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				Six Months Ended
(MILLIONS, EXCEPT PER COMMON SHARE DATA)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Revenues	$	27,742	$	18,899	$	53,402	$	33,415
Costs and expenses:
Cost of sales(a)	8,648		6,996		18,632		11,153
Selling, informational and administrative expenses(a)	3,048		2,923		5,642		5,700
Research and development expenses(a)	2,815		2,239		5,116		4,233
Acquired in-process research and development expenses(b)	1		219		356		238
Amortization of intangible assets	822		917		1,657		1,776
Restructuring charges and certain acquisition-related costs	189		(1)		381		21

Other (income)/deductions––net	772		(1,343)		1,122		(2,347)
Income from continuing operations before provision/(benefit) for taxes on income	11,447		6,949		20,497		12,641
Provision/(benefit) for taxes on income	1,570		1,123		2,742		1,931
Income from continuing operations	9,877		5,825		17,756		10,710

Discontinued operations––net of tax	34		(236)		26		(235)


Net income before allocation to noncontrolling interests	9,911		5,589		17,781		10,475
Less: Net income attributable to noncontrolling interests	6		26		12		35
Net income attributable to Pfizer Inc. common shareholders	$	9,906	$	5,563	$	17,769	$	10,440

Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	1.76	$	1.04	$	3.17	$	1.91
Discontinued operations––net of tax	0.01		(0.04)		—		(0.04)
Net income attributable to Pfizer Inc. common shareholders	$	1.77	$	0.99	$	3.17	$	1.87

Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders	$	1.73	$	1.02	$	3.09	$	1.88
Discontinued operations––net of tax	0.01		(0.04)		—		(0.04)
Net income attributable to Pfizer Inc. common shareholders	$	1.73	$	0.98	$	3.10	$	1.84

Weighted-average shares––basic	5,593		5,598		5,605		5,591
Weighted-average shares––diluted	5,712		5,678		5,735		5,670

(a)Exclusive of amortization of intangible assets.

(b)See Note 1D.

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended				Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net income before allocation to noncontrolling interests	$	9,911	$	5,589	$	17,781	$	10,475

Foreign currency translation adjustments, net	(1,268)		36		(1,631)		501


Unrealized holding gains/(losses) on derivative financial instruments, net	651		(248)		854		(35)
Reclassification adjustments for (gains)/losses included in net income(a)	(144)		(21)		(357)		238
	507		(270)		497		203
Unrealized holding gains/(losses) on available-for-sale securities, net	(486)		59		(620)		138
Reclassification adjustments for (gains)/losses included in net income(b)	255		61		487		(181)

	(232)		120		(132)		(43)

Reclassification adjustments related to amortization of prior service costs and other, net	(31)		(39)		(68)		(79)
Reclassification adjustments related to curtailments of prior service costs and other, net	1		(1)		(10)		(5)

	(30)		(41)		(78)		(84)
Other comprehensive income/(loss), before tax	(1,023)		(155)		(1,344)		577
Tax provision/(benefit) on other comprehensive income/(loss)	(55)		(63)		(115)		21
Other comprehensive income/(loss) before allocation to noncontrolling interests	$	(968)	$	(92)	$	(1,228)	$	556

Comprehensive income/(loss) before allocation to noncontrolling interests	$	8,943	$	5,498	$	16,553	$	11,031
Less: Comprehensive income/(loss) attributable to noncontrolling interests	—		28		6		38
Comprehensive income/(loss) attributable to Pfizer Inc.	$	8,943	$	5,469	$	16,546	$	10,992

(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)	July 3, 2022		December 31, 2021
	(Unaudited)
Assets
Cash and cash equivalents	$	1,780	$	1,944
Short-term investments	31,524		29,125
Trade accounts receivable, less allowance for doubtful accounts: 2022—$461; 2021—$492	15,155		11,479
Inventories	10,454		9,059
Current tax assets	2,583		4,266
Other current assets	5,970		3,820
Total current assets	67,466		59,693
Equity-method investments	14,799		16,472
Long-term investments	4,163		5,054
Property, plant and equipment, less accumulated depreciation: 2022—$14,969; 2021—$15,074	15,244		14,882
Identifiable intangible assets	29,065		25,146
Goodwill	49,891		49,208
Noncurrent deferred tax assets and other noncurrent tax assets	7,002		3,341
Other noncurrent assets	7,659		7,679

Total assets	$	195,290	$	181,476

Liabilities and Equity
Short-term borrowings, including current portion of long-term debt: 2022—$1,276; 2021—$1,636	$	5,990	$	2,241
Trade accounts payable	6,208		5,578
Dividends payable	2,245		2,249
Income taxes payable	3,350		1,266
Accrued compensation and related items	1,997		3,332
Deferred revenues	3,804		3,067
Other current liabilities	23,816		24,939

Total current liabilities	47,410		42,671

Long-term debt	34,294		36,195
Pension benefit obligations	3,030		3,489
Postretirement benefit obligations	227		235
Noncurrent deferred tax liabilities	558		349
Other taxes payable	10,990		11,331
Other noncurrent liabilities	11,311		9,743
Total liabilities	107,821		104,013

Commitments and Contingencies


Common stock	476		473
Additional paid-in capital	91,183		90,591

Treasury stock	(113,939)		(111,361)
Retained earnings	116,608		103,394
Accumulated other comprehensive loss	(7,119)		(5,897)
Total Pfizer Inc. shareholders’ equity	87,208		77,201
Equity attributable to noncontrolling interests	261		262
Total equity	87,469		77,462
Total liabilities and equity	$	195,290	$	181,476

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


		PFIZER INC. SHAREHOLDERS
	Common Stock				Treasury Stock
(MILLIONS, EXCEPT PER COMMON SHARE DATA)		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, April 3, 2022		9,494	$	476	$	90,844	(3,903)	$	(113,931)	$	111,193	$	(6,157)	$	82,424	$	261	$	82,685
Net income										9,906				9,906		6		9,911
Other comprehensive income/(loss), net of tax												(963)		(963)		(5)		(968)
Cash dividends declared, per share: $0.80
Common stock										(4,489)				(4,489)				(4,489)


Share-based payment transactions		2	—		339		—	(8)		(2)				330				330
Purchases of common stock							—	—						—				—

Other					—		—	—		—				—		—		—
Balance, July 3, 2022		9,496	$	476	$	91,183	(3,903)	$	(113,939)	$	116,608	$	(7,119)	$	87,208	$	261	$	87,469

		PFIZER INC. SHAREHOLDERS
	Common Stock				Treasury Stock
(MILLIONS, EXCEPT PER COMMON SHARE DATA)		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, April 4, 2021		9,445	$	472	$	89,002	(3,851)	$	(111,349)	$	95,158	$	(4,664)	$	68,620	$	245	$	68,865
Net income										5,563				5,563		26		5,589
Other comprehensive income/(loss), net of tax												(94)		(94)		2		(92)
Cash dividends declared, per share: $0.78
Common stock										(4,293)				(4,293)				(4,293)


Share-based payment transactions		5	—		334		—	(7)		(76)				251				251
Purchases of common stock							—	—						—				—

Other					—		—	—		(7)				(6)		—		(6)
Balance, July 4, 2021		9,450	$	472	$	89,336	(3,851)	$	(111,356)	$	96,346	$	(4,758)	$	70,042	$	273	$	70,315


		PFIZER INC. SHAREHOLDERS
	Common Stock				Treasury Stock
(MILLIONS, EXCEPT PER COMMON SHARE DATA)		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, 2022		9,471	$	473	$	90,591	(3,851)	$	(111,361)	$	103,394	$	(5,897)	$	77,201	$	262	$	77,462
Net income										17,769				17,769		12		17,781
Other comprehensive income/(loss), net of tax												(1,223)		(1,223)		(6)		(1,228)
Cash dividends declared, per share: $0.80
Common stock										(4,489)				(4,489)				(4,489)


Share-based payment transactions		25	2		588		(12)	(578)		(66)				(53)				(53)
Purchases of common stock							(39)	(2,000)						(2,000)				(2,000)

Other					3		—	—		—				3		(7)		(4)
Balance, July 3, 2022		9,496	$	476	$	91,183	(3,903)	$	(113,939)	$	116,608	$	(7,119)	$	87,208	$	261	$	87,469

		PFIZER INC. SHAREHOLDERS
	Common Stock				Treasury Stock
(MILLIONS, EXCEPT PER COMMON SHARE DATA)		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										10,440				10,440		35		10,475
Other comprehensive income/(loss), net of tax												552		552		3		556
Cash dividends declared, per share: $0.78
Common stock										(4,377)				(4,377)				(4,377)


Share-based payment transactions		43	2		662		(11)	(368)		(76)				221				221
Purchases of common stock							—	—						—				—

Other					—		—	—		(33)				(33)		—		(33)
Balance, July 4, 2021		9,450	$	472	$	89,336	(3,851)	$	(111,356)	$	96,346	$	(4,758)	$	70,042	$	273	$	70,315

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021
Operating Activities
Net income before allocation to noncontrolling interests	$	17,781	$	10,475
Discontinued operations—net of tax	26		(235)
Net income from continuing operations before allocation to noncontrolling interests	17,756		10,710
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	2,362		2,515
Asset write-offs and impairments	58		55

Deferred taxes from continuing operations	(3,461)		137

Share-based compensation expense	373		393
Benefit plan contributions in excess of expense/income	(146)		(779)
Other adjustments, net	1,270		(1,305)
Other changes in assets and liabilities, net of acquisitions and divestitures	(3,496)		4,102
Net cash provided by operating activities from continuing operations	14,717		15,828
Net cash provided by/(used in) operating activities from discontinued operations	(5)		9
Net cash provided by operating activities	14,711		15,837

Investing Activities
Purchases of property, plant and equipment	(1,394)		(1,091)
Purchases of short-term investments	(18,937)		(15,982)
Proceeds from redemptions/sales of short-term investments	20,151		7,572
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less	(3,153)		(505)
Purchases of long-term investments	(1,324)		(100)
Proceeds from redemptions/sales of long-term investments	226		297
Acquisition of business, net of cash acquired	(6,225)		—
Other investing activities, net	(91)		(72)
Net cash provided by/(used in) investing activities from continuing operations	(10,746)		(9,880)
Net cash provided by/(used in) investing activities from discontinued operations	—		(3)
Net cash provided by/(used in) investing activities	(10,746)		(9,884)

Financing Activities
Proceeds from short-term borrowings	4,012		—

Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less	379		(499)

Principal payments on long-term debt	(1,609)		—
Purchases of common stock	(2,000)		—
Cash dividends paid	(4,493)		(4,355)
Other financing activities, net	(347)		(509)


Net cash provided by/(used in) financing activities	(4,058)		(5,364)
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents	(67)		5
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents	(159)		593
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period	1,983		1,825
Cash and cash equivalents and restricted cash and cash equivalents, at end of period	$	1,824	$	2,418
Supplemental Cash Flow Information



Cash paid/(received) during the period for:
Income taxes	$	3,098	$	2,188
Interest paid	771		798
Interest rate hedges	(10)		(67)
Non-cash transaction:
Right-of-use assets obtained in exchange for lease liabilities	$	242	$	1,204

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 2021 Form 10-K. 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 2021 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 six months ended May 29, 2022 and May 30, 2021, and for U.S. subsidiaries is as of and for the three and six months ended July 3, 2022 and July 4, 2021.

At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business, and PC1, our global contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients. Biopharma is the only reportable segment. See Note 17A in our 2021 Form 10-K and Note 13 below*.*

Business development activities completed in 2021 and 2022 impacted financial results in the periods presented. Discontinued operations in the periods presented relate to the previously divested Meridian subsidiary and post-closing adjustments for other previously divested businesses. See Notes 1A and 2B in our 2021 Form 10-K, and Note 2B below.

We have made certain reclassification adjustments to conform prior-period amounts to the current presentation for discontinued operations, acquired IPR&D expenses and segment reporting.

B. New Accounting Standard Adopted in 2022

On January 1, 2022, we early adopted a new accounting standard for contract assets and contract liabilities acquired in a business combination. Under the new standard, acquired contract assets and contract liabilities are required to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606. This new guidance generally results in the acquirer recognizing contract assets and contract liabilities at the same amounts that were recorded by the acquiree. Previously, these amounts were recognized by the acquirer at fair value as of the acquisition date. We adopted this new standard on a prospective basis and there was no impact to our consolidated financial statements.

C. Revenues and Trade Accounts Receivable

*Revenue Recognition––*We record revenues from product sales when there is a transfer of control of the product from us to the customer. We typically determine transfer of control based on when the product is shipped or delivered and title passes to the customer. For certain contracts, the finished product may temporarily be stored at our or our third-party subcontractors’ locations under a bill-and-hold arrangement. Revenue is recognized on bill-and-hold arrangements at the point in time when the customer obtains control of the product and all of the following criteria have been met: the arrangement is substantive; the product is identified separately as belonging to the customer; the product is ready for physical transfer to the customer; and we do not have the ability to use the product or direct it to another customer. In determining when the customer obtains control of the product, we consider certain indicators, including whether we have a present right to payment from the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and whether customer acceptance has been received.

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

*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)	July 3, 2022		December 31, 2021
Reserve against Trade accounts receivable, less allowance for doubtful accounts	$	1,057	$	1,077
Other current liabilities:
Accrued rebates	3,875		3,811
Other accruals	458		528
Other noncurrent liabilities	386		433
Total accrued rebates and other sales-related accruals	$	5,776	$	5,850

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

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

During the three and six months ended July 3, 2022 and July 4, 2021, 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 1H in our 2021 Form 10-K.

D. Acquired In-Process Research and Development Expenses

In the first quarter of 2022, we began reporting acquired IPR&D expense as a separate line item in our consolidated statements of income. Acquired in-process research and development expenses includes costs incurred in connection with (a) all upfront and milestone payments on collaboration and in-license agreements, including premiums on equity securities and (b) asset acquisitions of acquired IPR&D. These costs were previously recorded in Research and development expenses. Prior periods have been revised to conform to the current period presentation. When we acquire net assets that do not constitute a business, as defined in U.S. GAAP, no goodwill is recognized and acquired IPR&D is expensed. The fair value of IPR&D acquired in connection with a business combination is recorded on the balance sheet as Identifiable intangible assets. See Notes 1E and 10 in our 2021 Form 10-K*.*

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

A. Acquisition

*Arena––*On March 11, 2022, we acquired Arena, a clinical stage company, for $100 per share in cash. The total fair value of the consideration transferred was $6.6 billion ($6.2 billion, net of cash acquired). In addition, $138 million in payments to Arena employees for the fair value of previously unvested long-term incentive awards was recognized as post-closing compensation expense and recorded in Restructuring charges and certain acquisition-related costs (see Note 3).

Arena’s portfolio includes development-stage therapeutic candidates in gastroenterology, dermatology, and cardiology, including etrasimod, an oral, selective sphingosine 1-phosphate (S1P) receptor modulator currently in development for a range of immuno-inflammatory diseases including UC, Crohn’s disease, atopic dermatitis, eosinophilic esophagitis, and alopecia areata. In connection with this acquisition, we provisionally recorded: (i) $5.5 billion in Identifiable intangible assets, consisting of $5.0 billion of IPR&D and $460 million of indefinite-lived Licensing agreements and other, (ii) $1.0 billion of Goodwill and (iii) $510 million of net deferred tax liabilities. The allocation of the consideration transferred to the assets acquired and the liabilities assumed has not yet been finalized.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Discontinued Operations

*Meridian––*On December 31, 2021, we completed the sale of our Meridian subsidiary. In the three and six months ended July 3, 2022, the amounts recorded under the interim TSAs and MSA were not material.

*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. In connection with this transaction, Pfizer and Viatris entered into various agreements to effect the separation and combination and to provide a framework for our relationship after the combination, including a separation and distribution agreement, interim operating models, including agency arrangements, MSAs, TSAs, a tax matters agreement, and an employee matters agreement, among others. The amounts recorded under these agreements were not material to our consolidated results of operations in the three and six months ended July 3, 2022 and July 4, 2021. Net amounts due from Viatris under the agreements were approximately $272 million as of July 3, 2022 and $53 million as of December 31, 2021. The cash flows associated with the 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.

Discontinued operations—net of tax for the three and six months ended July 4, 2021 reflects pre-tax loss from discontinued operations of $346 million and $337 million, respectively, and primarily includes pre-disposal operations related to our former Meridian subsidiary including a $345 million pre-tax expense to resolve a Multi-District Litigation relating to EpiPen against the Company in the U.S. District Court for the District of Kansas (prior to presenting Meridian as discontinued operations, this EpiPen litigation amount was included in Other (income)/deductions––net). For the three and six months ended July 3, 2022, Discontinued operations—net of tax reflects pre-tax income from discontinued operations of $34 million and $24 million, respectively, and relates to post-closing adjustments for previously divested businesses primarily for tax and legal matters.

C. Equity-Method Investment

*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 operated globally under the GSK Consumer Healthcare name. In exchange for the contribution of our consumer healthcare business to the JV, we received a 32% equity stake in the new company and GSK owned the remaining 68%. We have accounted 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 $14.6 billion as of July 3, 2022 and $16.3 billion as of December 31, 2021 and is reported as a private equity investment in Equity-method investments as of July 3, 2022 and December 31, 2021. 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, 2021 is primarily due to $1.7 billion in pre-tax foreign currency translation adjustments (see Note 6), as well as dividends totaling approximately $354 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 first quarter of 2022, which we recorded in our operating results in the second quarter of 2022, was $150 million. Our total share of the JV’s earnings generated in the fourth quarter of 2021 and first quarter of 2022, which we recorded in our operating results in the first six months of 2022, was $335 million. Our total share of the JV’s earnings generated in the first quarter of 2021, which we recorded in our operating results in the second quarter of 2021, was $148 million. Our total share of the JV’s earnings generated in the fourth quarter of 2020 and first quarter of 2021, which we recorded in our operating results in the first six months of 2021, was $218 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three and six months ending March 31, 2022, the most recent period available, and for the three and six months ending March 31, 2021, is as follows:
	Three Months Ended				Six Months Ended
(MILLIONS)	March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021
Net sales	$	3,526	$	3,180	$	6,945	$	6,275
Cost of sales	(1,322)		(1,169)		(2,634)		(2,356)
Gross profit	$	2,204	$	2,011	$	4,312	$	3,919
Income from continuing operations	487		483		1,077		716
Net income	487		483		1,077		716
Income attributable to shareholders	468		461		1,046		682

In connection with GSK’s previously announced planned demerger of at least 80% of GSK’s 68% equity interest in the Consumer Healthcare JV, in March 2022 the Consumer Healthcare JV completed its offering of a total aggregate principal amount of $8.75 billion in U.S. dollar-denominated senior notes of various maturities, €2.35 billion in euro-denominated senior notes of various maturities and £700 million in U.K. pound-denominated senior notes of various maturities (collectively, the “notes”). The notes were guaranteed by GSK generally up to and excluding the date of the demerger (the “Guarantee Assumption Date”). We agreed to indemnify GSK for 32% (representing our pro rata equity interest in the Consumer Healthcare JV) of any amount payable by GSK pursuant to its guarantee of the notes. Our indemnity was provided solely for the benefit of GSK. Neither we nor any of our subsidiaries is an issuer or guarantor of any of the notes.

Following its issuance of the notes in March 2022, which fell in our international second quarter of 2022, the Consumer Healthcare JV loaned to us and GSK the net proceeds received from the notes on a pro rata equity ownership basis, for which we received a loan of £2.9 billion ($3.7 billion as of the end of our second quarter of 2022), at an interest rate of 1.365% per annum payable semi-annually in arrears.

On July 18, 2022, GSK completed its demerger of the Consumer Healthcare JV which became Haleon, an independent, publicly traded company listed on the London Stock Exchange that holds the joint Consumer Healthcare business of GSK and Pfizer following the demerger. In conjunction with the demerger, we received £3.5 billion ($4.2 billion) in dividends from the JV in July 2022, which decreased the carrying value of our investment. Simultaneous with the receipt of the dividends, we repaid the loan from the JV. GSK similarly received pro rata dividends and simultaneously repaid its pro rata loan from the JV. In conjunction with these transactions, our indemnification of GSK’s guarantee discussed above was terminated. We continue to own 32% of Haleon after the transactions related to the demerger and continue to account for our interest in Haleon as an equity-method investment.

D. Collaborative Arrangement

*Collaboration with Biohaven––*In November 2021, we entered into a collaboration and license agreement and related sublicense agreement with Biohaven and certain of its subsidiaries to commercialize rimegepant and zavegepant for the treatment and prevention of migraines outside of the U.S., subject to regulatory approval. Biohaven will continue to lead R&D globally and we have the exclusive right to commercialization globally, outside of the U.S. Upon the closing of the transaction on January 4, 2022, we paid Biohaven $500 million, including an upfront payment of $150 million and an equity investment of $350 million. We recognized $263 million for the upfront payment and premium paid on our equity investment in Acquired in-process research and development expenses. Biohaven is also eligible to receive up to $740 million in non-U.S. commercialization milestone payments, in addition to tiered double-digit royalties on net sales outside of the U.S. In addition to the milestone payments and royalties above, we will also reimburse Biohaven for the portion of certain additional milestone payments and royalties due to third parties in accordance with preexisting Biohaven agreements, which are attributed to ex-U.S. sales.

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 continue our efforts to ensure our cost base and support model align appropriately with this operating structure. While certain direct costs

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 $1.8 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 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 $1.2 billion, with all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.
We are also optimizing our manufacturing network under this program and incurring one-time costs for cost-reduction initiatives related to our manufacturing operations. We expect to incur costs of $800 million, with approximately 25% of the costs to be non-cash. The costs for this effort include, among other things, severance costs, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.

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

From the start of this program in the fourth quarter of 2019 through July 3, 2022, we incurred costs of $2.5 billion, of which $987 million ($800 million of restructuring charges) is associated with Biopharma.

B. Key Activities


The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
	Three Months Ended				Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Restructuring charges/(credits):
Employee terminations	$	110	$	(4)	$	135	$	19
Asset impairments	20		2		28		(3)
Exit costs/(credits)	18		(3)		29		(3)
Restructuring charges/(credits)(a)	147		(5)		191		12
Transaction costs(b)	36		—		42		—
Integration costs and other(c)	6		4		148		8
Restructuring charges and certain acquisition-related costs	189		(1)		381		21
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net	—		4		(6)		12
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d):
Cost of sales	7		27		15		34
Selling, informational and administrative expenses	—		16		—		16

Total additional depreciation––asset restructuring	7		43		15		49
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	15		10		27		21
Selling, informational and administrative expenses	134		80		208		144


Total implementation costs	149		90		235		166
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	345	$	137	$	625	$	248

(a)Primarily represents cost reduction initiatives. Restructuring charges/(credits) associated with Biopharma: charges of $50 million and $46 million for the three and six months ended July 3, 2022, respectively, and credits of $4 million and charges of $1 million for the three and six months ended July 4, 2021, respectively.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(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. In the three and six months ended July 3, 2022, integration costs and other were mostly related to our acquisition of Arena, including $138 million in payments to Arena employees in the first quarter of 2022 for the fair value of previously unvested long-term incentive awards. See Note 2A.

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

(e)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, 2021(a)	$	1,014	$	—	$	57	$	1,071
Provision	135		28		29		191
Utilization and other(b)	(244)		(28)		(78)		(349)
Balance, July 3, 2022(c)	$	904	$	—	$	8	$	913

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

(b)Includes adjustments for foreign currency translation.

(c)Included in Other current liabilities ($794 million) and Other noncurrent liabilities ($119 million).

Note 4. Other (Income)/Deductions—Net


Components of Other (income)/deductions––net include:
	Three Months Ended				Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Interest income	$	(30)	$	(13)	$	(44)	$	(12)
Interest expense	293		316		614		651
Net interest expense	263		303		571		639
Royalty-related income	(217)		(212)		(389)		(388)
Net (gains)/losses on asset disposals	—		(58)		(1)		(98)
Net (gains)/losses recognized during the period on equity securities(a)	541		(800)		1,241		(1,200)
Income from collaborations, out-licensing arrangements and sales of compound/product rights(b)	(5)		(21)		(14)		(252)
Net periodic benefit costs/(credits) other than service costs	295		(237)		12		(503)
Certain legal matters, net	19		24		98		74

Consumer Healthcare JV equity method (income)/loss(c)	(149)		(140)		(334)		(202)
Other, net	26		(201)		(62)		(417)
Other (income)/deductions––net	$	772	$	(1,343)	$	1,122	$	(2,347)

(a)The losses in the second quarter and first six months of 2022 include, among other things, unrealized losses of $432 million and $776 million, respectively, related to investments in BioNTech and Cerevel Therapeutics Holdings, Inc. (Cerevel). The gains in the second quarter and first six months of 2021 included, among other things, unrealized gains of $917 million and $1.0 billion, respectively, related to investments in BioNTech and Cerevel.

(b)The first six months of 2021 included, among other things, $188 million of net collaboration income from BioNTech in the first quarter of 2021 related to Comirnaty.

(c)See Note 2C.

Note 5. Tax Matters

A. Taxes on Income from Continuing Operations

Our effective tax rate for continuing operations was 13.7% for the second quarter of 2022, compared to 16.2% for the second quarter of 2021, and was 13.4% for the first six months of 2022, compared to 15.3% for the first six months of 2021. The lower effective tax rates for the second quarter and first six months of 2022, compared to the second quarter and first six months of 2021, were primarily due to the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.

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 fourth annual installment of this liability was paid by its April 18, 2022 due date. The fifth annual installment is due April 18, 2023 and is reported in current Income taxes payable as of July 3, 2022*.* The remaining liability is reported in noncurrent Other taxes

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 2019-2022 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 2021 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				Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Foreign currency translation adjustments, net(a)	$	(114)	$	(19)	$	(185)	$	2
Unrealized holding gains/(losses) on derivative financial instruments, net	98		(51)		130		7
Reclassification adjustments for (gains)/losses included in net income	(3)		1		(26)		35
	95		(50)		105		43
Unrealized holding gains/(losses) on available-for-sale securities, net	(61)		7		(78)		17
Reclassification adjustments for (gains)/losses included in net income	32		8		61		(23)
	(29)		15		(17)		(5)






Reclassification adjustments related to amortization of prior service costs and other, net	(7)		(8)		(16)		(17)
Reclassification adjustments related to curtailments of prior service costs and other, net	—		(1)		(2)		(1)

	(8)		(8)		(18)		(18)
Tax provision/(benefit) on other comprehensive income/(loss)	$	(55)	$	(63)	$	(115)	$	21

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

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, 2021	$	(6,172)	$	119	$	(220)	$	377	$	(5,897)
Other comprehensive income/(loss)(a)	(1,440)		392		(116)		(59)		(1,223)
Balance, July 3, 2022	$	(7,612)	$	511	$	(336)	$	318	$	(7,119)

(a)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 2C) and the impact of our net investment hedging program.

PFIZER INC. AND SUBSIDIARY COMPANIES

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:


	July 3, 2022						December 31, 2021
(MILLIONS)	Total		Level 1		Level 2		Total		Level 1		Level 2
Financial assets:
Short-term investments
Equity securities with readily determinable fair values:
Money market funds	$	4,373	$	—	$	4,373	$	5,365	$	—	$	5,365

Available-for-sale debt securities:
Government and agency—non-U.S.	21,758		—		21,758		17,318		—		17,318
Government and agency—U.S.	2,839		—		2,839		4,050		—		4,050
Corporate and other	1,024		—		1,024		647		—		647
	25,621		—		25,621		22,014		—		22,014
Total short-term investments	29,994		—		29,994		27,379		—		27,379
Other current assets
Derivative assets:
Interest rate contracts	8		—		8		4		—		4
Foreign exchange contracts	1,322		—		1,322		704		—		704
Total other current assets	1,331		—		1,331		709		—		709
Long-term investments
Equity securities with readily determinable fair values(a)	3,041		3,028		13		3,876		3,849		27

Available-for-sale debt securities:
Government and agency—non-U.S.	305		—		305		465		—		465
Government and agency—U.S.	—		—		—		6		—		6
Corporate and other	74		—		74		50		—		50
	379		—		379		521		—		521
Total long-term investments	3,420		3,028		392		4,397		3,849		548
Other noncurrent assets
Derivative assets:
Interest rate contracts	—		—		—		16		—		16
Foreign exchange contracts	562		—		562		242		—		242
Total derivative assets	562		—		562		259		—		259
Insurance contracts(b)	665		—		665		808		—		808
Total other noncurrent assets	1,227		—		1,227		1,067		—		1,067
Total assets	$	35,972	$	3,028	$	32,944	$	33,552	$	3,849	$	29,703

Financial liabilities:
Other current liabilities
Derivative liabilities:

Foreign exchange contracts	$	432	$	—	$	432	$	476	$	—	$	476
Total other current liabilities	432		—		432		476		—		476
Other noncurrent liabilities
Derivative liabilities:
Interest rate contracts	206		—		206		—		—		—
Foreign exchange contracts	653		—		653		405		—		405
Total other noncurrent liabilities	859		—		859		405		—		405
Total liabilities	$	1,291	$	—	$	1,291	$	881	$	—	$	881

(a)Long-term equity securities of $144 million as of July 3, 2022 and $194 million as of December 31, 2021 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).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

*Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis––*The carrying value of Long-term debt, excluding the current portion was $34 billion as of July 3, 2022 and $36 billion as of December 31, 2021. The estimated fair value of such debt, using a market approach and Level 2 inputs, was $34 billion as of July 3, 2022 and $42 billion as of December 31, 2021.

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 July 3, 2022 and December 31, 2021. 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)	July 3, 2022		December 31, 2021
Short-term investments
Equity securities with readily determinable fair values(a)	$	4,373	$	5,365
Available-for-sale debt securities	25,621		22,014
Held-to-maturity debt securities	1,530		1,746
Total Short-term investments	$	31,524	$	29,125

Long-term investments
Equity securities with readily determinable fair values	$	3,041	$	3,876

Available-for-sale debt securities	379		521
Held-to-maturity debt securities	39		34
Private equity securities at cost(b)	705		623
Total Long-term investments	$	4,163	$	5,054
Equity-method investments	14,799		16,472
Total long-term investments and equity-method investments	$	18,962	$	21,526
Held-to-maturity cash equivalents	$	225	$	268

(a)As of July 3, 2022 and December 31, 2021, includes money market funds primarily invested in U.S. Treasury and government debt.

(b)Represent investments in the life sciences sector.

Debt Securities


At July 3, 2022, our investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows:
	July 3, 2022														December 31, 2021
			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.	$	22,445	$	36	$	(419)	$	22,062	$	21,758	$	305	$	—	$	18,032	$	13	$	(263)	$	17,783
Government and agency––U.S.	2,840		—		(1)		2,839		2,839		—		—		4,056		—		(1)		4,055
Corporate and other	1,098		2		(2)		1,098		1,024		74		—		698		—		(1)		697
Held-to-maturity debt securities
Time deposits and other	913		—		—		913		878		23		11		947		—		—		947
Government and agency––non-U.S.	881		—		—		881		876		3		1		1,102		—		—		1,102
Total debt securities	$	28,177	$	38	$	(422)	$	27,794	$	27,376	$	406	$	12	$	24,835	$	14	$	(265)	$	24,584

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				Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net (gains)/losses recognized during the period on equity securities(a)	$	541	$	(800)	$	1,241	$	(1,200)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period	(68)		24		(79)		(5)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)	$	610	$	(823)	$	1,320	$	(1,196)

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

(b)Included in net unrealized (gains)/losses are observable price changes on equity securities without readily determinable fair values. As of July 3, 2022, there were cumulative impairments and downward adjustments of $108 million and upward adjustments of $194 million. Impairments, downward and upward adjustments were not significant in the second quarter and first six months of 2022 and 2021.

C. Short-Term Borrowings


Short-term borrowings include:
(MILLIONS)	July 3, 2022		December 31, 2021

Current portion of long-term debt, principal amount	$	1,251	$	1,636
Other short-term borrowings, principal amount(a)	4,714		605
Total short-term borrowings, principal amount	5,965		2,241
Net fair value adjustments related to hedging and purchase accounting	25		—

Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted	$	5,990	$	2,241

(a)As of July 3, 2022, primarily includes $3.7 billion related to the Consumer Healthcare JV loan (see Note 2C), and cash collateral (see Note 7F). As of December 31, 2021, primarily includes cash collateral. See Note 7F.

D. Long-Term Debt


The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt:
(MILLIONS)	July 3, 2022		December 31, 2021
Total long-term debt, principal amount	$	33,352	$	34,948
Net fair value adjustments related to hedging and purchase accounting	1,125		1,438
Net unamortized discounts, premiums and debt issuance costs	(185)		(195)
Other long-term debt	2		4
Total long-term debt, carried at historical proceeds, as adjusted	$	34,294	$	36,195

E. Derivative Financial Instruments and Hedging Activities

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

The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen, and Canadian dollar, and include a portion of our forecasted foreign exchange-denominated intercompany inventory sales hedged up to two years. We may seek to protect against possible declines in the reported net investments of our foreign business entities.

*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.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
	July 3, 2022						December 31, 2021
			Fair Value						Fair Value
(MILLIONS)	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	31,576	$	1,642	$	711	$	29,576	$	787	$	717
Interest rate contracts	2,250		8		206		2,250		21		—
			1,650		917				808		717
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	25,929	243		375		$	21,419	160		164
Total			$	1,893	$	1,291			$	968	$	881

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.6 billion as of July 3, 2022 and $4.8 billion as of December 31, 2021.


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)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)	$	—	$	—	$	624	$	(258)	$	119	$	13
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		27		9		25		8
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(66)		26		—		—		—		—
Hedged item	66		(26)		—		—		—		—


Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—		—		674		1		—		—
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		59		36		33		26
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings	—		—		—		(11)		—		—
Foreign currency long-term debt	—		—		48		(8)		—		—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(394)		(65)		—		—		—		—

	$	(394)	$	(65)	$	1,432	$	(230)	$	177	$	47

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)
	Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)	$	—	$	—	$	811	$	(56)	$	314	$	(255)
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		43		21		43		18
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(222)		(1)		—		—		—		—
Hedged item	222		1		—		—		—		—


Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—		—		933		155		—		—
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		(15)		35		63		55
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings	—		—		26		27		—		—
Foreign currency long-term debt	—		—		70		48		—		—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(413)		(23)		—		—		—		—

	$	(413)	$	(23)	$	1,868	$	230	$	421	$	(182)

(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 gain of $68 million in the second quarter of 2022;
a net gain of $102 million in the first six months of 2022;
a net loss of $31 million in the second quarter of 2021; and
a net loss of $76 million in the first six months of 2021.

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 $725 million within the next 12 months into income*.* The maximum length of time over which we are hedging our exposure to the variability in future foreign exchange cash flows is approximately 21 years and relates to foreign currency debt.

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

(d)Short-term borrowings and long-term debt include foreign currency borrowings, which are used in net investment hedges. The short-term borrowings’ carrying value as of December 31, 2021 was $1.1 billion. The long-term debt carrying values as of July 3, 2022 and December 31, 2021 were $774 million and $844 million, respectively.


The following summarizes cumulative basis adjustments to our debt in fair value hedges:
	July 3, 2022						December 31, 2021
			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


Short-term borrowings, including current portion of long-term debt	$	—	$	—	$	22	$	—	$	—	$	—

Long-term debt	$	2,234	$	(206)	$	1,081	$	2,233	$	16	$	1,154

(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 13C below and Note 17C in our 2021 Form 10-K.

As of July 3, 2022, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by France, Germany, Canada, the U.S., Japan, Switzerland and the U.K.

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 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 July 3, 2022, the aggregate fair value of these derivative financial instruments that are in a net payable position was $362 million, for which we have posted collateral of $414 million with a corresponding amount reported in Short-term investments. As of July 3, 2022, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $739 million, for which we have received collateral of $755 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)	July 3, 2022		December 31, 2021
Finished goods	$	3,219	$	3,641
Work-in-process	5,194		4,424
Raw materials and supplies	2,041		994
Inventories(a)	$	10,454	$	9,059
Noncurrent inventories not included above(b)	$	943	$	939

(a)The increase from December 31, 2021 primarily reflects higher inventory levels for Paxlovid, and increases for certain products due to network strategy and supply recovery, partially offset by decreases due to market demand.

(b)Included in Other noncurrent assets.

B. Other Current Liabilities

Other current liabilities includes, among other things, amounts payable to BioNTech for the gross profit split for Comirnaty, which totaled $7.9 billion as of July 3, 2022 and $9.7 billion as of December 31, 2021.

Note 9. Identifiable Intangible Assets

A. Identifiable Intangible Assets


The following summarizes the components of Identifiable intangible assets:
	July 3, 2022						December 31, 2021
(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	$	73,097	$	(54,903)	$	18,193	$	73,346	$	(53,732)	$	19,614
Brands	922		(824)		98		922		(807)		115
Licensing agreements and other	2,296		(1,352)		945		2,284		(1,299)		985

	76,315		(57,079)		19,236		76,552		(55,838)		20,714
Indefinite-lived intangible assets
Brands	827				827		827				827
IPR&D(a)	8,029				8,029		3,092				3,092
Licensing agreements and other(a)	973				973		513				513
	9,829				9,829		4,432				4,432
Identifiable intangible assets(a), (b)	$	86,144	$	(57,079)	$	29,065	$	80,984	$	(55,838)	$	25,146

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(a)The increase in the gross carrying amounts mainly reflect the impact of the acquisition of Arena. See Note 2A.

(b)The increase is primarily due to the acquisition of Arena, partially offset by amortization expense.

B. Goodwill


The following summarizes the changes in the carrying amount of Goodwill:
(MILLIONS)	Total(a)
Balance, January 1, 2022	$	49,208
Additions(b)	1,033
Other(c)	(350)
Balance, July 3, 2022	$	49,891

(a)All goodwill is assigned within the Biopharma reportable segment.

(b)Additions relate to our acquisition of Arena. See Note 2A.

(c)Other represents the impact of foreign exchange.

Note 10. Pension and Postretirement Benefit Plans


The following summarizes the components of net periodic benefit cost/(credit):
	Pension Plans
	U.S.				International				Postretirement Plans
	Three Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Service cost	$	—	$	—	$	30	$	33	$	7	$	9
Interest cost	118		114		41		37		7		7
Expected return on plan assets	(245)		(261)		(77)		(82)		(12)		(10)
Amortization of prior service cost/(credit)	—		—		—		—		(31)		(39)
Actuarial (gains)/losses(a)	490		2		—		—		—		—
Curtailments	—		—		—		(1)		(1)		—
Special termination benefits	1		4		—		—		—		—
Net periodic benefit cost/(credit) reported in income	$	365	$	(142)	$	(6)	$	(14)	$	(30)	$	(32)


	Pension Plans
	U.S.				International				Postretirement Plans
	Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Service cost	$	—	$	—	$	60	$	66	$	15	$	18
Interest cost	236		227		82		73		14		14
Expected return on plan assets	(490)		(521)		(156)		(164)		(23)		(20)
Amortization of prior service credits	1		(1)		—		(1)		(68)		(77)
Actuarial (gains)/losses(a)	424		(45)		—		—		—		—
Curtailments	—		—		—		(1)		(14)		—
Special termination benefits	7		12		—		—		1		1
Net periodic benefit cost/(credit) reported in income	$	178	$	(329)	$	(14)	$	(26)	$	(76)	$	(64)

(a)Mainly reflects interim actuarial remeasurement losses in 2022, primarily driven by unfavorable plan asset performance, partially offset by gains due to an increase in interest rates.

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

For the six months ended July 3, 2022, we contributed $134 million, $89 million, and $11 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				Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
EPS Numerator––Basic


Income from continuing operations attributable to Pfizer Inc. common shareholders	$	9,871	$	5,799	$	17,743	$	10,675
Discontinued operations––net of tax	34		(236)		26		(235)


Net income attributable to Pfizer Inc. common shareholders	$	9,906	$	5,563	$	17,769	$	10,440
EPS Numerator––Diluted
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions	$	9,871	$	5,799	$	17,743	$	10,675
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions	34		(236)		26		(235)
Net income attributable to Pfizer Inc. common shareholders and assumed conversions	$	9,906	$	5,563	$	17,769	$	10,440
EPS Denominator
Weighted-average number of common shares outstanding––Basic	5,593		5,598		5,605		5,591
Common-share equivalents: stock options and stock issuable under employee compensation plans	119		80		130		79
Weighted-average number of common shares outstanding––Diluted	5,712		5,678		5,735		5,670
Anti-dilutive common stock equivalents(a)	1		5		—		4

(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. An adverse outcome could result in loss of patent protection for a product, a significant loss of revenues from a product or impairment of the value of associated assets. We are the plaintiff in the majority of these actions.
Product liability and other product-related litigation related to current or former products, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, and often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.
Commercial and other asserted or unasserted matters, which can include acquisition-, licensing-, intellectual property-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, and can involve complexities that will vary from matter to matter.
Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other jurisdictions.

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

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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. Some of our collaboration or licensing partners face challenges to the validity of their patent rights in non-U.S. jurisdictions. For example, in April 2022, the U.K. High Court issued a judgment finding invalid a BMS patent related to Eliquis due to expire in 2026. BMS is seeking permission to appeal the High Court’s decision. Additional challenges remain pending in other jurisdictions. Also, for example, in July 2022, CureVac AG (CureVac) brought a patent infringement action against BioNTech and certain of its subsidiaries in the German Regional Court alleging that Comirnaty infringes three German utility model patents and one expired European patent. Additional challenges involving Comirnaty patents may be filed against us and/or BioNTech in other jurisdictions in the future. Adverse decisions in these matters could have a material adverse effect on our results of operations. 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 have been challenged in inter partes review and post-grant review proceedings in the U.S. Patent and Trademark Office. In addition, another patent was challenged in federal court in Delaware; and that case was settled in September 2021 on terms not material to the company. Other challenges to pneumococcal vaccine patents remain pending at the Patent Trial and Appeal Board and outside the U.S. The invalidation of any of the patents in our pneumococcal portfolio could potentially allow additional competitor vaccines, if approved, to enter the marketplace earlier than anticipated. In the event that any of the patents are found valid and infringed, a competitor’s vaccine, if approved, might be prohibited from entering the market or a competitor might be required to pay us a royalty.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded significant damages or royalty payments, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold if we or one of our subsidiaries is found to have willfully infringed valid patent rights of a third party.

Actions In Which We Are The Plaintiff

EpiPen

In 2010, King, which we acquired in 2011 and is a wholly-owned subsidiary, brought a patent-infringement action against Sandoz in the U.S. District Court for the District of New Jersey in connection with Sandoz’s abbreviated new drug application (ANDA) filed with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name. We expect that the outcome of this matter will not be material to us.

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

In February 2022, we brought a separate patent-infringement action against Slayback Pharma LLC (Slayback) asserting the infringement and validity of our compound patent covering the active ingredient that was challenged by Slayback in its ANDA seeking approval to market a generic version of tofacitinib oral solution 1 mg/mL. In May 2022, we settled our action against Slayback on terms not material to us.

In June 2022, we brought a separate patent infringement action against MSN Laboratories Private Ltd. (MSN) asserting the infringement and validity of our compound patent covering the active agreement that was challenged by MSN in its ANDAs seeking approval to market generic versions of tofacitinib immediate release tablets (5 mg, 10 mg) and oral solution 1 mg/mL.

Inlyta (axitinib)

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

Ibrance (palbociclib)

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

Beginning in January 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance tablets. The generic companies are challenging some or all of the following patents: (i) the composition of matter patent expiring in 2027; (ii) the composition of matter patent expiring in 2023; (iii) the method of use patent expiring in 2023; (iv) the crystalline form patent expiring in 2034; and (v) a tablet formulation patent expiring in 2036. We brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies. We have settled with one of these generic companies on terms not material to us, and we dismissed the patent infringement actions relating to the crystalline form of patent, the composition of matter patent expiring in 2023, and the method of use patent against the generic companies that had challenged these patents.

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

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

matter patent expiring in 2026, two method of use patents expiring in 2027, and one other method of use patent expiring in 2030. In September 2021, we brought patent infringement actions against the generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the patents challenged by the generic companies.

Actions in Which We are the Defendant

Comirnaty

In March 2022, Alnylam Pharmaceuticals, Inc. (Alnylam) filed a complaint in the U.S. District Court for the District of Delaware against Pfizer and Pharmacia & Upjohn Co. LLC, our wholly owned subsidiary, alleging that Comirnaty infringes U.S. Patent No. 11,246,933, which was issued in February 2022, and seeking unspecified monetary damages. In July 2022, Alnylam filed a second complaint in the U.S. District Court for the District of Delaware against Pfizer, Pharmacia & Upjohn Co. LLC, BioNTech and BioNTech Manufacturing GmbH, alleging that Comirnaty infringes U.S. Patent No. 11,382,979, which was issued in July 2022, and seeking unspecified monetary damages.

Paxlovid

In June 2022, Enanta Pharmaceuticals, Inc. filed a complaint in the U.S. District Court for the District of Massachusetts against Pfizer alleging that the active ingredient in Paxlovid, nirmatrelvir, infringes U.S. Patent No. 11,358,953, which was issued in June 2022, and seeking unspecified monetary damages.

Matters Involving Pfizer and its 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.

Comirnaty

In July 2022, Pfizer, BioNTech and BioNTech Manufacturing GmbH filed a declaratory judgment complaint against CureVac in the U.S. District Court for the District of Massachusetts seeking a judgment of non-infringement for the following three patents relating to Comirnaty: U.S. Patent Nos. 11,135,312, 11,149,278, and 11,241,493.

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.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Effexor

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

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

Lipitor

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

In September 2013 and 2014, the District Court dismissed with prejudice the claims of the direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation plaintiffs. All plaintiffs 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 current and former 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. In August 2022, the District Court granted Pfizer’s motion to dismiss the complaint.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Nexium 24HR and Protonix

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

Docetaxel

*•*Personal Injury Actions

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

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

Mississippi Attorney General Government Action

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

Zantac

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

In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Southern District of Florida. Plaintiffs in the Multi-District Litigation have filed against Pfizer and many other defendants a master personal injury complaint, asserting a consolidated consumer class action 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. In addition, (i) Pfizer has received service of Canadian class action complaints naming Pfizer and other defendants, and seeking compensatory and punitive damages for personal injury and economic loss, allegedly arising from the defendants’ sale of Zantac in Canada; and (ii) the State of New Mexico and the Mayor and City Council of Baltimore separately filed civil actions against Pfizer and many other defendants in state court, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions. In April 2021, a Judicial Council Coordinated Proceeding was created in the Superior Court of California in Alameda County to coordinate personal injury actions against Pfizer and other defendants filed in California state court.

Chantix

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

A3. Legal Proceedings––Commercial and Other Matters

Monsanto-Related Matters

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

In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia

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in connection with various claims and litigation arising out of, or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.

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

Environmental Matters

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

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

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

Contracts with Iraqi Ministry of Health

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

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.

Viatris Securities Litigation

In October 2021, a putative class action was filed in the Court of Common Pleas of Allegheny County, Pennsylvania on behalf of former Mylan N.V. shareholders who received Viatris common stock in exchange for Mylan shares in connection with the spin-off of the Upjohn Business and its combination with Mylan (the Transactions). Viatris, Pfizer, and certain of each

PFIZER INC. AND SUBSIDIARY COMPANIES

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company’s current and former officers, directors and employees are named as defendants. The complaint alleges that the defendants violated certain provisions of the Securities Act of 1933 in connection with certain disclosures made in or omitted from the registration statement and related prospectus issued in connection with the Transactions. Plaintiff seeks damages, costs and expenses and other equitable and injunctive relief.

A4. Legal Proceedings––Government Investigations

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

Greenstone Investigations

U.S. Department of Justice Antitrust Division Investigation

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

State Attorneys General and Multi-District Generics Antitrust Litigation

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

Subpoena relating to Manufacturing of Quillivant XR

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

Government Inquiries relating to Meridian Medical Technologies

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

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

In June 2019, we received an informal request from the U.S. Department of Justice’s 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.

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

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

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

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 July 3, 2022, the estimated fair value of these indemnification obligations is not material to Pfizer. See Note 2C for a description of the March 2022 indemnity provided by Pfizer to GSK in connection with the issuance of notes by the Consumer Healthcare JV. In conjunction with the completion of GSK’s demerger transactions in July 2022, GSK’s guarantee and our related indemnification of GSK’s guarantee were terminated.

In addition, in connection with our entry into certain agreements and other transactions, our counterparties may be obligated 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, each of Viatris and Pfizer has agreed to assume, and to indemnify the other for, liabilities arising out of certain matters. Also, our global agreement with BioNTech to co-develop a mRNA-based coronavirus vaccine program aimed at preventing COVID-19 infection, includes certain indemnity provisions pursuant to which each of BioNTech and Pfizer has agreed to indemnify the other for certain liabilities that may arise in connection with certain third-party claims relating to Comirnaty.

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

C. 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 1E in our 2021 Form 10-K.

Note 13. Segment, Geographic and Other Revenue Information

A. Segment Information

We manage our commercial operations through two operating segments: Biopharma and PC1. The Biopharma and PC1 segments are each led by a single manager. Biopharma is the only reportable segment. Biopharma is a science-based medicines business that includes six therapeutic areas – Vaccines, Hospital, Oncology, Internal Medicine, Rare Disease, and Inflammation & Immunology. The Hospital therapeutic area commercializes our global portfolio of sterile injectable and anti-infective medicines, as well as an oral COVID-19 treatment.

Each operating segment has responsibility for its commercial activities. Regional commercial organizations market, distribute and sell our products and are supported by global platform functions that are responsible for the research, development, manufacturing and supply of our products and global corporate enabling functions. Biopharma receives its R&D services from WRDM and GPD. These services include IPR&D projects for new investigational products and additional indications for in-line products. Each operating segment has a geographic footprint across developed and emerging markets. Our chief operating decision maker uses the revenues and earnings of the operating segments, among other factors, for performance evaluation and resource allocation.

*Other Costs and Business Activities––*Certain pre-tax costs are not allocated to our operating segment results, such as costs associated with: (i) R&D and medical expenses managed by our WRDM and GPD organizations, (ii) corporate enabling functions and other corporate costs, (iii) overhead costs primarily associated with our manufacturing operations, (iv) our share of earnings from the Consumer Healthcare JV, as well as (v) all amortization of intangible assets, acquisition-related items, and certain significant items representing substantive and/or unusual, and in some cases recurring, items that are evaluated on an

PFIZER INC. AND SUBSIDIARY COMPANIES

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(UNAUDITED)

individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Beginning in the first quarter of 2022, acquisition-related items may now include purchase accounting impacts that previously would have been included as part of a reconciling item entitled “Purchase accounting adjustments” that we no longer separately present, such as: (i) the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, (ii) depreciation related to the increase/decrease in fair value of acquired fixed assets, (iii) amortization related to the increase in fair value of acquired debt and (iv) the fair value changes for contingent consideration. The operating results of PC1, our global contract development and manufacturing organization, are included in Other business activities.

*Segment Assets––*We manage our assets on a total company basis, not by operating segment, as our operating assets are shared or commingled. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were $195 billion as of July 3, 2022 and $181 billion as of December 31, 2021.

Selected Income Statement Information


The following provides selected income statement information by reportable segment:
	Three Months Ended								Six Months Ended
	Revenues				Earnings(a)				Revenues				Earnings(a)
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Reportable Segment:
Biopharma	$	27,425	$	18,463	$	17,223	$	9,816	$	52,748	$	32,588	$	30,662	$	18,199
Other business activities(b)	317		437		(3,441)		(2,524)		655		827		(5,917)		(4,571)
Reconciling Items:
Amortization of intangible assets	—		—		(822)		(928)		—		—		(1,657)		(1,798)
Acquisition-related items	—		—		(82)		(34)		—		—		(269)		27
Certain significant items(c)	—		—		(1,431)		618		—		—		(2,322)		784
	$	27,742	$	18,899	$	11,447	$	6,949	$	53,402	$	33,415	$	20,497	$	12,641

(a)I**ncome from continuing operations before provision/(benefit) for taxes on income. Biopharma’s earnings include dividend income from our investment in ViiV of $69 million in the second quarter of 2022 and $62 million in the second quarter of 2021, and $125 million in the first six months of 2022 and $89 million in the first six months of 2021.

(b)Other business activities include revenues and costs associated with PC1, as well as costs that we do not allocate to our operating segments, per above. Included in earnings in the second quarter and first six months of 2022 is a $450 million write-off to Cost of sales of inventory related to COVID-19 products that have exceeded or are expected to exceed their approved shelf-lives prior to being used.

(c)Certain significant items are substantive and/or unusual, and in some cases recurring, items (as noted above). For earnings in the second quarter and first six months of 2022, includes, among other items, net losses on equity securities of $539 million and $1.2 billion, respectively, recorded in Other (income)/deductions––net. For earnings in the second quarter and first six months of 2021, includes, among other items, net gains on equity securities of $798 million and $1.2 billion, respectively, recorded in Other (income)/deductions––net.

B. Geographic Information


The following summarizes revenues by geographic area:
	Three Months Ended					Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		% Change	July 3, 2022		July 4, 2021		% Change
United States	$	11,222	$	7,515	49	$	20,140	$	15,046	34
Developed Europe	5,480		4,577		20	11,569		7,615		52
Developed Rest of World	5,034		2,997		68	8,320		4,120		102
Emerging Markets	6,006		3,810		58	13,373		6,634		102
Revenues	$	27,742	$	18,899	47	$	53,402	$	33,415	60

C. Other Revenue Information

*Significant Customers––*For information on our significant wholesale customers, see Note 17C in our 2021 Form 10-K. Additionally, revenues from the U.S. government represented 26% and 22% of total revenues for the three and six months ended July 3, 2022, respectively, and primarily represent sales of Comirnaty and Paxlovid. Accounts receivable from the U.S.

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government represented 23% of total trade accounts receivable as of July 3, 2022, and primarily relate to sales of Comirnaty and Paxlovid.

Significant Product Revenues

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


(MILLIONS)		Three Months Ended				Six Months Ended
PRODUCT	PRIMARY INDICATION OR CLASS	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
TOTAL REVENUES(a)		$	27,742	$	18,899	$	53,402	$	33,415
PFIZER BIOPHARMACEUTICALS GROUP (BIOPHARMA)(a), (b)		$	27,425	$	18,463	$	52,748	$	32,588
Vaccines		$	10,459	$	9,234	$	25,399	$	14,127
Comirnaty direct sales and alliance revenues	Active immunization to prevent COVID-19	8,848		7,838		22,075		11,300
Prevnar family(c)	Pneumococcal disease	1,429		1,241		2,994		2,524
Nimenrix	Meningococcal ACWY disease	65		49		142		95
FSME-IMMUN/TicoVac	Tick-borne encephalitis disease	68		61		110		114
All other Vaccines	Various	49		46		78		94
Hospital(a)		$	9,714	$	1,745	$	12,905	$	3,630
Paxlovid	COVID-19 infection (high risk population)	8,115		—		9,585		—
Sulperazon	Bacterial infections	210		141		420		334
Ig Portfolio(d)	Various	125		107		232		212
Zavicefta	Bacterial infections	100		104		204		198
Zithromax	Bacterial infections	54		43		180		132
Medrol	Anti-inflammatory glucocorticoid	79		112		155		211
Fragmin	Treatment/prevention of venous thromboembolism	72		77		142		149
Vfend	Fungal infections	54		72		119		153
All other Anti-infectives	Various	367		474		749		929
All other Hospital	Various	537		613		1,120		1,314
Oncology		$	3,088	$	3,145	$	6,055	$	6,007
Ibrance	HR-positive/HER2-negative metastatic breast cancer	1,320		1,404		2,557		2,657
Xtandi alliance revenues	mCRPC, nmCRPC, mCSPC	290		303		558		570
Inlyta	Advanced RCC	274		257		508		486
Zirabev(e)	Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer	138		129		286		215
Bosulif	Philadelphia chromosome–positive chronic myelogenous leukemia	156		136		284		259
Xalkori	ALK-positive and ROS1-positive advanced NSCLC	118		120		244		255
Ruxience(e)	Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis	113		120		237		218
Retacrit(e)	Anemia	106		103		221		212
Sutent	Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor	97		194		211		394
Lorbrena	ALK-positive metastatic NSCLC	77		66		149		126
Bavencio alliance revenues	Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC	58		37		125		68
Aromasin	Post-menopausal early and advanced breast cancer	59		51		121		103
Besponsa	Relapsed or refractory B-cell acute lymphoblastic leukemia	58		45		109		95
Braftovi	In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab)(f), for the treatment of BRAFV600E -mutant mCRC after prior therapy	51		42		98		89
Trazimera(e)	HER-positive breast cancer and metastatic stomach cancers	46		41		98		87
Mektovi	In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation	44		36		84		71
All other Oncology	Various	82		60		163		102
Internal Medicine		$	2,405	$	2,403	$	4,846	$	4,997
Eliquis alliance revenues and direct sales	Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism	1,745		1,481		3,537		3,124

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


(MILLIONS)		Three Months Ended				Six Months Ended
PRODUCT	PRIMARY INDICATION OR CLASS	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Premarin family	Symptoms of menopause	115		128		217		271
BMP2	Development of bone and cartilage	75		66		142		115
Toviaz	Overactive bladder	45		62		99		119
Chantix/Champix	An aid to smoking cessation treatment in adults 18 years of age or older	1		184		4		401
All other Internal Medicine	Various	424		482		846		966
Rare Disease		$	909	$	895	$	1,872	$	1,720
Vyndaqel/Vyndamax	ATTR-cardiomyopathy and polyneuropathy	552		501		1,164		953
BeneFIX	Hemophilia B	113		112		225		225
Genotropin	Replacement of human growth hormone	91		109		171		189
Somavert	Acromegaly	64		68		132		133
Refacto AF/Xyntha	Hemophilia A	64		77		129		165
All other Rare Disease	Various	25		29		50		55
Inflammation & Immunology (I&I)		$	850	$	1,041	$	1,671	$	2,107
Xeljanz	RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis, ankylosing spondylitis	430		586		802		1,124
Enbrel (Outside the U.S. and Canada)	RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis	257		286		537		605
Inflectra(e)	Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis	137		136		272		313
All other I&I	Various	25		33		60		65
PFIZER CENTREONE(b)		$	317	$	437	$	655	$	827
Total Alliance revenues		$	2,317	$	1,880	$	4,631	$	3,650
Total Biosimilars(e)		$	580	$	559	$	1,185	$	1,089
Total Sterile Injectable Pharmaceuticals(g)		$	1,286	$	1,381	$	2,617	$	2,863

(a)On December 31, 2021, we completed the sale of our Meridian subsidiary. Prior to its sale, Meridian was managed as part of the Hospital therapeutic area. Beginning in the fourth quarter of 2021, the financial results of Meridian were reflected as discontinued operations. Prior-period financial information has been restated, as appropriate. See Note 1A.

(b)At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business, and PC1. PC1, which previously had been managed within the Hospital therapeutic area, includes revenues from our contract manufacturing, including certain Comirnaty-related manufacturing activities performed on behalf of BioNTech ($55 million and $101 million for the second quarter and the first six months of 2022, respectively, and $87 million for both the second quarter and the first six months of 2021), and revenues from our active pharmaceutical ingredient sales operation, as well as revenues related to our manufacturing and supply agreements with former legacy Pfizer businesses/partnerships, including but not limited to, transitional manufacturing and supply agreements with Viatris following the spin-off of the Upjohn Business. We have revised prior-period information to conform to the current management structure.

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

(d)Immunoglobulin (Ig) portfolio includes the revenues from Panzyga, Octagam and Cutaquig.

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

(f)Erbitux® is a registered trademark of ImClone LLC.

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

*Remaining Performance Obligations––*Contracted revenue expected to be recognized from remaining performance obligations for firm orders in long-term contracts to supply Comirnaty to our customers totaled approximately $24 billion as of July 3, 2022, which includes amounts received in advance and deferred, as well as amounts that will be invoiced as we deliver these products to our customers in future periods. Of this amount, we expect to recognize revenue of approximately $12 billion in 2022, $12 billion in 2023 and $200 million in 2024. Remaining performance obligations exclude arrangements with an original expected contract duration of less than one year.

*Deferred Revenues––*Our deferred revenues primarily relate to advance payments received or receivable from various government or government sponsored customers in international markets for supply of Comirnaty and Paxlovid. The deferred revenues related to Comirnaty and Paxlovid total $3.9 billion as of July 3, 2022, with $3.7 billion and $198 million recorded in current and noncurrent liabilities, respectively. The deferred revenues related to Comirnaty total $3.3 billion as of December 31, 2021, with $3.0 billion and $249 million recorded in current liabilities and noncurrent liabilities, respectively. There were no deferred revenues associated with Paxlovid as of December 31, 2021. The increase in Comirnaty and Paxlovid deferred revenues during the first six months of 2022 was primarily the result of additional advance payments received as we entered

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

into new or amended contracts, including new advance payments received for Paxlovid contracts, less amounts recognized in Revenues as we delivered the products to our customers and the impact of foreign exchange. During the second quarter and first six months of 2022, we recognized revenue of $800 million and $2.4 billion, respectively, that was included in the balance of Comirnaty deferred revenues as of December 31, 2021. The Comirnaty and Paxlovid deferred revenues as of July 3, 2022 will be recognized in Revenues proportionately as we transfer control of the products 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 last six months of 2023 and in the first quarter of 2024. Deferred revenues associated with contracts for other products were not significant as of July 3, 2022 or December 31, 2021.

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