Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS**

GENERAL

The following MD&A is intended to assist the reader in understanding our financial condition and results of operations, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources, and is provided as a supplement to and should be read in conjunction with the condensed consolidated financial statements and related notes in Item 1. Financial Statements in this Form 10-Q.

References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign exchange rate changes are part of our business, they are not within our control and because they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to evaluate our results.

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business and Strategy––Pfizer Inc. is a research-based, global biopharmaceutical company. We apply science and our global resources to bring therapies to people that extend and significantly improve their lives. In 2023, we are making additional investments in both R&D and SI&A to support Pfizer’s near- and longer-term growth plans, including to support anticipated new launches, commercial launch of COVID-19 products, potential pipeline programs and recently acquired assets. We manage our commercial operations through a global structure consisting of two operating segments: Biopharma and Business Innovation. Biopharma is the only reportable segment. See Note 13A.

We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 85% has been incurred since inception and through the first quarter of 2023. These charges include costs and expenses related to separation of legal entities and transaction costs.

In the fourth quarter of 2022, we began taking steps through our Transforming to a More Focused Company restructuring program to optimize our end-to-end R&D operations to reduce costs and cycle times as well as to further prioritize our internal R&D portfolio in areas where our capabilities are differentiated while increasing external innovation efforts to leverage an expanding and productive biotech sector. See Note 3. For a description of savings related to this program, see the Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitio ns and Cost-Reduction/Productivity Initiatives section within MD&A*.*

For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2022 Form 10-K.

Our Business Development Initiatives––We are committed to strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, but also through various business development activities. Our significant recent business development activities include the transactions discussed in Note 2 and the following:

Research and Development Funding Arrangement––In April 2023, we entered into an arrangement with Blackstone Life Sciences (Blackstone) under which we will receive up to a total of $550 million in 2023 through 2026 to co-fund our quarterly development costs for specified treatments. If successful, upon regulatory approval in the U.S. or certain major markets in the EU for the indications based on the applicable clinical trials, Blackstone will be eligible to receive a combination of approval-based fixed milestone payments of up to $468 million contingent upon the successful results of the clinical trials. Following potential regulatory approval, Blackstone will be eligible to receive a combination of fixed milestone payments of up to $550 million in total based on achievement of certain levels of cumulative applicable net sales, as well as royalties based on a mid-to-high single digit percentage of the applicable net sales.

Proposed Acquisition of Seagen––In March 2023, we and Seagen announced that the companies entered into an agreement under which we will acquire Seagen, a global biotechnology company that discovers, develops and commercializes transformative cancer medicines, for $229 in cash per Seagen share for a total enterprise value of approximately $43 billion. We expect to finance the transaction substantially through $31 billion of new, long-term debt, and the balance from a combination of short-term financing and existing cash. The transaction is expected to close in late 2023 or early 2024, subject to customary closing conditions, including approval of Seagen’s stockholders and receipt of required regulatory approvals.

Termination of Collaboration Arrangement with Merck KGaA, Darmstadt, Germany (Merck KGaA)**––In March 2023, it was announced that our alliance with Merck KGaA to co-develop and co-commercialize Bavencio (avelumab) will terminate. Effective June 30, 2023, Merck KGaA will take full control of the global commercialization of Bavencio. The current profit share will be replaced by a 15% royalty to Pfizer on net sales of Bavencio. We and Merck KGaA will continue to operationalize our respective ongoing clinical trials for Bavencio; and Merck KGaA will control all future R&D activities.

For a description of the more significant recent transactions through February 23, 2023, the filing date of our 2022 Form 10-K, see Note 2 in our 2022 Form 10-K.

Our First Quarter 2023 Performance

Revenues––Revenues decreased $7.4 billion, or 29%, in the first quarter of 2023 to $18.3 billion from $25.7 billion in the first quarter of 2022, reflecting an operational decrease of $6.6 billion, or 26%, as well as an unfavorable impact of foreign exchange of $730 million, or 3%. The operational decrease was primarily driven by a decline in Comirnaty, partially offset by growth from Paxlovid.

Excluding contributions from Comirnaty and Paxlovid, revenues increased 5% operationally, reflecting revenues from recently acquired products, Nurtec ODT/Vydura and Oxbryta, as well as increased Sulperazon revenues in China, and strong growth from Eliquis and the Vyndaqel family, partially offset by a decline in Xeljanz.

Revenue growth in the first quarter of 2023 was unfavorably impacted by approximately 1% as a result of the first quarter of 2023 having one fewer selling day in international markets compared to the first quarter of 2022. This unfavorable impact is expected to reverse in the fourth quarter of 2023.

As of May 2, 2023, on a total company basis, we forecasted revenues in 2023 of $67 billion to $71 billion, reflecting an operational decline of 31% at the midpoint from 2022 results, which we expect will also have an unfavorable impact on Income from continuing operations before provision/(benefit) for taxes on income. The total company expected revenue declines in 2023 are driven by an expected reduction in sales of our COVID-19 products, partially offset by expected operational growth from our non-COVID-19 in-line portfolio, anticipated new product and indication launches, and recently acquired products.

See the Revenues by Geography and Revenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. See also The Global Economic Environment––COVID-19 section below for information about our COVID-19 products, including expectations for 2023. For information regarding the primary indications or class of certain products, see Note 13C**.

Income from Continuing Operations Before Provision/(Benefit) for Taxes on Income––The decrease in Income from continuing operations before provision/(benefit) for taxes on income of $2.8 billion, to $6.3 billion in the first quarter of 2023 from $9.1 billion in the first quarter of 2022, was primarily due to lower revenues and an increase in Selling, informational and administrative expenses, partially offset by lower Cost of sales and lower Acquired in-process research and development expenses.

See the Analysis of the Condensed Consolidated Statements of Income within MD&A and Note 4. See also The Global Economic Environment––COVID-19 section below for information about our COVID-19 products, including expectations for 2023.

For information on our tax provision and effective tax rate, see the Provision/(Benefit) for Taxes on Income section within MD&A and Note 5.

Our Operating Environment––We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below, as well as in the Item 1. Business––Government Regulation and Price Constraints and Item 1A. Risk Factors sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A of our 2022 Form 10-K and the Item 1A . Risk Factors section of this Form 10-Q.

Intellectual Property Rights and Collaboration/Licensing Rights––The loss, expiration or invalidation of intellectual property rights, patent litigation settlements and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face increased generic competition over the next few years. While additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 2023 through 2025. We anticipate a more significant impact of reduced revenues from patent expiries in 2026 through 2030 as several of our in-line products experience patent-based expirations. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to help ensure appropriate patient access.

For additional information on patent rights we consider most significant in relation to our business as a whole, see the Item 1. Business––Patents and Other Intellectual Property Rights section of our 2022 Form 10-K. For a discussion of recent developments with respect to patent litigation, see Note 12A1**.

Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures––Governments globally, as well as private third-party payers in the U.S., may use a variety of measures to control costs, including, among others, proposing

pricing reform or legislation, employing formularies to control costs, cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. We anticipate that these and similar initiatives will continue to increase pricing and access pressures globally. In the U.S., we expect to see continued focus by Congress and the Biden Administration on regulating pricing, which could result in legislative and regulatory changes designed to control costs, such as the IRA that was signed into law in August 2022. We continue to evaluate the impact of the IRA on our business, operations and financial condition and results as the full effect of the IRA on our business and the pharmaceutical industry remains uncertain. In addition, changes to the Medicaid program or the federal 340B drug pricing program, including legal or legislative developments at the federal or state level with respect to the 340B program, could have a material impact on our business. See the Item 1. Business––Pricing Pressures and Managed Care Organizations and ––Government Regulation and Price Constraints and the Item 1A. Risk Factors––Pricing and Reimbursement sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A of our 2022 Form 10-K*.*

Product Supply––We periodically encounter supply delays, disruptions and shortages, including due to voluntary product recalls. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, are evaluating their product portfolios for the potential presence or formation of nitrosamines. This has led to recalls, including our voluntary recall of Chantix in 2021 and additional voluntary recalls initiated for other products in 2022 due to the presence of nitrosamines above the FDA interim acceptable intake limit, and may lead to additional recalls or other market actions for Pfizer products.

Regarding our supply chain generally, in the first quarter of 2023 and to date, we have not seen a significant disruption, and all of our manufacturing sites globally have continued to operate at or near normal levels; however, we continue to see heightened demand in the industry for certain components and raw materials, which could potentially result in constraining available supply leading to a possible future impact on our business. We are continuing to monitor and implement mitigation strategies in an effort to reduce any potential risk or impact including active supplier management, qualification of additional suppliers and advanced purchasing to the extent possible. For information on risks related to product manufacturing, see the Item 1A. Risk Factors––Product Manufacturing, Sales and Marketing Risks section of our 2022 Form 10-K.

The Global Economic Environment––In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to economic cycles. See the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our 2022 Form 10-K.

COVID-19––In response to COVID-19, we have developed Paxlovid and collaborated with BioNTech to jointly develop Comirnaty, including booster doses of an Omicron-adapted bivalent vaccine. As part of our strategy for COVID-19, we are continuing to make significant additional investments in breakthrough science and global manufacturing. This includes continuing to evaluate Comirnaty and Paxlovid, including against new variants of concern, developing variant adapted vaccine candidates and developing potential combination respiratory vaccines and potential next generation vaccines and therapies. We are also evaluating Paxlovid for additional populations. For additional information, including our continuing late-stage development efforts for Paxlovid, see the Pro duct Developments section within MD&A.

In the first quarter of 2023 and to date, we principally sold Comirnaty globally under government contracts and Paxlovid globally to government agencies and distributors. We expect Comirnaty in the U.S. will transition to traditional commercial market sales in the second half of 2023, triggered by the expiration of current contracts and the vaccines purchased through them becoming either depleted or not usable against new variants. Internationally, we expect sales of Comirnaty in international developed markets to generally be under government contracts in 2023, and in emerging markets, under a combination of private channels and government contracts; in both cases, we expect to generally transition to commercial markets starting in 2024. For Paxlovid, we expect to transition to traditional commercial markets in the second half of 2023 rather than significant government purchases. We also remain committed to helping ensure broad and equitable access to our COVID-19 products to eligible patients around the world. Revenues from our COVID-19 products are expected to go from their peak in 2022 to their low point in 2023 before potentially returning to growth in 2024. While patient demand for our COVID-19 products is expected to remain strong throughout 2023, much of that demand is expected to be fulfilled by existing supply of products that were delivered to governments and recorded as revenues in 2022. As of May 2, 2023, we forecasted Comirnaty revenues of approximately $13.5 billion in 2023, down 64% from actual 2022 results, with gross profit to be split evenly with BioNTech, and Paxlovid revenues of approximately $8 billion in 2023, down 58% from actual 2022 results. These forecasts are based on estimates and assumptions that are subject to significant uncertainties, including, among others, patient demand, which could be significantly impacted by the infectiousness and severity of the predominant strains of the SARS-CoV-2 virus during 2023, proportion of the population that receives a vaccine or is treated with an oral antiviral treatment, the number of doses per vaccinated person per year, number of symptomatic infections, market share of Comirnaty and Paxlovid, timing and terms for delivery of the contracted doses of Comirnaty to the EC, Paxlovid sales in China and the timing for transitioning Comirnaty and Paxlovid to commercial markets in the U.S.

For information on the impact of COVID-19 on our business, operations and financial conditions and results and risks associated with COVID-19 and our COVID-19 products, as well as COVID-19 intellectual property disputes, see the Item 1A. Risk Factors—COVID-19, —Intellectual Property Protection and —Third-Party Intellectual Property Claims sections and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 2022 Form 10-K, as well as Note 1 2 A1.

Russia/Ukraine Conflict––Our global operations may be impacted by the armed conflict between Russia and Ukraine. For both the three months ended April 2, 2023 and the fiscal year ended December 31, 2022, the business of our Russia and Ukraine subsidiaries represented less than 1% of our consolidated revenues and assets, and while we are monitoring the effects of the armed conflict between Russia and Ukraine, the situation continues to evolve and the long-term implications, including the broader economic consequences of the conflict, are difficult to predict at this time. For additional information on our response to the armed conflict between Russia and Ukraine as well as risks associated with the conflict, see the Item 1A. Risk Factors—Global Operations section and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 2022 Form 10-K.

SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

For a description of our significant accounting policies, see Note 1 in our 2022 Form 10-K*.* Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1D); Fair Value (Note 1E); Revenues (Note 1G); Asset Impairments (Note 1M); Tax Assets and Liabilities and Income Tax Contingencies (Note 1Q); Pension and Postretirement Benefit Plans (Note 1R); and Legal and Environmental Contingencies (Note 1S).

For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions section within MD&A in our 2022 Form 10-K. See also Note 1C in our 2022 Form 10-K for a discussion about the risks associated with estimates and assumptions.

For a discussion of a recently adopted accounting standard, see Note 1B.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Revenues by Geography


The following presents worldwide revenues by geography:
	Three Months Ended
	Worldwide				U.S.				International				World-wide	U.S.	Inter-national
(MILLIONS)	April 2, 2023		April 3, 2022		April 2, 2023		April 3, 2022		April 2, 2023		April 3, 2022		% Change
Operating segments:
Biopharma	$	17,971	$	25,323	$	8,396	$	8,816	$	9,575	$	16,507	(29)	(5)	(42)
Business Innovation	310		338		110		102		200		236		(8)	8	(15)
Total revenues	$	18,282	$	25,661	$	8,507	$	8,918	$	9,775	$	16,743	(29)	(5)	(42)

First Quarter of 2023 vs. First Quarter of 2022


The following provides an analysis of the change in worldwide revenues by geographic areas in the first quarter of 2023:
	Three Months Ended April 2, 2023
(MILLIONS)	Worldwide		U.S.		International
Operational growth/(decline):
Worldwide declines from Comirnaty(a)	$	(9,967)	$	(1,986)	$	(7,981)
Worldwide growth from Paxlovid(a)	2,754		945		1,809
Revenues from recently acquired products: Nurtec ODT/Vydura(a) and Oxbryta	237		234		3
Increased revenues from Sulperazon largely driven by demand in China	134		—		134
Worldwide growth from Eliquis, the Vyndaqel family, the Prevnar family and Inlyta, partially offset by declines from Xeljanz, Ibrance and Xtandi(a)	119		251		(132)
Other operational factors, net	73		144		(71)
Operational growth/(decline), net	(6,650)		(411)		(6,238)

Unfavorable impact of foreign exchange	(730)		—		(730)
Revenues increase/(decrease)	$	(7,379)	$	(411)	$	(6,968)

(a)See the Revenues––Selected Product Discussion section within MD&A for additional analysis.

Emerging markets revenues decreased $2.9 billion, or 39%, in the first quarter of 2023 to $4.5 billion from $7.4 billion in the first quarter of 2022, reflecting an operational decrease of $2.6 billion, or 36%, and an unfavorable impact from foreign exchange of 4%. The operational decrease in emerging markets was primarily driven by declines from Comirnaty, partially offset by growth from Paxlovid, as well as increased Sulperazon revenues largely driven by demand in China, which is not expected to be sustained.

Revenue Deductions––Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period. Historically, adjustments to these estimates to reflect actual results or updated expectations, have not been material to our overall business and generally have been less than 1% of revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product revenue growth trends.


The following presents information about revenue deductions:
	Three Months Ended
(MILLIONS)		April 2, 2023		April 3, 2022
Medicare rebates		$	225	$	201
Medicaid and related state program rebates		411		241
Performance-based contract rebates		1,192		806
Chargebacks		2,285		1,737
Sales allowances		1,516		1,204
Sales returns and cash discounts		513		270
Total		$	6,141	$	4,458

Revenue deductions are primarily a function of product sales volume, mix of products sold, contractual or legislative discounts and rebates.

For information on our accruals for revenue deductions, including the balance sheet classification of these accruals, see Note 1C**.

Revenues––Selected Product Discussion

Biopharma


														Revenue
(MILLIONS)														Three Months Ended							% Change
Product							Global Revenues				Region			April 2, 2023				April 3, 2022			Total		Oper.		Operational Results Commentary
Paxlovid							$4,069 *****				U.S.			$	1,960			$	1,015		93				Growth primarily driven by: •favorable timing of final delivery associated with the U.S. government contract before anticipated transition to traditional commercial markets in the second half of 2023; •strong demand in China under the temporary National Reimbursement Drug List (which ended on April 1, 2023) due to surge in COVID-19 infections; and •launch in certain international markets.
Int’l.			2,109		455				*			*
Worldwide			$	4,069	$	1,470			*			*



Comirnaty(a)			$3,064 Down 75% (operationally)		U.S.				$	328		$	2,314			(86)						Global declines largely driven by lower contracted deliveries and demand in international markets, as well as lower U.S. government contracted deliveries with anticipated transition to traditional commercial market sales in the second half of 2023.
	Int’l.				2,735				10,913			(75)				(73)
	Worldwide				$	3,064			$	13,227		(77)				(75)



Eliquis			$1,874 Up 7% (operationally)		U.S.				$	1,261		$	1,080			17						Growth driven primarily by continued oral anti-coagulant adoption and market share gains in the non-valvular atrial fibrillation indication in the U.S. and certain markets in Europe, partially offset by declines due to LOE and generic competition in certain international markets.
Int’l.			613				713				(14)			(8)
Worldwide			$	1,874			$	1,793			5			7



Prevnar family			$1,593 Up 4% (operationally)		U.S.				$	1,075		$	1,014			6						Growth primarily driven by the adult indications in the U.S. and certain markets in Europe due to strong patient demand following the launch of Prevnar 20/Apexxnar for the eligible adult population, partially offset by lower stocking and demand for Prevnar 13 pediatric indication in the U.S. due to competitor entry, as well as declines in certain emerging markets.
Int’l.	518		551		(6)		—
Worldwide	$	1,593	$	1,565	2		4



Ibrance			$1,144 Down 5% (operationally)		U.S.				$	750		$	753			—						Declines primarily driven by lower clinical trial purchases internationally, and planned price decreases in certain international developed markets.
Int’l.			394		484				(19)			(12)
Worldwide			$	1,144	$	1,237			(8)			(5)



Vyndaqel family			$686 Up 16% (operationally)		U.S.				$	384		$	265			45						Growth largely driven by continued strong uptake of the ATTR-CM indication, primarily in the U.S. and developed Europe, partially offset by a planned price decrease that went into effect in Japan in the second quarter of 2022.
Int’l.			302		347				(13)			(7)
Worldwide			$	686	$	612			12			16



Inlyta					$259 Up 14% (operationally)				U.S.			$	155			$	140			11				Growth primarily reflects continued strong performance in the U.S. and emerging markets driven by the adoption of combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC.
					Int’l.				104			94				11				18
					Worldwide				$	259		$	234			11				14



Xtandi					$258 Down 4% (operationally)				U.S.			$	258			$	268			(4)				Decline driven by lower net price mainly due to unfavorable changes in channel mix, partially offset by demand growth.
					Int’l.				—			—				—				—
					Worldwide				$	258		$	268			(4)				(4)



Xeljanz					$237 Down 33% (operationally)				U.S.			$	90			$	203			(55)				Declines driven primarily by lower net price in the U.S. due to unfavorable changes in channel mix, as well as decreased prescription volumes globally resulting from ongoing shifts in prescribing patterns related to label changes.
	Int’l.		147		169				(13)			(6)
	Worldwide		$	237	$	372			(36)			(33)



Nurtec ODT/Vydura							$167 *****				U.S.			$	163			$	—		*				Driven by the acquisition of Biohaven in the fourth quarter of 2022, after which Nurtec ODT/Vydura is now a Pfizer-owned product, compared to the first quarter of 2022 during which Pfizer only had commercialization rights outside of the U.S. under a collaboration and license agreement with Biohaven. See Notes 2A and 2E of our 2022 Form 10-K.
			Int’l.		4		1				*	*
			Worldwide		$	167			$	1		*		*

Business Innovation


									Revenue
(MILLIONS)									Three Months Ended				% Change
Operating Segment					Global Revenues		Region		April 2, 2023		April 3, 2022		Total	Oper.	Operational Results Commentary
Business Innovation					$310 Down 5% (operationally)		U.S.		$	110	$	102	8		Declines primarily driven by, among other things, the timing of Comirnaty supply to BioNTech, partially offset by higher manufacturing of divested products under manufacturing and supply agreements and higher COVID-19 manufacturing activities performed on behalf of customers.
Int’l.	200		236			(15)		(11)
Worldwide	$	310	$	338		(8)		(5)

(a)Comirnaty includes direct sales and Alliance revenues related to sales of the Pfizer-BioNTech COVID-19 vaccine, which are recorded within our Primary Care customer group. It does not include revenues for certain Comirnaty-related manufacturing activities performed on behalf of BioNTech, which are included in PC1, which is part of the Business Innovation operating segment. See Note 13C.

Indicates calculation not meaningful.

See the Item 1. Business—Patents and Other Intellectual Property Rights section of our 2022 Form 10-K for information regarding the expiration of various patent rights, Note 12 for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above and Note 13C for additional information regarding the primary indications or class of the selected products discussed above.

Costs and Expenses


Costs and expenses follow:
	Three Months Ended
(MILLIONS)		April 2, 2023			April 3, 2022			% Change
Cost of sales		$	4,886		$	9,984		(51)
Percentage of Revenues		26.7		%	38.9		%
Selling, informational and administrative expenses		3,418			2,593			32
Research and development expenses		2,505			2,301			9
Acquired in-process research and development expenses		21			355			(94)
Amortization of intangible assets		1,103			835			32
Restructuring charges and certain acquisition-related costs		9			192			(96)
Other (income)/deductions—net		70			350			(80)

Cost of Sales

Cost of sales decreased $5.1 billion, primarily due to:

a reduction of $5.4 billion due to lower sales of Comirnaty,

partially offset by:

an increase of $400 million due to higher sales of Paxlovid.

The decrease in Cost of sales as a percentage of revenues was primarily driven by changes in sales mix, including lower sales of Comirnaty and higher sales of Paxlovid.

Selling, Informational and Administrative Expenses

Selling, informational and administrative expenses increased $824 million, primarily due to:

a $500 million increase in marketing and promotional expenses ($280 million for Paxlovid and $220 million for recently acquired and launched products); and
a $180 million increase in spending on products across multiple customer groups.

Research and Development Expenses

Research and development expenses increased $203 million, primarily due to:

increased investments of $420 million to develop recently acquired assets and certain vaccine programs, as well as activities to support upcoming product launches,

partially offset by:

lower spending of $250 million on programs to prevent and treat COVID-19 and certain other late-stage clinical programs.

Acquired In-Process Research and Development Expenses

Acquired in-process research and development expenses decreased $334 million, primarily reflecting the non-recurrence of (i) an upfront payment to Biohaven and a premium paid on our equity investment in Biohaven totaling $263 million and (ii) a $76 million premium paid on our equity investment in BioNTech to develop a potential mRNA vaccine against shingles, both recorded in the first quarter of 2022.

Amortization of Intangible Assets

Amortization of intangible assets increased $268 million, primarily as a result of amortization of intangible assets from our acquisitions of Biohaven and GBT, partially offset by fully amortized assets.

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

Transforming to a More Focused Company Program––For a description of our program, as well as the anticipated and actual costs, see Note 3A**. The program savings discussed below may be rounded and represent approximations. In connection with restructuring our corporate enabling functions, we achieved gross cost savings of $1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, in the two year period from 2021 through 2022. In connection with transforming our commercial go-to market strategy, we expect net cost savings of $1.4 billion, to be

achieved primarily from 2022 through 2024. In connection with manufacturing network optimization, we expect net cost savings of $550 million to be achieved primarily from 2020 through 2023. In connection with optimizing our end-to-end R&D operations, we expect net cost savings of $2.3 billion to be achieved primarily from 2023 through 2025.

Certain qualifying costs for this program in all periods since inception were recorded and reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income. See the Non-GAAP Financial Measure: Adjusted Income section within MD&A.

In addition to this program, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products.

Other (Income)/Deductions—Net

The favorable change of $279 million was primarily driven by (i) lower net losses on equity securities, (ii) higher dividend income and (iii) lower net interest expense, partially offset by (iv) intangible asset impairment charges recorded in the first quarter of 2023 and (v) lower net periodic benefit credits associated with pension and postretirement plans. See Note 4**.

Provision/(Benefit) for Taxes on Income


	Three Months Ended
(MILLIONS)		April 2, 2023			April 3, 2022			% Change
Provision/(benefit) for taxes on income		$	715		$	1,172		(39)
Effective tax rate on continuing operations		11.4		%	12.9		%

For information about our effective tax rate and the events and circumstances contributing to the changes between periods, as well as details about discrete elements that impacted our tax provisions, see Note 5**.

Discontinued Operations

For information about our discontinued operations, see Note 2B.

PRODUCT DEVELOPMENTS

A comprehensive update of Pfizer’s development pipeline was published as of May 2, 2023 and is available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of our research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.

This section provides information as of the date of this filing about significant marketing application-related regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan.

The tables below include filing and approval milestones for products that have occurred in the last twelve months and generally do not include approvals that may have occurred prior to that time. The tables include filings with regulatory decisions pending (even if the filing occurred outside of the last twelve-month period).

COVID-19 Vaccine Products

U.S.––In April 2023, in order to simplify the vaccination schedule for most individuals, the FDA amended an EUA for the emergency use of the Pfizer‑BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5), which has been developed in collaboration with BioNTech, for active immunization to prevent COVID-19 caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) in individuals 6 months of age and older. In the U.S., the monovalent Pfizer-BioNTech COVID-19 Vaccine is no longer authorized for emergency use or CDC-recommended, although Comirnaty remains a licensed vaccine. This decision relates entirely to the FDA’s strategy to harmonize COVID-19 vaccines and is not indicative of any safety-related signals or concerns.

In February 2023, Pfizer and BioNTech announced the submission of a supplemental Biologics License Application (sBLA) to the FDA for approval of the companies’ Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine (Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5)) as a primary series and booster dose(s) for individuals 12 years of age and older.

The following table contains the authorized uses of the Pfizer‑BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5) for the various patient populations in the U.S.:


PATIENT POPULATION AND AUTHORIZATIONS (U.S. ONLY)
AGE	Individuals 6 months of age and older not previously vaccinated with a COVID-19 vaccine		Individuals 5 years of age and older previously vaccinated with 1 or more doses of a monovalent COVID-19 Vaccine(a)		Individuals 6 months through 4 years of age previously vaccinated with the monovalent Pfizer-BioNTech COVID-19 Vaccine
One previous dose of the Pfizer-BioNTech COVID-19 Vaccine	Two previous doses of the Pfizer-BioNTech COVID-19 Vaccine		Three previous doses of the Pfizer-BioNTech COVID-19 Vaccine

6 months – 4 years(b)	3 doses, 0.2 mL each Dose 1: Week 0 Dose 2: Week 3 Dose 3: ≥ 8 weeks after Dose 2		2 doses(c), 0.2 mL each Dose 1: 3 weeks after receipt of the Pfizer-BioNTech COVID-19 Vaccine Dose 2: ≥8 weeks after Dose 1	Single dose, 0.2 mL ≥8 weeks after receipt of second dose of the Pfizer-BioNTech COVID-19 Vaccine	Single dose, 0.2 mL ≥2 months after receipt of third dose of the Pfizer-BioNTech COVID-19 Vaccine

5-11 years	Single dose, 0.2 mL	Single dose, 0.2 mL ≥2 months after monovalent COVID-19 Vaccine

12-64 years	Single dose, 0.3 mL	Single dose, 0.3 mL ≥2 months after monovalent COVID-19 Vaccine

≥65 years	Single dose, 0.3 mL. One additional dose, 0.3 mL, may be administered ≥4 months after first dose of an authorized bivalent COVID-19 vaccine	Single dose, 0.3 mL ≥2 months after monovalent COVID-19 vaccine One additional dose, 0.3 mL, may be administered ≥4 months after first dose of an authorized bivalent COVID-19 vaccine

(a)Monovalent refers to a COVID-19 vaccine that contains or encodes the spike protein of only the Original SARS-CoV-2.

(b)Notwithstanding the age limitations for use of the vaccine, individuals turning from 4 to 5 years of age during the vaccination series should receive all doses with the Pfizer-BioNTech COVID-19 Vaccine, Bivalent.

(c)Notwithstanding the age limitations for use of the vaccine, individuals turning from 4 to 5 years of age during the vaccination series should receive 2 doses with the Pfizer-BioNTech COVID-19 Vaccine, Bivalent.

For individuals with certain kinds of immunocompromise 6 months through 4 years of age who have received three 0.2 mL doses (the Pfizer‑BioNTech COVID-19 Vaccine or the Pfizer-BioNTech COVID-19 Vaccine, Bivalent), a fourth dose (0.2 mL) with the Pfizer-BioNTech COVID-19 Vaccine, Bivalent may be administered at least one month following the most recent dose; additional doses of the Pfizer-BioNTech COVID-19 Vaccine, Bivalent may be administered at the discretion of the healthcare provider, taking into consideration the individual’s clinical circumstances. For individuals with certain kinds of immunocompromise 5 years of age and older, a single additional age-appropriate dose of the Pfizer‑BioNTech COVID-19 Vaccine, Bivalent may be administered at least 2 months following the initial dose of a bivalent COVID-19 vaccine; additional age‑appropriate doses of the Pfizer‑BioNTech COVID‑19 Vaccine, Bivalent may be administered at the discretion of the healthcare provider, taking into consideration the individual’s clinical circumstances.

EU and Japan ––In March 2023, Pfizer and BioNTech announced the submission of an application to the EMA to extend the Omicron BA.4/BA.5-adapted bivalent vaccine’s marketing authorization (MA) to include use in children six months through four years of age as both primary series (all three doses) and booster vaccination (fourth dose).

In February 2023, Pfizer and BioNTech announced the submission of an application to the EMA for a variation of the

MA to include the bivalent vaccine as a primary course of vaccination in individuals five years of age and older.

The following table includes filings and approvals for our COVID-19 vaccine products in the EU and Japan. All COVID-19 vaccine products listed in this table have been developed in collaboration with BioNTech.


PATIENT POPULATION AND DATE OF APPROVAL/FILING(a)
COVID-19 VACCINE PRODUCT(b)		PRIMARY SERIES OR BOOSTER		16 Years of age and older			12-15 Years of age			5-11 Years of age			6 Months through 4 Years of age
			EU	JAPAN		EU	JAPAN		EU	JAPAN	EU	JAPAN
Comirnaty			30-µg 2-dose primary						10-µg 2-dose primary		3-µg 3-dose primary
Primary		Approved December 2020	Cond. J-NDA February 2021		Approved May 2021	Cond. J-NDA May 2021		Approved November 2021	Cond. J-NDA January 2022	CMA October 2022	Cond. J-NDA October 2022
		30-µg booster dose						10-µg booster dose
Booster		Approved October 2021	Cond. J-NDA November 2021		Approved February 2022	Cond. J-NDA March 2022		Approved September 2022	Cond. J-NDA August 2022
Comirnaty Original/Omicron BA.4/BA.5 Vaccine(b)			30-µg 2-dose primary						10-µg 2-dose primary		3-µg 3-dose primary
Primary			Filed April 2023			Filed April 2023			Filed April 2023		Filed April 2023
		30-µg booster dose						10-µg booster dose		3-µg booster dose
Booster		Approved September 2022	Cond. J-NDA October 2022		Approved September 2022	Cond. J-NDA October 2022		Approved September 2022	Cond. J-NDA February 2023		Filed April 2023
Comirnaty Original/Omicron BA.1 Vaccine	Booster		30-µg booster dose
	Approved September 2022	Cond. J-NDA October 2022		Approved September 2022	Cond. J-NDA October 2022

(a)All EU approvals prior to October 10, 2022 were under the CMA, and later converted to full Marketing Authorization as of October 10, 2022. Dates shown in table reflect original CMA date.

(b)Refers to the Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5) and Comirnaty Original/Omicron BA.4/BA.5 Vaccine.

Other Products


PRODUCT	INDICATION OR PROPOSED INDICATION	APPROVED/FILED*
U.S.	EU	JAPAN
Myfembree (relugolix, estradiol, and norethindrone acetate)(a)	Moderate to severe pain associated with endometriosis	Approved August 2022
Ngenla (somatrogon)(b)	Pediatric growth hormone deficiency	Filed January 2021	Approved February 2022	Approved January 2022
Prevnar 20/Apexxnar (Vaccine)(c)	Active immunization to prevent pneumonia, invasive disease and otitis media caused by Streptococcus pneumoniae (adults)	Approved June 2021	Approved February 2022
Active immunization to prevent pneumonia, invasive disease and otitis media caused by Streptococcus pneumoniae (pediatric)	Approved April 2023		Filed March 2023
TicoVac (Vaccine)	Active immunization to prevent tick-borne encephalitis disease	Approved August 2021		Filed March 2023
Paxlovid(d) (nirmatrelvir [PF-07321332]; ritonavir)	COVID-19 in high-risk adults and children (12-18 years of age; >88lbs)	EUA December 2021	Approved February 2023	Approved February 2022
Nurtec ODT/Vydura (rimegepant)	Acute treatment of migraine with or without aura (adults)	Approved February 2020	Approved April 2022
Prevention of episodic migraine (adults)	Approved May 2021	Approved April 2022
ritlecitinib (PF-06651600)	Alopecia areata	Filed September 2022	Filed September 2022	Filed September 2022
Zavzpret (zavegepant) (intranasal)	Acute treatment of migraine with or without aura (adults)	Approved March 2023
PF-06886992 (Vaccine)	Active immunization to prevent serogroups ABCWY meningococcal infections (adolescent and young adults)	Filed December 2022
PF-06928316 (Vaccine)	Active immunization to prevent respiratory syncytial virus infection (maternal)	Filed February 2023	Filed January 2023	Filed February 2023
Active immunization to prevent respiratory syncytial virus infection (older adults)	Filed December 2022	Filed January 2023
etrasimod	Ulcerative colitis (moderately to severely active)	Filed December 2022	Filed November 2022
Braftovi (encorafenib) and Mektovi (binimetinib)	BRAFV600E-mutant metastatic non-small cell lung cancer	Filed April 2023
elranatamab (PF-06863135)	Multiple myeloma triple-class refractory	Filed February 2023	Filed February 2023
Talzenna (talazoparib)	Combination with Xtandi (enzalutamide) for first-line mCRPC	Filed February 2023	Filed February 2023

*For the U.S., the filing date is the date on which the FDA accepted our submission. For the EU, the filing date is the date on which the EMA validated our submission.

(a)Being developed in collaboration with Myovant.

(b)Being developed in collaboration with OPKO.

(c)In October 2022, the CDC’s ACIP voted to recommend a single dose of Prevnar 20 to help protect adults previously vaccinated with Prevnar 13 or both Prevnar 13 and PPSV23 against invasive disease and pneumonia caused by the 20 Streptococcus pneumoniae serotypes in Prevnar 20.

(d)In June 2022, we announced the submission of an NDA to the FDA for approval of Paxlovid for the treatment of COVID-19 in both vaccinated and unvaccinated individuals who are at high risk for progression to severe illness from COVID-19. In December 2022, Pfizer announced the FDA has extended the review period for the NDA for Paxlovid. At the request of the FDA, Pfizer submitted additional analyses of efficacy and safety data from the pivotal Evaluation of Protease Inhibition for COVID-19 in High-Risk Patients and supportive Evaluation of Protease Inhibition for COVID-19 in Standard-Risk Patients trials to be considered as part of its NDA for Paxlovid. Results from these analyses are consistent with previously disclosed efficacy and safety data for the trials. In order to allow time for a full review of the application, including the additional data analyses submitted, the FDA has extended the Prescription Drug User Fee Act goal date by three months to May 2023.

In December 2021, in light of the results from the completed required postmarketing safety study of Xeljanz, ORAL Surveillance (A3921133), the U.S. label for Xeljanz was revised. In addition, in November 2022, the EMA concluded their assessment of JAK inhibitors authorized for inflammatory diseases in the EU, including Xeljanz and Cibinqo, and recommended that risk minimization measures, including special warnings and precautions for use, should be revised and harmonized for all such JAK inhibitors. The resulting EU label changes were finalized in April 2023. We continue to work with regulatory agencies worldwide to review the full results and analyses of ORAL Surveillance and their impact on product labeling. See the Item 1A. Risk Factors—Post-Authorization/Approval Data and the Product Development sections of our 2022 Form 10-K.

In China, the following products received regulatory approvals in the last twelve months: Cresemba (IV formulation) for the treatment of adult patients with invasive aspergillosis and invasive mucormycosis in June 2022; Xeljanz for the treatment of adult patients with active psoriatic arthritis in October 2022; and Prevenar 13 in infants and children aged 6 weeks to 15 months, in April 2023.

The following provides information about additional indications and new drug candidates in late-stage development:


		PRODUCT/CANDIDATE	PROPOSED DISEASE AREA
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS	Ibrance (palbociclib)(a)	ER+/HER2+ metastatic breast cancer
Xtandi (enzalutamide)(b)	Non-metastatic high-risk castration sensitive prostate cancer
Talzenna (talazoparib)	Combination with Xtandi (enzalutamide) for DNA Damage Repair (DDR)-deficient mCSPC
somatrogon (PF-06836922)(c)	Adult growth hormone deficiency
Braftovi (encorafenib) and Erbitux® (cetuximab)(d)	First-line BRAFV600E-mutant mCRC
Braftovi (encorafenib) and Mektovi (binimetinib) and Keytruda® (pembrolizumab)(e)	BRAFV600E/K-mutant metastatic or unresectable locally advanced melanoma
Paxlovid (nirmatrelvir [PF-07321332]; ritonavir)	COVID-19 in high-risk children (6-11 years of age; >88lbs)
zavegepant (oral)	Prevention of chronic migraine (adults)
ritlecitinib (PF-06651600)	Vitiligo
elranatamab (PF-06863135)	Multiple myeloma double-class exposed
Newly diagnosed multiple myeloma post-transplant maintenance
Newly diagnosed multiple myeloma transplant-ineligible
Voxelotor	Sickle Cell Disease (pediatric)
Eliquis (apixaban)	Venous thromboembolism (pediatric)
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT		aztreonam-avibactam (PF-06947387)	Treatment of infections caused by Gram-negative bacteria with limited or no treatment options
fidanacogene elaparvovec (PF-06838435)(f)	Hemophilia B
giroctocogene fitelparvovec (PF-07055480)(g)	Hemophilia A
PF-06425090 (Vaccine)	Immunization to prevent primary clostridioides difficile infection
sasanlimab (PF-06801591)	Combination with Bacillus Calmette-Guerin for non-muscle-invasive bladder cancer
fordadistrogene movaparvovec (PF-06939926)	Duchenne muscular dystrophy (ambulatory)
marstacimab (PF-06741086)	Hemophilia
Omicron-based mRNA vaccine(h)	Immunization to prevent COVID-19 (adults)
VLA15 (PF-07307405) vaccine(i)	Immunization to prevent Lyme Disease
PF-07252220 (quadrivalent mRNA-based vaccine)	Immunization to prevent influenza
Vepdegestrant (PF-07850327)(j)	Breast Cancer Metastatic - 2nd line + ER+/HER2-
inclacumab (PF-07940370)	Sickle Cell Disease

(a)Being developed in collaboration with The Alliance Foundation Trials, LLC.

(b)Being developed in collaboration with Astellas.

(c)Being developed in collaboration with OPKO.

(d)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono.

(e)Keytruda® is a registered trademark of Merck Sharp & Dohme Corp. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono.

(f)Being developed in collaboration with Spark Therapeutics, Inc.

(g)Being developed in collaboration with Sangamo Therapeutics, Inc.

(h)Being developed in collaboration with BioNTech.

(i)Being developed in collaboration with Valneva SE.

(j)Being developed in collaboration with Arvinas, Inc.

For additional information about our R&D organization, see the Item 1. Business—Research and Development section of our 2022 Form 10-K.

NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME

Adjusted income is an alternative measure of performance used by management to evaluate our overall performance as a supplement to our GAAP Reported performance measures. As such, we believe that investors’ understanding of our performance is enhanced by disclosing this measure. We use Adjusted income, certain components of Adjusted income and Adjusted diluted EPS to present the results of our major operations––the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide––prior to considering certain income statement elements as follows:


Measure	Definition	Relevance of Metrics to Our Business Performance
Adjusted income	Net income attributable to Pfizer Inc. common shareholders(a) before the impact of amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items	•Provides investors useful information to: ◦evaluate the normal recurring operational activities, and their components, on a comparable year-over-year basis ◦assist in modeling expected future performance on a normalized basis •Provides investors insight into the way we manage our budgeting and forecasting, how we evaluate and manage our recurring operations and how we reward and compensate our senior management(b)
Adjusted cost of sales, Adjusted selling, informational and administrative expenses, Adjusted research and development expenses and Adjusted other (income)/deductions––net	Cost of sales, Selling, informational and administrative expenses, Research and development expenses and Other (income)/deductions––net(a), each before the impact of amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items, which are components of the Adjusted income measure
Adjusted diluted EPS	EPS attributable to Pfizer Inc. common shareholders––diluted(a) before the impact of amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items

(a)Most directly comparable GAAP measure.

(b)The short-term incentive plans for substantially all non-sales-force employees worldwide are funded from a pool based on our performance, measured in significant part versus three budgeted metrics, one of which is Adjusted diluted EPS (as defined for annual incentive compensation purposes), which is derived from Adjusted income and accounts for 40% of the bonus pool funding tied to financial performance. Additionally, the payout for performance share awards is determined in part by Adjusted net income, which is derived from Adjusted income. Beginning in the first quarter of 2022, we no longer exclude any expenses for acquired IPR&D from our non-GAAP Adjusted results but we continue to exclude certain of these expenses for our financial results for annual incentive compensation purposes. The bonus pool funding, which is largely based on financial performance, is adjusted by our R&D pipeline performance, as measured by four metrics, and performance against certain of our ESG metrics, and may be further modified by our Compensation Committee’s assessment of other factors.

Adjusted income and its components and Adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, they may not be comparable to the calculation of similar measures of other companies and are presented to permit investors to more fully understand how management assesses performance. A limitation of these measures is that they provide a view of our operations without including all events during a period, and do not provide a comparable view of our performance to peers. These measures are not, and should not be viewed as, substitutes for their most directly comparable GAAP measures of Net income attributable to Pfizer Inc. common shareholders, components of Net income attributable to Pfizer Inc. common shareholders and EPS attributable to Pfizer Inc. common shareholders—diluted, respectively.

We also recognize that, as internal measures of performance, these measures have limitations, and we do not restrict our performance-management process solely to these measures. We also use other tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, total shareholder return, both on an absolute basis and relative to a publicly traded pharmaceutical index, plays a significant role in determining payouts under certain of our incentive compensation plans.

Adjusted Income and Adjusted Diluted EPS

Amortization of Intangible Assets—Adjusted income excludes all amortization of intangible assets.

Acquisition-Related Items—Adjusted income excludes certain acquisition-related items, which are comprised of transaction, integration, restructuring charges and additional depreciation costs for business combinations because these costs are unique to each transaction and represent costs that were incurred to restructure and integrate businesses as a result of an acquisition. We have made no adjustments for resulting synergies. Acquisition-related items may include purchase accounting impacts such as the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, depreciation related to the increase/decrease in fair value of acquired fixed assets, amortization related to the increase in fair value of acquired debt, and the fair value changes for contingent consideration.

Discontinued Operations—Adjusted income excludes the results of discontinued operations, as well as any related gains or losses on the disposal of such operations. We believe that this presentation is meaningful to investors because, while we review our product portfolio for strategic fit with our operations, we do not build or run our business with the intent to discontinue parts of our business. Restatements due to discontinued operations do not impact compensation or change the Adjusted income measure for the compensation in respect of the restated periods, but are presented for consistency across all periods.

Certain Significant Items—Adjusted income excludes certain significant items representing substantive and/or unusual items that are evaluated individually on a quantitative and qualitative basis. Certain significant items may be highly variable and difficult to predict. Furthermore, in some cases it is reasonably possible that they could reoccur in future periods. For example, although major non-acquisition-related cost-reduction programs are specific to an event or goal with a defined term, we may have subsequent programs based on reorganizations of the business, cost productivity or in response to LOE or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of litigation matters at acquired companies that were inestimable, not probable or unresolved at the date of acquisition, or legal matters related to divested products or businesses. Gains and losses on equity securities, and pension and postretirement actuarial remeasurement gains and losses have a very high degree of inherent market volatility, which we do not control and cannot predict with any level of certainty and because we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business. Unusual items represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. See the Reconciliations of GAAP Reported to Non-GAAP Adjusted information—Certain Line Items below for a non-inclusive list of certain significant items and the Non-GAAP Financial Measure: Adjusted Income section within MD&A of our 2022 Form 10-K.

Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items


	Three Months Ended April 2, 2023
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA)	Cost of sales(a)				Selling, informational and administrative expenses(a)				Other (income)/deductions––net(a)		Net income attributable to Pfizer Inc. common shareholders(a), (b)		Earnings per common share attributable to Pfizer Inc. common shareholders––diluted
GAAP Reported	$	4,886			$	3,418			$	70	$	5,543	$	0.97
Amortization of intangible assets	—		—		—		1,103
Acquisition-related items	(97)		(2)		18		163
Discontinued operations(c)	—		—		—		(1)
Certain significant items:
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d)	(32)		(59)		—		30
Certain asset impairments(e)	—		—		(264)		264
(Gains)/losses on equity securities(e)	—		—		(452)		452
Actuarial valuation and other pension and postretirement plan (gains)/losses	—		—		(8)		8
Other(f)	(10)		(6)		107		(88)
Income tax provision—non-GAAP items							(437)
Non-GAAP Adjusted	$	4,746	$	3,350	$	(528)	$	7,036	$	1.23


	Three Months Ended April 3, 2022
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA)	Cost of sales(a)		Selling, informational and administrative expenses(a)		Other (income)/deductions––net(a)		Net income attributable to Pfizer Inc. common shareholders(a), (b)		Earnings per common share attributable to Pfizer Inc. common shareholders––diluted
GAAP Reported	$	9,984	$	2,593	$	350	$	7,864	$	1.37
Amortization of intangible assets	—		—		—		835
Acquisition-related items	4		(1)		(26)		187
Discontinued operations(c)	—		—		—		10
Certain significant items:
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d)	(20)		(74)		—		122

(Gains)/losses on equity securities(e)	—		—		(698)		698
Actuarial valuation and other pension and postretirement plan (gains)/losses	—		—		72		(72)
Other(f)	(10)		(23)		(104)		143
Income tax provision—non-GAAP items							(448)
Non-GAAP Adjusted	$	9,958	$	2,496	$	(406)	$	9,338	$	1.62

(a)Items that reconcile GAAP Reported to non-GAAP Adjusted balances are shown pre-tax. Our effective tax rates for GAAP Reported income from continuing operations were: 11.4% in the three months ended April 2, 2023 and 12.9% in the three months ended April 3, 2022. See Note 5. Our effective tax rates for non-GAAP Adjusted income were 14.0% in the three months ended April 2, 2023 and 14.8% in the three months ended April 3, 2022.

(b)The amounts for the three months ended April 2, 2023 and April 3, 2022 include reconciling amounts for Research and development expenses that are not material.

(c)See Note 2B.

(d)Includes employee termination costs, asset impairments and other exit costs related to our cost-reduction and productivity initiatives not associated with acquisitions. See Note 3**.

(e)See Note 4.

(f)For the three months ended April 2, 2023, the total Other (income)/deductions––net adjustment of $107 million primarily includes dividend income of $211 million related to our investment in Nimbus resulting from Takeda Pharmaceutical Company Limited’s acquisition of Nimbus’s oral, selective allosteric tyrosine kinase 2 (TYK2) inhibitor program subsidiary, partially offset by charges of (i) $50 million mostly related to our equity-method accounting pro-rata share of intangible asset amortization and impairments, costs of separating from GSK and restructuring costs recorded by Haleon, and (ii) $36 million for certain legal matters, primarily for certain product liability expenses related to products discontinued and/or divested by Pfizer. For the three months ended April 3, 2022, the total Other (income)/deductions––net adjustment of $104 million primarily included charges of $79 million for certain legal matters representing certain product liability expenses related to products discontinued and/or divested by Pfizer, and to a lesser extent, legal obligations related to pre-acquisition commitments.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended
(MILLIONS)	April 2, 2023		April 3, 2022		Drivers of change
Cash provided by/(used in):
Operating activities	$	1,212	$	6,541	The change was primarily driven by a decrease in net income adjusted for non-cash items, the timing of receipts and payments in the ordinary course of business, including timing of payments to BioNTech for the gross profit split for Comirnaty (see Note 8B), a decrease in advance payments for Comirnaty and Paxlovid, and a decrease in cash dividends received from equity method investments.
Investing activities	$	3,315	$	567	The change was driven mainly by $6.2 billion cash used to acquire Arena, net of cash acquired, in the first quarter of 2022, partially offset by $3.7 billion fewer net redemptions of short-term investments with original maturities less than and greater than three months in the first quarter of 2023.
Financing activities	$	(2,771)	$	(6,578)	The change was driven mainly by $2.0 billion of purchases of common stock in the first quarter of 2022, and a $1.3 billion decrease in payments of long-term debt.

ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK

Due to our significant operating cash flows, which is a key strength of our liquidity and capital resources and our primary funding source, as well as our financial assets, access to capital markets, revolving credit agreements, and available lines of credit, we believe that we have, and will maintain, the ability to meet our liquidity needs to support ongoing operations, our capital allocation objectives, and our contractual and other obligations for the foreseeable future. For information about the sources and uses of our funds and capital resources, as well as our operating cash flows, see our Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Equity, and the Analysis of the Condensed Consolidated Statements of Cash Flows within MD&A. For information on our money market funds, available-for sale-debt securities and long-term debt, see Note 7.

For information about our diverse sources of funds, off-balance sheet arrangements, contractual and other obligations, global economic conditions, market risk and LIBOR, see the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk section within MD&A in our 2022 Form 10-K. For more information on guarantees and indemnifications, see Note 12B.

Credit Ratings––The cost and availability of financing are influenced by credit ratings, and an increase or decrease in our credit rating could have a beneficial or adverse effect on financing. Our long-term debt is rated high-quality by both S&P and Moody’s. In March 2023, following the announcement of the proposed acquisition of Seagen, Moody’s changed the outlook on our long-term debt to Negative; S&P downgraded our short-term rating from A-1+ to A-1.


The current ratings assigned to our commercial paper and senior unsecured long-term debt:
NAME OF RATING AGENCY	Pfizer Short-Term Rating	Pfizer Long-Term Rating	Outlook/Watch
Moody’s	P-1	A1	Negative
S&P	A-1	A+	Stable

These ratings are not recommendations to buy, sell or hold securities and the ratings are subject to revision or withdrawal at any time by the rating organizations. Each rating should be evaluated independently of any other rating.

Debt Capacity––Lines of Credit––As of April 2, 2023, we had access to a $7 billion committed U.S. revolving credit facility, which may be used for general corporate purposes including to support our commercial paper borrowings. Lenders under this facility have approximately $700 million of commitments maturing in November 2026 and $6.3 billion of commitments maturing in November 2027. In addition to the U.S. revolving credit facility, our lenders have provided us an additional $316 million in lines of credit, of which $287 million expire within one year. Essentially all lines of credit were unused as of April 2, 2023.

Capital Allocation Framework––Our capital allocation framework is primarily devised to facilitate the achievement of medical breakthroughs through R&D investments and business development activities and returning capital to shareholders through dividends and share repurchases. We expect to finance the proposed acquisition of Seagen substantially through $31 billion of new, long-term debt, and the balance from a combination of short-term financing and existing cash. See the O verview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A and the Item 1A. Risk Factors section for additional information about our proposed acquisition of Seagen. In April 2023, our BOD declared a dividend of $0.41 per share, payable on June 9, 2023, to shareholders of record at the close of business on May 12, 2023. At April 2, 2023, our remaining share-purchase authorization was approximately $3.3 billion, with no repurchases in the first three months of 2023. See Note 12 in our 2022 Form 10-K for more information on our publicly announced share-purchase plans.

Our financing plan for Seagen does not involve monetizing any portion of our Haleon stake. Our intentions with respect to our Haleon stake are set out in our Schedule 13D (as amended) initially filed with the SEC on July 27, 2022.

NEW ACCOUNTING STANDARDS

Recently Adopted Accounting Standard

See Note 1B**.


Recently Issued Accounting Standards, Not Adopted as of April 2, 2023
Standard/Description	Effective Date	Effect on the Financial Statements
Reference rate reform provides temporary optional expedients and exceptions to the guidance for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued after 2021 because of reference rate reform. The new guidance provides the following optional expedients: 1. Simplify accounting analyses under current U.S. GAAP for contract modifications. 2. Simplify the assessment of hedge effectiveness and allow hedging relationships affected by reference rate reform to continue. 3. Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.	Elections can be adopted prospectively at any time through December 31, 2024.	We will apply certain of the optional expedients on hedge accounting relationships and related contracts, if necessary. We do not expect this new guidance to have a material impact on our consolidated financial statements.
In June 2022, the FASB issued final guidance to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered when measuring fair value. Recognizing a contractual sale restriction as a separate unit of account is not permitted.	January 1, 2024, with early adoption permitted.	We are assessing the impact, but currently do not expect this new guidance to have a material impact on our consolidated financial statements.

FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This Form 10-Q contains forward-looking statements. We also provide forward-looking statements in other materials we release to the public, as well as public oral statements. Given their forward-looking nature, these statements involve substantial risks, uncertainties and potentially inaccurate assumptions.

We have tried, wherever possible, to identify such statements by using words such as “will,” “may,” “could,” “likely,” “ongoing,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “assume,” “target,” “forecast,” “guidance,” “goal,” “objective,” “aim,” “seek,” “potential,” “hope” and other words and terms of similar meaning or by using future dates.

We include forward-looking information in our discussion of the following, among other topics:

our anticipated operating and financial performance, reorganizations, business plans, strategy and prospects;
expectations for our product pipeline, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, launches, clinical trial results and other developing data; revenue contribution and projections; potential pricing and reimbursement; potential market dynamics and size; growth, performance, timing of exclusivity and potential benefits;
strategic reviews, capital allocation objectives, dividends and share repurchases;
plans for and prospects of our acquisitions, dispositions and other business development activities, and our ability to successfully capitalize on growth opportunities and prospects;
sales, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings;
expectations for impact of or changes to existing or new government regulations or laws;
our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war and other large-scale crises; and
manufacturing and product supply.

In particular, forward-looking information in this Form 10-Q includes statements relating to specific future actions, performance and effects, including, among others, the expected benefits of the organizational changes to our operations; our 2023 revenue expectations; our ongoing efforts to respond to COVID-19, including our plans and expectations regarding Comirnaty and Paxlovid, and any potential future vaccines or treatments; the forecasted revenue, demand, manufacturing and supply of Comirnaty and Paxlovid, including expectations for the commercial market for Comirnaty and Paxlovid; our expectations regarding the impact of COVID-19 on our business; the expected impact of patent expiries and generic competition; the expected pricing pressures on our products and the anticipated impact to our business; the availability of raw materials for 2023; the benefits expected from our business development transactions, including our proposed acquisition of Seagen; our anticipated liquidity position; the anticipated costs and savings from certain of our initiatives, including our Transforming to a More Focused Company program; and our planned capital spending.

Given their nature, we cannot assure that any outcome expressed in these forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results and those anticipated, estimated, implied or projected. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the Item 1A. Risk Factors section in our 2022 Form 10-K and the Item 1A. Risk Factors of this Form 10-Q.

Therefore, you are cautioned not to unduly rely on forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. You are advised, however, to consult any further disclosures we make on related subjects.

Some of the factors that could cause actual results to differ are identified below, as well as those discussed in the Item 1A. Risk Factors section in our 2022 Form 10-K, the Item 1A. Risk Factors section of this Form 10-Q and within MD&A. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. The occurrence of any of the risks identified below, in the Item 1A. Risk Factors section in our 2022 Form 10-K, the Item 1A. Risk Factors section of this Form 10-Q or within MD&A, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results of operations, or we may be required to increase our accruals for contingencies. It is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties:

Risks Related to Our Business, Industry and Operations, and Business Development

the outcome of R&D activities, including, the ability to meet anticipated pre-clinical or clinical endpoints, commencement and/or completion dates for our pre-clinical or clinical trials, regulatory submission dates, and/or regulatory approval and/or launch dates; the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new pre-clinical or clinical data and further analyses of existing pre-clinical or clinical data; risks associated with preliminary, early stage or interim data; the risk that pre-clinical and clinical trial data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities; and whether and when additional data from our pipeline programs will be published in scientific journal publications, and if so, when and with what modifications and interpretations;
our ability to successfully address comments received from regulatory authorities such as the FDA or the EMA, or obtain approval for new products and indications from regulators on a timely basis or at all; regulatory decisions impacting labeling, including the scope of indicated patient populations, product dosage, manufacturing processes, safety and/or other matters, including decisions relating to emerging developments regarding potential product impurities; the impact of, or uncertainties regarding the ability to obtain, recommendations by technical or advisory committees; and the timing of pricing approvals and product launches;
claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates, including claims and concerns that may arise from the outcome of post-approval clinical trials, which could impact marketing approval, product labeling, and/or availability or commercial potential, including uncertainties regarding the commercial or other impact of the results of the Xeljanz ORAL Surveillance (A3921133) study or actions by regulatory authorities based on analysis of ORAL Surveillance or other data, including on other JAK inhibitors in our portfolio;
the success and impact of external business development activities, including the ability to identify and execute on potential business development opportunities; the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all; the ability to realize the anticipated benefits of any such transactions in the anticipated time frame or at all; the potential need for and impact of additional equity or debt financing to pursue these opportunities, which could result in increased leverage and/or a downgrade of our credit ratings; challenges integrating the businesses and operations; disruption to business and operations relationships; risks related to growing revenues for certain acquired products; significant transaction costs; and unknown liabilities;
risks and uncertainties related to Pfizer’s proposed acquisition of Seagen, including, among other things, risks related to the satisfaction or waiver of the conditions to closing the proposed acquisition (including the failure to obtain necessary regulatory approvals and failure to obtain the requisite vote by Seagen stockholders) in the anticipated timeframe or at all, including the possibility that the proposed acquisition does not close; the possibility that competing offers may be made; risks related to the ability to realize the anticipated benefits of the proposed acquisition, including the possibility that the expected benefits from the acquisition will not be realized or will not be realized within the expected time period; the risk that the businesses will not be integrated successfully; disruption from the transaction making it more difficult to maintain business and operational relationships; negative effects of the announcement or the consummation of the proposed acquisition on the market price of Pfizer’s common stock and/or operating results; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the proposed acquisition or Seagen’s business; risks related to the financing of the transaction; other business effects and uncertainties, including the effects of industry, market, business, economic, political or regulatory conditions; future exchange and interest rates; changes in tax and other laws, regulations, rates and policies; the impact of the proposed acquisition on future business combinations or disposals; uncertainties regarding the commercial success of Pfizer’s and Seagen’s commercialized and pipeline products; the uncertainties inherent in R&D; whether and when drug applications may be filed in any jurisdictions for Pfizer’s or Seagen’s pipeline products; whether and when any such applications may be approved by regulatory authorities, which will depend on myriad factors, including making a determination as to whether the product's benefits outweigh its known risks and determination of the product's efficacy and, if approved, whether any such products will be commercially successful; and competitive developments;
competition, including from new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat or prevent diseases and conditions similar to those treated or intended to be prevented by our in-line products and product candidates;
the ability to successfully market both new and existing products, including biosimilars;
difficulties or delays in manufacturing, sales or marketing; supply disruptions, shortages or stock-outs at our facilities or third-party facilities that we rely on; and legal or regulatory actions;
the impact of public health outbreaks, epidemics or pandemics (such as COVID-19) on our business, operations and financial condition and results, including impacts on our employees, manufacturing, supply chain, sales and marketing, R&D and clinical trials;
risks and uncertainties related to our efforts to continue to develop and commercialize Comirnaty and Paxlovid or any potential future COVID-19 vaccines, treatments or combinations, as well as challenges related to their manufacturing, supply and distribution;
risks related to our ability to achieve our revenue forecasts for Comirnaty and Paxlovid or any potential future COVID-19 vaccines or treatments, including, among other things, whether and when additional supply or purchase agreements will be reached and the risk that demand for any products may be reduced, no longer exist or not meet expectations, which may lead to excess inventory on-hand and/or in the channel or reduced revenues;
trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or favorable formulary placement for our products;
interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations and monetary policy actions in countries experiencing high inflation rates;
any significant issues involving our largest wholesale distributors or government customers, which account for a substantial portion of our revenues;
the impact of the increased presence of counterfeit medicines or vaccines in the pharmaceutical supply chain;
any significant issues related to the outsourcing of certain operational and staff functions to third parties; and any significant issues related to our JVs and other third-party business arrangements;
uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions, such as inflation, and recent and possible future changes in global financial markets;
any changes in business, political and economic conditions due to actual or threatened terrorist activity, geopolitical instability, civil unrest or military action;
the impact of product recalls, withdrawals and other unusual items, including uncertainties related to regulator-directed risk evaluations and assessments, including our ongoing evaluation of our product portfolio for the potential presence or formation of nitrosamines;
trade buying patterns;
the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, as well as any other corporate strategic initiatives and growth strategies, and cost-reduction and productivity initiatives, each of which requires upfront costs but may fail to yield anticipated benefits and may result in unexpected costs or organizational disruption;
the ability to successfully achieve our climate goals and progress our environmental sustainability and other ESG priorities;

Risks Related to Government Regulation and Legal Proceedings

the impact of any U.S. healthcare reform or legislation or any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs, including the IRA, or changes in the tax treatment of employer-sponsored health insurance that may be implemented;
U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, intellectual property, reimbursement or access or restrictions on U.S. direct-to-consumer advertising; limitations on interactions with healthcare professionals and other industry stakeholders; as well as pricing pressures for our products as a result of highly competitive insurance markets;
legislation or regulatory action in markets outside of the U.S., such as China or Europe, including, without limitation, laws related to pharmaceutical product pricing, intellectual property, medicine safety, environmental impact of medicines, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;
the exposure of our operations globally to possible capital and exchange controls, economic conditions, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, the impact of political or civil unrest or military action, including the ongoing conflict between Russia and Ukraine and its economic consequences, unstable governments and legal systems, inter-governmental disputes and natural disasters or disruptions related to climate change;
legal defense costs, insurance expenses, settlement costs and contingencies, including those related to actual or alleged environmental contamination;
the risk and impact of an adverse decision or settlement and the risk related to adequacy of reserves related to legal proceedings;
the risk and impact of tax related litigation and investigations;
governmental laws and regulations affecting our operations, including, without limitation, the recently enacted IRA, changes in laws and regulations or their interpretation, including, among others, changes in tax laws and regulations internationally and in the U.S., the adoption of global minimum taxation requirements outside the U.S. and potential changes to existing tax law by the current U.S. Presidential administration and Congress;

Risks Related to Intellectual Property, Technology and Security

any significant breakdown or interruption of our information technology systems and infrastructure (including cloud services);
any business disruption, theft of confidential or proprietary information, security threats on facilities or infrastructure, extortion or integrity compromise resulting from a cyber-attack or other malfeasance by, but not limited to, nation states, employees, business partners or others;
the risk that our currently pending or future patent applications may not be granted on a timely basis or at all, or any patent-term extensions that we seek may not be granted on a timely basis, if at all; and
risks to our products, patents and other intellectual property, such as: (i) claims of invalidity that could result in LOE; (ii) claims of patent infringement, including asserted and/or unasserted intellectual property claims; (iii) claims we may assert against intellectual property rights held by third parties; (iv) challenges faced by our collaboration or licensing partners to the validity of their patent rights; or (v) any pressure, or legal or regulatory action by, various stakeholders or governments that could potentially result in us not seeking intellectual property protection or agreeing not to enforce or being restricted from enforcing intellectual property rights related to our products, including Comirnaty and Paxlovid.

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