PFIZER INC

Note 1. Basis of Presentation and Significant Accounting Policies

A. Basis of Presentation

We prepared these condensed consolidated financial statements in conformity with U.S. GAAP, consistent in all material respects with those applied in our 2023 Form 10-K. As permitted under the SEC requirements for interim reporting, certain footnotes or other financial information have been condensed or omitted.

These financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods presented. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2023 Form 10-K. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three months ended February 25, 2024 and February 26, 2023, and for U.S. subsidiaries is as of and for the three months ended March 31, 2024 and April 2, 2023.

We manage our commercial operations throughtwo operating segments, each led by a single manager: Biopharma and Business Innovation. Biopharma is the only reportable segment. See Note 13A.

We have made certain reclassification adjustments to conform prior-period amounts to the current presentation for:

•in the first quarter of 2024, we reclassified royalty income (substantially all of which is related to Biopharma) from Other (income)/deductions––net and began presenting Royalty revenues as a separate line item within Total revenues in our consolidated statements of income, and reclassified the associated royalty receivables from Other current assets to Trade accounts receivable, less allowance for doubtful accounts in our consolidated balance sheet;

•in the fourth quarter of 2023, we began presenting Product revenues and Alliance revenues as separate line items within Total revenues in our consolidated statements of income; and

•segment reporting and geographic information in connection with the commercial reorganization that went into effect on January 1, 2024 (see Note 13).

Business development activities, including the December 2023 acquisition of Seagen, impacted financial results in the periods presented. See Note 2 below, as well as Notes 1A and 2 in our 2023 Form 10-K.

B. New Accounting Standard Adopted in 2024

On January 1, 2024, we adopted a new accounting standard which clarifies that contractual sale restrictions are not considered in measuring equity securities at fair value. The new guidance is consistent with our existing policy; therefore, it had no impact on our consolidated financial statements.

C. Revenues and Trade Accounts Receivable

Customers––Our prescription biopharmaceutical products, with the exception of Paxlovid in 2023, are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. We principally sold Paxlovid globally to government agencies in 2023. Our vaccines in the U.S. are primarily sold directly to the federal government (including the CDC), wholesalers, individual provider offices, retail pharmacies and integrated delivery systems. Our vaccines outside the U.S. are primarily sold to government and non-government institutions. Certain of our vaccines, including Comirnaty, are subject to seasonality of demand.

Deductions from Revenues––Our accruals for Medicare, Medicaid and related state program and performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts are as follows:

Trade Accounts Receivable––Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type (high risk versus low risk and government versus non-government), and fixed reserve percentages are established for each pool of trade accounts receivables.

In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. When management becomes aware of certain customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded.

During the three months ended March 31, 2024 and April 2, 2023, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements. For additional information on our trade accounts receivable, see Note 1G in our 2023 Form 10-K.

Note 2. Acquisition and Equity-Method Investment

A. Acquisition

Seagen––On December 14, 2023 (the acquisition date), we acquired Seagen, a global biotechnology company that discovers, develops and commercializes transformative cancer medicines, for $229 per share in cash. The total fair value of the consideration transferred was $44.2 billion ($43.4 billion, net of cash acquired). The combination of certain Pfizer and Seagen entities may be pending in various jurisdictions and integration is subject to completion of various local legal and regulatory steps.

The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of the acquisition date, including adjustments made in the first quarter of 2024 (measurement period adjustments) with a corresponding change to goodwill. The estimated values are not yet finalized (see below) and are subject to change, which could be significant. We will finalize the amounts recognized as soon as possible but no later than one year from the acquisition date.

(a)The changes in the estimated fair values 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.

(b)As adjusted, comprised of $1.2 billion current inventories and $2.1 billion noncurrent inventories.

(c)As adjusted, comprised mainly of $7.0 billion of finite-lived developed technology rights with an estimated weighted-average life of approximately 18 years.

The measurement period adjustments did not have a material impact on our earnings.

The following items are subject to change:

•Amounts for certain balances included in working capital (excluding inventories), 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 identifiable intangible assets, inventories, contractual commitments, PP&E, and operating lease right-of-use assets and liabilities, pending finalization of valuation efforts, the completion of certain physical inventory counts and the confirmation of the physical existence and condition of certain PP&E assets.

•Amounts for income tax assets, receivables and liabilities, pending the filing of Seagen’s 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.

The following table provides unaudited U.S. GAAP supplemental pro forma information as if the acquisition of Seagen had occurred on January 1, 2022:

The unaudited supplemental pro forma consolidated results do not purport to reflect what the combined company’s results of operations would have been had the acquisition occurred on January 1, 2022, nor do they project the future results of operations of the combined company or reflect the expected realization of any cost savings associated with the acquisition. The actual results of operations of the combined company may differ significantly from the pro forma adjustments reflected here due to many factors.

The unaudited supplemental pro forma financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and the liabilities assumed from Seagen. The historical U.S. GAAP financial information of Pfizer and Seagen was adjusted, primarily for the following pre-tax adjustments for the three months ended April 2, 2023:

•Additional amortization expense of approximately $142 million related to the preliminary estimate of the fair value of identifiable intangible assets acquired.

•Additional expense related to the preliminary estimate of the fair value adjustment to acquisition-date inventory estimated to have been sold of approximately $224 million.

•Additional estimated interest expense of approximately $488 million related to the debt issued by Pfizer and the commercial paper borrowings to partially finance the acquisition.

•Elimination of interest income of approximately $67 million associated with money market funds under the assumption that a portion of these funds would have been liquidated to partially fund the acquisition.

The above adjustments were then adjusted for the applicable tax impact using an estimated weighted-average statutory tax rate applied to the applicable pro forma adjustments.

B. Equity-Method Investment

Haleon––We owned 32% of Haleon as of December 31, 2023. In March 2024, we sold approximately 30% of our investment in Haleon through the sale of 791 million ordinary shares in a global public offering, and the sale of 102 million ordinary shares directly to Haleon for total consideration of $3.5 billion. We recognized a gain on the sale of our Haleon shares of $150 million during the first quarter of 2024 in Other (income)/deductions––net(see Note 4). After the share sale, we owned approximately 23% of the outstanding voting shares of Haleon as of March 31, 2024.

The fair value of our investment in Haleon as of March 31, 2024, based on quoted market prices of Haleon stock, was $8.7 billion. Haleon is a foreign investee whose reporting currency is the U.K. pound, and therefore we translate its financial statements into U.S. dollars and recognize the impact of foreign currency translation adjustments in the carrying value of our investment and in other comprehensive income. We record our share of earnings from Haleon on a quarterly basis on a one-quarter lag in Other (income)/deductions––net.

(a)See Note 6.

(b)Equity-method basis difference adjustments and amortization included in Other (income)/deductions – net. Adjustments are associated with the impact of Haleon’s brand sales and impairments of intangible assets and changes in Haleon’s tax rates on intangible asset-related deferred tax liabilities. See Note 4.

Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

A. Realigning our Cost Base Program

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. We expect costs associated with this multi-year effort to continue through 2024 and to total approximately $2.8 billion, primarily representing cash expenditures for severance and implementation costs, of which $2.3 billion is associated with our Biopharma segment. From the start of this program through March 31, 2024, we incurred costs under this program of $1.6 billion, of which $1.3 billion is associated with our Biopharma segment (substantially all of which represents restructuring charges).

B. Key Activities

(a)In 2024, primarily represents Seagen acquisition-related costs, largely offset by cost-reduction initiatives. In 2023, primarily represents cost-reduction initiatives. Amounts associated with our Biopharma segment: credits of $37 million for the three months ended March 31, 2024 and credits of $64 million for the three months ended April 2, 2023.

(b)Represents external costs for banking, legal, accounting and other similar services.

(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs.

(d)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

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

The Biopharma segment information above reflects changes as a result of the reorganization in the first quarter of 2024 (see Note 13A).

(a)Included in Other current liabilities ($1.3 billion) and Other noncurrent liabilities ($663 million).

(b)Other activity includes adjustments for foreign currency translation that are not material to our condensed consolidated financial statements.

(c)Included in Other current liabilities($1.1 billion) and Other noncurrent liabilities($519 million).