Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Pfizer Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Pfizer Inc. and Subsidiary Companies (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1C to the consolidated financial statements, the Company has elected to change its method of accounting for pension and postretirement plans in 2021 to immediately recognize actuarial gains and losses in the consolidated statements of income.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the U.S. Medicare, Medicaid, and performance-based contract rebates accrual

As discussed in Note 1H to the consolidated financial statements, the Company records estimated deductions for Medicare, Medicaid, and performance-based contract rebates (collectively, U.S. rebates) as a reduction to gross product revenues. The accrual for U.S. rebates is recorded in the same period that the corresponding revenues are recognized. The length of time between when a sale is made and when the U.S. rebate is paid by the Company can be as long as one year, which increases the need for significant management judgment and knowledge of market conditions and practices in estimating the accrual.

We identified the evaluation of the U.S. rebates accrual as a critical audit matter because the evaluation of the product-specific experience ratio assumption involved especially challenging auditor judgment. The product-specific experience ratio assumption relates to estimating which of the Company’s revenue transactions will ultimately be subject to a related rebate.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s U.S. rebates accrual process related to the development of the product-specific experience ratio assumptions. We estimated the U.S. rebates accrual using internal information and historical data and compared the result to the Company’s estimated U.S. rebates accrual. We evaluated the Company’s ability to accurately estimate the accrual for U.S. rebates by comparing historically recorded accruals to the actual amount that was ultimately paid by the Company.

Evaluation of gross unrecognized tax benefits

As discussed in Notes 5D and 1Q, the Company’s tax positions are subject to audit by local taxing authorities in each respective tax jurisdiction, and the resolution of such audits may span multiple years. Since tax law is complex and often subject to varied interpretations and judgments, it is uncertain whether some of the Company’s tax positions will be sustained upon audit. As of December 31, 2021, the Company has recorded gross unrecognized tax benefits, excluding associated interest, of $6.1 billion.

Pfizer Inc.			2021 Form 10-K			49

Report of Independent Registered Public Accounting Firm

We identified the evaluation of the Company’s gross unrecognized tax benefits as a critical audit matter because a high degree of audit effort, including specialized skills and knowledge, and complex auditor judgment was required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution of its tax positions.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control over the Company’s liability for unrecognized tax position process related to (1) interpretation of tax law, (2) evaluation of which of the Company’s tax positions may not be sustained upon audit, and (3) estimation and recording of the gross unrecognized tax benefits. We involved tax and valuation professionals with specialized skills and knowledge who assisted in evaluating the Company’s interpretation of tax laws, including the assessment of transfer pricing practices in accordance with applicable tax laws and regulations. We inspected settlements with applicable taxing authorities, including assessing the expiration of statutes of limitations. We tested the calculation of the liability for uncertain tax positions, including an evaluation of the Company’s assessment of the technical merits of tax positions and estimates of the amount of tax benefits expected to be sustained.

Evaluation of product and other product-related litigation

As discussed in Notes 1S and 16 to the consolidated financial statements, the Company is involved in product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others. Certain of these pending product and other product-related legal proceedings could result in losses that could be substantial. The accrued liability and/or disclosure for the pending product and other product-related legal proceedings requires a complex series of judgments by the Company about future events, which involves a number of uncertainties.

We identified the evaluation of product and other product-related litigation as a critical audit matter. Challenging auditor judgment was required to evaluate the Company’s judgments about future events and uncertainties.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s product liability and other product-related litigation processes, including controls related to (1) the evaluation of information from external and internal legal counsel, (2) forward-looking expectations, and (3) new legal proceedings, or other legal proceedings not currently reserved or disclosed. We read letters received directly from the Company’s external and internal legal counsel that described the Company’s probable or reasonably possible legal contingency to pending product and other product-related legal proceedings. We inspected the Company’s minutes from meetings of the Audit Committee, which included the status of key litigation matters. We evaluated the Company’s ability to estimate its monetary exposure to pending product and other product-related legal proceedings by comparing historically recorded liabilities to actual monetary amounts incurred upon resolution of prior legal matters. We analyzed relevant publicly available information about the Company, its competitors, and the industry.

We have not been able to determine the specific year that we or our predecessor firms began serving as the Company’s auditor, however, we are aware that we or our predecessor firms have served as the Company’s auditor since at least 1942.
New York, New York
February 24, 2022

Pfizer Inc.			2021 Form 10-K			50

Consolidated Statements of Income

Pfizer Inc. and Subsidiary Companies

									Year Ended December 31,
(MILLIONS, EXCEPT PER COMMON SHARE DATA)															2021						2020						2019
Revenues															$	81,288					$	41,651					$	40,905
Costs and expenses:
Cost of sales(a)															30,821						8,484						8,054
Selling, informational and administrative expenses(a)															12,703						11,597						12,726
Research and development expenses(a)															13,829						9,393						8,385
Amortization of intangible assets															3,700						3,348						4,429
Restructuring charges and certain acquisition-related costs															802						579						601
(Gain) on completion of Consumer Healthcare JV transaction															—						(6)						(8,107)
Other (income)/deductions––net															(4,878)						1,219						3,497
Income from continuing operations before provision/(benefit) for taxes on income															24,311						7,036						11,321
Provision/(benefit) for taxes on income															1,852						370						583
Income from continuing operations															22,459						6,666						10,738
Discontinued operations––net of tax															(434)						2,529						5,318
Net income before allocation to noncontrolling interests															22,025						9,195						16,056
Less: Net income attributable to noncontrolling interests															45						36						29
Net income attributable to Pfizer Inc. common shareholders															$	21,979					$	9,159					$	16,026
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders															$	4.00					$	1.19					$	1.92
Discontinued operations––net of tax															(0.08)						0.46						0.95
Net income attributable to Pfizer Inc. common shareholders															$	3.92					$	1.65					$	2.88
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders															$	3.93					$	1.18					$	1.89
Discontinued operations––net of tax															(0.08)						0.45						0.94
Net income attributable to Pfizer Inc. common shareholders															$	3.85					$	1.63					$	2.82
Weighted-average shares––basic															5,601						5,555						5,569
Weighted-average shares––diluted															5,708						5,632						5,675

(a)Exclusive of amortization of intangible assets, except as disclosed in Note 1M.

See Accompanying Notes.

Pfizer Inc.			2021 Form 10-K			51

Consolidated Statements of Comprehensive Income

Pfizer Inc. and Subsidiary Companies

						Year Ended December 31,
(MILLIONS)						2021						2020						2019
Net income before allocation to noncontrolling interests						$	22,025					$	9,195					$	16,056
Foreign currency translation adjustments, net						(682)						772						675
Reclassification adjustments						—						(17)						(288)
						(682)						755						387
Unrealized holding gains/(losses) on derivative financial instruments, net						526						(582)						476
Reclassification adjustments for (gains)/losses included in net income(a)						134						21						(664)
						660						(561)						(188)
Unrealized holding gains/(losses) on available-for-sale securities, net						(355)						361						(1)
Reclassification adjustments for (gains)/losses included in net income(b)						(30)						(188)						39
						(384)						173						38
Benefit plans: prior service (costs)/credits and other, net						116						52						(7)
Reclassification adjustments related to amortization of prior service costs and other, net						(154)						(176)						(181)
Reclassification adjustments related to curtailments of prior service costs and other, net						(74)						—						(2)
Other						(2)						—						1
						(113)						(124)						(189)
Other comprehensive income/(loss), before tax						(519)						243						48
Tax provision/(benefit) on other comprehensive income/(loss)						71						(227)						178
Other comprehensive income/(loss) before allocation to noncontrolling interests						$	(589)					$	471					$	(130)
Comprehensive income/(loss) before allocation to noncontrolling interests						$	21,435					$	9,666					$	15,926
Less: Comprehensive income/(loss) attributable to noncontrolling interests						43						27						18
Comprehensive income/(loss) attributable to Pfizer Inc.						$	21,393					$	9,639					$	15,908

(a)Reclassified into Other (income)/deductions—net and Cost of sales. See Note 7E.

(b)Reclassified into Other (income)/deductions—net.

See Accompanying Notes.

Pfizer Inc.			2021 Form 10-K			52

Consolidated Balance Sheets

Pfizer Inc. and Subsidiary Companies

						As of December 31,
(MILLIONS, EXCEPT PER COMMON SHARE DATA)						2021						2020
Assets
Cash and cash equivalents						$	1,944					$	1,786
Short-term investments						29,125						10,437
Trade accounts receivable, less allowance for doubtful accounts: 2021—$492; 2020—$508						11,479						7,913
Inventories						9,059						8,020
Current tax assets						4,266						3,264
Other current assets						3,820						3,646
Total current assets						59,693						35,067
Equity-method investments						16,472						16,856
Long-term investments						5,054						3,406
Property, plant and equipment						14,882						13,745
Identifiable intangible assets						25,146						28,337
Goodwill						49,208						49,556
Noncurrent deferred tax assets and other noncurrent tax assets						3,341						2,383
Other noncurrent assets						7,679						4,879
Total assets						$	181,476					$	154,229
Liabilities and Equity
Short-term borrowings, including current portion of long-term debt: 2021—$1,636; 2020—$2,002						$	2,241					$	2,703
Trade accounts payable						5,578						4,283
Dividends payable						2,249						2,162
Income taxes payable						1,266						1,049
Accrued compensation and related items						3,332						3,049
Deferred revenues						3,067						1,113
Other current liabilities						24,939						11,561
Total current liabilities						42,671						25,920
Long-term debt						36,195						37,133
Pension benefit obligations						3,489						4,766
Postretirement benefit obligations						235						645
Noncurrent deferred tax liabilities						349						4,063
Other taxes payable						11,331						11,560
Other noncurrent liabilities						9,743						6,669
Total liabilities						104,013						90,756
Commitments and Contingencies
Preferred stock, no par value, at stated value; 27 shares authorized; no shares issued or outstanding at December 31, 2021 and December 31, 2020						—						—
Common stock, $0.05 par value; 12,000 shares authorized; issued: 2021—9,471; 2020—9,407						473						470
Additional paid-in capital						90,591						88,674
Treasury stock, shares at cost: 2021—3,851; 2020—3,840						(111,361)						(110,988)
Retained earnings						103,394						90,392
Accumulated other comprehensive loss						(5,897)						(5,310)
Total Pfizer Inc. shareholders’ equity						77,201						63,238
Equity attributable to noncontrolling interests						262						235
Total equity						77,462						63,473
Total liabilities and equity						$	181,476					$	154,229

See Accompanying Notes.

Pfizer Inc.			2021 Form 10-K			53

Consolidated Statements of Equity

Pfizer Inc. and Subsidiary Companies

						PFIZER INC. SHAREHOLDERS
Preferred Stock												Common Stock																		Treasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES)						Shares						Stated Value						Shares						Par Value						Add’l Paid-In Capital						Shares						Cost						Retained Earnings						Accum. Other Comp. Loss						Share - holders’ Equity						Non-controlling Interests						Total Equity
Balance, January 1, 2019						478						$	19					9,332						$	467					$	86,253					(3,615)						$	(101,610)					$	83,527					$	(5,249)					$	63,407					$	351					$	63,758
Net income																																																16,026												16,026						29						16,056
Other comprehensive income/(loss), net of tax																																																						(118)						(118)						(11)						(130)
Cash dividends declared, per share: $1.46
Common stock																																																(8,174)												(8,174)												(8,174)
Preferred stock																																																(1)												(1)												(1)
Noncontrolling interests																																																												—						(6)						(6)
Share-based payment transactions																		37						2						1,219						(8)						(326)																		894												894
Purchases of common stock																																				(213)						(8,865)																		(8,865)												(8,865)
Preferred stock conversions and redemptions						(47)						(2)																		(3)						—						1																		(4)												(4)
Other																														(40)						—						—						19												(21)						(60)						(81)
Balance, December 31, 2019						431						17						9,369						468						87,428						(3,835)						(110,801)						91,397						(5,367)						63,143						303						63,447
Net income																																																9,159												9,159						36						9,195
Other comprehensive income/(loss), net of tax																																																						480						480						(9)						471
Cash dividends declared, per share: $1.53
Common stock																																																(8,571)												(8,571)												(8,571)
Preferred stock																																																—												—												—
Noncontrolling interests																																																												—						(91)						(91)
Share-based payment transactions																		37						2						1,261						(6)						(218)																		1,044												1,044
Preferred stock conversions and redemptions(a)						(431)						(17)																		(15)						1						31																		(1)												(1)
Distribution of Upjohn Business(b)																																																(1,592)						(423)						(2,015)						(3)						(2,018)
Other																														—						—												—												—						(1)						(1)
Balance, December 31, 2020						—						—						9,407						470						88,674						(3,840)						(110,988)						90,392						(5,310)						63,238						235						63,473
Net income																																																21,979												21,979						45						22,025
Other comprehensive income/(loss), net of tax																																																						(587)						(587)						(3)						(589)
Cash dividends declared, per share: $1.57
Common stock																																																(8,816)												(8,816)												(8,816)
Preferred stock																																																												—												—
Noncontrolling interests																																																												—						(8)						(8)
Share-based payment transactions																		64						3						1,917						(11)						(373)						(77)												1,470												1,470
Other																														—						—						—						(85)												(85)						(7)						(92)
Balance, December 31, 2021						—						$	—					9,471						$	473					$	90,591					(3,851)						$	(111,361)					$	103,394					$	(5,897)					$	77,201					$	262					$	77,462

(a)See Note 12.

(b)See Note 2B.

See Accompanying Notes.

Pfizer Inc.			2021 Form 10-K			54

Consolidated Statements of Cash Flows

Pfizer Inc. and Subsidiary Companies

						Year Ended December 31,
(MILLIONS)						2021						2020						2019
Operating Activities
Net income before allocation to noncontrolling interests						$	22,025					$	9,195					$	16,056
Discontinued operations—net of tax						(434)						2,529						5,318
Net income from continuing operations before allocation to noncontrolling interests						22,459						6,666						10,738
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization						5,191						4,681						5,755
Asset write-offs and impairments						276						2,049						2,889
TCJA impact						—						—						(323)
Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed(a)						—						(6)						(8,254)
Deferred taxes from continuing operations						(4,293)						(1,575)						561
Share-based compensation expense						1,182						755						687
Benefit plan contributions in excess of expense/income						(3,123)						(1,242)						(55)
Other adjustments, net						(1,573)						(479)						(1,080)
Other changes in assets and liabilities, net of acquisitions and divestitures:
Trade accounts receivable						(3,811)						(1,275)						(1,124)
Inventories						(1,125)						(778)						(1,071)
Other assets						(1,057)						(137)						847
Trade accounts payable						1,242						355						(341)
Other liabilities						18,721						2,768						861
Other tax accounts, net						(1,166)						(1,240)						(3,074)
Net cash provided by operating activities from continuing operations						32,922						10,540						7,015
Net cash provided by/(used in) operating activities from discontinued operations						(343)						3,863						5,572
Net cash provided by operating activities						32,580						14,403						12,588
Investing Activities
Purchases of property, plant and equipment						(2,711)						(2,226)						(2,046)
Purchases of short-term investments						(38,457)						(13,805)						(6,835)
Proceeds from redemptions/sales of short-term investments						27,447						11,087						9,183
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less						(8,088)						920						6,925
Purchases of long-term investments						(1,068)						(597)						(201)
Proceeds from redemptions/sales of long-term investments						649						723						232
Acquisitions of businesses, net of cash acquired						—						—						(10,861)
Other investing activities, net(a)						(305)						(265)						(223)
Net cash provided by/(used in) investing activities from continuing operations						(22,534)						(4,162)						(3,825)
Net cash provided by/(used in) investing activities from discontinued operations						(12)						(109)						(120)
Net cash provided by/(used in) investing activities						(22,546)						(4,271)						(3,945)
Financing Activities
Proceeds from short-term borrowings						—						12,352						16,455
Principal payments on short-term borrowings						—						(22,197)						(8,378)
Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less						(96)						(4,129)						2,551
Proceeds from issuance of long-term debt						997						5,222						4,942
Principal payments on long-term debt						(2,004)						(4,003)						(6,806)
Purchases of common stock						—						—						(8,865)
Cash dividends paid						(8,729)						(8,440)						(8,043)
Other financing activities, net						16						(444)						(342)
Net cash provided by/(used in) financing activities from continuing operations						(9,816)						(21,640)						(8,485)
Net cash provided by/(used in) financing activities from discontinued operations						—						11,991						—
Net cash provided by/(used in) financing activities						(9,816)						(9,649)						(8,485)
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents						(59)						(8)						(32)
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents						159						475						125
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period						1,825						1,350						1,225
Cash and cash equivalents and restricted cash and cash equivalents, at end of period						$	1,983					$	1,825					$	1,350
- Continued -

Pfizer Inc.			2021 Form 10-K			55

Consolidated Statements of Cash Flows

Pfizer Inc. and Subsidiary Companies

						Year Ended December 31,
						2021						2020						2019
Supplemental Cash Flow Information
Cash paid/(received) during the period for:
Income taxes						$	7,427					$	3,153					$	3,664
Interest paid						1,467						1,641						1,587
Interest rate hedges						(2)						(20)						(42)
Non-cash transactions:
Right-of-use assets obtained in exchange for lease liabilities						$	1,943					$	410					$	314
32% equity-method investment in the Consumer Healthcare JV received in exchange for contributing Pfizer’s Consumer Healthcare business(a)						—						—						15,711

(a)The $8.3 billion Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed reflects the receipt of a 32% equity-method investment in the new company initially valued at $15.7 billion in exchange for net assets contributed of $7.6 billion and is presented in operating activities net of $146 million cash conveyed that is reflected in Other investing activities, net. See Note 2C.

See Accompanying Notes.

Pfizer Inc.			2021 Form 10-K			56

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Note 1. Basis of Presentation and Significant Accounting Policies

A. Basis of Presentation

The consolidated financial statements include the accounts of our parent company and all subsidiaries and are prepared in accordance with U.S. GAAP. The decision of whether or not to consolidate an entity for financial reporting purposes requires consideration of majority voting interests, as well as effective economic or other control over the entity. Typically, we do not seek control by means other than voting interests. For subsidiaries operating outside the U.S., the financial information is included as of and for the year ended November 30 for each year presented. Pfizer's fiscal year-end for U.S. subsidiaries is as of and for the year ended December 31 for each year presented. Substantially all unremitted earnings of international subsidiaries are free of legal and contractual restrictions. All significant transactions among our subsidiaries have been eliminated.

At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business and PC1, our global contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients. See Note 17. On December 31, 2021, we completed the sale of our Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products. Prior to its sale, Meridian was managed within the Hospital therapeutic area. Beginning in the fourth quarter of 2021, the financial results of Meridian are reflected as discontinued operations for all periods presented. On December 21, 2020, Pfizer and Viatris completed the termination of a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (the Mylan-Japan collaboration) pursuant to an agreement dated November 13, 2020, and we transferred related inventories and operations that were part of the Mylan-Japan collaboration to Viatris. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. Beginning in the fourth quarter of 2020, the financial results of the Upjohn Business and the Mylan-Japan collaboration were reflected as discontinued operations for all periods presented. The assets and liabilities associated with Meridian and the Mylan-Japan collaboration are classified as assets and liabilities of discontinued operations as of December 31, 2020. Upon completion of the spin-off of the Upjohn Business on November 16, 2020, the Upjohn assets and liabilities were derecognized from our consolidated balance sheet and are reflected in Retained Earnings–Distribution of Upjohn Business in the consolidated statement of equity. Prior to the spin-off of the Upjohn Business in November 2020, the Upjohn Business, the Mylan-Japan collaboration and Meridian were managed as part of our former Upjohn operating segment. With the separation of the Upjohn Business, the Mylan-Japan collaboration and Meridian, as well as the formation of the Consumer Healthcare JV in 2019, Pfizer transformed into a more focused, global leader in science-based innovative medicines and vaccines. Certain prior year amounts have been reclassified to conform with the current year presentation. In addition, other acquisitions and business development activities completed in 2021, 2020 and 2019 impacted financial results in the periods presented. See Note 2.

Certain amounts in the consolidated financial statements and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.

B*.* New Accounting Standard Adopted in 2021

On January 1, 2021, we adopted a new accounting standard for income tax that eliminates certain exceptions to the guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material impact on our consolidated financial statements.

C. Change in Accounting Principle

In the first quarter of 2021, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of our pension and postretirement plans (MTM Accounting). Under the prior policy, we deferred recognition of these gains and losses in Accumulated other comprehensive loss. The accumulated actuarial gains/losses outside of a “corridor” were then amortized into net periodic benefit costs over the average remaining service period or the average life expectancy of participants. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented, and as of January 1, 2019, resulted in a cumulative effect decrease to Retained earnings of $6.0 billion, with a corresponding offset to Accumulated other comprehensive loss. Each time a pension or postretirement plan is remeasured, the actuarial gain or loss is recognized immediately and classified as Other (income)/deductions––net.

We believe that MTM Accounting is a more preferable policy as it provides improved transparency of results and performance, better alignment with fair value accounting principles and a better reflection of current economic and interest rate trends on plan investments and assumptions and the actuarial impact of plan remeasurements.

Pfizer Inc.			2021 Form 10-K			57

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

The impacts of the adjustments on our consolidated financial statements are summarized as follows:
						Year Ended December 31,
						2021																		2020																		2019
(MILLIONS, EXCEPT PER COMMON SHARE DATA)						Previous Accounting Principle						Impact of Change						As Reported						Previous Accounting Principle						Impact of Change						As Adjusted						Previous Accounting Principle						Impact of Change						As Adjusted
Consolidated Statements of Income:
(Gain) on completion of Consumer Healthcare JV transaction						$	—					$	—					$	—					$	(6)					$	—					$	(6)					$	(8,086)					$	(21)					$	(8,107)
Other (income)/deductions––net						(2,820)						(2,058)						(4,878)						672						547						1,219						3,264						233						3,497
Income from continuing operations before provision/(benefit) for taxes on income						22,253						2,058						24,311						7,584						(547)						7,036						11,533						(212)						11,321
Provision/(benefit) for taxes on income						1,399						453						1,852						496						(125)						370						631						(48)						583
Discontinued operations––net of tax						(434)						—						(434)						2,564						(35)						2,529						5,400						(82)						5,318
Net income before allocation to noncontrolling interests						20,420						1,605						22,025						9,652						(457)						9,195						16,302						(246)						16,056
Net income attributable to Pfizer Inc. common shareholders						20,374						1,605						21,979						9,616						(457)						9,159						16,273						(246)						16,026
Earnings per common share––basic*:*
Income from continuing operations attributable to Pfizer Inc. common shareholders						$	3.71					$	0.29					$	4.00					$	1.27					$	(0.08)					$	1.19					$	1.95					$	(0.03)					$	1.92
Discontinued operations––net of tax						(0.08)						—						(0.08)						0.46						(0.01)						0.46						0.97						(0.01)						0.95
Net income attributable to Pfizer Inc. common shareholders						3.63						0.29						3.92						1.73						(0.08)						1.65						2.92						(0.04)						2.88
Earnings per common share––diluted*:*
Income from continuing operations attributable to Pfizer Inc. common shareholders						$	3.65					$	0.28					$	3.93					$	1.25					$	(0.07)					$	1.18					$	1.92					$	(0.03)					$	1.89
Discontinued operations––net of tax						(0.08)						—						(0.08)						0.46						(0.01)						0.45						0.95						(0.01)						0.94
Net income attributable to Pfizer Inc. common shareholders						3.57						0.28						3.85						1.71						(0.08)						1.63						2.87						(0.04)						2.82
						Year Ended December 31,
						2021																		2020																		2019
(MILLIONS)						Previous Accounting Principle						Impact of Change						As Reported						Previous Accounting Principle						Impact of Change						As Adjusted						Previous Accounting Principle						Impact of Change						As Adjusted
Consolidated Statements of Comprehensive Income:
Foreign currency translation adjustments, net						$	(731)					$	49					$	(682)					$	957					$	(185)					$	772					$	654					$	21					$	675
Benefit plans: actuarial gains/(losses), net						1,565						(1,565)						—						(1,128)						1,128						—						(826)						826						—
Reclassification adjustments related to amortization						285						(285)						—						276						(276)						—						241						(241)						—
Reclassification adjustments related to settlements, net						209						(209)						—						278						(278)						—						274						(274)						—
Other						49						(49)						—						(189)						189						—						22						(22)						—
Tax provision/(benefit) on other comprehensive income/(loss)						545						(475)						71						(349)						122						(227)						115						63						178
Consolidated Statements of Cash Flows:
Deferred taxes from continuing operations						$	(4,746)					$	453					$	(4,293)					$	(1,449)					$	(125)					$	(1,575)					$	609					$	(48)					$	561
Benefit plan contributions in excess of expense/income						(1,065)						(2,058)						(3,123)						(1,790)						547						(1,242)						(288)						233						(55)

						Year Ended December 31,
						2021																		2020
(MILLIONS)						Previous Accounting Principle						Impact of Change						As Reported						Previous Accounting Principle						Impact of Change						As Adjusted
Consolidated Balance Sheets:
Noncurrent deferred tax assets and other noncurrent tax assets						$	3,320					$	22					$	3,341					$	2,383					$	—					$	2,383
Other noncurrent assets						7,679						—						7,679						4,879						—						4,879
Pension benefit obligations						3,489						—						3,489						4,766						—						4,766
Retained earnings						101,789						1,605						103,394						96,770						(6,378)						90,392
Accumulated other comprehensive loss						(4,313)						(1,583)						(5,897)						(11,688)						6,378						(5,310)

Pfizer Inc.			2021 Form 10-K			58

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

D. Estimates and Assumptions

In preparing these financial statements, we use certain estimates and assumptions that affect reported amounts and disclosures. These estimates and assumptions can impact all elements of our financial statements. For example, in the consolidated statements of income, estimates are used when accounting for deductions from revenues, determining the cost of inventory that is sold, allocating cost in the form of depreciation and amortization, and estimating restructuring charges and the impact of contingencies, as well as determining provisions for taxes on income. On the consolidated balance sheets, estimates are used in determining the valuation and recoverability of assets, and in determining the reported amounts of liabilities, all of which also impact the consolidated statements of income. Certain estimates of fair value and amounts recorded in connection with acquisitions, revenue deductions, impairment reviews, restructuring-associated charges, investments and financial instruments, valuation allowances, pension and postretirement benefit plans, contingencies, share-based compensation, and other calculations can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.

Our estimates are often based on complex judgments and assumptions that we believe to be reasonable, but that can be inherently uncertain and unpredictable. If our estimates and assumptions are not representative of actual outcomes, our results could be materially impacted. As future events and their effects cannot be determined with precision, our estimates and assumptions may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. We are subject to risks and uncertainties that may cause actual results to differ from estimated amounts, such as changes in the healthcare environment, competition, litigation, legislation and regulations. We regularly evaluate our estimates and assumptions using historical experience and expectations about the future. We adjust our estimates and assumptions when facts and circumstances indicate the need for change.

E. Acquisitions

Our consolidated financial statements include the operations of acquired businesses after the completion of the acquisitions. We account for acquired businesses using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date and that the fair value of acquired IPR&D be recorded on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. When we acquire net assets that do not constitute a business, as defined in U.S. GAAP, no goodwill is recognized and acquired IPR&D is expensed in Research and development expenses.

Contingent consideration in a business combination is included as part of the acquisition cost and is recognized at fair value as of the acquisition date. Fair value is generally estimated by using a probability-weighted discounted cash flow approach. See Note 16D. Any liability resulting from contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. These changes in fair value are recognized in earnings in Other (income)/deductions––net.

F. Fair Value

We measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. We estimate fair value using an exit price approach, which requires, among other things, that we determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of non-financial assets and, for liabilities, assuming that the risk of non-performance will be the same before and after the transfer.

When estimating fair value, depending on the nature and complexity of the asset or liability, we may use one or all of the following techniques:

• Income approach, which is based on the present value of a future stream of net cash flows.

• Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.

• Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence.

Our fair value methodologies depend on the following types of inputs:

• Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).

• Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).

• Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).

The following inputs and valuation techniques are used to estimate the fair value of our financial assets and liabilities:

• Available-for-sale debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted yield curves.

• Equity securities with readily determinable fair values—quoted market prices and observable NAV prices.

• Derivative assets and liabilities—third-party matrix-pricing model that uses inputs derived from or corroborated by observable market data. Where applicable, these models use market-based observable inputs, including interest rate yield curves to discount future cash flow amounts, and forward and spot prices for currencies. The credit risk impact to our derivative financial instruments was not significant.

• Money market funds—observable NAV prices.

We periodically review the methodologies, inputs and outputs of third-party pricing services for reasonableness. Our procedures can include, for example, referencing other third-party pricing models, monitoring key observable inputs (like benchmark interest rates) and selectively performing test-comparisons of values with actual sales of financial instruments.

Pfizer Inc.			2021 Form 10-K			59

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

G. Foreign Currency Translation

For most of our international operations, local currencies have been determined to be the functional currencies. We translate functional currency assets and liabilities to their U.S. dollar equivalents at exchange rates in effect as of the balance sheet date and income and expense amounts at average exchange rates for the period. The U.S. dollar effects that arise from changing translation rates are recorded in Other comprehensive income/(loss). The effects of converting non-functional currency monetary assets and liabilities into the functional currency are recorded in Other (income)/deductions––net. For operations in highly inflationary economies, we translate monetary items at rates in effect as of the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net, and we translate non-monetary items at historical rates.

H. Revenues and Trade Accounts Receivable

Revenue Recognition––We record revenues from product sales when there is a transfer of control of the product from us to the customer. We typically determine transfer of control based on when the product is shipped or delivered and title passes to the customer.

Our Sales Contracts––Sales on credit are typically under short-term contracts. Collections are based on market payment cycles common in various markets, with shorter cycles in the U.S. Sales are adjusted for sales allowances, chargebacks, rebates and sales returns and cash discounts. Sales returns occur due to LOE, product recalls or a changing competitive environment.

Deductions from Revenues––Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, rebates, sales allowances and sales returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment is required when estimating the impact of these revenue deductions on gross sales for a reporting period.

*Provisions for pharmaceutical sales returns––*Provisions are based on a calculation for each market that incorporates the following, as appropriate: local returns policies and practices; historical returns as a percentage of sales; an understanding of the reasons for past returns; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, such as LOE, product recalls or a changing competitive environment. Generally, returned products are destroyed, and customers are refunded the sales price in the form of a credit.

We record sales incentives as a reduction of revenues at the time the related revenues are recorded or when the incentive is offered, whichever is later. We estimate the cost of our sales incentives based on our historical experience with similar incentives programs to predict customer behavior.

The following outlines our common sales arrangements:

• Customers––Our prescription pharmaceutical products are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. In the U.S., we primarily sell our vaccines products directly to the federal government, CDC, wholesalers, individual provider offices, retail pharmacies, and integrated delivery networks. Outside the U.S., we primarily sell our vaccines to government and non-government institutions. Prescription pharmaceutical products that ultimately are used by patients are generally covered under governmental programs, managed care programs and insurance programs, including those managed through PBMs, and are subject to sales allowances and/or rebates payable directly to those programs. Those sales allowances and rebates are generally negotiated, but government programs may have legislated amounts by type of product (e.g., patented or unpatented).

Specifically:

• In the U.S., we sell our products principally to distributors and hospitals. We also have contracts with managed care programs or PBMs and legislatively mandated contracts with the federal and state governments under which we provide rebates based on medicines utilized by the lives they cover. We record provisions for Medicare, Medicaid, and performance-based contract pharmaceutical rebates based upon our experience ratio of rebates paid and actual prescriptions written during prior periods. We apply the experience ratio to the respective period’s sales to determine the rebate accrual and related expense. This experience ratio is evaluated regularly to ensure that the historical trends are as current as practicable. We estimate discounts on branded prescription drug sales to Medicare Part D participants in the Medicare “coverage gap,” also known as the “doughnut hole,” based on the historical experience of beneficiary prescriptions and consideration of the utilization that is expected to result from the discount in the coverage gap. We evaluate this estimate regularly to ensure that the historical trends and future expectations are as current as practicable. For performance-based contract rebates, we also consider current contract terms, such as changes in formulary status and rebate rates.

• Outside the U.S., the majority of our pharmaceutical sales allowances are contractual or legislatively mandated and our estimates are based on actual invoiced sales within each period, which reduces the risk of variations in the estimation process. In certain European countries, rebates are calculated on the government’s total unbudgeted pharmaceutical spending or on specific product sales thresholds and we apply an estimated allocation factor against our actual invoiced sales to project the expected level of reimbursement. We obtain third-party information that helps us to monitor the adequacy of these accruals.

• Provisions for pharmaceutical chargebacks (primarily reimbursements to U.S. wholesalers for honoring contracted prices and legislated discounts to third parties) closely approximate actual amounts incurred, as we settle these deductions generally within two to five weeks of incurring the liability.

We recorded direct product sales and/or Alliance revenues of more than $1 billion for each of nine products in 2021, for each of seven products in 2020 and for each of six products in 2019. In the aggregate, these direct products sales and/or alliance product revenues represented 75% of our revenues in 2021, 54% of our revenues in 2020 and 49% of our revenues in 2019. See Note 17B for additional information. The loss or expiration of intellectual property rights can have a significant adverse effect on our revenues as our contracts with customers will generally be at lower selling prices and lower volumes due to added generic competition. We generally provide for higher sales returns during the period in which individual markets begin to near the loss or expiration of intellectual property rights.

Pfizer Inc.			2021 Form 10-K			60

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Our accruals for Medicare, Medicaid and related state program and performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts are as follows:
						As of December 31,
(MILLIONS)						2021						2020
Reserve against Trade accounts receivable, less allowance for doubtful accounts						$	1,077					$	861
Other current liabilities**:**
Accrued rebates						3,811						3,017
Other accruals						528						432
Other noncurrent liabilities						433						399
Total accrued rebates and other sales-related accruals						$	5,850					$	4,708

Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from Revenues.

Trade Accounts Receivable—Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type (high risk versus low risk and government versus non-government), and fixed reserve percentages are established for each pool of trade accounts receivables.

In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. These credit risk indicators are monitored on a quarterly basis to determine whether there have been any changes in the economic environment that would indicate the established reserve percentages should be adjusted, and are considered on a regional basis to reflect more geographic-specific metrics. Additionally, write-offs and recoveries of customer receivables are tracked against collections on a quarterly basis to determine whether the reserve percentages remain appropriate. When management becomes aware of certain customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.

During 2021 and 2020, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our consolidated financial statements.

I. Collaborative Arrangements

Payments to and from our collaboration partners are presented in our consolidated statements of income based on the nature of the arrangement (including its contractual terms), the nature of the payments and applicable accounting guidance. Under co-promotion agreements, we record the amounts received for our share of gross profits from our collaboration partners as alliance revenues, a component of Revenues, when our collaboration partners are the principal in the transaction and we receive a share of their net sales or profits. Alliance revenues are recorded as we perform co-promotion activities for the collaboration and the collaboration partners sell the products to their customers. The related expenses for selling and marketing these products including reimbursements to or from our collaboration partners for these costs are included in Selling, informational and administrative expenses. In collaborative arrangements where we manufacture a product for our collaboration partners, we record revenues when we transfer control of the product to our collaboration partners. In collaboration arrangements where we are the principal in the transaction, we record amounts paid to collaboration partners for their share of net sales or profits earned, and all royalty payments to collaboration partners as Cost of sales. Royalty payments received from collaboration partners are included in Other (income)/deductions—net.

Reimbursements to or from our collaboration partners for development costs are typically recorded in Research and development expenses. Upfront payments and pre-approval milestone payments due from us to our collaboration partners in development stage collaborations are recorded as Research and development expenses. Milestone payments due from us to our collaboration partners after regulatory approval has been attained for a medicine are recorded in Identifiable intangible assets—Developed technology rights. Upfront and pre-approval milestone payments earned from our collaboration partners by us are recognized in Other (income)/deductions—net over the development period for the products, when our performance obligations include providing R&D services to our collaboration partners. Upfront, pre-approval and post-approval milestone payments earned by us may be recognized in Other (income)/deductions—net immediately when earned or over other periods depending upon the nature of our performance obligations in the applicable collaboration. Where the milestone event is regulatory approval for a medicine, we generally recognize milestone payments due to us in the transaction price when regulatory approval in the applicable jurisdiction has been attained. We may recognize milestone payments due to us in the transaction price earlier than the milestone event in certain circumstances when recognition of the income would not be probable of a significant reversal.

J. Cost of Sales and Inventories

Inventories are recorded at the lower of cost or net realizable value. The cost of finished goods, work in process and raw materials is determined using average actual cost. We regularly review our inventories for impairment and reserves are established when necessary.

K. Selling, Informational and Administrative Expenses

Selling, informational and administrative costs are expensed as incurred. Among other things, these expenses include the internal and external costs of marketing, advertising, shipping and handling, information technology and legal defense. Advertising expenses totaled approximately $2.0 billion in 2021, $1.8 billion in 2020 and $2.3 billion in 2019. Production costs are expensed as incurred and the costs of TV, radio, and other electronic media and publications are expensed when the related advertising occurs.

Pfizer Inc.			2021 Form 10-K			61

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

L. Research and Development Expenses

R&D costs are expensed as incurred. These expenses include the costs of our proprietary R&D efforts, as well as costs incurred in connection with certain licensing arrangements. Before a compound receives regulatory approval, we record upfront and milestone payments we make to third parties under licensing arrangements as expense. Upfront payments are recorded when incurred, and milestone payments are recorded when the specific milestone has been achieved. Once a compound receives regulatory approval, we record any milestone payments in Identifiable intangible assets, less accumulated amortization and, unless the asset is determined to have an indefinite life, we typically amortize the payments on a straight-line basis over the remaining agreement term or the expected product life cycle, whichever is shorter.

M. Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets

Long-lived assets include:

• Property, plant and equipment, less accumulated depreciation—These assets are recorded at cost, including any significant improvements after purchase, less accumulated depreciation. Property, plant and equipment assets, other than land and construction in progress, are depreciated on a straight-line basis over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.

• Identifiable intangible assets, less accumulated amortization—These assets are recorded at fair value at acquisition. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Intangible assets with indefinite lives are not amortized until a useful life can be determined.

• Goodwill—Goodwill represents the excess of the consideration transferred for an acquired business over the assigned values of its net assets. Goodwill is not amortized.

Amortization of finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization of intangible assets that are for a single function and depreciation of property, plant and equipment are included in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.

We review our long-lived assets for impairment indicators throughout the year. We perform impairment testing for indefinite-lived intangible assets and goodwill at least annually and for all other long-lived assets whenever impairment indicators are present. When necessary, we record impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets.

Specifically:

• For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property, plant and equipment, whenever impairment indicators are present, we calculate the undiscounted value of the projected cash flows for the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we reevaluate the remaining useful lives of the assets and modify them, as appropriate.

• For indefinite-lived intangible assets, such as brands and IPR&D assets, when necessary, we determine the fair value of the asset and record an impairment loss, if any, for the excess of book value over fair value. In addition, in all cases of an impairment review other than for IPR&D assets, we re-evaluate whether continuing to characterize the asset as indefinite-lived is appropriate.

• For goodwill, when necessary, we determine the fair value of each reporting unit and record an impairment loss, if any, for the excess of the book value of the reporting unit over the implied fair value.

N. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

We may incur restructuring charges in connection with acquisitions when we implement plans to restructure and integrate the acquired operations or in connection with our cost-reduction and productivity initiatives.

• In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and

• In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges for site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems.

Included in Restructuring charges and certain acquisition-related costs are all restructuring charges, as well as certain other costs associated with acquiring and integrating an acquired business. If the restructuring action results in a change in the estimated useful life of an asset, that incremental impact is classified in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination. Transaction costs, such as banking, legal, accounting and other similar costs incurred in connection with a business acquisition are expensed as incurred*.*

Our business and platform functions may be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as our corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement).

O. Cash Equivalents and Statement of Cash Flows

Cash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased. If items meeting this definition are part of a larger investment pool, we classify them as Short-term investments.

Pfizer Inc.			2021 Form 10-K			62

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Cash flows for financial instruments designated as fair value or cash flow hedges may be included in operating, investing or financing activities, depending on the classification of the items being hedged. Cash flows for financial instruments designated as net investment hedges are classified according to the nature of the hedging instrument. Cash flows for financial instruments that do not qualify for hedge accounting treatment are classified according to their purpose and accounting nature.

P. Investments and Derivative Financial Instruments

The classification of an investment depends on the nature of the investment, our intent and ability to hold the investment, and the degree to which we may exercise influence. Our investments are primarily comprised of the following:

• Public equity securities with readily determinable fair values, which are carried at fair value, with changes in fair value reported in Other (income)/deductions—net.

• Available-for-sale debt securities, which are carried at fair value, with changes in fair value reported in Other comprehensive income/(loss) until realized.

• Held-to-maturity debt securities, which are carried at amortized cost.

• Private equity securities without readily determinable fair values and where we have no significant influence are measured at cost minus any impairment and plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

• For equity investments in common stock or in-substance common stock where we have significant influence over the financial and operating policies of the investee, we use the equity-method of accounting. Under the equity-method, we record our share of the investee’s income and expenses in Other (income)/deductions—net. The excess of the cost of the investment over our share of the underlying equity in the net assets of the investee as of the acquisition date is allocated to the identifiable assets and liabilities of the investee, with any remaining excess amount allocated to goodwill. Such investments are initially recorded at cost, which is the fair value of consideration paid and typically does not include contingent consideration.

Realized gains or losses on sales of investments are determined by using the specific identification cost method.

We regularly evaluate all of our financial assets for impairment. For investments in debt and equity, when a decline in fair value, if any, is determined, an impairment charge is recorded and a new cost basis in the investment is established.

Derivative financial instruments are carried at fair value in various balance sheet categories (see Note 7A), with changes in fair value reported in Net income or, for derivative financial instruments in certain qualifying hedging relationships, in Other comprehensive income/(loss) (see Note 7E).

Q. Tax Assets and Liabilities and Income Tax Contingencies

Tax Assets and Liabilities

Current tax assets primarily include (i) tax effects for intercompany transfers of inventory within our combined group, which are recognized in the consolidated statements of income when the inventory is sold to a third party and (ii) income tax receivables that are expected to be recovered either via refunds from taxing authorities or reductions to future tax obligations.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws. We provide a valuation allowance when we believe that our deferred tax assets are not recoverable based on an assessment of estimated future taxable income that incorporates ongoing, prudent and feasible tax-planning strategies, that would be implemented, if necessary, to realize the deferred tax assets. Amounts recorded for valuation allowances requires judgments about future income which can depend heavily on estimates and assumptions. All deferred tax assets and liabilities within the same tax jurisdiction are presented as a net amount in the noncurrent section of our consolidated balance sheet.

The TCJA subjects a U.S. shareholder to current tax on global intangible low-taxed income earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that we are permitted to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-taxed income in future years or provide for the tax expense related to such income in the year the tax is incurred. We elected to recognize deferred taxes for temporary differences expected to reverse as global intangible low-taxed income in future years.

Other non-current tax assets primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction.

Other taxes payable as of December 31, 2021 and 2020 include liabilities for uncertain tax positions and the noncurrent portion of the repatriation tax liability for which we elected payment over eight years through 2026. For additional information, see Note 5D for uncertain tax positions and Note 5A for the repatriation tax liability and other estimates and assumptions in connection with the TCJA.

Income Tax Contingencies

We account for income tax contingencies using a benefit recognition model. If we consider that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, we recognize all or a portion of the benefit. We measure the benefit by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the taxing authority with full knowledge of all relevant information.

Pfizer Inc.			2021 Form 10-K			63

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

We regularly monitor our position and subsequently recognize the unrecognized tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to “more likely than not”; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. Liabilities for uncertain tax positions are classified as current only when we expect to pay cash within the next 12 months. Interest and penalties, if any, are recorded in Provision/(benefit) for taxes on income and are classified on our consolidated balance sheet with the related tax liability.

Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution.

R. Pension and Postretirement Benefit Plans

The majority of our employees worldwide are covered by defined benefit pension plans, defined contribution plans or both. In the U.S., we have both IRC-qualified and supplemental (non-qualified) defined benefit plans and defined contribution plans, as well as other postretirement benefit plans consisting primarily of medical insurance for retirees and their eligible dependents. We recognize the overfunded or underfunded status of each of our defined benefit plans as an asset or liability. The obligations are generally measured at the actuarial present value of all benefits attributable to employee service rendered, as provided by the applicable benefit formula. Our pension and other postretirement obligations may be determined using assumptions such as discount rate, expected annual rate of return on plan assets, expected employee turnover and participant mortality. For our pension plans, the obligation may also include assumptions as to future compensation levels. For our other postretirement benefit plans, the obligation may include assumptions as to the expected cost of providing medical insurance benefits, as well as the extent to which those costs are shared with the employee or others (such as governmental programs). Plan assets are measured at fair value. Net periodic pension and postretirement benefit costs other than the service costs are recognized in Other (income)/deductions—net.

S. Legal and Environmental Contingencies

We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business, such as patent litigation, product liability and other product-related litigation, commercial litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications. In assessing contingencies related to legal and environmental proceedings that are pending against the Company, or unasserted claims that are probable of being asserted, we record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. We record anticipated recoveries under existing insurance contracts when recovery is assured.

T. Share-Based Payments

Our compensation programs can include share-based payments. Generally, grants under share-based payment programs are accounted for at fair value and these fair values are generally amortized on a straight-line basis over the vesting terms with the related costs recorded in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.

Note 2. Acquisitions, Divestitures, Equity-Method Investments, Licensing Arrangements and Collaborative Arrangements

A. Acquisitions

Trillium

On November 17, 2021, we acquired all of the issued and outstanding common stock not already owned by Pfizer of Trillium, a clinical stage immuno-oncology company developing therapies targeting cancer immune evasion pathways and specific cell targeting approaches, for a price of $18.50 per share in cash, for total consideration of $2.0 billion, net of cash acquired. As a result, Trillium became our wholly owned subsidiary. We previously held a 2% ownership investment in Trillium. Trillium’s lead program, TTI-622, is an investigational fusion protein that is designed to block the inhibitory activity of CD47, a molecule that is overexpressed by a wide variety of tumors.

We accounted for the transaction as an asset acquisition since the lead asset, TTI-622, represented substantially all of the fair value of the gross assets acquired, which exclude cash acquired. At the acquisition date, we recorded a $2.1 billion charge representing an acquired IPR&D asset with no alternative future use in Research and development expenses, of which the $2.0 billion net cash consideration is presented as a cash outflow from operating activities. In connection with this acquisition, we recorded $256 million of assets acquired primarily consisting of cash and investments. Liabilities assumed were approximately $81 million.

Array

On July 30, 2019, we acquired Array, a commercial stage biopharmaceutical company focused on the discovery, development and commercialization of targeted small molecule medicines to treat cancer and other diseases of high unmet need, for $48 per share in cash. The total fair value of the consideration transferred was $11.2 billion ($10.9 billion, net of cash acquired). In addition, $157 million in payments to Array employees for the fair value of previously unvested stock options was recognized as post-closing compensation expense and recorded in Restructuring charges and certain acquisition-related costs (see Note 3). We financed the majority of the transaction with debt and the balance with existing cash.

Pfizer Inc.			2021 Form 10-K			64

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Array’s portfolio includes Braftovi (encorafenib) and Mektovi (binimetinib), a broad pipeline of targeted cancer medicines in different stages of R&D, as well as a portfolio of out-licensed medicines, which may generate milestones and royalties over time.

The final allocation of the consideration transferred to the assets acquired and the liabilities assumed was completed in 2020. In connection with this acquisition, we recorded: (i) $6.3 billion in Identifiable intangible assets, consisting of $2.0 billion of Developed technology rights with a useful life of 16 years, $2.8 billion of IPR&D and $1.5 billion of Licensing agreements and other ($1.2 billion for technology in development*––indefinite-lived licensing agreements and $360 million for developed technology––*finite-lived licensing agreements with a useful life of 10 years), (ii) $6.1 billion of Goodwill, (iii) $1.1 billion of net deferred tax liabilities and (iv) $451 million of assumed long-term debt, which was paid in full in 2019.

In 2020, we recorded measurement period adjustments to the estimated fair values initially recorded in 2019, which resulted in a reduction in Identifiable intangible assets of approximately $900 million with a corresponding change to Goodwill and net deferred tax liabilities. The measurement period adjustments were recorded to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date and did not have a material impact on our consolidated statement of income for the year ended December 31, 2020.

Therachon

On July 1, 2019, we acquired all the remaining shares of Therachon, a privately-held clinical-stage biotechnology company focused on rare diseases, with assets in development for the treatment of achondroplasia, a genetic condition and the most common form of short-limb dwarfism, for $340 million upfront, plus potential milestone payments of up to $470 million contingent on the achievement of key milestones in the development and commercialization of the lead asset. We accounted for the transaction as an asset acquisition since the lead asset represented substantially all the fair value of the gross assets acquired. The total fair value of the consideration transferred for Therachon was $322 million, which consisted of $317 million of cash and our previous $5 million investment in Therachon. In connection with this asset acquisition, we recorded a charge of $337 million in Research and development expenses.

B. Divestitures

Meridian

On December 31, 2021, we completed the sale of our Meridian subsidiary for approximately $51 million in cash and recognized a loss of approximately $167 million, net of tax, in Discontinued operations––net of tax. In connection with the sale, Pfizer and the purchaser of Meridian entered into various agreements to provide a framework for our relationship after the sale, including interim TSAs and a manufacturing supply agreement (MSA). The TSAs primarily involve Pfizer providing services related to information technology, among other activities, and are generally expected to be for terms of no more than 12 to 18 months post sale. The MSA is for a term of three years post sale with a two year extension period. No amounts were recorded under the above arrangements in 2021.

Upjohn Separation and Combination with Mylan

On November 16, 2020, we completed the spin-off and the combination of the Upjohn Business with Mylan (the Transactions) to form Viatris.

The Transactions were structured as an all-stock, Reverse Morris Trust transaction. Specifically, (i) we contributed the Upjohn Business to a wholly owned subsidiary, which was renamed Viatris, so that the Upjohn Business was separated from the remainder of our business (the Separation), (ii) following the Separation, we distributed, on a pro rata basis, all of the shares of Viatris common stock held by Pfizer to Pfizer stockholders as of the November 13, 2020 record date, such that each Pfizer stockholder as of the record date received approximately 0.124079 shares of Viatris common stock per share of Pfizer common stock (the Distribution); and (iii) immediately after the Distribution, the Upjohn Business combined with Mylan in a series of transactions in which Mylan shareholders received one share of Viatris common stock for each Mylan ordinary share held by such shareholder, subject to any applicable withholding taxes (the Combination). Prior to the Distribution, Viatris made a cash payment to Pfizer equal to $12.0 billion as partial consideration for the contribution of the Upjohn Business to Viatris. As of the closing of the Combination, Pfizer stockholders owned approximately 57% of the outstanding shares of Viatris common stock, and Mylan shareholders owned approximately 43% of the outstanding shares of Viatris common stock, in each case on a fully diluted, as-converted and as-exercised basis. The Transactions are generally expected to be tax free to Pfizer and Pfizer stockholders for U.S. tax purposes. Beginning November 16, 2020, Viatris operates both the Upjohn Business and Mylan as an independent publicly traded company, which is traded under the symbol “VTRS” on the NASDAQ.

In connection with the Transactions, in June 2020, Upjohn Inc. and Upjohn Finance B.V. completed privately placed debt offerings of $7.45 billion and €3.60 billion aggregate principal amounts, respectively, (approximately $11.4 billion) of senior unsecured notes and entered into other financing arrangements, including a $600 million delayed draw term loan agreement and a revolving credit facility agreement for up to $4.0 billion. Proceeds from the debt offerings and other financing arrangements were used to fund the $12.0 billion cash distribution Viatris made to Pfizer prior to the Distribution. We used the cash distribution proceeds to pay down commercial paper borrowings and redeem the $1.15 billion aggregate principal amount outstanding of our 1.95% senior unsecured notes that were due in June 2021 and $342 million aggregate principal amount outstanding of our 5.80% senior unsecured notes that were due in August 2023, before the maturity date. Interest expense for the $11.4 billion in debt securities incurred during 2020 is included in Discontinued operations––net of tax. Following the Separation and Combination of the Upjohn Business with Mylan, we are no longer the obligor or guarantor of any Upjohn debt or Upjohn financing arrangements.

As a result of the spin-off of the Upjohn Business, we distributed net assets of $1.6 billion as of November 16, 2020, which was reflected as a reduction to Retained earnings and reflects the change in accounting principle in the first quarter of 2021 to MTM Accounting. See Note 1C. Of this amount, $412 million represents cash transferred to the Upjohn Business, with the remainder considered a non-cash activity in the consolidated statement of cash flows for the year ended December 31, 2020. The spin-off also resulted in a net increase to Accumulated other comprehensive loss of $423 million for the derecognition of net gains on foreign currency translation adjustments of $397 million and prior service net credits associated with benefit plans of $26 million, which were reclassified to Retained earnings.

As a result of the separation of Upjohn, we incurred separation-related costs of $434 million in 2020 and $83 million in 2019, which are included in Discontinued operations––net of tax. These costs primarily relate to professional fees for regulatory filings and separation activities within finance, tax, legal and information system functions as well as investment banking fees.

Pfizer Inc.			2021 Form 10-K			65

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

In connection with the Transactions, Pfizer and Viatris entered into various agreements to effect the Separation and Combination to provide a framework for our relationship after the Combination, including a separation and distribution agreement, interim operating models, including agency arrangements, MSAs, TSAs, a tax matters agreement, and an employee matters agreement, among others. The interim agency operating model arrangements primarily include billings, collections and remittance of rebates that we are performing on a transitional basis on behalf of Viatris. Under the MSAs, Pfizer or Viatris, as the case may be, manufactures, labels and packages products for the other party. The terms of the MSAs range in initial duration from four to seven years post-Separation. The TSAs primarily involve Pfizer providing services to Viatris related to finance, information technology and human resource infrastructure and are generally expected to be for terms of no more than three years post-Separation. The amounts recorded under the above agreements were not material to our consolidated results of operations in 2021 and 2020. In addition, Pfizer and Mylan had a pre-existing arms-length commercial agreement, which is continuing with Viatris and is not material to Pfizer’s consolidated financial statements.

Net amounts due from Viatris under the above agreements were $53 million as of December 31, 2021 and $401 million as of December 31, 2020. The cash flows associated with the above agreements are included in Net cash provided by operating activities from continuing operations, except for a $277 million payment to Viatris made in 2021 pursuant to terms of the separation agreement, which is reported in Other financing activities, net, and was recorded as a payable to Viatris in Other current liabilities as of December 31, 2020.

Components of Discontinued operations––net of tax:
												Year Ended December 31,(a)
(MILLIONS)												2021						2020						2019
Revenues												$	277					$	7,572					$	10,845
Costs and expenses:
Cost of sales												204						2,106						2,173
Selling, informational and administrative expenses												26						1,682						1,624
Research and development expenses												9						224						265
Amortization of intangible assets												45						224						181
Restructuring charges and certain acquisition-related costs												2						29						146
Other (income)/deductions––net												365						428						401
Pre-tax income/(loss) from discontinued operations												(375)						2,879						6,056
Provision/(benefit) for taxes on income												(107)						349						738
Income/(loss) from discontinued operations––net of tax												(268)						2,529						5,318
Pre-tax loss on sale of discontinued operations												(211)						—						—
Benefit for taxes on income												(44)						—						—
Loss on sale of discontinued operations––net of tax												(167)						—						—
Discontinued operations––net of tax												$	(434)					$	2,529					$	5,318

(a)In 2021, Discontinued operations—net of tax primarily includes (i) the operations of Meridian prior to its sale on December 31, 2021 recognized in Income/(loss) from discontinued operations—net of tax, which includes a pre-tax amount for a Multi-District Litigation relating to EpiPen against the Company in the U.S. District Court for the District of Kansas for $345 million; and (ii) the after tax loss of $167 million related to the sale of Meridian recognized in Loss on sale of discontinued operations––net of tax. To a much lesser extent, Discontinued operations—net of tax in 2021 also includes the operations of the Mylan-Japan collaboration prior to its termination on December 21, 2020 and post-closing adjustments directly related to our former Upjohn and Nutrition discontinued businesses, including adjustments for tax, benefits and legal-related matters recognized in Income/(loss) from discontinued operations—net of tax. In 2020 and 2019, Discontinued operations—net of tax relates to the operations of the Upjohn Business, Meridian and the Mylan-Japan collaboration and includes the change in accounting principle in the first quarter of 2021 to MTM Accounting. See Note 1C. In 2020, Discontinued operations—net of tax includes pre-tax interest expense of $116 million associated with the U.S. dollar and Euro denominated senior unsecured notes issued by Upjohn Inc. and Upjohn Finance B.V. in the second quarter of 2020 and pre-tax charges of $223 million related to the remeasurement of Euro debt issued by Upjohn Finance B.V. in the second quarter of 2020.

Components of assets and liabilities of discontinued operations and other assets held for sale:
												As of December 31,(a)
(MILLIONS)												2021						2020
Current assets of discontinued operations and other assets held for sale––Other current assets												$	25		$	215
Property, plant and equipment												$	—		$	155
Identifiable intangible assets												—			134
Other noncurrent assets												—			29
Noncurrent assets of discontinued operations––Other noncurrent assets												$	—		$	319
Current liabilities of discontinued operations––Other current liabilities												$	—		$	74
Noncurrent liabilities of discontinued operations––Other noncurrent liabilities												$	—		$	16

(a)Amounts as of December 31, 2021 represent property, plant and equipment held for sale. Amounts as of December 31, 2020 primarily relate to discontinued operations of our former Meridian subsidiary and the Mylan-Japan collaboration.

Pfizer Inc.			2021 Form 10-K			66

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

C. Equity-Method Investments

Formation of Consumer Healthcare JV

On July 31, 2019, we completed a transaction in which we and GSK combined our respective consumer healthcare businesses into a new JV that operates globally under the GSK Consumer Healthcare name. In exchange, we received a 32% equity stake in the new company and GSK owns the remaining 68%. Upon closing, we deconsolidated our Consumer Healthcare business and recognized a pre-tax gain of $8.1 billion ($5.4 billion, net of tax) in the third quarter of 2019 in (Gain) on completion of Consumer Healthcare JV transaction for the difference in the fair value of our 32% equity stake and the carrying value of our Consumer Healthcare business. Our financial results and our Consumer Healthcare segment’s operating results for 2019 reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. The financial results for 2021 and 2020 do not reflect any contribution from the Consumer Healthcare business.

In valuing our investment in the Consumer Healthcare JV, we used discounted cash flow techniques. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which include the expected impact of competitive, legal or regulatory forces on the products; the long-term growth rate, which seeks to project the sustainable growth rate over the long term; the discount rate, which seeks to reflect our best estimate of the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

We are accounting for our interest in the Consumer Healthcare JV as an equity-method investment. The carrying value of our investment in the Consumer Healthcare JV is $16.3 billion as of December 31, 2021 and $16.7 billion as of December 31, 2020 and is reported as a private equity investment in Equity-method investments as of December 31, 2021 and 2020. The Consumer Healthcare JV is a foreign investee whose reporting currency is the U.K. pound, and therefore we translate its financial statements into U.S. dollars and recognize the impact of foreign currency translation adjustments in the carrying value of our investment and in other comprehensive income. The decrease in the value of our investment from December 31, 2020 to December 31, 2021 is primarily due to dividends totaling $499 million, as well as $384 million in pre-tax foreign currency translation adjustments (see Note 6), partially offset by our share of the JV’s earnings. We record our share of earnings from the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Our total share of the JV’s earnings generated in the fourth quarter of 2020 and the first nine months of 2021, which we recorded in our operating results in 2021, was $495 million. Our total share of the JV’s earnings generated in the fourth quarter of 2019 and the first nine months of 2020, which we recorded in our operating results in 2020, was $417 million. Our total share of two months of the JV’s earnings generated in the third quarter of 2019, which we recorded in our operating results in the fourth quarter of 2019, was $47 million. As of the July 31, 2019 closing date, we estimated that the fair value of our investment in the Consumer Healthcare JV was $15.7 billion and that 32% of the underlying equity in the carrying value of the net assets of the Consumer Healthcare JV was $11.2 billion, resulting in an initial basis difference of approximately $4.5 billion. In the fourth quarter of 2019, we preliminarily completed the allocation of the basis difference, which resulted from the excess of the initial fair value of our investment over the underlying equity in the carrying value of the net assets of the JV, primarily to inventory, definite-lived intangible assets, indefinite-lived intangible assets, related deferred tax liabilities and equity method goodwill within the investment account. During the fourth quarter of 2019, the Consumer Healthcare JV revised the initial carrying value of the net assets of the JV and our 32% share of the underlying equity in the carrying value of the net assets of the Consumer Healthcare JV was reduced to $11.0 billion and our initial basis difference was increased to $4.8 billion. The adjustment was allocated to equity method goodwill within the investment account. We began recording the amortization of basis differences allocated to inventory, definite-lived intangible assets and related deferred tax liabilities in Other (income)/deductions––net commencing August 1, 2019. The total amortization and adjustment of basis differences resulting from the excess of the initial fair value of our investment over the underlying equity in the carrying value of the net assets of the JV is included in Other (income)/deductions––net and was not material to our results of operations in the periods presented. See Note 4. Amortization of basis differences on inventory and related deferred tax liabilities was completely recognized by the second quarter of 2020. Basis differences on definite-lived intangible assets and related deferred tax liabilities are being amortized over the lives of the underlying assets, which range from 8 to 20 years.

As a part of Pfizer in 2019, pre-tax income on a management basis for the Consumer Healthcare business was $654 million through July 31, 2019.

Summarized financial information for our equity method investee, the Consumer Healthcare JV, as of September 30, 2021, the most recent period available, and as of September 30, 2020 and for the periods ending September 30, 2021, 2020, and 2019 is as follows:
(MILLIONS)												September 30, 2021						September 30, 2020
Current assets												$	6,890					$	6,614
Noncurrent assets												39,445						38,361
Total assets												$	46,335					$	44,975
Current liabilities												$	5,133					$	5,246
Noncurrent liabilities												5,218						5,330
Total liabilities												$	10,351					$	10,576
Equity attributable to shareholders												$	35,705					$	34,154
Equity attributable to noncontrolling interests												279						245
Total net equity												$	35,984					$	34,400

Pfizer Inc.			2021 Form 10-K			67

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

												For the Twelve Months Ending												For the Two Months Ending
(MILLIONS)												September 30, 2021						September 30, 2020						September 30, 2019
Net sales												$	12,836					$	12,720					$	2,161
Cost of sales												(4,755)						(5,439)						(803)
Gross profit												$	8,081					$	7,281					$	1,358
Income from continuing operations												1,614						1,350						152
Net income												1,614						1,350						152
Income attributable to shareholders												1,547						1,307						148

Investment in ViiV

In 2009, we and GSK created ViiV, which is focused on research, development and commercialization of human immunodeficiency virus (HIV) medicines. We own approximately 11.7% of ViiV, and prior to 2016 we accounted for our investment under the equity method due to the significant influence that we have over the operations of ViiV through our board representation and minority veto rights. We suspended application of the equity method to our investment in ViiV in 2016 when the carrying value of our investment was reduced to zero due to the recognition of cumulative equity method losses and dividends. Since 2016, we have recognized dividends from ViiV as income in Other (income)/deductions––net when earned, including dividends of $166 million in 2021, $278 million in 2020 and $220 million in 2019 (see Note 4).

Summarized financial information for our equity method investee, ViiV, as of December 31, 2021 and 2020 and for the years ending December 31, 2021, 2020, and 2019 is as follows:
												As of December 31,
(MILLIONS)												2021						2020
Current assets												$	3,608					$	3,283
Noncurrent assets												3,563						3,381
Total assets												$	7,171					$	6,664
Current liabilities												$	3,497					$	3,028
Noncurrent liabilities												6,536						6,370
Total liabilities												$	10,033					$	9,398
Total net equity/(deficit) attributable to shareholders												$	(2,862)					$	(2,734)

												Year Ended December 31,
(MILLIONS)												2021						2020						2019
Net sales												$	6,380					$	6,224					$	6,139
Cost of sales												(682)						(574)						(516)
Gross profit												$	5,698					$	5,650					$	5,623
Income from continuing operations												2,040						2,012						3,398
Net income												2,040						2,012						3,398
Income attributable to shareholders												2,040						2,012						3,398

D. Licensing Arrangements

Agreement with Valneva

On April 30, 2020, we signed an agreement to co-develop and commercialize Valneva’s Lyme disease vaccine candidate, VLA15, which covers six serotypes that are prevalent in North America and Europe. Valneva and Pfizer will work closely together throughout the development of VLA15. Valneva is eligible to receive a total of up to $308 million in cash payments from us consisting of a $130 million upfront payment, which was paid and recorded in Research and development expenses in our second quarter of 2020, as well as $35 million in development milestones and $143 million in early commercialization milestones. Under the terms of the agreement, Valneva will fund 30% of all development costs through completion of the development program, and in return we will pay Valneva tiered royalties. We will lead late-stage development and have sole control over commercialization.

Agreement with Akcea

On October 4, 2019, we entered into a worldwide exclusive licensing agreement for AKCEA-ANGPTL3-LRx, an investigational antisense therapy being developed to treat patients with certain cardiovascular and metabolic diseases, with Akcea, a wholly-owned subsidiary of Ionis. The transaction closed in November 2019 and we made an upfront payment of $250 million to Akcea, which was recorded in Research and development expenses in our fourth quarter of 2019. On January 31, 2022, we and Ionis announced the discontinuation of the Pfizer-led clinical development program for the licensed product and that we would be returning the rights to the licensed product to Ionis.

Pfizer Inc.			2021 Form 10-K			68

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

E. Collaborative Arrangements

We enter into collaborative arrangements with respect to in-line medicines, as well as medicines in development that require completion of research and regulatory approval. Collaborative arrangements are contractual agreements with third parties that involve a joint operating activity, typically a research and/or commercialization effort, where both we and our partner are active participants in the activity and are exposed to the significant risks and rewards of the activity. Our rights and obligations under our collaborative arrangements vary. For example, we have agreements to co-promote pharmaceutical products discovered by us or other companies, and we have agreements where we partner to co-develop and/or participate together in commercializing, marketing, promoting, manufacturing and/or distributing a drug product.

Collaboration with Beam

On December 24, 2021, we entered into a multi-year research collaboration with Beam to utilize Beam’s in vivo base editing programs, which use mRNA and lipid nanoparticles, for three targets for rare genetic diseases of the liver, muscle and central nervous system. Under the terms of the agreement, Beam conducts all research activities through development candidate selection for three undisclosed targets, which are not included in Beam’s existing programs, and we may opt in to obtain exclusive licenses to each development candidate. Beam has a right to opt in, at the end of phase 1/2 studies, upon the payment by Beam of an option exercise fee, to a global co-development and co-commercialization agreement with respect to one program licensed under the collaboration pursuant to which we and Beam would share net profits as well as development and commercialization costs in a 65%/35% ratio (Pfizer/Beam). Upon entering into the agreement, we recorded $300 million in Research and development expenses in the fourth quarter of 2021 for an upfront payment due to Beam, and if we exercise our opt in to licenses for all three targets, Beam would be eligible for up to an additional $1.05 billion in development, regulatory and commercial milestone payments for a potential total deal consideration of up to $1.35 billion. Beam is also eligible to receive royalties on global net sales for each licensed program.

Collaboration with Arvinas

On July 21, 2021, we entered into a global collaboration with Arvinas to develop and commercialize ARV-471, an investigational oral PROTAC® (PROteolysis TArgeting Chimera) estrogen receptor protein degrader. The estrogen receptor is a well-known disease driver in most breast cancers. In connection with the agreement, we made an upfront cash payment of $650 million to Arvinas and we made a $350 million equity investment in the common stock of Arvinas. We recognized $706 million for the upfront payment and a premium paid on our equity investment in Research and development expenses in our third quarter of 2021. Arvinas is also eligible to receive up to $400 million in approval milestones and up to $1 billion in commercial milestones. The companies will equally share worldwide development costs, commercialization expenses and profits. As of December 31, 2021, we held a 6.5% equity stake of Arvinas.

Collaboration with Myovant

On December 26, 2020, we entered into a collaboration with Myovant to jointly develop and commercialize Orgovyx (relugolix) in advanced prostate cancer and Myfembree (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) in women’s health in the U.S. and Canada. We also received an exclusive option to commercialize relugolix in oncology outside the U.S. and Canada, excluding certain Asian countries, which we declined to exercise. Under the terms of the agreement, the companies will equally share profits and allowable expenses for Orgovyx and Myfembree in the U.S. and Canada, with Myovant bearing our share of allowable expenses up to a maximum of $100 million in 2021 and up to a maximum of $50 million in 2022. We record our share of gross profits as Alliance revenue. Myovant remains responsible for regulatory interactions and drug supply and continues to lead clinical development for Myfembree. Myovant is entitled to receive up to $4.35 billion, including an upfront payment of $650 million, which was made in December 2020, $200 million in potential regulatory milestones for FDA approvals for Myfembree in women’s health, of which $100 million was paid to Myovant in July 2021 and recognized as Identifiable intangible assets—Developed technology rights, and tiered sales milestones of up to $3.5 billion in total for prostate cancer and for the combined women’s health indications. In connection with this transaction, in 2020 we recognized $499 million in Identifiable intangible assets––Developed technology rights and $151 million in Research and development expenses representing the relative fair value of the portion of the upfront payment allocated to the approved indication and unapproved indications of the product, respectively.

Collaboration with CStone

On September 29, 2020, we entered into a strategic collaboration with CStone to address oncological needs in China. The collaboration encompasses our $200 million upfront equity investment in CStone, the development and commercialization of CStone’s sugemalimab (CS1001, PD-L1 antibody) in mainland China, and a framework between the companies to bring additional oncology assets to the Greater China market. The transaction closed on October 9, 2020. As of December 31, 2021, we held a 9.8% equity stake of CStone.

Collaborations with BioNTech

On December 30, 2021, we entered into a new research, development and commercialization agreement to develop a potential first mRNA-based vaccine for the prevention of shingles (herpes zoster virus) based on BioNTech’s proprietary mRNA technology and our antigen technology. Under the terms of the agreement, we agreed to pay BioNTech $225 million, including an upfront cash payment of $75 million and an equity investment of $150 million. BioNTech is eligible to receive future regulatory and sales milestone payments of up to $200 million. In return, BioNTech agreed to pay us $25 million for our proprietary antigen technology. The net upfront payment to BioNTech was recorded to Research and development expenses in our fourth quarter of 2021. We and BioNTech will share development costs. We will have commercialization rights to the potential vaccine worldwide, excluding Germany, Turkey and certain developing countries where BioNTech will have commercialization rights. We and BioNTech will share gross profits from commercialization of any product.

On April 9, 2020, we signed a global agreement with BioNTech to co-develop a mRNA-based coronavirus vaccine program, BNT162b2, aimed at preventing COVID-19 infection. In connection with the April 2020 agreement, we made an upfront cash payment of $72 million and an equity investment in the common stock of BioNTech of $113 million. We recognized $98 million for the upfront payment and a premium paid on the equity investment in Research and development expenses in our second quarter of 2020. BioNTech became eligible to receive potential milestone payments of up to $563 million for a total consideration of $748 million. Under the terms of this agreement, we and BioNTech share gross profits and development costs equally after approval and successful commercialization of the vaccine, and we were responsible for all of

Pfizer Inc.			2021 Form 10-K			69

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

the development costs until commercialization of the vaccine. Thereafter, BioNTech was to repay us its 50 percent share of these development costs through reductions in gross profit sharing and milestone payments to BioNTech over time. On January 29, 2021, we and BioNTech signed an amended version of the April 2020 agreement. Under the January 2021 agreement, BioNTech paid us their 50 percent share of prior development costs in a lump sum payment during the first quarter of 2021. Further R&D costs are being shared equally. We have commercialization rights to the vaccine worldwide, excluding Germany and Turkey where BioNTech markets and distributes the vaccine under the agreement with us, and excluding China, Hong Kong, Macau and Taiwan, which are subject to a separate collaboration between BioNTech and Shanghai Fosun Pharmaceutical (Group) Co., Ltd. We recognize Revenues and Cost of sales on a gross basis in markets where we are commercializing the vaccine and we record our share of gross profits related to sales of the vaccine by BioNTech in Germany and Turkey in Alliance revenues.

We made an additional investment of $50 million in common stock of BioNTech as part of an underwritten equity offering by BioNTech, which closed in July 2020. As of December 31, 2021, we held an equity stake of 2.5% of BioNTech.

Summarized Financial Information for Collaborative Arrangements

The following provides the amounts and classification of payments (income/(expense)) between us and our collaboration partners:
						Year Ended December 31,
(MILLIONS)						2021						2020						2019
Revenues—Revenues(a)						$	590					$	284					$	305
Revenues—Alliance revenues(b)						7,652						5,418						4,648
Total revenues from collaborative arrangements						$	8,241					$	5,703					$	4,953
Cost of sales(c)						$	(16,169)					$	(61)					$	(52)
Selling, informational and administrative expenses(d)						(175)						(194)						(176)
Research and development expenses(e)						(742)						(192)						104
Other income/(deductions)—net(f)						820						567						362

(a)Represents sales to our partners of products manufactured by us.

(b)Substantially all relates to amounts earned from our partners under co-promotion agreements. The increase in 2021 reflects increases in alliance revenues from Comirnaty, Eliquis and Xtandi, while the increase in 2020 reflects increases in alliance revenues from Eliquis and Xtandi.

(c)Primarily relates to amounts paid to collaboration partners for their share of net sales or profits earned in collaboration arrangements where we are the principal in the transaction, and cost of sales for inventory purchased from our partners. The increase in 2021 is primarily related to Comirnaty.

(d)Represents net reimbursements to our partners for selling, informational and administrative expenses incurred.

(e)Primarily relates to upfront payments and pre-approval milestone payments earned by our partners as well as net reimbursements.

(f)Primarily relates to royalties from our collaboration partners.

The amounts outlined in the above table do not include transactions with third parties other than our collaboration partners, or other costs for the products under the collaborative arrangements.

Note 3**.** Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

In 2019, we substantially completed several multi-year initiatives focused on positioning us for future growth and creating a simpler, more efficient operating structure within each business.

A. Transforming to a More Focused Company Program

With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a more focused, global leader in science-based innovative medicines and vaccines. We have undertaken efforts to ensure our cost base and support model align appropriately with our new operating structure. While certain direct costs transferred to the Consumer Healthcare JV and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. This program is primarily composed of the following three initiatives:

• We are taking steps to restructure our corporate enabling functions to appropriately support our business, R&D and PGS platform functions. We expect costs, primarily related to restructuring our corporate enabling functions, to total $1.6 billion, with substantially all costs to be cash expenditures. Actions include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.

• In addition, we are transforming our commercial go-to market model in the way we engage patients and physicians. We expect costs of $1.1 billion, with substantially all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.

• We are also optimizing our manufacturing network under this program and incurring one-time costs for cost-reduction initiatives related to our manufacturing operations. We expect to incur costs of $800 million, with approximately 25% of the costs to be non-cash. The costs for this effort include, among other things, severance costs, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.

The program costs discussed above are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.

From the start of this program in the fourth quarter of 2019 through December 31, 2021, we incurred costs of $2.2 billion, of which $856 million is associated with Biopharma ($712 million in 2021, $79 million in 2020 and $64 million in 2019).

Pfizer Inc.			2021 Form 10-K			70

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

B. Key Activities

In 2021 and 2020, we incurred costs of $1.3 billion and $838 million, respectively, composed primarily of the Transforming to a More Focused Company program. In 2019, we incurred costs of $820 million composed of $548 million for the 2017-2019 and Organizing for Growth initiatives, $288 million for the integration of Array, $94 million for the integration of Hospira, and $87 million for the Transforming to a More Focused Company program, partially offset by income of $197 million, primarily due to the reversal of certain accruals upon the effective favorable settlement of an IRS audit for multiple tax years and other acquisition-related initiatives.

The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
												Year Ended December 31,
(MILLIONS)																		2021						2020						2019
Restructuring charges/(credits):
Employee terminations																		$	680					$	474					$	108
Asset impairments																		53						66						69
Exit costs/(credits)																		8						(6)						50
Restructuring charges/(credits)(a)																		741						535						227
Transaction costs(b)																		20						10						63
Integration costs and other(c)																		41						34						311
Restructuring charges and certain acquisition-related costs																		802						579						601
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net(d)																		(63)						3						23
Additional depreciation––asset restructuring recorded in our consolidated statements of income as follows(e):
Cost of sales																		63						21						29
Selling, informational and administrative expenses																		23						—						3
Research and development expenses																		—						(3)						8
Total additional depreciation––asset restructuring																		87						17						40
Implementation costs recorded in our consolidated statements of income as follows(f):
Cost of sales																		45						40						61
Selling, informational and administrative expenses																		426						197						73
Research and development expenses																		1						1						22
Total implementation costs																		472						238						156
Total costs associated with acquisitions and cost-reduction/productivity initiatives																		$	1,298					$	838					$	820

(a)Represents acquisition-related costs ($9 million credit in 2021 and $192 million credit in 2019) and cost reduction initiatives ($750 million charge in 2021, $535 million charge in 2020, and $418 million charge in 2019). 2021 and 2020 charges mainly represent employee termination costs for our Transforming to a More Focused Company cost-reduction program. 2019 restructuring charges mainly represent employee termination costs for cost-reduction and productivity initiatives, partially offset by the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years (see Note 5B). The employee termination costs for 2019 were primarily for our improvements to operational effectiveness as part of the realignment of our business structure, and also included employee termination costs for the Transforming to a More Focused Company cost-reduction program.

(b)Represents external costs for banking, legal, accounting and other similar services.

(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. 2021 costs primarily related to our acquisition of Trillium. 2020 costs primarily related to our acquisition of Array. 2019 costs mainly related to our acquisitions of Array, including $157 million in payments to Array employees for the fair value of previously unvested stock options that was recognized as post-closing compensation expense (see Note 2A), and Hospira.

(d)Amounts include the impact of a change in accounting principle. See Note 1C.

(e)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(f)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.

The following summarizes the components and changes in restructuring accruals:
(MILLIONS)						Employee Termination Costs						Asset Impairment Charges						Exit Costs						Accrual
Balance, January 1, 2020						$	770					$	—					$	46					$	816
Provision						474						66						(6)						535
Utilization and other(a)						(462)						(66)						(25)						(554)
Balance, December 31, 2020(b)						782						—						15						798
Provision						680						53						8						741
Utilization and other(a)						(449)						(53)						34						(468)
Balance, December 31, 2021(c)						$	1,014					$	—					$	57					$	1,071

(a)Includes adjustments for foreign currency translation.

(b)Included in Other current liabilities ($628 million) and Other noncurrent liabilities ($169 million).

(c)Included in Other current liabilities ($816 million) and Other noncurrent liabilities ($255 million).

Pfizer Inc.			2021 Form 10-K			71

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Note 4. Other (Income)/Deductions—Net

Components of Other (income)/deductions––net include:
						Year Ended December 31,
(MILLIONS)						2021						2020						2019
Interest income						$	(36)					$	(73)					$	(225)
Interest expense(a)						1,291						1,449						1,573
Net interest expense						1,255						1,376						1,348
Royalty-related income						(857)						(770)						(646)
Net (gains)/losses on asset disposals						(99)						237						(32)
Net (gains)/losses recognized during the period on equity securities(b)						(1,344)						(540)						(454)
Income from collaborations, out-licensing arrangements and sales of compound/product rights(c)						(396)						(326)						(168)
Net periodic benefit costs/(credits) other than service costs(d)						(2,547)						311						305
Certain legal matters, net(e)						182						28						292
Certain asset impairments(f)						86						1,691						2,792
Business and legal entity alignment costs(g)						—						—						300
Consumer Healthcare JV equity method (income)/loss(h)						(471)						(298)						(17)
Other, net(i)						(687)						(491)						(224)
Other (income)/deductions––net						$	(4,878)					$	1,219					$	3,497

(a)Capitalized interest totaled $108 million in 2021, $96 million in 2020 and $88 million in 2019.

(b)2021 gains include, among other things, unrealized gains of $1.6 billion related to investments in BioNTech and Cerevel. 2020 gains included, among other things, unrealized gains of $405 million related to investments in BioNTech and SpringWorks Therapeutics, Inc. (SpringWorks). 2019 gains included, among other things, unrealized gains of $295 million related to investments in Cortexyme, Inc. and SpringWorks.

(c)2021 includes, among other things, $188 million of net collaboration income from BioNTech related to the COVID-19 vaccine and $97 million of milestone income from multiple licensees. 2020 included, among other things, (i) a $75 million upfront payment received from our sale of our CK1 assets to Biogen, (ii) $40 million of milestone income from Puma Biotechnology, Inc. related to Neratinib regulatory approvals in the EU, (iii) $30 million of milestone income from Lilly related to the first commercial sale in the U.S. of LOXO-292 for the treatment of RET fusion-positive NSCLC and (iv) $108 million in milestone income from multiple licensees. 2019 included, among other things, $78 million in milestone income from Mylan Pharmaceuticals Inc. related to the FDA’s approval and launch of Wixela Inhub®, a generic of Advair Diskus®(fluticasone propionate and salmeterol inhalation powder) and $52 million in milestone income from multiple licensees.

(d)Amounts include the impact of a change in accounting principle. See Notes 1C and 11. In 2019, other non-service cost components’ activity related to the Consumer Healthcare JV transaction, such as gain on settlements, were recorded in (Gain) on completion of Consumer Healthcare JV transaction.

(e)Includes legal reserves for certain pending legal matters.

(f)2020 represents intangible asset impairment charges associated with our Biopharma segment: (i) $900 million related to IPR&D assets for unapproved indications of certain cancer medicines, acquired in our Array acquisition, and reflected, among other things, updated commercial forecasts; (ii) $528 million related to Eucrisa, a finite-lived developed technology right acquired in our Anacor acquisition, and reflected updated commercial forecasts mainly reflecting competitive pressures; and (iii) $263 million related to finite-lived developed technology rights for certain generic sterile injectables acquired in our Hospira acquisition, and reflected updated commercial forecasts mainly reflecting competitive pressures.

2019 primarily included intangible asset impairment charges of $2.8 billion, mainly composed of $2.6 billion, related to Eucrisa, and reflected updated commercial forecasts mainly reflecting competitive pressures.

(g)Mainly represents incremental costs for the design, planning and implementation of our then new business structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and other advisory services.

(h)See Note 2C.

(i)2021 includes, among other things, (i) income net of costs associated with TSAs of $288 million; (ii) dividend income of $166 million from our investment in ViiV and (iii) charges of $142 million, reflecting the change in the fair value of contingent consideration. 2020 included, among other things, (i) dividend income of $278 million from our investment in ViiV; (ii) income net of costs associated with TSAs of $114 million and (iii) charges of $105 million, reflecting the change in the fair value of contingent consideration. 2019 included, among other things, (i) dividend income of $220 million from our investment in ViiV; (ii) charges of $152 million for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity, associated with the formation of the Consumer Healthcare JV; and (iii) net losses on early retirement of debt of $138 million.

The asset impairment charges included in Other (income)/deductions––net are based on estimates of fair value.

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

Components of Income from continuing operations before provision/(benefit) for taxes on income include:
						Year Ended December 31,
(MILLIONS)						2021						2020						2019
United States						$	6,064					$	(2,887)					$	7,332
International						18,247						9,924						3,988
Income from continuing operations before provision/(benefit) for taxes on income*(*a), (b)						$	24,311					$	7,036					$	11,321

Pfizer Inc.			2021 Form 10-K			72

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

(a)2021 v. 2020*––*The domestic income in 2021 versus domestic loss in 2020 was mainly related to Comirnaty income, lower asset impairment charges, net periodic benefit credits in 2021 versus net periodic benefit costs in 2020 and higher net gains from equity securities, partially offset by higher R&D expenses. The increase in the international income was primarily related to Comirnaty income, net periodic benefit credits in 2021 versus net periodic benefit costs in 2020 and lower asset impairment charges.

(b)2020 v. 2019*––*The domestic loss in 2020 versus domestic income in 2019 was mainly related to the non-recurrence of the gain on the completion of the Consumer Healthcare JV transaction as well as higher asset impairment charges and higher R&D expenses. The increase in the international income was primarily related to the non-recurrence of the write off of assets contributed to the Consumer Healthcare JV as well as lower asset impairment charges and lower amortization of intangible assets.

Components of Provision/(benefit) for taxes on income based on the location of the taxing authorities include:
						Year Ended December 31,
(MILLIONS)						2021						2020						2019
United States
Current income taxes:
Federal						$	3,342					$	372					$	(1,887)
State and local						34						56						(186)
Deferred income taxes:
Federal						(3,850)						(1,164)						1,254
State and local						(491)						(131)						276
Total U.S. tax benefit						(964)						(867)						(543)
TCJA
Current income taxes						—						—						(135)
Deferred Income taxes						—						—						(187)
Total TCJA tax benefit						—						—						(323)
International
Current income taxes						2,769						1,517						2,418
Deferred income taxes						48						(279)						(969)
Total international tax provision						2,816						1,237						1,449
Provision/(benefit) for taxes on income						$	1,852					$	370					$	583

Amounts discussed below are rounded to the nearest hundred million and represent approximations.

We elected, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, to pay our initial estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings over eight years through 2026. The third annual installment of this liability was paid by its April 15, 2021 due date. The fourth annual installment is due April 18, 2022 and is reported in current Income taxes payable as of December 31, 2021. The remaining liability is reported in noncurrent Other taxes payable. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.

The changes in Provision/(benefit) for taxes on income impacting the effective tax rate year-over-year are summarized below:

2021 v. 2020

The higher effective tax rate in 2021 was mainly the result of:

• the change in the jurisdictional mix of earnings primarily related to Comirnaty; and

• lower tax benefits related to the impairment of intangible assets,

partially offset by:

• certain initiatives executed in the third quarter of 2021 associated with our investment in the Consumer Healthcare JV with GSK based on estimates and assumptions that we believe to be reasonable.

2020 v. 2019

The higher effective tax rate in 2020 was mainly the result of:

• the non-recurrence of the $1.4 billion tax benefits, representing taxes and interest, recorded in 2019 due to the favorable settlement of an IRS audit for multiple tax years;

• the non-recurrence of the tax benefits related to certain tax initiatives associated with the implementation of our then new business structure; and

• the non-recurrence of the tax benefits recorded in 2019 as a result of additional guidance issued by the U.S. Department of Treasury related to the TCJA, as well as:

• lower tax benefits related to the impairment of intangible assets,

partially offset by:

• the non-recurrence of the tax expense of $2.7 billion recorded in the third quarter of 2019 associated with the gain on the completion of the Consumer Healthcare JV transaction; and

• the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.

In all years, federal, state and international net tax liabilities assumed or established as part of a business acquisition are not included in Provision/(benefit) for taxes on income (see Note 2A).

Pfizer Inc.			2021 Form 10-K			73

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

B. Tax Rate Reconciliation

The reconciliation of the U.S. statutory income tax rate to our effective tax rate for Income from continuing operations follows:
						Year Ended December 31,
						2021						2020						2019
U.S. statutory income tax rate						21.0		%				21.0		%				21.0		%
TCJA impact(a)						—						—						(2.9)
Taxation of non-U.S. operations (b), (c)						(4.3)						(9.9)						(4.7)
Tax settlements and resolution of certain tax positions(a)						(0.4)						(2.7)						(14.0)
Completion of Consumer Healthcare JV transaction(a)						—						—						8.3
Certain Consumer Healthcare JV initiatives(a)						(6.0)						—						—
U.S. R&D tax credit						(0.5)						(1.4)						(0.8)
Interest(d)						0.4						1.1						0.6
All other, net(e)						(2.6)						(2.8)						(2.3)
Effective tax rate for income from continuing operations						7.6		%				5.3		%				5.2		%

(a)See Note 5A.

(b)For taxation of non-U.S. operations, this rate impact reflects the income tax rates and relative earnings in the locations where we do business outside the U.S., together with the U.S. tax cost on our international operations, changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions,” as well as changes in valuation allowances. Specifically: (i) the jurisdictional location of earnings is a significant component of our effective tax rate each year, and the rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of such earnings as compared to our total earnings; (ii) the U.S. tax implications of our foreign operations is a significant component of our effective tax rate each year and generally offsets some of the reduction to our effective tax rate each year resulting from the jurisdictional location of earnings; (iii) the impact of certain tax initiatives; and (iv) the impact of changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions” is a component of our effective tax rate each year that can result in either an increase or decrease to our effective tax rate. The jurisdictional mix of earnings, which includes the impact of the location of earnings as well as the U.S. tax cost on our international operations, can vary as a result of operating fluctuations in the normal course of business and as a result of the extent and location of other income and expense items, such as restructuring charges, asset impairments and gains and losses on strategic business decisions. See also Note 5A for the components of pre-tax income and Provision/(benefit) for taxes on income, which is based on the location of the taxing authorities, and for information about settlements and other items impacting Provision/(benefit) for taxes on income.

(c)In all years, the reduction in our effective tax rate is a result of the jurisdictional location of earnings and is largely due to lower tax rates in certain jurisdictions, as well as manufacturing and other incentives for our subsidiaries in Singapore and, to a lesser extent, in Puerto Rico. We benefit from Puerto Rican tax incentives pursuant to a grant that expires during 2029. Under such grant, we are partially exempt from income, property and municipal taxes. In Singapore, we benefit from incentive tax rates effective through 2047 on income from manufacturing and other operations.

(d)Includes changes in interest related to our uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions”.

(e)All other, net is primarily due to routine business operations.

C. Deferred Taxes

Components of our deferred tax assets and liabilities, shown before jurisdictional netting, follow:
						2021 Deferred Tax*												2020 Deferred Tax*
(MILLIONS)						Assets						(Liabilities)						Assets						(Liabilities)
Prepaid/deferred items(a)						$	4,086					$	(456)					$	3,114					$	(336)
Inventories						408						(56)						276						(25)
Intangible assets(b)						1,778						(4,577)						793						(5,355)
Property, plant and equipment(c)						117						(1,647)						211						(1,220)
Employee benefits(d)						1,594						(178)						1,981						(124)
Restructurings and other charges						303						—						291						—
Legal and product liability reserves						373						—						382						—
Net operating loss/tax credit carryforwards(e)						1,431						—						1,761						—
Unremitted earnings						—						(45)						—						(46)
State and local tax adjustments						197						—						171						—
Investments(f)						70						(689)						130						(3,545)
All other						89						(68)						80						(76)
						10,446						(7,714)						9,190						(10,726)
Valuation allowances						(1,462)						—						(1,586)						—
Total deferred taxes						$	8,983					$	(7,714)					$	7,604					$	(10,726)
Net deferred tax asset/(liability)(g)						$	1,269																	$	(3,123)

*The deferred tax assets and liabilities associated with global intangible low-taxed income are included in the relevant categories. See Note 1Q.

(a)The increase in net deferred tax assets in 2021 is primarily related to temporary differences associated with Comirnaty royalty accruals and the result of operating lease ROU liabilities recognized during the period.

(b)The increase in the deferred tax assets is primarily due to the acquisition of intangible assets relating to Trillium and the decrease in the 2021 deferred tax liabilities is primarily the result of amortization of intangible assets.

Pfizer Inc.			2021 Form 10-K			74

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

(c)The increase in net deferred tax liabilities in 2021 is primarily the result of operating lease ROU assets recognized during the period. See Note 15.

(d)The decrease in net deferred tax assets in 2021 is primarily the result of favorable pension plan asset performance reported in the period. See Note 11A.

(e)The amounts in 2021 and 2020 are reduced for unrecognized tax benefits of $3.0 billion and $3.0 billion, respectively, where we have net operating loss carryforwards, similar tax losses, and/or tax credit carryforwards that are available, under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position.

(f)The decrease in net deferred tax liabilities in 2021 is primarily due to certain initiatives executed in the third quarter of 2021 associated with our investment in the Consumer Healthcare JV.

(g)In 2021, Noncurrent deferred tax assets and other noncurrent tax assets ($1.6 billion), and Noncurrent deferred tax liabilities ($0.3 billion). In 2020, Noncurrent deferred tax assets and other noncurrent tax assets ($0.9 billion), and Noncurrent deferred tax liabilities ($4.1 billion).

We have carryforwards, primarily related to net operating and capital losses, general business credits, foreign tax credits and charitable contributions, which are available to reduce future U.S. federal and/or state, as well as international, income taxes payable with either an indefinite life or expiring at various times from 2022 to 2041. Certain of our U.S. net operating losses and general business credits are subject to limitations under IRC Section 382.

As of December 31, 2021, we have not made a U.S. tax provision on $55.0 billion of unremitted earnings of our international subsidiaries. As these earnings are intended to be indefinitely reinvested overseas, the determination of a hypothetical unrecognized deferred tax liability as of December 31, 2021 is not practicable. The amount of indefinitely reinvested earnings is based on estimates and assumptions and subject to management evaluation, and is subject to change in the normal course of business based on operational cash flow, completion of local statutory financial statements and the finalization of tax returns and audits, among other things. Accordingly, we regularly update our earnings and profits analysis for such events.

D. Tax Contingencies

For a description of our accounting policies associated with accounting for income tax contingencies, see Note 1Q.

Uncertain Tax Positions

As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon audit. As of December 31, 2021, we had $4.5 billion and as of December 31, 2020, we had $4.3 billion in net unrecognized tax benefits, excluding associated interest.

• Tax assets for uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction. As of December 31, 2021, we had $1.5 billion in assets associated with uncertain tax positions. These amounts were included in Noncurrent deferred tax assets and other noncurrent tax assets ($1.4 billion) and Other taxes payable ($105 million). As of December 31, 2020, we had $1.3 billion in assets associated with uncertain tax positions. These amounts were included in Noncurrent deferred tax assets and other noncurrent tax assets ($1.1 billion), Noncurrent deferred tax liabilities ($122 million) and Other taxes payable ($46 million).

• Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate.

The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows:
(MILLIONS)						2021						2020						2019
Balance, beginning						$	(5,595)					$	(5,381)					$	(6,259)
Acquisitions						—						37						(44)
Divestitures(a)						—						265						—
Increases based on tax positions taken during a prior period(b)						(111)						(232)						(36)
Decreases based on tax positions taken during a prior period(b), (c)						103						64						1,109
Decreases based on settlements for a prior period(d)						24						15						100
Increases based on tax positions taken during the current period(b)						(550)						(411)						(383)
Impact of foreign exchange						22						(72)						25
Other, net(b), (e)						40						120						107
Balance, ending(f)						$	(6,068)					$	(5,595)					$	(5,381)

(a)For 2020, related to the separation of Upjohn. See Note 2B.

(b)Primarily included in Provision/(benefit) for taxes on income.

(c)Primarily related to effectively settling certain issues with the U.S. and foreign tax authorities. See Note 5A.

(d)Primarily related to cash payments and reductions of tax attributes.

(e)Primarily related to decreases as a result of a lapse of applicable statutes of limitations.

(f)In 2021, included in Income taxes payable ($19 million), Other current assets ($42 million) Noncurrent deferred tax assets and other noncurrent tax assets ($3.0 billion), Noncurrent deferred tax liabilities ($5 million) and Other taxes payable ($3.0 billion). In 2020, included in Income taxes payable ($34 million), Noncurrent deferred tax assets and other noncurrent tax assets ($18 million), Noncurrent deferred tax liabilities ($3.0 billion) and Other taxes payable ($2.5 billion).

• Interest related to our unrecognized tax benefits is recorded in accordance with the laws of each jurisdiction and is recorded primarily in Provision/(benefit) for taxes on income. In 2021 and 2020, we recorded net increases in interest of $108 million and $89 million, respectively. In 2019, we recorded a net decrease in interest of $564 million, resulting primarily from a settlement with the IRS. Gross accrued interest totaled $601 million as of December 31, 2021 (reflecting a decrease of $1 million as a result of cash payments) and gross

Pfizer Inc.			2021 Form 10-K			75

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

accrued interest totaled $493 million as of December 31, 2020 (reflecting a decrease of $5 million as a result of cash payments and a decrease of $75 million relating to the separation of Upjohn). In 2021 and 2020, these amounts were substantially all included in Other taxes payable. Accrued penalties are not significant. See also Note 5A.

Status of Tax Audits and Potential Impact on Accruals for Uncertain Tax Positions

The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued Revenue Agent’s Reports (RARs) for tax years 2011-2013 and 2014-2015. We are not in agreement with the RARs and are currently appealing certain disputed issues. Tax years 2016-2018 are currently under audit. Tax years 2019-2021 are open, but not under audit. All other tax years are closed. In addition to the open audit years in the U.S., we have open audit years in certain major international tax jurisdictions such as Canada (2013-2021), Europe (2011-2021, primarily reflecting Ireland, the U.K., France, Italy, Spain and Germany), Asia Pacific (2011-2021, primarily reflecting China, Japan and Singapore) and Latin America (1998-2021, primarily reflecting Brazil).

Any settlements or statutes of limitations expirations could result in a significant decrease in our uncertain tax positions. We estimate that it is reasonably possible that within the next 12 months, our gross unrecognized tax benefits, exclusive of interest, could decrease by as much as $75 million, as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.

E. Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)

Components of the Tax provision/(benefit) on other comprehensive income/(loss) include:
												Year Ended December 31,
(MILLIONS)																		2021						2020						2019
Foreign currency translation adjustments, net(a)																		$	43					$	(119)					$	260
Unrealized holding gains/(losses) on derivative financial instruments, net																		84						(88)						83
Reclassification adjustments for (gains)/losses included in net income																		29						(25)						(125)
																		114						(113)						(42)
Unrealized holding gains/(losses) on available-for-sale securities, net																		(44)						45						—
Reclassification adjustments for (gains)/losses included in net income																		(4)						(24)						5
																		(48)						22						5
Benefit plans: prior service (costs)/credits and other, net																		27						12						(1)
Reclassification adjustments related to amortization of prior service costs and other, net																		(47)						(31)						(43)
Reclassification adjustments related to curtailments of prior service costs and other, net																		(17)						—						(1)
Other																		(1)						1						—
																		(38)						(17)						(45)
Tax provision/(benefit) on other comprehensive income/(loss)																		$	71					$	(227)					$	178

(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that are expected to be held indefinitely.

Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests

The following summarizes the changes, net of tax, in Accumulated other comprehensive loss(a):
						Net Unrealized Gains/(Losses)																		Benefit Plans
(MILLIONS)						Foreign Currency Translation Adjustments						Derivative Financial Instruments						Available-For-Sale Securities						Prior Service (Costs)/ Credits and Other						Accumulated Other Comprehensive Income/(Loss)
Balance, January 1, 2019						$	(6,075)					$	167					$	(68)					$	728					$	(5,249)
Other comprehensive income/(loss)(b)						139						(146)						33						(144)						(118)
Balance, December 31, 2019						(5,936)						20						(35)						584						(5,367)
Other comprehensive income/(loss)(b)						883						(448)						151						(106)						480
Distribution of Upjohn Business(c)						(397)						—						—						(26)						(423)
Balance, December 31, 2020						(5,450)						(428)						116						452						(5,310)
Other comprehensive income/(loss)****(b)						(722)						547						(336)						(75)						(587)
Balance, December 31, 2021						$	(6,172)					$	119					$	(220)					$	377					$	(5,897)

(a)Amounts include the impact of a change in accounting principle. See Note 1C.

(b)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests. Foreign currency translation adjustments include net losses in 2021 and net gains in 2020 and 2019 related to our equity-method investment in the Consumer Healthcare JV (see Note 2C), and the impact of our net investment hedging program.

(c)For more information, see Note 2B.

Pfizer Inc.			2021 Form 10-K			76

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Note 7. Financial Instruments

A. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis and Fair Value Hierarchy, using a Market Approach:

						As of December 31, 2021																								As of December 31, 2020
(MILLIONS)						Total						Level 1						Level 2												Total						Level 1						Level 2
Financial assets:
Short-term investments
Classified as equity securities with readily determinable fair values:
Money market funds						$	5,365					$	—					$	5,365											$	567					$	—					$	567
Classified as available-for-sale debt securities:
Government and agency—non-U.S.						17,318						—						17,318												7,719						—						7,719
Government and agency—U.S.						4,050						—						4,050												982						—						982
Corporate and other						647						—						647												1,008						—						1,008
						22,014						—						22,014												9,709						—						9,709
Total short-term investments						27,379						—						27,379												10,276						—						10,276
Other current assets
Derivative assets:
Interest rate contracts						4						—						4												18						—						18
Foreign exchange contracts						704						—						704												234						—						234
Total other current assets						709						—						709												251						—						251
Long-term investments
Classified as equity securities with readily determinable fair values(a)						3,876						3,849						27												2,809						2,776						32
Classified as available-for-sale debt securities:
Government and agency—non-U.S.						465						—						465												6						—						6
Government and agency—U.S.						6						—						6												121						—						121
Corporate and other						50						—						50												—						—						—
						521						—						521												128						—						128
Total long-term investments						4,397						3,849						548												2,936						2,776						160
Other noncurrent assets
Derivative assets:
Interest rate contracts						16						—						16												117						—						117
Foreign exchange contracts						242						—						242												5						—						5
Total derivative assets						259						—						259												122						—						122
Insurance contracts(b)						808						—						808												693						—						693
Total other noncurrent assets						1,067						—						1,067												814						—						814
Total assets						$	33,552					$	3,849					$	29,703											$	14,278					$	2,776					$	11,501
Financial liabilities:
Other current liabilities
Derivative liabilities:
Foreign exchange contracts						$	476					$	—					$	476											$	501					$	—					$	501
Total other current liabilities						476						—						476												501						—						501
Other noncurrent liabilities
Derivative liabilities:
Foreign exchange contracts						405						—						405												599						—						599
Total other noncurrent liabilities						405						—						405												599						—						599
Total liabilities						$	881					$	—					$	881											$	1,100					$	—					$	1,100

(a)Long-term equity securities of $194 million as of December 31, 2021 and $190 million as of December 31, 2020 were held in restricted trusts for U.S. non-qualified employee benefit plans.

(b)Includes life insurance policies held in restricted trusts for U.S. non-qualified employee benefit plans. The underlying invested assets in these contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net (see Note 4).

Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis

The carrying value of Long-term debt, excluding the current portion was $36 billion as of December 31, 2021 and $37 billion as of December 31, 2020. The estimated fair value of such debt, using a market approach and Level 2 inputs, was $42 billion as of December 31, 2021 and $46 billion as of December 31, 2020.

Pfizer Inc.			2021 Form 10-K			77

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of December 31, 2021 and 2020. The fair value measurements of our held-to-maturity debt securities and short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities are based on Level 3 inputs.

B. Investments

Total Short-Term, Long-Term and Equity-Method Investments

The following summarizes our investments by classification type:
						As of December 31,
(MILLIONS)						2021						2020
Short-term investments
Equity securities with readily determinable fair values(a)						$	5,365					$	567
Available-for-sale debt securities						22,014						9,709
Held-to-maturity debt securities						1,746						161
Total Short-term investments						$	29,125					$	10,437
Long-term investments
Equity securities with readily determinable fair values						$	3,876					$	2,809
Available-for-sale debt securities						521						128
Held-to-maturity debt securities						34						37
Private equity securities at cost(b)						623						432
Total Long-term investments						$	5,054					$	3,406
Equity-method investments						16,472						16,856
Total long-term investments and equity-method investments						$	21,526					$	20,262
Held-to-maturity cash equivalents						$	268					$	89

(a)As of December 31, 2021 and 2020, includes money market funds primarily invested in U.S. Treasury and government debt.

(b)Represent investments in the life sciences sector.

Debt Securities

At December 31, 2021, our investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows:
						As of December 31, 2021																																										As of December 31, 2020
												Gross Unrealized																		Maturities (in Years)																								Gross Unrealized
(MILLIONS)						Amortized Cost						Gains						Losses						Fair Value						Within 1						Over 1 to 5						Over 5						Amortized Cost						Gains						Losses						Fair Value
Available-for-sale debt securities
Government and agency*––*non-U.S.						$	18,032					$	13					$	(263)					$	17,783					$	17,318					$	465					$	—					$	7,593					$	136					$	(4)					$	7,725
Government and agency*––*U.S.						4,056						—						(1)						4,055						4,050						6						—						1,104						—						(1)						1,103
Corporate and other						698						—						(1)						697						647						50						—						1,006						2						—						1,008
Held-to-maturity debt securities
Time deposits and other						947						—						—						947						917						18						11						283						—						—						283
Government and agency*––*non-U.S.						1,102						—						—						1,102						1,097						4						1						5						—						—						5
Total debt securities						$	24,835					$	14					$	(265)					$	24,584					$	24,029					$	543					$	13					$	9,991					$	138					$	(5)					$	10,124

Any expected credit losses to these portfolios would be immaterial to our financial statements.

Equity Securities

The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity method investments, held at the reporting date:
						Year Ended December 31,
(MILLIONS)						2021						2020						2019
Net (gains)/losses recognized during the period on equity securities(a)						$	(1,344)					$	(540)					$	(454)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period						(80)						(24)						(25)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)						$	(1,264)					$	(515)					$	(429)

(a)Reported in Other (income)/deductions––net. See Note 4.

(b)Included in net unrealized gains are observable price changes on equity securities without readily determinable fair values. As of December 31, 2021, there were cumulative impairments and downward adjustments of $97 million and upward adjustments of $156 million. Impairments, downward and upward adjustments were not significant in 2021, 2020 and 2019.

Pfizer Inc.			2021 Form 10-K			78

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

C. Short-Term Borrowings

Short-term borrowings include:
						As of December 31,
(MILLIONS)						2021						2020
Commercial paper						$	—					$	556
Current portion of long-term debt, principal amount						1,636						2,004
Other short-term borrowings, principal amount(a)						605						145
Total short-term borrowings, principal amount						2,241						2,705
Net unamortized discounts, premiums and debt issuance costs						—						(2)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted						$	2,241					$	2,703

(a)Primarily includes cash collateral. See Note 7F.

The weighted-average effective interest rate on commercial paper outstanding was approximately 0.13% as of December 31, 2020.

As of December 31, 2021, we had access to a $7 billion committed U.S. revolving credit facility expiring in 2026, which may be used for general corporate purposes including to support our commercial paper borrowings. In addition to the U.S. revolving credit facility, our lenders have provided us an additional $360 million in lines of credit, of which $322 million expire within one year. Essentially all lines of credit were unused as of December 31, 2021.

D. Long-Term Debt

The following outlines our senior unsecured long-term debt and the weighted-average stated interest rate by maturity:
						As of December 31,
(MILLIONS)						2021						2020
Notes due 2022 (1.0% for 2020)(a)						$	—					$	1,728
Notes due 2023 (3.2% for 2021 and 2020)						2,550						2,550
Notes due 2024 (3.9% for 2021 and 2020)						2,250						2,250
Notes due 2025 (0.8% for 2021 and 2020)						750						750
Notes due 2026 (2.9% for 2021 and 2020)						3,000						3,000
Notes due 2027 (2.1% for 2021 and 2.0% for 2020)						1,051						1,121
Notes due 2028-2032 (3.1% for 2021 and 3.4% for 2020)						6,660						5,660
Notes due 2033-2037 (5.6% for 2021 and 2020)						4,250						4,250
Notes due 2038-2042 (5.5% for 2021 and 2020)						6,079						6,086
Notes due 2043-2047 (3.7% for 2021 and 2020)						4,858						4,878
Notes due 2048-2050 (3.6% for 2021 and 2020)						3,500						3,500
Total long-term debt, principal amount						34,948						35,774
Net fair value adjustments related to hedging and purchase accounting						1,438						1,562
Net unamortized discounts, premiums and debt issuance costs						(195)						(207)
Other long-term debt						4						4
Total long-term debt, carried at historical proceeds, as adjusted						$	36,195					$	37,133
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above (1.0% for 2021 and 2.6% for 2020))						$	1,636					$	2,002

(a)Reclassified to the current portion of long-term debt.

Our long-term debt outlined in the above table is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.

Issuances

In August 2021, we issued the following senior unsecured notes at an effective interest rate of 1.79%:
(MILLIONS)												Principal
Interest Rate						Maturity Date						As of December 31, 2021
1.750%(a)						August 18, 2031						$	1,000

(a)The notes may be redeemed by us at any time, in whole, or in part, at a redemption price plus accrued and unpaid interest.

In May 2020, we completed a public offering of $4.0 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 2.11% and in March 2020, we completed a public offering of $1.25 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 2.67%.

In March 2019, we completed a public offering of $5.0 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 3.57%.

Pfizer Inc.			2021 Form 10-K			79

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Retirements

In November 2020, we repurchased all $1.15 billion and $342 million principal amount outstanding of the 1.95% senior unsecured notes due June 2021 and 5.80% senior unsecured notes due August 2023 and recorded a total net loss of $36 million, in Other (income)/deductions––net. See Note 2B.

In March 2020, we repurchased at par all $1.065 billion principal amount outstanding of our senior unsecured notes due in 2047.

In January 2019, we repurchased all €1.1 billion ($1.3 billion) principal amount outstanding of the 5.75% euro-denominated debt due June 2021 at a redemption value of €1.3 billion ($1.5 billion). We recorded a net loss of $138 million in Other (income)/deductions––net, which included the related termination of cross currency swaps.

E. Derivative Financial Instruments and Hedging Activities

Foreign Exchange Risk

A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. Where foreign exchange risk is not offset by other exposures, we manage our foreign exchange risk principally through the use of derivative financial instruments and foreign currency debt. These financial instruments serve to mitigate the impact on net income as a result of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.

The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen and Canadian dollar.

• We hedge a portion of our forecasted intercompany inventory sales denominated in euro, Japanese yen, Canadian dollar, Chinese renminbi, U.K. pound and Australian dollar for up to two years.

• Under certain market conditions, we may seek to protect against possible declines in the reported net investments of our foreign business entities.

Changes in fair value are reported in earnings or in Other comprehensive income/(loss), depending on the nature and purpose of the financial instrument (hedge or offset relationship). For certain foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize the excluded amount through an amortization approach in earnings. The hedge relationships are as follows:

• Generally, we recognize the gains and losses on foreign exchange contracts that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged item. We also recognize the offsetting foreign exchange impact attributable to the hedged item in earnings.

• Generally, we record in Other comprehensive income/(loss) gains or losses on foreign exchange contracts that are designated as cash flow hedges and reclassify those amounts into earnings in the same period or periods during which the hedged transaction affects earnings.

• We record in Other comprehensive income/(loss) ––Foreign currency translation adjustments, net the foreign exchange gains and losses related to foreign exchange-denominated debt and foreign exchange contracts designated as a hedge of our net investments in foreign subsidiaries and reclassify those amounts into earnings upon the sale or substantial liquidation of our net investments.

• For foreign exchange contracts not designated as hedging instruments, we recognize the gains and losses immediately into earnings along with the earnings impact of the items they generally offset. These contracts take the opposite currency position of that reflected on the balance sheet to counterbalance the effect of any currency movement.

Interest Rate Risk

Our interest-bearing investments and borrowings are subject to interest rate risk. Depending on market conditions, we may change the profile of our outstanding debt or investments by entering into derivative financial instruments like interest rate swaps, either to hedge or offset the exposure to changes in the fair value of hedged items with fixed interest rates, or to convert variable rate debt or investments to fixed rates. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.

We recognize the change in fair value on interest rate contracts that are designated as fair value hedges in earnings, as well as the offsetting earnings impact of the hedged risk attributable to the hedged item.

The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
(MILLIONS)						As of December 31, 2021																		As of December 31, 2020
												Fair Value																		Fair Value
						Notional						Asset						Liability						Notional						Asset						Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)						$	29,576					$	787					$	717					$	24,369					$	145					$	1,005
Interest rate contracts						2,250						21						—						1,950						135						—
												808						717												280						1,005
Derivatives not designated as hedging instruments:
Foreign exchange contracts						$	21,419					160						164						$	15,063					94						95
Total												$	968					$	881											$	373					$	1,100

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.8 billion as of December 31, 2021 and $5.0 billion as of December 31, 2020.

Pfizer Inc.			2021 Form 10-K			80

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations):
						Gains/(Losses) Recognized in OID(a)												Gains/(Losses) Recognized in OCI(a)												Gains/(Losses) Reclassified from OCI into OID and COS(a)
						Year Ended December 31,
(MILLIONS)						2021						2020						2021						2020						2021						2020
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)						$	—					$	—					$	488					$	(649)					$	(173)					$	(77)
Amount excluded from effectiveness testing and amortized into earnings(c)						—						—						38						55						38						57
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts						(7)						369						—						—						—						—
Hedged item						7						(369)						—						—						—						—
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts						—						—						468						(501)						—						—
Amount excluded from effectiveness testing and amortized into earnings(c)						—						—						52						181						109						154
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings						—						—						78						8						—						—
Foreign currency long-term debt						—						—						86						(183)						—						—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts						(192)						178						—						—						—						—
All other net(c)						—						—						1						12						1						(1)
						$	(192)					$	178					$	1,210					$	(1,077)					$	(25)					$	133

(a)OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the consolidated statements of income*.* COS = Cost of Sales, included in Cost of sales in the consolidated statements of income. OCI = Other comprehensive income/(loss), included in the consolidated statements of comprehensive income*.*

(b)The amounts reclassified from OCI into COS were:

• a net loss of $89 million in 2021; and

• a net gain of $172 million in 2020 (including a gain of $22 million reported in Discontinued operations––net of tax).

The remaining amounts were reclassified from OCI into OID. Based on year-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $362 million within the next 12 months into income*.* The maximum length of time over which we are hedging our exposure to the variability in future foreign exchange cash flows is approximately 21 years and relates to foreign currency debt.

(c)The amounts reclassified from OCI were reclassified into OID.

(d)Short-term borrowings and long-term debt include foreign currency borrowings which are used as net investment hedges. The short-term borrowings carrying value as of December 31, 2021 was $1.1 billion. The long-term debt carrying values as of December 31, 2021 and December 31, 2020 were $844 million and $2.1 billion, respectively.

The following summarizes cumulative basis adjustments to our long-term debt in fair value hedges:
						As of December 31, 2021																		As of December 31, 2020
												Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount																		Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount
(MILLIONS)						Carrying Amount of Hedged Assets/Liabilities(a)						Active Hedging Relationships						Discontinued Hedging Relationships						Carrying Amount of Hedged Assets/Liabilities(a)						Active Hedging Relationships						Discontinued Hedging Relationships
Long-term debt						$	2,233					$	16					$	1,154					$	2,016					$	117					$	1,149

(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.

F*.* Credit Risk

On an ongoing basis, we monitor and review the credit risk of our customers, financial institutions and exposures in our investment portfolio.

With respect to our trade accounts receivable, we monitor the creditworthiness of our customers to which we grant credit in the normal course of business. In general, there is no requirement for collateral from customers. For additional information on our trade accounts receivable and

Pfizer Inc.			2021 Form 10-K			81

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

allowance for credit losses, see Note 1H. A significant portion of our trade accounts receivable balances are due from wholesalers and governments. For additional information on our trade accounts receivables with significant customers, see Note 17C.

With respect to our investments, we monitor concentrations of credit risk associated with government, government agency, and corporate issuers of securities. Investments are placed in instruments that are investment grade and are primarily short in duration. Exposure limits are established to limit a concentration with any single credit counterparty. As of December 31, 2021, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by the U.S., Canada, Japan, U.K., Germany, France, Australia, and Switzerland.

With respect to our derivative financial instrument agreements with financial institutions, we do not expect to incur a significant loss from failure of any counterparty. Derivative financial instruments are executed under International Swaps and Derivatives Association (ISDA) master agreements with credit-support annexes that contain zero threshold provisions requiring collateral to be exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk with any individual financial institution. As of December 31, 2021, the aggregate fair value of these derivative financial instruments that are in a net payable position was $372 million, for which we have posted collateral of $382 million with a corresponding amount reported in Short-term investments. As of December 31, 2021, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $477 million, for which we have received collateral of $581 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.

Note 8. Other Financial Information

A. Inventories

The following summarizes the components of Inventories:
						As of December 31,
(MILLIONS)						2021						2020
Finished goods						$	3,641					$	2,867
Work in process						4,424						4,436
Raw materials and supplies						994						716
Inventories(a)						$	9,059					$	8,020
Noncurrent inventories not included above(b)						$	939					$	890

(a)The change from December 31, 2020 reflects increases for certain products, including inventory build for new product launches (primarily Comirnaty), network strategy and supply recovery, partially offset by decreases due to market demand.

(b)Included in Other noncurrent assets. There are no recoverability issues for these amounts.

B. Other Current Liabilities

Other current liabilities includes, among other things, amounts payable to BioNTech for the gross profit split for Comirnaty, which totaled $9.7 billion as of December 31, 2021 and $25 million as of December 31, 2020.

Note 9. Property, Plant and Equipment (PP&E)

The following summarizes the components of Property, plant and equipment:
						Useful Lives						As of December 31,
(MILLIONS)						(Years)						2021						2020
Land						-						$	423					$	443
Buildings						33-50						9,001						8,998
Machinery and equipment						8-20						12,252						11,000
Furniture, fixtures and other						3-12.5						4,457						4,484
Construction in progress						-						3,822						3,481
												29,955						28,406
Less: Accumulated depreciation												15,074						14,661
Property, plant and equipment												$	14,882					$	13,745

The following provides long-lived assets by geographic area:
						As of December 31,
(MILLIONS)						2021						2020
Property, plant and equipment
United States						$	8,385					$	7,666
Developed Europe						5,094						4,775
Developed Rest of World						347						413
Emerging Markets						1,056						890
Property, plant and equipment						$	14,882					$	13,745

Pfizer Inc.			2021 Form 10-K			82

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Note 10. Identifiable Intangible Assets and Goodwill

A. Identifiable Intangible Assets

The following summarizes the components of Identifiable intangible assets:
						As of December 31, 2021																		As of December 31, 2020
(MILLIONS)						Gross Carrying Amount						Accumulated Amortization						Identifiable Intangible Assets, less Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization						Identifiable Intangible Assets, less Accumulated Amortization
Finite-lived intangible assets
Developed technology rights(a)						$	73,346					$	(53,732)					$	19,614					$	73,040					$	(50,532)					$	22,508
Brands						922						(807)						115						922						(774)						148
Licensing agreements and other						2,284						(1,299)						985						2,292						(1,187)						1,106
						76,552						(55,838)						20,714						76,255						(52,493)						23,762
Indefinite-lived intangible assets
Brands						827												827						827												827
IPR&D						3,092												3,092						3,175												3,175
Licensing agreements and other						513												513						573												573
						4,432												4,432						4,575												4,575
Identifiable intangible assets(b)						$	80,984					$	(55,838)					$	25,146					$	80,830					$	(52,493)					$	28,337

(a)The increase in the gross carrying amount primarily reflects $500 million of capitalized Comirnaty sales milestones to BioNTech, partially offset by net losses from foreign currency translation adjustments.

(b)The decrease is primarily due to amortization, partially offset by the capitalization of the Comirnaty milestones described above.

Developed Technology Rights

Developed technology rights represent the cost for developed technology acquired from third parties and can include the right to develop, use, market, sell and/or offer for sale the product, compounds and intellectual property that we have acquired with respect to products, compounds and/or processes that have been completed. We possess a well-diversified portfolio of hundreds of developed technology rights across therapeutic categories, representing our commercialized products. The significant components of developed technology rights are the following: Xtandi, Prevnar 13/Prevenar 13 Infant, Braftovi/Mektovi, Premarin, Prevnar 13/Prevenar 13 Adult, Eucrisa, Orgovyx, Zavicefta, Tygacil, Bavencio, Merrem/Meronem and Comirnaty. Also included in this category are the post-approval milestone payments made under our alliance agreements for certain prescription pharmaceutical products.

Brands

Brands represent the cost for tradenames and know-how, as the products themselves do not receive patent protection. Indefinite-lived brands include Medrol and Depo-Medrol, while finite-lived brands include Zavedos and Depo-Provera.

IPR&D

IPR&D assets represent R&D assets that have not yet received regulatory approval in a major market. The significant components of IPR&D are the following: the program for the oral poly adenosine diphosphate (ADP) ribose polymerase inhibitor for the treatment of patients with germline BRCA-mutated advanced breast cancer acquired as part of the Medivation acquisition and assets acquired in connection with the Array acquisition. IPR&D assets are required to be classified as indefinite-lived assets until the successful completion or the abandonment of the associated R&D effort. Accordingly, during the development period after the date of acquisition, these assets are not amortized until approval is obtained in a major market, typically either the U.S. or the EU, or in a series of other countries, subject to certain specified conditions and management judgment. At that time, we will determine the useful life of the asset, reclassify it out of IPR&D and begin amortization. If the associated R&D effort is abandoned, the related IPR&D assets will likely be written-off, and we will record an impairment charge.

IPR&D assets are high-risk assets, given the uncertain nature of R&D. Accordingly, we expect that many of these IPR&D assets will become impaired and be written-off at some time in the future.

Licensing Agreements

Licensing agreements for developed technology and for technology in development primarily relate to out-licensing arrangements acquired from third parties, including the Array acquisition. These assets represent the cost for the license, where we acquired the right to future royalties and/or milestones upon development or commercialization by the licensing partner. A significant component of the licensing arrangements are for out-licensing arrangements with a number of partners for oncology technology in varying stages of development that have not yet received regulatory approval in a major market. Accordingly, during the development period after the date of acquisition, each of these assets is classified as indefinite-lived intangible assets and will not be amortized until approval is obtained in a major market. At that time we will determine the useful life of the asset, reclassify the respective licensing arrangement asset to finite-lived intangible asset and begin amortization. If the development effort is abandoned, the related licensing asset will likely be written-off, and we will record an impairment charge.

Pfizer Inc.			2021 Form 10-K			83

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Amortization

The weighted-average life for each of our total finite-lived intangible assets is approximately 8 years, and for the largest component, developed technology rights, is approximately 7 years. Total amortization expense for finite-lived intangible assets was $3.7 billion in 2021, $3.4 billion in 2020 and $4.5 billion in 2019.

The following provides the expected annual amortization expense:
(MILLIONS)						2022						2023						2024						2025						2026
Amortization expense						$	3,279					$	2,936					$	2,686					$	2,500					$	2,449

B. Goodwill

The following summarizes the components and changes in the carrying amount of Goodwill:
(MILLIONS)																														Total(a)
Balance, January 1, 2020																														$	48,181
Additions(b)																														727
Other(c)																														648
Balance, December 31, 2020																														49,556
Additions																														—
Other(c)																														(348)
Balance, December 31, 2021																														$	49,208

(a)As a result of the reorganization of our commercial operations during the fourth quarter of 2021 (see Note 17), we were required to estimate the relative fair values of our PC1 and Hospital organizations to determine any reallocation of goodwill. We completed this analysis and determined that no goodwill was required to be reallocated. As a result, our entire goodwill balance continues to be assigned within the Biopharma reportable segment.

(b)Additions primarily represent the impact of measurement period adjustments related to our Array acquisition (see Note 2A).

(c)Other represents the impact of foreign exchange.

Note 11**.** Pension and Postretirement Benefit Plans and Defined Contribution Plans

The majority of our employees worldwide are eligible for retirement benefits provided through defined benefit pension plans, defined contribution plans or both. In the U.S., we sponsor both IRC-qualified and supplemental (non-qualified) defined benefit plans and defined contribution plans. A qualified plan meets the requirements of certain sections of the IRC, and, generally, contributions to qualified plans are tax deductible. A qualified plan typically provides benefits to a broad group of employees with restrictions on discriminating in favor of highly compensated employees with regard to coverage, benefits and contributions. A supplemental (non-qualified) plan provides additional benefits to certain employees. In addition, we provide medical insurance benefits to certain retirees and their eligible dependents through our postretirement plans.

As discussed in Note 1C, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of pension and postretirement plans. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented.

A. Components of Net Periodic Benefit Costs and Changes in Other Comprehensive Income/(Loss)

The following summarizes the components of net periodic benefit cost/(credit), including those reported as part of discontinued operations for 2020 and 2019, and the changes in Other comprehensive income/(loss) for our benefit plans:
						Pension Plans																																				Postretirement Plans
						U.S.																		International
						Year Ended December 31,
(MILLIONS)						2021						2020						2019						2021						2020						2019						2021						2020						2019
Service cost						$	—					$	—					$	—					$	130					$	146					$	125					$	36					$	38					$	37
Interest cost						455						533						676						146						164						215						29						49						75
Expected return on plan assets						(1,052)						(1,015)						(890)						(327)						(314)						(318)						(39)						(36)						(33)
Amortization of prior service cost/(credit)						(2)						(3)						(4)						(1)						(3)						(4)						(151)						(170)						(173)
Actuarial (gains)/losses(a)						(684)						1,152						284						(690)						148						669						(167)						(165)						(118)
Curtailments						—						—						(4)						(4)						—						(1)						(82)						—						(62)
Special termination benefits						17						1						20						—						—						—						2						—						2
Net periodic benefit cost/(credit) reported in income						(1,265)						668						82						(746)						141						686						(372)						(282)						(271)
Cost/(credit) reported in Other comprehensive income/(loss)						2						5						4						4						5						21						107						114						164
Cost/(credit) recognized in Comprehensive income						$	(1,264)					$	674					$	86					$	(742)					$	145					$	707					$	(265)					$	(168)					$	(107)

(a)Reflects actuarial remeasurement gains in 2021, primarily due to favorable plan asset performance and increases in discount rates, and actuarial remeasurement losses in 2020 and 2019, primarily due to decreases in discount rates partially offset by favorable plan asset performance.

Pfizer Inc.			2021 Form 10-K			84

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

The components of net periodic benefit cost/(credit) other than the service cost component are included in Other (income)/deductions––net (see Note 4).

B. Actuarial Assumptions

						Pension Plans																																				Postretirement Plans
						U.S.																		International
						Year Ended December 31,
(PERCENTAGES)						2021						2020						2019						2021						2020						2019						2021						2020						2019
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate:
Pension plans/postretirement plans						2.6		%				3.3		%				4.4		%																						2.5		%				3.2		%				4.3		%
Interest cost																								1.2		%				1.5		%				2.2		%
Service cost																								1.4		%				1.6		%				2.4		%
Expected return on plan assets						6.8		%				7.0		%				7.2		%				3.4		%				3.6		%				3.9		%				6.8		%				7.0		%				7.3		%
Rate of compensation increase(a)																								2.9		%				2.9		%				1.4		%
Weighted-average assumptions used to determine benefit obligations at fiscal year-end:
Discount rate						2.9		%				2.6		%				3.3		%				1.6		%				1.5		%				1.7		%				2.9		%				2.5		%				3.2		%
Rate of compensation increase(a)																								2.8		%				2.9		%				1.4		%

(a)The rate of compensation increase is not used to determine the net periodic benefit cost and benefit obligation for the U.S. pension plans as these plans are frozen.

All of the assumptions are reviewed on at least an annual basis. We revise these assumptions based on an annual evaluation of long-term trends as well as market conditions that may have an impact on the cost of providing retirement benefits.

The weighted-average discount rate for our U.S. defined benefit plans is determined annually and evaluated and modified to reflect at year-end the prevailing market rate of a portfolio of high-quality fixed income investments, rated AA/Aa or better that reflect the rates at which the pension benefits could be effectively settled. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA/Aa or better, including, when there is sufficient data, a yield curve approach. These rate determinations are made consistent with local requirements. Overall, the yield curves used to measure the benefit obligations at year-end 2021 resulted in higher discount rates as compared to the prior year.

The following provides the healthcare cost trend rate assumptions for our U.S. postretirement benefit plans:
						As of December 31,
						2021						2020
Healthcare cost trend rate assumed for next year						6.0		%				5.6		%
Rate to which the cost trend rate is assumed to decline						4.0		%				4.5		%
Year that the rate reaches the ultimate trend rate						2045						2037

Pfizer Inc.			2021 Form 10-K			85

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

C. Obligations and Funded Status

The following provides: (i) an analysis of the changes in our benefit obligations, plan assets and funded status of our benefit plans, including those reported as part of discontinued operations for 2020, (ii) the funded status recognized in our consolidated balance sheets and (iii) the pre-tax components of cumulative amounts recognized in Accumulated other comprehensive loss:
						Pension Plans																								Postretirement Plans
						U.S.												International
						Year Ended December 31,
(MILLIONS)						2021						2020						2021						2020						2021						2020
Change in benefit obligation(a)
Benefit obligation, beginning						$	18,306					$	17,886					$	12,001					$	11,059					$	1,238					$	1,667
Service cost						—						—						130						146						36						38
Interest cost						455						533						146						164						29						49
Employee contributions						—						—						10						8						78						88
Plan amendments						—						2						—						2						(116)						(56)
Changes in actuarial assumptions and other(b)						(331)						2,112						89						702						(117)						(132)
Foreign exchange impact						—						—						(298)						646						1						2
Upjohn spin-off(c)						—						(1,016)						3						(320)						—						(218)
Acquisitions/divestitures/other, net						—						—						—						—						—						—
Curtailments and special termination benefits						17						1						(2)						—						(8)						—
Settlements						(785)						(767)						(47)						(34)						—						—
Benefits paid						(512)						(445)						(374)						(372)						(147)						(201)
Benefit obligation, ending(a)						17,150						18,306						11,657						12,001						995						1,238
Change in plan assets
Fair value of plan assets, beginning						16,094						14,586						9,811						8,956						588						519
Actual return on plan assets						1,405						1,974						1,106						868						89						69
Company contributions						143						1,433						451						197						145						113
Employee contributions						—						—						10						8						78						88
Foreign exchange impact						—						—						(229)						462						—						—
Upjohn spin-off(c)						—						(687)						2						(270)						—						—
Acquisitions/divestitures, net						—						—						—						(6)						—						—
Settlements						(785)						(767)						(47)						(34)						—						—
Benefits paid						(512)						(445)						(374)						(372)						(147)						(201)
Fair value of plan assets, ending						16,346						16,094						10,729						9,811						753						588
Funded status—Plan assets less than benefit obligation						$	(805)					$	(2,211)					$	(928)					$	(2,191)					$	(241)					$	(651)
Amounts recorded in our consolidated balance sheet:
Noncurrent assets						$	447					$	—					$	1,480					$	522					$	—					$	—
Current liabilities						(138)						(127)						(33)						(31)						(6)						(6)
Noncurrent liabilities						(1,113)						(2,084)						(2,376)						(2,681)						(235)						(645)
Funded status						$	(805)					$	(2,211)					$	(928)					$	(2,191)					$	(241)					$	(651)
Pre-tax components of cumulative amounts recognized in Accumulated other comprehensive loss:
Prior service (costs)/credits						$	(6)					$	(4)					$	(35)					$	(31)					$	581					$	688
Information related to the funded status of pension plans with an ABO in excess of plan assets(d):
Fair value of plan assets						$	120					$	16,094					$	1,304					$	6,674
ABO						1,371						18,306						3,344						8,961
Information related to the funded status of pension plans with a PBO in excess of plan assets(d):
Fair value of plan assets						$	120					$	16,094					$	1,381					$	6,735
PBO						1,371						18,306						3,789						9,447

(a)For the U.S. pension plans, the benefit obligation is both the PBO and ABO as these plans are frozen and future benefit accruals no longer increase with future compensation increases. For the international pension plans, the benefit obligation is the PBO. The ABO for our international pension plans was $11.2 billion in 2021 and $11.5 billion in 2020. For the postretirement plans, the benefit obligation is the ABO.

(b)Primarily includes actuarial gains resulting from increases in discount rates in 2021, offset by increases in inflation assumptions in 2021 for the international plans, and actuarial losses resulting from decreases in discount rates in 2020.

(c)For more information, see Note 2B.

(d)Our main U.S. qualified plan and many of our international plans were overfunded as of December 31, 2021.

Pfizer Inc.			2021 Form 10-K			86

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

D. Plan Assets

The following provides the components of plan assets, including those reported as part of discontinued operations for 2020:
												As of December 31, 2021																														As of December 31, 2020
																		Fair Value																														Fair Value
(MILLIONS EXCEPT TARGET ALLOCATION PERCENTAGE)						Target Allocation Percentage						Total						Level 1						Level 2						Level 3						Assets Measured at NAV(a)						Total						Level 1						Level 2						Level 3						Assets Measured at NAV(a)
U.S. pension plans
Cash and cash equivalents						0-10%						$	1,326					$	78					$	1,248					$	—					$	—					$	781					$	70					$	711					$	—					$	—
Equity securities:						20-40%
Global equity securities												2,273						2,233						38						2						—						3,241						3,213						27						1						—
Equity commingled funds												1,352						—						1,152						—						200						1,325						—						1,110						—						215
Fixed income securities:						45-75%
Corporate debt securities												5,566						18						5,548						—						—						6,499						23						6,476						—						—
Government and agency obligations(b)												2,533						—						2,533						—						—						1,555						—						1,555						—						—
Fixed income commingled funds												38						—						38						—						—						23						—						23						—						—
Other investments:						5-20%
Partnership investments(c)												2,079						3						—						—						2,076						1,431						—						—						—						1,431
Insurance contracts												158						—						158						—						—						190						—						190						—						—
Other commingled funds(d)												1,019						—						10						—						1,009						1,049						—						11						—						1,038
Total						100		%				$	16,346					$	2,332					$	10,726					$	2					$	3,286					$	16,094					$	3,306					$	10,103					$	1					$	2,684
International pension plans
Cash and cash equivalents						0-10%						$	541					$	191					$	346					$	—					$	3					$	407					$	61					$	346					$	—					$	—
Equity securities:						10-20%
Equity commingled funds												1,453						—						1,386						—						67						2,051						—						1,681						—						370
Fixed income securities:						45-70%
Corporate debt securities												1,187						—						1,187						—						—						925						—						925						—						—
Government and agency obligations(b)												2,415						—						2,415						—						—						1,334						—						1,334						—						—
Fixed income commingled funds												2,266						—						1,138						—						1,128						2,484						—						1,217						—						1,267
Other investments:						15-35%
Partnership investments(c)												107						—						2						—						106						69						—						3						—						66
Insurance contracts												1,329						—						56						1,273						—						1,027						—						57						969						1
Other(d)												1,431						—						141						404						886						1,514						—						117						393						1,003
Total						100		%				$	10,729					$	191					$	6,672					$	1,677					$	2,189					$	9,811					$	61					$	5,681					$	1,362					$	2,707
U.S. postretirement plans(e)
Cash and cash equivalents						0-5%						$	85					$	3					$	82					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Insurance contracts						95-100%						669						—						669						—						—						588						—						588						—						—
Total						100		%				$	753					$	3					$	750					$	—					$	—					$	588					$	—					$	588					$	—					$	—

(a)Certain investments that are measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets.

(b)Government and agency obligations are inclusive of repurchase agreements.

(c)Mainly includes investments in private equity, private debt, public equity limited partnerships, and, to a lesser extent, real estate and venture capital.

(d)Mostly includes investments in hedge funds and real estate.

(e)Reflects postretirement plan assets, which support a portion of our U.S. retiree medical plans.

The following provides an analysis of the changes in our more significant investments valued using significant unobservable inputs, including those reported as part of discontinued operations for 2020:
												International Pension Plans
																														Year Ended December 31,
(MILLIONS)																														2021						2020
Fair value, beginning																														$	1,362					$	1,342
Actual return on plan assets:
Assets held, ending																														23						22
Purchases, sales, and settlements, net																														52						(47)
Transfer into/(out of) Level 3																														265						(13)
Exchange rate changes																														(24)						58
Fair value, ending																														$	1,677					$	1,362

Pfizer Inc.			2021 Form 10-K			87

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

The following methods and assumptions were used to estimate the fair value of our pension and postretirement plans’ assets:

• Cash and cash equivalents: Level 1 investments may include cash, cash equivalents and foreign currency valued using exchange rates. Level 2 investments may include short-term investment funds which are commingled funds priced at a stable NAV by the administrator of the funds.

• Equity securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 1 and Level 2 investments may include commingled funds that have a readily determinable fair value based on quoted prices on an exchange or a published NAV derived from the quoted prices in active markets of the underlying securities. Level 3 investments may include individual securities that are unlisted, delisted, suspended, or illiquid and are typically valued using their last available price.

• Fixed income securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include commingled funds that have a readily determinable fair value based on observable prices of the underlying securities. Level 2 investments may include corporate bonds, government and government agency obligations and other fixed income securities valued using bid evaluation pricing models or quoted prices of securities with similar characteristics. Level 3 investments may include securities that are valued using alternative pricing sources, such as investment managers or brokers, which use proprietary pricing models that incorporate unobservable inputs.

• Other investments: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include Insurance contracts which invest in interest bearing cash, U.S. government securities and corporate debt instruments. Level 3 investments may include securities or insurance contracts that are valued using alternative pricing sources, such as investment managers or brokers, which use proprietary pricing models that incorporate unobservable inputs.

Equity securities, Fixed income securities and Other investments may each be combined into commingled funds. Most commingled funds are valued to reflect the interest in the fund based on the reported year-end NAV. Partnership and Other investments are valued based on year-end reported NAV (or its equivalent), with adjustments as appropriate for lagged reporting of up to three months.

Certain investments are authorized to include derivatives, such as equity or bond futures, swaps, options and currency futures or forwards for managing risks and exposures.

Global plan assets are managed with the objective of generating returns that will enable the plans to meet their future obligations, while seeking to manage net periodic benefit costs and cash contributions over the long-term. We utilize long-term asset allocation ranges in the management of our plans’ invested assets. Our long-term return expectations are developed based on a diversified, global investment strategy that takes into account historical experience, as well as the impact of portfolio diversification, active portfolio management, and our view of current and future economic and financial market conditions. As market conditions and other factors change, we may adjust our targets accordingly and our asset allocations may vary from the target allocations.

E. Cash Flows

It is our practice to fund amounts for our qualified pension plans that are at least sufficient to meet the minimum requirements set forth in applicable employee benefit laws and local tax laws.

The following provides the expected future cash flow information related to our benefit plans:
						Pension Plans												Postretirement Plans
(MILLIONS)						U.S.						International
Expected employer contributions:
2022						$	138					$	177					$	74
Expected benefit payments:
2022						$	1,296					$	384					$	78
2023						1,155						372						73
2024						1,140						383						69
2025						1,089						392						66
2026						1,058						397						68
2027–2031						4,908						2,124						359

The above table reflects the total U.S. and international plan benefits projected to be paid from the plans or from our general assets under the current actuarial assumptions used for the calculation of the benefit obligation.

F. Defined Contribution Plans

We have defined contribution plans in the U.S. and other countries. For the majority of the U.S. defined contribution plans, employees may contribute a portion of their salaries and bonuses to the plans, and we match, in cash, a portion of the employee contributions. We also offer a Retirement Savings Contribution (RSC) which is an annual non-contributory employer contribution in the U.S. and Puerto Rico. We recorded charges related to the employer contributions to global defined contribution plans of $732 million in 2021, $685 million in 2020 and $659 million in 2019.

Pfizer Inc.			2021 Form 10-K			88

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Note 12. Equity

A. Common Stock Purchases

We purchase our common stock through privately negotiated transactions or in the open market as circumstances and prices warrant. Purchased shares under each of the share-purchase plans, which are authorized by our BOD, are available for general corporate purposes. In December 2017, the BOD authorized a $10 billion share repurchase program, which was exhausted in the first quarter of 2019. In December 2018, the BOD authorized another $10 billion share repurchase program to be utilized over time and share repurchases commenced thereunder in the first quarter of 2019.

In February 2019, we entered into an ASR with Goldman Sachs & Co. LLC to repurchase $6.8 billion of our common stock pursuant to our previously announced share repurchase authorization. We paid $6.8 billion and received an initial delivery of 130 million shares of common stock, which represented approximately 80% of the notional amount of the ASR. In August 2019, the ASR with Goldman Sachs & Co. LLC was completed resulting in Goldman Sachs & Co. LLC owing us an additional 33.5 million shares of our common stock. The average price paid for all of the shares delivered under the ASR was $41.42 per share. The common stock received is included in Treasury stock.

The following provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced share purchase plans, including our ASR:
						Year Ended December 31,
(SHARES IN MILLIONS, DOLLARS IN BILLIONS)						2021						2020						2019(a)
Shares of common stock purchased						—						—						213
Cost of purchase						$	—					$	—					$	8.9

(a)Represents shares purchased pursuant to the ASR with Goldman Sachs & Co. LLC entered into in February 2019, as well as open market share repurchases of $2.1 billion.

Our remaining share-purchase authorization was approximately $5.3 billion at December 31, 2021.

B. Preferred Stock and Employee Stock Ownership Plans

Prior to May 4, 2020, we had outstanding Series A convertible perpetual preferred stock (the Series A Preferred Stock) that was held by an ESOP trust (the Trust). All outstanding shares of Series A Preferred Stock were converted, at the direction of the independent fiduciary under the Trust and in accordance with the certificate of designations for the Series A Preferred Stock, into shares of our common stock on May 4, 2020. The Trust received an aggregate of 1,070,369 shares of our common stock upon conversion, with zero shares of Series A Preferred Stock remaining outstanding as a result of the conversion. In December 2020, we filed a certificate of elimination and a restated certificate of incorporation with the Delaware Secretary of State, which eliminated the Series A Preferred Stock.

Since May 4, 2020, we have one ESOP that holds common stock of the Company (Common ESOP). As of December 31, 2021, all shares of common stock held by the Common ESOP have been allocated to the Pfizer U.S. defined contribution plan participants. The compensation cost related to the Common ESOP was $19 million in 2021, $19 million in 2020 and $20 million in 2019.

Note 13. Share-Based Payments

Our compensation programs can include share-based payment awards with value that is determined by reference to the fair value of our shares and that provide for the grant of shares or options to acquire shares or similar arrangements. Our share-based awards are designed based on competitive survey data or industry peer groups used for compensation purposes, and are allocated between different long-term incentive awards, generally in the form of Total Shareholder Return Units (TSRUs), Restricted Stock Units (RSUs), Portfolio Performance Shares (PPSs), Performance Share Awards (PSAs), Breakthrough Performance Awards (BPAs) and Stock Options, as determined by the Compensation Committee.

The 2019 Stock Plan (2019 Plan) replaced and superseded the 2014 Plan. It provides for 400 million shares, in addition to shares remaining under the 2014 Plan, to be authorized for grants. The 2019 Plan provides that the number of stock options, TSRUs, RSUs, or performance-based awards that may be granted to any one individual during any 36-month period is limited to 20 million shares, and that RSUs count as three shares, PPSs, PSAs and BPAs count as three shares times the maximum potential payout, while TSRUs and stock options count as one share, toward the maximum shares available under the 2019 Plan. As of December 31, 2021, 315 million shares were available for award. Although not required to do so, we have used authorized and unissued shares and, to a lesser extent, treasury stock to satisfy our obligations under these programs.

Pfizer Inc.			2021 Form 10-K			89

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

A summary of the awards and valuation details:

Awarded to			Terms			Valuation			Recognition and Presentation
Total Shareholder Return Units (TSRUs)(a), (b)
Senior and other key management and select employees			•Entitle the holder to receive shares of our common stock with a value equal to the difference between the defined settlement price and the grant price, plus the dividend equivalents accumulated during the five or seven-year term, if and to the extent the total value is positive. •Settlement price is the average closing price of our common stock during the 20 trading days ending on the fifth or seventh anniversary of the grant, as applicable; the grant price is the closing price of our common stock on the date of the grant. •Automatically settle on the fifth or seventh anniversary of the grant but vest on the third anniversary of the grant.			As of the grant date using a Monte Carlo simulation model			Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate.
Restricted Stock Units (RSUs)
Select employees			•Entitle the holder to receive a specified number of shares of our common stock, including dividend equivalents that are reinvested into additional RSUs. •For RSUs granted, in virtually all instances, the units vest on the third anniversary of the grant date assuming continuous service from the grant date.			As of the grant date using the closing price of our common stock			Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate.
Portfolio Performance Shares (PPSs)
Select employees			•Entitle the holder to receive, at the end of the performance period, shares of our common stock, if any, including shares resulting from dividend equivalents earned on such shares. •For PPSs granted, the awards vest on the third anniversary of the grant assuming continuous service from the grant date and the number of shares paid, if any, depends on the achievement of predetermined goals related to Pfizer’s long-term product portfolio during a three or five-year performance period from the year of the grant date, as applicable. •The number of shares that may be earned ranges from 0% to 200% of the initial award depending on goal achievement over the performance period.			As of the grant date using the intrinsic value method using the closing price of our common stock			Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate, and adjusted each reporting period, as necessary, to reflect changes in the price of our common stock, the number of shares that are probable of being earned, and management’s assessment of the probability that the specified performance criteria will be achieved.
Performance Share Awards (PSAs)
Senior and other key management			•Entitle the holder to receive, at the end of the performance period, shares of our common stock (retirees) earned, if any, or an equal value in cash (active colleagues), including dividend equivalents on shares earned, dependent upon the achievement of predetermined goals related to two measures: a.Adjusted net income over three one-year periods; and b.TSR as compared to the NYSE ARCA Pharmaceutical Index (DRG Index) over the three-year performance period. •PSAs vest on the third anniversary of the grant assuming continuous service from the grant date. •The award that may be earned ranges from 0% to 200% of the target award depending on goal achievement over the performance period.			As of the grant date using the intrinsic value method using the closing price of our common stock			Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, and adjusted each reporting period, as necessary, to reflect changes in the price of our common stock, the number of shares that are probable of being earned and management’s assessment of the probability that the specified performance criteria will be achieved.
Breakthrough Performance Awards (BPAs)
Select employees identified as instrumental in delivering medicines to patients (excluding executive officers)			•Entitle the holder to receive, at the end of the performance period, shares of our common stock, if any, including shares resulting from dividend equivalents earned on such shares. •For BPAs granted, the awards, if earned/vested, are settled at the end of the performance period, but no earlier than the one-year anniversary of the date of grant and dependent upon the achievement of the respective predetermined performance goals related to advancing Pfizer’s product pipeline during the performance period. •The number of shares that may be earned ranges from 0% to 600% of the target award depending on the level and timing of goal achievement over the performance period.			As of the grant date using the intrinsic value method using the closing price of our common stock			Amortized on a straight-line basis over the probable vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, and adjusted each reporting period, as necessary, to reflect changes in the price of our common stock, the number of shares that are probable of being earned and management’s assessment of the probability that the specified performance criteria will be achieved and/or management’s assessment of the probable vesting term.

Pfizer Inc.			2021 Form 10-K			90

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Awarded to			Terms			Valuation			Recognition and Presentation
Stock Options
Select employees			•Entitle the holder to purchase a specified number of shares of our common stock at a price per share equal to the closing market price of our common stock on the date of grant, for a period of time when vested. •Since 2016, only a limited set of non-U.S. employees received stock option grants. No stock options were awarded to senior and other key management in any period presented. •Stock options vest on the third anniversary of the grant assuming continuous service from the grant date and have a contractual term of 10 years.			As of the grant date using the Black-Scholes-Merton option-pricing model			Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate.

(a)Retirement-eligible holders, as defined in the grant terms, can convert their TSRUs, when vested, into Profit Units (PTUs) with a conversion ratio based on a calculation used to determine the shares at TSRU settlement. The PTUs are entitled to earn Dividend Equivalent Units (DEUs), and the PTUs and DEUs will be settled in our common stock on the TSRUs’ original settlement date and will be subject to the terms and conditions of the original grant including forfeiture provisions.

(b)In 2017, Performance Total Shareholder Return Units (PTSRUs) were awarded to the Former Chairman and Chief Executive Officer (1,444,395 PTSRUs) and 361,099 PTSRUs were awarded to the Group President, Chief Business Officer (former role Group President Pfizer Innovative Health) at a grant price of $30.31 and at a GDFV of $5.54 per PTSRU. In addition to having the same characteristics and valuation methodology of TSRUs, PTSRU grants require special service and performance conditions.

The following provides data related to all TSRU, RSU, PPS, PSA and stock option activity:
(MILLIONS, EXCEPT FAIR VALUE OF SHARES VESTED PER TSRU AND STOCK OPTION)						TSRUs																		RSUs																		PPSs																		PSAs																		Stock Options
Year Ended December 31,						2021						2020						2019						2021						2020						2019						2021						2020						2019						2021						2020						2019						2021						2020						2019
Total fair value of shares vested(a)						$7.26						$6.22						$8.52						$304						$334						$454						$181						$119						$136						$33						$25						$64						$4.86						$3.56						$5.98
Total intrinsic value of options exercised or share units converted						$594						$84						$175																								$228						$224						$245																								$584						$293						$261
Cash received upon exercise																																																																														$795						$425						$394
Tax benefits realized from exercise																																																																														$106						$55						$47
Compensation cost recognized, pre-tax(b)						$259						$287						$294						$281						$272						$275						$535						$180						$114						$76						$31						$28						$5						$6						$7
Total compensation cost related to nonvested awards not yet recognized, pre-tax						$187						$224						$229						$271						$228						$241						$175						$104						$87						$54						$32						$34						$3						$4						$5
Weighted-average period over which cost is expected to be recognized (years)						1.6						1.6						1.6						1.8						1.7						1.7						1.8						1.8						1.8						1.8						1.9						1.8						1.6						1.7						1.6

(a)Weighted-average GDFV per TSRUs and stock options.

(b)TSRU includes expense for PTSRUs, which is not significant for all years presented.

Total share-based payment expense was $1.2 billion, $780 million and $718 million in 2021, 2020 and 2019, respectively, which includes pre-tax share-based payment expense included in Discontinued operations*––*net of tax of $2 million, $25 million and $32 million in 2021, 2020 and 2019, respectively. Tax benefit for share-based compensation expense was $227 million, $141 million and $137 million in 2021, 2020 and 2019, respectively.

The table above excludes total expense due to the modification for share-based awards in connection with our cost reduction/productivity initiatives, which was not significant for all years presented and is recorded in Restructuring charges and certain acquisition-related costs (see Note 3). Amounts capitalized as part of inventory cost were not significant for any period presented.

Summary of the weighted-average assumptions used in the valuation of TSRUs and stock options:
						TSRUs																		Stock Options
Year Ended December 31,						2021						2020						2019						2021						2020						2019
Expected dividend yield (based on a constant dividend yield during the expected term)						4.51		%				4.36		%				3.27		%				4.51		%				4.36		%				3.27		%
Risk-free interest rate (based on interpolated yield on U.S. Treasury zero-coupon issues)						0.93		%				1.15		%				2.55		%				1.27		%				1.25		%				2.66		%
Expected stock price volatility (based on implied volatility, after consideration of historical volatility)						26.53		%				20.99		%				18.34		%				26.54		%				20.97		%				18.34		%
TSRUs contractual/stock options expected term, years (based on historical exercise and post-vesting termination patterns for stock options)						5.15						5.12						5.13						6.75						6.75						6.75

Pfizer Inc.			2021 Form 10-K			91

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Summary of all TSRU, RSU, PPS, PSA and BPA activity during 2021 (with the shares granted representing the maximum award that could be achieved for PPSs, PSAs and BPAs):
						TSRUs																		RSUs												PPSs(a)												PSAs												BPAs
TSRUs						Per TSRU, Weighted Average												Shares						Weighted Avg. GDFV per share						Shares						Weighted Avg. Intrinsic Value per share						Shares						Weighted Avg. Intrinsic Value per share						Shares						Weighted Avg. Intrinsic Value per share
(Thousands)						GDFV						Grant Price						(Thousands)									(Thousands)						(Thousands)									(Thousands)
Nonvested, December 31, 2020			129,844						$	6.90					$	32.94					23,692						$	35.50					20,077						$	36.81					5,264						$	36.81					—						$	—
Granted			34,522						7.26						33.83						10,893						34.31						8,632						33.82						1,798						33.82						1,165						38.73
Vested			(44,888)						7.21						30.54						(8,747)						34.66						(6,095)						33.88						(984)						33.85						—						—
Reinvested dividend equivalents																					956						41.33
Forfeited			(4,879)						6.77						33.78						(1,255)						35.17						(1,133)						41.45						(924)						34.43						(306)						47.47
Nonvested, December 31, 2021			114,599						$	6.90					$	34.12					25,540						$	35.52					21,480						$	59.05					5,154						$	59.05					859						$	59.05

(a)Vested and non-vested shares outstanding, but not paid as of December 31, 2021 were 34.1 million.

Summary of TSRU and PTU information as of December 31, 2021(a), (b):
						TSRUs (Thousands)						PTUs (Thousands)						Weighted-Average Grant Price Per TSRU						Weighted-Average Remaining Contractual Term (Years)						Aggregate Intrinsic Value (Millions)
TSRUs Outstanding						206,996						—						$	31.71					2.2						$	5,969
TSRUs Vested						92,398						—						28.72						0.8						2,946
TSRUs Expected to vest(c)						110,476						—						34.16						3.3						2,910
TSRUs exercised and converted to PTUs						—						3,074						$	—					0.8						$	182

(a)In 2021, we settled 46,060,346 TSRUs with a weighted-average grant price of $23.04 per unit.

(b)In 2021, 7,093,787 TSRUs with a weighted-average grant price of $27.41 per unit were converted into 2,943,737 PTUs.

(c)The number of TSRUs expected to vest takes into account an estimate of expected forfeitures.

Summary of all stock option activity during 2021:
						Shares (Thousands)						Weighted-Average Exercise Price Per Share						Weighted-Average Remaining Contractual Term (Years)						Aggregate Intrinsic Value(a) (Millions)
Outstanding, December 31, 2020						75,402						$	28.31
Granted						779						33.82
Exercised						(31,036)						25.75
Forfeited						(89)						34.39
Expired						(181)						20.27
Outstanding, December 31, 2021						44,874						30.20						2.7						$	1,295
Vested and expected to vest, December 31, 2021(b)						44,747						30.19						2.7						1,291
Exercisable, December 31, 2021						41,583						$	29.81					2.3						$	1,216

(a)Market price of our underlying common stock less exercise price.

(b)The number of options expected to vest takes into account an estimate of expected forfeitures.

Pfizer Inc.			2021 Form 10-K			92

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Note 14. Earnings Per Common Share Attributable to Pfizer Inc. Common Shareholders

The following presents the detailed calculation of EPS:
						Year Ended December 31,
(IN MILLIONS)						2021						2020						2019
EPS Numerator––Basic
Income from continuing operations attributable to Pfizer Inc.						$	22,414					$	6,630					$	10,708
Less: Preferred stock dividends––net of tax						—						—						1
Income from continuing operations attributable to Pfizer Inc. common shareholders						22,414						6,630						10,708
Discontinued operations––net of tax						(434)						2,529						5,318
Net income attributable to Pfizer Inc. common shareholders						$	21,979					$	9,159					$	16,025
EPS Numerator––Diluted
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions						$	22,414					$	6,630					$	10,708
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions						(434)						2,529						5,318
Net income attributable to Pfizer Inc. common shareholders and assumed conversions						$	21,979					$	9,159					$	16,026
EPS Denominator
Weighted-average number of common shares outstanding––Basic						5,601						5,555						5,569
Common-share equivalents: stock options, stock issuable under employee compensation plans convertible preferred stock and accelerated share repurchase agreements						107						77						106
Weighted-average number of common shares outstanding––Diluted						5,708						5,632						5,675
Anti-dilutive common stock equivalents(a)						2						4						2

(a)These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.

Allocated shares held by the Common ESOP, including reinvested dividends, are considered outstanding for EPS calculations and the eventual conversion of allocated preferred shares held by the Preferred ESOP was assumed in the diluted EPS calculation until the conversion date, which occurred in May 2020. See Note 12.

Note 15. Leases

We lease real estate, fleet, and equipment for use in our operations. Our leases generally have lease terms of 1 to 30 years, some of which include options to terminate or extend leases for up to 5 to 10 years or on a month-to-month basis. We include options that are reasonably certain to be exercised as part of the determination of lease terms. We may negotiate termination clauses in anticipation of any changes in market conditions, but generally these termination options have not been exercised. Residual value guarantees are generally not included within our operating leases with the exception of some fleet leases. In addition to base rent payments, the leases may require us to pay directly for taxes and other non-lease components, such as insurance, maintenance and other operating expenses, which may be dependent on usage or vary month-to-month. Variable lease payments amounted to $381 million in 2021, $380 million in 2020 and $326 million in 2019. We elected the practical expedient to not separate non-lease components from lease components in calculating the amounts of ROU assets and lease liabilities for all underlying asset classes.

We determine if an arrangement is a lease at inception of the contract and we perform the lease classification test as of the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

For operating leases, the ROU assets and liabilities in our consolidated balance sheets follows:
												As of December 31,
(MILLIONS)						Balance Sheet Classification						2021						2020
ROU assets						Other noncurrent assets						$	2,839					$	1,386
Lease liabilities (short-term)						Other current liabilities						449						320
Lease liabilities (long-term)						Other noncurrent liabilities						2,510						1,108

Components of total lease cost includes:
						Year Ended December 31,
(MILLIONS)						2021						2020						2019
Operating lease cost						$	548					$	432					$	421
Variable lease cost						381						380						326
Sublease income						(41)						(40)						(45)
Total lease cost						$	888					$	772					$	702

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Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Other supplemental information follows:
						As of December 31,
(MILLIONS)						2021						2020
Operating leases
Weighted-Average Remaining Contractual Lease Term (Years)						12						6.9
Weighted-Average Discount Rate						2.8		%				2.9		%

						Year Ended December 31,
(MILLIONS)						2021						2020						2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	387					$	333					$	338
(Gains)/losses on sale and leaseback transactions, net						1						(3)						(29)

The following reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the consolidated balance sheet as of December 31, 2021:
(MILLIONS)
Period						Operating Lease Liabilities
Next one year(a)						$	520
1-2 years						417
2-3 years						322
3-4 years						279
4-5 years						217
Thereafter						1,865
Total undiscounted lease payments						3,621
Less: Imputed interest						661
Present value of minimum lease payments						2,960
Less: Current portion						449
Noncurrent portion						$	2,510

(a)Reflects lease payments due within 12 months subsequent to the balance sheet date.

Note 16. Contingencies and Certain Commitments

We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business, including tax and legal contingencies. The following outlines our legal contingencies. For a discussion of our tax contingencies, see Note 5B.

A. Legal Proceedings

Our legal contingencies include, but are not limited to, the following:

• Patent litigation, which typically involves challenges to the coverage and/or validity of patents on various products, processes or dosage forms. An adverse outcome could result in loss of patent protection for a product, a significant loss of revenues from that product or impairment of the value of associated assets. We are the plaintiff in the majority of these actions.

• Product liability and other product-related litigation related to current or former products, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, and often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.

• Commercial and other asserted or unasserted matters, which can include acquisition-, licensing-, intellectual property-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter.

• Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other jurisdictions.

Certain of these contingencies could result in increased expenses and/or losses, including damages, royalty payments, fines and/or civil penalties, which could be substantial, and/or criminal charges.

We believe that our claims and defenses in matters in which we are a defendant are substantial, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of matters, which could have a material adverse effect on our results of operations and/or our cash flows in the period in which the amounts are accrued or paid.

We have accrued for losses that are both probable and reasonably estimable. Substantially all of our contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.

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Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. For proceedings under environmental laws to which a governmental authority is a party, we have adopted a disclosure threshold of $1 million in potential or actual governmental monetary sanctions.

The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors to assess materiality, such as, among others, the amount of damages and the nature of other relief sought, if specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be, or is, a class action and, if not certified, our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; whether related actions have been transferred to multidistrict litigation; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters in which we are the plaintiff, we consider, among other things, the financial significance of the product protected by the patent(s) at issue. Some of the matters discussed below include those which management believes that the likelihood of possible loss in excess of amounts accrued is remote.

A1. Legal Proceedings––Patent Litigation

We are involved in suits relating to our patents, including but not limited to, those discussed below. Most involve claims by generic drug manufacturers that patents covering our products (or those of our collaboration/licensing partners to which we have licenses or co-promotion rights and to which we may or may not be a party), processes or dosage forms are invalid and/or do not cover the product of the generic drug manufacturer. Also, counterclaims, as well as various independent actions, have been filed alleging that our assertions of, or attempts to enforce, patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents that are discussed below, patent rights to certain of our products or those of our collaboration/licensing partners are being challenged in various other jurisdictions. For example, some of our collaboration or licensing partners face challenges to the validity of their patent rights in non-U.S. jurisdictions. We are also party to patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for allegedly causing delay of generic entry.

We also are often involved in other proceedings, such as inter partes review, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts relating to our intellectual property or the intellectual property rights of others. Also, if one of our patents is found to be invalid by such proceedings, generic or competitive products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio were challenged in inter partes review and post-grant review proceedings in the U.S. In 2017, the Patent Trial and Appeal Board (PTAB) initiated proceedings with respect to two of our pneumococcal vaccine patents. However, the PTAB declined to initiate proceedings as to two other pneumococcal vaccine patents; those two patents, and one other patent, were challenged in federal court in Delaware. In September 2021, Pfizer and a challenger entered into a settlement and license agreement, resolving all worldwide legal proceedings involving that challenger, related to our pneumococcal vaccine patents. Other challenges to pneumococcal vaccine patents remain pending at the PTAB and outside the U.S. The invalidation of any of the patents in our pneumococcal portfolio could potentially allow additional competitor vaccines into the marketplace. In the event that any of the patents are found valid and infringed, a competitor’s vaccine might be prohibited from entering the market or a competitor might be required to pay us a royalty.

We are also subject to patent litigation pursuant to which one or more third parties seek damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our Hospira subsidiaries are involved in patent and patent-related disputes over their attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded significant damages or royalty payments, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold if we or one of our subsidiaries is found to have willfully infringed valid patent rights of a third party.

Actions In Which We Are The Plaintiff

EpiPen

In 2010, King, which we acquired in 2011 and is a wholly-owned subsidiary, brought a patent-infringement action against Sandoz in the U.S. District Court for the District of New Jersey in connection with Sandoz’s abbreviated new drug application (ANDA) filed with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name.

Xeljanz (tofacitinib)

Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate ANDAs with the FDA seeking approval to market their generic versions of tofacitinib tablets in one or both of 5 mg and 10 mg dosage strengths, and in both immediate and extended release forms. To date, we have settled actions with several manufacturers on terms not material to us. The remaining actions continue in the U.S. District Court for the District of Delaware as described below.

In January 2021, we brought a separate patent-infringement action against Aurobindo Pharma Limited (Aurobindo) asserting the infringement and validity of the patent covering the active ingredient expiring in December 2025 and the patent covering a polymorphic form of tofacitinib expiring in 2023, which Aurobindo challenged in its ANDA seeking approval to market a generic version of tofacitinib 5 mg and 10 mg tablets.

In October 2021, we brought a separate patent-infringement action against Sinotherapeutics Inc. (Sinotherapeutics) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Sinotherapeutics in its ANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets.

In February 2022, we brought a separate patent-infringement action against Teva Pharmaceuticals USA, Inc. (Teva) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Teva in its ANDA seeking approval to market a generic version of tofacitinib 22 mg extended release tablets.

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Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

In February 2022, we brought a separate patent-infringement action against Slayback Pharma LLC (Slayback) asserting the infringement and validity of our compound patent covering the active ingredient that was challenged by Slayback in its ANDA seeking approval to market a generic version of tofacitinib oral solution 1 mg/mL.

Inlyta (axitinib)

In 2019, Glenmark Pharmaceuticals Ltd. (Glenmark) notified us that it had filed an ANDA with the FDA seeking approval to market a generic version of Inlyta. Glenmark asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In 2019, we filed suit against Glenmark in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.

Ibrance (palbociclib)

Beginning in September 2020, we received correspondence from several generic companies notifying us that they would seek approval to market generic versions of Ibrance capsules. The generic companies assert the invalidity and non-infringement of our crystalline form patent which expires in 2034. Beginning in October 2020, we brought patent infringement actions against each of these generic companies in various federal courts, asserting the validity and infringement of the crystalline form patent. We have settled with one of these generic companies on terms not material to the company.

Beginning in January 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance tablets. The generic companies are challenging some or all of the following patents: (i) the composition of matter patent expiring in 2027; (ii) the composition of matter patent expiring in 2023; (iii) the method of use patent expiring in 2023; (iv) the crystalline form patent expiring in 2034; and (v) a tablet formulation patent expiring in 2036. We brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies.

Eucrisa

Beginning in September 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Eucrisa. The companies assert the invalidity and non-infringement of a composition of matter patent expiring in 2026, two method of use patents expiring in 2027, and one other method of use patent expiring in 2030. In September 2021, we brought patent infringement actions against the generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the patents challenged by the generic companies.

Matter Involving Our Collaboration/Licensing Partners

Eliquis

In 2017, twenty-five generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed ANDAs seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the three patents listed in the Orange Book for Eliquis. One of the patents expired in December 2019 and the remaining patents currently are set to expire in 2026 and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. BMS and Pfizer filed patent-infringement actions against all generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031 patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all three patents. In August 2020, the U.S. District Court for the District of Delaware ruled that both the 2026 patent and the 2031 patent are valid and infringed by the proposed generic products. In August and September 2020, the generic filers appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit. Prior to the August 2020 ruling, we and BMS settled with certain of the companies on terms not material to us, and we and BMS may settle with other generic companies in the future. In September 2021, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court’s decision.

A2. Legal Proceedings––Product Litigation

We are defendants in numerous cases, including but not limited to those discussed below, related to our pharmaceutical and other products. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.

Asbestos

Between 1967 and 1982, Warner-Lambert owned American Optical Corporation (American Optical), which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. Warner-Lambert was acquired by Pfizer in 2000 and is a wholly owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.

Numerous lawsuits against American Optical, Pfizer and certain of its previously owned subsidiaries are pending in various federal and state courts seeking damages for alleged personal injury from exposure to products allegedly containing asbestos and other allegedly hazardous materials sold by Pfizer and certain of its previously owned subsidiaries.

There also are a small number of lawsuits pending in various federal and state courts seeking damages for alleged exposure to asbestos in facilities owned or formerly owned by Pfizer or its subsidiaries.

Effexor

Beginning in 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR in the Orange Book, enforcing certain patents for Effexor XR and entering into a litigation settlement agreement with a generic drug manufacturer with respect to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class in the

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Notes to Consolidated Financial Statements

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purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.

In 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement, but declined to dismiss the other direct purchaser plaintiff claims. In 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. In 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded the claims to the District Court.

Lipitor

Beginning in 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain Pfizer affiliates, and, in most of the actions, Ranbaxy Laboratories Ltd. (Ranbaxy) and certain Ranbaxy affiliates. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation in the U.S. District Court for the District of New Jersey.

In September 2013 and 2014, the District Court dismissed with prejudice the claims of the direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the Court of Appeals. In 2017, the Court of Appeals reversed the District Court’s decisions and remanded the claims to the District Court.

Also, in 2013, the State of West Virginia filed an action in West Virginia state court against Pfizer and Ranbaxy, among others, that asserts claims and seeks relief on behalf of the State of West Virginia and residents of that state that are substantially similar to the claims asserted and the relief sought in the purported class actions described above.

EpiPen (Direct Purchaser)

In February 2020, a lawsuit was filed in the U.S. District Court for the District of Kansas against Pfizer, its affiliates King and Meridian, and various Mylan entities, on behalf of a purported U.S. nationwide class of direct purchaser plaintiffs who purchased EpiPen devices directly from the defendants. Plaintiffs in this action generally allege that Pfizer and Mylan conspired to delay market entry of generic EpiPen through the settlement of patent litigation regarding EpiPen, and thereby delayed market entry of generic EpiPen in violation of federal antitrust law. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2011. In July 2021, the District Court granted defendants’ motion to dismiss the direct purchaser complaint, without prejudice. In September 2021, plaintiffs filed an amended complaint.

Nexium 24HR and Protonix

A number of individual and multi-plaintiff lawsuits have been filed against Pfizer, certain of its subsidiaries and/or other pharmaceutical manufacturers in various federal and state courts alleging that the plaintiffs developed kidney-related injuries purportedly as a result of the ingestion of certain proton pump inhibitors. The cases against Pfizer involve Protonix and/or Nexium 24HR and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the District of New Jersey. As part of our Consumer Healthcare JV transaction with GSK, the JV has agreed to assume, and to indemnify Pfizer for, liabilities arising out of such litigation to the extent related to Nexium 24HR.

Docetaxel

*•*Personal Injury Actions

A number of lawsuits have been filed against Hospira and Pfizer in various federal and state courts alleging that plaintiffs who were treated with Docetaxel developed permanent hair loss. The significant majority of the cases also name other defendants, including the manufacturer of the branded product, Taxotere. Plaintiffs seek compensatory and punitive damages.

In 2016, the federal cases were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Eastern District of Louisiana.

• Mississippi Attorney General Government Action

In 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and eight other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.

Zantac

A number of lawsuits have been filed against Pfizer in various federal and state courts alleging that plaintiffs developed various types of cancer, or face an increased risk of developing cancer, purportedly as a result of the ingestion of Zantac. The significant majority of these cases also name other defendants that have historically manufactured and/or sold Zantac. Pfizer has not sold Zantac since 2006, and only sold an OTC version of the product. Plaintiffs seek compensatory and punitive damages.

In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Southern District of Florida. Plaintiffs in the Multi-District Litigation have filed against Pfizer and many other defendants a master personal injury complaint, a consolidated consumer class action complaint alleging, among other things, claims under consumer protection

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Notes to Consolidated Financial Statements

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statutes of all 50 states, and a medical monitoring complaint seeking to certify medical monitoring classes under the laws of 13 states. Plaintiffs previously had filed a consolidated third-party payor class action complaint alleging violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) statute and seeking reimbursement for payments made for the prescription version of Zantac, but the Multi-District Litigation court dismissed that complaint; Plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit. In addition, (i) Pfizer has received service of Canadian class action complaints naming Pfizer and other defendants, and seeking compensatory and punitive damages for personal injury and economic loss, allegedly arising from the defendants’ sale of Zantac in Canada; and (ii) the State of New Mexico and the Mayor and City Council of Baltimore separately filed civil actions against Pfizer and many other defendants in state court, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions. In April 2021, a Judicial Council Coordinated Proceeding was created in the Superior Court of California in Alameda County to coordinate personal injury actions against Pfizer and other defendants filed in California state court.

Chantix

Beginning in August 2021, a number of putative class actions have been filed against Pfizer in various U.S. federal courts following Pfizer’s voluntary recall of Chantix due to the presence of a nitrosamine, N-nitroso-varenicline. Plaintiffs assert that they suffered economic harm purportedly as a result of purchasing Chantix or generic varenicline medicines sold by Pfizer. Plaintiffs seek to represent nationwide and state-specific classes and seek various remedies, including damages and medical monitoring. Similar putative class actions have been filed in Canada and Israel, where the product brand is Champix.

A3. Legal Proceedings––Commercial and Other Matters

Monsanto-Related Matters

In 1997, Monsanto Company (Former Monsanto) contributed certain chemical manufacturing operations and facilities to a newly formed corporation, Solutia Inc. (Solutia), and spun off the shares of Solutia. In 2000, Former Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia. Pharmacia then transferred its agricultural operations to a newly created subsidiary, named Monsanto Company (New Monsanto), which it spun off in a two-stage process that was completed in 2002. Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer.

In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia in connection with various claims and litigation arising out of, or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.

In connection with its spin-off in 1997, Solutia assumed, and agreed to indemnify Pharmacia for, liabilities related to Former Monsanto’s chemical businesses. As the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s indemnification obligations relating to Former Monsanto’s chemical businesses are primarily limited to sites that Solutia has owned or operated. In addition, in connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities primarily related to Former Monsanto’s chemical businesses, including, but not limited to, any such liabilities that Solutia assumed. Solutia’s and New Monsanto’s assumption of, and agreement to indemnify Pharmacia for, these liabilities apply to pending actions and any future actions related to Former Monsanto’s chemical businesses in which Pharmacia is named as a defendant, including, without limitation, actions asserting environmental claims, including alleged exposure to polychlorinated biphenyls. Solutia and/or New Monsanto are defending Pharmacia in connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses, and have been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.

Environmental Matters

In 2009, we submitted a revised site-wide feasibility study with regard to the Wyeth Holdings Corporation (formerly, American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. In 2011, Wyeth Holdings Corporation executed an Administrative Settlement Agreement and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the U.S. Environmental Protection Agency (EPA) with regard to the Bound Brook facility. In accordance with the 2011 Administrative Settlement Agreement, we completed construction of an interim remedy. In 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area. In 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for two adjacent lagoons. In 2015, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey that allows Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. The consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court in 2015. In 2018, the EPA issued a final remediation plan for the two adjacent lagoons. In 2019, Wyeth Holdings LLC entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the lagoons. In September 2021, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey, which the court approved in November 2021, that will allow Wyeth Holdings LLC to complete the design and implement the remedy for the two adjacent lagoons.

We have accrued for the estimated costs of the site remedies for the Bound Brook facility.

We are a party to a number of other proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and other state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.

Contracts with Iraqi Ministry of Health

In 2017, a number of U.S. service members, civilians, and their families brought a complaint in the U.S. District Court for the District of Columbia against a number of pharmaceutical and medical devices companies, including Pfizer and certain of its subsidiaries, alleging that the defendants violated the U.S. Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health, and seeks monetary relief. In July 2020, the District Court granted defendants’ motions to dismiss and dismissed all of plaintiffs’ claims. In January 2022, the Court of Appeals reversed the District Court’s decision. In February 2022, the defendants filed for en banc review of the Court of Appeals’ decision.

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Notes to Consolidated Financial Statements

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Allergan Complaint for Indemnity

In 2019, Pfizer was named as a defendant in a complaint, along with King, filed by Allergan Finance LLC (Allergan) in the Supreme Court of the State of New York, asserting claims for indemnity related to Kadian, which was owned for a short period by King in 2008, prior to Pfizer's acquisition of King in 2010. This suit was voluntarily discontinued without prejudice in January 2021.

Breach of Contract––Xalkori/Lorbrena

We are a defendant in a breach of contract action brought by New York University (NYU) in the Supreme Court of the State of New York (Supreme Court). NYU alleges that it is entitled to royalties on Pfizer’s sales of Xalkori under the terms of a Research and License Agreement between NYU and Sugen, Inc. Sugen, Inc. was acquired by Pharmacia in August 1999, and Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer. The action was originally filed in 2013. In 2015, the Supreme Court dismissed the action and, in 2017, the New York State Appellate Division reversed the decision and remanded the proceedings to the Supreme Court. In January 2020, the Supreme Court denied both parties’ summary judgment motions.

In October 2020, NYU filed a separate breach of contract action against Pfizer alleging that it is entitled to royalties on sales of Lorbrena under the terms of the same NYU-Sugen, Inc. Research and Licensing Agreement. In February 2022, the parties reached an agreement to settle both breach of contract actions on terms not material to Pfizer.

Viatris Securities Litigation

In October 2021, a putative class action was filed in the Court of Common Pleas of Allegheny County, Pennsylvania on behalf of former Mylan N.V. shareholders who received Viatris common stock in exchange for Mylan shares in connection with the spin-off of the Upjohn Business and its combination with Mylan (the Transactions). Viatris, Pfizer, and certain of each company’s current and former officers, directors and employees are named as defendants. The complaint alleges that the defendants violated certain provisions of the Securities Act of 1933 in connection with certain disclosures made in or omitted from the registration statement and related prospectus issued in connection with the Transactions. Plaintiff seeks damages, costs and expenses and other equitable and injunctive relief.

A4. Legal Proceedings––Government Investigations

We are subject to extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. Criminal charges, substantial fines and/or civil penalties, limitations on our ability to conduct business in applicable jurisdictions, corporate integrity or deferred prosecution agreements, as well as reputational harm and increased public interest in the matter could result from government investigations in the U.S. and other jurisdictions in which we do business. In addition, in a qui tam lawsuit in which the government declines to intervene, the relator may still pursue a suit for the recovery of civil damages and penalties on behalf of the government. Among the investigations by government agencies are the matters discussed below.

Greenstone Investigations

• U.S. Department of Justice Antitrust Division Investigation

Since July 2017, the U.S. Department of Justice's Antitrust Division has been investigating our former Greenstone generics business. We believe this is related to an ongoing broader antitrust investigation of the generic pharmaceutical industry. We have produced records relating to this investigation.

• State Attorneys General and Multi-District Generics Antitrust Litigation

In April 2018, Greenstone received requests for information from the Antitrust Department of the Connecticut Office of the Attorney General. In May 2019, Attorneys General of more than 40 states plus the District of Columbia and Puerto Rico filed a complaint against a number of pharmaceutical companies, including Greenstone and Pfizer. The matter has been consolidated with a Multi-District Litigation in the Eastern District of Pennsylvania. As to Greenstone and Pfizer, the complaint alleges anticompetitive conduct in violation of federal and state antitrust laws and state consumer protection laws. In June 2020, the State Attorneys General filed a new complaint against a large number of companies, including Greenstone and Pfizer, making similar allegations, but concerning a new set of drugs. This complaint was transferred to the Multi-District Litigation in July 2020. The Multi-District Litigation also includes civil complaints filed by private plaintiffs and state counties against Pfizer, Greenstone and a significant number of other defendants asserting allegations that generally overlap with those asserted by the State Attorneys General.

Subpoena relating to Manufacturing of Quillivant XR

In October 2018, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York (SDNY) seeking records relating to our relationship with another drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We have produced records pursuant to the subpoena.

Government Inquiries relating to Meridian Medical Technologies

In February 2019, we received a civil investigative demand from the U.S. Attorney’s Office for the SDNY. The civil investigative demand seeks records and information related to alleged quality issues involving the manufacture of auto-injectors at the Meridian site. In August 2019, we received a HIPAA subpoena from the U.S. Attorney’s Office for the Eastern District of Missouri seeking similar records and information. We are producing records in response to these requests.

U.S. Department of Justice/SEC Inquiry relating to Russian Operations

In June 2019, we received an informal request from the U.S. Department of Justice’s FCPA Unit seeking documents relating to our operations in Russia. In September 2019, we received a similar request from the SEC’s FCPA Unit. We have produced records pursuant to these requests.

Docetaxel––Mississippi Attorney General Government Investigation

See Legal Proceedings––Product Litigation––Docetaxel––Mississippi Attorney General Government Investigation above for information regarding a government investigation related to Docetaxel marketing practices.

Pfizer Inc.			2021 Form 10-K			99

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

U.S. Department of Justice Inquiries relating to India Operations

In March 2020, we received an informal request from the U.S. Department of Justice's Consumer Protection Branch seeking documents relating to our manufacturing operations in India, including at our former facility located at Irrungattukottai in India. In April 2020, we received a similar request from the U.S. Attorney’s Office for the SDNY regarding a civil investigation concerning operations at our facilities in India. We are producing records pursuant to these requests.

U.S. Department of Justice/SEC Inquiry relating to China Operations

In June 2020, we received an informal request from the U.S. Department of Justice's FCPA Unit seeking documents relating to our operations in China. In August 2020, we received a similar request from the SEC’s FCPA Unit. We are producing records pursuant to these requests.

Zantac––State of New Mexico and Mayor and City Council of Baltimore Civil Actions

See Legal Proceedings––Product Litigation––Zantac above for information regarding civil actions separately filed by the State of New Mexico and the Mayor and City Council of Baltimore alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions.

A5. Legal Proceedings––Matters Resolved During 2021

During 2021, certain matters, including the matter discussed below, were resolved or became the subject of definitive settlement agreements or settlement agreements-in-principle.

EpiPen

Beginning in 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its current and former affiliates King and Meridian, and/or various entities affiliated with Mylan, and Mylan former Chief Executive Officer, Heather Bresch. The plaintiffs in these actions represent U.S. nationwide classes comprising persons or entities who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. Against Pfizer and/or its affiliates, plaintiffs in these actions generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal and various state antitrust laws. At least one lawsuit also alleges that Pfizer and/or Mylan violated RICO. Plaintiffs also filed various federal antitrust, state consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan and/or its affiliates regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2011. In 2017, all of these indirect purchase actions were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan and/or its affiliates to which Pfizer, King and Meridian are not parties. In July 2021, Pfizer and plaintiffs filed a stipulation of settlement to resolve the Multi-District Litigation for $345 million. The District Court approved the settlement in November 2021, and the payment was made in accordance with the terms of the settlement agreement.

B. Guarantees and Indemnifications

In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities prior to or following a transaction. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of December 31, 2021, the estimated fair value of these indemnification obligations has been included in our financial statements and is not material to Pfizer.

In addition, in connection with our entry into certain agreements and other transactions, our counterparties may agree to indemnify us. For example, in November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction and as previously disclosed, Viatris has agreed to assume, and to indemnify Pfizer for, liabilities arising out of certain matters.

We have also guaranteed the long-term debt of certain companies that we acquired and that now are subsidiaries of Pfizer. See Note 7D.

C. Certain Commitments

As of December 31, 2021, we had commitments totaling $5.2 billion that are legally binding and enforceable. These commitments include payments relating to potential milestone payments deemed reasonably likely to occur, and purchase obligations for goods and services.

See Note 5A for information on the TCJA repatriation tax liability.

D. Contingent Consideration for Acquisitions

We may be required to make payments to sellers for certain prior business combinations that are contingent upon future events or outcomes. See Note 1E. The estimated fair value of contingent consideration as of December 31, 2021 is $697 million, of which $135 million is recorded in Other current liabilities and $563 million in Other noncurrent liabilities, and as of December 31, 2020 is $689 million, of which $123 million is recorded in Other current liabilities and $566 million in Other noncurrent liabilities. The increase in the contingent consideration balance from December 31, 2020 is primarily due to fair value adjustments, partially offset by payments made upon the achievement of certain sales-based milestones.

E. Insurance

Our insurance coverage reflects market conditions (including cost and availability) existing at the time it is written, and our decision to obtain insurance coverage or to self-insure varies accordingly. Depending upon the cost and availability of insurance and the nature of the risk involved, the amount of self-insurance may be significant. The cost and availability of coverage have resulted in self-insuring certain exposures, including product liability. If we incur substantial liabilities that are not covered by insurance or substantially exceed insurance

Pfizer Inc.			2021 Form 10-K			100

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

coverage and that are in excess of existing accruals, there could be a material adverse effect on our cash flows or results of operations in the period in which the amounts are paid and/or accrued.

Note 17. Segment, Geographic and Other Revenue Information

A. Segment Information

We regularly review our operating segments and the approach used by management to evaluate performance and allocate resources. With the formation of the Consumer Healthcare JV in 2019 and the completion of the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer transformed into a more focused, global leader in science-based innovative medicines and vaccines and beginning in the fourth quarter of 2020 operated as a single operating segment engaged in the discovery, development, manufacturing, marketing, sale and distribution of biopharmaceutical products worldwide. At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business and PC1, our global contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients. Biopharma is a science-based medicines business that includes six therapeutic areas – Oncology, Inflammation & Immunology, Rare Disease, Hospital, Vaccines and Internal Medicine. The Hospital therapeutic area commercializes our global portfolio of sterile injectable and anti-infective medicines.

Each operating segment has responsibility for its commercial activities. Regional commercial organizations market, distribute and sell our products and are supported by global platform functions that are responsible for the research, development, manufacturing and supply of our products and global corporate enabling functions. Biopharma receives its R&D services from GPD and WRDM. These services include IPR&D projects for new investigational products and additional indications for in-line products. Each business has a geographic footprint across developed and emerging markets. Our chief operating decision maker uses the revenues and earnings of the operating segments, among other factors, for performance evaluation and resource allocation. Biopharma is the only reportable segment. We have revised prior-period information (Revenues and Earnings, as defined by management) to conform to the current management structure.

Other Costs and Business Activities

Certain pre-tax costs are not allocated to our operating segment results, such as costs associated with the following:

• WRDM––the R&D and Medical expenses managed by our WRDM organization, which is generally responsible for research projects for our Biopharma portfolio until proof-of-concept is achieved and then for transitioning those projects to the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRDM organization also has responsibility for certain science-based and other platform-services organizations, which provide end-to-end technical expertise and other services to the various R&D projects, as well as the Worldwide Medical and Safety group, which ensures that Pfizer provides all stakeholders––including patients, healthcare providers, pharmacists, payers and health authorities––with complete and up-to-date information on the risks and benefits associated with Pfizer products so that they can make appropriate decisions on how and when to use Pfizer’s medicines.

• GPD––the costs associated with our GPD organization, which is generally responsible for clinical trials from WRDM in the Biopharma portfolio, including late-stage portfolio spend. GPD also provides technical support and other services to Pfizer R&D projects. GPD is responsible for facilitating all regulatory submissions and interactions with regulatory agencies.

• Corporate and Other Unallocated––the costs associated with (i) corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement, among others), all strategy, business development, portfolio management and valuation capabilities, patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments; (ii) overhead expenses primarily associated with our manufacturing (which include manufacturing variances associated with production) operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs; and (iii) our share of earnings from the Consumer Healthcare JV.

• Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and PP&E; (ii) acquisition-related items, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, representing substantive and/or unusual, and in some cases recurring, items (such as pension and postretirement actuarial remeasurement gains and losses, gains on the completion of joint venture transactions, restructuring charges, legal charges or net gains and losses on investments in equity securities) that are evaluated on an individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities.

The operating results of PC1, our global contract development and manufacturing organization, and through July 31, 2019 our former Consumer Healthcare business are included in Other business activities.

Segment Assets

We manage our assets on a total company basis, not by operating segment, as our operating assets are shared or commingled. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were $181 billion as of December 31, 2021 and $154 billion as of December 31, 2020.

Pfizer Inc.			2021 Form 10-K			101

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

Selected Income Statement Information

The following table provides selected income statement information by reportable segment:
						Revenues																								Earnings(a)																		Depreciation and Amortization(b)
						Year Ended December 31,																								Year Ended December 31,																		Year Ended December 31,
(MILLIONS OF DOLLARS)						2021						2020						2019																								2021						2020						2019						2021						2020						2019
Reportable Segment:
Biopharma						$	79,557					$	40,724					$	38,013																							$	40,226					$	27,089					$	24,419					$	1,439					$	1,013					$	978
Other business activities(c)						1,731						926						2,892																								(10,396)						(12,308)						(11,216)						598						603						592
Reconciling Items:
Purchase accounting adjustments						—						—						—																								(3,175)						(3,117)						(4,153)						3,067						3,047						4,145
Acquisition-related costs						—						—						—																								(52)						(44)						(185)						—						—						3
Certain significant items(d)						—						—						—																								(2,292)						(4,584)						2,456						87						18						37
						$	81,288					$	41,651					$	40,905																							$	24,311					$	7,036					$	11,321					$	5,191					$	4,681					$	5,755

(a)Income from continuing operations before provision/(benefit) for taxes on income. Biopharma’s earnings include dividend income from our investment in ViiV of $166 million in 2021, $278 million in 2020 and $220 million in 2019.

(b)Certain production facilities are shared. Depreciation is allocated based on estimates of physical production. Amounts here relate solely to the depreciation and amortization associated with continuing operations.

(c)Other business activities include revenues and costs associated with PC1, as well as costs associated with global WRDM and GPD platform functions, global corporate enabling functions and other corporate items, as noted above, that we do not allocate to our operating segments. In 2019, Other business activities also include revenues and costs associated with our former Consumer Healthcare business through July 31, 2019. See Note 2C.

(d)Certain significant items are substantive and/or unusual, and in some cases recurring, items (as noted above) that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. For Earnings in 2021, includes, among other items: (i) a $2.1 billion charge for IPR&D related to our acquisition of Trillium, which was accounted for as an asset acquisition and recorded in Research and development expenses, (ii) restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring of $1.3 billion ($450 million recorded in Selling, informational and administrative expenses and the remaining amount primarily recorded in Restructuring charges and certain acquisition-related costs) and (iii) upfront and milestone payments on collaborative and licensing arrangements of $1.1 billion recorded in Research and development expenses, partially offset by (iv) actuarial valuation and other pension and postretirement plan gains of $1.6 billion recorded in Other (income)/deductions––net and (v) gains on equity securities of $1.3 billion recorded in Other (income)/deductions––net. For Earnings in 2020, includes, among other items; (i) charges of $1.7 billion related to certain asset impairments recorded in Other (income)/deductions––net, (ii) actuarial valuation and other pension and postretirement plan losses of $1.1 billion recorded in Other (income)/deductions––net and (iii) restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring of $791 million ($197 million recorded in Selling, informational and administrative expenses and the remaining amount primarily recorded in Restructuring charges and certain acquisition-related costs). For Earnings in 2019, includes, among other items: (i) a pre-tax gain of $8.1 billion recorded in (Gain) on completion of Consumer Healthcare JV transaction associated with the completion of the Consumer Healthcare JV transaction, partially offset by (ii) charges of $2.8 billion related to certain asset impairments recorded in Other (income)/deductions––net and (iii) actuarial valuation and other pension and postretirement plan losses of $750 million recorded in Other (income)/deductions––net. For additional information, see Notes 2A, 2C, 3 and 4.

B. Geographic Information

The following summarizes revenues by geographic area:
												Year Ended December 31,
(MILLIONS)																								2021						2020						2019
United States																								$	29,746					$	21,455					$	20,326
Developed Europe																								18,336						7,788						7,729
Developed Rest of World																								12,506						4,036						4,022
Emerging Markets																								20,701						8,372						8,828
Revenues																								$	81,288					$	41,651					$	40,905

Revenues exceeded $500 million in each of 21, 8 and 10 countries outside the U.S. in 2021, 2020 and 2019, respectively. The U.S. is the only country to contribute more than 10% of total revenue in 2021, 2020 and 2019. As a percentage of revenues, our largest national market outside the U.S. was Japan, which contributed 9% of total revenue in 2021 and 6% in each of 2020 and 2019.

We and our collaboration partner, BioNTech, have entered into agreements to supply pre-specified doses of Comirnaty with multiple developed and emerging nations around the world and are continuing to deliver doses of Comirnaty under such agreements. We currently sell the Comirnaty vaccine directly to government and government sponsored customers. This includes supply agreements entered into in November 2020 and February and May 2021 with the EC on behalf of the different EU member states and certain other countries. Each EU member state submits its own Comirnaty vaccine order to us and is responsible for payment pursuant to terms of the supply agreements negotiated by the EC.

C. Other Revenue Information

Significant Customers

Our prescription pharmaceutical products are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. In the U.S., we primarily sell our vaccine products directly to the federal government, CDC, wholesalers, individual provider offices, retail pharmacies and integrated delivery networks. Outside the U.S., we primarily sell our vaccines to government and non-government institutions.

Pfizer Inc.			2021 Form 10-K			102

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

The following summarizes revenue, as a percentage of total revenues, for our three largest U.S. wholesaler customers:
						Year Ended December 31,
						2021						2020						2019
McKesson, Inc.						9		%				16		%				15		%
AmerisourceBergen Corporation						7		%				14		%				11		%
Cardinal Health, Inc.						5		%				10		%				9		%

Collectively, our three largest U.S. wholesaler customers represented 24%, 30% and 25% of total trade accounts receivable as of December 31, 2021, 2020 and 2019.

Additionally, revenues from the U.S. government represented 13% of total revenues for 2021, and primarily represent sales of Comirnaty. Accounts receivable from the U.S. government represented 12% of total trade accounts receivable as of December 31, 2021, and primarily relate to sales of Comirnaty.

Significant Product Revenues

The following provides detailed revenue information for several of our major products:

(MILLIONS)												Year Ended December 31,
PRODUCT						PRIMARY INDICATION OR CLASS						2021						2020						2019
TOTAL REVENUES(a)												$	81,288					$	41,651					$	40,905
PFIZER BIOPHARMACEUTICALS GROUP (BIOPHARMA)(a), (b)												$	79,557					$	40,724					$	38,013
Vaccines												$	42,625					$	6,575					$	6,504
Comirnaty direct sales and alliance revenues						Active immunization to prevent COVID-19						36,781						154						—
Prevnar family(c)						Pneumococcal disease						5,272						5,850						5,847
Nimenrix						Meningococcal ACWY disease						193						221						230
FSME-IMMUN/TicoVac						Tick-borne encephalitis disease						185						196						220
Trumenba						Meningococcal B disease						118						112						135
All other Vaccines						Various						74						42						73
Oncology												$	12,333					$	10,867					$	9,014
Ibrance						HR-positive/HER2-negative metastatic breast cancer						5,437						5,392						4,961
Xtandi alliance revenues						mCRPC, nmCRPC, mCSPC						1,185						1,024						838
Inlyta						Advanced RCC						1,002						787						477
Sutent						Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor						673						819						936
Bosulif						Philadelphia chromosome–positive chronic myelogenous leukemia						540						450						365
Xalkori						ALK-positive and ROS1-positive advanced NSCLC						493						544						530
Ruxience(d)						Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis						491						170						(1)
Retacrit(d)						Anemia						444						386						225
Zirabev(d)						Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer						444						143						1
Lorbrena						ALK-positive metastatic NSCLC						266						204						115
Aromasin						Post-menopausal early and advanced breast cancer						211						148						136
Trazimera(d)						HER-positive breast cancer and metastatic stomach cancers						197						98						6
Besponsa						Relapsed or refractory B-cell acute lymphoblastic leukemia						192						182						157
Braftovi						In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy						187						160						48
Bavencio alliance revenues						Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC						178						80						49
Mektovi						In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation						155						142						49
All other Oncology						Various						238						137						122
Internal Medicine												$	9,329					$	9,003					$	8,790
Eliquis alliance revenues and direct sales						Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism						5,970						4,949						4,220
Premarin family						Symptoms of menopause						563						680						734
Chantix/Champix						An aid to smoking cessation treatment in adults 18 years of age or older						398						919						1,107
BMP2						Development of bone and cartilage						266						274						287
Toviaz						Overactive bladder						238						252						250
Pristiq						Depression						187						171						176
All other Internal Medicine						Various						1,706						1,758						2,016

Pfizer Inc.			2021 Form 10-K			103

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

(MILLIONS)												Year Ended December 31,
PRODUCT						PRIMARY INDICATION OR CLASS						2021						2020						2019
Hospital(a)												$	7,301					$	6,777					$	6,695
Sulperazon						Bacterial infections						683						618						684
Medrol						Anti-inflammatory glucocorticoid						432						402						469
Zavicefta						Bacterial infections						413						212						108
Fragmin						Treatment/prevention of venous thromboembolism						305						252						253
Zithromax						Bacterial infections						278						276						336
Vfend						Fungal infections						267						270						346
Tygacil						Bacterial infections						200						160						197
Precedex						Sedation agent in surgery or intensive care						177						260						155
Zyvox						Bacterial infections						173						222						251
Paxlovid						COVID-19 Infection (high risk population)						76						—						—
IVIg Products(e)						Various						430						376						275
All other Anti-infectives						Various						1,453						1,294						1,396
All other Hospital						Various						2,412						2,435						2,225
Inflammation & Immunology (I&I)												$	4,431					$	4,567					$	4,733
Xeljanz						RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis, ankylosing spondylitis						2,455						2,437						2,242
Enbrel (Outside the U.S. and Canada)						RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis						1,185						1,350						1,699
Inflectra/Remsima(d)						Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis						657						659						625
All other I&I						Various						134						121						167
Rare Disease												$	3,538					$	2,936					$	2,278
Vyndaqel/Vyndamax						ATTR-cardiomyopathy and polyneuropathy						2,015						1,288						473
BeneFIX						Hemophilia B						438						454						488
Genotropin						Replacement of human growth hormone						389						427						498
Refacto AF/Xyntha						Hemophilia A						304						370						426
Somavert						Acromegaly						277						277						264
All other Rare Disease						Various						115						120						129
PFIZER CENTREONE(b)												$	1,731					$	926					$	810
CONSUMER HEALTHCARE BUSINESS(f)												$	—					$	—					$	2,082
Total Alliance revenues												$	7,652					$	5,418					$	4,648
Total Biosimilars(d)												$	2,343					$	1,527					$	911
Total Sterile Injectable Pharmaceuticals(g)												$	5,746					$	5,315					$	5,013

(a)On December 31, 2021, we completed the sale of our Meridian subsidiary. Prior to its sale, Meridian was managed as part of the Hospital therapeutic area. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. On December 21, 2020, Pfizer and Viatris completed the termination of the Mylan-Japan collaboration. Beginning in the fourth quarter of 2021, the financial results of Meridian are reflected as discontinued operations for all periods presented. Beginning in the fourth quarter of 2020, the financial results of the Upjohn Business and Mylan-Japan collaboration were reflected as discontinued operations for all periods presented. Prior-period financial information has been restated, as appropriate. See Note 1A.

(b)At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business and PC1. PC1, which previously had been managed within the Hospital therapeutic area, includes revenues from our contract manufacturing, including certain Comirnaty-related manufacturing activities performed on behalf of BioNTech ($320 million for 2021 and $0 million for 2020 and 2019), and active pharmaceutical ingredient sales operation, as well as revenues related to our manufacturing and supply agreements with former legacy Pfizer businesses/partnerships, including but not limited to, transitional manufacturing and supply agreements with Viatris following the spin-off of the Upjohn Business. We have revised prior period information to conform to the current management structure.

(c)Prevnar family include revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult).

(d)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Inflectra/Remsima, Ruxience, Retacrit, Zirabev and Trazimera.

(e)Intravenous immunoglobulin (IVIg) products include the revenues from Panzyga, Octagam and Cutaquig.

(f)On July 31, 2019, our Consumer Healthcare business, an OTC medicines business, was combined with GSK’s consumer healthcare business to form a new consumer healthcare JV. See Note 2C.

(g)Total Sterile Injectable Pharmaceuticals represents the total of all branded and generic injectable products in the Hospital therapeutic area, including anti-infective sterile injectable pharmaceuticals.

Remaining Performance Obligations

Contracted revenue expected to be recognized from remaining performance obligations for firm orders in long-term contracts to supply Comirnaty to our customers totals $34.4 billion as of December 31, 2021, which includes amounts received in advance and deferred and amounts that will be invoiced as we deliver the product to our customers in future periods. Of this amount, we expect to recognize revenue of

Pfizer Inc.			2021 Form 10-K			104

Notes to Consolidated Financial Statements

Pfizer Inc. and Subsidiary Companies

$22.3 billion in 2022, $11.8 billion in 2023 and $265 million in 2024. Remaining performance obligations exclude arrangements with an original expected contract duration of less than one year.

Deferred Revenues

Our deferred revenues primarily relate to advance payments received or receivable in connection with contracts that we entered into during 2021 and 2020 with various government or government sponsored customers in international markets for supply of Comirnaty. The deferred revenues associated with the advance payments related to Comirnaty total $3.3 billion as of December 31, 2021 and $957 million as of December 31, 2020, with $3.0 billion and $249 million recorded in current liabilities and noncurrent liabilities, respectively as of December 31, 2021, and $957 million recorded in current liabilities as of December 31, 2020. The increase in the Comirnaty deferred revenues during 2021 was the result of additional advance payments received as we entered into new or amended contracts or as we invoiced customers in advance of vaccine deliveries less amounts recognized in Revenues as we delivered doses to our customers. During 2021, we recognized in revenue substantially all of the balance of Comirnaty deferred revenues as of December 31, 2020. The Comirnaty deferred revenues as of December 31, 2021 will be recognized in Revenues proportionately as we deliver doses of the vaccine to our customers and satisfy our performance obligation under the contracts, with the amounts included in current liabilities expected to be recognized in Revenues within the next 12 months, and the amounts included in noncurrent liabilities expected to be recognized in Revenues in 2023 and in the first quarter of 2024. Deferred revenues associated with contracts for other products were not significant as of December 31, 2021 or 2020.

Pfizer Inc.			2021 Form 10-K			105

Selected Quarterly Financial Data (Unaudited)

Pfizer Inc. and Subsidiary Companies

						Quarter
(MILLIONS, EXCEPT PER COMMON SHARE DATA)						First						Second						Third						Fourth
2021(a)
Revenues						$	14,516					$	18,899					$	24,035					$	23,838
Costs and expenses(b)						8,802						11,951						15,546						19,876
Restructuring charges and certain acquisition-related costs(c)						22						(1)						646						135
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)						5,692						6,949						7,843						3,827
Provision/(benefit) for taxes on income/(loss)(d)						808						1,123						(328)						249
Income/(loss) from continuing operations						4,885						5,825						8,171						3,578
Discontinued operations––net of tax(e)						1						(236)						(13)						(187)
Net income/(loss) before allocation to noncontrolling interests						4,886						5,589						8,159						3,391
Less: Net income attributable to noncontrolling interests						9						26						12						(2)
Net income/(loss) attributable to Pfizer Inc. common shareholders						$	4,877					$	5,563					$	8,146					$	3,393
Earnings/(loss) per common share—basic:
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders						$	0.87					$	1.04					$	1.45					$	0.64
Discontinued operations––net of tax						—						(0.04)						—						(0.03)
Net income/(loss) attributable to Pfizer Inc. common shareholders						$	0.87					$	0.99					$	1.45					$	0.60
Earnings/(loss) per common share—diluted:
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders						$	0.86					$	1.02					$	1.43					$	0.62
Discontinued operations––net of tax						—						(0.04)						—						(0.03)
Net income/(loss) attributable to Pfizer Inc. common shareholders						$	0.86					$	0.98					$	1.42					$	0.59

(a)Business development activities impacted our results of operations in 2021*.* See Note 1A.

(b)The fourth quarter historically reflects higher costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. Cost of sales for all quarters reflects higher costs for Comirnaty. The fourth quarter includes a $2.1 billion charge for IPR&D expense associated with the acquisition of Trillium, as well as other upfront and milestone payments on collaboration and licensing arrangements. See Notes 2A, D and E.

(c)The third and fourth quarters of 2021 primarily include employee termination costs associated with our Transforming to a More Focused Company program. See Note 3.

(d)All periods reflect a change in the jurisdictional mix of earnings primarily related to Comirnaty. The third quarter of 2021 reflects benefits resulting from certain initiatives executed in the third quarter of 2021 associated with our investment in the Consumer Healthcare JV with GSK. See Note 5A.

(e)All periods include the operating results of Meridian prior to its sale on December 31, 2021 and to a lesser extent post-closing adjustments directly related to prior discontinued businesses. The second quarter of 2021 includes a pre-tax charge of $345 million to resolve a legal matter related to Meridian and the fourth quarter of 2021 includes an after tax loss of $167 million related to the sale of Meridian. See Note 2B.

Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.

Pfizer Inc.			2021 Form 10-K			106

Selected Quarterly Financial Data (Unaudited)

Pfizer Inc. and Subsidiary Companies

						Quarter
(MILLIONS, EXCEPT PER COMMON SHARE DATA)						First						Second						Third						Fourth
2020(a)
Revenues						$	10,007					$	9,795					$	10,215					$	11,634
Costs and expenses(b)						7,100						6,389						9,635						10,917
Restructuring charges and certain acquisition-related costs						54						360						2						163
(Gain) on completion of Consumer Healthcare JV transaction						(6)						—						—						—
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)						2,859						3,046						577						554
Provision/(benefit) for taxes on income/(loss)						358						425						(334)						(80)
Income/(loss) from continuing operations						2,501						2,621						911						634
Discontinued operations––net of tax(c)						863						876						566						224
Net income/(loss) before allocation to noncontrolling interests						3,364						3,497						1,477						857
Less: Net income attributable to noncontrolling interests						9						8						8						11
Net income/(loss) attributable to Pfizer Inc. common shareholders						$	3,355					$	3,489					$	1,469					$	847
Earnings/(loss) per common share—basic:
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders						$	0.45					$	0.47					$	0.16					$	0.11
Discontinued operations––net of tax						0.16						0.16						0.10						0.04
Net income/(loss) attributable to Pfizer Inc. common shareholders						$	0.60					$	0.63					$	0.26					$	0.15
Earnings/(loss) per common share—diluted:
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders						$	0.44					$	0.47					$	0.16					$	0.11
Discontinued operations––net of tax						0.15						0.16						0.10						0.04
Net income/(loss) attributable to Pfizer Inc. common shareholders						$	0.60					$	0.62					$	0.26					$	0.15

(a)Business development activities impacted our results of operations in 2020*.* See Note 1A.

(b)The fourth quarter historically reflects higher costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. Certain asset impairments totaled $900 million in the third quarter of 2020 and $791 million in the fourth quarter of 2020 recorded in Other (income)/deductions—net. See Note 4.

(c)Operating results of the Upjohn Business through November 16, 2020, the date of the spin-off and combination with Mylan, the Mylan-Japan collaboration and Meridian are presented as discontinued operations in all periods presented. See Note 2B.

Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.