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(a)	Excludes amortization of intangible assets, except as disclosed in Note 9A. Identifiable Intangible Assets and Goodwill:Identifiable Intangible Assets.

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(a)	Reclassified into Discontinued operations—net of tax in the condensed consolidated statements of income.

(b)	Reclassified into Other (income)/deductions—net in the condensed consolidated statements of income.

(c)	Generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, in the condensed consolidated statements of income. For additional information, see Note 10. Pension and Postretirement Benefit Plans.

(d)	See Note 5C. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Income/(Loss).

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•	Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).

•	Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).

•	Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).

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•

In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and

•	In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems.

•

Manufacturing plant network rationalization and optimization, where execution timelines are necessarily long. Our plant network strategy is expected to result in the exit of five sites over the next several years. In connection with these activities, during 2014-2016, we expect to incur costs of approximately $300 million associated with prior acquisition activity and costs of approximately $1.3 billion associated with new non-acquisition-related cost-reduction initiatives. Through June 28, 2015, we incurred approximately $252 million and $340 million, respectively, associated with these initiatives.

•

New global commercial structure reorganization, which primarily includes the streamlining of certain functions, the realignment of regional locations and colleagues to support the businesses, as well as implementing the necessary system changes to support future reporting requirements. In connection with this reorganization, during 2014-2016, we expect to incur costs of approximately $300 million. Through June 28, 2015, we incurred approximately $191 million associated with this reorganization.

•	Other new cost-reduction/productivity initiatives, primarily related to commercial property rationalization and consolidation. In connection with these cost-reduction activities, during 2014-2016, we expect to incur costs of approximately $900 million. Through June 28, 2015, we incurred approximately $263 million associated with these initiatives.

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(a)	In the six months ended June 28, 2015, Employee terminations represent the expected reduction of the workforce by approximately 500 employees, mainly in sales.

•	For the second quarter of 2015, the Global Innovative Pharmaceutical segment (GIP) ($7 million); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC) ($14 million); the Global Established Pharmaceutical segment (GEP) ($2 million income); Worldwide Research and Development and Medical (WRD/M) ($4 million); manufacturing operations ($14 million); and Corporate ($6 million).

•	For the first six months of 2015, GIP ($19 million); VOC ($27 million); GEP ($8 million); WRD/M ($16 million); manufacturing operations ($8 million income); and Corporate ($24 million).

•	For the second quarter of 2014, GIP ($9 million); VOC ($6 million); GEP ($24 million); WRD/M ($8 million); manufacturing operations ($12 million); and Corporate ($7 million).

•	For the first six months of 2014, GIP ($11 million); VOC ($6 million); GEP ($31 million); WRD/M ($9 million); manufacturing operations ($38 million); and Corporate ($11 million).

(b)	Transaction costs represent external costs directly related to acquired businesses and primarily include expenditures for banking, legal, accounting and other similar services.

(c)	Pre-integration costs represent external, incremental costs directly related to our pending acquisition with Hospira. Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes.

(d)	Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(e)	Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.

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(a)	Included in Other current liabilities ($735 million) and Other noncurrent liabilities ($431 million).

(b)	Includes adjustments for foreign currency translation.

(c)	Included in Other current liabilities ($575 million) and Other noncurrent liabilities ($433 million).

(a)

Interest income increased in the second quarter and first six months of 2015, primarily due to higher investment returns. Interest expense decreased in the second quarter and first six months of 2015, primarily due to lower interest rates on new fixed rate debt added in the second quarter of 2014, the repayment of some long-term debt in the first quarter of 2015 and the benefit of the effective conversion of some fixed-rate liabilities to floating-rate liabilities.

(b)	In the first six months of 2014, primarily includes approximately $620 million for Neurontin-related matters (including off-label promotion actions and antitrust actions) and approximately $55 million for an Effexor-related matter.

(c)

In the first six months of 2015, primarily includes gains on sales/out-licensing of product and compound rights (approximately $69 million) and gains on sales of investments in equity securities (approximately $125 million). In the first six months of 2014, primarily includes gains on sales/out-licensing of product and compound rights (approximately $96 million) and gains on sales of investments in equity securities (approximately $98 million).

(d)

In the first six months of 2014, includes intangible asset impairment charges of $114 million, virtually all of which relates to an in-process research and development (IPR&D) compound for the treatment of skin fibrosis. The intangible asset impairment charge for the first six months of 2014 is associated with Worldwide Research and Development and reflects, among other things, the impact of changes to the development program.

(e)	In the second quarter and first six months of 2015 and 2014, represents expenses for planning and implementing changes to our infrastructure to align our operations and reporting for our business segments established in 2014.

•	the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business,

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•	a decline in tax benefits associated with the resolution of certain tax positions pertaining to prior years, with various foreign tax authorities, and the expiration of certain statutes of limitations.

•	the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business,

•	a decline in tax benefits associated with the resolution of certain tax positions pertaining to prior years, primarily with various foreign tax authorities, and the expiration of certain statutes of limitations.

•	With respect to Pfizer Inc., the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently assessing the procedural options; it is likely that Pfizer will appeal certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014 and 2015 are open, but not under audit. All other tax years are closed.

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(a)	Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.

(a)	Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $17 million loss for the first six months of 2015.

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(a)	We use a market approach in valuing financial instruments on a recurring basis. For additional information, see Note 1C. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than 1% that use Level 1 inputs.

(b)

As of June 28, 2015, trading funds and securities are composed of $90 million of trading equity funds, $120 million of trading debt funds, and $86 million of trading equity securities. As of December 31, 2014, trading securities of $105 million is composed of debt and equity securities. The trading equity securities as of June 28, 2015 and the trading debt and equity securities as of December 31, 2014 are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.

(c)	Gross unrealized gains and losses are not significant.

(d)	Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $76 million as of June 28, 2015; and foreign currency forward-exchange contracts with fair values of $159 million as of December 31, 2014.

(e)

Short-term borrowings includes foreign currency short-term borrowings with fair values of $536 million as of June 28, 2015, which are used as hedging instruments. The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities at cost and short-term borrowings not measured at fair value on a recurring basis were not significant as of June 28, 2015 or December 31, 2014. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities carried at cost are based on Level 3 inputs.

(f)	Our private equity securities represent investments in the life sciences sector.

(g)

Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency swaps with fair values of $208 million and foreign currency forward-exchange contracts with fair values of $95 million as of June 28, 2015; and foreign currency swaps with fair values of $121 million and foreign currency forward-exchange contracts with fair values of $54 million as of December 31, 2014.

(h)	Some carrying amounts may include adjustments for discount or premium amortization or for the effect of hedging the interest rate fair value risk associated with certain financial liabilities by interest rate swaps.

(i)	Includes foreign currency debt with fair value of $560 million as of December 31, 2014, which are used as hedging instruments.

(j)

The fair value of our long-term debt (not including the current portion of long-term debt) was $30.8 billion as of June 28, 2015 and $36.6 billion as of December 31, 2014. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. Generally, the difference between the fair value of our long-term debt and the amount reported on the condensed consolidated balance sheet is due to a decline in relative market interest rates since the debt issuance.

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(a)	As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($16 million), foreign currency swaps ($520 million) and foreign currency forward-exchange contracts ($294 million) and, as of December 31, 2014, include interest rate swaps ($34 million), foreign currency swaps ($494 million) and foreign currency forward-exchange contracts ($531 million).

(b)	As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($652 million), foreign currency swaps ($91 million) and foreign currency forward-exchange contracts ($23 million) and, as of December 31, 2014, include interest rate swaps ($767 million), foreign currency swaps ($99 million) and foreign currency forward-exchange contracts ($15 million).

(c)	As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($4 million), foreign currency swaps ($589 million) and foreign currency forward-exchange contracts ($265 million) and, as of December 31, 2014, include interest rate swaps ($1 million), foreign currency swaps ($13 million) and foreign currency forward-exchange contracts ($78 million).

(d)	As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($376 million), foreign currency swaps ($737 million) and foreign currency forward-exchange contracts ($1 million) and, as of December 31, 2014, include interest rate swaps ($16 million) and foreign currency swaps ($581 million).

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(a)	Issued by governments, government agencies or supranational entities, as applicable, all of which are investment-grade.

(b)	Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment-grade.

(c)

Includes loan-backed, receivable-backed, and mortgage-backed securities, all of which are investment-grade and in senior positions in the capital structure of the security. Loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans, and receivable-backed securities are collateralized by credit cards receivables. Mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages.

(d)	Involving U.S. securities.

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

(b)	Also, includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges, as well as the offsetting gains and losses attributable to the hedged items in such hedging relationships.

(c)	There was no significant ineffectiveness for any period presented.

(d)

For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income/(loss)––Unrealized holding gains/(losses) on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.

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(a)	Included in Other noncurrent assets. There are no recoverability issues associated with these amounts.

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(a)	The decrease in identifiable intangible assets, less accumulated amortization, is primarily related to amortization, partially offset by assets acquired as part of the acquisition of Baxter’s portfolio of marketed vaccines. For information about the assets acquired as part of the acquisition of Baxter’s portfolio of marketed vaccines, see Note 2A.

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(a)	Primarily reflects the impact of foreign exchange.

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(a)

The increase in net periodic benefit costs for the three and six months ended June 28, 2015, compared to the three and six months ended June 29, 2014, for our U.S. qualified pension plans was primarily driven by (i) the increase in the amounts amortized for actuarial losses resulting from the decrease, in 2014, in the discount rate used to determine the benefit obligation (which increased the amount of deferred actuarial losses) and, to a lesser extent, a 2014 change in mortality assumptions (reflecting a longer life expectancy for plan participants), and (ii) higher settlement activity. The aforementioned increases were partially offset by (i) a greater expected return on plan assets resulting from an increased plan asset base due to a voluntary contribution of $1.0 billion made at the beginning of January 2015, which in turn was partially offset by a decrease in the expected rate of return on plan assets from 8.50% to 8.25%, and (ii) lower interest costs resulting from the decrease, in 2014, in the discount rate used to determine the benefit obligation.

(b)

The decrease in net periodic benefit costs for the three and six months ended June 28, 2015, compared to the three and six months ended June 29, 2014, for our international pension plans was primarily driven by (i) the decrease in interest cost resulting from the decrease, in 2014, in the discount rate used to determine the benefit obligation, (ii) a decrease in service cost related to changes in actuarial assumptions (lower inflation and lower rate of wage increases) and the U.K. pension plan freeze in 2014, which offset the impact of the decrease, in 2014, in the discount rate used to determine the benefit obligation (the effect of which is an increase in service costs). The aforementioned decreases to net periodic benefit costs were partially offset by (i) a decrease in the expected return on plan assets due to a lower expected rate of return on plan assets and (ii) an increase in the amounts amortized for actuarial losses resulting from the decrease, in 2014, in the discount rate used to determine the benefit obligation.

(c)

The decrease in net periodic benefit costs for the three and six months ended June 28, 2015, compared to the three and six months ended June 29, 2014, for our postretirement plans was primarily driven by (i) the increase in the amounts amortized for prior service credits and (ii) an increase in curtailment gain resulting from the implementation of changes to certain retiree medical benefits to adopt programs eligible for the Medicare Part D plan subsidy, as allowed under the employer group waiver plan, which was approved and communicated to plan participants, and will go into effect on January 1, 2016, as well as (iii) a decrease in interest cost resulting from the decrease, in 2014, in the discount rate used to determine the benefit obligation. The aforementioned decreases were partially offset by an increase in actuarial losses resulting from the decrease, in 2014, in the discount rate used to determine the benefit obligation.

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(a)	Contributions to the postretirement plans were more than offset by reimbursements of approximately $133 million received for eligible 2014 prescription drug expenses for certain retirees.

(b)

Contributions expected to be made for 2015 are inclusive of amounts contributed during the six months ended June 28, 2015, including the $1.0 billion voluntary contribution that was made in January 2015 for the U.S. Qualified plan. The U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments.

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(a)	These common stock equivalents were outstanding for the six months ended June 28, 2015 and June 29, 2014, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.

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•

Patent litigation, which typically involves challenges to the coverage and/or validity of our patents on various products, processes or dosage forms. We are the plaintiff in the vast majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in a loss of patent protection for the drug at issue, a significant loss of revenues from that drug and impairments of any associated assets.

•	Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.

•	Commercial and other matters, which can include merger-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter.

•	Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other countries.

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•	Personal Injury Actions

•	Antitrust Actions

•	Whistleblower Action

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•	Antitrust Actions

•	Personal Injury Actions

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Global Innovative Pharmaceutical segment––GIP is focused on developing, registering and commercializing novel, value-creating medicines that significantly improve patients’ lives. These therapeutic areas include inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women’s/men’s health and include leading brands, such as Xeljanz, Eliquis and Lyrica (U.S., Japan). GIP has a pipeline of medicines in inflammation, cardiovascular/metabolic disease, neuroscience and pain, and rare diseases.

•

Global Vaccines, Oncology and Consumer Healthcare segment––VOC focuses on the development and commercialization of vaccines and products for oncology and consumer healthcare. Consumer Healthcare manufactures and markets several well known, over-the-counter (OTC) products. Each of the three businesses in VOC operates as a separate, global business with distinct specialization in terms of the science and market approach necessary to deliver value to consumers and patients.

•	Global Established Pharmaceutical segment––GEP includes the brands that have lost market exclusivity and, generally, the mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets and, to a much smaller extent, generic pharmaceuticals. Additionally, GEP includes our development portfolio of sterile injectable and biosimilar products.

•

Worldwide Research and Development (WRD), which is generally responsible for research projects until proof-of-concept is achieved and then for transitioning those projects to the appropriate operating segment for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. This organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.

•

Pfizer Medical, which is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, partnerships with global public health and medical associations, regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes.

•	Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments.

•	Other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations not directly attributable to an operating segment.

•

Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, which include non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities.

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(a)	Income from continuing operations before provision for taxes on income.

(b)

Other business activities includes the revenues and operating results of Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales operation, which in 2015 includes the revenues and expenses related to our transitional manufacturing and supply agreements with Zoetis. Other business activities also includes the costs managed by our Worldwide Research and Development organization and our Pfizer Medical organization.

(c)	For a description, see the “Other Costs and Business Activities” section above.

(d)	Certain significant items are substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis.

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(a)	Developed Europe region includes the following markets: Western Europe, Finland and the Scandinavian countries. Revenues denominated in euros were $1.8 billion and $2.3 billion in the second quarter of 2015 and 2014, respectively, and $3.6 billion and $4.5 billion in the first six months of 2015 and 2014, respectively.

(b)	Developed Rest of World region includes the following markets: Australia, Canada, Japan, New Zealand and South Korea.

(c)	Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, the Middle East, Eastern Europe, Africa, Turkey and Central Europe.

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(a)	Indicates the business to which the revenues relate. GIP = the Global Innovative Pharmaceutical segment; V = the Global Vaccines

(b)	In the second quarter and the first six months of 2015, all revenues were composed of Prevnar 13/Prevenar 13. In the second quarter and the first six months of 2014, revenues were composed of the Prevnar family of products, which included Prevnar 13/Prevenar 13 and, to a much lesser extent, Prevenar (7-valent).

(c)	Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in GEP. All other Lyrica revenues are included in GIP.

(d)	Viagra revenues from the U.S. and Canada are included in GIP. All other Viagra revenues are included in GEP.

(e)	Includes Eliquis (GIP), Rebif (GIP), Spiriva (GEP) and Aricept (GEP).

(f)	Other includes revenues generated from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and revenues related to our transitional manufacturing and supply agreements with Zoetis.

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•	the performance of several key products in developed markets, including Prevnar 13 primarily in adults (primarily in the U.S.), Eliquis, Lyrica (GIP) (primarily in the U.S. and Japan), Xeljanz (primarily in the U.S), Viagra (GIP) and Ibrance (in the U.S.), as well as from vaccines acquired in December 2014 from Baxter International Inc. (Baxter) (collectively, up approximately $950 million); and

•	a 6% operational increase in revenues in emerging markets, reflecting continued strong operational growth primarily from Lipitor and Prevenar 13 (collectively, up approximately $135 million),

•	the loss of exclusivity and immediate multi-source generic competition for Celebrex in the U.S. in December 2014 (down approximately $460 million);

•

the loss of exclusivity for Zyvox in the U.S. in the first half of 2015, Lyrica (GEP) in certain developed Europe markets, beginning in the first quarter of 2015, Celebrex in Canada, developed Europe, Australia and New Zealand, Rapamune in the U.S., Inspra in developed Europe, and Viagra (GEP) (international developed markets) (collectively, down approximately $290 million) and the loss of exclusivity for certain other products (collectively, down approximately $60 million);

•	the performance of certain other products such as Lipitor in developed markets and Nexium 24HR and Geodon in the U.S. (collectively, down approximately $170 million); and

•	the termination of the Spiriva co-promotion collaboration in certain countries (down approximately $30 million).

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•	the performance of several key products in developed markets, including Prevnar 13 primarily in adults (primarily in the U.S.), Eliquis, Lyrica (GIP) (primarily in the U.S. and Japan), Xeljanz (primarily in the U.S.), Viagra (GIP) and Ibrance (in the U.S.), as well as from vaccines acquired in December 2014 from Baxter (collectively, up approximately $1.7 billion); and

•	a 9% operational increase in revenues in emerging markets, reflecting continued strong operational growth, primarily from Lipitor, Prevenar 13, Zyvox and Viagra (in China) (collectively, up approximately $320 million),

•	the loss of exclusivity and immediate multi-source generic competition for Celebrex in the U.S. in December 2014 (down approximately $840 million);

•

the loss of exclusivity for Zyvox in the U.S. in the first half of 2015, Lyrica (GEP) in certain developed Europe markets beginning in the first quarter of 2015, Celebrex in Canada, developed Europe, Australia and New Zealand, Rapamune in the U.S., Inspra in developed Europe, Viagra (GEP) (international developed markets) and Aricept in Canada (collectively, down approximately $490 million), and the loss of exclusivity for certain other products (collectively, down approximately $80 million);

•	the performance of certain other products such as Lipitor in developed markets, BeneFIX and Geodon in the U.S., and Norvasc in Japan (collectively, down approximately $260 million); and

•	the termination of the Spiriva co-promotion collaboration in certain countries (down approximately $100 million).

•	higher legal charges (up $101 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net),

•	lower cost of sales (down $282 million) (see also the “Costs and Expenses––Cost of Sales” section of this MD&A);

•	lower amortization of intangible assets (down $129 million) (see also the “Costs and Expenses––Amortization of Intangible Assets ” section of this MD&A);

•	a lower effective tax rate (down 1.5 percentage points to 25.6%) (see also the “Provision for Taxes on Income” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 5. Tax Matters);

•	lower selling, informational and administrative expenses (down $134 million) (see also the “Costs and Expenses––Selling, Informational and Administrative Expenses (SI&A) Expenses” section of this MD&A); and

•	lower net interest expense (down $80 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net).

•	higher research and development expenses (up $238 million) (see also the “Costs and Expenses––Research and Development (R&D) Expenses” section of this MD&A); and

•	higher charges for business and legal entity alignment activities (up $97 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net),

•	lower legal charges (down $593 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

•	lower cost of sales (down $489 million) (see also the “Costs and Expenses––Cost of Sales” section of this MD&A);

•	lower amortization of intangible assets (down $307 million) (see also the “Costs and Expenses––Amortization of Intangible Assets” section of this MD&A);

•	lower net interest expense (down $93 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

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•	lower asset impairments (down $90 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net); and

•	lower selling, informational and administrative expenses (down $69 million) (see also the “Costs and Expenses––Selling, Information and Administrative Expenses (SI&A) Expenses” section of this MD&A).

•	$203 million in the second quarter of 2015 and $30 million in the second quarter of 2014, and $437 million in the first six months of 2015 and $205 million in the first six months of 2014, recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare “coverage gap” discount provision; and

•

$56 million in the second quarter of 2015 and $54 million in the second quarter of 2014, and $89 million in the first six months of 2015 and $25 million in the first six months of 2014, recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs. The increase in the first six months of 2015 was primarily a result of a decrease in the favorable true-up in the first six months of 2015, compared to the favorable true-up in the first six months of 2014, associated with the final invoice for the respective prior-calendar year received from the federal government, which reflected a lower share than that of the initial invoice.

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•

We believe that patients, who are experiencing increases in co-pays and restrictions on access to medicines as payers seek to control costs, sometimes switch to generic products, delay treatments, skip doses or use less effective treatments. We are exposed to negative pricing pressure in various markets around the world. The U.S. has highly competitive insurance markets, and Europe, Japan, China, Canada, South Korea and a number of other international markets have government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs for the government-sponsored healthcare system, particularly under recent global pressures. Furthermore, some government agencies and third-party payers use health technology assessments in ways that, at times, lead to restricted access to and lower prices for new medicines.

•	We continue to monitor developments regarding government and government agency receivables in several European markets, including Greece, where economic conditions remain challenging and uncertain. For further information about our Accounts Receivable, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.

•

Significant portions of our revenues and earnings, as well as our substantial international assets, are exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk in part through operational means, including managing same-currency revenues in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk also is managed through the use of derivative financial instruments and foreign currency debt. As we operate in multiple foreign currencies, including the euro, the Japanese yen, the Chinese renminbi, the U.K. pound, the Canadian dollar and approximately 100 other currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. If the U.S. dollar were to weaken against another currency, assuming all other variables remained constant, our revenues would increase, having a positive impact on earnings, and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having

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Global Innovative Pharmaceutical segment––GIP is focused on developing, registering and commercializing novel, value-creating medicines that significantly improve patients’ lives. These therapeutic areas include inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women’s/men’s health and include leading brands, such as Xeljanz, Eliquis and Lyrica (U.S. and Japan). GIP has a pipeline of medicines in inflammation, cardiovascular/metabolic disease, neuroscience and pain, and rare diseases.

•

Global Vaccines, Oncology and Consumer Healthcare segment––VOC focuses on the development and commercialization of vaccines and products for oncology and consumer healthcare. Consumer Healthcare manufactures and markets several well known, over-the-counter (OTC) products. Each of the three businesses in VOC operates as a separate, global business with distinct specialization in terms of the science and market approach necessary to deliver value to consumers and patients.

•	Global Established Pharmaceutical segment––GEP includes the brands that have lost market exclusivity and, generally, the mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets and, to a much smaller extent, generic pharmaceuticals. Additionally, GEP includes our development portfolio of sterile injectable and biosimilar products.

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Agreement to Acquire Nimenrix and Mencevax Vaccines from GlaxoSmithKline plc (GSK)––On June 22, 2015, we announced that we entered into an agreement with GSK to acquire its quadrivalent meningitis ACWY vaccines, Nimenrix and Mencevax, for total consideration of approximately $130 million (€115 million). This transaction will add two high-quality and complementary vaccines to our portfolio, allowing us to reach a broader global population. We do not expect this transaction to have any significant impact on our 2015 financial performance. The transaction is subject to customary closing conditions as well as regulatory approvals in several markets, and is expected to close in the second half of 2015.

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Acquisition of a Minority Interest in AM-Pharma B.V. (AM-Pharma)––On April 9, 2015, we acquired a minority equity interest in AM-Pharma, a privately held Dutch biopharmaceutical company focused on the development of recombinant human Alkaline Phosphatase (recAP) for inflammatory diseases, and secured an exclusive option to acquire the remaining equity in the company. The option becomes exercisable upon delivery of the clinical trial report after completion of a Phase II trial of recAP in the treatment of Acute Kidney Injury related to sepsis. Results from the current Phase II trial for recAP are expected in the second half of 2016. Under the terms of the agreement, we paid $87.5 million for both the exclusive option and the minority equity interest, which was recorded as a cost-method investment in Long-term investments, and we may make additional payments of up to $512.5 million upon exercise of the option and potential launch of any product that may result from this investment.

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Agreement to Acquire Hospira, Inc. (Hospira)––On February 5, 2015, we announced that we entered into a definitive merger agreement under which we agreed to acquire Hospira, the world’s leading provider of injectable drugs and infusion technologies and a global leader in biosimilars, for $90 per share in cash, for a total enterprise value of approximately $17 billion. We expect to finance the transaction through a combination of existing cash and new debt, with approximately two-thirds of the value financed from cash and one-third from debt. The transaction is subject to customary closing conditions, including regulatory approvals in several jurisdictions, and is expected to close in the second half of 2015. On May 13, 2015, Hospira shareholders voted in favor of the proposal to adopt the merger agreement, which was also a condition to closing the transaction. On August 4, 2015, the European Commission approved the transaction under the EU Merger Regulation. The European Commission’s decision includes our commitment to divest certain assets in the EU.

•	Collaboration with OPKO Health, Inc. (OPKO)––On December 13, 2014, we entered into a collaborative agreement with OPKO to develop and commercialize OPKO’s long-acting human growth hormone (hGH-CTP) for the treatment of growth

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Acquisition of Marketed Vaccines Business of Baxter International Inc. (Baxter)––On December 1, 2014 (which falls in the first fiscal quarter of 2015 for our international operations), we completed the acquisition of Baxter’s portfolio of marketed vaccines for a final purchase price of $648 million. The portfolio that was acquired consists of NeisVac-C and FSME-IMMUN/TicoVac. NeisVac-C is a vaccine that helps protect against meningitis caused by group C meningococcal meningitis and FSME-IMMUN/TicoVac is a vaccine that helps protect against tick-borne encephalitis.

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Collaboration with Merck KGaA––On November 17, 2014, we entered into a collaborative agreement with Merck KGaA, to jointly develop and commercialize avelumab, an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer. We and Merck KGaA are exploring the therapeutic potential of this novel anti-PD-L1 antibody as a single agent as well as in various combinations with our and Merck KGaA’s broad portfolio of approved and investigational oncology therapies. The companies will collaborate on up to 20 high priority immuno-oncology clinical development programs, including combination trials, in 2015. These clinical development programs include up to six trials (Phase 2 or 3) that could be pivotal for potential product registrations. We and Merck KGaA are also combining resources and expertise to advance Pfizer’s anti-PD-1 antibody into Phase 1 trials. Under the terms of the agreement, in the fourth quarter of 2014, we made an upfront payment of $850 million to Merck KGaA and Merck KGaA is eligible to receive regulatory and commercial milestone payments of up to approximately $2.0 billion. Both companies will jointly fund all development and commercialization costs, and split equally any profits generated from selling any anti-PD-L1 or anti-PD-1 products from this collaboration. Also, as part of the agreement, we gave Merck KGaA certain co-promotion rights for Xalkori in the U.S. and several other key markets. In 2014, we recorded $1.2 billion of Research and development expenses associated with this collaborative arrangement, composed of the $850 million upfront cash payment as well as an additional amount of $309 million, reflecting the estimated fair value of the co-promotion rights given to Merck KGaA.

•	Acquisition of InnoPharma, Inc. (InnoPharma)––On September 24, 2014, we completed our acquisition of InnoPharma, a privately held pharmaceutical development company, for an upfront cash payment of $225 million and contingent milestone payments of up to $135 million.

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License from Cellectis SA (Cellectis)––On June 18, 2014, we entered into a global arrangement with Cellectis to develop Chimeric Antigen Receptor T-cell immunotherapies in the field of oncology directed at select cellular surface antigen targets. In August 2014, we made an upfront payment of $80 million to Cellectis, which was recorded in Research and development expenses. We will also fund R&D costs associated with 15 Pfizer-selected targets and, for the benefit of Cellectis, a portion of the R&D costs associated with four Cellectis-selected targets within the arrangement. Cellectis is eligible to receive development, regulatory and commercial milestone payments of up to $185 million per product that results from the Pfizer-selected targets. Cellectis is also eligible to receive tiered royalties on net sales of any products that are commercialized by Pfizer.

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Collaboration with Eli Lilly & Company (Lilly)––In October 2013, we entered into a collaboration agreement with Lilly to jointly develop and globally commercialize Pfizer’s tanezumab, which provides that Pfizer and Lilly will equally share product-development expenses as well as potential revenues and certain product-related costs. On March 23, 2015, Pfizer and Lilly announced that the companies are preparing to resume the Phase 3 clinical program for tanezumab. As a result, on March 27, 2015, we received a $200 million upfront payment from Lilly in accordance with the collaboration agreement between Pfizer and Lilly, which is recorded as deferred income in our condensed consolidated balance sheet and is being recognized into Other (income)/deductions––net over a multi-year period beginning in the second quarter of 2015. This announcement followed a decision by the U.S. Food and Drug Administration (FDA) to lift the partial clinical hold on the tanezumab development program after a review of nonclinical data characterizing the sympathetic nervous system response

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License of Nexium OTC Rights––In August 2012, we entered into an agreement with AstraZeneca PLC (AstraZeneca) for the exclusive, global, OTC rights for Nexium, a leading prescription drug approved to treat the symptoms of gastroesophageal reflux disease. In connection with this Consumer Healthcare licensing agreement, we made an upfront payment of $250 million to AstraZeneca, which was recorded in Research and development expenses in our consolidated statement of income for the year ended December 31, 2012. On May 27, 2014, we launched Nexium 24HR in the U.S., and on July 11, 2014, we paid AstraZeneca a related $200 million product launch milestone payment; and on August 1, 2014, we launched Nexium Control in Europe, and on September 15, 2014, we paid AstraZeneca a related $50 million product launch milestone payment. These post-approval milestone payments were recorded in Identifiable intangible assets, less accumulated amortization in the consolidated balance sheet and are being amortized over the estimated useful life of the Nexium brand. AstraZeneca is eligible to receive additional milestone payments of up to $300 million, based on the level of worldwide sales as well as royalty payments, based on worldwide sales.

(a)	The 2015 financial guidance reflects the following:

•	Does not assume the completion of any business development transactions not completed as of June 28, 2015, including any one-time upfront payments associated with such transactions. Our 2015 financial guidance does not reflect any impact from our pending acquisition of Hospira, which is expected to close during the second half of 2015.

•	Excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of June 28, 2015.

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•	Exchange rates assumed are a blend of the actual exchange rates in effect through the second quarter of 2015 and the mid-July 2015 exchange rates for the remainder of the year. Excludes the impact of a potential devaluation of the Venezuelan bolivar.

•	Guidance for reported revenues reflects the anticipated negative impact of $3.4 billion due to recent and expected generic competition for certain products that have recently lost or are anticipated to soon lose patent protection, partially offset by anticipated revenue growth from certain other products.

•	Guidance for reported revenues also reflects the anticipated negative impact of approximately $3.3 billion as a result of unfavorable changes in essentially all foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2014.

•	Guidance for the effective tax rate on Adjusted income does not assume the renewal of the U.S. research and development (R&D) tax credit. The renewal of the U.S. R&D tax credit is not anticipated to have a material impact on the effective tax rate on Adjusted income.

•

Guidance for reported and adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately 6.25 billion shares, inclusive of share repurchases in 2015. Share repurchases in 2015 were composed of $1.0 billion of shares repurchased through January 30, 2015, a $5.0 billion accelerated share repurchase agreement executed in February 2015 and a $0.2 billion cash payment in July 2015 to satisfy the settlement terms of the accelerated share repurchase agreement. Pfizer elected to settle the terms of the accelerated share repurchase agreement with cash as opposed to the commensurate value in shares. Actual and projected dilution related to employee compensation programs is expected to partially offset these share repurchases.

(b)	For an understanding of Adjusted income and its components and Adjusted diluted EPS (all of which are non-GAAP financial measures), see the “Adjusted Income” section of this MD&A.

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(a)	GIP = the Global Innovative Pharmaceutical segment; VOC = the Global Vaccines, Oncology and Consumer Healthcare segment; and GEP = the Global Established Pharmaceutical segment.

(b)	Includes revenues generated from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and also includes the revenues related to our transitional manufacturing and supply agreements with Zoetis, Inc. (Zoetis).

•	in the U.S., revenues increased $88 million, or 2%, in the second quarter of 2015, and increased $247 million, or 3%, in the first six months of 2015, compared to the same periods in 2014, reflecting, among other things:

◦	the performance of several key products, including Prevnar 13 primarily in adults, Ibrance (which was launched in the U.S. in February 2015), Eliquis, Xeljanz, Lyrica, Viagra and Celecoxib (collectively, up approximately $790 million in the second quarter of 2015 and $1.5 billion in the first six months of 2015),

◦	losses of exclusivity and immediate multi-source generic competition for Celebrex in the U.S. in December 2014 (down approximately $460 million in the second quarter of 2015 and $840 million in the first six months of 2015);

◦	the loss of exclusivity for Zyvox and Rapamune, as well as the termination of our Spiriva co-promotion collaboration (collectively, down approximately $140 million in the second quarter of 2015 and $280 million in the first six months of 2015); and

◦	the performance of certain other products such as Lipitor, Geodon and BeneFIX, as well as the non-recurrence in 2015 of initial retailer stocking associated with the launch of Nexium 24HR in May 2014 (collectively, down approximately $170 million in the second quarter of 2015 and $160 million in the first six months of 2015).

•

in our international markets, revenues decreased $1.0 billion, or 13%, in the second quarter of 2015, and decreased $1.7 billion, or 11%, in the first six months of 2015, compared to the same periods in 2014. Foreign exchange unfavorably impacted international revenues by approximately $1.0 billion, or 13%, in the second quarter of 2015 and unfavorably impacted international revenues by approximately $1.8 billion, or 12%, in the first six months of 2015. Operationally,

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◦	the operational growth in emerging markets of Prevenar 13, Lipitor, Zyvox, Viagra (GEP) and Norvasc (collectively, up approximately $200 million in the second quarter of 2015 and $400 million in the first six months of 2015); and

◦	higher revenues in developed markets for Eliquis and Lyrica (GIP), as well as from vaccines acquired in December 2014 from Baxter (in Europe) (collectively, up approximately $190 million in the second quarter of 2015 and $300 million in the first six months of 2015),

◦	lower revenues for Lyrica (GEP), Celebrex, Inspra and Viagra (GEP) as a result of the loss of exclusivity, as well as Lipitor, Norvasc, and for the first six months of 2015, Enbrel in developed markets, and Vfend and Zosyn/Tazocin in emerging markets (collectively, down approximately $280 million in the second quarter of 2015 and $460 million in the first six months of 2015).

(a)	Rebates are product-specific and, therefore, for any given year are impacted by the mix of products sold.

(b)

Performance-based contract rebates include contract rebates with managed care customers within the U.S., including health maintenance organizations and pharmacy benefit managers, who receive rebates based on the achievement of contracted performance terms and claims under these contracts. Outside the U.S., performance-based contract rebates include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or sales milestones.

(c)	Chargebacks primarily represent reimbursements to U.S. wholesalers for honoring contracted prices to third parties.

(d)	Sales allowances primarily represent price reductions that are contractual or legislatively mandated outside the U.S., discounts and distribution fees.

(e)

For the three months ended June 28, 2015, associated with the following segments: GIP ($1.0 billion); VOC ($0.4 billion); and GEP ($2.3 billion). For the three months ended June 29, 2014, associated with the following segments: GIP ($0.7 billion); VOC ($0.3 billion); and GEP ($2.2 billion). For the six months ended June 28, 2015, associated with the following segments: GIP ($1.9 billion); VOC ($0.7 billion); and GEP ($4.2 billion).

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•	an increase in chargebacks primarily due to products that have lost exclusivity in the U.S. and increasing competitive pressures, as well as increases for certain U.S. branded products; and

•	an increase in Medicaid and related state program rebates, primarily as a result of updated estimates of sales related to these programs, as well as a decrease in Managed Medicaid estimated rebates in the second quarter of 2014.

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(a)	Indicates the business to which the revenues relate. GIP = the Global Innovative Pharmaceutical segment; V = the Global Vaccines business; O = the Global Oncology business; and GEP = the Global Established Pharmaceutical segment.

(b)	As compared to the three and six months ended June 29, 2014, as applicable.

(c)	In the second quarter and the first six months of 2015, all revenues were composed of Prevnar 13/Prevenar 13. In the second quarter and first six months of 2014, revenues were composed of the Prevnar family of products, which included Prevnar 13/Prevenar 13 and, to a much lesser extent, Prevenar (7-valent).

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(d)	Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in GEP. All other Lyrica revenues are included in GIP.

(e)	Viagra revenues from the U.S. and Canada are included in GIP. All other Viagra revenues are included in GEP.

(f)	Includes Eliquis (GIP), Rebif (GIP), Spiriva (GEP) and Aricept (GEP).

(g)	All other GIP, All other GEP and All other V/O are subsets of All other biopharmaceutical revenues.

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Prevnar/Prevenar 13 (V), is our pneumococcal conjugate vaccine for the prevention of pneumococcal disease. Overall, worldwide revenues for Prevnar/Prevenar 13 increased 43% operationally in the second quarter of 2015, and 45% operationally in the first six months of 2015, compared to the same periods in 2014. Foreign exchange had an unfavorable impact on worldwide revenues of 6% in the second quarter and the first six months of 2015, compared to the same periods in 2014.

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Lyrica (GEP (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/GIP (All other revenues)) is indicated in the U.S. for three neuropathic pain conditions, fibromyalgia and adjunctive therapy for adult patients with partial onset seizures. In certain markets outside the U.S., indications include neuropathic pain (peripheral and central), fibromyalgia, adjunctive treatment of epilepsy and generalized anxiety disorder. Worldwide revenues for Lyrica increased 1% operationally in the second quarter of 2015, and 5% operationally in the first six months of 2015, compared to the same periods in 2014. Foreign exchange had an unfavorable impact on worldwide revenues of 8% in the second quarter of 2015, and 7% in the first six months of 2015, compared to the same periods in 2014.

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Enbrel (GIP, outside the U.S. and Canada), indicated for the treatment of moderate-to-severe rheumatoid arthritis, polyarticular juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis, ankylosing spondylitis (a type of arthritis affecting the spine), and nonradiographic axial spondyloarthritis, recorded an increase in worldwide revenues, excluding the U.S. and Canada, of 2% operationally in the second quarter of 2015, and a decrease of 2% operationally in the first six months of 2015, compared to the same periods in 2014. Results for the second quarter of 2015 were favorably impacted by demand in certain markets in Europe and Asia, partially offset by the timing of government purchases in Latin America and to a lesser extent, the change in the distribution channel in the U.K. Results for the first six months of 2015 were unfavorably impacted by a change in the distribution channel in the U.K. Foreign exchange had an unfavorable impact of 18% in the second quarter of 2015, and 14% in the first six months of 2015, compared to the same periods in 2014.

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Lipitor (GEP) is indicated for the treatment of elevated LDL-cholesterol levels in the blood. Lipitor faces generic competition in all major developed markets. Branded Lipitor recorded worldwide revenues of $509 million, or a decrease of 1% operationally in the second quarter of 2015, and $950 million, or an increase of 1% operationally in the first six months of 2015, compared to the same periods in 2014. Results for the second quarter of 2015 were unfavorably impacted by continued brand erosion due to generic competition in developed markets. Results for the first six months of 2015 increased primarily due to strong volume growth in emerging markets, primarily in China, resulting from reallocation of field force and promotional efforts, partially offset by brand erosion due to generic competition and increased payer pressure worldwide. Foreign exchange had an unfavorable impact of 5% in the second quarter of 2015, and 6% in the first six months of 2015, compared to the same periods in 2014.

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Viagra (GIP (U.S. and Canada revenues)/GEP (All other revenues excluding U.S. and Canada)) is indicated for the treatment for erectile dysfunction. Viagra worldwide revenues increased 8% operationally in the second quarter of 2015, and 9% operationally in the first six months of 2015, compared to the same periods in 2014, primarily due to strong operational performance in the U.S. and emerging markets. International revenues decreased 5% operationally in the second quarter of 2015, and 3% operationally in the first six months of 2015, compared to the same periods in 2014, primarily due to the impact of generic competition in developed markets outside of North America, partially offset by strong operational performance in China. Foreign exchange had an unfavorable impact on international revenues of 8% in the second quarter of 2015, and 10% in the first six months of 2015, compared to the same periods in 2014. Revenues in the U.S. increased 14% in the second quarter of 2015, and 15% in the first six months of 2015, compared to the same periods in 2014, primarily driven by price increases, higher purchases from the U.S. Department of Veterans Affairs/Department of Defense, and increased quantity per prescription, partially offset by lower commercial demand resulting from price sensitivity.

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Sutent (O) is indicated for the treatment of advanced renal cell carcinoma, including metastatic renal cell carcinoma (mRCC); gastrointestinal stromal tumors after disease progression on, or intolerance to, imatinib mesylate; and advanced pancreatic neuroendocrine tumor. Sutent worldwide revenues increased 7% operationally in the second quarter of 2015, and increased 4% operationally in the first six months of 2015, compared to the same periods in 2014, primarily due to price increases in the U.S., as well as strong demand in certain European and emerging markets. Foreign exchange had an unfavorable impact of 12% in the second quarter of 2015, and 11% in the first six months of 2015, compared to the same periods in 2014.

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Zyvox (GEP) is among the world’s best-selling branded agents used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide revenues decreased 17% operationally in the second quarter of 2015, and 13% operationally in the first six months of 2015, compared to the same periods in 2014, due to generic competition in the U.S. beginning in the first half of 2015, partially offset by growth in China. Foreign exchange had an unfavorable impact of 9% in the second quarter of 2015, and 8% in the first six months of 2015, compared to the same periods in 2014.

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Norvasc (GEP) is indicated for the treatment of hypertension. Norvasc worldwide revenues decreased 4% operationally in the second quarter of 2015, and 3% operationally in the first six months of 2015, compared to the same periods in 2014, due to generic erosion, primarily in Japan, partially offset by volume growth in emerging markets, primarily in China. Foreign exchange had an unfavorable impact of 7% in the second quarter and in the first six months of 2015, compared to the same periods in 2014.

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Our Premarin family of products (GEP) helps women address moderate-to-severe menopausal symptoms. Premarin worldwide revenues decreased 4% operationally in the second quarter of 2015, and 5% operationally in the first six months of 2015, compared to the same periods in 2014. Revenues in the U.S. were unfavorably impacted by prescription volume declines for Premarin Family Oral brands, partially offset by price increases.

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Celebrex (GEP), indicated for the treatment of the signs and symptoms of osteoarthritis and rheumatoid arthritis worldwide and for the management of acute pain in adults in the U.S., Japan and certain other markets, recorded a decrease in worldwide revenues of 68% operationally in the second quarter of 2015, and 66% operationally in the first six months of 2015, compared to the same periods in 2014, primarily driven by the loss of exclusivity and launch of multi-source generic competition in the U.S. (December 2014) and in most other developed markets. Foreign exchange had an unfavorable impact of 3% in the second quarter and the first six months of 2015, compared to the same periods in 2014.

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BeneFIX and ReFacto AF/Xyntha (GIP) are hemophilia products using state-of-the-art manufacturing that assist patients with their lifelong hemophilia bleeding disorders. BeneFIX worldwide revenues decreased 7% operationally in the second quarter and in the first six months of 2015, compared to the same periods in 2014, primarily as a result of the erosion of market share in the U.S. due to the launch of competing new extended half-life treatment options. Foreign exchange had an unfavorable impact on revenues of 8% in the second quarter of 2015, and 7% in the first six months of 2015, compared to the same periods in 2014.

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Pristiq (GEP) is indicated for the treatment of major depressive disorder in the U.S. and in various other countries. Pristiq has also been indicated for treatment of moderate-to-severe vasomotor symptoms (VMS) associated with menopause in Thailand, Mexico, the Philippines and Ecuador. Pristiq recorded a decrease in worldwide revenues of 7% operationally in the second quarter of 2015, and 5% operationally in the first six months of 2015, compared to the same periods in 2014, primarily due to decreased market share in the U.S., partially offset by U.S. market price increases. Foreign exchange had an unfavorable impact on revenues of 4% in the second quarter and the first six months of 2015, compared to the same periods in 2014.

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Chantix/Champix (GIP) is an aid to smoking-cessation treatment in adults 18 years of age and older. Worldwide revenues increased 8% operationally in the second quarter of 2015, and 10% operationally in the first six months of 2015, compared to the same periods in 2014. Foreign exchange had an unfavorable impact on revenues of 6% in the second quarter of 2015, and 5% in the first six months of 2015, compared to the same periods in 2014.

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Xalkori (O) is indicated for the treatment of patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) that is anaplastic lymphoma kinase (ALK)-positive. Xalkori worldwide revenues increased 19% operationally in the second quarter of 2015, and 26% operationally in the first six months of 2015, compared to the same periods in 2014, as a result of an increase in diagnostic rates for the ALK gene mutation, which has led to more patients being treated, and price increases in the U.S. Foreign exchange had a 9% unfavorable impact in the second quarter and the first six months of 2015, compared to the same periods in 2014.

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Xeljanz (GIP) is approved for use as a second-line therapy for the treatment of adult patients with moderate to severe active rheumatoid arthritis (after traditional disease-modifying antirheumatic drugs) in more than 40 markets including the U.S., Japan, Australia, Canada, Switzerland and Brazil. Xeljanz recorded an increase in worldwide revenues of 89% operationally in the second quarter of 2015, and 88% operationally in the first six months of 2015, compared to the same periods in 2014, primarily in the U.S., driven by continued growth through rheumatologist acceptance and consumer awareness. Foreign exchange had a 2% unfavorable impact in the second quarter and in the first six months of 2015, compared to the same periods in 2014.

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Inlyta (O) is indicated for the treatment of patients with advanced renal cell carcinoma (RCC) after failure of a prior systemic treatment. Worldwide revenues increased 21% operationally in the second quarter of 2015, and 19% operationally in the first six months of 2015, compared to the same periods in 2014, primarily due to increased market share. Revenues in the U.S. increased 21% in the second quarter of 2015, and 16% in the first six months of 2015, compared to the same periods in 2014, primarily due to increased market share and price increases. International revenues increased 21% operationally in the second quarter of 2015, and 22% operationally in the first six months of 2015, compared to the same periods in 2014, primarily due to strong growth in developed markets in Europe, where a large proportion of oncologists are prescribing Inlyta. Foreign exchange had an unfavorable impact on international revenues of 19% in the second quarter of 2015, and 18% in the first six months of 2015, compared to the same periods in 2014.

•	Ibrance (O), indicated as a first-line treatment for certain forms of advanced breast cancer, was approved and launched in the U.S. in February 2015. Ibrance recorded worldwide revenues of $140 million in the second quarter of 2015 and $178 million in the first six months of 2015.

•	Alliance revenues (GEP/GIP) increased 41% operationally worldwide in the second quarter of 2015, and 26% operationally in the first six months of 2015, compared to the same periods in 2014, mainly due to:

◦	an increase in Eliquis alliance revenues,

◦	the termination of the co-promotion collaboration for Spiriva (GEP) in most developed markets, which resulted in a decrease in Pfizer’s share of Spiriva revenues of approximately $30 million operationally in the second quarter of 2015, and $100 million operationally in the first six months of 2015, compared to the same periods in 2014.

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Eliquis (apixaban) (GIP) is being jointly developed and commercialized by Pfizer and Bristol-Myers Squibb (BMS). The two companies share commercialization expenses and profit/losses equally on a global basis. In April 2015, we signed an agreement with BMS to transfer full commercialization rights in certain smaller markets to us, beginning in the third quarter of 2015. BMS will supply the product to us at cost plus a percentage of the net sales to end-customers in these markets. Eliquis is part of the Novel Oral Anticoagulant (NOAC) market; the agents in this class were developed as alternative treatment options to warfarin in appropriate patients. Eliquis (apixaban) is approved for multiple indications in major markets around the world:

◦	to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation (NVAF);

◦	for the treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE), and for the reduction in the risk of recurrent DVT and PE following initial therapy; and

◦	for the prophylaxis of DVT, which may lead to PE, in patients who have undergone hip or knee replacement surgery.

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(a)	This indication for Eliquis (apixaban) was developed and is being commercialized in collaboration with BMS.

*	The dates set forth in this column are the dates on which the FDA accepted our submissions.

(a)

In May 2012, the FDA’s Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to the tafamidis NDA. The FDA has requested the completion of a second efficacy study, and also has asked for additional information on the data within the current tafamidis NDA. We continue to work with the FDA to define a path forward.

(b)	In June 2010, we received a “complete response” letter from the FDA for the Celebrex chronic pain supplemental NDA. The supplemental NDA remains pending. There are no additional granted patents related to this potential approval.

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(c)

NDAs for Viviant (bazedoxifene) for treatment and prevention of post-menopausal osteoporosis remain pending before the FDA. In February 2008, the FDA advised it expected to convene an advisory committee pending responses to the “approvable letters” received in December 2007 and May 2008 with respect to the NDAs. In view of the approval of Duavee (conjugated estrogens/bazedoxifene), we continue to assess next steps for Viviant.

*	For applications in the EU, the dates set forth in this column are the dates on which the European Medicines Agency (EMA) validated our submissions.

(a)	This indication for Eliquis (apixaban) was developed and is being commercialized in collaboration with BMS.

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(a)	Remicade® is a registered trademark of Janssen Biotech, Inc.

(b)	Herceptin® is a registered trademark of Genentech, Inc.

(c)	Rituxan® is a registered trademark of Biogen MA Inc.

(d)	Avastin® is a registered trademark of Genentech, Inc.

(e)	Humira® is a registered trademark of AbbVie Biotechnology Ltd.

(f)

In March 2015, we and our alliance partner, Eli Lilly & Company, announced that we are preparing to resume the Phase 3 clinical program for tanezumab. This announcement followed a decision by the FDA to lift the partial clinical hold on the tanezumab development program after a review of nonclinical data characterizing the sympathetic nervous system response to tanezumab. A partial clinical hold had been in place for tanezumab since December 2012 due to adverse changes in the sympathetic nervous system of mature animals.

•	favorable foreign exchange of 10%; and

•	to a lesser extent, a decrease in royalty expense,

•	an increase in sales volumes, including as a result of the acquisition of Baxter’s portfolio of marketed vaccines in Europe.

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•	favorable foreign exchange; and

•	to a lesser extent, a decrease in royalty expenses.

•	favorable foreign exchange of 12%,

•	an increase in sales volumes, including as a result of the acquisition of Baxter’s portfolio of marketed vaccines in Europe.

•	the favorable impact of foreign exchange of 7% for the second quarter of 2015 and 6% for the first six months of 2015; and

•	lower field force, advertising and promotional expenses, reflecting the benefits of cost-reduction and productivity initiatives,

•	promotional expenses for Prevnar 13 in adults in the U.S., as well as increased costs to support several recently launched products and other in-line products;

•	an increase in compensation costs in the U.S.; and

•	a higher cost in the first six months of 2015 for the Branded Prescription Drug Fee compared to the same period in 2014.

•	the favorable impact of foreign exchange of 2%; and

•	lower clinical trial expenses for Trumenba, Prevnar 13 adult, and certain oncology products, as well as lower clinical trial expenses as a result of completion of postmarketing commitments, primarily for certain in-line products,

•	incremental investment in the late-stage pipeline, primarily bococizumab; and

•	increased investment in biosimilar and generic sterile injectable development programs.

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•	the $295 million upfront payment to OPKO in the first quarter of 2015 associated with a worldwide development and commercialization agreement;

•	investment in the late-stage pipeline, primarily bococizumab; and

•	increased investment in biosimilar and generic sterile injectable development programs,

•	lower clinical trial expenses for Trumenba, Prevnar 13 adult and certain oncology products, as well as lower clinical trial expenses as a result of the completion of postmarketing commitments for certain in-line products; and

•	the favorable impact of foreign exchange of 2%.

(a)	Comprises Restructuring charges and certain acquisition-related costs as well as costs associated with our cost-reduction/productivity initiatives included in Cost of sales, Research and development expenses and/or Selling, informational and administrative expenses, as appropriate.

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•	senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income basis;

•	our annual budgets are prepared on an Adjusted income basis; and

•	senior management’s annual compensation is derived, in part, using this Adjusted income measure. See the “Adjusted Income––General Description of Adjusted Income Measure” section of our 2014 Financial Report for additional information.

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(a)	For details of adjustments, see “Details of Income Statement Items Excluded from Adjusted Income” below.

(b)

The effective tax rate on Non-GAAP Adjusted income was 25.6% in the second quarter of 2015, compared with 27.9% in the second quarter of 2014. This decline was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, partially offset by a decline in tax benefits associated with the resolution of certain tax positions pertaining to prior years, with various foreign tax authorities, and the expiration of certain statutes of limitations. The effective tax rate on Non-GAAP Adjusted income was 25.0% in the first six months of 2015, compared with 26.5% in the first six months of 2014. This decline was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, partially offset by a decline in tax benefits associated with the resolution of certain tax positions pertaining to prior years, primarily with various foreign tax authorities, and the expiration of certain statutes of limitations.

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(a)	Included primarily in Amortization of intangible assets.

(b)	Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate.

(c)

Included in Restructuring charges and certain acquisition-related costs (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations. Transaction costs represent external costs directly related to acquired businesses and primarily include expenditures for banking, legal, accounting and other similar services. Pre-integration costs represent external, incremental costs directly related to our pending acquisition with Hospira. Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes.

(d)	Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions. Included in Cost of sales for both the three months and six months ended June 28, 2015 and June 29, 2014.

(e)

Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. In the three months and six months ended June 29, 2014, also includes the favorable impact of the remeasurement of certain deferred tax liabilities resulting from plant network restructuring activities.

(f)	Included in Discontinued operations––net of tax. For the six months ended June 29, 2014, represents post-close adjustments.

(g)	Amounts relate to our cost-reduction/productivity initiatives. Included in Restructuring charges and certain acquisition-related costs (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).

(h)	Amounts relate to our cost-reduction/productivity initiatives (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).

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(i)	Included in Other (income)/deductions—net (see the “Other (Income)/Deductions—Net” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).

(j)	Included in Other (income)/deductions––net. Represents expenses for planning and implementing changes to align our operations and reporting for our business segments established in 2014.

(k)

Includes, among other things, income associated with the transitional manufacturing and supply agreements with Zoetis that are primarily included in Revenues ($71 million) and Cost of sales ($60 million) for the three months ended June 29, 2014 and in Revenues ($128 million) and Cost of sales ($110 million) for the six months ended June 29, 2014. Virtually all other items are included in Other (income)/deductions––net for the three months and six months ended June 28, 2015 and June 29, 2014.

(l)	Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate.

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(a)	Amounts represent the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment.

(b)	Total Innovative Products represents the sum of the GIP and VOC segments.

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(c)	Other comprises the revenues and costs included in our Adjusted income components (see footnote (d) below) that are managed outside our three operating segments and includes the following:

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(i)	PCS—the revenues and costs of Pfizer CentreSource (PCS), our contract manufacturing and bulk pharmaceutical chemical sales operation. In the second quarter and first six months of 2015, PCS also includes revenues and expenses related to our transitional manufacturing and supply agreements with Zoetis.

(ii)

WRD—the research and development expenses managed by our Worldwide Research and Development organization (WRD), which is generally responsible for research projects until proof-of-concept is achieved and then for transitioning those projects to the appropriate operating segment for possible clinical and commercial development. This organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.

(iii)

Medical—the costs associated with our Pfizer Medical organization (Medical), which is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, partnerships with global public health and medical associations, regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes.

(iv)	Corporate—the costs associated with Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance, and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments.

(v)	Other Unallocated—other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations not directly attributable to an operating segment.

(vi)	See the “Analysis of Operating Segment Information” section of Pfizer’s 2014 Financial Report for certain qualitative information about our Other costs. This information will be provided on an annual basis.

(d)	See the “Adjusted Income” section of this MD&A for a definition of these “Adjusted Income “ components.

(e)	Includes costs associated with (i) purchase accounting adjustments; (ii) acquisition-related costs; and (iii) certain significant items, which are substantive, unusual items that are evaluated on an individual basis by management. For additional information about these reconciling items and/or our Non-GAAP Adjusted measure of performance, see the “Adjusted Income” section of this MD&A.

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Revenues decreased 1% in both the second quarter of 2015 and the first six months of 2015, compared to the same periods in 2014. Foreign exchange had an unfavorable impact of 9% on GIP revenues in the second quarter of 2015, and 8% on GIP revenues in the first six months of 2015, compared to the same periods in 2014. Revenues increased by 8% operationally in the second quarter of 2015 and increased by 7% operationally in the first six months of 2015, compared to the same periods in 2014, primarily due to:

◦	strong operational performance from recently launched products, including Eliquis globally and Xeljanz, primarily in the U.S. (collectively, up approximately $220 million for the second quarter of 2015 and $380 million for the first six months of 2015); and

◦	the continued strong performance of Lyrica, primarily in the U.S. and Japan, and Viagra in the U.S. (collectively, up approximately $130 million for the second quarter of 2015 and $300 million for the first six months of 2015),

◦	generic competition for Rapamune in the U.S., which began in October 2014, and by increased competition for BeneFIX in the U.S. (collectively, down approximately $40 million for the second quarter of 2015 and $90 million for the first six months of 2015).

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•

Cost of sales as a percentage of Revenues decreased 2.4 percentage points in the second quarter of 2015, compared to the same period in 2014, primarily driven by favorable foreign exchange, a decrease in royalty expense and an increase in alliance revenues, which have no associated cost of sales. Cost of sales as a percentage of Revenues decreased 2.3 percentage points in the first six months of 2015, compared to the same period in 2014, primarily driven by favorable foreign exchange, an increase in alliance revenue, which have no associated cost of sales, and a decrease in royalty expense. The decrease in Cost of sales of 19% in the second quarter of 2015, and 18% in the first six months of 2015, compared to the same periods in 2014, was primarily driven by favorable foreign exchange and, to a lesser extent, a decrease in royalty expense.

•

The decrease in Selling, informational and administrative expenses of 1% in the second quarter of 2015, compared to the same period in 2014, reflects favorable foreign exchange, largely offset by additional investment in recently launched products and certain in-line products. The increase in Selling, informational and administrative expenses of 2% in the first six months of 2015, compared to the same period in 2014, reflects additional investment in recently launched products and certain in-line products, partially offset by favorable foreign exchange.

•

The increase in Research and development expenses of 19% in the second quarter of 2015, compared to the same period in 2014, primarily reflects investment in the late-stage pipeline, primarily bococizumab, partially offset by lower clinical trial expenses as a result of the completion of postmarketing commitments for certain in-line products. The increase in Research and development expenses of 39% in the first six months of 2015, compared to the same period in 2014, primarily reflects the $295 million upfront payment to OPKO, and investment in the late-stage pipeline, primarily bococizumab, partially offset by lower clinical trial expenses as a result of the completion of postmarketing commitments for certain in-line products.

•	Revenues increased 21% in the second quarter of 2015, and increased 22% in the first six months of 2015, compared to the same periods in 2014, which includes an increase in revenues of 29% operationally in both the second quarter of 2015 and in the first six months of 2015.

◦

Global Vaccines Revenues increased 44% to $1.6 billion in the second quarter of 2015, compared to $1.1 billion in the same period in 2014, and increased 44% to $2.9 billion in the first six months of 2015, compared to $2.0 billion in the same period in 2014, reflecting an operational increase in revenues of 52% in both the second quarter of 2015 and in the first six months of 2015. The increases were primarily due to an 87% increase in the second quarter of 2015 and 84% in the first six months of 2015 in Prevnar family revenue in the U.S., primarily driven by continued strong uptake among adults following the positive recommendation from the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices for use in adults aged 65 and older in the third quarter of 2014. International revenues increased 25% operationally in the second quarter of 2015 and 23% operationally in the first six months of 2015, driven by the Prevenar family, which grew 10% operationally in the second quarter of 2015 and 12% operationally in the first six months of 2015, primarily reflecting increased shipments associated with Gavi, the Vaccine Alliance, and the favorable impact of Prevenar’s inclusion in additional national immunization programs in certain emerging markets compared to the same periods in 2014, as well as the inclusion in the second quarter and first six months of 2015 of revenues associated with the acquisition of Baxter’s portfolio of marketed vaccines in Europe.

◦

Global Oncology Revenues increased 25% to $713 million in the second quarter of 2015, compared to $570 million in the same period in 2014, and increased 17% to $1.2 billion in the first six months of 2015, compared to $1.1 billion in the same period in 2014, reflecting an operational increase in revenues of 36% in the second quarter of 2015 and 27% in the first six months of 2015, primarily driven by our launch of Ibrance in the U.S. in February 2015 for advanced breast cancer, and, to a lesser extent, stronger demand for Sutent, Inlyta and Xalkori in most markets.

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◦

Consumer Healthcare Revenues decreased 8% to $840 million in the second quarter of 2015, compared to $912 million in the same period in 2014, reflecting an operational decrease in revenues of 2% in the second quarter of 2015, as compared to the same period in 2014, primarily due to the non-recurrence of initial retailer stocking associated with the launch of Nexium 24HR in the U.S. in late-May 2014. Excluding Nexium 24HR, revenues in the Consumer Healthcare business in the U.S. increased 5% driven by increased promotional support for key brands. Additionally, revenues from emerging markets increased 11% operationally, primarily driven by China and Venezuela. Revenues decreased 1% to $1.6 billion in the first six months of 2015, compared to $1.7 billion in the same period in 2014, reflecting an operational increase in revenues of 4% in the first six months of 2015, primarily due to the launch of Nexium 24HR in the U.S. in late-May 2014, as well as growth in dietary supplement products in certain emerging markets primarily driven by China and Venezuela.

•

Cost of sales as a percentage of Revenues decreased 2.5 percentage points in the second quarter of 2015 and decreased 2.7 percentage points in the first six months of 2015, compared to the same periods in 2014, primarily driven by favorable foreign exchange, manufacturing efficiencies and a favorable change in product mix. The increase in Cost of sales of 6% in the second quarter of 2015, and 5% in the first six months of 2015, compared to the same periods in 2014, was primarily due to an increase in sales volumes, including as a result of the acquisition of Baxter’s portfolio of marketed vaccines in Europe, largely offset by favorable foreign exchange and manufacturing efficiencies.

•

Selling informational and administrative expenses increased 6% in the second quarter of 2015, compared to the same period in 2014, primarily driven by promotional expenses for Prevnar 13 in adults in the U.S., as well as the launch expenses for Ibrance (palbociclib) in the U.S., partially offset by favorable foreign exchange. The increase in Selling informational and administrative expenses of 9% in the first six months of 2015, compared to the same period in 2014, was primarily driven by promotional expenses for Prevnar 13 in adults in the U.S., as well as the launch expenses for Ibrance and Trumenba in the U.S., partially offset by favorable foreign exchange.

•

Research and development expenses decreased 19% in the second quarter of 2015, and 9% in the first six months of 2015, compared to the same periods in 2014, primarily reflecting lower clinical trial spend for Trumenba, Prevnar 13 adult and certain oncology products, partially offset by increased costs associated with our vaccine and oncology programs, primarily our anti-PD-L1 alliance with Merck KGaA.

•	Revenues decreased 22%, to $5.1 billion in the second quarter of 2015, compared to $6.5 billion in the same period in 2014, and decreased 19% to $10.1 billion in the first six months of 2015, compared to $12.5 billion in the same period in 2014, which includes an operational decrease in revenues of 14% in the second quarter of 2015 and 12% in the first six months of 2015, primarily due to:

◦

the loss of exclusivity and immediate launch of multi-source generic competition for Celebrex in the U.S. in December 2014 as well as generic competition for Zyvox in the U.S. beginning in the first half of 2015 and for Lyrica in certain developed Europe markets beginning in the first quarter of 2015 (collectively, down by approximately $630 million for the second quarter of 2015 and $1.1 billion for the first six months of 2015);

◦	a decline in Lipitor revenues in developed markets as a result of continued generic competition (down approximately $90 million for the second quarter of 2015 and $130 million for the first six months of 2015); and

◦	the termination in most countries of the co-promotion collaboration for Spiriva, including in the U.S. (where the collaboration expired in April 2014), which has resulted in a decline in Pfizer’s share of Spiriva revenues (down approximately $30 million for the second quarter of 2015 and $100 million for the first six months of 2015),

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◦	growth in emerging markets, where revenues increased 2% operationally for the second quarter of 2015 and 6% for the first six months of 2015, primarily driven by Lipitor, Zyvox, Viagra and Norvasc (collectively, up by approximately $120 million for the second quarter of 2015 and $220 million for the first six months of 2015).

•

Cost of sales as a percentage of Revenues increased 0.5 percentage points in the second quarter of 2015, compared to the same period in 2014, primarily due to the impact of losses of exclusivity resulting in an unfavorable change in product mix, partially offset by favorable foreign exchange. The decrease in Cost of sales of 19% in the second quarter of 2015, compared to the same period in 2014, was primarily driven by favorable foreign exchange, lower volumes due to products losing exclusivity, and, to a lesser extent, a decrease in royalty expense. Cost of sales as a percentage of Revenues increased 0.8 percentage points in the first six months of 2015, compared to the same period in 2014, primarily due to the impact of losses of exclusivity resulting in an unfavorable change in product mix, partially offset by favorable foreign exchange. The decrease in Cost of sales of 15% in the first six months of 2015, compared to the same period in 2014, was primarily driven by favorable foreign exchange and lower volumes as a result of products losing exclusivity.

•

Selling, informational and administrative expenses decreased 18% in the second quarter of 2015, compared to the same period in 2014, primarily due to lower field force, advertising and promotional expenses, reflecting the benefits of cost-reduction and productivity initiatives, and the favorable impact of foreign exchange. The decrease in Selling, informational and administrative expenses of 17% in the first six months of 2015, compared to the same period in 2014, was primarily due to lower field force, advertising and promotional expenses, reflecting the benefits of cost reduction and productivity initiatives, and the favorable impact of foreign exchange, partially offset by a higher cost for the Branded Prescription Drug Fee compared to the prior year.

•	Research and development expenses were largely unchanged in the second quarter of 2015 and in the first six months of 2015, compared to the same periods in 2014, reflecting increased investment in biosimilar and sterile injectable development programs, offset by lower clinical trial expenses related to postmarketing commitments, primarily for Celebrex and Pristiq.

•	The unfavorable change in Other (income)/deductions––net in the first six months of 2015, compared to the same period in 2014, primarily reflects the non-recurrence of prior year gains on the sale of product rights.

•

For Foreign currency translation adjustments, net, for the second quarter of 2015, reflects primarily the strengthening of the U.S. dollar against the euro, Japanese yen and Brazilian real, partially offset by the weakening of the U.S. dollar against the Canadian dollar; for the six months of 2015, reflects primarily the strengthening of the U.S. dollar against the euro, Brazilian real, Canadian dollar, Australian dollar, Mexican peso, Japanese yen, Denmark krone and Turkish lira. Also, for the first six months of 2014, includes the reclassification, into income, of amounts associated with legal entity dispositions.

•	For Unrealized holding gains/(losses) on derivative financial instruments, net and Unrealized holding gains/(losses) on available-for-sale securities, net, reflects the impact of fair value remeasurements and the reclassification of realized amounts into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.

•

For Benefit plans: actuarial gains/(losses), net, primarily reflects the reclassification into income of amounts related to (i) the amortization of changes in the pension benefit obligation previously recognized in Other comprehensive income and (ii) settlement activity, as well as the impact of foreign exchange. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.

•

For Benefit plans: prior service credits and other, net, reflects a $507 million reduction in our U.S. Postretirement Plan obligation due to a plan amendment approved in June 2015 that introduced a cap on costs for certain groups within the plan, partially offset by the reclassification into income of amounts related to (i) amortization of changes in prior service costs and credits previously recognized in Other comprehensive income and (ii) curtailment activity. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.

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•	For Trade accounts receivable, less allowance for doubtful accounts, the change also reflects the timing of sales and collections in the normal course of business.

•	For Inventories, the change also reflects inventory acquired as part of the acquisition of Baxter’s portfolio of marketed vaccines, recorded at acquisition date fair value, as well as inventory builds in advance of plant shutdowns/product transfers, partially offset by planned inventory reductions.

•	For Property, plant and equipment, less accumulated depreciation (PP&E), the change also reflects depreciation, largely offset by capital additions in the normal course of business and, to a lesser extent, the PP&E assets acquired as part of the acquisition of Baxter’s portfolio of marketed vaccines.

•

For Identifiable intangible assets, less accumulated amortization, the change reflects amortization, partially offset by identifiable intangible assets acquired as part of the acquisition of Baxter’s portfolio of marketed vaccines. For additional information about our intangible assets, see Notes to Condensed Consolidated Financial Statements—Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets.

•	For Trade accounts payable, the change also reflects the timing of purchases and payments in the normal course of business.

•	For Other current liabilities, the change also reflects payments of certain legal claims, as well as the timing of other payments and accruals in the normal course of business, partially offset by an increase in the payables associated with our derivative financial instruments.

•

For Pension benefit obligations, net and Postretirement benefit obligations, net, the change also reflects, among other things, a $1.0 billion voluntary pension contribution in January 2015 and a $507 million reduction in our U.S. Postretirement Plan obligation due to a plan amendment approved in June 2015 that introduced a cap on costs for certain groups within the plan. For additional information about the net periodic pension cost, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.

•	For Other noncurrent liabilities, the change also reflects an increase in the payables associated with our derivative financial instruments and, to a lesser extent, the deferral of an upfront payment received from Eli Lilly & Company as part of a collaborative arrangement, partially offset by other payments and accruals in the normal course of business.

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*	Calculation not meaningful.

•	net redemptions of investments of $5.3 billion in the first six months of 2015, compared to net purchases of investments of $1.3 billion in the first six months of 2014,

•	cash paid of $679 million, net of cash acquired, primarily for the acquisition of Baxter’s portfolio of marketed vaccines in the first six months of 2015 (see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisition, Collaborative Arrangements, Equity-Method Investment and Cost-Method Investment: Acquisition).

•	purchases of common stock of $6.0 billion in the first six months of 2015, compared to $2.5 billion in the first six months of 2014; and

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•	net payments on borrowings of $509 million in the first six months of 2015, compared to net proceeds from borrowings of $1.0 billion in the first six months of 2014,

•	proceeds from the exercise of stock options of $981 million in the first six months of 2015, compared to $583 million in the first six months of 2014.

•	the working capital requirements of our operations, including our research and development activities;

•	investments in our business;

•	dividend payments and potential increases in the dividend rate;

•	share repurchases;

•	the cash requirements associated with our cost-reduction/productivity initiatives;

•	paying down outstanding debt;

•	contributions to our pension and postretirement plans; and

•	business-development activities.

(a)	See Notes to Condensed Consolidated Financial Statements––Note 7. Financial Instruments for a description of certain assets held and for a description of the credit risk related to our financial instruments held.

(b)	Net financial assets decreased as net cash provided by operating activities decreased, and dividend payments and share purchases, among other things, more than offset the redemptions/sales net of purchases of investments and proceeds from the exercise of stock options. For additional information, see the “Analysis of the Condensed Consolidated Statements of Cash Flows” section of this MD&A.

(c)	Represents total Pfizer Inc. shareholders’ equity divided by the actual number of common shares outstanding (which excludes treasury stock).

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(a)	In April 2015, the FASB issued an exposure draft to propose a one-year deferral of the effective date. At its July 9, 2015 meeting, the FASB agreed to defer by one year the mandatory effective date of its revenue recognition standard, but will also provide entities the option to adopt it as of the original effective date.

•

the outcome of research and development activities including, without limitation, the ability to meet anticipated clinical trial commencement and completion dates, regulatory submission and approval dates, and launch dates for product candidates, as well as the possibility of unfavorable clinical trial results, including unfavorable new clinical data and additional analyses of existing clinical data;

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•

decisions by regulatory authorities regarding whether and when to approve our drug applications, which will depend on the assessment by such regulatory authorities of the benefit-risk profile suggested by the totality of the efficacy and safety information submitted; and decisions by regulatory authorities regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products;

•	the speed with which regulatory authorizations, pricing approvals and product launches may be achieved;

•	the outcome of post-approval clinical trials, which could result in the loss of marketing approval for a product or changes in the labeling for, and/or increased or new concerns about the safety or efficacy of, a product that could affect its availability or commercial potential;

•	risks associated with interim data, including the risk that final results of studies for which interim data have been provided and/or additional clinical trials may be different from (including less favorable than) the interim data results and may not support further clinical development of the applicable product candidate or indication;

•	the success of external business-development activities, including the ability to satisfy the conditions to closing of announced transactions in the anticipated timeframe or at all, including our and Hospira’s ability to satisfy the conditions to closing our merger agreement;

•	competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;

•	the implementation by the FDA of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products in the U.S., with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;

•	the ability to meet generic and branded competition after the loss of patent protection for our products or competitor products;

•	the ability to successfully market both new and existing products domestically and internationally;

•	difficulties or delays in manufacturing;

•	trade buying patterns;

•	the impact of existing and future legislation and regulatory provisions on product exclusivity;

•	trends toward managed care and healthcare cost containment;

•	the impact of any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs or changes in the tax treatment of employer-sponsored health insurance that may be implemented, and/or any significant additional taxes or fees that may be imposed on the pharmaceutical industry as part of any broad deficit-reduction effort;

•	the impact of U.S. healthcare legislation enacted in 2010—the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act––and of any modification or repeal of any of the provisions thereof;

•

U.S. federal or state legislation or regulatory action affecting, among other things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; direct-to-consumer advertising and interactions with healthcare professionals; and the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines; as well as pricing pressures as a result of highly competitive insurance markets;

•	legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access, including, in particular, continued government-mandated price reductions for certain biopharmaceutical products and government-imposed access restrictions in certain countries;

•	the exposure of our operations outside the U.S. to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest and unstable governments and legal systems;

•	contingencies related to actual or alleged environmental contamination;

•	claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates;

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•	any significant breakdown, infiltration or interruption of our information technology systems and infrastructure;

•	legal defense costs, insurance expenses, settlement costs, the risk of an adverse decision or settlement and the adequacy of reserves related to product liability, patent protection, government investigations, consumer, commercial, securities, antitrust, environmental and tax issues, ongoing efforts to explore various means for resolving asbestos litigation, and other legal proceedings;

•	our ability to protect our patents and other intellectual property, both domestically and internationally;

•	interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;

•	governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending and possible future proposals;

•	any significant issues involving our largest wholesaler customers, which account for a substantial portion of our revenues;

•	the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;

•	any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timeliness and compliance with applicable legal requirements and industry standards;

•	any significant issues that may arise related to our joint ventures and other third-party business arrangements;

•	changes in U.S. generally accepted accounting principles;

•

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 and recent and possible future changes in global financial markets; and the related risk that our allowance for doubtful accounts may not be adequate;

•	any changes in business, political and economic conditions due to actual or threatened terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas;

•	growth in costs and expenses;

•	changes in our product, segment and geographic mix; and

•

the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls and withdrawals and other unusual items, including our ability to realize the projected benefits of our cost-reduction and productivity initiatives, including those related to our research and development organization, of the internal separation of our commercial operations into our new operating structure and of our pending acquisition of Hospira.

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(a)

On June 27, 2013, we announced that the Board of Directors had authorized a $10 billion share-purchase plan, which was exhausted in the first quarter of 2015 (the June 2013 Stock Purchase Plan). On October 23, 2014, we announced that the Board of Directors had authorized an additional $11 billion share-purchase plan, and share purchases commenced thereunder in January 2015 (the October 2014 Stock Purchase Plan). On February 9, 2015, we entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. (GS&Co.) to repurchase shares of our common stock. This agreement was entered into under our previously announced share repurchase authorization. Pursuant to the terms of the agreement, on February 11, 2015, we paid $5 billion to GS&Co. and received approximately 150 million shares of our common stock from GS&Co. On July 2, 2015, the accelerated share repurchase agreement with GS&Co. was completed, which, per the terms of the agreement, resulted in us owing GS&Co. a certain number of shares of Pfizer common stock or its equivalent dollar value. Pursuant to the agreement’s settlement terms, we elected to settle this amount in cash and paid an additional $160 million to GS&Co. on July 13, 2015, resulting in a total of approximately $5.2 billion paid to GS&Co. After giving effect to this accelerated share repurchase agreement, as well as other share repurchases to date in 2015, our remaining share-purchase authorization is approximately $5.4 billion. We do not currently expect to repurchase additional shares this year.

(b)

These columns reflect the following transactions during the second fiscal quarter of 2015: (i) the surrender to Pfizer of 46,162 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees; (ii) the open market purchase by the trustee of 18,896 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance share awards and who deferred receipt of such awards; (iii) the surrender to Pfizer of 5,126 shares of common stock to satisfy tax withholding obligations in connection with the vesting of performance share awards issued to employees; and (iv) the surrender to Pfizer of 12,310 shares of common stock to pay the exercise price and to satisfy tax withholding obligations in connection with the exercise of employee stock options.

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