primarily due to continued
headwinds from products that recently lost marketing exclusivity and
product supply, we had solid operational growth in emerging markets and
in biosimilars.

"Looking ahead, we are encouraged by the convergence of two positive
trends: an expected decline in the unfavorable revenue impact associated
with product losses of exclusivity and the beginning of an expected
multi-year wave of potential new product launches and product line
extensions driven by our pipeline. We believe that the convergence of
these trends, coupled with anticipated continued strong growth from the
aforementioned innovative products, positions the Company for long-term
success," Mr. Read concluded.

Frank D'Amelio, Executive Vice President, Business Operations and Chief
Financial Officer, stated, "Overall, I am pleased with our third-quarter
2017 financial results, including 2% operational revenue growth after
excluding the net impact of acquisitions and divestitures completed in
2016 and the first nine months of 2017. As a result of our strong
performance to date in 2017, we narrowed the ranges for certain 2017
financial guidance components, including a $0.03 increase to the
midpoint of our range for Adjusted diluted EPS(2) to a range
of $2.58 to $2.62. The midpoint of our new guidance range for Adjusted
diluted EPS(2) implies 8% growth compared with last year.
Finally, earlier this month, we announced that we are reviewing
strategic alternatives for our Consumer Healthcare business."

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

Third-quarter 2017 revenues totaled $13.2 billion, an increase of $123
million, or 1% compared to the prior-year quarter, reflecting
operational growth of $178 million, or 1%, slightly offset by the
unfavorable impact of foreign exchange of $54 million.

Excluding the revenues for HIS in the prior-year quarter and the
unfavorable impact of foreign exchange, third-quarter 2017 revenues
increased by $458 million, or 4%. Third-quarter 2017 revenues excluding
the net impact of acquisitions and divestitures completed in 2016 and
the first nine months of 2017 increased $264 million, or 2%,
operationally compared to third-quarter 2016.

Innovative Health Highlights

  • IH revenues increased 11% operationally in third-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 revenues increased
    59% operationally while global operational revenue growth for Eliquis
    and Xeljanz was 43% and 49%, respectively.
  • Third-quarter 2017 operational growth was negatively impacted by lower
    revenues for Enbrel in most developed Europe markets due to continued
    biosimilar competition, and for Viagra in the U.S. primarily due to
    wholesaler destocking in advance of anticipated generic competition
    beginning in December 2017.
  • Global Prevnar 13/Prevenar 13 revenues declined 1% operationally in
    third-quarter 2017. In the U.S., Prevnar 13 revenues decreased 4%,
    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 growth from the
    pediatric indication. Prevenar 13 revenues in international markets
    increased 5% operationally, primarily due to the favorable overall
    impact of timing of government purchases in certain emerging markets
    for the pediatric indication.

Essential Health Highlights

  • Third-quarter 2017 EH revenues declined 11% operationally, of which 5%
    operationally was due to the February 2017 divestiture of HIS.
    Third-quarter 2017 EH revenues were also negatively impacted by a 22%
    operational decline from Peri-LOE Products, including declines in
    Pristiq in the U.S. as well as Lyrica and Vfend, both primarily in
    developed Europe. EH revenues were also negatively impacted by a 12%
    operational decline from the Sterile Injectable Pharmaceuticals (SIP)
    portfolio, primarily due to legacy Hospira product shortages in the
    U.S. These declines were partially offset by 67% operational growth
    from Biosimilars.
  • EH developed markets revenues declined 18% operationally, of which 6%
    operationally was due to the February 2017 divestiture of HIS. EH
    developed markets revenues were also negatively impacted by a 33%
    operational decline from Peri-LOE Products and a 20% operational
    decline from the SIP portfolio, primarily due to the aforementioned
    legacy Hospira product shortages in the U.S., partially offset by 65%
    operational growth from Biosimilars.
  • EH revenues in emerging markets grew 7% operationally, primarily
    driven by 6% operational growth from the Legacy Established Products
    portfolio and 14% operational growth from the SIP portfolio. Excluding
    HIS from both periods, EH revenues in emerging markets grew 8%
    operationally.

GAAP Reported(1) Income Statement Highlights

 
SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(1)
                 
($ in millions)

(Favorable)/Unfavorable

Third-Quarter Nine Months
2017 2016 % Change 2017 2016 % Change
    Total   Oper.     Total   Oper.
Cost of Sales(1) $ 2,847 $ 3,085 (8%) (8%) $ 7,980 $ 9,111 (12%) (10%)
Percent of Revenues 21.6 % 23.6 % N/A N/A 20.5 % 23.2 % N/A N/A
SI&A Expenses(1) 3,500 3,559 (2%) (1%) 10,233 10,414 (2%) (1%)
R&D Expenses(1)   1,859       1,881     (1%)   (1%)   5,346       5,360      
Total $ 8,205     $ 8,525     (4%)   (4%) $ 23,560     $ 24,885     (5%)   (4%)
 

Other (Income)/Deductions−net(1)

$ 51 $ 1,417 (96%) (97%) ($16 ) $ 2,815 * (98%)
Effective Tax Rate on Reported Income(1)     20.3 %     15.5 %               20.1 %     14.6 %        
 

* Indicates calculation not meaningful.

Adjusted(2) Income Statement Highlights

 
SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)
                 
($ in millions)

(Favorable)/Unfavorable

Third-Quarter Nine Months

2017

2016 % Change 2017 2016 % Change
    Total   Oper.     Total   Oper.
Adjusted Cost of Sales(2) $ 2,699 $ 2,957 (9%) (9%) $ 7,729 $ 8,584 (10%) (7%)
Percent of Revenues 20.5 % 22.7 % N/A N/A 19.9 % 21.9 % N/A N/A
Adjusted SI&A Expenses(2) 3,478 3,531 (1%) (1%) 10,151 10,342 (2%) (1%)
Adjusted R&D Expenses(2)   1,851       1,873     (1%)   (1%)   5,326       5,336      
Total $ 8,028     $ 8,361     (4%)   (4%) $ 23,206     $ 24,262     (4%)   (3%)
 

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

($261 ) ($168 ) 55% 59% ($519 ) ($547 ) (5%) (17%)
Effective Tax Rate on Adjusted Income(2)     23.7 %     22.0 %               22.9 %     22.7 %        
 

The diluted weighted-average shares outstanding used to calculate
Reported(1) and Adjusted(2) diluted EPS declined
by 109 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 February 2017 and
completed in May 2017.

A full reconciliation of Reported(1) to Adjusted(2)
financial measures and associated footnotes can be found starting on
page 17 of the press release located at the hyperlink below.

RECENT NOTABLE DEVELOPMENTS (Since August 1, 2017)

Product Developments

  • Bavencio (avelumab) -- In September 2017, Merck KGaA,
    Darmstadt, Germany (Merck KGaA) and Pfizer announced that the European
    Commission granted marketing authorization for Bavencio as a
    monotherapy for the treatment of adult patients with metastatic Merkel
    cell carcinoma, a rare and aggressive skin cancer. Bavencio will have
    marketing authorization in the 28 countries of the European Union in
    addition to Norway, Liechtenstein and Iceland. Bavencio has been
    launched in certain European markets and is expected to become
    commercially available in other European markets in the coming months.
    Additionally, in September 2017, Bavencio was approved by the Japanese
    Ministry of Health, Labour and Welfare (MHLW) for curatively
    unresectable Merkel cell carcinoma in Japan.
  • Besponsa (inotuzumab ozogamicin) -- In August 2017, Pfizer
    announced that the U.S. Food and Drug Administration (FDA) approved
    Besponsa for the treatment of adults with relapsed or refractory
    B-cell precursor acute lymphoblastic leukemia. Besponsa is the first
    and only CD22-directed antibody-drug conjugate approved for this
    indication.
  • Bosulif (bosutinib) -- In August 2017, Pfizer and Avillion LLP
    announced that a supplemental New Drug Application (sNDA) for Bosulif
    was accepted for filing and granted Priority Review by the FDA. If
    approved, the sNDA would expand the approved use of Bosulif to include
    patients with newly diagnosed chronic phase Philadelphia
    chromosome-positive chronic myeloid leukemia. The Prescription Drug
    User Fee Act (PDUFA) goal date for a decision by the FDA is in
    December 2017. In addition, the European Medicines Agency (EMA)
    validated for review a Type II Variation application for use of
    Bosulif in the same patient population.
  • Ibrance (palbociclib)
    • In September 2017, Ibrance was approved by the Japanese MHLW for
      use in patients with hormone receptor-positive (HR+), human
      epidermal growth factor receptor 2-negative inoperable or
      recurrent breast cancer.
    • In August 2017, the Alliance Foundation Trials, LLC, in
      conjunction with Pfizer and six international cancer research
      groups, announced the launch of PATINA – a randomized, open-label,
      Phase 3 clinical study of palbociclib. The PATINA trial will
      evaluate palbociclib in combination with anti-HER2 therapy and
      endocrine therapy versus standard therapy as a first-line
      treatment for patients with HR+, human epidermal growth factor
      receptor 2-positive (HER2+) metastatic breast cancer. The trial
      randomized its first patient in July 2017.
  • Inflectra (infliximab-dyyb, infliximab CT-P13) -- In October
    2017, Pfizer and Celltrion Healthcare announced the secondary outcomes
    from a Phase 3 study of Inflectra that demonstrated that switching
    patients with Crohn's disease (CD) to Inflectra from Remicade®(7)
    (infliximab) led to comparable efficacy, safety and tolerability to
    treatment with Remicade®(7) over a 24 week period. The full
    54-week results of the randomized controlled trial comparing Inflectra
    and Remicade®(7) in biologic-naïve patients with active CD
    support the long-term effectiveness of treatment with Inflectra. The
    results also demonstrated that Inflectra was well-tolerated, with a
    similar safety profile to Remicade®(7). Full results of
    this study were presented at the 25th United European
    Gastroenterology Week conference.
  • Lyrica CR (pregabalin) -- In October 2017, Pfizer announced
    that the FDA approved Lyrica CR extended-release tablets CV as
    once-daily therapy for the management of neuropathic pain associated
    with diabetic peripheral neuropathy and the management of postherpetic
    neuralgia. Lyrica CR did not receive approval for the management of
    fibromyalgia. Pfizer expects Lyrica CR will be available in the U.S.
    beginning in January 2018.
  • Mylotarg (gemtuzumab ozogamicin) -- In September 2017, Pfizer
    announced that the FDA approved Mylotarg for adults with newly
    diagnosed CD33-positive acute myeloid leukemia (AML), and adults and
    children 2 years and older with relapsed or refractory CD33-positive
    AML. Mylotarg is the first therapy with an indication that includes
    pediatric AML and is also the only AML therapy that targets CD33, an
    antigen expressed on AML cells in up to 90% of patients.
  • Sutent (sunitinib malate) -- In September 2017, Pfizer
    announced that the FDA's Oncologic Drug Advisory Committee (ODAC)
    voted 6 in favor and 6 against the benefit-risk profile for Sutent as
    adjuvant treatment of adult patients at high risk of recurrent renal
    cell carcinoma after nephrectomy (surgical removal of the
    cancer-containing kidney). The role of the Advisory Committee is to
    provide recommendations to the FDA. The ODAC discussions were based on
    the sNDA currently under review by the FDA. The PDUFA goal date for a
    decision by the FDA is in January 2018.
  • Xeljanz (tofacitinib citrate) -- In August 2017, Pfizer
    announced that the FDA's Arthritis Advisory Committee (AAC) voted 10
    to 1 to recommend approval of the proposed dose of tofacitinib for the
    treatment of adult patients with active psoriatic arthritis. Pfizer
    submitted sNDAs for Xeljanz 5 mg twice daily and Xeljanz XR extended
    release 11 mg once daily for this pending indication. The PDUFA goal
    date for a decision by the FDA is in December 2017.
  • Xtandi (enzalutamide) -- In September 2017, Astellas Pharma
    Inc. (Astellas) and Pfizer announced that the Phase 3 PROSPER trial
    evaluating Xtandi plus androgen deprivation therapy (ADT) versus ADT
    alone in patients with non-metastatic Castration-Resistant Prostate
    Cancer (CRPC) met its primary endpoint of improved metastasis-free
    survival. The preliminary safety analysis of the PROSPER trial appears
    consistent with the safety profile of Xtandi in previous clinical
    trials. Based on the results of PROSPER, the companies intend to
    discuss the data with global health authorities to potentially support
    expanding the label for Xtandi to cover all patients with CRPC.

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.

  • Lorlatinib (PF-06463922) -- In October 2017, Pfizer announced
    full results from the Phase 2 clinical trial of the investigational,
    next-generation tyrosine kinase inhibitor lorlatinib that exhibited
    clinically meaningful activity against lung tumors and brain
    metastases in a range of patients with ALK-positive and ROS1-positive
    advanced non-small cell lung cancer (NSCLC), including those who were
    heavily pretreated. Further, side effects were generally manageable
    and primarily mild to moderate in severity. The results were presented
    during an oral session at the International Association for the Study
    of Lung Cancer 18th World Conference on Lung Cancer. Pfizer
    is currently evaluating lorlatinib in the Phase 3 CROWN study, an
    ongoing, open label, randomized, two-arm study comparing lorlatinib to
    crizotinib in the first-line treatment of patients with metastatic
    ALK-positive NSCLC.
  • PF-04965842 -- In September 2017, positive results from a Phase
    2b clinical trial of PF-04965842, Pfizer's JAK1 inhibitor for atopic
    dermatitis (AD), were presented at the 26th Congress of the
    European Academy of Dermatology and Venereology. The 12-week,
    double-blind, placebo-controlled, dose-ranging study evaluated the
    efficacy and safety of 267 adult patients with moderate-to-severe AD
    who were randomized to receive either placebo or 10 mg, 30 mg, 100 mg
    or 200 mg of PF-04965842 once-daily. After evaluating the results of
    this trial, Pfizer intends to initiate pivotal studies of PF-04965842
    in AD in the coming months.
  • PF-05280014 (proposed biosimilar trastuzumab)
    • In September 2017, Pfizer announced positive findings from
      REFLECTIONS B327-02, a pivotal Phase 3 randomized, double-blind
      comparative safety and efficacy study of the company's
      investigational trastuzumab biosimilar versus Herceptin®(8)
      (trastuzumab), at the European Society for Medical Oncology (ESMO)
      2017 Congress. Positive data from a supplemental study,
      REFLECTIONS B327-04, were also presented at the meeting. The
      REFLECTIONS B327-02 study achieved the primary objective for
      equivalence in the objective response rate of PF-05280014 versus
      Herceptin®(8) in patients receiving first-line
      treatment, in combination with paclitaxel, for HER2+ metastatic
      breast cancer. The REFLECTIONS B327-04 study found there were no
      clinically meaningful differences between PF-05280014 and Herceptin®(8)
      in terms of efficacy, safety, immunogenicity, and noninferiority
      in pharmacokinetics, as neoadjuvant treatment taken in combination
      with docetaxel and carboplatin for patients with operable HER2+
      breast cancer. PF-05280014 is being developed by Pfizer as a
      potential biosimilar to Herceptin®(8).
    • In August 2017, the FDA accepted for review a Biologics License
      Application for PF-05280014. The Biosimilar User Fee Act goal date
      for a decision by the FDA is in April 2018. In addition, the EMA
      validated for review a Marketing Authorization Application for
      PF-05280014 in July 2017.
  • PF-06482077 -- In October 2017, Pfizer initiated a Phase 2
    clinical trial to evaluate the safety and immunogenicity of
    PF-06482077, Pfizer's next-generation multi-valent pneumococcal
    conjugate vaccine candidate in healthy adults. PF-06482077 is being
    studied to potentially extend coverage beyond the thirteen serotypes
    covered by Prevnar 13 to include seven additional serotypes prevalent
    in causing pneumococcal disease in adults and children. Results from a
    previously completed Phase 1 trial demonstrated that the vaccine
    candidate was safe and well tolerated and induced functional immune
    responses that could kill all twenty serotypes. The FDA granted Fast
    Track designation for PF-06482077 in May 2017 for use in an infant
    population and in October 2017 for use in an adult population. The
    FDA's Fast Track approach is a process designed to facilitate the
    development and expedite the review of new drugs and vaccines intended
    to treat or prevent serious conditions and address an unmet medical
    need.

Corporate Developments

  • In October 2017, Pfizer announced that it is reviewing strategic
    alternatives for its Consumer Healthcare business. A range of options
    will be considered, including a full or partial separation of the
    Consumer Healthcare business from Pfizer through a spin-off, sale or
    other transaction, and Pfizer may ultimately determine to retain the
    business. This review is part of Pfizer's continuing efforts to
    allocate resources and capital to best serve patients and maximize
    value for its shareholders. Pfizer expects that any decision regarding
    strategic alternatives for Consumer Healthcare would be made during
    2018. The company does not plan to make any further statements about
    the strategic review process until a decision has been reached or upon
    the completion of the strategic review.

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/Q3_2017_PFE_Earnings_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 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations−Non-GAAP Financial Measure (Adjusted Income)" section
of Pfizer's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 2, 2017, 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 third quarter
and first nine months 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 third quarter and first nine months for U.S.
subsidiaries reflect the three and nine months ending on October 1,
2017 and October 2, 2016 while Pfizer's third quarter and first nine
months for subsidiaries operating outside the U.S. reflect the three
and nine months ending on August 27, 2017 and August 28, 2016.
 
(4) The following acquisitions and divestitures impacted financial
results for the periods presented:
 
  • On June 24, 2016, Pfizer acquired Anacor Pharmaceuticals, Inc.
    (Anacor). Therefore, financial results for the first nine months of
    2017 reflect legacy Anacor operations while financial results for the
    first nine months of 2016 reflect approximately three months of legacy
    Anacor operations. Financial results for the third quarter of 2017 and
    2016 both reflect legacy Anacor operations.
  • On September 28, 2016, Pfizer acquired Medivation, Inc. (Medivation).
    Therefore, financial results for the third quarter and first nine
    months of 2017 reflect legacy Medivation operations while financial
    results for the third quarter and first nine months of 2016 reflect
    three business days of legacy Medivation operations, which were
    immaterial.
  • On December 22, 2016, Pfizer completed the acquisition of the
    development and commercialization rights to AstraZeneca's small
    molecule anti-infective business, primarily outside the U.S.
    Therefore, financial results for the third quarter and first nine
    months of 2017 reflect contributions from certain legacy AstraZeneca
    anti-infective products.
  • On February 3, 2017, Pfizer completed the sale of its global infusion
    therapy net assets, Hospira Infusion Systems (HIS). Therefore,
    financial results for the third quarter of 2017 do not reflect any
    contribution from legacy HIS operations, while the first nine months
    of 2017 reflect approximately one month of legacy HIS domestic
    operations and approximately two months of legacy HIS international
    operations.(3) Financial results for the third quarter and
    first nine months of 2016 reflect three and nine months of legacy HIS
    global operations, respectively.
   
(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 business; therefore, Pfizer believes
presenting operational variances provides useful information in
evaluating the results of its business.
 
(6) 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 October 1, 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 September 2017 and mid-October 2017 exchange rates for
    the remainder of the year.
  • Reflects an anticipated negative revenue impact of $2.3 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 $0.1 billion on revenues
    and $0.01 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 and 6.1 billion
    shares, which reflects the impact of the $5 billion accelerated share
    repurchase agreement executed in February 2017 and completed in May
    2017.
   
(7) Remicade® is a registered U.S. trademark of Janssen
Biotech, Inc.
 
(8) Herceptin® is a registered U.S. trademark of Genentech,
Inc.
 

DISCLOSURE NOTICE: Except where otherwise noted, the information
contained in this earnings release and the related attachments is as of
October 31, 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, including anticipated regulatory submissions,
data read-outs, approvals, performance, timing of exclusivity and
potential benefits of Pfizer's products and product candidates,
strategic reviews, capital allocation, business-development plans, the
benefits expected from our acquisitions and other business development
activities, manufacturing and product supply 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 preliminary, early stage or interim data,
    including the risk that final results of studies for which
    preliminary, early stage or interim data have been provided and/or
    additional clinical trials may be different from (including less
    favorable than) the preliminary, early stage or 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 or to realize the anticipated
    benefits of such transactions;
  • 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 delays caused by
    natural events, such as hurricanes; supply shortages at our
    facilities; and 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;
  • risks and uncertainties related to our acquisitions of Hospira, Inc.
    (Hospira), Anacor Pharmaceuticals, Inc. (Anacor), Medivation, Inc.
    (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;
    risks related to our ability to grow revenues for Xtandi and expand
    Xtandi into the non-metastatic castration-resistant prostate cancer
    setting; significant transactions costs; and unknown liabilities; and
  • risks and uncertainties related to our evaluation of strategic
    alternatives for our Consumer Healthcare business, including, among
    other things, the ability to realize the anticipated benefits of any
    strategic alternatives we may pursue for our Consumer Healthcare
    business, including the potential for disruption to our business
    resulting from the evaluation of strategic alternatives for Pfizer
    Consumer Healthcare; the possibility that we may not be able to
    realize a higher value for Pfizer Consumer Healthcare through
    strategic alternatives; 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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