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

136K characters. Original on sec.gov · Markdown

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

OPERATIONS**

GENERAL

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

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

In the first quarter of 2024, we reclassified royalty income (substantially all of which is related to our Biopharma segment) from Other (income)/deductions––net and began presenting Royalty revenues as a separate line item within Total revenues in our consolidated statements of operations. Prior-period amounts have been recast to conform to the current presentation.

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business and Strategy––Pfizer Inc. is a research-based, global biopharmaceutical company. We apply science and our global resources to bring therapies to people that extend and significantly improve their lives. Our 2024 key priorities are:

  • Achieve world-class oncology leadership

  • Deliver next wave of pipeline innovation

  • Maximize performance of our new products

  • Expand margins by realigning our cost base

  • Allocate capital to enhance shareholder value

One way we believe we will be more efficient, effective and able to execute on these five strategic priorities is through technology, including artificial intelligence.

We manage our commercial operations through a global structure consisting of three operating segments: Biopharma, PC1 and Pfizer Ignite. Biopharma is the only reportable segment. See Note 13A.

In the fourth quarter of 2023, we announced that we launched a multi-year, enterprise-wide cost realignment program (Realigning Our Cost Base Program) that aims to realign our costs with our longer-term revenue expectations. In the second quarter of 2024, we announced that we launched a multi-year, multi-phased program to reduce our costs of goods sold (Manufacturing Optimization Program), which is expected to include operational efficiencies, network structure changes, and product portfolio enhancements. See Note 3. For a description of anticipated savings related to these programs, see the Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives section within MD&A*.*

For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2023 Form 10-K.

Our Business Development Initiatives––We are committed to strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, but also through various business development activities. For a description of the more significant recent transactions through February 22, 2024, the filing date of our 2023 Form 10-K, see Note 2 in our 2023 Form 10-K. Our significant recent business activities include the transactions discussed in Note 2 and the following:

AbbVie’s Acquisition of Cerevel Therapeutics*––*On August 1, 2024, AbbVie acquired all outstanding shares of Cerevel for $45 per share in cash. Cerevel was created through an arrangement between Bain Capital and us, under which we outlicensed the global development, manufacturing and commercialization rights to a portfolio of our neuroscience assets to Cerevel in exchange for an equity ownership stake, as well as potential future regulatory and commercial milestone payments and royalties. In connection with the closing of the acquisition, we received $1.2 billion in merger consideration for our Cerevel shares. We will recognize a gain of approximately $100 million in the third quarter of 2024 in Other (income)/deductions––net. Our rights under the outlicense are not affected by the acquisition of Cerevel.

Our Second Quarter 2024 and First Six Months of 2024 Performance

Total Revenues––Total revenues increased $277 million, or 2%, in the second quarter of 2024 to $13.3 billion from $13.0 billion in the second quarter of 2023, reflecting an operational increase of $447 million, or 3%, partially offset by an unfavorable impact of foreign exchange of $170 million, or 1%. The operational increase was primarily driven by revenues from legacy Seagen products acquired in December 2023 as well as growth from the Vyndaqel family, Eliquis, Paxlovid, and Nurtec ODT/Vydura, partially offset by declines in Comirnaty and, to a much lesser extent, Xeljanz and Ibrance. Excluding contributions from Comirnaty and Paxlovid, Total revenues increased $1.6 billion, or 14%, operationally.

Total revenues decreased $3.3 billion, or 11%, in the first six months of 2024 to $28.2 billion from $31.5 billion in the first six months of 2023, reflecting an operational decrease of $3.1 billion, or 10%, as well as an unfavorable impact of foreign exchange of $278 million, or 1%. The operational decrease was primarily driven by declines in Comirnaty and Paxlovid. Excluding contributions from Comirnaty and Paxlovid, Total revenues increased $2.9 billion, or 13%, operationally, reflecting revenues from legacy Seagen products acquired in December 2023 as well as continued growth from the Vyndaqel family and Eliquis.

See the Total Revenues by Geography and Total Revenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. Certain of our vaccines, including Comirnaty, are subject to seasonality of demand, with a greater portion of revenues anticipated in the fall and winter seasons. See also The Global Economic Environment––COVID-19 section below for information about our COVID-19 products. For information regarding the primary indications or class of certain products, see Note 13C**.

Income/(Loss) from Continuing Operations Before Provision/(Benefit) for Taxes on Income(Loss)–– Loss from continuing operations before provision/(benefit) for taxes on income/(loss) in the second quarter of 2024 was $103 million, compared to income of $2.3 billion in the second quarter of 2023, primarily due to (i) an increase in restructuring charges and certain acquisition related costs, (ii) net losses on equity securities in 2024 versus net gains on equity securities in 2023 and (iii) higher net interest expense*.*

The decrease in Income from continuing operations before provision/(benefit) for taxes on income of $5.2 billion, to $3.3 billion in the first six months of 2024 from $8.5 billion in the first six months of 2023, was primarily due to (i) lower revenues, (ii) an increase in restructuring charges and certain acquisition related costs and (iii) higher net interest expense, partially offset by (iv) a decrease in Cost of sales.

See the Analysis of the Condensed Consolidated Statements of Operations section within MD&A and Note 4. For information on our tax provision and effective tax rate, see the Provision/(Benefit) for Taxes on Income/(Loss) section within MD&A and Note 5.

Our Operating Environment––We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below, as well as in the Item 1. Business––Government Regulation and Price Constraints and Item 1A. Risk Factors sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A of our 2023 Form 10-K.

Intellectual Property Rights and Collaboration/Licensing Rights––The loss, expiration or invalidation of intellectual property rights, patent litigation settlements and judgments, and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face increased generic competition over the next few years. While additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 2024 through 2025. We anticipate a more significant impact of reduced revenues from patent expiries in 2026 through 2030 as several of our in-line products experience patent-based expirations. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to help ensure appropriate patient access.

For additional information on patent rights we consider most significant to our business as a whole, see the Item 1. Business––Patents and Other Intellectual Property Rights section of our 2023 Form 10-K. For a discussion of recent developments with respect to patent litigation involving certain of our products, see Note 12A1**.

Regulatory Environment/Pricing and Access––Government and Other Payor Group Pressures––Governments globally, as well as private third-party payors in the U.S., may use a variety of measures to control costs, including, among others, legislative or regulatory pricing reforms, drug formularies (including tiering and utilization management tools), cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. We anticipate that these and similar initiatives will continue to increase pricing and access pressures globally. In the U.S., we expect to see continued focus by Congress and the Presidential Administration on regulating drug pricing regardless of which party comes to power following

the upcoming November 2024 elections. Implementation of the drug pricing provisions of the IRA, which was signed into law in August 2022, will continue over the next several years. In August 2023, the Biden Administration unveiled the first ten medicines subject to the Medicare Drug Price Negotiation Program (the Program), which requires manufacturers of select drugs to engage in a process with the federal government to set new Medicare prices which would go into effect in 2026. Eliquis was among the first ten medicines subject to the Program. We expect the government to publicly disclose the new Medicare price for Eliquis by September 1, 2024. We continue to evaluate the impact of the IRA on our business, operations and financial condition and results as the full effect of the IRA on our business and the pharmaceutical industry remains uncertain. In addition, changes to the Medicaid Drug Rebate Program or the 340B Drug Pricing Program (the 340B Program), including legal or legislative developments at the federal or state level with respect to the 340B Program, could have a material impact on our business. See the Item 1. Business––Pricing Pressures and Managed Care Organizations and ––Government Regulation and Price Constraints and the Item 1A. Risk Factors––Pricing and Reimbursement sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A of our 2023 Form 10-K*.*

*Impact of the July 2023 Tornado in Rocky Mount, North Carolina (NC)**––*Our manufacturing facility in Rocky Mount, NC was damaged by a tornado in July 2023. The facility is a key producer of sterile injectables and is responsible for manufacturing nearly 25 percent of all our sterile injectables, including anesthesia, analgesia, and micronutrients. While manufacturing has resumed, the supply of medicines impacted by the tornado is expected to be affected through 2024.

We incurred losses in 2023 and in the first six months of 2024 that were partially offset by insurance recoveries received in 2023. We expect to record additional insurance recoveries in future periods, but we are unable to predict the timing of receipt with certainty.

Product Supply––We periodically encounter supply delays, disruptions and shortages, including due to voluntary product recalls and natural or man-made disasters. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, are evaluating their product portfolios for the potential presence or formation of nitrosamines. In 2021, Pfizer recalled all lots of Chantix in the U.S. due to the presence of a nitrosamine, N-nitroso-varenicline, at or above the FDA interim acceptable intake limit. Regulatory authorities have issued updated guidance on nitrosamine acceptable intake levels. With this guidance, which included an updated intake level for N-nitroso-varenicline, we expect to make regulatory submissions in the second half of 2024 to potentially enable Chantix to return to market in the U.S. and in certain international markets.

Except for the impact of the tornado in Rocky Mount, NC discussed above, we have not seen a significant disruption of our supply chain in the first six months of 2024 and through the date of filing of this Form 10-Q, and all of our manufacturing sites globally have continued to operate at or near normal levels. We continue to monitor industry demand for certain components and raw materials and implement mitigation strategies in an effort to reduce any potential risk or impact to product supply, including active supplier management, qualification of additional suppliers and advanced purchasing to the extent possible. For information on risks related to product manufacturing, see the Item 1A. Risk Factors––Product Manufacturing, Sales and Marketing Risks section of our 2023 Form 10-K.

CIFFREO Study Readout––In June 2024, we announced that CIFFREO, a Phase 3 study evaluating fordadistrogene movaparvovec in ambulatory patients with DMD did not meet its primary endpoint and that key secondary endpoints also did not show a significant difference between participants treated with fordadistrogene movaparvovec and placebo. See the Product Developments section within MD&A. As a result, we recorded a $240 million intangible asset impairment charge in the second quarter of 2024 (see Note 4). Additionally, we expect to record a charge of approximately $400 million in the third quarter of 2024 after a decision to sell one of our facilities was made in July 2024 as a result of the discontinuation of the DMD program.

The Global Economic Environment––In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to economic cycles. See the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our 2023 Form 10-K.

COVID-19––In response to COVID-19, we developed Paxlovid and collaborated with BioNTech to jointly develop Comirnaty. As part of our strategy for COVID-19, we are continuing to make significant investments in breakthrough science. This includes continuing to evaluate Comirnaty and Paxlovid, including against new variants of concern, developing variant adapted vaccine candidates and developing potential combination respiratory vaccines and potential next generation vaccines and therapies. We are also evaluating Paxlovid for additional populations. See the Product Developments section within MD&A.

In 2023, we principally sold Comirnaty globally under government contracts. In September 2023, Comirnaty transitioned to traditional commercial market sales in the U.S., triggered by the expiration of contracts and the COVID-19 vaccines from Pfizer and BioNTech purchased through them becoming either depleted or not used following the introduction of a new variant vaccine. Internationally, sales of Comirnaty in international developed markets were generally under government contracts in 2023, and in emerging markets, under a combination of private channels and government contracts; in both cases, we started transitioning to commercial markets in 2024. Due to the commercial market transition as well as the anticipated seasonality of

demand for COVID vaccinations, we expect approximately 90% of our 2024 global revenues for Comirnaty to be recorded in the second half of the year, mostly in the fourth quarter.

In 2023, we principally sold Paxlovid globally to government agencies. On October 13, 2023, we announced an amended agreement with the U.S. government, which facilitated the transition of Paxlovid to traditional commercial markets in the U.S. in November 2023, with minimal uptake of NDA-labeled commercial product before January 1, 2024 (see Note 13C**). Internationally, for Paxlovid, most markets have now transitioned to commercial markets, and we are expecting most revenue for Paxlovid to be generated through commercial channels in 2024.

For information on risks associated with our COVID-19 products, including certain assumptions made for purposes of our operational planning and financial projections and the uncertainty of future developments, as well as COVID-19 intellectual property disputes, see the Item 1A. Risk Factors—COVID-19, —Intellectual Property Protection and —Third-Party Intellectual Property Claims sections of our 2023 Form 10-K, as well as Notes 12A1 and 13 and the Forward-Looking Information and Factors that May Affect Future Results section of this Form 10-Q*.*

Israel/Hamas Conflict––Our local operations have been impacted by the armed conflict between Israel and Hamas that began on October 7, 2023. For both the six months ended June 30, 2024 and the fiscal year ended December 31, 2023, the business of our Israeli subsidiary represented less than 1% of our consolidated revenues and assets. We are closely monitoring developments in this conflict, including evaluating potential impacts to our business, customers, suppliers, employees, and operations in Israel and elsewhere in the Middle East that may impact global operations. At this time, longer term impacts to the Company are uncertain and subject to change.

Russia/Ukraine Conflict––Our local operations have been impacted by the armed conflict between Russia and Ukraine. For both the six months ended June 30, 2024 and the fiscal year ended December 31, 2023, the business of our Russia and Ukraine subsidiaries represented less than 1% of our consolidated revenues and assets. While we are monitoring the effects of the conflict between Russia and Ukraine, the situation continues to evolve and the long-term implications, including the broader economic consequences of the conflict, potential additional sanctions, and actions by our customers or suppliers (including financial institutions) are difficult to predict at this time.

For information on risks associated with these conflicts, see the Item 1A. Risk Factors—Global Operations section of our 2023 Form 10-K.

SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

For a description of our significant accounting policies, see Note 1 in our 2023 Form 10-K*.* Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1D); Fair Value (Note 1E); Revenues (Note 1G); Asset Impairments (Note 1M); Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Note 1N); Tax Assets and Liabilities and Income Tax Contingencies (Note 1Q); Pension and Postretirement Benefit Plans (Note 1R); and Legal and Environmental Contingencies (Note 1S).

For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions section within MD&A of our 2023 Form 10-K. See also Note 1C in our 2023 Form 10-K for a discussion about the risks associated with estimates and assumptions.

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

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Total Revenues by Geography

The following presents worldwide Total revenues by geography:
Three Months Ended
WorldwideU.S.InternationalWorld-wideU.S.Inter-national
(MILLIONS)June 30, 2024July 2, 2023June 30, 2024July 2, 2023June 30, 2024July 2, 2023% Change
Operating segments:
Biopharma$12,991$12,690$7,828$6,367$5,163$6,323223(18)
Pfizer CentreOne2783074982229225(10)(40)2
Pfizer Ignite15101510——4747—
Total revenues$13,283$13,007$7,892$6,458$5,391$6,548222(18)
Six Months Ended
WorldwideU.S.InternationalWorld-wideU.S.Inter-national
(MILLIONS)June 30, 2024July 2, 2023June 30, 2024July 2, 2023June 30, 2024July 2, 2023% Change
Operating segments:
Biopharma$27,595$30,863$17,254$14,965$10,341$15,898(11)15(35)
Pfizer CentreOne535615120190416425(13)(37)(2)
Pfizer Ignite32143214——**—
Total revenues$28,162$31,492$17,406$15,169$10,756$16,323(11)15(34)
* Indicates calculation not meaningful.
The following provides an analysis of the worldwide change in Total revenues by geographic areas in the second quarter of 2024 compared to the second quarter of 2023:
(MILLIONS)WorldwideU.S.International
Operational growth/(decline):
Revenues from legacy Seagen, which was acquired in December 2023$845$806$39
Worldwide growth from the Vyndaqel family, Eliquis, Nurtec ODT/Vydura, Xtandi and Abrysvo, partially offset by worldwide declines from Xeljanz, Ibrance, the Prevnar family and Inlyta595431164
Worldwide growth from Paxlovid1126845
Worldwide decline from Comirnaty(1,290)41(1,331)
Decline in oncology biosimilars, largely due to lower net price in the U.S.(80)(82)2
Other operational factors, net26617095
Operational growth/(decline), net4471,434(986)
Unfavorable impact of foreign exchange(170)—(170)
Total revenues increase/(decrease)$277$1,434$(1,157)
The following provides an analysis of the worldwide change in Total revenues by geographic areas in the first six months of 2024 compared to the first six months of 2023:
(MILLIONS)WorldwideU.S.International
Operational growth/(decline):
Worldwide decline from Comirnaty$(3,998)$(169)$(3,829)
Worldwide decline from Paxlovid(1,918)(92)(1,825)
Decline in oncology biosimilars, largely due to lower net price in the U.S.(228)(223)(5)
Decreased revenues from Sulperazon, largely driven by lower demand in China in the first quarter of 2024 as compared to the first quarter of 2023(172)—(172)
Revenues from legacy Seagen, which was acquired in December 20231,5861,51868
Worldwide growth from the Vyndaqel family, Eliquis, Xtandi, Nurtec ODT/Vydura and the Prevnar family, partially offset by declines from Xeljanz, Ibrance and Inlyta1,220956264
Revenues from Abrysvo, primarily driven by the launch of the older adult indication in the U.S. in July 202320117229
Other operational factors, net25675181
Operational growth/(decline), net(3,052)2,237(5,289)
Unfavorable impact of foreign exchange(278)—(278)
Total revenues increase/(decrease)$(3,330)$2,237$(5,567)

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

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

The following presents information about product revenue deductions:
Three Months EndedSix Months Ended
(MILLIONS)June 30, 2024July 2, 2023June 30, 2024July 2, 2023
Medicare rebates$757$207$1,477$432
Medicaid and related state program rebates5164111,126822
Performance-based contract rebates1,6661,2293,0482,421
Chargebacks2,9112,3055,6624,589
Sales allowances1,5921,5943,0853,109
Sales returns and cash discounts533238350751
Total(a)$7,976$5,984$14,749$12,125

(a)The increase in revenue deductions in the second quarter and first six months of 2024 is primarily driven by the transition of Paxlovid and Comirnaty to commercial markets, our acquisition of Seagen in December 2023, and higher sales of other recently acquired products, partially offset in the first six months of 2024 by a $771 million favorable final adjustment recorded in the first quarter of 2024 to the estimated non-cash Paxlovid revenue reversal of $3.5 billion recorded in the fourth quarter of 2023 (see Note 13C).

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

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

Total Revenues––Selected Product Discussion

Biopharma

(MILLIONS)Revenue% Change
ProductPeriodGlobal RevenuesRegionJune 30, 2024July 2, 2023TotalOper.Operational Results Commentary
EliquisQTD$1,877 Up 8% (operationally)U.S.$1,262$1,15210Growth driven primarily by continued oral anti-coagulant adoption and market share gains in the non-valvular atrial fibrillation indication in the U.S. and certain markets in Europe, partially offset by declines due to loss of patent-based exclusivity and generic competition in certain international markets.
Int’l.61561014
Worldwide$1,877$1,76278
YTD$3,917 Up 9% (operationally)U.S.$2,675$2,41311
Int’l.1,2421,22324
Worldwide$3,917$3,63689
Prevnar familyQTD$1,359 Down 4% (operationally)U.S.$832$868(4)QTD declines primarily driven by fewer adult vaccinations in the U.S. and lower pediatric indication sales in certain emerging markets and Japan, partially offset by growth in the pediatric indication in the U.S. as a result of the Prevnar 20 launch in 2023, as well as strong uptake of the adult indication in certain international markets. YTD growth primarily driven by the pediatric indication in the U.S. as a result of the Prevnar 20 launch in 2023, as well as strong uptake of the adult indication in certain international markets, partially offset by fewer adult vaccinations in the U.S.
Int’l.527563(6)(3)
Worldwide$1,359$1,431(5)(4)
YTD$3,050 Up 2% (operationally)U.S.$1,981$1,9531
Int’l.1,0691,081(1)2
Worldwide$3,050$3,03312
Vyndaqel familyQTD$1,323 Up 71% (operationally)U.S.$861$43498Growth largely driven by continued strong demand, primarily in the U.S. and international developed markets.
Int’l.4623483336
Worldwide$1,323$7826971
YTD$2,460 Up 68% (operationally)U.S.$1,612$81897
Int’l.8486503032
Worldwide$2,460$1,4686868
PaxlovidQTD$251 Up 79% (operationally)U.S.$68$—*QTD growth primarily driven by: • no second quarter 2023 U.S. sales in anticipation of transition to commercial markets in the second half of 2023; and • increases in infections and demand in certain international markets in the second quarter of 2024. YTD declines primarily driven by: • lower contractual deliveries in most international markets and in the U.S. as a result of the transition to traditional commercial market sales; and • lower demand in China due to the non-recurrent surge in COVID-19 infection during the first quarter of 2023, partially offset by: • a $771 million favorable final adjustment recorded in the first quarter of 2024 to the estimated non-cash revenue reversal of $3.5 billion recorded in the fourth quarter of 2023 (see Note 13C**).
Int’l.1841432931
Worldwide$251$1437679
YTD$2,286 Down 46% (operationally)U.S.$1,868$1,960(5)
Int’l.4182,252(81)(81)
Worldwide$2,286$4,212(46)(46)
IbranceQTD$1,130 Down 8% (operationally)U.S.$741$850(13)Declines primarily driven by lower demand due to competitive pressure globally and price decreases in certain international developed markets, partially offset by increased clinical trial supply orders in certain international developed markets versus prior year.
Int’l.390397(2)1
Worldwide$1,130$1,247(9)(8)
YTD$2,184 Down 8% (operationally)U.S.$1,420$1,600(11)
Int’l.765791(3)(1)
Worldwide$2,184$2,391(9)(8)
XtandiQTD$495 Up 17% (operationally)U.S.$495$42317Growth largely driven by strong demand due to uptake of the nmCSPC indication following approval in the fourth quarter of 2023.
Int’l.————
Worldwide$495$4231717
YTD$913 Up 20% (operationally)U.S.$913$76320
Int’l.————
Worldwide$913$7632020
PadcevQTD$394 *****U.S.$387$—*Growth driven by the acquisition of Seagen in the fourth quarter of 2023 as well as strong demand.
Int’l.7—**
Worldwide$394$—**
YTD$735 *****U.S.$721$—*
Int’l.14—**
Worldwide$735$—**
(MILLIONS)Revenue% Change
ProductPeriodGlobal RevenuesRegionJune 30, 2024July 2, 2023TotalOper.Operational Results Commentary
ComirnatyQTD$195 Down 87% (operationally)U.S.$58$16*Declines largely driven by lower contractual deliveries and demand in international markets (as well as lower U.S. volumes YTD), reflecting the anticipated seasonality of demand for vaccinations and as certain markets, including the U.S., transition to traditional commercial market sales.
Int’l.1371,471(91)(90)
Worldwide$195$1,488(87)(87)
YTD$548 Down 88% (operationally)U.S.$176$345(49)
Int’l.3734,207(91)(91)
Worldwide$548$4,552(88)(88)
AdcetrisQTD$279 *****U.S.$271$—*Growth driven by the acquisition of Seagen in the fourth quarter of 2023.
Int’l.7—**
Worldwide$279$—**
YTD$536 *****U.S.$524$—*
Int’l.12—**
Worldwide$536$—**
Nurtec ODT/VyduraQTD$356 Up 44% (operationally)U.S.$339$24439QTD growth primarily driven by strong demand in the U.S. as well as recent launches in international markets. YTD growth primarily driven by strong demand in the U.S. as well as recent launches in international markets, partially offset by lower net price in the U.S. due to unfavorable changes in channel mix.
Int’l.174**
Worldwide$356$2474444
YTD$533 Up 29% (operationally)U.S.$506$40625
Int’l.277**
Worldwide$533$4142929
XeljanzQTD$303 Down 34% (operationally)U.S.$181$333(46)Declines driven primarily by decreased prescription volumes globally resulting from ongoing shifts in prescribing patterns related to label changes, as well as lower net price in the U.S. due to unfavorable changes in channel mix and the impact of regulatory exclusivity expiry in Canada.
Int’l.122136(11)(7)
Worldwide$303$469(35)(34)
YTD$497 Down 29% (operationally)U.S.$255$423(40)
Int’l.242284(15)(12)
Worldwide$497$706(30)(29)
InlytaQTD$252 Down 2% (operationally)U.S.$151$168(10)Declines primarily driven by lower demand in the U.S. as well as lower volumes and lower net price in international developed markets, partially offset by higher demand in China.
Int’l.10194811
Worldwide$252$262(4)(2)
YTD$489 Down 5% (operationally)U.S.$292$323(9)
Int’l.197199(1)2
Worldwide$489$521(6)(5)
AbrysvoQTD$56 *****U.S.$41$—*Growth primarily driven by the launch of the older adult indication in the U.S. in July 2023.
Int’l.15—**
Worldwide$56$—**
YTD$201 *****U.S.$172$—*
Int’l.29—**
Worldwide$201$—**

Pfizer CentreOne

(MILLIONS)Revenue% Change
Operating SegmentPeriodGlobal RevenuesRegionJune 30, 2024July 2, 2023TotalOper.Operational Results Commentary
PC1QTD$278 Down 9% (operationally)U.S.$49$82(40)Declines primarily driven by lower manufacturing of divested and other third-party products under manufacturing and supply agreements, partially offset by growth in manufacturing-related services.
Int’l.22922523
Worldwide$278$307(10)(9)
YTD$535 Down 13% (operationally)U.S.$120$190(37)
Int’l.416425(2)(2)
Worldwide$535$615(13)(13)
  • Indicates calculation not meaningful.

See the Item 1. Business—Patents and Other Intellectual Property Rights section of our 2023 Form 10-K for information regarding the expiration of various patent rights, Note 12 for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above and Note 13C for additional information regarding the primary indications or class of the selected products discussed above.

Costs and Expenses

Costs and expenses follow:
Three Months EndedSix Months Ended
(MILLIONS)June 30, 2024July 2, 2023% ChangeJune 30, 2024July 2, 2023% Change
Cost of sales$3,300$3,2372$6,679$8,122(18)
Percentage of Total revenues24.8%24.9%23.7%25.8%
Selling, informational and administrative expenses3,7173,49767,2126,9144
Research and development expenses2,6962,64825,1895,1531
Acquired in-process research and development expenses633(81)655(88)
Amortization of intangible assets1,3071,184102,6152,28714
Restructuring charges and certain acquisition-related costs1,254214*1,356222*
Other (income)/deductions—net1,107(75)*1,787200*
* Indicates calculation not meaningful.

Second Quarter of 2024 vs. Second Quarter of 2023 and First Six Months of 2024 vs. First Six Months of 2023

Cost of Sales

Cost of sales increased $63 million in the second quarter of 2024, primarily due to:

*•*an impact of $500 million from our Seagen acquisition, inclusive of the amortization of the fair value step-up of inventory,

partially offset by:

  • a favorable change in sales mix of $500 million, primarily driven by lower sales of Comirnaty.

Cost of sales decreased $1.4 billion in the first six months of 2024, primarily due to:

  • a favorable change in sales mix of $2.3 billion, primarily driven by lower sales of Comirnaty,

partially offset by:

  • an impact of $910 million from our Seagen acquisition, inclusive of the amortization of the fair value step-up of inventory.

Cost of sales as a percentage of Total revenues was relatively flat in the second quarter of 2024 and reflects favorable changes in sales mix primarily driven by lower sales of Comirnaty, which resulted in a lower related charge for the 50% gross profit split with BioNTech and applicable royalty expenses; offset by the amortization of the fair value step-up of inventory related to the Seagen acquisition.

The decrease in Cost of sales as a percentage of Total revenues in the first six months of 2024 was mainly driven by a favorable change in sales mix, primarily driven by lower sales of Comirnaty and, to a lesser extent, a favorable impact of foreign exchange, partially offset by the amortization of the fair value step-up of inventory related to the Seagen acquisition.

Certain of our vaccines, including Comirnaty, are subject to seasonality of demand, with a greater portion of revenues and related cost of sales anticipated in the fall and winter seasons. See also The Global Economic Environment––COVID-19 section for information about our COVID-19 products.

Selling, Informational and Administrative Expenses

Selling, informational and administrative expenses increased $220 million in the second quarter of 2024, primarily due to an increase of $180 million in marketing and promotional expenses for recently launched and acquired products.

Selling, informational and administrative expenses increased $297 million in the first six months of 2024, primarily due to:

  • an increase of $420 million in marketing and promotional expenses for recently launched and acquired products; and

  • an increase of $145 million for corporate enabling functions primarily driven by digital costs from our December 2023 acquisition of Seagen,

partially offset by:

  • a decrease of $270 million in marketing and promotional expenses for Paxlovid.

Research and Development Expenses

Research and development expenses were relatively flat in the second quarter and the first six months of 2024, primarily due to:

  • increased spending of $220 million in the second quarter and $475 million in the first six months mainly to develop certain medicines acquired from Seagen,

  • offset by lower spending of $235 million in the second quarter and partially offset by $400 million in the first six months primarily as a result of our cost realignment program; and

  • for the first six months, lower spending of $80 million related to certain ongoing vaccine programs.

Amortization of Intangible Assets

Amortization of intangible assets increased $123 million in the second quarter of 2024 and $328 million in the first six months of 2024, primarily driven by:

  • increases of $140 million in the second quarter and $270 million in the first six months from our December 2023 acquisition of Seagen; and

  • increases of $120 million in the second quarter and $240 million in the first six months related to assets reclassified in 2023 from IPR&D to developed technology rights,

partially offset by:

  • decreases of $160 million in the second quarter and $250 million in the first six months related to changes in asset lives and fully amortized assets.

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

Realigning our Cost Base Program*––*This program is expected to deliver net cost savings of at least $4 billion, to be achieved primarily from 2023 through 2024.

Manufacturing Optimization Program*––*The first phase of this multi-phased program is expected to deliver savings of approximately $1.5 billion by the end of 2027, some of which is expected to begin being realized in 2025.

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

For a description of our programs, as well as the anticipated and actual costs, see Note 3A. The program savings discussed above may be rounded and represent approximations. In addition to these programs, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in light of patent-based and regulatory exclusivity expiries as well as the expiration of collaborative arrangements for various products. Improvement of operating margin will continue to be an important focus for the Company.

Seagen acquisition*––*In connection with our acquisition of Seagen, we are focusing our efforts on achieving an appropriate cost structure for the combined company. We expect to generate approximately $1 billion of annual cost synergies, to be achieved by 2026. The one-time costs to generate these synergies are expected to be approximately $1.5 billion, incurred primarily from 2023 through 2025.

Other (Income)/Deductions—Net

The unfavorable period-over-period change of $1.2 billion in the second quarter of 2024 was primarily driven by (i) net losses on equity securities in the second quarter of 2024 versus net gains on equity securities in the second quarter of 2023, (ii) higher net interest expense and (iii) intangible asset impairment charges recorded in the second quarter of 2024.

The unfavorable period-over-period change of $1.6 billion for the first six months of 2024, was primarily driven by (i) higher net interest expense, (ii) equity losses from our investment in Haleon in the first six months of 2024 versus equity income in the second quarter of 2023, (iii) lower dividend income and (iv) higher charges for certain legal matters. See Note 4**.

Provision/(Benefit) for Taxes on Income/(Loss)

Three Months EndedSix Months Ended
(MILLIONS)June 30, 2024July 2, 2023% ChangeJune 30, 2024July 2, 2023% Change
Provision/(benefit) for taxes on income/(loss)$(134)$(71)89$159$644(75)
Effective tax rate on continuing operations130.2%(3.1)%4.8%7.5%

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

Cash paid for income taxes, net of refunds, consisted of:
Year Ended December 31,
(MILLIONS)202320222021
United States$1,923$3,867$4,455
International1,2244,0002,972
Total$3,147$7,867$7,427

*Changes in Tax Laws––*Many countries outside the U.S. have enacted legislation for global minimum taxation resulting from the Organization for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting “Pillar 2” project. The EU has approved a directive requiring member states to incorporate the OECD provisions into their respective domestic laws, and countries outside the EU are also enacting the provisions into their domestic law. The provisions are generally effective for Pfizer in 2024, though significant details and guidance around the provisions are still pending. Income tax expense could be adversely affected as the legislation becomes effective in countries in which we do business, and such impact could be material to our results of operations. We continue to monitor pending OECD guidance and legislation enactment and implementation by individual countries.

PRODUCT DEVELOPMENTS

A comprehensive update of Pfizer’s development pipeline was published as of July 30, 2024 and is available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of our research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.

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

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

Products

PRODUCTINDICATION OR PROPOSED INDICATIONAPPROVED/FILED*
U.S.EUJAPAN
COVID-19 Vaccine (pediatric)(a)Active immunization to prevent COVID-19 caused by SARS-CoV-2 for individuals 6 months through 4 years of ageAuthorized September 2023Approved August 2023Approved September 2023
Active immunization to prevent COVID-19 caused by SARS-CoV-2 for individuals 5 through 11 years of ageAuthorized September 2023Approved August 2023Approved September 2023
Comirnaty (COVID-19 Vaccine)(b)Active immunization to prevent COVID-19 caused by SARS-CoV-2 in individuals 12 years of age and olderApproved September 2023Approved August 2023Approved September 2023
Prevnar 20/Prevenar 20 (Vaccine)Active immunization to prevent pneumonia invasive disease caused by Streptococcus pneumoniae in adults ages 18 years and olderApproved June 2021Approved February 2022Filed September 2023
Active immunization to prevent pneumonia and invasive disease in infants and children six weeks through 17 years of age, and for the prevention of otitis media in infants six weeks through five years of age caused by the original seven serotypes contained in Prevnar(c).Approved April 2023Approved March 2024Approved March 2024
TicoVac (Vaccine)Active immunization to prevent tick-borne encephalitis in individuals 1 year of age and olderApproved August 2021Approved March 2024
Nurtec ODT/Vydura (rimegepant)Acute treatment of migraine with or without aura in adultsApproved February 2020Approved April 2022
Prevention of episodic migraine in adultsApproved May 2021Approved April 2022
Litfulo/Ritfulo (ritlecitinib)Severe alopecia areata for individuals 12 years of age and olderApproved June 2023Approved September 2023Approved June 2023
Zavzpret (zavegepant) (intranasal)Acute treatment of migraine with or without aura in adultsApproved March 2023
Penbraya (PF-06886992) (Vaccine)Active immunization to prevent serogroups ABCWY meningococcal infections in adolescents and young adults 10 through 25 years of ageApproved October 2023Filed June 2023
PRODUCTINDICATION OR PROPOSED INDICATIONAPPROVED/FILED*
U.S.EUJAPAN
Abrysvo (Vaccine)Active immunization of pregnant individuals for the prevention of lower respiratory tract disease caused by RSV in infants from birth through 6 months of ageApproved August 2023Approved August 2023Approved January 2024
Active immunization for the prevention of lower respiratory tract disease caused by RSV in individuals 60 years and olderApproved May 2023Approved August 2023Approved March 2024
Active immunization for the prevention of lower respiratory tract disease caused by RSV in individuals 18-59 years of ageFiled July 2024Filed June 2024
Velsipity (etrasimod)Moderately to severely active ulcerative colitis in adultsApproved October 2023Approved February 2024Filed June 2024
Braftovi (encorafenib) and Mektovi (binimetinib)(d)BRAFV600E-mutant metastatic non-small cell lung cancer in adult patientsApproved October 2023Filed October 2023
Elrexfio (elranatamab)Triple-class relapsed/refractory multiple myeloma in adult patientsApproved August 2023Approved December 2023Approved March 2024
Talzenna (talazoparib)Combination with Xtandi (enzalutamide) for adult patients with HRR gene-mutated mCRPC(e)Approved June 2023Approved January 2024Approved January 2024
Treatment of adult patients with germline breast cancer susceptibility gene (gBRCA)1/2-mutations, who have human epidermal growth factor receptor 2-negative (HER2-) locally advanced (LA) or metastatic breast cancer (MBC)Approved October 2018Approved June 2019Approved January 2024
Beqvez/Durveqtix (fidanacogene elaparvovec)(f)Moderate to severe hemophilia B in adultsApproved April 2024Approved July 2024Filed June 2024
Xtandi (enzalutamide)(g)nmCSPC with biochemical recurrence at high risk for metastasis (high-risk BCR)Approved November 2023Approved April 2024
marstacimab (PF-06741086)Hemophilia A and BFiled December 2023Filed October 2023Filed February 2024
Emblaveo (aztreonam-avibactam)(h)Treatment of infections in adult patients caused by Gram-negative bacteria with limited or no treatment optionsApproved April 2024
Padcev (enfortumab vedotin-ejfv)(i)In combination with Keytruda®(j) (pembrolizumab) for locally advanced or metastatic urothelial cancer in adultsApproved December 2023Filed January 2024Filed January 2024
Tivdak (tisotumab vedotin-tftv)(k)Recurrent or metastatic cervical cancer with disease progression on or after first-line therapyApproved(l) April 2024Filed February 2024
2024-2025 COVID-19 Vaccine (JN.1 strain)Active immunization to prevent COVID-19 caused by SARS-CoV-2 for individuals 6 months of age and olderApproved July 2024Filed July 2024
Ngenla (somatrogon)(m)Adult growth hormone deficiencyFiled June 2024
Adcetris (brentuximab vedotin)(n)Relapsed/refractory diffuse large B-cell lymphomaFiled July 2024

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

(a)In September 2023, Pfizer and BioNTech announced the FDA granted EUA for the Omicron XBB.1.5-adapted monovalent COVID-19 vaccine for individuals 6 months through 4 years of age and 5 through 11 years of age (Pfizer-BioNTech COVID-19 Vaccine (2023-2024 Formula)).

(b)In September 2023, Pfizer and BioNTech announced the FDA approved a regulatory application for their Omicron XBB.1.5-adapted monovalent COVID-19 vaccine for individuals 12 years of age and older (Comirnaty (COVID-19 Vaccine, mRNA, 2023-2024 Formula)).

(c)For EU, approved indications are pneumococcal invasive disease pneumonia and otitis media. For Japan, approved indication is invasive pneumococcal disease.

(d)Pierre Fabre is the Marketing Authorization Holder for Braftovi (encorafenib) and Mektovi (binimetinib) in the EU.

(e)Listed indication applies to U.S. only. EU indication (all comers): mCRPC in whom chemotherapy is not clinically indicated; Japan indication: BRCA gene-mutated mCRPC.

(f)Being developed in collaboration with Spark Therapeutics, Inc. As of July 2024, Durveqtix has received Conditional Marketing Authorization in the EU.

(g)Being developed in collaboration with Astellas.

(h)Being developed in collaboration with AbbVie. AbbVie has the exclusive commercialization rights to this investigative therapy in the U.S. and Canada; Pfizer leads the joint development program and has commercialization rights in all other countries.

(i)Being developed in collaboration with Astellas.

(j)Keytruda® is a registered trademark of Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc.

(k)Being developed in collaboration with Genmab A/S.

(l)April 2024 approval date in the U.S. refers to the conversion of a prior accelerated approval to full approval

(m)Being developed in collaboration with OPKO Health, Inc.

(n)Being developed in collaboration with Takeda. Takeda has ex-U.S./Canada rights.

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

PRODUCT/CANDIDATEPROPOSED DISEASE AREA
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTSIbrance (palbociclib)(a)ER+/HER2+ metastatic breast cancer
Talzenna (talazoparib)Combination with Xtandi (enzalutamide) for DNA Damage Repair-deficient mCSPC
Braftovi (encorafenib) and Erbitux® (cetuximab)(b)First-line BRAFV600E-mutant mCRC
Paxlovid (nirmatrelvir; ritonavir)COVID-19 in high-risk children (6-11 years of age; >88lbs)
Litfulo (ritlecitinib)Vitiligo
Elrexfio (elranatamab)Multiple myeloma double-class exposed
Newly diagnosed multiple myeloma post-transplant maintenance
Newly diagnosed multiple myeloma transplant-ineligible
2nd line + relapsed refractory multiple myeloma
Oxbryta (voxelotor)Sickle cell disease (pediatric)
Leg ulcers in patients with sickle cell disease
Eliquis (apixaban)(c)Venous thromboembolism (pediatric)
Padcev (enfortumab vedotin)(d)Cisplatin-ineligible/decline muscle-invasive bladder cancer
Cisplatin-eligible muscle-invasive bladder cancer
Tukysa (tucatinib)HER2+ adjuvant breast cancer
2nd line/3rd line HER2+ metastatic breast cancer
1st line HER2+ maintenance metastatic breast cancer
1st line HER2+ metastatic colorectal cancer
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENTgiroctocogene fitelparvovec (PF-07055480)(e)Hemophilia A
PF-06425090 (vaccine)Immunization to prevent primary clostridioides difficile infection
sasanlimab (PF-06801591)Combination with Bacillus Calmette-Guerin for non-muscle-invasive bladder cancer
VLA15 (PF-07307405) vaccine(f)Immunization to prevent Lyme disease
PF-07252220 (quadrivalent mRNA-based vaccine)Immunization to prevent influenza
vepdegestrant (PF-07850327)(g)Breast cancer metastatic - 2nd line ER+/HER2-
inclacumab (PF-07940370)Sickle cell disease
Ibrance + vepdegestrant(g)ER+/HER2- metastatic breast cancer
dazukibart (PF-06823859)Dermatomyositis, polymyositis
disitamab vedotin(h)1st line HER2 (≥IHC1+) metastatic urothelial cancer
PF-07926307 (COVID/flu combo vaccine)(i)Immunization to prevent COVID infection and influenza
sisunatovir (PF-07923568)Respiratory syncytial virus infection (adults)
sigvotatug vedotin (PF-08046047)2nd line non-small cell lung cancer
osivelotor (PF-07940367)Sickle cell disease
atirmociclib (PF-07220060)2nd line metastatic breast cancer

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

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

(c)Being developed in collaboration with BMS.

(d)Being developed in collaboration with Astellas.

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

(f)Being developed in collaboration with Valneva SE.

(g)Vepdegestrant is being developed in collaboration with Arvinas, Inc.

(h)Being developed in collaboration with RemeGen Co., Ltd.

(i)Being developed in collaboration with BioNTech.

CIFFREO, a Phase 3 global, multicenter, randomized, double-blind, placebo-controlled study evaluating the investigational mini-dystrophin gene therapy, fordadistrogene movaparvovec, in ambulatory patients with DMD did not meet its primary endpoint of improvement in motor function among boys 4 to 7 years of age treated with the gene therapy compared to placebo. Key secondary endpoints, including 10-meter run/walk velocity and time to rise from floor velocity, also did not show a significant difference between participants treated with fordadistrogene movaparvovec and placebo. A decision to cease development of fordadistrogene movaparvovec has been endorsed, and it has been removed from the table above.

In July 2024, the EMA initiated a referral procedure under Article 20 of Regulation (EC) No 726/2004 for Oxbryta (voxelotor). This review relates to a potential safety concern arising from observations in two ongoing clinical trials. The EMA will assess the information from these studies, taking into account all the available data on the benefits and risks of Oxbryta. Pfizer will be working with the EMA throughout the review process, and with other regulators globally in relation to this matter.

For additional information about our R&D organization, see Note 13 and the Item 1. Business—Research and Development section of our 2023 Form 10-K. For additional information regarding certain collaboration arrangements see the Item 1. Business—Collaboration and Co-Promotion Agreements section of our 2023 Form 10-K.

NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME

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

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

(a)Most directly comparable GAAP measure.

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

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

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

Adjusted Income and Adjusted Diluted EPS

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

Acquisition-Related Items—Adjusted income excludes certain acquisition-related items, which are composed of transaction, integration, restructuring charges and additional depreciation costs for business combinations because these costs are unique to each transaction and represent costs that were incurred to restructure and integrate businesses as a result of an acquisition. We

have made no adjustments for resulting synergies. Acquisition-related items may include purchase accounting impacts such as the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, depreciation related to the increase/decrease in fair value of acquired fixed assets, amortization related to the increase in fair value of acquired debt, and the fair value changes for contingent consideration.

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

Certain Significant Items—Adjusted income excludes certain significant items representing substantive and/or unusual items that are evaluated individually on a quantitative and qualitative basis. Certain significant items may be highly variable and difficult to predict. Furthermore, in some cases it is reasonably possible that they could reoccur in future periods. For example, although major non-acquisition-related cost-reduction programs are specific to an event or goal with a defined term, we may have subsequent programs based on reorganizations of the business, cost productivity or in response to generic or biosimilar entry or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of litigation matters at acquired companies that were inestimable, not probable or unresolved at the date of acquisition, or legal matters related to divested products or businesses. Gains and losses on equity securities and pension and postretirement actuarial remeasurement gains and losses have a very high degree of inherent market volatility, which we do not control and cannot predict with any level of certainty, and we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business. Unusual items represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. See the Reconciliations of GAAP Reported to Non-GAAP Adjusted information—Certain Line Items below for a non-inclusive list of certain significant items and the Non-GAAP Financial Measure: Adjusted Income section within MD&A of our 2023 Form 10-K.

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

Three Months Ended June 30, 2024
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA)Cost of sales(a)Selling, informational and administrative expenses(a)Other (income)/deductions––net(a)Net income attributable to Pfizer Inc. common shareholders(a), (b)Earnings per common share attributable to Pfizer Inc. common shareholders––diluted
GAAP Reported$3,300$3,717$1,107$41$0.01
Amortization of intangible assets———1,307
Acquisition-related items(445)(10)(18)617
Discontinued operations———(20)
Certain significant items:
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(c)(50)(36)—1,215
Certain asset impairments(d)——(240)240
(Gains)/losses on equity securities——(342)342
Actuarial valuation and other pension and postretirement plan (gains)/losses——(2)2
Other(e)(37)(3)(247)292
Income tax provision—non-GAAP items(635)
Non-GAAP Adjusted$2,768$3,669$258$3,400$0.60
Six Months Ended June 30, 2024
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA)Cost of sales(a)Selling, informational and administrative expenses(a)Other (income)/deductions––net(a)Net income attributable to Pfizer Inc. common shareholders(a), (b)Earnings per common share attributable to Pfizer Inc. common shareholders––diluted
GAAP Reported$6,679$7,212$1,787$3,156$0.55
Amortization of intangible assets———2,615
Acquisition-related items(762)(16)(21)1,125
Discontinued operations———(20)
Certain significant items:
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(c)(71)(65)—1,198
Certain asset impairments(d)——(349)349
(Gains)/losses on equity securities——(317)317
Actuarial valuation and other pension and postretirement plan (gains)/losses——(5)5
Other(e)(42)(8)(541)599
Income tax provision—non-GAAP items(1,271)
Non-GAAP Adjusted$5,804$7,123$555$8,074$1.42
Three Months Ended July 2, 2023
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA)Cost of sales(a)Selling, informational and administrative expenses(a)Other (income)/deductions––net(a)Net income attributable to Pfizer Inc. common shareholders(a), (b)Earnings per common share attributable to Pfizer Inc. common shareholders––diluted
GAAP Reported$3,237$3,497$(75)$2,327$0.41
Amortization of intangible assets———1,184
Acquisition-related items(136)(2)(168)387
Discontinued operations———3
Certain significant items:
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(c)(17)(67)—235
(Gains)/losses on equity securities——135(135)
Actuarial valuation and other pension and postretirement plan (gains)/losses——1(1)
Other(e)(12)(8)(171)194
Income tax provision—non-GAAP items(355)
Non-GAAP Adjusted$3,072$3,419$(278)$3,839$0.67
Six Months Ended July 2, 2023
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA)Cost of sales(a)Selling, informational and administrative expenses(a)Other (income)/deductions––net(a)Net income attributable to Pfizer Inc. common shareholders(a), (b)Earnings per common share attributable to Pfizer Inc. common shareholders––diluted
GAAP Reported$8,122$6,914$200$7,870$1.38
Amortization of intangible assets———2,287
Acquisition-related items(233)(5)(150)550
Discontinued operations———2
Certain significant items:
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(c)(50)(126)—265
Certain asset impairments(d)——(264)264
(Gains)/losses on equity securities——(317)317
Actuarial valuation and other pension and postretirement plan (gains)/losses——(6)6
Other(e)(22)(14)(64)105
Income tax provision—non-GAAP items(791)
Non-GAAP Adjusted$7,818$6,769$(601)$10,876$1.90

(a)Items that reconcile GAAP Reported to non-GAAP Adjusted balances are shown pre-tax. Our effective tax rates for GAAP Reported income/(loss) from continuing operations were 130.2% and 4.8% in the three and six months ended June 30, 2024, respectively, and (3.1)% and 7.5% in the three and six

months ended July 2, 2023, respectively. See Note 5. Our effective tax rates for non-GAAP Adjusted income were 12.9% and 15.1% in the three and six months ended June 30, 2024, respectively, and 6.8% and 11.6% in the three and six months ended July 2, 2023, respectively.

(b)The amounts for the three and six months ended June 30, 2024 and July 2, 2023 include reconciling amounts for Research and development expenses that are not material to our non-GAAP consolidated results of operations.

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

(d)See Note 4.

(e)For the second quarter of 2024, the total Other (income)/deductions––net adjustment of $247 million includes charges of (i) $169 million for certain legal matters, primarily representing certain product liability expenses related to products discontinued and/or divested by Pfizer and (ii) $104 million mostly related to Pfizer’s share of an investee capital transaction recognized by Haleon for treasury stock Haleon purchased in the first quarter of 2024. For the first six months of 2024, the total Other (income)/deductions––net adjustment of $541 million primarily includes charges of (i) $377 million for certain legal matters, primarily representing certain product liability expenses related to products discontinued and/or divested by Pfizer and (ii) $351 million mostly related to (a) our equity-method accounting pro-rata share of intangible asset amortization, impairments and restructuring costs recorded by Haleon, as well as (b) adjustments to our equity-method basis differences and (c) Pfizer’s share of the aforementioned investee capital transaction, partially offset by (iii) a $150 million gain on the partial sale of our investment in Haleon. For the second quarter of 2023, the total Other (income)/deductions––net adjustment of $171 million primarily included charges of $139 million for certain legal matters, primarily representing certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer. For the first six months of 2023, the total Other (income)/deductions––net adjustment of $64 million primarily included charges of (i) $175 million for certain legal matters, primarily for certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer, and (ii) $70 million mostly related to our equity-method accounting pro-rata share of intangible asset amortization and impairments, costs of separating from GSK and restructuring costs recorded by Haleon, partially offset by dividend income of $211 million related to our investment in Nimbus resulting from Takeda’s acquisition of Nimbus’s oral, selective allosteric tyrosine kinase 2 (TYK2) inhibitor program subsidiary.

ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended
(MILLIONS)June 30, 2024July 2, 2023Drivers of change
Cash provided by/(used in):
Operating activities$(691)$4The change was primarily driven by a decrease in net income adjusted for non-cash items and the timing of receipts and payments in the ordinary course of business.
Investing activities$6,332$(22,170)The change was driven mainly by $23.6 billion greater net redemptions of short-term investments in 2024, as well as $3.5 billion of proceeds from the partial sale of the Haleon investment.
Financing activities$(7,390)$24,403The change was driven mainly by $30.8 billion of proceeds from the issuance of long-term debt in 2023, as well as $1.0 billion greater repayments of long-term debt in 2024.

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

Our historically robust operating cash flows, which we expect to continue over time, is a key strength of our liquidity and capital resources and our primary funding source. We expect operating cash flows to be significantly below typical levels this year, and were particularly lower in the first half, largely due to the timing of certain payments and one-time expenses. Additionally, with an anticipated heavy weighting of revenue to the fourth quarter of 2024 due to the expected seasonality of certain products in our portfolio, a potentially higher level of cash collections may carry over into the first quarter of 2025. We continue to believe that with our ongoing operating cash flows, together with our financial assets, access to capital markets, revolving credit agreements, and available lines of credit, we have and will maintain the ability to meet our liquidity needs to support ongoing operations, our capital allocation objectives, and our contractual and other obligations for the foreseeable future. For information about the sources and uses of our funds and capital resources, as well as our operating cash flows, see our Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Equity, and the Analysis of the Condensed Consolidated Statements of Cash Flows section within MD&A. For information on our money market funds, available-for sale-debt securities and long-term debt, see Note 7.

For information about our diverse sources of funds, off-balance sheet arrangements, contractual and other obligations, global economic conditions and market risk, see the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk section within MD&A of our 2023 Form 10-K. For more information on guarantees and indemnifications, see Note 12B.

Credit Ratings––The cost and availability of financing are influenced by credit ratings, and an increase or decrease in our credit rating could have a beneficial or adverse effect on financing. Our long-term debt is rated high-quality by both S&P and Moody’s.

As of the date of the filing of this Form 10-Q, the following ratings have been assigned to our commercial paper and senior unsecured long-term debt:
NAME OF RATING AGENCYPfizer Short-Term RatingPfizer Long-Term RatingOutlook/Watch
Moody’sP-1A2Stable Outlook
S&PA-1AStable Outlook

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

Debt Capacity––Lines of Credit––As of the date of the filing of this Form 10-Q, we had access to a total of $15 billion in committed U.S. revolving credit facilities, consisting of an $8.0 billion facility maturing in October 2024 and a $7.0 billion facility maturing in October 2028, which may be used for general corporate purposes including to support our global commercial paper borrowings. In addition to the U.S. revolving credit facilities, our lenders have provided us an additional $280 million in lines of credit, of which $250 million expire within one year. Essentially all lines of credit were unused as of the date of the filing of this Form 10-Q.

Capital Allocation Framework––Our capital allocation framework is primarily devised to enhance shareholder value and is based on three core pillars: maintaining and growing our dividend over time, reinvesting in the business and making share repurchases after de-levering our balance sheet. In April 2024, our BOD declared a dividend of $0.42 per share, payable on June 14, 2024, to shareholders of record at the close of business on May 10, 2024. In June 2024, our BOD declared a dividend of $0.42 per share, payable on September 3, 2024, to shareholders of record at the close of business on July 26, 2024. As of June 30, 2024, our remaining share-purchase authorization was $3.3 billion, with no repurchases in the first six months of 2024. See Note 12 in our 2023 Form 10-K for more information on our publicly announced share-purchase plans.

In March 2024, we sold a portion of our investment in Haleon for $3.5 billion (see Note 2B). We expect to resume monetizing our 23% Haleon stake in the future. Once our Haleon ownership is less than 20%, we expect to no longer include Haleon equity-method income in our results of operations.

NEW ACCOUNTING STANDARDS

Recently Adopted Accounting Standard

See Note 1B**.

Recently Issued Accounting Standards, Not Adopted as of June 30, 2024
Standard/DescriptionEffective DateEffect on the Financial Statements
In November 2023, the FASB issued final guidance to improve transparency of segment disclosures. The final guidance requires the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, other segment items by reportable segment and a description of its composition, and requires all current annual disclosures be provided in interim periods.2024 for annual reports and 2025 for interim reports. Early adoption is permitted.This new guidance will result in increased disclosures in the notes to our financial statements.
In December 2023, the FASB issued final guidance to improve income tax disclosures. The final guidance requires enhanced disclosures primarily related to existing rate reconciliation and income taxes paid information.2025 for annual reports. Early adoption is permitted.This new guidance will result in increased disclosures in the notes to our financial statements.

FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS

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

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

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

  • our anticipated operating and financial performance, including financial guidance and projections;

  • reorganizations, business plans, strategy, goals and prospects;

  • expectations for our product pipeline, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, launches, clinical trial results and other developing data; revenue contribution and

projections; potential pricing and reimbursement; potential market dynamics, including demand, market size and utilization rates; and growth, performance, timing of exclusivity and potential benefits;

  • strategic reviews, capital allocation objectives, dividends and share repurchases;

  • plans for and prospects of our acquisitions, dispositions and other business development activities, and our ability to successfully capitalize on growth opportunities and prospects;

  • sales, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings;

  • expectations regarding the impact of or changes to existing or new government regulations or laws;

  • our ability to anticipate and respond to and our expectations regarding the impact of macroeconomic, geopolitical, health and industry trends, pandemics, acts of war and other large-scale crises; and

  • manufacturing and product supply.

In particular, forward-looking information in this Form 10-Q includes statements relating to specific future actions, performance and effects, including, among others, the expected benefits of the organizational changes to our operations; our anticipated operating and financial performance; our ongoing efforts to respond to COVID-19, including our plans and expectations regarding Comirnaty and Paxlovid, and any potential future vaccines or treatments, including anticipated revenue and expectations for the commercial market for Comirnaty and Paxlovid; our expectations regarding the impact of COVID-19 on our business; the expected seasonality of demand for certain of our vaccines, including Comirnaty; expected patent terms; the expected impact of patent expiries and generic and biosimilar competition; the expected pricing pressures on our products and the anticipated impact to our business; the benefits expected from our business development transactions, including our December 2023 acquisition of Seagen; our anticipated cash flows and liquidity position; the anticipated costs, savings and potential benefits from certain of our initiatives, including our enterprise-wide Realigning our Cost Base Program, which we launched in October 2023 and our Manufacturing Optimization Program to reduce our cost of goods sold, which we announced in May 2024; our expectations regarding the impact from the 2023 tornado on our manufacturing facility in Rocky Mount, NC; our planned capital spending; and our capital allocation framework.

Given their nature, we cannot assure that any outcome expressed in these forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results and those anticipated, estimated, implied or projected. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the Item 1A. Risk Factors section in our 2023 Form 10-K.

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

Some of the factors that could cause actual results to differ are identified below, as well as those discussed in the Item 1A. Risk Factors section in our 2023 Form 10-K and within MD&A. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. The occurrence of any of the risks identified below, in the Item 1A. Risk Factors section in our 2023 Form 10-K or within MD&A, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results of operations, or we may be required to increase our accruals for contingencies. It is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties:

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

  • the outcome of R&D activities, including the ability to meet anticipated pre-clinical or clinical endpoints, commencement and/or completion dates for our pre-clinical or clinical trials, regulatory submission dates, and/or regulatory approval and/or launch dates; the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new pre-clinical or clinical data and further analyses of existing pre-clinical or clinical data; risks associated with preliminary, early stage or interim data; the risk that pre-clinical and clinical trial data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities; and whether and when additional data from our pipeline programs will be published in scientific journal publications, and if so, when and with what modifications and interpretations; and uncertainties regarding the future development of our product candidates, including whether or when our product candidates will advance to future studies or phases of development or whether or when regulatory applications may be filed for any of our product candidates;

  • our ability to successfully address comments received from regulatory authorities such as the FDA or the EMA, or obtain approval for new products and indications from regulators on a timely basis or at all;

  • regulatory decisions impacting labeling, including the scope of indicated patient populations, product dosage, manufacturing processes, safety and/or other matters, including decisions relating to emerging developments regarding potential product impurities; uncertainties regarding the ability to obtain, and the scope of,

recommendations by technical or advisory committees, and the timing of, and ability to obtain, pricing approvals and product launches, all of which could impact the availability or commercial potential of our products and product candidates;

  • claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates, including claims and concerns that may arise from the outcome of post-approval clinical trials, which could impact marketing approval, product labeling, and/or availability or commercial potential;

  • the success and impact of external business development activities, such as the December 2023 acquisition of Seagen, including the ability to identify and execute on potential business development opportunities; the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all; the ability to realize the anticipated benefits of any such transactions in the anticipated time frame or at all; the potential need for and impact of additional equity or debt financing to pursue these opportunities, which has in the past and could in the future result in increased leverage and/or a downgrade of our credit ratings and could limit our ability to obtain future financing; challenges integrating the businesses and operations; disruption to business and operations relationships; risks related to growing revenues for certain acquired or partnered products; significant transaction costs; and unknown liabilities;

  • competition, including from new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat or prevent diseases and conditions similar to those treated or intended to be prevented by our in-line products and product candidates;

  • the ability to successfully market both new and existing products, including biosimilars;

  • difficulties or delays in manufacturing, sales or marketing; supply disruptions, shortages or stock-outs at our facilities or third-party facilities that we rely on; and legal or regulatory actions;

  • the impact of public health outbreaks, epidemics or pandemics (such as COVID-19) on our business, operations and financial condition and results, including impacts on our employees, manufacturing, supply chain, sales and marketing, R&D and clinical trials;

  • risks and uncertainties related to our efforts to continue to develop and commercialize Comirnaty and Paxlovid or any potential future COVID-19 vaccines, treatments or combinations, as well as challenges related to their manufacturing, supply and distribution, including, among others, the risk that as the market for COVID-19 products continues to become more endemic and seasonal, demand for our COVID-19 products has and may continue to be reduced or not meet expectations, or may no longer exist, which has and may continue to lead to reduced revenues, excess inventory on-hand and/or in the channel which, for Paxlovid and Comirnaty, resulted in significant inventory write-offs in 2023 and could continue to result in inventory write-offs, or other unanticipated charges; risks related to our ability to develop and commercialize variant adapted vaccines; challenges related to the transition to the commercial market for our COVID-19 products; uncertainties related to the public’s adherence to vaccines, boosters, treatments or combinations; risks related to our ability to accurately predict or achieve our revenue forecasts for Comirnaty and Paxlovid or any potential future COVID-19 vaccines or treatments; and potential third-party royalties or other claims related to Comirnaty or Paxlovid;

  • trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or favorable formulary placement for our products;

  • interest rate and foreign currency exchange rate fluctuations, including the impact of currency devaluations and monetary policy actions in countries experiencing high inflation or deflation rates;

  • any significant issues involving our largest wholesale distributors or government customers, which account for a substantial portion of our revenues;

  • the impact of the increased presence of counterfeit medicines, vaccines or other products in the pharmaceutical supply chain;

  • any significant issues related to the outsourcing of certain operational and staff functions to third parties;

  • any significant issues related to our JVs and other third-party business arrangements, including modifications or disputes related to supply agreements or other contracts with customers including governments or other payors;

  • uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions, such as inflation or interest rate fluctuations, and recent and possible future changes in global financial markets;

  • the exposure of our operations globally to possible capital and exchange controls, economic conditions, expropriation, sanctions and/or other restrictive government actions, changes in intellectual property legal protections and remedies, unstable governments and legal systems and inter-governmental disputes;

  • the impact of disruptions related to climate change and natural disasters, including uncertainties related to the impact of the tornado at our manufacturing facility in Rocky Mount, NC in 2023;

  • any changes in business, political and economic conditions due to actual or threatened terrorist activity, geopolitical instability, political or civil unrest or military action, including the ongoing conflicts between Russia and Ukraine and in the Middle East and the resulting economic or other consequences;

  • the impact of product recalls, withdrawals and other unusual items, including uncertainties related to regulator-directed risk evaluations and assessments, including our ongoing evaluation of our product portfolio for the potential presence or formation of nitrosamines;

  • trade buying patterns;

  • the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;

  • the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, as well as any other corporate strategic initiatives and growth strategies, and cost-reduction and productivity initiatives, including any potential future phases, each of which requires upfront costs but may fail to yield anticipated benefits and may result in unexpected costs, organizational disruption, adverse effects on employee morale, retention issues or other unintended consequences;

  • the ability to successfully achieve our climate goals and progress our environmental sustainability and other ESG priorities;

Risks Related to Government Regulation and Legal Proceedings

  • the impact of any U.S. healthcare reform or legislation or any significant spending reduction or cost control efforts affecting Medicare, Medicaid or other publicly funded or subsidized health programs, including the IRA, or changes in the tax treatment of employer-sponsored health insurance that may be implemented;

  • U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, intellectual property, reimbursement or access or restrictions on U.S. direct-to-consumer advertising; limitations on interactions with healthcare professionals and other industry stakeholders; as well as pricing pressures for our products as a result of highly competitive biopharmaceutical markets;

  • legislation or regulatory action in markets outside of the U.S., such as China or Europe, including, without limitation, laws related to pharmaceutical product pricing, intellectual property, medical regulation, environmental protections, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;

  • legal defense costs, insurance expenses, settlement costs and contingencies, including without limitation, those related to legal proceedings and actual or alleged environmental contamination;

  • the risk and impact of an adverse decision or settlement and risk related to the adequacy of reserves related to legal proceedings;

  • the risk and impact of tax related litigation and investigations;

  • governmental laws and regulations affecting our operations, including, without limitation, the IRA, changes in laws and regulations or their interpretation, including, among others, changes in tax laws and regulations internationally and in the U.S., the adoption of global minimum taxation requirements outside the U.S. generally effective in most jurisdictions since January 1, 2024 and potential changes to existing tax law by the current U.S. Presidential administration and Congress, including the House-passed bill called “Tax Relief for American Families and Workers Act of 2024”;

Risks Related to Intellectual Property, Technology and Security

  • any significant breakdown or interruption of our information technology systems and infrastructure (including cloud services);

  • any business disruption, theft of confidential or proprietary information, security threats on facilities or infrastructure, extortion or integrity compromise resulting from a cyber-attack, which may include those using adversarial artificial intelligence techniques, or other malfeasance by, but not limited to, nation states, employees, business partners or others;

  • risks and challenges related to the use of software and services that include artificial intelligence-based functionality and other emerging technologies;

  • the risk that our currently pending or future patent applications may not be granted on a timely basis or at all, or any patent-term extensions that we seek may not be granted on a timely basis, if at all; and

  • risks to our products, patents and other intellectual property, such as: (i) claims of invalidity that could result in patent revocation; (ii) claims of patent infringement, including asserted and/or unasserted intellectual property claims; (iii) claims

we may assert against intellectual property rights held by third parties; (iv) challenges faced by our collaboration or licensing partners to the validity of their patent rights; or (v) any pressure, or legal or regulatory action by, various stakeholders or governments that could potentially result in us not seeking intellectual property protection or agreeing not to enforce or being restricted from enforcing intellectual property rights related to our products, including Comirnaty and Paxlovid.

Previous: Item 1. FINANCIAL STATEMENTS · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK