Item 1. FINANCIAL STATEMENTS

224K characters. Original on sec.gov · Markdown

Item 1. FINANCIAL STATEMENTS

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months EndedNine Months Ended
(MILLIONS, EXCEPT PER SHARE DATA)October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Revenues$13,232$22,638$44,247$76,040
Costs and expenses:
Cost of sales(a), (b)9,2696,06317,39124,696
Selling, informational and administrative expenses(a)3,2813,39110,1969,032
Research and development expenses(a)2,7112,6967,8647,813
Acquired in-process research and development expenses67524122880
Amortization of intangible assets1,1798223,4662,478
Restructuring charges and certain acquisition-related costs155199377580
Other (income)/deductions––net(79)(59)(356)1,063
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)(3,352)9,0015,18729,498
Provision/(benefit) for taxes on income/(loss)(964)356(320)3,098
Income/(loss) from continuing operations(2,388)8,6455,50726,400
Discontinued operations––net of tax12(21)114
Net income/(loss) before allocation to noncontrolling interests(2,376)8,6235,51826,404
Less: Net income attributable to noncontrolling interests6153027
Net income/(loss) attributable to Pfizer Inc. common shareholders$(2,382)$8,608$5,488$26,378
Earnings/(loss) per common share––basic:
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders$(0.42)$1.54$0.97$4.70
Discontinued operations––net of tax————
Net income/(loss) attributable to Pfizer Inc. common shareholders$(0.42)$1.54$0.97$4.71
Earnings/(loss) per common share––diluted:
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders$(0.42)$1.51$0.96$4.60
Discontinued operations––net of tax————
Net income/(loss) attributable to Pfizer Inc. common shareholders$(0.42)$1.51$0.96$4.60
Weighted-average shares––basic5,6465,6075,6425,606
Weighted-average shares––diluted5,6465,7185,7145,729

(a)Exclusive of amortization of intangible assets.

(b)See Notes 8 and 13.

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(UNAUDITED)

Three Months EndedNine Months Ended
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Net income/(loss) before allocation to noncontrolling interests$(2,376)$8,623$5,518$26,404
Foreign currency translation adjustments, net(109)(918)234(2,549)
Unrealized holding gains/(losses) on derivative financial instruments, net4085895191,443
Reclassification adjustments for (gains)/losses included in net income/(loss)(a)(67)(615)73(972)
341(26)593471
Unrealized holding gains/(losses) on available-for-sale securities, net(83)(777)30(1,397)
Reclassification adjustments for (gains)/losses included in net income/(loss)(b)51606(442)1,094
(32)(171)(411)(303)
Reclassification adjustments related to amortization of prior service costs and other, net(29)(31)(88)(99)
Reclassification adjustments related to curtailments of prior service costs and other, net(1)2(14)(8)
(30)(29)(102)(107)
Other comprehensive income/(loss), before tax170(1,144)313(2,488)
Tax provision/(benefit) on other comprehensive income/(loss)36(33)(17)(149)
Other comprehensive income/(loss) before allocation to noncontrolling interests$134$(1,111)$330$(2,339)
Comprehensive income/(loss) before allocation to noncontrolling interests$(2,242)$7,512$5,848$24,065
Less: Comprehensive income/(loss) attributable to noncontrolling interests4102316
Comprehensive income/(loss) attributable to Pfizer Inc.$(2,247)$7,503$5,826$24,049

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

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

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(MILLIONS)October 1, 2023December 31, 2022
(Unaudited)
Assets
Cash and cash equivalents$3,148$416
Short-term investments41,03322,316
Trade accounts receivable, less allowance for doubtful accounts: 2023—$465; 2022—$44911,08610,952
Inventories10,2048,981
Current tax assets3,9173,577
Other current assets4,6245,017
Total current assets74,01251,259
Equity-method investments11,02511,033
Long-term investments3,2144,036
Property, plant and equipment, less accumulated depreciation: 2023—$15,779; 2022—$15,17417,86216,274
Identifiable intangible assets40,22443,370
Goodwill51,52751,375
Noncurrent deferred tax assets and other noncurrent tax assets8,3506,693
Other noncurrent assets8,80813,163
Total assets$215,021$197,205
Liabilities and Equity
Short-term borrowings, including current portion of long-term debt: 2023—$2,260; 2022—$2,560$2,548$2,945
Trade accounts payable5,3386,809
Dividends payable—2,303
Income taxes payable1,8981,587
Accrued compensation and related items2,3723,407
Deferred revenues2,2042,520
Other current liabilities16,77622,568
Total current liabilities31,13642,138
Long-term debt61,04832,884
Pension and postretirement benefit obligations2,1662,250
Noncurrent deferred tax liabilities1,1251,023
Other taxes payable8,0999,812
Other noncurrent liabilities14,24213,180
Total liabilities117,817101,288
Commitments and Contingencies
Common stock478476
Additional paid-in capital92,49691,802
Treasury stock(114,485)(113,969)
Retained earnings126,411125,656
Accumulated other comprehensive loss(7,966)(8,304)
Total Pfizer Inc. shareholders’ equity96,93495,661
Equity attributable to noncontrolling interests270256
Total equity97,20495,916
Total liabilities and equity$215,021$197,205

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

PFIZER INC. SHAREHOLDERS
Common StockTreasury Stock
(MILLIONS, EXCEPT PER SHARE DATA)SharesPar ValueAdd’l Paid-In CapitalSharesCostRetained EarningsAccum. Other Comp. LossShare- holders’ EquityNon-controlling interestsTotal Equity
Balance, July 2, 20239,561$478$92,329(3,916)$(114,482)$128,796$(8,102)$99,019$274$99,293
Net income/(loss)(2,382)(2,382)6(2,376)
Other comprehensive income/(loss), net of tax135135(2)134
Cash dividends declared, per share: $—
Common stock———
Noncontrolling interests—(8)(8)
Share-based payment transactions1—167—(4)(2)161161
Other———————
Balance, October 1, 20239,562$478$92,496(3,916)$(114,485)$126,411$(7,966)$96,934$270$97,204
PFIZER INC. SHAREHOLDERS
Common StockTreasury Stock
(MILLIONS, EXCEPT PER SHARE DATA)SharesPar ValueAdd’l Paid-In CapitalSharesCostRetained EarningsAccum. Other Comp. LossShare- holders’ EquityNon-controlling interestsTotal Equity
Balance, July 3, 20229,496$476$91,183(3,903)$(113,939)$116,608$(7,119)$87,208$261$87,469
Net income/(loss)8,6088,608158,623
Other comprehensive income/(loss), net of tax(1,106)(1,106)(5)(1,111)
Cash dividends declared, per share: $0.40
Common stock(2,245)(2,245)(2,245)
Noncontrolling interests—(7)(7)
Share-based payment transactions20—172—(6)(5)161161
Other4———4(4)—
Balance, October 2, 20229,515$476$91,359(3,903)$(113,945)$122,967$(8,225)$92,631$259$92,891
PFIZER INC. SHAREHOLDERS
Common StockTreasury Stock
(MILLIONS, EXCEPT PER SHARE DATA)SharesPar ValueAdd’l Paid-In CapitalSharesCostRetained EarningsAccum. Other Comp. LossShare- holders’ EquityNon-controlling interestsTotal Equity
Balance, January 1, 20239,519$476$91,802(3,903)$(113,969)$125,656$(8,304)$95,661$256$95,916
Net income/(loss)5,4885,488305,518
Other comprehensive income/(loss), net of tax338338(8)330
Cash dividends declared, per share: $0.82
Common stock(4,629)(4,629)(4,629)
Noncontrolling interests—(8)(8)
Share-based payment transactions432694(12)(516)(104)7777
Other———————
Balance, October 1, 20239,562$478$92,496(3,916)$(114,485)$126,411$(7,966)$96,934$270$97,204
PFIZER INC. SHAREHOLDERS
Common StockTreasury Stock
(MILLIONS, EXCEPT PER SHARE DATA)SharesPar ValueAdd’l Paid-In CapitalSharesCostRetained EarningsAccum. Other Comp. LossShare- holders’ EquityNon-controlling interestsTotal Equity
Balance, January 1, 20229,471$473$90,591(3,851)$(111,361)$103,394$(5,897)$77,201$262$77,462
Net income/(loss)26,37826,3782726,404
Other comprehensive income/(loss), net of tax(2,328)(2,328)(11)(2,339)
Cash dividends declared, per share: $1.20
Common stock(6,734)(6,734)(6,734)
Noncontrolling interests—(7)(7)
Share-based payment transactions452760(12)(584)(71)108108
Purchases of common stock(39)(2,000)(2,000)(2,000)
Other7———7(11)(4)
Balance, October 2, 20229,515$476$91,359(3,903)$(113,945)$122,967$(8,225)$92,631$259$92,891

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended
(MILLIONS)October 1, 2023October 2, 2022
Operating Activities
Net income before allocation to noncontrolling interests$5,518$26,404
Discontinued operations—net of tax114
Net income from continuing operations before allocation to noncontrolling interests5,50726,400
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by/(used in) operating activities:
Depreciation and amortization4,6203,545
Asset write-offs and impairments499287
Deferred taxes(1,584)(3,399)
Share-based compensation expense404508
Benefit plan contributions in excess of expense/income(467)(532)
Inventory write-offs and related charges associated with COVID-19 products(a)5,847476
Other adjustments, net(744)1,481
Other changes in assets and liabilities, net of acquisitions and divestitures(10,622)(8,081)
Net cash provided by/(used in) operating activities3,46020,685
Investing Activities
Purchases of property, plant and equipment(2,863)(2,235)
Purchases of short-term investments(30,138)(29,701)
Proceeds from redemptions/sales of short-term investments18,01835,087
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less(6,102)(10,877)
Purchases of long-term investments(166)(1,627)
Proceeds from redemptions/sales of long-term investments189446
Acquisitions of businesses, net of cash acquired(25)(6,225)
Dividend received from the Consumer Healthcare JV—3,960
Other investing activities, net(193)(200)
Net cash provided by/(used in) investing activities(21,282)(11,373)
Financing Activities
Proceeds from short-term borrowings143,887
Payments on short-term borrowings—(3,887)
Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less(106)870
Proceeds from issuance of long-term debt30,831—
Payments on long-term debt(2,569)(1,609)
Purchases of common stock—(2,000)
Cash dividends paid(6,932)(6,738)
Other financing activities, net(613)(342)
Net cash provided by/(used in) financing activities20,624(9,819)
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents(39)(139)
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents2,764(646)
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period4681,983
Cash and cash equivalents and restricted cash and cash equivalents, at end of period$3,233$1,338
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes$2,907$4,919
Interest paid1,1531,121
Interest rate hedges9828

(a) See Notes 8 and 13.

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 2022 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 2022 Form 10-K*.* Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three and nine months ended August 27, 2023 and August 28, 2022, and for U.S. subsidiaries is as of and for the three and nine months ended October 1, 2023 and October 2, 2022.

We manage our commercial operations through two operating segments, each led by a single manager: Biopharma and Business Innovation. Biopharma is the only reportable segment. See Note 13A below and Note 17A in our 2022 Form 10-K*.*

Business development activities impacted financial results in the periods presented. 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 long-term debt issued in May 2023 (see Note 7D), and the balance from a combination of short-term financing and existing cash. The transaction was approved by Seagen’s shareholders in May 2023. In October 2023, we received unconditional antitrust clearance from the EC on the proposed acquisition. The transaction is expected to close in late 2023 or early 2024, and remains subject to customary closing conditions, including receipt of required regulatory approvals. See Note 2 below, as well as Notes 1A and 2 in our 2022 Form 10-K.

We have made certain reclassification adjustments to conform prior-period amounts to the current presentation for segment reporting.

B. New Accounting Standards Adopted in 2023

On January 1, 2023, we adopted a new accounting standard for supplier finance programs which requires increased disclosures in the notes to our financial statements. See Note 8C**.

In the second quarter of 2023, we adopted new accounting standards on reference rate reform that provide temporary optional expedients and exceptions to the guidance for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate that were discontinued after June 30, 2023. We applied certain of the optional expedients related to hedge accounting relationships. The main purpose of the expedients is to allow hedge accounting to continue uninterrupted and make it easier to apply the requirements to maintain hedge accounting during the transition period through December 31, 2024.

C. Revenues and Trade Accounts Receivable

*Customers––*Our prescription biopharmaceutical 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 and distributors. In the U.S., we primarily sell our vaccines directly to the federal government (including the CDC), wholesalers, individual provider offices, retail pharmacies and integrated delivery systems. 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)October 1, 2023December 31, 2022
Reserve against Trade accounts receivable, less allowance for doubtful accounts$1,599$1,200
Other current liabilities:
Accrued rebates5,0834,479
Other accruals436430
Other noncurrent liabilities640612
Total accrued rebates and other sales-related accruals$7,757$6,722

*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. When management becomes aware of certain customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded.

During the three and nine months ended October 1, 2023 and October 2, 2022, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements. For additional information on our trade accounts receivable, see Note 1G in our 2022 Form 10-K.

Note 2. Acquisitions, Divestitures, Equity-Method Investment and Research and Development Arrangement

A. Acquisitions

*GBT––*On October 5, 2022, we acquired GBT, a biopharmaceutical company dedicated to the discovery, development and delivery of life-changing treatments for underserved patient communities, starting with sickle cell disease. The total fair value of the consideration transferred was $5.7 billion ($5.2 billion, net of cash acquired). In connection with this business combination, we provisionally recorded: (i) $4.4 billion in Identifiable intangible assets, consisting of $3.0 billion of IPR&D and $1.4 billion of developed technology rights with a useful life of six years, (ii) $1.0 billion of Goodwill, (iii) $672 million of inventories to be sold over approximately three years, (iv) $523 million of net deferred tax liabilities and (v) $331 million of assumed long-term debt that was paid in full in the fourth quarter of 2022. The allocation of the consideration transferred to the assets acquired and liabilities assumed has not yet been finalized.

*Biohaven––*On October 3, 2022, we acquired Biohaven, the maker of Nurtec ODT/Vydura (rimegepant), an innovative therapy approved for both acute treatment of migraine and prevention of episodic migraine in adults. The total fair value of the consideration transferred was $11.8 billion, which includes the fair value of Pfizer’s previous investment in Biohaven on the acquisition date of approximately $300 million. In connection with this business combination, we provisionally recorded: (i) $12.1 billion in Identifiable intangible assets, consisting of $11.6 billion of developed technology rights with a useful life of 11 years and $450 million of IPR&D, (ii) $828 million of Goodwill, (iii) $813 million of inventories to be sold over approximately two years, (iv) $398 million of trade accounts receivable, (v) $1.4 billion of assumed long-term debt that was paid in full in the fourth quarter of 2022, (vi) $550 million of net deferred tax liabilities and (vii) $526 million of Other current liabilities. The allocation of the consideration transferred to the assets acquired and liabilities assumed has not yet been finalized.

*Arena––*On March 11, 2022, we acquired Arena, a clinical stage company with development-stage therapeutic candidates in gastroenterology, dermatology and cardiology. The total fair value of the consideration transferred was $6.6 billion ($6.2 billion, net of cash acquired). The final allocation of the consideration transferred to the assets acquired and the liabilities assumed was completed in the first quarter of 2023. In connection with this business combination, we 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) $490 million of net deferred tax liabilities.

B. Divestitures

Divestiture of Early-Stage Rare Disease Gene Therapy Portfolio––On September 19, 2023, we completed an agreement with Alexion, under which Alexion purchased and licensed the assets of our early-stage rare disease gene therapy portfolio. This agreement is consistent with our previously announced strategy to pivot from viral capsid-based gene therapy approaches to

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

harnessing new platform technologies that we believe can have a transformative impact on patients, such as mRNA or in vivo gene editing. Under the terms of the agreement, Alexion will pay us total consideration of up to $1 billion, consisting of an upfront payment of $300 million paid at closing and future contingent milestone payments, plus tiered royalties based on annual net sales of the assets. In connection with the closing of the transaction, Pfizer recognized a $222 million pre-tax gain in Other (income)/deductions––net (see Note 4).

Discontinued operations––net of tax in the periods presented relate to post-close adjustments for previously divested businesses that were classified as discontinued operations. In the three and nine months ended October 1, 2023 and October 2, 2022, amounts recorded under interim agreements, including TSAs and MSAs, associated with these disposals were not material. Under agreements related to the 2020 spin-off and the combination of the Upjohn Business with Mylan to form Viatris, net amounts due to Viatris were $31 million as of October 1, 2023 and $94 million as of December 31, 2022. The cash flows associated with the agreements are included in Net cash provided by/(used in) operating activities. For information about the nature of these agreements, see Note 2B in our 2022 Form 10-K.

C. Equity-Method Investment

Haleon/*Consumer Healthcare JV––*On July 18, 2022, GSK completed a demerger of the Consumer Healthcare JV which became Haleon, an independent, publicly traded company listed on the London Stock Exchange that holds the joint historical consumer healthcare business of GSK and Pfizer following the demerger. We continue to own 32% of the ordinary shares of Haleon after the demerger.

The carrying value of our investment in Haleon was $10.8 billion as of both October 1, 2023 and December 31, 2022, and is reported in Equity-method investments. The fair value of our investment in Haleon as of October 1, 2023, based on quoted market prices of Haleon stock, was $12.3 billion. Haleon/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 value of our investment was effectively unchanged during the first nine months of 2023, primarily due to our share of Haleon’s earnings of $341 million, partially offset by $183 million in pre-tax foreign currency translation adjustments (see Note 6) and $154 million in dividends. We record our share of earnings from Haleon/the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net. Our total share of Haleon’s earnings generated in the second quarter of 2023, which we recorded in our operating results in the third quarter of 2023, was $122 million. Our total share of Haleon’s earnings generated in the fourth quarter of 2022 and first six months of 2023, which we recorded in our operating results in the first nine months of 2023, was $341 million. Our total share of the JV’s earnings generated in the second quarter of 2022, which we recorded in our operating results in the third quarter of 2022, was $67 million. Our total share of the JV’s earnings generated in the fourth quarter of 2021 and first six months of 2022, which we recorded in our operating results in the first nine months of 2022, was $402 million. In the third quarter and first nine months of 2022, our equity-method income included in Other (income)/deductions––net also included charges of $118 million and $119 million, respectively, primarily for adjustments to our equity-method basis differences related to the separation of Haleon/the Consumer Healthcare JV from GSK. 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 Haleon/the Consumer Healthcare JV was not material to our results of operations in the third quarter and first nine months of 2023. See Note 4**.

Summarized financial information for our equity-method investee, Haleon/the Consumer Healthcare JV, for the three and nine months ending June 30, 2023, the most recent period available, and for the three and nine months ending June 30, 2022, is as follows:
Three Months EndedNine Months Ended
(MILLIONS)June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Net sales$3,490$3,218$10,379$10,164
Cost of sales(1,323)(1,196)(4,211)(3,830)
Gross profit$2,167$2,022$6,168$6,334
Income from continuing operations4032261,1331,303
Net income4032261,1331,303
Income attributable to shareholders3822101,0661,256

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

D. Research and Development Arrangement

*Research and Development Funding Arrangement with Blackstone––*In April 2023, we entered into an arrangement with 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. As there is substantive transfer of risk to the financial partner, the development funding is recognized by us as an obligation to perform contractual services. We are recognizing the funding as a reduction of Research and development expenses using an attribution model over the period of the related expenses. The reduction to Research and development expenses for the third quarter and first nine months of 2023 was $43 million and $88 million, respectively. 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 approval-based fixed milestone payments of up to $468 million contingent upon the successful results of the clinical trials. Fixed milestone payments due upon approval will be recorded as intangible assets and amortized to Amortization of intangible assets over the shorter of the term of the agreement or estimated commercial life of the product. 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. Fixed sales-based milestone payments will be recorded as intangible assets and amortized to Amortization of intangible assets over the shorter of the term of the agreement or estimated commercial life of the product, and royalties on net sales will be recorded as Cost of sales when incurred.

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

A. Transforming to a More Focused Company Program

In 2019, we announced that we would be incurring costs associated with our Transforming to a More Focused Company Program, a multi-year effort to ensure our cost base aligns appropriately with our operating structure following Pfizer’s transformation into a more focused, innovative science-based global biopharmaceutical business. This program includes activities to (i) restructure our corporate enabling functions to appropriately support our operating structure; (ii) transform our commercial go-to-market model; and (iii) optimize our manufacturing network and R&D operations.

The activities associated with transforming our commercial go-to-market model are substantially complete. Activities associated with restructuring our corporate enabling functions and optimizing our manufacturing network and R&D operations are ongoing and are expected to be substantially completed by the end of 2023. The costs to restructure our corporate enabling functions, and to optimize our R&D operations and reduce cycle times, as well as to further prioritize our internal R&D portfolio, primarily include severance and implementation costs. The costs to optimize our manufacturing network largely include severance, implementation costs, product transfer costs, site exit costs, and accelerated depreciation.

From the start of this program in the fourth quarter of 2019 through October 1, 2023, we incurred costs of $3.9 billion, of which $1.5 billion ($1.1 billion of restructuring charges) is associated with Biopharma. We have incurred approximately 90% of total expected costs to date, and we expect the remaining costs to be substantially incurred through 2023.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

B. Key Activities

The following summarizes costs and credits for acquisitions and cost-reduction/productivity initiatives:
Three Months EndedNine Months Ended
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Restructuring charges/(credits):
Employee terminations$16$158$77$293
Asset impairments40174544
Exit costs/(credits)1524431
Restructuring charges/(credits)(a)71177165368
Transaction costs(b)5—1442
Integration/pre-integration costs and other(c)7822198170
Restructuring charges and certain acquisition-related costs155199377580
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net——(7)(5)
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of operations, mainly in Cost of sales(d)572822
Implementation costs recorded in our condensed consolidated statements of operations as follows(e):
Cost of sales16144340
Selling, informational and administrative expenses71136196344
Research and development expenses29—59—
Total implementation costs116150298384
Total costs associated with acquisitions and cost-reduction/productivity initiatives$276$357$696$982

(a)Primarily represents cost-reduction initiatives. Restructuring charges/(credits) associated with Biopharma: charges of $1 million and credits of $22 million for the three and nine months ended October 1, 2023, respectively, and charges of $62 million and $108 million for the three and nine months ended October 2, 2022, respectively.

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

(c)Represents external, incremental costs directly related to integrating acquired businesses and our proposed acquisition of Seagen, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. In the nine months ended October 1, 2023, integration/pre-integration costs and other were mostly related to our acquisitions of Biohaven and GBT and our proposed acquisition of Seagen. In the nine months ended October 2, 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 that was recognized as post-closing compensation expense.

(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 CostsAsset Impairment ChargesExit CostsAccrual
Balance, December 31, 2022(a)$1,196$—$8$1,204
Provision/(credit)774544165
Utilization and other(b)(700)(45)(39)(784)
Balance, October 1, 2023(c)$573$—$12$585

(a)Included in Other current liabilities ($991 million) and Other noncurrent liabilities ($213 million).

(b)Other activity includes adjustments for foreign currency translation that are not material.

(c)Included in Other current liabilities ($447 million) and Other noncurrent liabilities ($137 million).

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4. Other (Income)/Deductions—Net

Components of Other (income)/deductions––net include:
Three Months EndedNine Months Ended
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Interest income$(523)$(70)$(1,015)$(114)
Interest expense6953111,521925
Net interest expense(a)173240505811
Royalty-related income(260)(239)(737)(628)
Net (gains)/losses on asset disposals—7(2)6
Net (gains)/losses recognized during the period on equity securities(b)3931127091,353
Income from collaborations, out-licensing arrangements and sales of compound/product rights(10)(4)(84)(17)
Net periodic benefit costs/(credits) other than service costs(92)(306)(260)(294)
Certain legal matters, net(c)7177246175
Certain asset impairments(d)—200264200
Haleon/Consumer Healthcare JV equity method (income)/loss(e)(131)51(354)(283)
Other, net(f)(222)(198)(643)(260)
Other (income)/deductions––net$(79)$(59)$(356)$1,063

(a)The decrease in net interest expense in the third quarter and first nine months of 2023 reflects higher interest expense driven by our $31 billion aggregate principal amount of senior unsecured notes issued in May 2023 as part of the financing for our proposed acquisition of Seagen, which was more than offset by higher interest income on the investment of the net proceeds from the debt issuance.

(b)The net losses in the third quarter of 2023 include, among other things, unrealized losses of $312 million related to our investments in Cerevel Therapeutics Holdings, Inc. (Cerevel) and Allogene Therapeutics, Inc (Allogene). The net losses in the first nine months of 2023 include, among other things, unrealized losses of $606 million related to our investments in BioNTech, Cerevel and Allogene. The net losses in the first nine months of 2022 included, among other things, unrealized losses of $974 million related to our investments in BioNTech, Cerevel and Arvinas.

(c)The third quarter of 2023 includes legal obligations related to pre-acquisition matters and certain product liability expenses related to products discontinued and/or divested by Pfizer. The first nine months of 2023 primarily includes certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer and legal obligations related to pre-acquisition matters. The third quarter and first nine months of 2022 primarily included certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer.

(d)The first nine months of 2023 primarily represents intangible asset impairment charges, including $128 million associated with Other business activities, related to IPR&D and developed technology rights for acquired software assets and reflects unfavorable pivotal trial results and updated commercial forecasts, and $120 million associated with our Biopharma segment resulting from the discontinuation of a study related to an out-licensed IPR&D asset for the treatment of prostate cancer, acquired in our Array BioPharma Inc. (Array) acquisition. The third quarter and first nine months of 2022 represented an intangible asset impairment charge associated with our Biopharma segment, representing an IPR&D asset for the unapproved indication of symptomatic dilated cardiomyopathy due to a mutation of the gene encoding the lamin A/C protein, acquired in our Array acquisition, and was a result of the Phase 3 trial reaching futility at a pre-planned interim analysis.

(e)See Note 2C**.

(f)The third quarter and first nine months of 2023 includes, among other things, a $222 million gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion. The first nine months of 2023 also includes, among other things, dividend income of $213 million from our investment in ViiV and $211 million from 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.

Additional information about the intangible assets that were impaired during 2023 follows:
Nine Months Ended
Fair Value(a)October 1, 2023
(MILLIONS)AmountLevel 1Level 2Level 3Impairment
Intangible assets––Licensing agreements and other(b)$—$—$—$—$120
Intangible assets––IPR&D(b)————94
Intangible assets––Developed technology rights(b)————34
Total$—$—$—$—$248

(a)The fair value amount is presented as of the date of impairment, as this asset is not measured at fair value on a recurring basis. See also Note 1E in our 2022 Form 10-K*.*

(b)Reflects intangible assets written down to fair value in 2023. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows for the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.

Note 5. Tax Matters

A. Taxes on Income/(Loss) from Continuing Operations

Our effective tax rate for continuing operations was 28.8% for the third quarter of 2023, compared to 4.0% for the third quarter of 2022, and was (6.2)% for the first nine months of 2023, compared to 10.5% for the first nine months of 2022. The positive effective tax rate for the third quarter of 2023 reflects a tax benefit on a pre-tax loss primarily resulting from changes in forecast and jurisdictional mix of earnings. The tax benefit for the third quarter of 2023 and the negative effective tax rate for the first nine months of 2023, compared to the tax provisions for the third quarter and first nine months of 2022, were primarily due to changes in forecast and jurisdictional mix of earnings. The tax provisions for the third quarter and first nine months of 2022 also included tax benefits related to global income tax resolutions in multiple tax jurisdictions spanning multiple tax years that included the closing of U.S. Internal Revenue Service audits covering five tax years.

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 fifth annual installment of this liability was paid by its April 18, 2023 due date. The sixth annual installment is due April 15, 2024 and is reported in current Income taxes payable as of October 1, 2023. The remaining liability is reported in noncurrent Other taxes payable. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.

B. Tax Contingencies

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

The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, tax years 2016-2018 are under audit. Tax years 2019-2023 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 and certain related audits, appeals and investigations in certain major international tax jurisdictions dating back to 2012.

See Note 5D in our 2022 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 EndedNine Months Ended
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Foreign currency translation adjustments, net(a)$(28)$20$(33)$(165)
Unrealized holding gains/(losses) on derivative financial instruments, net8047108177
Reclassification adjustments for (gains)/losses included in net income/(loss)(5)(72)(16)(97)
75(25)9180
Unrealized holding gains/(losses) on available-for-sale securities, net(10)(97)4(175)
Reclassification adjustments for (gains)/losses included in net income/(loss)676(55)137
(4)(21)(51)(38)
Reclassification adjustments related to amortization of prior service costs and other, net(7)(7)(21)(23)
Reclassification adjustments related to curtailments of prior service costs and other, net(1)—(3)(3)
(7)(8)(24)(26)
Tax provision/(benefit) on other comprehensive income/(loss)$36$(33)$(17)$(149)

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

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests

The following summarizes the changes, net of tax, in Accumulated other comprehensive loss:
Net Unrealized Gains/(Losses)Benefit Plans
(MILLIONS)Foreign Currency Translation Adjustments(a)Derivative Financial InstrumentsAvailable-For-Sale SecuritiesPrior Service (Costs)/Credits and OtherAccumulated Other Comprehensive Income/(Loss)
Balance, December 31, 2022$(8,360)$(412)$220$248$(8,304)
Other comprehensive income/(loss)(b)274501(360)(78)338
Balance, October 1, 2023$(8,086)$89$(140)$170$(7,966)

(a)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests.

(b)Foreign currency translation adjustments include net losses related to our equity-method investment in Haleon (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:

October 1, 2023December 31, 2022
(MILLIONS)TotalLevel 1Level 2TotalLevel 1Level 2
Financial assets:
Short-term investments
Equity securities with readily determinable fair values:
Money market funds$13,193$—$13,193$1,588$—$1,588
Available-for-sale debt securities:
Government and agency—non-U.S.18,236—18,23615,915—15,915
Government and agency—U.S.5,832—5,8321,313—1,313
Corporate and other2,179—2,1791,514—1,514
26,247—26,24718,743—18,743
Total short-term investments39,440—39,44020,331—20,331
Other current assets
Derivative assets:
Interest rate contracts1—1———
Foreign exchange contracts712—712714—714
Total other current assets713—713714—714
Long-term investments
Equity securities with readily determinable fair values(a)2,1182,11262,8362,82313
Available-for-sale debt securities:
Government and agency—non-U.S.138—138280—280
Corporate and other73—7372—72
211—211352—352
Total long-term investments2,3292,1122173,1882,823365
Other noncurrent assets
Derivative assets:
Interest rate contracts1—1———
Foreign exchange contracts413—413364—364
Total derivative assets414—414364—364
Insurance contracts(b)718—718665—665
Total other noncurrent assets1,132—1,1321,028—1,028
Total assets$43,613$2,112$41,501$25,261$2,823$22,439
Financial liabilities:
Other current liabilities
Derivative liabilities:
Interest rate contracts$4$—$4$10$—$10
Foreign exchange contracts193—193694—694
Total other current liabilities197—197704—704
Other noncurrent liabilities
Derivative liabilities:
Interest rate contracts533—533321—321
Foreign exchange contracts738—738864—864
Total other noncurrent liabilities1,270—1,2701,185—1,185
Total liabilities$1,468$—$1,468$1,889$—$1,889

(a)Long-term equity securities of $127 million as of October 1, 2023 and $143 million as of December 31, 2022 were held in restricted trusts for U.S. non-qualified employee benefit plans.

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

*Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis––*The carrying value of Long-term debt, excluding the current portion, was $61 billion as of October 1, 2023 and $33 billion as of December 31, 2022. The estimated fair value of such debt, using a market approach and Level 2 inputs, was $57 billion as of October 1, 2023 and $30 billion as of December 31, 2022.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of October 1, 2023 and December 31, 2022. The fair value measurements of our held-to-maturity debt securities and short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities are based on Level 3 inputs.

B. Investments

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

The following summarizes our investments by classification type:
(MILLIONS)October 1, 2023December 31, 2022
Short-term investments
Equity securities with readily determinable fair values(a)$13,193$1,588
Available-for-sale debt securities26,24718,743
Held-to-maturity debt securities1,5931,985
Total Short-term investments$41,033$22,316
Long-term investments
Equity securities with readily determinable fair values(b)$2,118$2,836
Available-for-sale debt securities211352
Held-to-maturity debt securities5048
Private equity securities at cost(b)834800
Total Long-term investments$3,214$4,036
Equity-method investments11,02511,033
Total long-term investments and equity-method investments$14,239$15,069
Held-to-maturity cash equivalents$384$679

(a)Represent money market funds primarily invested in U.S. Treasury and government debt.

(b)Represent investments in the life sciences sector.

Debt Securities

Our investment portfolio consists of investment-grade debt securities issued across diverse governments, corporate and financial institutions:
October 1, 2023December 31, 2022
Gross UnrealizedContractual or Estimated Maturities (in Years)Gross Unrealized
(MILLIONS)Amortized CostGainsLossesFair ValueWithin 1Over 1 to 5Over 5Amortized CostGainsLossesFair Value
Available-for-sale debt securities
Government and agency*––*non-U.S.$18,528$16$(170)$18,374$18,236$138$—$15,946$297$(48)$16,195
Government and agency––U.S.5,833—(1)5,8325,832——1,313——1,313
Corporate and other2,257—(6)2,2522,17973—1,5847(4)1,586
Held-to-maturity debt securities
Time deposits and other944——94489835111,171——1,171
Government and agency*––*non-U.S.1,084——1,0841,080311,542——1,542
Total debt securities$28,646$16$(176)$28,486$28,225$249$12$21,556$304$(53)$21,807

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 EndedNine Months Ended
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Net (gains)/losses recognized during the period on equity securities(a)$393$112$709$1,353
Less: Net (gains)/losses recognized during the period on equity securities sold during the period(1)(5)(48)(84)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)$394$116$757$1,436

(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 October 1, 2023, there were cumulative impairments and downward adjustments of $188 million and upward adjustments of $213 million. Impairments, downward and upward adjustments were not significant in the third quarters and first nine months of 2023 and 2022.

C. Short-Term Borrowings

Short-term borrowings include:
(MILLIONS)October 1, 2023December 31, 2022
Current portion of long-term debt, principal amount$2,250$2,550
Other short-term borrowings, principal amount(a)288385
Total short-term borrowings, principal amount2,5382,935
Net fair value adjustments1010
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted$2,548$2,945

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

D. Long-Term Debt

Issuance

In May 2023, we issued, through our wholly-owned finance subsidiary, PIE, the following senior unsecured notes as part of the financing for our proposed acquisition of Seagen(a), (b):
(MILLIONS)Principal
Interest RateMaturity DateOctober 1, 2023
4.65%(c)May 19, 2025$3,000
4.45%(c)May 19, 20263,000
4.45%(c)May 19, 20284,000
4.65%(c)May 19, 20303,000
4.75%May 19, 20335,000
5.11%(c)May 19, 20433,000
5.30%May 19, 20536,000
5.34%(c)May 19, 20634,000
Total long-term debt issued in the second quarter of 2023(d)$31,000

(a)The notes are fully and unconditionally guaranteed on a senior unsecured basis by Pfizer Inc. PIE was formed to finance a portion of the consideration for the proposed acquisition of Seagen and has no assets or operations and will have no assets or operations, other than as related to the issuance, administration and repayment of the notes and any other debt securities that it may issue in the future.

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

(c)The notes are subject to a special mandatory redemption (at a price equal to 101% of the aggregate principal amount of such series of notes, plus any accrued and unpaid interest) under certain circumstances if the proposed acquisition of Seagen is terminated or does not close by an agreed upon date.

(d)The weighted average effective interest rate for the notes at issuance was 4.93%.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following outlines our senior unsecured long-term debt* and the weighted-average stated interest rate by maturity:
(MILLIONS)October 1, 2023December 31, 2022
Notes due 2024 (3.9% for 2022)(a)$—$2,250
Notes due 2025 (3.9% for 2023 and 0.8% for 2022)3,750750
Notes due 2026 (3.7% for 2023 and 2.9% for 2022)6,0003,000
Notes due 2027 (2.2% for 2023 and 2.1% for 2022)9951,000
Notes due 2028 (4.6% for 2023 and 4.8% for 2022)5,6601,660
Notes due 2029 (3.5% for 2023 and 2022)1,7501,750
Notes due 2030-2034 (4.1% for 2023 and 2.9% for 2022)12,0004,000
Notes due 2035-2039 (5.8% for 2023 and 2022)8,0268,017
Notes due 2040-2044 (4.1% for 2023 and 3.6% for 2022)7,9314,903
Notes due 2045-2049 (4.1% for 2023 and 2022)3,5003,500
Notes due 2050-2063 (5.0% for 2023 and 2.7% for 2022)11,2501,250
Total long-term debt, principal amount$60,862$32,080
Net fair value adjustments related to hedging and purchase accounting677959
Net unamortized discounts, premiums and debt issuance costs(491)(175)
Other long-term debt—20
Total long-term debt, carried at historical proceeds, as adjusted$61,048$32,884
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above (3.9% for 2023 and 3.7% for 2022))$2,260$2,560

*****Our long-term debt is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.

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

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, Canadian dollar and Chinese renminbi, 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.

The following summarizes the fair value of the derivative financial instruments and notional amounts:
October 1, 2023December 31, 2022
Fair ValueFair Value
(MILLIONS)NotionalAssetLiabilityNotionalAssetLiability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)$27,979$960$781$26,603$838$1,196
Interest rate contracts6,25025372,250—331
9621,3198381,527
Derivatives not designated as hedging instruments:
Foreign exchange contracts$17,428165149$29,814240362
Total$1,127$1,468$1,078$1,889

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.7 billion as of October 1, 2023 and $4.4 billion as of December 31, 2022.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures:
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)October 1, 2023October 2, 2022October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)$—$—$359$528$20$558
Amount excluded from effectiveness testing and amortized into earnings(c)——49614657
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts(213)(124)————
Hedged item195124————
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts——297680——
Amount excluded from effectiveness testing and amortized into earnings(c)——5783532
Non-Derivative Financial Instruments in Net Investment Hedge Relationships(d):
Foreign currency long-term debt——2249——
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts57(420)————
$39$(420)$733$1,396$102$647
Gains/(Losses) Recognized in OID(a)Gains/(Losses) Recognized in OCI(a)Gains/(Losses) Reclassified from OCI into OID and COS(a)
Nine Months Ended
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Interest rate contracts$—$—$68$—$—$—
Foreign exchange contracts(b)——3121,339(210)872
Amount excluded from effectiveness testing and amortized into earnings(c)——139105136100
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts(210)(346)————
Hedged item192346————
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts——141,613——
Amount excluded from effectiveness testing and amortized into earnings(c)——816310295
Non-Derivative Financial Instruments in Net Investment Hedge Relationships(d):
Foreign currency short-term borrowings———26——
Foreign currency long-term debt——5119——
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts173(832)————
$155$(832)$620$3,264$29$1,068

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

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

  • a net gain of $49 million in the third quarter of 2023;

  • a net gain of $195 million in the first nine months of 2023;

  • a net gain of $125 million in the third quarter of 2022; and

  • a net gain of $227 million in the first nine months of 2022.

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 $302 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 20 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 related long-term debt carrying values as of October 1, 2023 and December 31, 2022 were $790 million and $795 million, respectively.

The following summarizes cumulative basis adjustments to our debt in fair value hedges:
October 1, 2023December 31, 2022
Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying AmountCumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount
(MILLIONS)Carrying Amount of Hedged Assets/Liabilities(a)Active Hedging RelationshipsDiscontinued Hedging RelationshipsCarrying Amount of Hedged Assets/Liabilities(a)Active Hedging RelationshipsDiscontinued Hedging Relationships
Short-term borrowings, including current portion of long-term debt$—$—$8$—$—$10
Long-term debt$6,709$(513)$973$2,235$(321)$1,042

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

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 2022 Form 10-K.

As of October 1, 2023, the largest investment exposures in our portfolio consisted primarily of money market funds mainly invested in U.S. Treasury and government debt, as well as sovereign debt instruments issued by the U.S., Germany, Canada, France, the U.K., and Japan.

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 October 1, 2023, the aggregate fair value of these derivative financial instruments that are in a net payable position was $941 million, for which we have posted collateral of $1.0 billion with a corresponding amount reported in Short-term investments. As of October 1, 2023, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $333 million, for which we have received collateral of $256 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.

Note 8. Other Financial Information

A. Inventories

The following summarizes the components of Inventories:
(MILLIONS)October 1, 2023December 31, 2022
Finished goods$2,892$2,603
Work-in-process6,5155,519
Raw materials and supplies797859
Inventories(a)$10,204$8,981
Noncurrent inventories not included above(b)$1,416$5,827

(a)The increase from December 31, 2022 of $1.2 billion reflects higher inventory levels for certain products due to supply recovery, new product launches and changes in net market demand, partially offset by $0.7 billion in inventory write-offs for Paxlovid and Comirnaty.

(b)Included in Other noncurrent assets. The decrease from December 31, 2022 of $4.4 billion is primarily driven by inventory write-offs for Paxlovid of $4.2 billion and, to a lesser extent, inventory write-offs for Comirnaty of $0.7 billion, partially offset by increases due to inventory build. The charges and

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

corresponding inventory write-offs were based on our analysis of Paxlovid and Comirnaty inventory levels as of October 1, 2023 in relation to our commercial outlook for both products. Based on our current estimates and assumptions, there are no recoverability issues for the remaining amounts.

B. Other Current Liabilities

Other current liabilities includes, among other things, amounts payable to BioNTech for the gross profit split for Comirnaty, which totaled $533 million as of October 1, 2023 and $5.2 billion as of December 31, 2022.

C. Supplier Finance Program Obligation

We maintain voluntary supply chain finance agreements with several participating financial institutions. Under these agreements, participating suppliers may voluntarily elect to sell their accounts receivable with Pfizer to these financial institutions. Our suppliers negotiate their financing agreements directly with the respective financial institutions and we are not a party to these agreements. We have no economic interest in our suppliers’ decision to participate and we pay the financial institutions the stated amount of confirmed invoices on the original maturity dates, which is generally within 90 to 120 days of the invoice date. The agreements with the financial institutions do not require Pfizer to provide assets pledged as security or other forms of guarantees for the supplier finance program. All outstanding amounts related to suppliers participating in such financing arrangements are recorded within trade payables in our consolidated balance sheet. As of October 1, 2023 and December 31, 2022, respectively, $781 million and $849 million of our trade payables to suppliers who participate in these financing arrangements were outstanding.

Note 9. Identifiable Intangible Assets

A. Identifiable Intangible Assets

The following summarizes the components of Identifiable intangible assets:
October 1, 2023December 31, 2022
(MILLIONS)Gross Carrying AmountAccumulated AmortizationIdentifiable Intangible Assets, less Accumulated AmortizationGross Carrying AmountAccumulated AmortizationIdentifiable Intangible Assets, less Accumulated Amortization
Finite-lived intangible assets
Developed technology rights(a)$86,001$(59,146)$26,855$85,604$(56,307)$29,297
Brands922(869)53922(844)78
Licensing agreements and other2,368(1,446)9222,237(1,397)841
89,290(61,461)27,83088,763(58,548)30,215
Indefinite-lived intangible assets
Brands827827827827
IPR&D(b)10,80310,80311,35711,357
Licensing agreements and other764764971971
12,39412,39413,15513,155
Identifiable intangible assets(c)$101,684$(61,461)$40,224$101,919$(58,548)$43,370

(a)The increase in the gross carrying amount includes, among other things, $495 million of capitalized milestones and the transfer of $450 million from IPR&D to developed technology rights as a result of the approval in the U.S. for Zavzpret nasal spray, and a $90 million capitalized milestone as a result of the approval of Ngenla in the U.S. (all in the second quarter of 2023).

(b)The decrease in the gross carrying amount mainly reflects the transfer from IPR&D to developed technology rights as a result of the approval in the U.S. of Zavzpret nasal spray.

(c)The decrease is primarily due to amortization expense of $3.5 billion and impairments of $248 million (see Note 4), partially offset by additions of $681 million mostly related to milestone payments for the approvals in the U.S. for Zavzpret nasal spray and Ngenla.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10. Pension and Postretirement Benefit Plans

The following summarizes the components of net periodic benefit cost/(credit):
Pension Plans
U.S.InternationalPostretirement Plans
Three Months Ended
(MILLIONS)Oct. 1, 2023Oct. 2, 2022Oct. 1, 2023Oct. 2, 2022Oct. 1, 2023Oct. 2, 2022
Service cost$—$—$21$29$3$7
Interest cost147151733857
Expected return on plan assets(194)(195)(77)(72)(11)(12)
Amortization of prior service cost/(credit)————(29)(31)
Actuarial (gains)/losses(a)(11)(193)————
Curtailments—————(1)
Special termination benefits—1————
Net periodic benefit cost/(credit) reported in income$(58)$(235)$17$(6)$(32)$(30)
Pension Plans
U.S.InternationalPostretirement Plans
Nine Months Ended
(MILLIONS)Oct. 1, 2023Oct. 2, 2022Oct. 1, 2023Oct. 2, 2022Oct. 1, 2023Oct. 2, 2022
Service cost$—$—$65$89$9$22
Interest cost4423872161211621
Expected return on plan assets(583)(685)(229)(229)(33)(35)
Amortization of prior service cost/(credit)11—(1)(90)(99)
Actuarial (gains)/losses(a)42313———
Curtailments——(1)—(12)(14)
Special termination benefits68———1
Net periodic benefit cost/(credit) reported in income$(131)$(57)$53$(20)$(109)$(106)

(a)The third quarter of 2022 mainly reflected interim actuarial remeasurement gains, primarily driven by an increase in the discount rate, partially offset by unfavorable plan asset performance. The first nine months of 2022 mainly reflected interim actuarial remeasurement losses, primarily driven by unfavorable plan asset performance, partially offset by gains due to an increase in the discount rate.

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 nine months ended October 1, 2023, we contributed $125 million, $128 million, and $28 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/(Loss) Per Common Share Attributable to Pfizer Inc. Common Shareholders

The following presents the detailed calculation of EPS/(LPS):
Three Months EndedNine Months Ended
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022
EPS/(LPS) Numerator
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders$(2,394)$8,630$5,477$26,373
Discontinued operations––net of tax12(21)114
Net income/(loss) attributable to Pfizer Inc. common shareholders$(2,382)$8,608$5,488$26,378
EPS/(LPS) Denominator
Weighted-average common shares outstanding––Basic5,6465,6075,6425,606
Common-share equivalents(a)—11172124
Weighted-average common shares outstanding––Diluted5,6465,7185,7145,729
Anti-dilutive common stock equivalents(b)58321

(a)For the three months ended October 1, 2023, due to the net loss attributable to Pfizer Inc. common shareholders, weighted average common-share equivalents of 56 million shares were not included in the computation of diluted LPS because their inclusion would have had an anti-dilutive effect.

(b)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, guarantees and indemnifications. The following outlines our legal contingencies, guarantees and indemnifications. 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 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.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 (or those of our collaboration/licensing partners to which we have licenses or co-promotion rights), including but not limited to, those discussed below. We face 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. In May 2023, the Court of Appeal dismissed BMS’s appeal and in October 2023, the Supreme Court refused BMS’s permission to appeal. Additional challenges are pending in other jurisdictions. Also, 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 certain German utility model patents and certain expired and unexpired European patents. 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, as well as court proceedings relating to our intellectual property or the intellectual property rights of others, including challenges to such rights initiated by us. Also, if one of our patents (or one of our collaboration/licensing partner’s 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, as well as 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.

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. If one of our marketed products (or a product of our collaboration/licensing partners to which we have licenses or co-promotion rights) 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.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Actions In Which We Are The Plaintiff

Xeljanz (tofacitinib)

Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate abbreviated new drug applications (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 November 2022, we filed an additional patent-infringement action against Sinotherapeutics relating to its challenge of our extended release formulation and method of treatment patents in its ANDA seeking approval to market a generic version of tofacitinib 22 mg extended release tablets.

In June 2023, we brought a patent infringement action against Aurobindo Pharma Limited and Aurobindo Pharma USA, Inc. (collectively, Aurobindo) asserting the infringement and validity of our basic compound patent, in connection with Aurobindo’s ANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets. Also in June 2023, we brought a patent infringement action against Sun Pharmaceutical Industries Limited and Sun Pharmaceutical Industries, Inc. (collectively, Sun) asserting the infringement and validity of our basic compound patent, in connection with Sun’s ANDA seeking approval to market a generic version of tofacitinib 5 mg and 10 mg immediate release tablets. In June 2023, we also brought a patent infringement action against Annora Pharma Private Limited (Annora) and Hetero USA, Inc. (Hetero) asserting the infringement and validity of our basic compound patent, in connection with Annora’s ANDA seeking approval to market a generic version of tofacitinib 1 mg/mL oral solution. In August 2023, we reached settlement agreements with each of Sun and Annora on terms not material to the Company.

Ibrance (palbociclib)

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. We have settled with one of these generic companies on terms not material to us, and have dismissed the patent infringement actions against all other generic companies except for the action against Synthon Pharmaceuticals Inc. and its affiliated entities, in which we have asserted the infringement and validity of the composition of matter patent, expiring in 2027.

Eucrisa

Beginning in September 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Eucrisa. The companies assert the invalidity and non-infringement of a composition of matter patent expiring in 2026, two method of use patents expiring in 2027, and one other method of use patent expiring in 2030. In September 2021, we brought patent infringement actions against the generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the patents challenged by the generic companies. In July 2023, we reached a settlement agreement with one generic company on terms not material to the Company and in July and August 2023, we reached settlement agreements with the remaining generic companies on terms not material to the Company.

Mektovi (binimetinib)

Beginning in August 2022, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Mektovi. The companies assert the invalidity and non-infringement of two method of use patents expiring in 2030, a method of use patent expiring in 2031, two method of use patents expiring in 2033, and a product by process patent expiring in 2033. Beginning in September 2022, 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 all six patents.

In August 2022 we received notice from Teva Pharmaceuticals, Inc. (Teva) that it had filed an ANDA seeking approval to market a generic version of Mektovi. Teva asserts the invalidity and non-infringement of two method of use patents expiring in 2033 and a product by process patent expiring in 2033. In June 2023, we brought a patent infringement action against Teva in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the three patents.

Vyndaqel-Vyndamax (tafamidis/tafamidis meglumine)

Beginning in June 2023, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of tafamidis capsules (61 mg) or tafamidis meglumine capsules (20 mg), challenging some or all of the patents listed in the FDA’s Orange Book for Vyndamax (tafamidis) and Vyndaqel (tafamidis meglumine). Scripps Research Institute (Scripps) owns the composition of matter patent and the method of treatment patents covering the products, and Pfizer is the exclusive licensee. Pfizer separately owns the crystalline form patent. Beginning in August 2023, we and Scripps brought

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 in suit. Pfizer is the sole plaintiff in actions that assert only the infringement and validity of the crystalline form patent.

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 Company LLC, our wholly owned subsidiary, alleging that Comirnaty infringes a U.S. patent 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 Company LLC, BioNTech and BioNTech Manufacturing GmbH, alleging that Comirnaty infringes a U.S. patent issued in July 2022, and seeking unspecified monetary damages. In May 2023, Alnylam filed a separate complaint in the U.S. District Court for the District of Delaware against Pfizer and Pharmacia & Upjohn Company LLC alleging that Comirnaty infringes four U.S. patents issued on various dates in 2023 and seeking unspecified monetary damages.

In August 2022, ModernaTX, Inc. (ModernaTX) and Moderna US, Inc. (Moderna) sued Pfizer, BioNTech, BioNTech Manufacturing GmbH and BioNTech US Inc. in the U.S. District Court for the District of Massachusetts, alleging that Comirnaty infringes three U.S. patents. In its complaint, Moderna stated that it is seeking damages for alleged infringement occurring after March 7, 2022.

In August 2022, ModernaTX filed a patent infringement action in Germany against Pfizer and certain subsidiary companies, as well as BioNTech and certain subsidiary companies, alleging that Comirnaty infringes two European patents. In September 2022, ModernaTX filed patent infringement actions in the U.K. and in the Netherlands against Pfizer and certain subsidiary companies, as well as BioNTech and certain subsidiary companies, on the same two European patents. In its complaints, ModernaTX stated that it is seeking damages for alleged infringement occurring after March 7, 2022. In the U.K., Pfizer and BioNTech have brought an action against ModernaTX seeking to revoke these two European patents, which was consolidated with the September 2022 action filed by ModernaTX. In November 2023, one of the European patents was revoked by the European Patent Office. ModernaTX has filed additional patent infringement actions against Pfizer and BioNTech in certain other ex-U.S. jurisdictions.

In April 2023, Arbutus Biopharma Corporation (Arbutus) and Genevant Sciences GmbH (Genevant) filed a complaint in the U.S. District Court for the District of New Jersey against Pfizer and BioNTech alleging that Comirnaty and its manufacture infringe five U.S. patents, and seeking unspecified monetary damages.

In June 2023, Promosome LLC filed a complaint in the U.S. District Court for the Southern District of California against Pfizer and BioNTech alleging that Comirnaty and its manufacture infringe a U.S. patent and seeking unspecified monetary damages. In October 2023, Promosome LLC dismissed the action with prejudice and the action was dismissed by the Court.

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 a U.S. patent issued in June 2022, and seeking unspecified monetary damages.

Abrysvo

In August 2023, GlaxoSmithKline Biologics SA and GlaxoSmithKline LLC filed a complaint in the U.S. District Court for the District of Delaware against Pfizer alleging that the active ingredient in Abrysvo infringes four U.S. patents. The complaint seeks unspecified monetary damages and a permanent injunction against sales of Abrysvo for use in adults over 60 years of age. In addition, we have challenged certain of GSK’s RSV vaccine patents in certain ex-U.S. jurisdictions, including the U.K., the Netherlands and Belgium, and GSK has asserted that Abrysvo infringes these patents.

Matters Involving Pfizer and its Collaboration/Licensing Partners

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 three U.S. patents relating to Comirnaty. In May 2023, the case was transferred to the U.S. District Court for the Eastern District of Virginia. Also in May 2023, CureVac asserted that Comirnaty infringes the three patents that were the subject of our declaratory judgment complaint, and asserted that Comirnaty infringes six additional U.S. patents.

In the U.K., Pfizer and BioNTech have sued CureVac seeking a judgment of invalidity of several patents and CureVac has made certain infringement counterclaims.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Xtandi (enzalutamide)

In July 2022, Medivation LLC and Medivation Prostate Therapeutics LLC (wholly owned subsidiaries of Pfizer); Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc.; and The Regents of the University of California filed a patent-infringement suit in the U.S. District Court for the District of New Jersey against Zydus Pharmaceuticals (USA) Inc. and Zydus Lifesciences Limited (collectively, Zydus). In April 2023, the case against Zydus was dismissed without prejudice. In December 2022, the same entities filed a patent-infringement suit in the U.S. District Court for the District of New Jersey against Sun in connection with those companies’ respective ANDAs seeking approval to market generic versions of enzalutamide. In October 2023, the case against Sun was settled on terms not material to Pfizer. The generic manufacturers challenged the composition of matter patent, which expires in 2027, covering enzalutamide and pharmaceutical compositions thereof, for treating prostate cancer.

A2. Legal Proceedings––Product Litigation

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

Asbestos

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

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

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

Effexor

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

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 MDL 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 MDL 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, and plaintiffs appealed to the U.S. Court of Appeals for the Tenth Circuit. In October 2023, the parties reached an agreement to settle the litigation on terms not material to Pfizer. The settlement is subject to court approval.

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. Additional lawsuits have been filed in which plaintiffs allege they developed blocked tear ducts following their treatment with Docetaxel.

In 2016, the federal cases were transferred for coordinated pre-trial proceedings to a MDL in the U.S. District Court for the Eastern District of Louisiana. In 2022, the eye injury cases were transferred for coordinated pre-trial proceedings to a MDL 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. In 2006, Pfizer sold the consumer business that included its Zantac OTC rights to Johnson & Johnson and transferred the assets and liabilities related to Zantac OTC to Johnson & Johnson in connection with the sale. Plaintiffs in these cases seek compensatory and punitive damages.

In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a MDL in the U.S. District Court for the Southern District of Florida (the Federal MDL Court). Plaintiffs in the MDL filed against Pfizer and many other defendants a master personal injury complaint, a consolidated consumer class action complaint alleging, among other things, claims under consumer protection statutes of all 50 states, and a medical monitoring complaint seeking to certify medical monitoring classes under the laws of 13 states. In December 2022, the Federal MDL Court granted defendants’ Daubert

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

motions to exclude plaintiffs’ expert testimony and motion for summary judgment on general causation, which has resulted in the dismissal of all complaints in the litigation. Plaintiffs have appealed the Federal MDL Court’s rulings.

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 courts, 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. Coordinated proceedings have also been created in other state courts. The large majority of the state court cases have been filed in the Superior Court of Delaware in New Castle County.

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. In December 2022, the federal actions were transferred for coordinated pre-trial proceedings to a MDL in the U.S. District Court for the Southern District of New York. Similar putative class actions have been filed in Canada and Israel, where the product brand is Champix.

A3. Legal Proceedings––Commercial and Other Matters

Monsanto-Related Matters

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

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

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

Environmental Matters

In 2009, as part of our acquisition of Wyeth, we assumed responsibility for environmental remediation at the Wyeth Holdings LLC (formerly known as Wyeth Holdings Corporation and American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. Since that time, we have executed or have become a party to a number of administrative settlement agreements, orders on consent, and/or judicial consent decrees, with the U.S. Environmental Protection Agency, the New Jersey Department of Environmental Protection and/or federal and state natural resource trustees to perform remedial design, removal and remedial actions, and related environmental remediation activities, and to resolve alleged damages to natural resources, at the Bound Brook facility. We have accrued for the currently estimated costs of these activities.

We are also 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.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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. In February 2023, the Court of Appeals denied defendants’ en banc petitions.

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 company’s current and former officers, directors and employees are named as defendants. An amended complaint was filed in January 2023, and 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, as well as related communications. Plaintiff seeks damages, costs and expenses and other equitable and injunctive relief.

Breach of Contract – Comirnaty

In September 2023, Pfizer and BioNTech Manufacturing GmbH initiated formal proceedings against the Republic of Poland in Belgium’s Court of First Instance of Brussels. Pfizer and BioNTech are seeking an order from the Court holding the Republic of Poland to its commitments for COVID-19 vaccine orders, which were placed by the Republic of Poland as part of their contract signed in May 2021.

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 MDL 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

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

concerning a new set of drugs. This complaint was transferred to the MDL in July 2020. The MDL 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 & Civil Investigative Demand relating to Tris Pharma/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 responded to that subpoena in full and have had no communication with the SDNY in connection with the subpoena since June 2019. Additionally, in September 2020, we received a Civil Investigative Demand (CID) from the Texas Attorney General’s office seeking records of a similar nature to those requested by the SDNY. We are producing records in response to this request.

Government Inquiries relating to Meridian Medical Technologies

In February 2019, we received a CID from the U.S. Attorney’s Office for the SDNY. The CID 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 issued by the U.S. Attorney’s Office for the Eastern District of Missouri, in coordination with the Department of Justice’s Consumer Protection Branch, seeking similar records and information. We have produced records in response to these and subsequent 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 Action above for information regarding a government investigation related to Docetaxel marketing practices.

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

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

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

In June 2020, we received an informal request from the U.S. Department of Justice’s FCPA Unit seeking documents relating to our operations in China. In August 2020, we received a similar request from the SEC’s FCPA Unit. We have produced 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.

Government Inquiries relating to Biohaven

In June 2022, the U.S. Department of Justice's Commercial Litigation Branch and the U.S. Attorney’s Office for the Western District of New York issued a CID relating to Biohaven. The CID seeks records and information related to, among other things, engagements with health care professionals and co-pay coupons cards. In March 2023, the California Department of Insurance issued a subpoena seeking records similar to those requested by the CID. Biohaven is a wholly-owned subsidiary that we acquired in October 2022. We are producing records in response to these requests.

U.S. Department of Justice Inquiry relating to Mexico Operations

In March 2023, we received an informal request from the U.S. Department of Justice’s FCPA Unit seeking documents relating to our operations in Mexico. We are producing records pursuant to this request.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Government Inquiries relating to Xeljanz

In April 2023, we received a HIPAA subpoena issued by the U.S. Attorney’s Office for the Western District of Virginia, in coordination with the Department of Justice’s Commercial Litigation Branch, seeking records and information related to programs Pfizer sponsored in retail pharmacies relating to Xeljanz. We are producing records pursuant to this request.

B. Guarantees and Indemnifications

In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities prior to or following a transaction. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of October 1, 2023, the estimated fair value of these indemnification obligations is not material to Pfizer.

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.

See Note 7D for information on Pfizer Inc.’s guarantee of the debt issued by PIE in May 2023.

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

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. See Note 1D in our 2022 Form 10-K.

Note 13. Segment, Geographic and Other Revenue Information

A. Segment Information

We manage our commercial operations through two operating segments, each led by a single manager: Biopharma and Business Innovation, an operating segment established in the first quarter of 2023 that includes PC1, our contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients, and Pfizer Ignite, a recently launched offering that provides strategic guidance and end-to-end R&D services to select innovative biotech companies that align with Pfizer’s R&D focus areas. Biopharma is the only reportable segment. 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. In consideration of planned future investments in oncology, including the proposed acquisition of Seagen, we are reorganizing our R&D operations. Beginning in July 2023, discovery to early- and late-phase clinical development for oncology is performed by a new end-to-end Oncology Research and Development (ORD) platform function and discovery to early- and late-phase clinical development for all remaining therapeutic areas is consolidated into the Pfizer Research and Development (PRD) platform function. ORD and PRD replace our former WRDM and Global Product Development (GPD) organizational design. Biopharma receives its R&D services from ORD and PRD. 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 Business Activities and Reconciling Items––*Other business activities include the operating results of Business Innovation as well as certain pre-tax costs not allocated to our operating segment results, such as costs associated with: (i) R&D and medical expenses managed by our ORD and PRD organizations; (ii) corporate enabling functions and other corporate costs; (iii) overhead costs primarily associated with our manufacturing operations; and (iv) our share of earnings from Haleon/the Consumer Healthcare JV. Reconciling items include the following items, transactions and events that are not allocated to our operating segments: (i) all amortization of intangible assets; (ii) acquisition-related items; and (iii) certain significant items, representing substantive and/or unusual, and in some cases recurring, items that are evaluated on an individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis.

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

*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 $215 billion as of October 1, 2023 and $197 billion as of December 31, 2022.

Selected Statement of Operations Information

The following provides selected information by reportable segment:
Three Months EndedNine Months Ended
RevenuesEarnings(a)RevenuesEarnings(a)
(MILLIONS)October 1, 2023October 2, 2022October 1, 2023October 2, 2022October 1, 2023October 2, 2022October 1, 2023October 2, 2022
Reportable Segment:
Biopharma$12,930$22,319$7,545$14,665$43,320$75,066$25,484$45,222
Other business activities(b)302319(8,782)(4,007)928974(14,387)(9,820)
Reconciling Items:
Amortization of intangible assets(1,179)(822)(3,466)(2,478)
Acquisition-related items(227)(62)(778)(331)
Certain significant items(c)(708)(773)(1,666)(3,095)
$13,232$22,638$(3,352)$9,001$44,247$76,040$5,187$29,498

(a)I**ncome/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss). Biopharma’s earnings include dividend income from our investment in ViiV of $30 million in the third quarter of 2023 and $112 million in the third quarter of 2022, and $213 million in the first nine months of 2023 and $237 million in the first nine months of 2022.

(b)Other business activities include revenues and costs associated with Business Innovation and costs that we do not allocate to our operating segments, per above, including acquired IPR&D expenses in the periods presented. Earnings in the third quarter and first nine months of 2023 include approximately $5.6 billion and $5.8 billion, respectively, of inventory write-offs and related charges to Cost of sales mainly due to lower-than-expected demand for our COVID-19 products. Earnings in the first nine months of 2022 included COVID-19-related charges of approximately $0.9 billion to Cost of sales, composed of (i) inventory write-offs of approximately $0.5 billion related to COVID-19 products that exceeded or were expected to exceed their approved shelf-lives prior to being used and (ii) charges of approximately $0.4 billion, primarily related to excess raw materials for Paxlovid recorded in the third quarter of 2022.

(c)Certain significant items are substantive and/or unusual, and in some cases recurring, items (as noted above). Earnings in the first nine months of 2023 include, among other items, net losses on equity securities of $711 million recorded in Other (income)/deductions––net. Earnings in the first nine months of 2022 included, among other items: (i) net losses on equity securities of $1.3 billion recorded in Other (income)/deductions––net and (ii) restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring of $701 million ($344 million recorded in Selling, informational and administrative expenses and the remaining amount primarily recorded in Restructuring charges and certain acquisition-related costs). See Note 4.

B. Geographic Information

The following summarizes revenues by geographic area:
Three Months EndedNine Months Ended
(MILLIONS)October 1, 2023October 2, 2022% ChangeOctober 1, 2023October 2, 2022% Change
United States$7,804$13,851(44)$22,497$33,991(34)
Developed Europe1,9813,136(37)7,21714,705(51)
Developed Rest of World1,0732,351(54)4,85210,671(55)
Emerging Markets2,3733,300(28)9,68116,673(42)
Revenues$13,232$22,638(42)$44,247$76,040(42)

In May 2023, we and our collaboration partner, BioNTech, amended our contract with the EC to deliver COVID-19 vaccines to the EU. The amended agreement includes rephasing of delivery of doses annually through 2026 and an aggregate volume reduction, providing additional flexibility for EU member states. The EC will maintain access to future adapted COVID-19 vaccines and the ability to donate doses, in alignment with the original agreement. See Note 13C.

C. Other Revenue Information

*Significant Customers––*For information on our significant wholesale customers, see Note 17C in our 2022 Form 10-K. Additionally, revenues from the U.S. government represented 7% of total revenues for the nine months ended October 1, 2023 and primarily represent sales of Paxlovid and Comirnaty. Revenues from the U.S. government represented 38% and 27% of total revenues for the three and nine months ended October 2, 2022, respectively, and primarily represented sales of Paxlovid and Comirnaty. Accounts receivable from the U.S. government represented 4% of total trade accounts receivable as of December 31, 2022 and primarily related to sales of Paxlovid and Comirnaty. Due to the transition of Comirnaty and the

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

expected transition of Paxlovid to commercial market sales in the second half of 2023, revenues from the U.S. government for the three months ended October 1, 2023 and accounts receivable from the U.S. government as of October 1, 2023 were not material.

Significant Product Revenues

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

(MILLIONS)Three Months EndedNine Months Ended
PRODUCTPRIMARY INDICATION OR CLASSOct. 1, 2023Oct. 2, 2022Oct. 1, 2023Oct. 2, 2022
TOTAL REVENUES$13,232$22,638$44,247$76,040
GLOBAL BIOPHARMACEUTICALS BUSINESS (BIOPHARMA)$12,930$22,319$43,320$75,066
Primary Care$6,287$15,846$23,602$55,676
Comirnaty direct sales and alliance revenues(a)Active immunization to prevent COVID-191,3074,4025,85926,477
Eliquis alliance revenues and direct salesNonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism1,4981,4645,1355,001
Prevnar familyActive immunization to prevent pneumonia, invasive disease and otitis media caused by Streptococcus pneumoniae1,8541,6074,8354,601
PaxlovidCOVID-19 in certain high-risk patients2027,5144,41417,099
Nurtec ODT/VyduraAcute treatment of migraine and prevention of episodic migraine233—6461
AbrysvoActive immunization to prevent RSV infection375—375—
Premarin familySymptoms of menopause92110299327
BMP2Bone graft for spinal fusion8258252201
FSME-IMMUN/TicoVacActive immunization to prevent tick-borne encephalitis disease9167237177
NimenrixActive immunization against invasive meningococcal ACWY disease4379121221
TrumenbaActive immunization to prevent invasive disease caused by Neisseria meningitidis group B5860108108
All other Primary CareVarious4524851,3211,463
Specialty Care$3,757$3,404$11,021$10,267
Vyndaqel familyATTR-CM and polyneuropathy8926022,3601,766
XeljanzRA, PsA, UC, active polyarticular course juvenile idiopathic arthritis, ankylosing spondylitis5035021,2101,304
Enbrel (Outside the U.S. and Canada)RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis208230627767
SulperazonBacterial infections122178619598
Ig Portfolio(b)Various140124428356
GenotropinReplacement of human growth hormone15890379261
ZaviceftaBacterial infections13098378302
InflectraCrohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis121131373403
BeneFIXHemophilia B10799321325
MedrolAnti-inflammatory glucocorticoid8979263235
ZithromaxBacterial infections6071254250
OxbrytaSickle cell disease85—232—
SomavertAcromegaly6970200202
Refacto AF/XynthaHemophilia A6158177188
FragminTreatment/prevention of venous thromboembolism5760175202
VfendFungal infections4651153171
CresembaFungal infections4041141114
BicillinBacterial infections3736134108
CibinqoAtopic dermatitis37119117
All other Anti-infectivesVarious270298820900
All other Specialty CareVarious5275751,6871,799
Oncology$2,885$3,070$8,696$9,124
IbranceHR-positive/HER2-negative metastatic breast cancer1,2441,2833,6353,841
Xtandi alliance revenuesmCRPC, nmCRPC, mCSPC313320877878
InlytaAdvanced RCC252252773760

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(MILLIONS)Three Months EndedNine Months Ended
PRODUCTPRIMARY INDICATION OR CLASSOct. 1, 2023Oct. 2, 2022Oct. 1, 2023Oct. 2, 2022
BosulifPhiladelphia chromosome–positive chronic myelogenous leukemia160141463425
LorbrenaALK-positive metastatic NSCLC15999393247
ZirabevTreatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer100146335432
RuxienceNon-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis88120302357
XalkoriALK-positive and Proto-Oncogene 1, Receptor Tyrosine Kinase-positive advanced NSCLC86118283362
RetacritAnemia8287262308
AromasinPost-menopausal early and advanced breast cancer7666225187
Bavencio alliance revenues(c)Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC1873186198
BesponsaRelapsed or refractory B-cell acute lymphoblastic leukemia5455171164
BraftoviIn combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab)(d), for the treatment of BRAFV600E -mutant mCRC after prior therapy5658156156
SutentAdvanced and/or metastatic RCC, adjuvant RCC, refractory gastrointestinal stromal tumors (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor4275136287
MektoviIn combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation4545127129
TrazimeraHER2-positive breast cancer and metastatic stomach cancers—5167149
All other OncologyVarious11080304243
BUSINESS INNOVATION(e)$302$319$928$974
Pfizer CentreOne(f)Various291318903972
Pfizer IgniteVarious101251
Total Alliance revenues included above$1,645$1,689$5,672$6,320

(a)Excludes revenues for certain Comirnaty-related manufacturing activities performed on behalf of BioNTech, which are included in the PC1 contract development and manufacturing organization. See footnote (f) below.

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

(c)In March 2023, it was announced that our alliance with Merck KGaA to co-develop and co-commercialize Bavencio (avelumab) would terminate. Effective June 30, 2023, Merck KGaA took full control of the global commercialization of Bavencio. Beginning in the third quarter of 2023, the related profit share was replaced by a 15% royalty to Pfizer on net sales of Bavencio, which is recorded in Other (income)/deductions––net. 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.

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

(e)See Note 13A above for information about Business Innovation. Prior-period financial information has been revised to reflect the current period presentation.

(f)PC1 includes revenues from our contract manufacturing, including certain Comirnaty-related manufacturing activities performed on behalf of BioNTech ($11 million for the first nine months of 2023 and $108 million for the first nine months of 2022, respectively), 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.

*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 $9 billion as of October 1, 2023, 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, current contract terms provide for expected delivery of product with contracted revenue from 2023 through 2026, the timing of which may be renegotiated. Remaining performance obligations are based on foreign exchange rates as of the end of our fiscal third quarter of 2023 and 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. The deferred revenues related to Comirnaty totaled $3.2 billion as of October 1, 2023, with $2.1 billion and $1.0 billion recorded in current liabilities and noncurrent liabilities, respectively. The deferred revenues related to Comirnaty totaled $2.5 billion as of December 31, 2022, with $2.4 billion and $77 million recorded in current liabilities and noncurrent liabilities, respectively. The increase in Comirnaty deferred revenues during the first nine months of 2023 was primarily the result of additional advance payments received as we entered into amended contracts and the impact of foreign exchange, partially offset by amounts recognized in Revenues as we delivered the products to our customers. During the third quarter and first nine months of 2023, we recognized

PFIZER INC. AND SUBSIDIARY COMPANIES.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

revenue of approximately $140 million and $2.1 billion, respectively, that was included in the balance of Comirnaty deferred revenues as of December 31, 2022. The Comirnaty deferred revenues as of October 1, 2023 will be recognized in Revenues proportionately as we transfer control of the product 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 from 2024 through 2026. Deferred revenues associated with contracts for other products were not significant as of October 1, 2023 or December 31, 2022.

Note 14. Subsequent Event

Amended Paxlovid Supply Agreement with the U.S. Government–– On October 13, 2023, we announced an amended agreement with the U.S. government, which will facilitate the expected transition of Paxlovid to traditional commercial markets in November 2023, with prices to be negotiated with commercial payers and a copay assistance program for eligible privately insured patients, as the U.S. government begins to discontinue the distribution of EUA-labeled Paxlovid. We will ensure commercial readiness by providing NDA-labeled commercial supply to all channels by the end of 2023. However, EUA-labeled Paxlovid will remain available free-of-charge to all eligible patients until the end of 2023, and therefore, we expect only minimal uptake of NDA-labeled commercial product before January 1, 2024. Components of this agreement include: (i) a non-cash return of any remaining EUA-labeled U.S. government inventory at the end of 2023, estimated to be 7.9 million treatment courses, with an associated revenue reversal of approximately $4.2 billion to be recorded in the fourth quarter of 2023; (ii) the conversion of those remaining EUA-labeled treatment courses previously purchased by the U.S. government to a volume-based credit, which will support continued access to Paxlovid through a U.S. government patient assistance program operated by Pfizer (which will provide the estimated 7.9 million treatment courses of FDA-approved, NDA-labeled Paxlovid free of charge to all eligible uninsured, Medicare and Medicaid patients through 2024, and to eligible uninsured and underinsured patients through 2028); and (iii) the creation in 2024 of a U.S. Strategic National Stockpile of 1.0 million treatment courses to enable future pandemic preparedness through 2028, to be managed and supplied by Pfizer at no cost to the U.S. government or taxpayers. While we will recognize revenue as the estimated 8.9 million treatment courses are delivered, there is no cash compensation for these treatment courses.

Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF