---

---

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

---

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

(b)	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.

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

---

---

---

---

•	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).

---

(a)

The measurement period adjustments for Identifiable intangible assets reflect changes in the estimated fair value of acquired finite-lived developed technology rights. The measurement period adjustments for Property, plant and equipment primarily reflect changes in the estimated fair value of acquired buildings and machinery and equipment. The changes in the estimated fair values for identifiable intangible assets and property, plant and equipment are primarily to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date. The measurement period adjustments did not result from intervening events subsequent to the acquisition date.

•	Amounts for certain balances included in working capital (excluding inventories), certain investments and certain legal contingencies, pending receipt of certain information that could affect provisional amounts recorded. We do not believe any adjustments for legal contingencies will have a material impact on our consolidated financial statements.

•	Amounts for intangibles, inventory and property, plant and equipment, pending finalization of valuation efforts for acquired intangible assets as well as the completion of certain physical inventory counts and the confirmation of the physical existence and condition of certain property, plant and equipment assets.

•	Amounts for income tax assets, receivables and liabilities, pending the filing of Hospira pre-acquisition tax returns and the receipt of information including but not limited to that from taxing authorities, which may change certain estimates and assumptions used.

---

•	Elimination of Hospira’s historical intangible asset amortization expense (approximately $12 million in the first quarter of 2015).

•	Additional amortization expense (approximately $127 million in the first quarter of 2015) related to the preliminary estimate of the fair value of identifiable intangible assets acquired.

•	Additional depreciation expense (approximately $22 million in the first quarter of 2015) related to the preliminary estimate of the fair value adjustment to property, plant and equipment (PP&E) acquired.

•	Adjustment related to the preliminary estimate of the non-recurring fair value adjustment to acquisition-date inventory estimated to have been sold (the addition of $5 million of charges in the first quarter of 2015).

•	Adjustment to decrease interest expense (approximately $10 million in the first quarter of 2015) related to the fair value adjustment of Hospira debt.

•

Adjustment for non-recurring acquisition-related costs directly attributable to the acquisition (the elimination of $14 million of charges in the first quarter of 2015), reflecting non-recurring charges incurred by Hospira, which would have been recorded in 2014 under the pro forma assumption that the Hospira acquisition was completed on January 1, 2014. Pfizer did not incur any such charges in the first quarter of 2015.

---

---

•

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 four sites over the next several years. In connection with these activities, during 2014-2016, we expect to incur costs of approximately $400 million associated with prior acquisition activity and costs of approximately $1.0 billion associated with new non-acquisition-related cost-reduction initiatives. Through April 3, 2016, we incurred approximately $357 million and $570 million, respectively, associated with these initiatives.

•

The 2014 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 different reporting requirements. In connection with this reorganization, during 2014-2016, we expect to incur costs of approximately $225 million. Through April 3, 2016, we incurred approximately $219 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 $850 million. Through April 3, 2016, we incurred approximately $532 million associated with these initiatives.

---

(a)

In the three months ended April 3, 2016, Employee terminations represent the expected reduction of the workforce by approximately 100 employees, mainly in manufacturing. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination.

•	the Global Innovative Pharmaceutical segment (GIP) ($8 million); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC) ($1 million); the Global Established Pharmaceutical segment (GEP) ($3 million); Worldwide Research and Development and Medical (WRD/M) ($3 million); manufacturing operations ($14 million); and Corporate ($1 million).

•	GIP ($12 million); VOC ($13 million); GEP ($10 million); WRD/M ($12 million); manufacturing operations ($22 million income); and Corporate ($18 million).

(b)	Transaction costs represent external costs for banking, legal, accounting and other similar services, most of which are directly related to the terminated transaction with Allergan.

(c)	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, primarily related to the acquisition of Hospira.

(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.

(a)	Included in Other current liabilities ($776 million) and Other noncurrent liabilities ($381 million).

(b)	Includes adjustments for foreign currency translation.

(c)	Included in Other current liabilities ($638 million) and Other noncurrent liabilities ($373 million).

---

(a)	Interest income increased in the first quarter of 2016, primarily due to higher investment returns.

(b)	In the first quarter of 2016, primarily includes an accrual for an unresolved legal matter and a settlement related to a patent matter.

(c)	In the first quarter of 2016, primarily includes gains on sales/out-licensing of product and compound rights (approximately $16 million). In the first quarter of 2015, primarily includes gains on sales/out-licensing of product and compound rights (approximately $45 million) and gains on sales of investments in equity securities (approximately $120 million).

(d)	In the first quarter of 2016, represents an impairment loss of $81 million related to Pfizer’s 49%-owned equity-method investment with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China, Hisun Pfizer, and an impairment loss of $50 million related to Pfizer's 40%-owned equity-method investment in Teuto. For additional information concerning Hisun Pfizer and Teuto, see Note 2C.

(e)	In the first quarter of 2016 and 2015, represents expenses for changes to our infrastructure to align our commercial operations, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business.

(f)	In the first quarter of 2016, primarily includes, among other things, income of $116 million from resolution of a contract disagreement.

•	benefits related to the final resolution (pending court approval) of an agreement in principle reached in February 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax position;

•	benefits associated with our Venezuela operations;

•	an increase 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; as well as

•	an increase in benefits associated with the U.S. R&D tax credit, which was not in effect in the prior year quarter but was permanently extended on December 18, 2015,

•	an unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.

---

•	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 appealing certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014-2016 are open, but not under audit. All other tax years are closed.

•	With respect to Hospira, Inc., the IRS is auditing 2010-2011 and 2012-2013. Tax years 2014-2015 (through date of acquisition) are open but not under audit. All other tax years are closed. The open tax years and audits for Hospira, Inc. and its subsidiaries are not considered material to Pfizer.

(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 $6 million loss for the first three months of 2016.

---

(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 and money market funds measured at net asset value.

(b)

As of April 3, 2016, trading funds are composed of $204 million of trading equity funds and $56 million of trading debt funds. As of December 31, 2015, trading funds are composed of $185 million of trading equity funds and $102 million of trading debt funds. As of April 3, 2016 and December 31, 2015, trading equity funds of $65 million and $85 million, respectively, 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 $144 million as of April 3, 2016; and foreign currency forward-exchange contracts with fair values of $136 million as of December 31, 2015.

(e)

Short-term borrowings include foreign currency short-term borrowings with fair values of $547 million as of December 31, 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 April 3, 2016 or December 31, 2015. 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 $188 million and foreign currency forward-exchange contracts with fair values of $117 million as of April 3, 2016; and foreign currency swaps with fair values of $234 million and foreign currency forward-exchange contracts with fair values of $59 million as of December 31, 2015.

(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)

We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. The update does not impact the measurement or recognition of debt issuance costs. As of April 3, 2016, debt issuance costs are $76 million and are presented as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-term debt ($75 million). In the December 31, 2015 condensed consolidated balance sheet, we have reclassified debt issuance costs of $79 million ($1 million from Other current assets and $79

---

(j)

The fair value of our long-term debt (not including the current portion of long-term debt) was $31.8 billion as of April 3, 2016 and $32.7 billion as of December 31, 2015. 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.

(a)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($5 million), foreign currency swaps ($62 million) and foreign currency forward-exchange contracts ($323 million) and, as of December 31, 2015, include interest rate swaps ($2 million), foreign currency swaps ($46 million) and foreign currency forward-exchange contracts ($538 million).

(b)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($1,428 million), foreign currency swaps ($41 million) and foreign currency forward-exchange contracts ($9 million) and, as of December 31, 2015, include interest rate swaps ($835 million), foreign currency swaps ($89 million) and foreign currency forward-exchange contracts ($20 million).

(c)

We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. The update does not impact the measurement or recognition of debt issuance costs. As of April 3, 2016, debt issuance costs are $76 million and are presented as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-term debt ($75 million). In the December 31, 2015 condensed consolidated balance sheet, we have reclassified debt issuance costs of $79 million ($1 million from Other current assets and $79 million from Other noncurrent assets) and have presented them as contra-liabilities to Short-term borrowings, including current portion of long-term debt ($1 million) and Long-term debt ($79 million) to conform to the current period presentation.

(d)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($5 million), foreign currency swaps ($454 million) and foreign currency forward-exchange contracts ($403 million) and, as of December 31, 2015, include interest rate swaps ($5 million), foreign currency swaps ($560 million) and foreign currency forward-exchange contracts ($80 million).

(e)	As of April 3, 2016, derivative instruments at fair value include interest rate swaps ($4 million), foreign currency swaps ($857 million) and foreign currency forward-exchange contracts ($29 million) and, as of December 31, 2015, include interest rate swaps ($134 million), foreign currency swaps ($928 million) and foreign currency forward-exchange contracts ($1 million).

---

(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. These securities are valued by third party models that use significant inputs derived from observable market data like prepayment rates, default rates, and recovery rates.

---

(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 loss––Unrealized holding 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 loss––Foreign currency translation adjustments, net.

---

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

(a)	The decrease in Identifiable intangible assets, less accumulated amortization, is primarily related to amortization, partially offset by assets acquired, the impact of measurement period adjustments related to our acquisition of Hospira (see Note 2A) and the impact of foreign exchange.

---

(a)	Primarily reflects the impact of foreign exchange.

---

(a)

The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our U.S. qualified pension plans was primarily driven by (i) lower service and interest costs, resulting from a change in methodology for measuring service and interest costs (see (e) below) and (ii) lower settlement activity. The aforementioned decreases were partially offset by (i) a lower expected return on plan assets resulting from a net decrease of approximately $1.1 billion in the asset base due in part to lump-sum payments made in 2015 to certain terminated colleagues to settle Pfizer’s pension obligation, partially offset by a voluntary contribution of $1.0 billion made at the beginning of January 2016 and (ii) an increase in the amounts amortized for actuarial losses.

(b)	The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our U.S. non-qualified pension plans was primarily driven by (i) lower settlement activity and (ii) a decrease in the amounts amortized for actuarial losses resulting from the increase, in 2015, in the discount rate used to determine the benefit obligation.

(c)

The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our international pension plans was primarily driven by (i) lower service and interest costs, resulting from foreign exchange rate changes and a change in methodology for measuring service and interest costs (see (e) below), and (ii) a decrease in the amounts amortized for actuarial losses resulting from large gains in 2015, which decreased the plan net loss position, 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 foreign exchange rates changes.

(d)

The decrease in net periodic benefit costs for the three months ended April 3, 2016, compared to the three months ended March 29, 2015, for our postretirement plans was primarily driven by (i) lower service and interest costs, resulting from a change in methodology for measuring service and interest costs (see (e) below) and (ii) an increase in prior service credits due to the postretirement medical plan cap changes during 2015. The aforementioned changes were partially offset by (i) a decrease in expected return on plan assets, primarily resulting from a decrease in plan assets reflecting Internal Revenue Code 401(h) reimbursements to Pfizer for eligible 2014 and 2015 prescription drug expenses for certain retirees, and (ii) lower curtailment gains.

(e)

Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for U.S. and certain international pension and other postretirement benefits. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the bond model or yield curve used to measure the respective plan obligations. For fiscal 2016, we elected to measure service and interest costs by applying the spot rates along the yield curve, or a yield curve implied from the bond model, to the plans' liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations. We have accounted for this change as a change in accounting estimate and, accordingly, have accounted for it on a prospective basis. The expected reduction in expense for 2016 associated with this change in estimate is $191 million, which is expected to be recognized evenly over each quarter of the year.

---

(a)	Contributions to the postretirement plans reflect Internal Revenue Code 401(h) reimbursements totaling $198 million received for eligible 2014 and 2015 prescription drug expenses for certain retirees.

(b)

Contributions expected to be made for 2016 are inclusive of amounts contributed during the three months ended April 3, 2016, including the $1.0 billion voluntary contribution that was made in January 2016 for the U.S. qualified plans, which was considered pre-funding for future anticipated mandatory contributions and is also expected to reduce Pension Benefit Guaranty Corporation variable rate premiums. 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.

(a)	These common stock equivalents were outstanding for the three months ended April 3, 2016 and March 29, 2015, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.

---

•

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.

---

---

---

•	Personal Injury Actions

---

•	Antitrust Actions

•	Whistleblower Action

•	Antitrust Actions

---

•	Personal Injury Actions

---

---

---

•

Our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) the revenues and expenses of legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including the revenues and expenses related to our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in GEP since we acquired Hospira on September 3, 2015. Prior to 2016, PCS was managed outside our operating segments as part of Pfizer Global Supply and reported as "Other Business Activities". We have reclassified prior period PCS operating results ($111 million of PCS revenues and $21 million of PCS earnings in the first quarter of 2015) to conform to the current period presentation as part of GEP.

•

In connection with the formation of a new GEP R&D organization, certain functions transferred from Pfizer’s WRD organization into the new GEP R&D organization. The new R&D organization within GEP expects to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars. We have reclassified approximately $66 million of costs in the first quarter of 2015 from WRD to GEP to conform to the current period presentation as part of GEP.

---

•

WRD, which is generally responsible for research projects for our Innovative Products business until proof-of-concept is achieved and then for transitioning those projects to the appropriate Innovative Products operating segment via the newly formed Global Product Development Group for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD 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, including GEP 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, and regulatory inspection readiness reviews.

•	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.

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

(b)

On September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our condensed consolidated statement of income includes the operating results of Hospira. As a result, legacy Hospira commercial operations, including the legacy Hospira One-2-One contract manufacturing business, are included in GEP’s operating results in our condensed consolidated statements of income for the first quarter of 2016, but not for the first quarter of 2015. See Note 2A for additional information. Effective as of the beginning of 2016, our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP.

---

(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.

(a)	On September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our condensed consolidated statement of income includes the operating results of Hospira. As a result, legacy Hospira operations are included in our condensed consolidated statements of income for the first quarter of 2016, but not for the first quarter of 2015. See Note 2A for additional information.

(b)	Developed Europe region includes the following markets: Western Europe, Finland and the Scandinavian countries. Revenues denominated in euros were $1.8 billion in the first quarter of 2016 and $1.8 billion in the first quarter of 2015.

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

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

---

---

(a)	The Innovative Products business is composed of two operating segments: GIP and VOC.

(b)	Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica-GEP. All other Lyrica revenues are included in Lyrica-GIP. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica-GIP and Lyrica-GEP.

(c)	Viagra revenues from the U.S. and Canada are included in Viagra-GIP. All other Viagra revenues are included in Viagra-GEP. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra-GIP and Viagra-GEP.

(d)	Includes Eliquis and Rebif.

(e)

The Established Products business consists of GEP, which includes all legacy Hospira commercial operations. Hospira's commercial operations, including the legacy Hospira One-2-One sterile injectables contract manufacturing business, are included in GEP’s operating results in our condensed consolidated statement of income commencing from the acquisition date of September 3, 2015. As a result, revenues for the first quarter of 2015 and GEP's revenues for the first quarter of 2015 do not include Hospira's revenues. Also, effective as of the beginning of 2016, our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) legacy Hospira's One-2-One sterile injectables contract manufacturing operation. Prior to 2016, PCS was managed outside our operating segments and its revenues were reported as other business activities. We have reclassified prior period PCS revenues ($111 million in the first quarter of 2015) to conform to the current period presentation as part of GEP.

(f)	Legacy Established Products include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products).

(g)	Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products primarily include Celebrex and Zyvox in most developed markets, Lyrica in certain developed Europe markets, Pristiq globally and Inspra in the EU.

(h)	Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products).

(i)	Infusion Systems include Medication Management Systems products composed of infusion pumps and related software and services, as well as I.V. Infusion Products, including large volume I.V. solutions and their associated administration sets.

(j)	Biosimilars include Inflectra (biosimilar infliximab) in certain European markets, Nivestim (biosimilar filgrastim) in certain Asian markets and Retacrit (biosimilar epoetin zeta) in certain international markets.

(k)

Pfizer CentreOne includes (i) revenues from legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including revenues related to our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) revenues from legacy Hospira’s One-2-One sterile injectables contract manufacturing operation. For additional information, see (e) above.

(l)	Total Alliance revenues represent the aggregate of worldwide revenues from Alliance revenues GIP and Alliance revenues GEP, which is included in All other Legacy Established Products.

---

---

---

---

---

•	higher Other, net (up $157 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

•	lower research and development expenses (down $155 million) (see also the “Costs and Expenses––Research and Development (R&D) Expenses” section of this MD&A);

•	lower charges for business and legal entity alignment costs (down $50 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net); and

•	lower net interest expense (down $23 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net),

•	higher cost of sales (up $1.0 billion) (see also the “Costs and Expenses––Cost of Sales” section of this MD&A);

•	higher selling, informational and administrative expenses (up $281 million) (see also the “Costs and Expenses––Selling, Informational and Administrative Expenses (SI&A) Expenses” section of this MD&A);

•	higher charges for legal matters (up $274 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

•	lower net gains on asset disposals (down $167 million); (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

•	higher asset impairments (up $131 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net);

•	higher restructuring charges and certain acquisition-related costs (up $81 million) (see also the Notes to Condensed Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives); and

•	higher amortization of intangible assets (up $66 million) (see also the “Costs and Expenses––Amortization of Intangible Assets ” section of this MD&A).

---

•	$96 million in the first quarter of 2016 and $88 million in the first quarter of 2015, recorded as a reduction to Revenues related to the Medicare “coverage gap” discount provision; and

•	$32 million in the first quarter of 2016 and $32 million in the first quarter of 2015, 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.

---

•

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 economic 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 net 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 a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.

---

---

•

Our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) the revenues and expenses of legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including the revenues and expenses related to our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in GEP since we acquired Hospira on September 3, 2015. Prior to 2016, PCS was managed outside our operating segments as part of Pfizer Global Supply and reported as "Other Business Activities". We have reclassified prior period PCS operating results ($111 million of PCS revenues and $21 million of PCS earnings in the first quarter of 2015) to conform to the current period presentation as part of GEP.

•

In connection with the formation of a new GEP R&D organization, certain functions transferred from Pfizer’s WRD organization into the new GEP R&D organization. The new R&D organization within GEP expects to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars. We have reclassified approximately $66 million of costs in the first quarter of 2015 from WRD to GEP to conform to the current period presentation as part of GEP.

---

---

•	Amounts for certain balances included in working capital (excluding inventories), certain investments and certain legal contingencies, pending receipt of certain information that could affect provisional amounts recorded. We do not believe any adjustments for legal contingencies will have a material impact on our consolidated financial statements.

•	Amounts for intangibles, inventory and property, plant and equipment, pending finalization of valuation efforts for acquired intangible assets as well as the completion of certain physical inventory counts and the confirmation of the physical existence and condition of certain property, plant and equipment assets.

•	Amounts for income tax assets, receivables and liabilities, pending the filing of Hospira pre-acquisition tax returns and the receipt of information including but not limited to that from taxing authorities, which may change certain estimates and assumptions used.

---

•

Research and Development Arrangement with NovaQuest Co-Investment Fund II, L.P. (NovaQuest)––In May 2016, our agreement with NovaQuest became effective, under which NovaQuest will fund up to $250 million in development costs related to certain Phase III clinical trials of Pfizer’s bococizumab compound and Pfizer will use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. Following potential regulatory approval, NovaQuest will be eligible to receive a combination of fixed milestone payments of up to $195 million in total based on achievement of first commercial sale and certain levels of cumulative net sales as well as royalties on bococizumab net sales over approximately nine years. NovaQuest’s development funding is expected to cover up to 40% of the development costs and will be received over six quarters during 2016 and 2017. As there is a substantive and genuine transfer of risk to NovaQuest, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. Fixed sales-based milestone payments will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the bococizumab product and royalties on net sales will be recorded as Cost of sales when incurred.

•

Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P. (NovaQuest)––In April 2016, Pfizer entered into an agreement with NovaQuest under which NovaQuest will fund up to $200 million in development costs related to certain Phase III clinical trials of Pfizer’s rivipansel compound and Pfizer will use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. Following potential regulatory approval, NovaQuest will be eligible to receive a combination of fixed milestone payments of up to approximately $267 million in total based on achievement of first commercial sale and certain levels of cumulative net sales as well as royalties on rivipansel net sales over approximately eight years. NovaQuest’s development funding is expected to cover up to 100% of the development costs and will be received over approximately twelve quarters from 2016 to 2019. As there is a substantive and genuine transfer of risk to NovaQuest, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. Fixed sales-based milestone payments will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the rivipansel product and royalties on net sales will be recorded as Cost of sales when incurred.

•	Terminated Agreement to Combine with Allergan plc––On April 6, 2016, we announced that the merger agreement between Pfizer and Allergan plc entered into on November 22, 2015 was terminated by mutual agreement of the companies. For additional information, see the “Our Business” section of this MD&A.

•

Research and Development Arrangement with RPI Finance Trust (RPI)––In January 2016, Pfizer entered into an agreement with RPI, a subsidiary of Royalty Pharma, under which RPI will fund up to $300 million in development costs related to certain Phase III clinical trials of Pfizer’s Ibrance (palbociclib) product primarily for adjuvant treatment of hormone receptor positive early breast cancer (the Indication). If successful and upon approval of Ibrance in the U.S. or certain major markets in the European Union (EU) for the Indication based on the applicable clinical trials, RPI will be eligible to receive a combination of approval-based fixed milestone payments of up to $250 million dependent upon results of the clinical trials and royalties on certain Ibrance sales over approximately seven years. RPI’s development funding is expected to cover up to 100% of the costs primarily for the applicable clinical trials through 2021. As there is a substantive and genuine transfer of risk to RPI, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for the first quarter of 2016 totaled $8.8 million. Fixed milestone payments due upon approval will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the Ibrance product and sales-based royalties will be recorded as Cost of sales when incurred.

•

Acquisition of a Minority Interest in AM-Pharma B.V. (AM-Pharma)––In April 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, which is expected to read out in 2017. 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.

---

•

Collaboration with OPKO Health, Inc. (OPKO)––We entered into a collaborative agreement with OPKO, which closed in January 2015, to develop and commercialize OPKO’s long-acting human growth hormone (hGH-CTP) for the treatment of growth hormone deficiency (GHD) in adults and children, as well as for the treatment of growth failure in children born small for gestational age (SGA) who fail to show catch-up growth by two years of age. hGH-CTP has the potential to reduce the required dosing frequency of human growth hormone to a single weekly injection from the current standard of one injection per day. We have received the exclusive license to commercialize hGH-CTP worldwide. OPKO will lead the clinical activities and will be responsible for funding the development programs for the key indications, which include Adult and Pediatric GHD and Pediatric SGA. We will be responsible for all development costs for additional indications, all postmarketing studies, manufacturing and commercialization activities for all indications, and we will lead the manufacturing activities related to product development. In February 2015, we made an upfront payment of $295 million to OPKO, which was recorded in Research and development expenses, and OPKO is eligible to receive up to an additional $275 million upon the achievement of certain regulatory milestones. OPKO is also eligible to receive royalty payments associated with the commercialization of hGH-CTP for Adult GHD, which is subject to regulatory approval. Upon the launch of hGH-CTP for Pediatric GHD, which is subject to regulatory approval, the royalties will transition to tiered gross profit sharing for both hGH-CTP and our product, Genotropin.

•

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 acquired 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.

•	Operational Factors: Strong performance to date coupled with an improved business outlook for 2016, which favorably impacted the midpoint of the guidance range for reported revenue by approximately $1.0 billion and for reported and adjusted diluted EPS by $0.12; and

▪	Foreign Exchange: Favorable changes in foreign exchange rates since mid-January 2016, which favorably impacted the midpoint of the guidance range for reported revenue by approximately $1.0 billion and for reported and adjusted diluted EPS by $0.06.

---

(a)	The 2016 financial guidance reflects the following:

•	Does not assume the completion of any business development transactions not completed as of April 3, 2016, including any one-time upfront payments associated with such transactions.

•	Excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of April 3, 2016.

•	Exchange rates assumed are a blend of the actual exchange rates in effect through the first quarter of 2016 and the mid-April 2016 exchange rates for the remainder of the year.

•	Guidance for 2016 reported revenues reflects the anticipated negative impact of $2.3 billion due to recent and expected generic competition for certain products that have recently lost or are anticipated to soon lose patent protection.

•

Guidance for 2016 reported revenues also reflects the anticipated negative impact of $1.3 billion as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2015, including $0.8 billion due to the estimated significant negative currency impact related to Venezuela. The anticipated negative impact on reported and adjusted diluted EPS resulting from unfavorable changes in foreign exchange rates compared to foreign exchange rates from 2015 is approximately $0.10, including $0.07 due to the estimated significant negative currency impact related to Venezuela.

•	Guidance for reported and adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately 6.2 billion shares.

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

---

---

(a)

GIP = the Global Innovative Pharmaceutical segment; VOC = the Global Vaccines, Oncology and Consumer Healthcare segment; and GEP = the Global Established Pharmaceutical segment. On September 3, 2015, we acquired Hospira, and commencing from the acquisition date, our financial statements reflect the operating results of Hospira. As a result, legacy Hospira operations are reflected in GEP’s operating results in our results of operations for the first quarter of 2016, but not for the first quarter of 2015. Also, effective as of the beginning of 2016, our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) legacy Hospira's One-2-One sterile injectables contract manufacturing operation. Prior to 2016, PCS was managed outside our operating segments and its revenues were reported as other business activities. We have reclassified prior period PCS revenues ($111 million in the first quarter of 2015) to conform to the current period presentation as part of GEP.

•	inclusion of revenues from legacy Hospira operations of $1.2 billion;

•	the continued strong performance of several key products in developed markets, including Ibrance, Prevnar/Prevenar 13, Eliquis, Lyrica (the Global Innovative Pharmaceutical segment (GIP)), Xeljanz and Chantix/Champix, all primarily in the U.S. (collectively, up approximately $1.2 billion); and

•	an 11% operational increase in revenues in emerging markets (excluding the contribution from legacy Hospira operations), reflecting continued strong performance primarily from Enbrel and Prevenar 13 and continued strong volume growth from certain other products (collectively, up approximately $280 million),

•	the loss of exclusivity and associated generic competition for Zyvox, primarily in the U.S. and certain developed Europe markets, and Lyrica (Global Established Pharmaceutical segment (GEP)) in certain developed Europe markets (collectively, down approximately $230 million); and

•	the expiration at the end of 2015 of the collaboration agreement to co-promote Rebif in the U.S. (down approximately $50 million).

•	in the U.S., revenues increased $2.2 billion, or 49%, in the first quarter of 2016, compared to the same period in 2015, reflecting, among other things:

◦	the continued strong performance of several key products including Ibrance, Prevnar 13, Lyrica (GIP), Eliquis, Xeljanz and Chantix (collectively, up approximately $1.0 billion); and

◦	the inclusion of legacy Hospira U.S. operations of approximately $930 million,

---

◦	the loss of exclusivity and associated generic competition for Zyvox (down approximately $100 million); and

◦	the expiration at the end of 2015 of the collaboration agreement to co-promote Rebif in the U.S. (down approximately $50 million).

•

in our international markets, revenues decreased $51 million, or 1%, in the first quarter of 2016, compared to the same period in 2015. Foreign exchange unfavorably impacted international revenues by approximately $729 million, or 11%, in the first quarter of 2016. Operationally, revenues increased $678 million, or 11%, in the first quarter of 2016, compared to the same period in 2015, reflecting, among other things:

◦	an 11% operational increase in revenues in emerging markets (excluding the contribution from legacy Hospira), reflecting continued strong performance primarily from Enbrel and Prevenar 13 and continued strong volume growth from certain other products (collectively, up approximately $280 million);

◦	the inclusion of legacy Hospira international operations of approximately $270 million; and

◦	the continued strong performance of Eliquis and higher revenues operationally for Enbrel and Prevenar 13 in developed markets (collectively, up approximately $130 million),

◦	lower revenues in developed markets for Lyrica (GEP), Celebrex and Zyvox as a result of the loss of exclusivity (collectively, down approximately $150 million).

(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 April 3, 2016, associated with the following segments: GIP ($1.2 billion); VOC ($0.4 billion); and GEP ($2.4 billion). For the three months ended March 29, 2015, associated with the following segments: GIP ($0.9 billion); VOC ($0.3 billion); and GEP ($1.9 billion).

•	an increase in chargebacks from GEP products, primarily due to the addition in 2016 of Hospira sterile injectables, and from certain Innovative Business products;

•	an increase in performance-based contract rebates primarily due to sales to managed care customers in the U.S. and higher rebates in certain developed Europe markets due to competitive pressures post loss of exclusivity for certain products; and

•	an increase in Medicaid and related state program rebates, primarily as a result of updated estimates of sales related to these programs.

---

(a)	As compared to the three months ended March 29, 2015.

(b)	The Innovative Products business is composed of two operating segments: GIP and VOC.

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

---

(d)	Viagra revenues from the U.S. and Canada are included in Viagra-GIP. All other Viagra revenues are included in Viagra-GEP. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra-GIP and Viagra-GEP.

(e)	Includes Eliquis and Rebif.

(f)

The Established Products business consists of GEP, which includes all legacy Hospira commercial operations. Hospira's commercial operations, including the legacy Hospira One-2-One sterile injectables contract manufacturing business, are included in GEP's operating results in our condensed consolidated statement of income, commencing from the acquisition date of September 3, 2015. As a result, our revenues for the first quarter of 2015 and GEP's revenues for the first quarter of 2015 do not include Hospira's revenues. Also, effective as of the beginning of 2016, our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) legacy Hospira's One-2-One sterile injectables contract manufacturing operation. Prior to 2016, PCS was managed outside our operating segments and its revenues were reported as other business activities. We have reclassified prior period PCS revenues ($111 million in the first quarter of 2015) to conform to the current period presentation as part of GEP.

(g)	Legacy Established Products include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products).

(h)	Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products primarily include Celebrex and Zyvox in most developed markets, Lyrica in certain developed Europe markets, Pristiq globally and Inspra in the EU.

(i)	Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products).

(j)	Infusion Systems include Medication Management Systems products composed of infusion pumps and related software and services, as well as I.V. Infusion Products, including large volume I.V. solutions and their associated administration sets.

(k)	Biosimilars include Inflectra (biosimilar infliximab) in certain European markets, Nivestim (biosimilar filgrastim) in certain Asian markets and Retacrit (biosimilar epoetin zeta) in certain international markets.

(l)

Pfizer CentreOne includes (i) revenues from legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including revenues related to our manufacturing and supply agreements with Zoetis Inc. (previously known as Pfizer CentreSource or PCS); and (ii) revenues from legacy Hospira’s One-2-One sterile injectables contract manufacturing operation. For additional information, see (f) above.

(m)	Total Alliance revenues represent the aggregate of worldwide revenues from Alliance revenues GIP and Alliance revenues GEP, which is included in All other Legacy Established Products.

*	Calculation not meaningful.

•	Prevnar/Prevenar 13 (Vaccines) is our pneumococcal conjugate vaccine for the prevention of pneumococcal disease. Overall, worldwide revenues for Prevnar/Prevenar 13 increased 19% operationally in the first quarter of 2016, compared to the same period in 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 3% in the first quarter of 2016 compared to the same period in 2015.

---

•

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 7% operationally in the first quarter of 2016, compared to the same period in 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 3% in the first quarter of 2016, compared to the same period in 2015.

•

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 10% operational increase in worldwide revenues, excluding the U.S. and Canada, in the first quarter of 2016, compared to the same period in 2015. Results for the first quarter of 2016 were favorably impacted by the change in the distribution channel in the U.K in 2015, demand in certain markets in Europe and the timing of purchases in certain emerging markets. Foreign exchange had an unfavorable impact of 13% in the first quarter of 2016, compared to the same period in 2015.

•	Ibrance (Oncology) has been approved and launched in the U.S., Albania, Argentina, Canada, Chile, Kuwait, Macau and the United Arab Emirates as a first-line treatment for certain forms of advanced breast cancer. Ibrance recorded worldwide revenues of $429 million in the first quarter of 2016, nearly all of which were recorded in the U.S.

•

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 $411 million, or a 3% operational increase in the first quarter of 2016, compared to the same period in 2015. Foreign exchange had an unfavorable impact of 10% in the first quarter of 2016, compared to the same period in 2015.

•

Viagra (GIP (U.S. and Canada revenues)/GEP (all other revenues excluding U.S. and Canada)) is indicated for the treatment of erectile dysfunction. Viagra worldwide revenues increased 3% operationally in the first quarter of 2016, compared to the same period in 2015, primarily due to operational growth in the U.S. Foreign exchange had an unfavorable impact of 3% in the first quarter of 2016, compared to the same period in 2015. Revenues in the U.S. increased 5% in the first quarter of 2016, compared to the same period in 2015, primarily reflecting price increases, wholesaler buying patterns and increased pill quantity per prescription, partially offset by lower patient demand and higher rebates. International revenues decreased 2% operationally in the first quarter of 2016, compared to the same period in 2015, primarily from generic competition in Russia and lower volumes in China partially offset by increased demand in certain Middle East markets. Foreign exchange had an unfavorable impact on international revenues of 10% in the first quarter of 2016, compared to the same period in 2015.

•

Sutent (Oncology) 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 22% operationally in the first quarter of 2016, compared to the same period in 2015, primarily due to price increases in the U.S., as well as strong demand in most markets. Foreign exchange had an unfavorable impact of 7% in the first quarter of 2016, compared to the same period in 2015.

•

Our Premarin family of products (GEP) helps women address moderate-to-severe menopausal symptoms. Premarin worldwide revenues increased 12% operationally in the first quarter of 2016, compared to the same period in 2015. Revenues in the U.S. increased 13% in the first three months of 2016 compared to the same period in 2015, primarily driven by price increases, partially offset by prescription volume declines and lower market growth. Foreign exchange had an unfavorable impact of 1% in the first quarter of 2016, compared to the same period in 2015.

•	Norvasc (GEP) is indicated for the treatment of hypertension. Norvasc worldwide revenues were relatively flat operationally in the first quarter of 2016, compared to the same period in 2015, primarily due to generic erosion in Japan offset by volume growth in

---

•	Chantix/Champix (GIP) is approved as an aid to smoking-cessation treatment in adults 18 years of age and older in multiple markets worldwide. Worldwide revenues increased 43% operationally in the first quarter of 2016, compared to the same period in 2015. Foreign exchange had an unfavorable impact on revenues of 4% in the first quarter of 2016, compared to the same period in 2015.

•

Xeljanz (GIP) is approved for use as a second-line therapy for the treatment of adult patients with moderate to severe active rheumatoid arthritis who have had an inadequate response or intolerance to methotrexate in more than 45 markets including the U.S., Japan, Australia, Canada, Switzerland and Brazil. Xeljanz worldwide revenues increased 108% operationally in the first quarter of 2016, compared to the same period in 2015. In the U.S., Xeljanz revenues increased 98% in the first quarter of 2016, compared to the same period in 2015, driven by continued adoption by rheumatologists, growing awareness among patients, price increases and wholesaler buying patterns. Foreign exchange had a 3% unfavorable impact on revenues in the first quarter of 2016, compared to the same period in 2015.

•

BeneFIX and ReFacto AF/Xyntha (GIP) are recombinant hemophilia products that assist patients with their lifelong hemophilia bleeding disorders. BeneFIX worldwide revenues increased 12% operationally in the first quarter of 2016, compared to the same period in 2015 primarily as a result of customer buying patterns in the U.S. Foreign exchange had an unfavorable impact on revenues of 5% in the first quarter of 2016 compared to the same period in 2015.

•

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. Worldwide revenues for Pristiq increased 15% operationally in the first quarter of 2016, compared to the same period in 2015, primarily due to operational growth in the U.S. driven by favorable pricing and increased demand. Foreign exchange had an unfavorable impact on revenues of 4% in the first quarter of 2016, compared to the same period in 2015.

•

Celebrex (GEP) is 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. Celebrex recorded an 8% decrease in worldwide operational revenues in the first quarter of 2016, compared to the same period in 2015, primarily driven by the loss of exclusivity and associated generic competition in most developed international markets. Foreign exchange had an unfavorable impact of 8% in the first quarter of 2016, compared to the same period in 2015.

•

Xalkori (Oncology) 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 or ROS1-positive. Xalkori worldwide revenues increased 29% operationally in the first quarter of 2016, compared to the same period in 2015, as a result of a steady increase in diagnostic rates for the ALK gene mutation across key markets, which has led to more patients being treated, and price increases in the U.S. Foreign exchange had a 5% unfavorable impact in the first quarter of 2016, compared to the same period in 2015.

•

Zyvox (GEP) is used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide revenues decreased 47% operationally in the first quarter of 2016, compared to the same period in 2015, due to generic competition in the U.S. and certain developed Europe markets and pricing pressures in developed international markets. Foreign exchange had an unfavorable impact on revenues of 6% in the first quarter of 2016, compared to the same period in 2015.

•

Inlyta (Oncology) is indicated for the treatment of patients with advanced renal cell carcinoma (RCC) after failure of a prior systemic treatment. Worldwide revenues increased 10% operationally in the first quarter of 2016, compared to the same period in 2015, primarily due to increased demand across key international markets with greater access and reimbursement, particularly in Europe as well as a launch in China in the third quarter of 2015. Foreign exchange had an unfavorable impact on international revenues of 8% in the first quarter of 2016, compared to the same period in 2015.

•	Alliance revenues (GEP/GIP) increased 66% operationally in the first quarter of 2016, compared to the same period in 2015, mainly due to:

◦	an increase in Eliquis alliance revenues due to increased market share,

---

◦	the expiration at the end of 2015 of the collaboration agreement to co-promote Rebif in the U.S., which resulted in a decrease of approximately $50 million in the first quarter of 2016, compared to the same period in 2015.

•

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 supplies 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.

---

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

(a)

Epogen® is a registered U.S. trademark of Amgen Inc.; Procrit® is a registered U.S. trademark of Johnson & Johnson. In October 2015, we received a “complete response” letter from the FDA with respect to our biologics license application for Retacrit, our proposed biosimilar to epoetin alfa, which was submitted for all indications of the reference product. We are working diligently to address the content of the letter.

(b)	In October 2015, we received a “complete response” letter from the FDA with respect to our supplemental NDA for Xeljanz for the treatment of adult patients with moderate to severe chronic plaque psoriasis. We have met with the FDA and are evaluating their feedback to help us determine our next steps. We are evaluating our options, especially in light of the evolving marketplace.

*	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 Bristol-Myers Squibb (BMS).

---

---

(a)

Remicade® is a registered trademark of Janssen Biotech, Inc. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade® (infliximab) in the 28 countries that form the European Economic Area (EEA) to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization and manufacturing rights to PF-06438179 in all countries outside of the EEA.

(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.

---

•	an increase in sales volumes due to (i) the inclusion of legacy Hospira operations, which is comprised of inventory measured at fair value on the acquisition date and amortized over the turn of the related inventory; and (ii) the net increase in sales volume of Pfizer legacy products.

•	an unfavorable change in product mix due to (i) the inclusion of legacy Hospira operations, which is comprised of inventory measured at fair value on the acquisition date and amortized over the turn of the related inventory; and (ii) the impact of losses of exclusivity; and

•	unfavorable foreign exchange,

•	a favorable change in product mix related to legacy Pfizer products, excluding losses of exclusivity; and, to a lesser extent,

•	an increase in alliance revenues which have no associated cost of sales.

•	the inclusion of legacy Hospira operations;

•	increased investments to support certain recently launched products, other in-line biopharmaceutical products and certain Consumer Healthcare products; and

•	an increase in the allowance for doubtful trade accounts receivable, resulting from recent unfavorable developments with a distributor,

•	the favorable impact of foreign exchange of 4%;

•	lower expenses associated with certain products that have recently lost marketing exclusivity; and

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

---

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

•	the favorable impact of foreign exchange of 1%,

•	the inclusion of legacy Hospira operations, including increased investment in biosimilar and sterile injectable development programs; and

•	higher clinical trial spend for certain oncology and GIP late-stage pipeline programs.

•

Research Units within our Worldwide Research and Development (WRD) organization continue to be generally responsible for research assets for our Innovative Products business (assets that have not yet achieved proof-of-concept). Our Research Units are organized in a variety of ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources within a Research Unit between various projects as necessary because the workforce shares similar skills, expertise and/or focus.

•	We created an R&D organization within the Global Established Pharma (GEP) business, which supports the large base of GEP products and is expected to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars.

•

We formed the Global Product Development Group (GPD), which will be generally responsible for the clinical development of assets that have achieved proof-of-concept across our innovative portfolio. This change in organization includes the transfer of the Development Operations organization from the WRD organization to the new GPD organization. GPD will now provide technical support and other services to Pfizer R&D projects.

•

Our science-based and other platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based functions (which are part of our WRD organization), such as Pharmaceutical Sciences, Medicinal Chemistry, Regulatory and Drug Safety, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of development, allowing us to react quickly in response to evolving needs.

---

(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.

*	Calculation not meaningful.

---

*	Calculation not meaningful.

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

•	our annual budgets are prepared on an Adjusted income and Adjusted diluted earnings per share basis; and

•	senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. See the “Adjusted Income––General Description of Adjusted Income Measure” section of our 2015 Financial Report for additional information.

---

---

(a)	For details of adjustments, see “Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income” below.

(b)

The effective tax rate on Non-GAAP Adjusted income was 23.8% in the first quarter of 2016, compared with 24.4% in the first quarter of 2015. This decline was primarily due to a favorable change in the jurisdictional mix of earnings, an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years with various foreign tax authorities, as well as an increase in tax benefits associated with the U.S. R&D tax credit, which was not in effect in the prior year quarter but was permanently extended on December 18, 2015.

---

(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 in the three months ended April 3, 2016 primarily represent external costs for banking, legal, accounting and other similar services, most of which are directly related to the terminated transaction with Allergan plc. 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. In the three months ended 2016, restructuring charges and integration costs primarily relate to our acquisition of Hospira on September 3, 2015.

(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 the three months ended March 29, 2015.

(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. The first quarter of 2016 was unfavorably impacted by the remeasurement of certain deferred tax liabilities resulting from plant network restructuring activities.

(f)	Included in Discontinued operations––net of tax. For the three months ended March 29, 2015, represents post-close adjustments.

(g)	Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions. 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 not related to acquisitions (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).

---

(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 changes to our infrastructure to align our commercial operations, including costs to internally separate our businesses into distinct legal entities as well as to streamline our intercompany supply operations to better support each business.

(k)	Primarily all included in Other (income)/deductions––net for the three months ended April 3, 2016 and March 29, 2015.

(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. The three months ended April 3, 2016 was favorably impacted by benefits related to the final resolution (pending court approval) of an agreement in principle reached in February 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our assessment of the likelihood of prevailing on the technical merits of our tax position, as well as benefits associated with our Venezuela operations.

•

Our entire contract manufacturing business, Pfizer CentreOne, is now part of GEP. Pfizer CentreOne consists of (i) the revenues and expenses of legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation, including the revenues and expenses related to our manufacturing and supply agreements with Zoetis Inc. (collectively Pfizer CentreSource or PCS); and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in GEP since we acquired Hospira on September 3, 2015. Prior to 2016, PCS was managed outside our operating segments as part of Pfizer Global Supply and reported as "Other Business Activities". We have reclassified prior period PCS operating results ($111 million of PCS revenues and $21 million of PCS earnings in the first quarter of 2015) to conform to the current period presentation as part of GEP.

•

In connection with the formation of a new GEP Research and Development (R&D) organization, certain functions transferred from Pfizer’s Worldwide Research and Development (WRD) organization into the new GEP R&D organization. The new R&D organization within GEP expects to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars. We have reclassified approximately $66 million of costs in the first quarter of 2015 from WRD to GEP to conform to the current period presentation as part of GEP.

---

(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.

(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:

(i)

WRD—the research and development expenses managed by our Worldwide Research and Development (WRD) organization, which is generally responsible for research projects for our Innovative Products business until proof-of-concept is achieved and then for transitioning those projects to the appropriate Innovative Products operating segment via the newly formed Global Product Development Group for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD 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, including GEP R&D projects. WRD is also responsible for facilitating all regulatory submissions

---

(ii)

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, and regulatory inspection readiness reviews.

(iii)	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.

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

(v)

Although we typically provide qualitative information about our Other costs on an annual basis, updated estimates are provided in the first quarter of 2016 as a result of the transfer of certain WRD functions to GEP that was effective at the beginning of 2016. For information purposes only, for the first quarter of 2016 we estimate that Other costs, in the aggregate and as described above, but excluding (i) net interest-related expense not attributable to an operating segment included in Corporate (approximately $219 million for the first quarter of 2016 in Other (income)/deductions––net); and (ii) net losses on investments not attributable to an operating segment and included in Corporate (approximately $5 million for the first quarter of 2016 in Other (income)/deductions––net), are generally associated with our operating segments, as follows:

•	WRD/Medical––The information provided in the table above for WRD and Medical was substantially all derived from our estimates of the costs incurred in connection with the R&D projects associated with each operating segment.

•

Corporate/Other Unallocated––Virtually all of the information provided in the table above for Corporate and Other Unallocated was derived using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from research and development and manufacturing costs. Management believes that the allocations of Corporate and Other Unallocated costs are reasonable.

(d)	See the “Non-GAAP Financial Measure (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 “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A.

---

•	Revenues increased 18% in the first quarter of 2016 compared to the same period in 2015. Foreign exchange had an unfavorable impact of 6% on GIP revenues in the first quarter of 2016, compared to the same period in 2015. Revenues increased by 25% operationally in the first quarter of 2016 compared to the same period in 2015, primarily due to the following operational factors:

◦	strong operational growth from Eliquis globally, Lyrica and Xeljanz both primarily in the U.S., Enbrel in most international markets and Chantix primarily in the U.S. (collectively, up approximately $680 million),

◦	a decline in Rebif revenues in the U.S. due to the expiration of the collaboration agreement to co-promote Rebif in the U.S., which expired at the end of 2015 (down approximately $50 million).

•

Cost of sales as a percentage of Revenues decreased 0.5 percentage points in the first quarter of 2016, compared to the same period in 2015, primarily driven by a decrease in royalty expense and an increase in alliance revenues, which have no associated cost of sales, partially offset by unfavorable foreign exchange. The increase in Cost of sales of 13% in the first quarter of 2016, compared to the same period in 2015, was primarily driven by an increase in sales volume and unfavorable foreign exchange, partially offset by a decrease in royalty expense.

•

The increase in Selling, informational and administrative expenses of 8% in the first quarter of 2016, compared to the same period in 2015, reflects an increase in the allowance for doubtful trade accounts receivable, resulting from recent unfavorable developments with a distributor and additional investment in Eliquis and Lyrica, partially offset by reduced investment in certain other products and favorable foreign exchange.

•	The decrease in Research and development expenses of 38% in the first quarter of 2016, compared to the same period in 2015, primarily reflects the non-recurrence of the $295 million upfront payment made to OPKO Health Inc. in the first quarter of 2015, partially offset primarily by increased investment in certain late-stage pipeline programs.

•	The unfavorable change in Other (income)/deductions––net in the first quarter of 2016, compared to the same period in 2015, primarily reflects a decrease in royalty income, partially offset by an increase in our equity income from a certain equity-method investment.

•	Revenues increased 27% in the first quarter of 2016, compared to the same period in 2015, which includes an increase in revenues of 33% operationally.

◦

Global Vaccines Revenues increased 18% to $1.6 billion in the first quarter of 2016, compared to $1.3 billion in the same period in 2015, reflecting an operational increase in revenues of 22% in the first quarter of 2016. The increases were primarily due to an increase of 22% in the first quarter of 2016 in Prevnar 13 revenue in the U.S., primarily driven by the timing of government purchases for the pediatric indication and continued strong uptake among adults due to the overall success of commercial programs. International revenues increased 19% operationally in the first quarter of 2016, driven by Prevenar 13, which grew 13% operationally in the first quarter of 2016, compared to the same period in 2015, primarily driven by adult launches mostly from Spain, Portugal, Greece and Canada.

---

◦

Global Oncology Revenues increased 90% to $1.0 billion in the first quarter of 2016, compared to $528 million in the same period in 2015, reflecting an operational increase in revenues of 95% in the first quarter of 2016 primarily driven by continued strong momentum following the February 2015 U.S. launch of Ibrance for advanced breast cancer and, to a lesser extent, stronger demand for Sutent and Xalkori in most markets.

◦

Consumer Healthcare Revenues increased 2% to $822 million in the first quarter of 2016, compared to $808 million in the same period in 2015, reflecting an operational increase in revenues of 10% in the first quarter of 2016, primarily due to the performance of Nexium 24HR and Advil, both in the U.S., reflecting strong demand following increased promotion and the launch of a tablet form for Nexium 24HR in the first quarter of 2016.

•

Cost of sales as a percentage of Revenues decreased 1.0 percentage point in the first quarter of 2016, compared to the same period in 2015, primarily driven by a favorable change in product mix, partially offset by an increase in royalty expense and unfavorable foreign exchange. The increase in Cost of sales of 19% in the first quarter of 2016 compared to the same period in 2015, was primarily due to an increase in sales volumes, driven primarily by continued strong uptake of Prevnar 13, and an increase in royalty expense.

•

Selling, informational and administrative expenses increased 36% in the first quarter of 2016, compared to the same period in 2015, primarily driven by an increase in the allowance for doubtful trade accounts receivable, resulting from recent unfavorable developments with a distributor, higher promotional expenses primarily in the U.S. for Prevnar 13, Ibrance, as well as certain Consumer Healthcare product, partially offset by favorable foreign exchange.

•	Research and development expenses increased 30% in the first quarter of 2016, compared to the same period in 2015, primarily reflecting increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA and Ibrance.

•

Revenues increased 17%, to $6.0 billion in the first quarter of 2016, compared to $5.1 billion in the same period in 2015. Foreign exchange had an unfavorable impact of 8% on GEP revenues in the first quarter of 2016, compared to the same period in 2015. Revenues increased by 24% operationally in the first quarter of 2016 compared to the same period in 2015, primarily due to the inclusion of legacy Hospira operations in the first quarter of 2016. Revenues excluding the contribution from the legacy Hospira portfolio, which contributed $1.2 billion, increased 1% operationally in the first quarter of 2016 compared to the same period in 2015, primarily due to the following operational factors:

◦	excluding the impact of product losses of exclusivity, growth in the U.S., where revenues increased 17% (up by approximately $220 million) for the first quarter of 2016, driven by 19% growth from Legacy Established Products and 22% growth from the Sterile Injectable Pharmaceuticals portfolio; and

◦	growth in emerging markets, where revenues increased 5% operationally for the first quarter of 2016 (up by approximately $100 million),

◦	the loss of exclusivity and associated generic competition for certain Peri-LOE Products, driven by Zyvox in the U.S. and certain developed Europe markets as well as Lyrica in certain developed Europe markets (collectively, down by approximately $230 million).

---

•

Cost of sales as a percentage of Revenues increased 4.8 percentage points in the first quarter of 2016, compared to the same period in 2015, primarily due to the inclusion of legacy Hospira operations and the impact of losses of exclusivity resulting in an unfavorable change in product mix. The increase in Cost of sales of 45% in the first quarter of 2016 compared to the same period in 2015, was primarily driven by the inclusion of legacy Hospira, partially offset by favorable foreign exchange and lower volumes as a result of products losing exclusivity.

•	Selling, informational and administrative expenses increased 5% in the first quarter of 2016, compared to the same period in 2015, primarily due to the inclusion of legacy Hospira operations, partially offset by lower field force, advertising and promotional expenses, reflecting the benefits of cost-reduction and productivity initiatives, and favorable foreign exchange.

•	Research and development expenses increased 38% in the first quarter of 2016, compared to the same period in 2015, reflecting the inclusion of legacy Hospira operations and increased investment in biosimilar development programs and sterile injectable development programs.

•	The favorable change in Other (income)/deductions––net in the first quarter of 2016, compared to the same period in 2015, primarily reflects resolution of a contract disagreement and favorable foreign exchange.

(a)	The selected balance sheet information is presented as of December 31, 2015 after all significant intercompany balances and transactions between legal entities have been eliminated. For subsidiaries operating outside the U.S., the selected balance sheet information is included as of November 30, 2015.

(b)	The selected balance sheet information for each operating segment has been developed as follows:

•	Trade accounts receivable, less allowance for doubtful accounts––significantly all amounts were derived using specific identification methods.

---

•	Inventories (including noncurrent portion)–– these amounts were derived using specific identification methods and with respect to shared inventory components, these amounts were derived using proportional allocation methods based on associated manufacturing costs and related product-specific inventory.

•	Current tax assets––for current tax assets (prepaid taxes associated with intercompany profits that are eliminated in consolidation), these amounts were derived using proportional allocation methods based on the associated unrealized intercompany profits.

•	Other current assets––these amounts were derived using proportional allocation methods based on country-specific revenues, or associated costs, as appropriate, as well as specific identification methods.

•	Trade accounts payable––the amounts were derived using specific identification methods and using proportional allocation methods based on associated manufacturing costs, certain research and development costs or other operating costs, as appropriate.

•

Accrued compensation and related items––these amounts were derived using proportional allocation methods based on country-specific compensation expenses and, with respect to amounts related to our enabling functions and other supporting functions, based on country-specific revenues and associated operating costs, as appropriate. In addition, amounts were also derived using specific identification methods.

◦	Other current liabilities––these amounts were derived using specific identification methods or estimates for the amounts associated with each operating segment, as well as proportional allocation methods based on country, global or regional revenue, country-specific manufacturing costs, certain research and development costs or other associated operating costs, as appropriate.

(c)	Corporate/Unallocated includes the following line items:

•	Cash and cash equivalents, Short-term investments, Short-term borrowings, including current portion of long-term debt and Dividends payable as these accounts are predominately non-operating financial assets and liabilities. Identification of amounts by operating segment is not meaningful as none of our operating segments operate as a standalone company with an identifiable debt/capital structure.

•	Income taxes payable as this account represents liabilities associated with specific legal entities and none of our operating segments operate as a standalone company with identifiable legal entities.

•	Current tax assets––the portion of these accounts included as Corporate/Unallocated primarily relates to tax assets associated with specific legal entities as none of our operating segments operate as a standalone company with identifiable legal entities.

•	Other current assets––the portion of these accounts included as Corporate/Unallocated primarily relates to derivative financial instruments. Identification of these amounts by operating segment is not meaningful as none of our operating segments operate as a standalone company with an identifiable debt/capital structure.

•	Trade accounts payable––the portion of this account included as Corporate/Unallocated primarily relates to liabilities associated with specific legal entities not identified with operating segments.

•

Accrued compensation and related items––the portion of these accounts included as Corporate/Unallocated primarily relates to our pension and post-retirement benefit obligations associated with former employees. We have not identified any of these amounts with a particular operating segment as these types of liabilities are theoretically funded through accumulated earnings and/or excess cash/investments and none of our operating segments operate as a standalone company with an identifiable debt/capital structure.

•	Other current liabilities––the portion of these accounts included as Corporate/Unallocated primarily relates to:

◦

Amounts associated with legal and environmental liabilities. Although some of these amounts may be associated with products sold in our current operating segments, we have not identified any of these amounts with a particular operating segment as these types of liabilities are theoretically funded through accumulated earnings and/or excess cash/investments and none of our operating segments operate as a standalone company with an identifiable debt/capital structure.

◦	Accrued interest and derivative financial instruments. Identification of these amounts by operating segment is not meaningful as none of our operating segments operate as a standalone company with an identifiable debt/capital structure.

(d)	Included in Other noncurrent assets on the consolidated balance sheet.

•	For Foreign currency translation adjustments, net, for the first quarter of 2016, reflects primarily the strengthening of the U.S. dollar against the British pound and Argentine peso, partially offset by the weakening of the U.S dollar against the euro and Japanese yen.

•	For Unrealized holding 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, net, primarily reflects the impact of foreign exchange and, to a significantly lesser extent, settlement activity. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.

•	For Benefit plans: prior service costs and other, net, for the first quarter of 2016, reflects the reclassification into income of amounts related to (i) amortization of changes in prior service costs and credits previously recognized in Other

---

•	For Trade accounts receivable, less allowance for doubtful accounts, the change reflects the timing of sales and collections in the normal course of business and an increase in the allowance for doubtful accounts, resulting from recent unfavorable developments with a distributor.

•	For Inventories, the change reflects planned inventory reductions, partially offset by inventory builds in the normal course of business.

•	For Other current assets, the change reflects an increase in VAT receivable balances, partially offset by a decrease in receivables associated with our derivative financial instruments.

•	For Property, plant and equipment, less accumulated depreciation (PP&E), the change reflects depreciation during the period, partially offset by capital additions in the normal course of business.

•

For Identifiable intangible assets, less accumulated amortization, the change reflects amortization, partially offset by the impact of measurement period adjustments related to our acquisition of Hospira (see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Research and Development and Collaborative Arrangements and Equity-Method Investments: Acquisitions) and Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets for additional information).

•	For Other noncurrent assets, the change reflects an increase in receivables associated with our derivative financial instruments.

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

•	For Dividends payable, the change reflects the first quarter 2016 dividend payment made in March 2016.

•	For Accrued compensation and related items, the decrease reflects bonus payments made to employees during the first quarter of 2016.

•	For Other current liabilities, the change reflects accruals for certain legal matters, an increase in VAT payable balances and an increase in payables associated with our derivative financial instruments, partially offset by payments of restructuring accruals and the timing of other payments in the normal course of business.

•	For Pension benefit obligations, net and Postretirement benefit obligations, net, the change reflects a $1.0 billion voluntary pension contribution in January 2016, as well as the information provided in Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.

•	For Other noncurrent liabilities, the change reflects a decrease in the payables associated with our derivative financial instruments, and distributions under certain of the Company’s deferred compensation programs partially offset by changes in accruals in the normal course of business.

---

•	For Treasury stock, the change reflects $5 billion paid to Goldman, Sachs & Co. in March 2016 pursuant to the terms of an accelerated share repurchase agreement. See Notes to Condensed Consolidated Financial Statements—Note 12. Commitments and Contingencies for additional information.

*	Calculation not meaningful.

•	net redemptions of investments of $4.8 billion in the first quarter of 2016, compared to $7.2 billion in the first quarter of 2015,

•	a decrease in cash paid for acquisitions of $568 million (see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Research and Development and Collaborative Arrangements, and Equity-Method Investments: Acquisitions).

•	purchases of common stock of $5.0 billion in the first quarter of 2016, compared to $6.0 billion in the first quarter of 2015;

---

•	cash dividends paid of $1.9 billion in the first quarter of 2016, compared to $1.8 billion in the first quarter of 2015; and

•	net payments on short-term borrowings and long-term debt of $481 million in the first quarter of 2016, compared to $136 million in the first quarter of 2015,

•	proceeds from the exercise of stock options of $296 million in the first quarter of 2016, compared to $794 million in the first quarter of 2015.

•	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)	Selected net financial assets decreased due to lower net proceeds from redemption/sales of both short-term and long-term investments, partially offset by the net increase in short-term borrowings and long-term debt. For additional information, see the “Analysis of the Condensed Consolidated Statements of Cash Flows” section of this MD&A.

(c)	The decrease in working capital is due to the timing of accruals, cash receipts and payments in the ordinary course of business.

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

---

---

---

(a)	Represents shares purchased pursuant to an accelerated share repurchase agreement. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies and “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities" in Part II, Item 2 of this Quarterly Report on Form 10-Q.

(b)	Includes approximately151 million shares purchased for $5 billion pursuant to an accelerated share repurchase agreement. For additional information, see Notes to Consolidated Financial Statements––Note 12. Equity in our 2015 Annual Report on Form 10-K.

---

---

•

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

•

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; decisions by regulatory authorities regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products; and uncertainties regarding our ability to address the comments in complete response letters received by us with respect to certain of our drug applications to the satisfaction of the FDA;

---

•	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 any announced transactions in the anticipated time frame or at all;

•	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 and regulatory authorities in certain other countries of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products, with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;

•	risks related to our ability to develop and launch biosimilars;

•	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 or cost controls 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, repeal or invalidation 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; restrictions on direct-to-consumer advertising; limitations on interactions with healthcare professionals; or 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 for our products 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 reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;

•	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, unstable governments and legal systems and inter-governmental disputes;

•	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;

•	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 matters, government investigations, consumer, commercial, securities, antitrust, environmental, employment, 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;

•	the impact of purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items;

•

the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls, 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, and of the internal separation of our commercial operations into our current operating structure;

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

•	risks related to internal control over financial reporting; and

•

risks and uncertainties related to our recent acquisition of Hospira, including, among other things, the ability to realize the anticipated benefits of the acquisition of Hospira, including the possibility that expected cost savings and accretion will not be realized or will not be realized within the expected time frame; the risk that the businesses will not be integrated successfully; disruption from the transaction making it more difficult to maintain business and operational relationships; significant transaction costs; and unknown liabilities.

---

---

---

---

(a)

On October 23, 2014, we announced that the Board of Directors had authorized an $11 billion share-purchase plan, and share purchases commenced thereunder in January 2015 (the October 2014 Stock Purchase Plan). In December 2015, the Board of Directors authorized a new $11 billion share repurchase program to be utilized over time. On March 8, 2016, we entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. (GS&Co.) to repurchase $5 billion of our common stock. Pursuant to the terms of the agreement, on March 10, 2016, we paid $5 billion to GS&Co. and received an initial delivery of approximately 136 million shares of our common stock from GS&Co. at a price of $29.36 per share, which represented, based on the closing share price of our common stock on the New York Stock Exchange on March 8, 2016, approximately 80% of the notional amount of the accelerated share repurchase agreement. As of April 3, 2016, the common stock received is included in Treasury Stock. At settlement of the agreement, which is expected to occur during the second quarter of 2016, GS&Co. may be required to deliver additional shares of common stock to us, or, under certain circumstances, we may be required to deliver shares of our common stock or may elect to make a cash payment to GS&Co., with the number of shares to be delivered or the amount of such payment, as well as the final average price per share, based on the volume-weighted average price, less a discount, of Pfizer's common stock during the term of the transaction. This agreement was entered into pursuant to our previously announced share repurchase authorization. After giving effect to the accelerated share repurchase agreement, our remaining share-purchase authorization is approximately $11.4 billion.

(b)

In addition to the amounts purchased under the accelerated share repurchase agreement, these columns reflect the following transactions during the first fiscal quarter of 2016: (i) the surrender to Pfizer of 3,042,322 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 24,303 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 328,391shares of common stock to satisfy tax withholding obligations in connection with the vesting of performance share awards issued to employees; (iv) the surrender to Pfizer of 151,279 shares of common stock to pay the exercise price and to satisfy tax withholding obligations in connection with the exercise of employee stock options; and (v) the surrender of 988,066 shares of common stock to satisfy withholding obligations in connection with the settlement of total shareholder return units.

---

---