Pfizer Reports Second-Quarter 2012 Results

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<0> Pfizer Reports Second-Quarter 2012 Results </0>

Pfizer Inc.Joan Campion, 212-733-2798orSuzanne Harnett, 212-733-8009Jennifer Davis, 212-733-0717

Pfizer Inc. (NYSE: PFE):

Pfizer Inc. (NYSE: PFE) today reported financial results for second-quarter 2012. Second-quarter 2012 revenues were $15.1 billion, a decrease of 9% compared with $16.5 billion in the year-ago quarter, which reflects an operational decline of $977 million, or 6%, and the unfavorable impact of foreign exchange of $451 million, or 3%.

For second-quarter 2012, U.S. revenues were $5.7 billion, a decrease of 15% compared with the year-ago quarter. This decrease was primarily the result of the U.S. loss of exclusivity of Lipitor on November 30, 2011. International revenues were $9.3 billion, a decrease of 5% compared with the prior-year quarter, primarily due to the unfavorable impact of foreign exchange. U.S. revenues represented 38% of total revenues in second-quarter 2012 compared with 41% in the year-ago quarter, while international revenues represented 62% of total revenues in second-quarter 2012 compared with 59% in the year-ago quarter.

Primary Care unit revenues decreased 31% operationally in comparison with the same period last year, primarily due to the loss of exclusivity of Lipitor in the U.S. in November 2011 and the resulting shift in the reporting of U.S. Lipitor revenues to the Established Products unit beginning January 1, 2012. U.S. branded Lipitor revenues, as reported by the Established Products unit, decreased to $296 million, from $1.4 billion reported by the Primary Care unit in second-quarter 2011, due to the aforementioned loss of exclusivity and the entry of multi-source generic competition in May 2012. Collectively, the decline in worldwide revenues for Lipitor and for certain other Primary Care unit products that lost exclusivity in various markets in 2012 and 2011, as well as the resulting shift in the reporting of certain product revenues to the Established Products unit, reduced Primary Care unit revenues by approximately $2.0 billion, or 34%, in comparison with second-quarter 2011. The impact of these declines was partially offset by the strong growth of Lyrica and Celebrex.

Specialty Care unit revenues declined 2% operationally in comparison with second-quarter 2011. Revenues were positively impacted by the growth of Enbrel, as well as the Prevenar franchise in Japan and Australia, while U.S. Prevnar 13 revenues were essentially flat and developed Europe Prevenar 13 revenues were slightly lower than in the prior-year quarter since most patients eligible to receive the pediatric catch-up dose have already been vaccinated and utilization in adults is minimal at this time. Additionally, Specialty Care unit revenues were negatively impacted by the losses of exclusivity of Vfend and Xalatan in the U.S. in February and March 2011, respectively, and the resulting shift in the reporting of Vfend and Xalatan U.S. revenues to the Established Products unit beginning January 1, 2012, as well as the loss of exclusivity of Xalatan in developed Europe in January 2012 and Geodon in the U.S. in March 2012. Collectively, these developments relating to Vfend, Xalatan and Geodon reduced Specialty Care unit revenues by approximately $265 million, or 7%, in comparison with second-quarter 2011.

Established Products unit revenues increased 18% operationally in comparison with the prior-year period, primarily reflecting $433 million of U.S. and Japan branded Lipitor revenues, contribution from the sales of the authorized generic version of Lipitor in the U.S. by Watson Pharmaceuticals, Inc. and launches of generic versions of other Pfizer branded primary care and specialty care products. Second-quarter 2012 revenues were negatively impacted in comparison with second-quarter 2011 by the entry of multi-source generic competition in the U.S. for donepezil (Aricept) in May 2011, as well as the continuing decline of U.S. revenues of certain products that previously lost exclusivity. Total revenues from established products in both the Established Products and Emerging Markets units were $3.8 billion, with $1.1 billion generated in emerging markets.

Emerging Markets unit revenues grew 14% operationally in comparison with second-quarter 2011, primarily due to volume growth mainly in China and Russia as a result of more targeted promotional efforts for key products, including Lipitor, Norvasc and Lyrica. Additionally, growth was driven by the timing of government purchases of Prevenar 13 in Turkey and Enbrel in Brazil compared with the year-ago quarter. Growth was partially offset by the timing of government purchases of Prevenar 13 and certain other products in Mexico in comparison with the year-ago period.

Animal Healthunit revenues increased 7% operationally in comparison with the same quarter last year, largely due to increased demand across the companion animal and global livestock portfolios in key geographies. Consumer Healthcare unit revenues increased 11% operationally in comparison with second-quarter 2011, primarily due to the addition of products from the acquisitions of Ferrosan Consumer Health in December 2011 and Alacer Corp. in February 2012.

Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses in the aggregate were $8.3 billion in second-quarter 2012, a decrease of 16% compared with $9.9 billion in second-quarter 2011. Excluding the favorable impact of foreign exchange of $396 million, or 4%, these costsdecreased 12%, primarily reflecting the benefits of cost-reduction and productivity initiatives. Savings in adjusted R&D expenses were generated in second-quarter 2012 by the discontinuation of certain therapeutic areas and R&D programs in connection with our previously announced initiatives. Lower adjusted SI&A expenses compared with the year-ago period reflect a reduction in the field force and a decrease in promotional spending, both partially in response to product losses of exclusivity, as well as more streamlined corporate support functions. Adjusted cost of sales and Adjusted cost of sales as a percent of revenues were favorably impacted by foreign exchange and the benefits generated from the on-going productivity initiatives to streamline the manufacturing network and unfavorably impacted by the decline in revenues contributing to a shift in geographic and business mix. Additionally, lower adjusted cost of sales compared with the same period last year reflects reduced manufacturing volumes given the aforementioned products that lost exclusivity in various markets.

In second-quarter 2012, the effective tax rate on adjusted incomewas 29%, comparable with second-quarter 2011. The second-quarter 2012 rate reflects the favorable impact of the change in the jurisdictional mix of earnings and the unfavorable impact of the expiration of the U.S. research and development tax credit.

The diluted weighted-average shares outstanding for second-quarter 2012 were 7.5 billion shares, a reduction of approximately 398 million shares compared with second-quarter 2011. This decline was primarily due to the Company's ongoing share-repurchase program.

As a result of the aforementioned factors, second-quarter 2012 adjusted income was $4.7 billion, comparable with the year-ago quarter, and adjusted diluted EPS was $0.62, an increase of 5% compared with $0.59 in second-quarter 2011.

In addition to the aforementioned factors, second-quarter 2012 reported earnings in comparison with the same period in 2011 were favorably impacted by lower purchase accounting adjustments, lower costs related to our cost-reduction and productivity initiatives, lower acquisition-related costs and lower impairment charges. Second-quarter 2012 reported earnings were unfavorably impacted by higher charges related to certain legal matters.

The effective tax rate on reported results was 29% in second-quarter 2012 compared with 30% in second-quarter 2011. The decrease was primarily due to the change in the jurisdictional mix of earnings, partially offset by the impact of the expiration of the U.S. research and development tax credit.

As a result of all these factors, second-quarter 2012 reported net income was $3.3 billion, an increase of 25% compared with $2.6 billion in the prior-year quarter, and reported diluted EPS was $0.43, an increase of 30% compared with $0.33 in second-quarter 2011.

Ian Read, Chairman and Chief Executive Officer, stated, "We delivered solid results this quarter. This performance was achieved despite the $1.8 billion, or 11%, negative impact on revenues of product losses of exclusivity compared with the year-ago period, primarily Lipitor in most major markets. Worldwide revenues from many of our key medicines, including Celebrex, Enbrel, Lyrica and the Prevnar/Prevenar franchise, increased and our Emerging Markets unit generated 14% operational revenue growth, driven primarily by our targeted investments in China and Russia. Overall, I am confident that Pfizer is well-positioned for long-term success given the potential of our innovative late-stage and emerging pipeline, strong operating cash flow, streamlined organization and disciplined approach to capital allocation."

"We are committed to keeping our capital allocation priorities aligned with the best interests of our shareholders. The pending sale of our Nutrition business and potential separation of our Animal Health business as a stand-alone public company to be named Zoetis remain on track. We anticipate filing a registration statement with the Securities and Exchange Commission by mid-August for a potential initial public offering (IPO) of up to a 20% ownership stake in Zoetis. If the IPO is successfully completed, which we are targeting for the first half of 2013, we will have a variety of options to achieve a potential full separation of Zoetis. As we continue to work toward a separation of this business, we remain open to all alternatives to maximize the after-tax return for our shareholders," concluded Mr. Read.

Frank D'Amelio, Chief Financial Officer, stated, "We are reaffirming our 2012 financial guidance, reflecting our solid performance year-to-date, our continued confidence in the business, our financial flexibility and the significant cost savings generated by our cost-reduction and productivity initiatives. We also continue to expect to repurchase approximately $5 billion of our common stock this year, with $3 billion repurchased through July 30."

Pfizer's financial guidance, at current exchange rates, is summarized below. Since the Nutrition business is presented as a discontinued operation, the full-year results of that business only impact the Reported Diluted EPS and operating cash flow components of our 2012 financial guidance.

Reported cost of sales decreased 23% in second-quarter 2012, compared to the same period in 2011, and decreased 22% in the first six months of 2012, compared to the same period in 2011. The decreases were due to a decline in revenues reflecting reduced manufacturing volumes related to products that lost exclusivity in various markets contributing to a shift in geographic and business mix, lower purchase accounting adjustments in 2012, lower costs related to our cost-reduction and productivity initiatives, as well as the benefits generated from the ongoing productivity initiatives to streamline the manufacturing network, and favorable foreign exchange of 8% for the second quarter of 2012 and 6% for the first six months of 2012.

Reported cost of sales as a percentage of revenues decreased 3.4 percentage points to 18.3% in second-quarter 2012, compared to the same period in 2011, reflecting the aforementioned factors.

Reported SI&A expenses decreased 17% in second-quarter 2012 and 13% in the first six months of 2012, compared to the same periods in 2011. The decreases were primarily due to savings generated from a reduction in the field force and a decrease in promotional spending, both partially in response to product losses of exclusivity, and more streamlined corporate support functions, as well as the favorable impact of foreign exchange of 2% for the second quarter of 2012 and 1% for the first six months of 2012.

Reported R&D expenses decreased 24% in second-quarter and 13% in the first six months of 2012, compared to the same periods in 2011, primarily due to savings generated by the discontinuation of certain therapeutic areas and R&D programs in connection with our previously announced cost-reduction and productivity initiatives. Charges related to those initiatives were lower in the second quarter of 2012 and higher in the first six months of 2012 than in the same periods in 2011.

The effectivetax rate on reported results was 28.8% in second-quarter 2012 compared with 29.9% in second-quarter 2011, and 28.9% in the first six months of 2012 compared with 29.5% in the first six months of 2011. The decreases were primarily due to a change in the jurisdictional mix of earnings, partially offset by the impact of the expiration of the U.S. research and development tax credit.

In second-quarter 2012, the effective tax rate on adjusted income was 28.9% compared with 29.1% in second-quarter 2011, and 29.0% in the first six months of 2012 compared with 28.6% in the first six months of 2011. The tax rates in both periods in 2012 compared to the same periods in 2011 were favorably impacted by the change in the jurisdictional mix of earnings and unfavorably impacted by the expiration of the U.S. research and development tax credit.

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DISCLOSURE NOTICE: The information contained in this earnings release and the attachments is as of July 31, 2012. We assume no obligation to update forward-looking statements contained in this earnings release and the attachments as a result of new information or future events or developments.

This earnings release and the attachments contain forward-looking statements about our future operating and financial performance, business plans and prospects, in-line products and product candidates, strategic review, capital allocation, and share-repurchase and dividend-rate plans that involve substantial risks and uncertainties. You can identify these statements by the fact that they use future dates or use words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "forecast," "goal," "objective," "aim" and other words and terms of similar meaning. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and in our reports on Form 10-Q, in each case including in the sections thereof captioned "Forward-Looking Information and Factors That May Affect Future Results" and "Item 1A. Risk Factors", and in our reports on Form 8-K.

This earnings release may include discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data.

This earnings release does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, which will be made only by prospectus.

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