PFIZER INC

Biopharma

Pfizer CentreOne

• Indicates calculation not meaningful.

See the Item 1. Business—Patents and Other Intellectual Property Rights section of our 2023 Form 10-K for information regarding the expiration of various patent rights, Note 12 for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above and Note 13C for additional information regarding the primary indications or class of the selected products discussed above.

Costs and Expenses

Second Quarter of 2024 vs. Second Quarter of 2023 and First Six Months of 2024 vs. First Six Months of 2023

Cost of Sales

Cost of sales increased $63 million in the second quarter of 2024, primarily due to:

•an impact of $500 million from our Seagen acquisition, inclusive of the amortization of the fair value step-up of inventory,

•a favorable change in sales mix of $500 million, primarily driven by lower sales of Comirnaty.

Cost of sales decreased $1.4 billion in the first six months of 2024, primarily due to:

•a favorable change in sales mix of $2.3 billion, primarily driven by lower sales of Comirnaty,

•an impact of $910 million from our Seagen acquisition, inclusive of the amortization of the fair value step-up of inventory.

Cost of sales as a percentage of Total revenues was relatively flat in the second quarter of 2024 and reflects favorable changes in sales mix primarily driven by lower sales of Comirnaty, which resulted in a lower related charge for the 50% gross profit split with BioNTech and applicable royalty expenses; offset by the amortization of the fair value step-up of inventory related to the Seagen acquisition.

The decrease in Cost of sales as a percentage of Total revenues in the first six months of 2024 was mainly driven by a favorable change in sales mix, primarily driven by lower sales of Comirnaty and, to a lesser extent, a favorable impact of foreign exchange, partially offset by the amortization of the fair value step-up of inventory related to the Seagen acquisition.

Certain of our vaccines, including Comirnaty, are subject to seasonality of demand, with a greater portion of revenues and related cost of sales anticipated in the fall and winter seasons. See also The Global Economic Environment––COVID-19 section for information about our COVID-19 products.

Selling, Informational and Administrative Expenses

Selling, informational and administrative expenses increased $220 million in the second quarter of 2024, primarily due to an increase of $180 million in marketing and promotional expenses for recently launched and acquired products.

Selling, informational and administrative expenses increased $297 million in the first six months of 2024, primarily due to:

•an increase of $420 million in marketing and promotional expenses for recently launched and acquired products; and

•an increase of $145 million for corporate enabling functions primarily driven by digital costs from our December 2023 acquisition of Seagen,

•a decrease of $270 million in marketing and promotional expenses for Paxlovid.

Research and Development Expenses

Research and development expenses were relatively flat in the second quarter and the first six months of 2024, primarily due to:

•increased spending of $220 million in the second quarter and $475 million in the first six months mainly to develop certain medicines acquired from Seagen,

•offset by lower spending of $235 million in the second quarter and partially offset by $400 million in the first six months primarily as a result of our cost realignment program; and

•for the first six months, lower spending of $80 million related to certain ongoing vaccine programs.

Amortization of Intangible Assets

Amortization of intangible assets increased $123 million in the second quarter of 2024 and $328 million in the first six months of 2024, primarily driven by:

•increases of $140 million in the second quarter and $270 million in the first six months from our December 2023 acquisition of Seagen; and

•increases of $120 million in the second quarter and $240 million in the first six months related to assets reclassified in 2023 from IPR&D to developed technology rights,

•decreases of $160 million in the second quarter and $250 million in the first six months related to changes in asset lives and fully amortized assets.

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

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.

Manufacturing Optimization Program––The first phase of this multi-phased program is expected to deliver savings of approximately $1.5 billion by the end of 2027, some of which is expected to begin being realized in 2025.

Certain qualifying costs for these programs in all periods since inception were recorded and 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.

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 patent-based and regulatory exclusivity expiries as well as the expiration of collaborative arrangements for various products. Improvement of operating margin will continue to be an important focus for the Company.

Seagen acquisition––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. The one-time costs to generate these synergies are expected to be approximately $1.5 billion, incurred primarily from 2023 through 2025.

Other (Income)/Deductions—Net

The unfavorable period-over-period change of $1.2 billion in the second quarter of 2024 was primarily driven by (i) net losses on equity securities in the second quarter of 2024 versus net gains on equity securities in the second quarter of 2023, (ii) higher net interest expense and (iii) intangible asset impairment charges recorded in the second quarter of 2024.

The unfavorable period-over-period change of $1.6 billion for the first six months of 2024, was primarily driven by (i) higher net interest expense, (ii) equity losses from our investment in Haleon in the first six months of 2024 versus equity income in the second quarter of 2023, (iii) lower dividend income and (iv) higher charges for certain legal matters. See Note 4.