PFIZER INC

Costs and Expenses

(a)Beginning in 2024, we will include royalty income in Total revenues and will restate prior periods for consistency with our 2024 presentation.

Cost of Sales

Cost of sales decreased $9.4 billion, primarily due to:

•a reduction of $14.2 billion due to lower sales of Comirnaty; and

•a reduction of $1.5 billion due to lower sales of Paxlovid,

•non-cash charges of $6.2 billion for inventory write-offs and related charges ($5.0 billion for Paxlovid and $1.2 billion for Comirnaty).

The increase in Cost of salesas a percentage of Total revenueswas mainly driven by the non-cash charge of $6.2 billion discussed above, and unfavorable changes in sales mix, primarily due to lower sales of Paxlovid and Comirnaty, which includes the unfavorable impact of the $3.5 billion non-cash Paxlovid revenue reversal.

Selling, Informational and Administrative Expenses

Selling, informational and administrative expenses increased $1.1 billion, mostly due to:

•an increase of $1.1 billion in marketing and promotional expenses for recently acquired and launched products;

•an increase of $280 million for the expected Paxlovid commercial launch;

•an increase of $210 million in our liability to be paid to participants of our supplemental savings plan; and

•an increase of $170 million in marketing and promotional expenses for rare disease products,

•a decrease of $690 million due to a lower provision for U.S. healthcare reform fees related to Comirnaty and Paxlovid.

Research and Development Expenses

Research and development expenses decreased $749 million, primarily due to:

•lower spending of $870 million mainly for lower compensation-related expenses, and ongoing vaccine and hospital programs, as well as

•a decrease of $260 million in the value of the portfolio performance share grants reflecting the decrease in the price of Pfizer’s common stock,

•increased investments of $345 million, mainly to develop certain acquired assets, as well as activities to support upcoming product launches.

Acquired In-Process Research and Development Expenses

Acquired in-process research and development expenses decreased $758 million primarily reflecting the non-recurrence of:

•an upfront payment of $426 million related to the closing of the acquisition of ReViral Ltd. in 2022;

•an upfront payment to Biohaven and a premium paid on our equity investment in Biohaven totaling $263 million in 2022; and

•a $76 million premium paid on our equity investment in BioNTech to develop a potential mRNA vaccine against shingles, both recorded in 2022.

See Notes 2A and 2E.

Amortization of Intangible Assets

Amortization of intangible assets increased $1.1 billion, primarily as a result of 2023 reflecting a full year of amortization of intangible assets from our acquisitions of Biohaven and GBT, higher amortization of intangible assets related to Prevnar, as well as reclassifications of IPR&D to developed technology rights, partially offset by fully amortized assets. See Notes 2A and 10A.

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

Transforming to a More Focused Company Program––In connection with restructuring our corporate enabling functions, we achieved gross cost savings of $1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, in the two year period from 2021 through 2022. In connection with transforming our commercial go-to market strategy, we expect net cost savings of $1.4 billion, to be achieved primarily from 2022 through 2024. In connection with manufacturing network optimization, we achieved net cost savings of $550 million. In connection with optimizing our end-to-end R&D operations, we expect net cost savings of $2.3 billion to be achieved primarily from 2023 through 2025.

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

Certain qualifying costs for these programs were recorded in 2023, 2022 and 2021, and are reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income. See the Non-GAAP Financial Measure: Adjusted Income section within MD&A.

In connection with our acquisition of Seagen, we are focusing our efforts on achieving an appropriate cost structure for the combined company. We expect to generate approximately $1 billion of annual cost synergies, to be achieved by 2026.

For a description of our programs, as well as the anticipated and actual costs, see Note 3A, The program savings discussed above may be rounded and represent approximations. In addition to these programs, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products.

Other (Income)/Deductions––Net

The favorable period-over-period change of $1.1 billion was primarily driven by net gains on equity securities in 2023 versus net losses recognized on equity securities in 2022 and lower net interest expense, partially offset by higher intangible asset impairment charges. See

Note 4.

Upjohn Separation Costs

Since inception through December 31, 2023, we have incurred substantially all costs of approximately $700 million in connection with separating Upjohn, including costs and expenses related to separation of legal entities and transaction costs.