Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three Months Ended				Nine Months Ended
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Revenues	$	24,094	$	10,277	$	57,653	$	30,224
Costs and expenses:
Cost of sales(a)	9,973		2,007		21,232		5,773
Selling, informational and administrative expenses(a)	2,905		2,658		8,617		7,858
Research and development expenses(a)	3,447		2,300		7,920		6,050
Amortization of intangible assets	981		862		2,784		2,579
Restructuring charges and certain acquisition-related costs	646		2		668		417
(Gain) on completion of Consumer Healthcare JV transaction	—		—		—		(6)
Other (income)/deductions––net	(1,696)		1,878		(3,697)		1,114
Income from continuing operations before provision/(benefit) for taxes on income	7,836		570		20,128		6,438
Provision/(benefit) for taxes on income	(331)		(347)		1,518		434
Income from continuing operations	8,167		917		18,610		6,004

Income/(loss) from discontinued operations––net of tax	(9)		560		24		2,334


Net income before allocation to noncontrolling interests	8,159		1,477		18,633		8,338
Less: Net income attributable to noncontrolling interests	12		8		47		25
Net income attributable to Pfizer Inc. common shareholders	$	8,146	$	1,469	$	18,586	$	8,313

Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	1.45	$	0.16	$	3.32	$	1.08
Income/(loss) from discontinued operations––net of tax	—		0.10		—		0.42
Net income attributable to Pfizer Inc. common shareholders	$	1.45	$	0.26	$	3.32	$	1.50

Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	1.42	$	0.16	$	3.26	$	1.06
Income/(loss) from discontinued operations––net of tax	—		0.10		—		0.42
Net income attributable to Pfizer Inc. common shareholders	$	1.42	$	0.26	$	3.27	$	1.48

Weighted-average shares––basic	5,609		5,557		5,597		5,552
Weighted-average shares––diluted	5,725		5,633		5,688		5,622

(a)Exclusive of amortization of intangible assets, except as disclosed in Note 9 in this Form 10-Q and Note 1L in our 2020 Form 10-K.

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Net income before allocation to noncontrolling interests	$	8,159	$	1,477	$	18,633	$	8,338

Foreign currency translation adjustments, net	(866)		1,403		(366)		(27)


Unrealized holding gains/(losses) on derivative financial instruments, net	213		(372)		179		(661)
Reclassification adjustments for (gains)/losses included in net income(a)	48		143		286		(25)
	261		(230)		464		(685)
Unrealized holding gains/(losses) on available-for-sale securities, net	(266)		239		(128)		231
Reclassification adjustments for (gains)/losses included in net income(b)	9		(85)		(172)		(25)

	(257)		155		(300)		205

Reclassification adjustments related to amortization of prior service costs and other, net	(39)		(45)		(119)		(134)
Reclassification adjustments related to curtailments of prior service costs and other, net	(59)		—		(59)		—
Other	2		(3)		(3)		1
	(97)		(47)		(181)		(133)
Other comprehensive income/(loss), before tax	(959)		1,280		(382)		(640)
Tax provision/(benefit) on other comprehensive income/(loss)	(65)		(19)		(44)		(311)
Other comprehensive income/(loss) before allocation to noncontrolling interests	$	(894)	$	1,299	$	(338)	$	(329)

Comprehensive income/(loss) before allocation to noncontrolling interests	$	7,265	$	2,776	$	18,296	$	8,009
Less: Comprehensive income/(loss) attributable to noncontrolling interests	9		11		48		16
Comprehensive income/(loss) attributable to Pfizer Inc.	$	7,256	$	2,766	$	18,248	$	7,993

(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. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(MILLIONS)	October 3, 2021		December 31, 2020
	(Unaudited)
Assets
Cash and cash equivalents	$	1,966	$	1,784
Short-term investments	27,730		10,437
Trade accounts receivable, less allowance for doubtful accounts: 2021—$494; 2020—$508	11,897		7,930
Inventories	8,640		8,046
Current tax assets	3,877		3,264
Other current assets	3,790		3,605
Total current assets	57,900		35,067
Equity-method investments	16,349		16,856
Long-term investments	5,248		3,406
Property, plant and equipment, less accumulated depreciation: 2021—$15,403; 2020—$14,812	14,436		13,900
Identifiable intangible assets	26,306		28,471
Goodwill	49,489		49,577
Noncurrent deferred tax assets and other noncurrent tax assets	2,755		2,383
Other noncurrent assets	6,705		4,569

Total assets	$	179,188	$	154,229

Liabilities and Equity
Short-term borrowings, including current portion of long-term debt: 2021—$2,663; 2020—$2,002	$	3,629	$	2,703
Trade accounts payable	4,698		4,309
Dividends payable	2,191		2,162
Income taxes payable	4,496		1,049
Accrued compensation and related items	2,571		3,058
Deferred revenues	3,529		1,113
Other current liabilities	20,690		11,527

Total current liabilities	41,803		25,920

Long-term debt	36,250		37,133
Pension benefit obligations	3,676		4,766
Postretirement benefit obligations	627		645
Noncurrent deferred tax liabilities	328		4,063
Other taxes payable	11,336		11,560
Other noncurrent liabilities	9,201		6,669
Total liabilities	103,221		90,756

Commitments and Contingencies


Common stock	473		470
Additional paid-in capital	89,973		88,674

Treasury stock	(111,359)		(110,988)
Retained earnings	102,252		90,392
Accumulated other comprehensive loss	(5,649)		(5,310)
Total Pfizer Inc. shareholders’ equity	75,691		63,238
Equity attributable to noncontrolling interests	275		235
Total equity	75,967		63,473
Total liabilities and equity	$	179,188	$	154,229

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


	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, July 4, 2021	—	$	—	9,450	$	472	$	89,336	(3,851)	$	(111,356)	$	96,346	$	(4,758)	$	70,042	$	273	$	70,315
Net income												8,146				8,146		12		8,159
Other comprehensive income/(loss), net of tax														(891)		(891)		(3)		(894)
Cash dividends declared, per share: $0.39
Common stock												(2,192)				(2,192)				(2,192)
Preferred stock																—				—
Noncontrolling interests																—		(8)		(8)
Share-based payment transactions				13	1		637		—	(3)		(1)				634				634
Purchases of common stock									—	—						—				—
Preferred stock conversions and redemptions	—	—					—		—	—						—				—
Other							—		—	—		(47)				(47)		1		(46)
Balance, October 3, 2021	—	$	—	9,462	$	473	$	89,973	(3,851)	$	(111,359)	$	102,252	$	(5,649)	$	75,691	$	275	$	75,967

	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, June 28, 2020	—	$	—	9,394	$	470	$	87,886	(3,840)	$	(110,978)	$	93,946	$	(6,983)	$	64,342	$	228	$	64,570
Net income												1,469				1,469		8		1,477
Other comprehensive income/(loss), net of tax														1,296		1,296		3		1,299
Cash dividends declared, per share: $0.38
Common stock												(2,113)				(2,113)				(2,113)
Preferred stock																—				—
Noncontrolling interests																—		(1)		(1)
Share-based payment transactions				3	—		275		—	(2)						273				273
Purchases of common stock									—	—						—				—
Preferred stock conversions and redemptions	—	—					—		—	—						—				—
Other							—		—	—		—				—		(1)		(1)
Balance, September 27, 2020	—	$	—	9,397	$	470	$	88,161	(3,840)	$	(110,980)	$	93,302	$	(5,687)	$	65,267	$	236	$	65,503

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


	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, 2021	—	$	—	9,407	$	470	$	88,674	(3,840)	$	(110,988)	$	90,392	$	(5,310)	$	63,238	$	235	$	63,473
Net income												18,586				18,586		47		18,633
Other comprehensive income/(loss), net of tax														(338)		(338)		—		(338)
Cash dividends declared, per share: $1.17
Common stock												(6,569)				(6,569)				(6,569)
Preferred stock																—				—
Noncontrolling interests																—		(8)		(8)
Share-based payment transactions				56	3		1,300		(11)	(371)		(77)				855				855
Purchases of common stock									—	—						—				—
Preferred stock conversions and redemptions	—	—					—		—	—						—				—
Other							—		—	—		(81)				(81)		1		(79)
Balance, October 3, 2021	—	$	—	9,462	$	473	$	89,973	(3,851)	$	(111,359)	$	102,252	$	(5,649)	$	75,691	$	275	$	75,967

	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, 2020	431	$	17	9,369	$	468	$	87,428	(3,835)	$	(110,801)	$	91,397	$	(5,367)	$	63,143	$	303	$	63,447
Net income												8,313				8,313		25		8,338
Other comprehensive income/(loss), net of tax														(319)		(319)		(9)		(329)
Cash dividends declared, per share: $1.14
Common stock												(6,408)				(6,408)				(6,408)
Preferred stock												—				—				—
Noncontrolling interests																—		(81)		(81)
Share-based payment transactions				28	1		748		(6)	(210)						539				539
Purchases of common stock									—	—						—				—
Preferred stock conversions and redemptions	(431)	(17)					(15)		1	31						(1)				(1)
Other							—		—	—		—				—		(1)		(1)
Balance, September 27, 2020	—	$	—	9,397	$	470	$	88,161	(3,840)	$	(110,980)	$	93,302	$	(5,687)	$	65,267	$	236	$	65,503

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020
Operating Activities
Net income before allocation to noncontrolling interests	$	18,633	$	8,338
Income from discontinued operations—net of tax	24		2,334
Net income from continuing operations before allocation to noncontrolling interests	18,610		6,004
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	3,914		3,573
Asset write-offs and impairments	115		989
Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed	—		(6)
Deferred taxes from continuing operations	(3,702)		(735)

Share-based compensation expense	687		468
Benefit plan contributions in excess of expense/income	(1,933)		(760)
Other adjustments, net	(1,848)		(313)
Other changes in assets and liabilities, net of acquisitions and divestitures	10,816		(2,856)
Net cash provided by operating activities from continuing operations	26,660		6,364
Net cash provided by operating activities from discontinued operations	6		2,414
Net cash provided by operating activities	26,666		8,778

Investing Activities
Purchases of property, plant and equipment	(1,718)		(1,413)
Purchases of short-term investments	(26,280)		(9,309)
Proceeds from redemptions/sales of short-term investments	15,852		8,397
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less	(7,152)		671
Purchases of long-term investments	(861)		(284)
Proceeds from redemptions/sales of long-term investments	569		648

Other investing activities, net	(370)		160
Net cash provided by/(used in) investing activities from continuing operations	(19,960)		(1,129)
Net cash provided by/(used in) investing activities from discontinued operations	—		(11,472)
Net cash provided by/(used in) investing activities	(19,960)		(12,601)

Financing Activities
Proceeds from short-term borrowings	—		12,352
Principal payments on short-term borrowings	(1)		(17,449)
Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less	265		1,624
Proceeds from issuance of long-term debt	997		5,222
Principal payments on long-term debt	(1,001)		(2,511)

Cash dividends paid	(6,540)		(6,328)
Other financing activities, net	(185)		(166)
Net cash provided by/(used in) financing activities from continuing operations	(6,465)		(7,257)
Net cash provided by/(used in) financing activities from discontinued operations	—		11,395
Net cash provided by/(used in) financing activities	(6,465)		4,138
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents	(32)		(39)
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents	209		277
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period	1,825		1,350
Cash and cash equivalents and restricted cash and cash equivalents, at end of period	$	2,034	$	1,627
Supplemental Cash Flow Information



Cash paid/(received) during the period for:
Income taxes	$	2,943	$	2,445
Interest paid	1,205		1,297
Interest rate hedges	(26)		(45)

Non-cash transaction:
Right-of-use assets obtained in exchange for lease liabilities	$	1,552	$	157

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Significant Accounting Policies

A. Basis of Presentation

We prepared these condensed consolidated financial statements in conformity with U.S. GAAP, consistent in all material respects with those applied in our 2020 Form 10-K, except as disclosed in Note 1C. As permitted under the SEC requirements for interim reporting, certain footnotes or other financial information have been condensed or omitted.

These financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods presented. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2020 Form 10-K*.* Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three and nine months ended August 29, 2021 and August 23, 2020, and for U.S. subsidiaries is as of and for the three and nine months ended October 3, 2021 and September 27, 2020.

Business development activities impacted financial results in the periods presented. See Note 1A in our 2020 Form 10-K, and Note 2. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. For additional information, see Note 2B in our 2020 Form 10-K. On December 21, 2020, which fell in Pfizer’s international first quarter of 2021, Pfizer and Viatris completed the termination of 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. As a result, the financial position and results of operations of the Upjohn Business and the Mylan-Japan collaboration are presented as discontinued operations. Prior-period information has been restated to reflect our current organization structure.

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 condensed consolidated financial statements.

For information on new accounting standards adopted in 2020, see Note 1B in our 2020 Form 10-K.

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, 2020, resulted in a cumulative effect decrease to Retained earnings of $6.3 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. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



The impacts of the adjustments on our condensed consolidated financial statements are summarized as follows:
	Three Months Ended
	October 3, 2021						September 27, 2020
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	Previous Accounting Principle		Impact of Change		As Reported		Previous Accounting Principle		Impact of Change		As Adjusted
Condensed Consolidated Statements of Income:
Other (income)/deductions––net	$	(641)	$	(1,055)	$	(1,696)	$	889	$	989	$	1,878
Income from continuing operations before provision/(benefit) for taxes on income	6,782		1,055		7,836		1,559		(989)		570
Provision/(benefit) for taxes on income	(561)		230		(331)		(104)		(243)		(347)
Income/(loss) from discontinued operations––net of tax	(9)		—		(9)		539		21		560
Net income before allocation to noncontrolling interests	7,334		825		8,159		2,202		(724)		1,477
Net income attributable to Pfizer Inc. common shareholders	7,322		825		8,146		2,194		(724)		1,469
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	1.30	$	0.15	$	1.45	$	0.30	$	(0.13)	$	0.16
Income/(loss) from discontinued operations––net of tax	—		—		—		0.10		—		0.10
Net income attributable to Pfizer Inc. common shareholders	1.30		0.15		1.45		0.39		(0.13)		0.26
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	1.27	$	0.15	$	1.42	$	0.29	$	(0.13)	$	0.16
Income/(loss) from discontinued operations––net of tax	—		—		—		0.10		—		0.10
Net income attributable to Pfizer Inc. common shareholders	1.27		0.15		1.42		0.39		(0.13)		0.26
Condensed Consolidated Statements of Comprehensive Income:
Foreign currency translation adjustments, net	$	(961)	$	95	$	(866)	$	1,609	$	(206)	$	1,403
Benefit plans: actuarial gains/(losses), net	836		(836)		—		(1,211)		1,211		—
Reclassification adjustments related to amortization	74		(74)		—		67		(67)		—
Reclassification adjustments related to settlements, net	139		(139)		—		174		(174)		—
Other	95		(95)		—		(206)		206		—
Tax provision/(benefit) on other comprehensive income/(loss)	(89)		23		(65)		(262)		243		(19)



	Nine Months Ended
	October 3, 2021						September 27, 2020
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	Previous Accounting Principle		Impact of Change		As Reported		Previous Accounting Principle		Impact of Change		As Adjusted
Condensed Consolidated Statements of Income:
Other (income)/deductions––net	$	(2,414)	$	(1,283)	$	(3,697)	$	232	$	881	$	1,114
Income from continuing operations before provision/(benefit) for taxes on income	18,845		1,283		20,128		7,320		(881)		6,438
Provision/(benefit) for taxes on income	1,237		281		1,518		647		(213)		434
Income/(loss) from discontinued operations––net of tax	24		—		24		2,374		(40)		2,334
Net income before allocation to noncontrolling interests	17,631		1,002		18,633		9,046		(709)		8,338
Net income attributable to Pfizer Inc. common shareholders	17,584		1,002		18,586		9,022		(709)		8,313
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	3.14	$	0.18	$	3.32	$	1.20	$	(0.12)	$	1.08
Income/(loss) from discontinued operations––net of tax	—		—		—		0.43		(0.01)		0.42
Net income attributable to Pfizer Inc. common shareholders	3.14		0.18		3.32		1.62		(0.13)		1.50
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	3.08	$	0.18	$	3.26	$	1.18	$	(0.12)	$	1.06
Income/(loss) from discontinued operations––net of tax	—		—		—		0.42		(0.01)		0.42
Net income attributable to Pfizer Inc. common shareholders	3.09		0.18		3.27		1.60		(0.13)		1.48

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Nine Months Ended
	October 3, 2021						September 27, 2020
(MILLIONS)	Previous Accounting Principle		Impact of Change		As Reported		Previous Accounting Principle		Impact of Change		As Adjusted
Condensed Consolidated Statements of Comprehensive Income:
Foreign currency translation adjustments, net	$	(354)	$	(11)	$	(366)	$	96	$	(123)	$	(27)
Benefit plans: actuarial gains/(losses), net	881		(881)		—		(1,372)		1,372		—
Reclassification adjustments related to amortization	222		(222)		—		200		(200)		—
Reclassification adjustments related to settlements, net	162		(162)		—		240		(240)		—
Other	(11)		11		—		(123)		123		—
Tax provision/(benefit) on other comprehensive income/(loss)	(20)		(24)		(44)		(527)		215		(311)
Condensed Consolidated Statements of Cash Flows:
Deferred taxes from continuing operations	$	(3,983)	$	281	$	(3,702)	$	(522)	$	(213)	$	(735)
Benefit plan contributions in excess of expense/income	(650)		(1,283)		(1,933)		(1,642)		881		(760)

	October 3, 2021						December 31, 2020
(MILLIONS)	Previous Accounting Principle		Impact of Change		As Reported		Previous Accounting Principle		Impact of Change		As Adjusted
Condensed Consolidated Balance Sheets:
Noncurrent deferred tax assets and other noncurrent tax assets	$	3,012	$	(257)	$	2,755	$	2,383	$	—	$	2,383
Other noncurrent assets	6,687		18		6,705		4,569		—		4,569
Pension benefit obligations	3,677		—		3,676		4,766		—		4,766
Retained earnings	101,250		1,002		102,252		96,770		(6,378)		90,392
Accumulated other comprehensive loss	(4,408)		(1,241)		(5,649)		(11,688)		6,378		(5,310)

D. Revenues and Trade Accounts Receivable

*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.

*Deductions from Revenues––*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:


(MILLIONS)	October 3, 2021		December 31, 2020
Reserve against Trade accounts receivable, less allowance for doubtful accounts	$	996	$	861
Other current liabilities:
Accrued rebates	3,470		3,017
Other accruals	470		436
Other noncurrent liabilities	503		399
Total accrued rebates and other sales-related accruals	$	5,439	$	4,712

*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,

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 the three and nine months ended October 3, 2021 and September 27, 2020, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements. For additional information on our trade accounts receivable, see Note 1G in our 2020 Form 10-K.

Note 2. Discontinued Operations, Equity-Method Investment and Collaborative Arrangement

A. Discontinued Operations

Upjohn Separation and Combination with Mylan

On November 16, 2020, we completed the spin-off and the combination of the Upjohn Business with Mylan to form Viatris. See Note 1A.

In connection with this transaction, 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, manufacturing and supply agreements (MSAs), transition service agreements (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. In the three and nine months ended October 3, 2021, the amounts recorded under the above agreements were not material to our consolidated results of operations. Net amounts due from Viatris under the above agreements were approximately $197 million as of October 3, 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 the first quarter of 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. In addition, Pfizer and Mylan had pre-existing arms-length commercial agreements, which are continuing with Viatris and are not material to Pfizer’s consolidated financial statements.

The operating results of the Upjohn Business and the Mylan-Japan collaboration are reported as Income/(loss) from discontinued operations––net of tax.


Components of Income/(loss) from discontinued operations––net of tax:
	Three Months Ended(a)				Nine Months Ended(a)
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Revenues	$	—	$	1,854	$	27	$	5,737
Costs and expenses:
Cost of sales	4		526		18		1,425
Selling, informational and administrative expenses	2		359		(1)		1,061
Research and development expenses	—		60		1		165
Amortization of intangible assets	—		37		—		109
Restructuring charges and certain acquisition-related costs	—		1		—		18
Other (income)/deductions––net	5		233		6		304
Pre-tax income/(loss) from discontinued operations	(10)		639		3		2,654
Provision/(benefit) for taxes on income	(2)		79		(21)		320




Income/(loss) from discontinued operations––net of tax	$	(9)	$	560	$	24	$	2,334

(a)In the third quarter of 2021, Income/(loss) from discontinued operations—net of tax reflects post-closing adjustments directly related to our discontinued operations, including adjustments for legal and tax related matters. In the first nine months of 2021, Income/(loss) from discontinued operations—net of tax includes the operations of the Mylan-Japan collaboration, which terminated during Pfizer’s international first quarter of 2021, and post-closing adjustments directly related to our discontinued operations, including adjustments for tax, benefits and legal related matters. In the three and nine months ended September 27, 2020, Income/(loss) from discontinued operations—net of tax relates to the Upjohn Business and the Mylan-Japan collaboration and includes the change in accounting principle in the first quarter of 2021 to MTM Accounting, which has been applied on a retrospective basis for all prior periods presented. See Note 1C. In the three and nine months ended September 27, 2020, Income/(loss) from discontinued operations—net of tax includes interest expense of $76 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 charges of $144 million related to the remeasurement of Euro debt issued by Upjohn Finance B.V. in the second quarter of 2020.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Equity-Method Investment

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%.

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 $16.1 billion as of October 3, 2021 and $16.7 billion as of December 31, 2020 and is reported as a private equity investment in Equity-method investments as of October 3, 2021 and December 31, 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 is primarily due to $549 million in pre-tax foreign currency translation adjustments (see Note 6), as well as dividends totaling approximately $295 million, 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. Our total share of the JV’s earnings generated in the second quarter of 2021, which we recorded in our operating results in the third quarter of 2021, was $106 million. Our total share of the JV’s earnings generated in the fourth quarter of 2020 and first six months of 2021, which we recorded in our operating results in the first nine months of 2021, was $324 million. Our total share of the JV’s earnings generated in the second quarter of 2020, which we recorded in our operating results in the third quarter of 2020, was $166 million. Our total share of the JV’s earnings generated in the fourth quarter of 2019 and first six months of 2020, which we recorded in our operating results in the first nine months of 2020, was $306 million. 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.



Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three and nine months ending June 30, 2021, the most recent period available, and for the three and nine months ending June 30, 2020, is as follows:
	Three Months Ended				Nine Months Ended
(MILLIONS)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net sales	$	3,152	$	2,927	$	9,428	$	9,618
Cost of sales	(1,180)		(1,061)		(3,536)		(4,266)
Gross profit	$	1,972	$	1,866	$	5,892	$	5,352
Income from continuing operations	348		524		1,064		995
Net income	348		524		1,064		995
Income attributable to shareholders	330		518		1,012		959

C. Collaboration Arrangement

Collaboration with Arvinas

On July 22, 2021, we announced 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. Under the terms of the collaboration agreement, we made an upfront payment to Arvinas of $650 million in July 2021, which was recorded to Research and development expenses. On September 13, 2021, we made a $350 million equity investment in Arvinas, receiving approximately 3.5 million newly issued shares of Arvinas common stock, priced at a 30% premium to the 30-day volume weighted average price on July 20, 2021, representing an equity ownership stake by Pfizer of approximately 7% as of September 13, 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.

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

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 focused, global leader in science-based innovative medicines and vaccines. We have

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 and incurring certain legacy cost-reduction initiatives related to our manufacturing business. We expect to incur costs of $500 million, with approximately 20% of the costs to be non-cash. The costs for this effort include, among other things, 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 October 3, 2021, we incurred costs of $2.0 billion.

B. Key Activities


The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits, which are composed primarily of the Transforming to a More Focused Company program:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Restructuring charges/(credits):
Employee terminations	$	630	$	(15)	$	649	$	340
Asset impairments	10		20		9		43
Exit costs/(credits)	3		(11)		—		(10)
Restructuring charges/(credits)(a)	643		(5)		657		374
Transaction costs(b)	—		—		—		14
Integration costs and other(c)	3		7		11		29
Restructuring charges and certain acquisition-related costs	646		2		668		417
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net(d)	(63)		—		(51)		2
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	23		4		64		14
Selling, informational and administrative expenses	8		—		23		—
Research and development expenses	—		—		—		(3)
Total additional depreciation––asset restructuring	31		4		87		10
Implementation costs recorded in our condensed consolidated statements of income as follows(f):
Cost of sales	8		9		29		27
Selling, informational and administrative expenses	142		36		287		114
Research and development expenses	—		1		1		2

Total implementation costs	151		47		316		142
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	764	$	52	$	1,020	$	571

(a)Primarily represents cost reduction initiatives.

(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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(d)Amounts for the three and nine months ended September 27, 2020 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, December 31, 2020(a)	$	782	$	—	$	15	$	798
Provision	649		9		—		657
Utilization and other(b)	(306)		(9)		(5)		(319)
Balance, October 3, 2021(c)	$	1,125	$	—	$	10	$	1,135

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

(b)Includes adjustments for foreign currency translation.

(c)Included in Other current liabilities ($860 million) and Other noncurrent liabilities ($275 million).

Note 4. Other (Income)/Deductions—Net


Components of Other (income)/deductions––net include:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Interest income	$	(10)	$	(15)	$	(21)	$	(68)
Interest expense	325		345		975		1,102
Net interest expense	315		330		954		1,034
Royalty-related income	(261)		(214)		(649)		(524)
Net (gains)/losses on asset disposals	(1)		(2)		(99)		—
Net (gains)/losses recognized during the period on equity securities(a)	(400)		70		(1,601)		(408)
Income from collaborations, out-licensing arrangements and sales of compound/product rights(b)	(65)		(30)		(317)		(245)
Net periodic benefit costs/(credits) other than service costs(c)	(1,132)		1,043		(1,635)		749
Certain legal matters, net(d)	38		(17)		458		5
Certain asset impairments(e)	—		900		—		900
Consumer Healthcare JV equity method (income)/loss(f)	(105)		(103)		(307)		(196)
Other, net	(84)		(99)		(501)		(202)
Other (income)/deductions––net	$	(1,696)	$	1,878	$	(3,697)	$	1,114

(a)The gains in the third quarter and first nine months of 2021 include, among other things, unrealized gains of $420 million and $1.5 billion, respectively, related to investments in BioNTech and Cerevel Therapeutics, LLC. The losses in the third quarter of 2020 included, among other things, unrealized losses of $131 million related to our investment in Allogene. The gains in the first nine months of 2020 included, among other things, unrealized gains of $397 million related to our investments in Allogene and BioNTech.

(b)The first nine months of 2021 includes, among other things, $188 million of net collaboration income from BioNTech in the first quarter of 2021 related to the COVID-19 vaccine. The first nine months of 2020 mainly included, among other things, (i) an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, Inc., (ii) $40 million of milestone income from Puma Biotechnology, Inc. related to Neratinib regulatory approvals in the EU and (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.

(c)Amounts include the impact of a change in accounting principle. See Notes 1C and 10.

(d)The first nine months of 2021 primarily includes an amount to resolve a Multi-District Litigation relating to EpiPen pending against the Company in the U.S. District Court for the District of Kansas for $345 million, which remains subject to court approval. See Note 12A5.

(e)The third quarter and first nine months of 2020 included intangible asset impairment charges of $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.

(f)See Note 2B.

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

Our effective tax rate for continuing operations was (4.2)% for the third quarter of 2021, compared to (60.9)% for the third quarter of 2020, and was 7.5% for the first nine months of 2021, compared to 6.7% for the first nine months of 2020.

The negative effective tax rate for the third quarter of 2021 was primarily a result of 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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

that we believe to be reasonable. The negative effective tax rate for the third quarter of 2020 was primarily a result of benefits associated with certain intangible asset impairments (see Note 4(e)). The increase in the effective tax rate for the first nine months of 2021, compared to the first nine months of 2020, was due to the change in the jurisdictional mix of earnings primarily related to Comirnaty and the non-recurrence of benefits associated with certain intangible asset impairments, partially offset by certain initiatives executed in the third quarter of 2021 associated with our investment in the Consumer Healthcare JV with GSK.

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 15, 2022 and is reported in current Income taxes payable as of October 3, 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.

B. Tax Contingencies

We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation.

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 dating back to 2011.

For additional information, see Note 5D in our 2020 Form 10-K.

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


Components of Tax provision/(benefit) on other comprehensive income/(loss) include:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Foreign currency translation adjustments, net(a)	$	(32)	$	10	$	(30)	$	(167)
Unrealized holding gains/(losses) on derivative financial instruments, net	21		(43)		28		(126)
Reclassification adjustments for (gains)/losses included in net income	13		7		48		(13)
	34		(37)		76		(139)
Unrealized holding gains/(losses) on available-for-sale securities, net	(33)		30		(16)		29
Reclassification adjustments for (gains)/losses included in net income	1		(11)		(22)		(3)
	(32)		19		(37)		26






Reclassification adjustments related to amortization of prior service costs and other, net	(22)		(11)		(39)		(32)
Reclassification adjustments related to curtailments of prior service costs and other, net	(14)		—		(14)		—
Other	—		(1)		(1)		1
	(36)		(11)		(54)		(31)
Tax provision/(benefit) on other comprehensive income/(loss)	$	(65)	$	(19)	$	(44)	$	(311)

(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that we intend to hold indefinitely.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests


The following summarizes the changes, net of tax, in Accumulated other comprehensive loss:
	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, December 31, 2020(a)	$	(5,450)	$	(428)	$	116		$	452	$	(5,310)
Other comprehensive income/(loss)(b)	(336)		388		(262)			(127)		(338)

Balance, October 3, 2021	$	(5,787)	$	(40)	$	(146)		$	325	$	(5,649)

(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 related to our equity method investment in the Consumer Healthcare JV (see Note 2B) and net gains related to the impact of our net investment hedging program.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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:


	October 3, 2021						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	$	2,367	$	—	$	2,367	$	567	$	—	$	567

Classified as available-for-sale debt securities:
Government and agency—non-U.S.	16,826		—		16,826		7,719		—		7,719
Government and agency—U.S.	4,881		—		4,881		982		—		982
Corporate and other	1,181		—		1,181		1,008		—		1,008
	22,887		—		22,887		9,709		—		9,709
Total short-term investments	25,254		—		25,254		10,276		—		10,276
Other current assets
Derivative assets:
Interest rate contracts	6		—		6		18		—		18
Foreign exchange contracts	478		—		478		234		—		234
Total other current assets	484		—		484		251		—		251
Long-term investments
Classified as equity securities with readily determinable fair values(a)	4,165		4,141		25		2,809		2,776		32

Classified as available-for-sale debt securities:
Government and agency—non-U.S.	425		—		425		6		—		6
Government and agency—U.S.	9		—		9		121		—		121
Corporate and other	—		—		—		—		—		—
	434		—		434		128		—		128
Total long-term investments	4,600		4,141		459		2,936		2,776		160
Other noncurrent assets
Derivative assets:
Interest rate contracts	18		—		18		117		—		117
Foreign exchange contracts	219		—		219		5		—		5
Total derivative assets	236		—		236		122		—		122
Insurance contracts(b)	762		—		762		693		—		693
Total other noncurrent assets	998		—		998		814		—		814
Total assets	$	31,336	$	4,141	$	27,195	$	14,278	$	2,776	$	11,501

Financial liabilities:
Other current liabilities
Derivative liabilities:

Foreign exchange contracts	$	346	$	—	$	346	$	501	$	—	$	501
Total other current liabilities	346		—		346		501		—		501
Other noncurrent liabilities
Derivative liabilities:

Foreign exchange contracts	477		—		477		599		—		599
Total other noncurrent liabilities	477		—		477		599		—		599
Total liabilities	$	823	$	—	$	823	$	1,100	$	—	$	1,100

(a)Long-term equity securities of $191 million as of October 3, 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).

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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


Carrying values and estimated fair values using a market approach:
	October 3, 2021				December 31, 2020
(MILLIONS)	Carrying Value		Estimated Fair Value at Level 2		Carrying Value		Estimated Fair Value at Level 2
Financial Liabilities
Long-term debt, excluding the current portion	$	36,250	$	42,228	$	37,133	$	45,533

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 October 3, 2021 and December 31, 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:
(MILLIONS)	October 3, 2021		December 31, 2020
Short-term investments
Equity securities with readily determinable fair values(a)	$	2,367	$	567
Available-for-sale debt securities	22,887		9,709
Held-to-maturity debt securities	2,476		161
Total Short-term investments	$	27,730	$	10,437

Long-term investments
Equity securities with readily determinable fair values	$	4,165	$	2,809

Available-for-sale debt securities	434		128
Held-to-maturity debt securities	32		37
Private equity securities at cost(b)	616		432
Total Long-term investments	$	5,248	$	3,406
Equity-method investments	16,349		16,856
Total long-term investments and equity-method investments	$	21,596	$	20,262
Held-to-maturity cash equivalents	$	467	$	89

(a)As of October 3, 2021 and December 31, 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 October 3, 2021, our debt 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:
	October 3, 2021														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.	$	17,414	$	16	$	(179)	$	17,251	$	16,826	$	425	$	—	$	7,593	$	136	$	(4)	$	7,725
Government and agency––U.S.	4,890		—		(1)		4,889		4,881		9		—		1,104		—		(1)		1,103
Corporate and other	1,185		—		(4)		1,181		1,181		—		—		1,006		2		—		1,008
Held-to-maturity debt securities
Time deposits and other	986		—		—		986		959		16		11		283		—		—		283
Government and agency––non-U.S.	1,988		—		—		1,988		1,984		4		1		5		—		—		5
Total debt securities	$	26,463	$	16	$	(183)	$	26,297	$	25,830	$	454	$	12	$	9,991	$	138	$	(5)	$	10,124

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Net (gains)/losses recognized during the period on equity securities(a)	$	(400)	$	70	$	(1,601)	$	(408)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period	(78)		2		(83)		(16)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)	$	(322)	$	68	$	(1,518)	$	(391)

(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 October 3, 2021, there were cumulative impairments and downward adjustments of $95 million and upward adjustments of $151 million. Impairments, downward and upward adjustments were not significant in the third quarter and first nine months of 2021 and 2020.

C. Short-Term Borrowings


Short-term borrowings include:
(MILLIONS)	October 3, 2021		December 31, 2020
Commercial paper	$	100	$	556
Current portion of long-term debt, principal amount	2,664		2,004
Other short-term borrowings, principal amount(a)	866		145
Total short-term borrowings, principal amount	3,630		2,705

Net unamortized discounts, premiums and debt issuance costs	(1)		(2)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted	$	3,629	$	2,703

(a)Includes cash collateral. See Note 7F.

D. Long-Term Debt

New Issuance


In the third quarter of 2021, we issued the following senior unsecured notes at an effective interest rate of 1.79%:
(MILLIONS)		Principal
Interest Rate	Maturity Date	As of October 3, 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.


The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt:
(MILLIONS)	October 3, 2021		December 31, 2020
Total long-term debt, principal amount	$	34,975	$	35,774
Net fair value adjustments related to hedging and purchase accounting	1,470		1,562
Net unamortized discounts, premiums and debt issuance costs	(200)		(207)
Other long-term debt	4		4
Total long-term debt, carried at historical proceeds, as adjusted	$	36,250	$	37,133
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above)	$	2,663	$	2,002

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. We manage our foreign exchange risk principally through the use of derivative financial instruments and

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

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.


The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
	October 3, 2021						December 31, 2020
			Fair Value						Fair Value
(MILLIONS)	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	27,798	$	568	$	743	$	24,369	$	145	$	1,005
Interest rate contracts	1,250		24		—		1,950		135		—
			592		743				280		1,005
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	24,150	129		81		$	15,063	94		95
Total			$	720	$	823			$	373	$	1,100

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of October 3, 2021 and $5.0 billion as of December 31, 2020.


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)
	Three Months Ended
(MILLIONS)	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)	$	—	$	—	$	204	$	(379)	$	(59)	$	(149)
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		10		7		10		7
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(5)		(9)		—		—		—		—
Hedged item	5		9		—		—		—		—


Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—		—		177		(257)		—		—
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c)	—		—		19		9		26		38
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings	—		—		25		—		—		—
Foreign currency long-term debt	—		—		19		(72)		—		—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(74)		255		—		—		—		—
All other net(c)	—		—		—		—		—		—
	$	(74)	$	255	$	453	$	(692)	$	(21)	$	(104)

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Gains/(Losses) Recognized in OID(a)				Gains/(Losses) Recognized in OCI(a)				Gains/(Losses) Reclassified from OCI into OID and COS(a)
	Nine Months Ended
(MILLIONS)	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)	$	—	$	—	$	147	$	(721)	$	(314)	$	(23)
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		31		49		28		48
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(6)		383		—		—		—		—
Hedged item	6		(383)		—		—		—		—


Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—		—		332		(17)		—		—
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c)	—		—		54		185		82		122
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings	—		—		52		8		—		—
Foreign currency long-term debt	—		—		66		(69)		—		—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(97)		205		—		—		—		—
All other net(c)	—		—		1		12		1		(1)
	$	(97)	$	205	$	683	$	(553)	$	(204)	$	147

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

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

a net loss of $18 million in the third quarter of 2021;
a net loss of $94 million in the first nine months of 2021;
a net gain of $34 million in the third quarter of 2020; and
a net gain of $184 million in the first nine months of 2020.

The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $202 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 22 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 in net investment hedges. The short-term borrowings carrying value as of October 3, 2021 was $1.2 billion. The long-term debt carrying values as of October 3, 2021 and December 31, 2020 were $862 million and $2.1 billion, respectively.


The following summarizes cumulative basis adjustments for fair value hedges to our long-term debt:
	October 3, 2021						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	$	1,241	$	18	$	1,178	$	2,016	$	117	$	1,149

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

F. Credit Risk

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 13B below and Note 17B in our 2020 Form 10-K.

As of October 3, 2021, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by the U.S., Canada, Germany, Japan, U.K., France, Australia, Sweden, Denmark, Switzerland, and Finland.

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 October 3, 2021, the aggregate fair value of these derivative financial instruments that are in a net payable position was $357 million, for which we have posted collateral of $357 million with a corresponding amount reported in Short-term investments. As of October 3, 2021, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $246 million, for which we have received collateral of $236 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:
(MILLIONS)	October 3, 2021		December 31, 2020
Finished goods	$	3,280	$	2,878
Work-in-process	4,469		4,430
Raw materials and supplies	891		738
Inventories(a)	$	8,640	$	8,046
Noncurrent inventories not included above(b)	$	935	$	890

(a)The change from December 31, 2020 primarily reflects increases for certain products, including inventory build for new product launches (primarily Comirnaty), supply recovery and network strategy, 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 $7.8 billion as of October 3, 2021 and $25 million as of December 31, 2020.

Note 9. Identifiable Intangible Assets


The following summarizes the components of Identifiable intangible assets:
	October 3, 2021						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)	$	74,144	$	(53,472)	$	20,673	$	73,545	$	(50,902)	$	22,643
Brands	922		(799)		123		922		(774)		148
Licensing agreements and other	2,284		(1,273)		1,011		2,292		(1,186)		1,106

	77,350		(55,544)		21,807		76,759		(52,862)		23,896
Indefinite-lived intangible assets
Brands	827				827		827				827
IPR&D	3,100				3,100		3,175				3,175
Licensing agreements and other	573				573		573				573
	4,500				4,500		4,575				4,575
Identifiable intangible assets(b)	$	81,850	$	(55,544)	$	26,306	$	81,334	$	(52,862)	$	28,471

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(a)The increase in the gross carrying amount primarily reflects $500 million of capitalized Comirnaty sales milestones to BioNTech.

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

Amortization

Total amortization of finite-lived intangible assets was $993 million for the third quarter of 2021 and $873 million for the third quarter of 2020, and $2.8 billion for the first nine months of 2021 and $2.6 billion for the first nine months of 2020.

Note 10. Pension and Postretirement Benefit 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.


The following summarizes the components of net periodic benefit cost/(credit), including in 2020 costs/(credits) reported as part of discontinued operations:

	Pension Plans
	U.S.				International				Postretirement Plans
	Three Months Ended
(MILLIONS)	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
Service cost	$	—	$	—	$	32	$	36	$	9	$	10
Interest cost	114		139		37		40		7		13
Expected return on plan assets	(261)		(251)		(83)		(79)		(10)		(9)
Amortization of prior service credits	—		(1)		—		(1)		(39)		(43)

Curtailments	—		—		—		—		(64)		—
Actuarial (gains)/losses(a)	(836)		1,212		—		—		—		—
Special termination benefits	—		—		—		—		—		—
Net periodic benefit cost/(credit) reported in income	$	(983)	$	1,099	$	(14)	$	(3)	$	(96)	$	(30)

	Pension Plans
	U.S.				International				Postretirement Plans
	Nine Months Ended
(MILLIONS)	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
Service cost	$	—	$	—	$	98	$	108	$	27	$	29
Interest cost	341		419		110		122		22		38
Expected return on plan assets	(782)		(754)		(246)		(238)		(29)		(27)
Amortization of prior service credits	(1)		(3)		(1)		(2)		(116)		(129)

Curtailments	—		—		(1)		—		(64)		—
Actuarial (gains)/losses(a)	(881)		1,369		—		2		—		—
Special termination benefits	12		1		—		—		1		—
Net periodic benefit cost/(credit) reported in income	$	(1,312)	$	1,033	$	(40)	$	(7)	$	(160)	$	(89)

(a)Mainly reflects interim actuarial remeasurement gains in 2021, primarily due to favorable plan asset performance and an increase in the discount rate, and interim actuarial remeasurement losses in 2020, primarily due to a reduction in the discount rate.

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

For the nine months ended October 3, 2021, we contributed $127 million, $259 million, and $35 million to our U.S. Pension Plans, International Pension Plans, and Postretirement Plans, respectively, from our general assets, which include direct employer benefit payments.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 11. Earnings Per Common Share Attributable to Pfizer Inc. Common Shareholders


The following presents the detailed calculation of EPS:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
EPS Numerator––Basic
Income from continuing operations attributable to Pfizer Inc.	$	8,155	$	909	$	18,563	$	5,979
Less: Preferred stock dividends––net of tax	—		—		—		—
Income from continuing operations attributable to Pfizer Inc. common shareholders	8,155		909		18,563		5,979
Income/(loss) from discontinued operations––net of tax	(9)		560		24		2,334


Net income attributable to Pfizer Inc. common shareholders	$	8,146	$	1,469	$	18,586	$	8,313
EPS Numerator––Diluted
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions	$	8,155	$	909	$	18,563	$	5,979
Income/(loss) from discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions	(9)		560		24		2,334
Net income attributable to Pfizer Inc. common shareholders and assumed conversions	$	8,146	$	1,469	$	18,586	$	8,313
EPS Denominator
Weighted-average number of common shares outstanding––Basic	5,609		5,557		5,597		5,552
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements	116		76		91		70
Weighted-average number of common shares outstanding––Diluted	5,725		5,633		5,688		5,622
Anti-dilutive common stock equivalents(a)	—		7		3		5

(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.

Note 12. 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. We are the plaintiff in the majority of these actions. An adverse outcome in actions in which we are the plaintiff 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.
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, 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.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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, 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.

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

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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 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 2018, 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 11 mg extended release tablets. In September 2021, we settled the case against Teva on terms not material to us.

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.

Inlyta (axitinib)

In 2019, Glenmark Pharmaceuticals Limited (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)

In 2019, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance capsules. The companies asserted the invalidity and non-infringement of two composition of matter patents, one of which expires in 2023 and one of which expires in 2027, as a result of a U.S. Patent Term Extension certificate issued in January 2021, and a method of use patent covering palbociclib, which expires in 2023. In 2019, 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. In August 2021, the litigation concluded without settlements or a court decision.

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 certain 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

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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 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

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in the 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 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.

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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.

Array Securities Litigation

In 2017, two purported class actions were filed in the U.S. District Court for the District of Colorado alleging that Array, which we acquired in 2019 and is our wholly owned subsidiary, and certain of its former officers violated federal securities laws in connection with certain disclosures made, or omitted, by Array regarding the NRAS-mutant melanoma program. In 2018, the actions were consolidated into a single proceeding. In March 2021, the parties reached an agreement in principle to resolve the litigation on terms not material to Pfizer.

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 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 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 two 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

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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 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. The plaintiffs are appealing the District Court’s decision.

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.

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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 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.

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 our 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 Foreign Corrupt Practices Act (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.

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 Note 12A2. Contingencies and Certain Commitments: 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.

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A5. Legal Proceedings––Matters Resolved During the First Nine Months of 2021

During the first nine months of 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 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 the federal Racketeer Influenced and Corrupt Organizations Act (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 settlement is subject to court approval, and the payment has been 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 October 3, 2021, the estimated fair value of these indemnification obligations was not significant.

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, which are now subsidiaries of Pfizer. See Note 7D.

C. 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. For additional information, see Note 1D in our 2020 Form 10-K.

Note 13. Product, Geographic and Other Revenue Information

A. Geographic Information


The following summarizes revenues by geographic area:
	Three Months Ended					Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		% Change	October 3, 2021		September 27, 2020		% Change
United States	$	7,079	$	5,425	30	$	22,269	$	15,827	41
Developed Europe	6,221		1,864		234	13,836		5,437		154
Developed Rest of World	4,498		1,065		322	8,617		2,974		190
Emerging Markets	6,296		1,923		227	12,930		5,986		116
Revenues	$	24,094	$	10,277	134	$	57,653	$	30,224	91

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 European Commission (EC)

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

B. Other Revenue Information

Significant Customers

For information on our significant wholesale customers, see Note 17B in our 2020 Form 10-K. Additionally, revenues from the U.S. government represented 10% and 12% of total revenues for the three and nine months ended October 3, 2021, respectively, and primarily represent sales of Comirnaty. Accounts receivable from the U.S. government represented 8% of total trade accounts receivable as of October 3, 2021, and primarily relate to sales of Comirnaty.

Significant Product Revenues

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


(MILLIONS)		Three Months Ended				Nine Months Ended
PRODUCT	PRIMARY INDICATION OR CLASS	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
TOTAL REVENUES(a)		$	24,094	$	10,277	$	57,653	$	30,224
Vaccines		$	14,583	$	1,717	$	28,711	$	4,574
Comirnaty direct sales and alliance revenues	Active immunization to prevent COVID-19	12,977		—		24,277		—
Prevnar family(b)	Pneumococcal disease	1,447		1,534		3,971		4,100
FSME/IMMUN-TicoVac	Tick-borne encephalitis disease	47		77		161		170
Nimenrix	Meningococcal ACWY disease	51		50		145		180
Trumenba	Meningococcal B disease	52		48		102		85
All other Vaccines	Various	10		8		55		39
Oncology		$	3,085	$	2,761	$	9,091	$	7,843
Ibrance	HR-positive/HER2-negative metastatic breast cancer	1,381		1,357		4,039		3,955
Xtandi alliance revenues	mCRPC, nmCRPC, mCSPC	309		266		879		741
Inlyta	Advanced RCC	256		195		742		559
Sutent	Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor	142		202		537		616
Bosulif	Philadelphia chromosome–positive chronic myelogenous leukemia	136		111		395		324
Xalkori	ALK-positive and ROS1-positive advanced NSCLC	116		122		371		409
Ruxience(c)	Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis	124		59		343		78
Retacrit(c)	Anemia	110		102		322		278
Zirabev(c)	Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer	96		48		311		63
Lorbrena	ALK-positive metastatic NSCLC	67		55		193		142
Aromasin	Post-menopausal early and advanced breast cancer	56		35		159		107
Besponsa	Relapsed or refractory B-cell acute lymphoblastic leukemia	50		44		145		134
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	47		42		136		116
Bavencio alliance revenues	Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC	54		21		122		51
Mektovi	In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation	41		34		112		103
All other Oncology	Various	98		69		286		167
Internal Medicine		$	2,097	$	2,085	$	7,093	$	6,695
Eliquis direct sales and alliance revenues	Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism	1,346		1,114		4,470		3,686
Premarin family	Symptoms of menopause	148		168		420		471
Chantix/Champix	An aid to smoking cessation treatment in adults 18 years of age or older	7		223		409		728
BMP2	Development of bone and cartilage	71		70		186		197

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


(MILLIONS)		Three Months Ended				Nine Months Ended
PRODUCT	PRIMARY INDICATION OR CLASS	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
Toviaz	Overactive bladder	56		59		174		183
Pristiq	Depression	43		40		144		124
All other Internal Medicine	Various	426		411		1,291		1,305
Hospital(a)		$	2,367	$	1,790	$	6,968	$	5,741
Sulperazon	Bacterial infections	181		143		515		432
Medrol	Anti-inflammatory glucocorticoid	109		87		320		295
Zavicefta	Bacterial infections	107		49		306		143
EpiPen	Epinephrine injection used in treatment of life-threatening allergic reactions	78		75		225		234
Fragmin	Treatment/prevention of venous thromboembolism	74		60		223		178
Vfend	Fungal infections	51		52		204		201
Zithromax	Bacterial infections	66		25		198		218
Tygacil	Bacterial infections	56		33		153		115
Precedex	Sedation agent in surgery or intensive care	50		55		147		211
Zyvox	Bacterial infections	41		51		144		176
IVIg Products(d)	Various	99		88		311		271
Pfizer CentreOne(e)	Various	521		242		1,348		618
All other Anti-infectives	Various	355		301		1,081		936
All other Hospital	Various	577		529		1,794		1,713
Inflammation & Immunology (I&I)		$	1,094	$	1,173	$	3,200	$	3,299
Xeljanz	RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis	610		654		1,734		1,741
Enbrel (Outside the U.S. and Canada)	RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis	283		321		888		1,005
Inflectra/Remsima(c)	Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis	172		162		485		471
All other I&I	Various	28		35		93		83
Rare Disease		$	869	$	752	$	2,588	$	2,071
Vyndaqel/Vyndamax	ATTR-cardiomyopathy and polyneuropathy	501		351		1,454		859
BeneFIX	Hemophilia B	104		107		328		337
Genotropin	Replacement of human growth hormone	95		107		284		316
Refacto AF/Xyntha	Hemophilia A	69		92		235		272
Somavert	Acromegaly	70		67		203		198
All other Rare Disease	Various	30		27		84		89
Total Alliance revenues		$	2,068	$	1,250	$	5,718	$	4,036
Total Biosimilars(c)		$	575	$	424	$	1,663	$	1,001
Total Sterile Injectable Pharmaceuticals(f)		$	1,443	$	1,192	$	4,306	$	3,826

(a)On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. See Note 1A. Beginning in the fourth quarter of 2020, the results of our Meridian subsidiary, which was previously included in our former Upjohn operating segment, are reported in the Hospital therapeutic area for all periods presented.

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

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

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

(e)Pfizer CentreOne includes revenues from our contract manufacturing, including certain Comirnaty-related manufacturing activities performed on behalf of BioNTech ($187 million and $274 million for the third quarter and the first nine months of 2021, respectively), 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.

(f)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.

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 $3.7 billion as of October 3, 2021 and $957 million as of December 31, 2020, with $3.4 billion and $264 million recorded in current liabilities and noncurrent liabilities, respectively as of October 3, 2021, and $957 million recorded in current liabilities as of December 31, 2020. The increase in the Comirnaty deferred revenues during the first nine months of 2021 was the result of additional advance

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 the third quarter and first nine months of 2021, we recognized revenue of $136 million and $950 million, respectively, that was included in the balance of Comirnaty deferred revenues as of December 31, 2020. The Comirnaty deferred revenues as of October 3, 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 the fourth quarter of 2022 and in 2023.

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