PFIZER INC

Financial Highlights––The following is a summary of certain financial performance metrics (in billions, except per share data):

*For additional information regarding Adjusted diluted EPS (which is a non-GAAP financial measure), including reconciliations of certain GAAP Reported to non-GAAP Adjusted information, see the Non-GAAP Financial Measure: Adjusted Income section within MD&A.

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

Our Business and Strategy––Pfizer Inc. is a research-based, global biopharmaceutical company. We apply science and our global resources to bring therapies to people that extend and significantly improve their lives. See the Item 1. Business––About Pfizer section. As a science-driven global biopharmaceutical company, we remain focused on advancing our pipeline, supporting our marketed brands and deploying capital responsibly, with a focus on initiatives that can help contribute to our long-term revenue and future growth. Most of our revenues come from the manufacture and sale of biopharmaceutical products. We believe that our medicines and vaccines provide significant value for healthcare providers and patients and continuously evaluate how we can best collaborate with patients, physicians and payors to support and expand patient access to reliable, affordable healthcare around the world. In addition, we continually seek to expand and broaden our product portfolio offerings through prioritized development of our pipeline and business development opportunities targeted at critical unmet patient needs. As a result, our commercial organizational structure and R&D operations are critical to the successful execution of our business strategy. Our ability to fulfill our purpose, Breakthroughs that change patients’ lives, remains a core focus and underscores our commitment to addressing the needs of society to help sustain long-term value creation for all stakeholders. Our 2024 key priorities are:

•Achieve world-class oncology leadership

•Deliver next wave of pipeline innovation

•Maximize performance of our new products

•Expand margins by realigning our cost base

•Allocate capital to enhance shareholder value

In 2023, we managed our commercial operations through a global structure consisting of two operating segments: Biopharma and Business Innovation. Biopharma was the only reportable segment. See Note 1A and the Item 1. Business––Commercial Operations section.

In December 2023, we completed our acquisition of Seagen. At the beginning of 2024, we made changes in our commercial organization that went into effect on January 1, 2024 to incorporate Seagen and improve focus, speed and execution. Specifically, within our Biopharma reportable segment we created:

•the Pfizer Oncology Division, which brings together U.S. oncology commercial operations from both Pfizer and Seagen and is led by the Chief Oncology Officer, Executive Vice President, who also leads Pfizer’s newly combined global oncology R&D operations;

•the Pfizer U.S. Commercial Division, which focuses on the commercialization of non-oncology products in the U.S. and is led by the Chief U.S. Commercial Officer, Executive Vice President; and

•the Pfizer International Commercial Division, which focuses on the commercialization of Pfizer’s entire product portfolio outside the U.S. and is led by the Chief International Commercial Officer, Executive Vice President.

In the fourth quarter of 2022, we began taking steps through our Transforming to a More Focused Company restructuring program to optimize our end-to-end R&D operations to reduce costs and cycle times as well as to further prioritize our internal R&D portfolio in areas where our capabilities are differentiated while increasing external innovation efforts to leverage an expanding and productive biotech sector. Beginning in July 2023, in consideration of planned future investments in oncology, including the acquisition of Seagen on December 14, 2023, we reorganized our R&D platform operations. See Note 17A. In the fourth quarter of 2023, we announced that we launched a multi-year, enterprise-wide cost realignment program that aims to realign our costs with our longer-term revenue expectations. See Note 3. For a description of savings related to these programs, see the Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives section within MD&A.

R&D: We believe we have a strong pipeline and are well-positioned for future growth. R&D is at the heart of fulfilling our purpose to deliver breakthroughs that change patients’ lives as we work to translate advanced science and technologies into the medicines and vaccines that may be the most impactful for patients. Innovation, drug discovery and development are critical to our success. In addition to discovering and developing new products, our R&D efforts seek to add value to our existing products by improving their effectiveness and ease of dosing and by discovering potential new indications. See the Item 1. Business—Research and Development section for our R&D priorities and strategy.

We seek to leverage a strong pipeline, organize around expected operational growth drivers and capitalize on trends creating long-term growth opportunities, including:

•an aging global population that is generating increased demand for innovative medicines and vaccines that address patients’ unmet needs; and

•advances in both biological science and platform technologies that are enhancing the delivery of breakthrough new medicines and vaccines.

Our Business Development Initiatives––We are committed to strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, but also through various business development activities. We view our business development activity as an enabler of our strategies and seek to generate growth by pursuing opportunities and transactions that have the potential to strengthen our business and our capabilities. We assess our business, assets and scientific capabilities/portfolio as part of our regular, ongoing portfolio review process and also continue to consider business development activities that will help advance our business strategy. For a discussion of recent significant business development activities, see Note 2.

Our 2023 Performance

Total Revenues––Total revenues decreased $41.8 billion, or 42%, to $58.5 billion in 2023 from $100.3 billion in 2022, reflecting an operational decrease of $40.8 billion, or 41%, as well as an unfavorable impact of foreign exchange of $1.0 billion, or 1%. The operational decrease was primarily driven by significant declines in revenues from Comirnaty and Paxlovid, including a $3.5 billion non-cash revenue reversal for Paxlovid recorded in the fourth quarter of 2023. Excluding contributions from Comirnaty and Paxlovid, Total revenues increased 7% operationally, reflecting an increase in revenues from Nurtec ODT/Vydura and Oxbryta; revenues from Abrysvo, primarily driven by the launch of the older adult indication in the U.S.; as well as continued growth from the Vyndaqel family and Eliquis; partially offset by a decline in Ibrance.

The following chart outlines the components of the net change in Total revenues:

See the Total Revenues by Geography and Total Revenues––Selected Product Discussion sections within MD&A for more information, including a discussion of key drivers of our revenue performance. See also The Global Economic Environment––COVID-19 section below for information about our COVID-19 products. For information regarding the primary indications or class of certain products, see Note 17C.

While royalty income through December 31, 2023 has been recorded in Other Income/(Deductions)—net, we will begin reporting such royalty income in Total revenues beginning in 2024 and will restate prior periods for consistency with our 2024 presentation. Additionally, we will no longer record royalties from U.S. sales of Bavencio, as we have irrevocably chosen to donate the right to such royalties to the American Association for Cancer Research.

Income from Continuing Operations Before Provision/(Benefit) for Taxes on Income––The decrease in Income from continuing operations before provision/(benefit) for taxes on income of $33.7 billion, to $1.1 billion in 2023 from $34.7 billion in 2022, was primarily attributable to (i) lower revenues, (ii) higher intangible asset impairment charges, and (iii) increases in Restructuring charges and certain acquisition-related costs, Amortization of intangible assets, and Selling, informational and administrative expenses, partially offset by (iv) a decrease in Cost of sales and (v) net gains on equity securities in 2023 versus net losses on equity securities in 2022.

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

Our Operating Environment––We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below. See also the Item 1. Business––Government Regulation and Price Constraints and Item 1A. Risk Factors sections.

Regulatory Environment––Pipeline Productivity––Our product lines must be replenished over time to offset revenue losses when products lose exclusivity or market share or to respond to healthcare and innovation trends, as well as to provide for earnings growth, primarily through internal R&D or through collaborations, acquisitions, JVs, licensing or other arrangements. As a result, we devote considerable resources to our R&D activities which, while essential to our growth, incorporate a high degree of risk and cost, including whether a particular product candidate or new indication for an in-line product will achieve the desired clinical endpoint or safety profile, will be approved by regulators or will be successful commercially. Clinical trials are conducted to determine, among other things, whether an investigational drug, vaccine or device is safe and effective for a particular patient population. After a product has been approved or authorized and launched, we continue to monitor its safety as long as it is available to patients, including conducting postmarketing trials, voluntarily or pursuant to a regulatory request. For the entire life of the product, we collect safety data and report safety information to the FDA and other regulators. Regulatory authorities evaluate potential safety concerns and take any regulatory action deemed necessary and appropriate. Such action(s) may include: updating a product’s labeling, restricting its use, communicating new safety information or, in rare cases, seeking to suspend or remove a product from the market.

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

For additional information on patent rights we consider most significant to our business as a whole, see the Item 1. Business––Patents and Other Intellectual Property Rights section. For a discussion of recent developments with respect to patent litigation, see Note 16A1.

Regulatory Environment/Pricing and Access––Government and Other Payor Group Pressures––The pricing of medicines and vaccines by pharmaceutical manufacturers and the cost of healthcare, which includes medicines, vaccines, medical services and hospital services, continues to be important to payors, governments, patients, and other stakeholders. Federal and state governments and private third-party payors in the U.S. continue to take action to manage the utilization and cost of drugs, including increasingly employing formularies to control costs and encourage utilization of certain drugs, including through the use of deductibles, utilization management tools, cost sharing or formulary placement. We consider a number of factors impacting the pricing of our medicines and vaccines. Within the U.S., we often engage with patients, doctors and healthcare plans. We also often provide significant discounts from the list price to insurers, including PBMs and MCOs. The price that patients pay in the U.S. for prescribed medicines and vaccines is ultimately set by healthcare providers and insurers. Governments globally, as well as private third-party payors in the U.S., may use a variety of measures to control costs, including, among others, legislative or regulatory pricing reforms, drug formularies (including tiering and utilization management tools), cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), QCE processes and VBP. We anticipate that these and similar initiatives will continue to increase pricing and access pressures globally. In the U.S., we expect to see continued focus by Congress and the Biden Administration on regulating pricing. The drug pricing provisions of the IRA, which was signed into law in August 2022, began to be implemented in 2022 and implementation efforts will continue over the next several years. In August 2023, the Biden Administration unveiled the first ten medicines subject to the “Medicare Drug Price Negotiation Program,” which requires manufacturers of select drugs to engage in a process with the federal government to set new Medicare prices which would go into effect in 2026. Among the first ten medicines subject to the Program included Eliquis. We continue to evaluate the impact of the IRA on our business, operations and financial condition and results as the full effect of the IRA on our business and the pharmaceutical industry remains uncertain. In addition, changes to the Medicaid Drug Rebate program or the 340B Program, including legal or legislative developments at the federal or state level with respect to the 340B program, could have a material impact on our business. See the Item 1. Business––Pricing Pressures and Managed Care Organizations and––Government Regulation and Price Constraints and the Item 1A. Risk Factors––Pricing and Reimbursement sections.

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

In 2023, we recorded $286 million to Cost of sales for inventory losses, overhead costs related to the period in which the facility could not operate, and incremental costs resulting from the tornado damage. Losses incurred in 2023 were partially offset by insurance recoveries received in the fourth quarter of 2023. We may record additional losses and/or costs and/or insurance recoveries in future periods, but we are unable to predict them with certainty at this time.

Product Supply––We periodically encounter supply delays, disruptions and shortages, including due to voluntary product recalls and natural or man-made disasters. In 2021, Pfizer recalled all lots of Chantix in the U.S. due to the presence of a nitrosamine, N-nitroso-varenicline, at or above the FDA interim acceptable intake limit. Regulatory authorities outside the U.S. have issued updated guidance on nitrosamine acceptable intake levels. With this recently issued guidance, which included an updated intake level for N-nitroso-varenicline, we expect to make regulatory submissions in 2024 to potentially enable Chantix to return to market outside the U.S., and our related discussions with FDA are ongoing.

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

The Global Economic Environment––In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to economic cycles. Certain factors in the global economic environment that may impact our global operations include, among other things, currency and interest rate fluctuations, capital and exchange controls, local and global economic conditions including inflation, recession, volatility and/or lack of liquidity in capital markets, expropriation and other restrictive government actions, changes in intellectual property, legal protections and remedies, trade regulations, tax laws and regulations and procedures and actions affecting approval, production, pricing, and marketing of, reimbursement for and access to our products, as well as impacts of political or civil unrest or military action, including the ongoing conflicts between Russia and Ukraine and in the Middle East and their economic consequences, geopolitical instability, terrorist activity, unstable governments and legal systems, inter-governmental disputes, public health outbreaks, epidemics, pandemics, natural disasters or disruptions related to climate change. Government pressures can lead to negative pricing pressure in various markets where governments take an active role in setting prices, access criteria or other means of cost control. For additional information on risks related to our global operations, see the Item 1A. Risk Factors—Global Operations section.

COVID-19––In response to COVID-19, we developed Paxlovid and collaborated with BioNTech to jointly develop Comirnaty, including an Omicron XBB.1.5-adapted monovalent vaccine. As part of our strategy for COVID-19, we are continuing to make significant investments in breakthrough science and global manufacturing. This includes continuing to evaluate Comirnaty and Paxlovid, including against new variants of concern, developing variant adapted vaccine candidates and developing potential combination respiratory vaccines and potential next generation vaccines and therapies. We are also evaluating Paxlovid for additional populations. See the Product Developments section within MD&A.

In 2023, we principally sold Comirnaty globally under government contracts. In September 2023, Comirnaty transitioned to traditional commercial market sales in the U.S., triggered by the expiration of current contracts and the COVID-19 vaccines from Pfizer and BioNTech purchased through them becoming either depleted or not used following the introduction of a new variant vaccine. Internationally, sales of Comirnaty in international developed markets were generally under government contracts in 2023, and in emerging markets, under a combination of private channels and government contracts; in both cases, we expect to start transitioning to commercial markets in 2024. Due to the commercial market transition as well as the anticipated seasonal nature of COVID vaccination, we expect more than 80% of our 2024 global revenues for Comirnaty to be recorded in the second half of the year.

In 2023, we principally sold Paxlovid globally to government agencies. Internationally, for Paxlovid, we are continuing the transition to commercial markets and are expecting most revenue for Paxlovid to be generated through commercial channels in 2024. On October 13, 2023, we announced an amended agreement with the U.S. government, which facilitated the transition of Paxlovid to traditional commercial markets in November 2023, with minimal uptake of NDA-labeled commercial product before January 1, 2024. See Note 17C.

For information on risks associated with our COVID-19 products, including certain assumptions made for purposes of our operational planning and financial projections and the uncertainty of future developments, as well as COVID-19 intellectual property disputes, see the Item 1A. Risk Factors—COVID-19,—Intellectual Property Protection and––Third-Party Intellectual Property Claims sections and Note 16A1.

Israel/Hamas Conflict––Our local operations have been impacted by the armed conflict between Israel and Hamas that began on October 7, 2023. For the years ended December 31, 2023 and 2022, the business of our Israeli subsidiary represented less than 1% of our consolidated revenues and assets. We are closely monitoring developments in this conflict, including evaluating potential impacts to our business, customers, suppliers, employees, and operations in Israel and elsewhere in the Middle East that may impact global operations. At this time, longer term impacts to the Company are uncertain and subject to change.

Russia/Ukraine Conflict––Our local operations have been impacted by the armed conflict between Russia and Ukraine. For the years ended December 31, 2023 and 2022, the business of our Russia and Ukraine subsidiaries represented less than 1% of our consolidated revenues and assets, and while we are monitoring the effects of the conflict between Russia and Ukraine, the situation continues to evolve and the long-term implications, including the broader economic consequences of the conflict, are difficult to predict at this time. While as of now, we do not anticipate any significant negative impacts on our global operations from this conflict, continued regional instability, geopolitical shifts, potential additional sanctions and other restrictive measures against Russia, neighboring countries or allies of Russia, any retaliatory measures taken by Russia, neighboring countries or allies of Russia, and actions by our customers or suppliers, including financial institutions, in response to such measures could adversely affect the global macroeconomic environment, our operations, currency exchange rates and financial markets, which could in turn adversely impact our business and results of operations.