PFIZER INC

OPERATIONS

GENERAL

The following MD&A is intended to assist the reader in understanding our financial condition and results of operations, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources, and is provided as a supplement to and should be read in conjunction with the condensed consolidated financial statements and related notes in Item 1. Financial Statements in this Form 10-Q.

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 because 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.

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

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. Our 2025 key priorities are to:

1. Improve R&D productivity with sharpened focus

2. Expand margins and maximize operational efficiency

3, Achieve commercial excellence in our key categories

4. Optimize capital allocation.

One way we believe we will be more efficient, effective and able to execute on these strategic priorities is through digital enablement, including automation and AI.

Segments––We manage our commercial operations through a global structure consisting of three operating segments: Biopharma, PC1 and Pfizer Ignite. Biopharma is the only reportable segment. See Note 13A.

Restructuring Programs

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.

•In the second quarter of 2025, we announced additional anticipated productivity opportunities, designed to further reduce costs primarily in SI&A, driven in large part by enhanced digital enablement, including automation and AI, and simplification of business processes.

•In connection with our efforts to simplify the structure and sharpen the focus of our R&D organization, in the first quarter of 2025, we expanded this program after having identified additional opportunities to drive improvements in productivity and operational efficiencies through enhanced digital enablement, including automation and AI, and simplification of business processes.

Manufacturing Optimization Program––In the second quarter of 2024, we announced that we launched a multi-year, multi-phased program to reduce our costs of goods sold, which is expected to include operational efficiencies, network structure changes, and product portfolio enhancements.

See Note 3 for the anticipated and actual costs of these programs. For a description of anticipated 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.

For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2024 Form 10-K.

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. For a description of the more significant recent transactions through February 27, 2025, the filing date of our 2024 Form 10-K, see Note 2 in our 2024 Form 10-K. See Note 2 and the following for significant recent activities:

In-Licensing Arrangement with 3SBio––In July 2025, we completed an exclusive global, ex-China, in-licensing agreement with 3SBio, a leading Chinese biopharmaceutical company, for the development, manufacturing and commercialization of SSGJ-707, a bispecific antibody targeting PD-1 and vascular endothelial growth factor, currently undergoing several clinical trials in China for NSCLC, mCRC, and gynecological tumors. Under the terms of the agreement, 3SBio will receive an upfront payment of $1.25 billion and is eligible to receive milestone payments associated with certain development, regulatory and commercial milestones up to $4.8 billion as well as tiered double-digit royalties on sales of SSGJ-707, if approved. Additionally, the agreement provides Pfizer the option to extend the license to include exclusive development and commercialization rights to SSGJ-707 in China. In exchange for the option to the exclusive rights in China, we will make an upfront payment to 3SBio of $100 million and, in the event the option is exercised, we would pay an option exercise fee of up to $50 million depending on future events. In connection with this transaction, we will record a $1.35 billion charge in the third quarter of 2025 in Acquired in-process research and development expenses, which will be presented as a cash outflow from operating activities. We also made a $100 million equity investment in 3SBio.

Our Second Quarter 2025 and First Six Months of 2025 Performance

Total Revenues––Total revenues increased $1.4 billion, or 10%, in the second quarter of 2025 to $14.7 billion from $13.3 billion in the second quarter of 2024, reflecting an operational increase of $1.3 billion, or 10%, as well as a de minimis impact of foreign exchange. The operational increase was primarily driven by growth from the Vyndaqel family, Comirnaty, Paxlovid, Padcev, Eliquis, Abrysvo, Lorbrena and several other products despite the unfavorable impact of higher manufacturer discounts resulting from the IRA Medicare Part D Redesign, partially offset by a decline in Ibrance.

Total revenues increased $205 million, or 1%, in the first six months of 2025 to $28.4 billion from $28.2 billion in the first six months of 2024, reflecting an operational increase of $439 million, or 2%, partially offset by an unfavorable impact of foreign exchange of $234 million, or 1%. The operational increase was primarily driven by growth from the Vyndaqel family, Comirnaty, Padcev, Lorbrena, Xtandi, Elrexfio and several other products despite the unfavorable impact of higher manufacturer discounts resulting from the IRA Medicare Part D Redesign, partially offset by declines in Paxlovid and several other products.

See the Total Revenues by Geography and Total Revenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. Certain of our vaccines, including Comirnaty, are subject to seasonality of demand, with a greater portion of revenues anticipated in the fall and winter seasons, as well as potential changes in recommendation for vaccination, and Paxlovid revenues trend with infection rates. 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 13C.

Income/(loss) from Continuing Operations Before Provision/(Benefit) for Taxes on Income/(loss)––Income from continuing operations before provision/(benefit) for taxes on income was $3.0 billion in the second quarter of 2025, compared to a loss of $103 million in the second quarter of 2024, primarily due to higher revenues, a decrease in Restructuring charges and certain acquisition-related costsand net gains on equity securities versus net losses on equity securities in the second quarter of 2024, partially offset by an increase in Cost of sales.

The increase in Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss) of $2.5 billion, to $5.8 billion in the first six months of 2025 from $3.3 billion in the first six months of 2024, was primarily due to decreases in Selling, informational and administrative expenses, Restructuring charges and certain acquisition-related costs, Research and development expensesand net interest expense.

See the Analysis of the Condensed Consolidated Statements of Operations section within MD&A and Notes 3 and 4. For information on our tax provision and effective tax rate, see the Provision/(Benefit) for Taxes on Income/(Loss) 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 Constraintsand Item 1A. Risk Factors sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A of our 2024 Form 10-K.

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-based or regulatory exclusivity expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries in 2025 and anticipate a more significant impact of reduced revenues from patent-based or regulatory exclusivity expiries in 2026 through 2030 as several of our in-line products experience these 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 of our 2024 Form 10-K. For a discussion of recent developments with respect to patent litigation involving certain of our products, see Note 12A1.

Regulatory Environment/Pricing and Access––Government and Other Payor Group Pressures––Governments globally, as well as 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), quality consistency evaluation processes, clawbacks and volume-based procurement. 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 the U.S. government and states on regulating drug pricing and access to medicine, including but not limited to, the potential for international reference pricing, including Most-Favored-Nation (MFN) drug pricing. The drug pricing provisions of the IRA are being implemented over the next several years. In August 2023, CMS published 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. Eliquis was among the first ten medicines subject to the Medicare Drug Price Negotiation Program. In August 2024, the government released the new Medicare price for Eliquis, which, effective January 1, 2026, will be required to be offered to all Medicare beneficiaries and to covered entities participating in the 340B Program that dispense Eliquis to a Medicare beneficiary if that maximum fair price is lower than the discounted price such entities are offered under the 340B Program ceiling price calculation. The Eliquis Medicare price is factored into our long-term financial planning, in accordance with our standard financial reporting and forecasting protocols. On January 17, 2025, CMS announced the selection of another 15 drugs from Medicare Part D for the maximum fair price, with prices to be set and effective on January 1, 2027. Ibrance and Xtandi were included in the list of 15 drugs selected. Another 15 drugs from Medicare Part B or Medicare Part D will be selected by February 1, 2026, for the maximum price to be set and in effect by January 1, 2028. It is possible that more of our products could be selected in future years, which could, among other things, lead to lower revenues prior to expiry of intellectual property protections. 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. The IRA also made significant changes to the Medicare Part D benefit design (IRA Medicare Part D Redesign), which took effect beginning in 2025 and are impacting our revenues. In 2025, we expect a favorable impact from the $2,000 annual out-of-pocket cap and new Prescription Payment Plan, more than offset by an expected unfavorable impact from the sunsetting of the Coverage Gap Discount Program and the addition of new manufacturer discounts in the initial and catastrophic coverage phases, which we anticipate will have a net unfavorable impact to revenue in 2025 of approximately $1 billion, year-over-year. We expect a higher impact in the beginning of 2025, moderating through the remainder of the year, when compared to 2024. We expect these changes will more acutely impact our higher-priced medicines as they are expected to reach catastrophic coverage earlier in the year. 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 Organizationsand ––Government Regulation and Price Constraints and the Item 1A. Risk Factors––Pricing and Reimbursement sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A of our 2024 Form 10-K.

Policy/Regulatory Environment––New and potential policy, regulatory or other changes from the U.S. Presidential administration, Congress and states, including, among others, increased or new regulatory requirements, changes, delays or failure to receive recommendations, reimbursement and regulatory approvals and coverage for our vaccines and medicines could have a material adverse effect on our business, earnings, cash flows, liquidity and financial guidance.

Product Supply––We periodically encounter supply delays, disruptions and shortages, including due to voluntary product recalls and natural or man-made disasters. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, are evaluating their product portfolios for the potential presence or formation of nitrosamines and we are actively engaging with regulatory authorities on this topic. If nitrosamines are detected in products, this may lead to submission of comprehensive data packages to regulatory authorities to support discussions on the relevant intake limit for the product and potential impact on patient supply, and, in some instances, may lead to market action for such products. For example, in 2021, Pfizer recalled Chantix due to the presence of a nitrosamine, N-nitroso-varenicline, at or above acceptable intake limits communicated by various regulatory authorities. Following issuance of updated guidance on acceptable intake limits for N-nitroso-varenicline by regulatory authorities, Chantix has returned to market in certain international markets and may return to additional markets, including the U.S., in the future.

We have not seen a significant disruption of our supply chain in the first six months of 2025 and through the date of filing of this Form 10-Q, and all of our manufacturing sites globally have continued to operate at or near normal levels. We do not anticipate the availability of raw materials to have a significant impact on our operations in 2025, but are monitoring potential supply chain disruptions as a result of ongoing geopolitical and trade negotiations, which could, among other things, impact costs. We are continuing to monitor and implement mitigation strategies 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 of our 2024 Form 10-K.

Voluntary Withdrawal of Oxbryta––See the Product Developments section within MD&A.

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. See the Item 1A. Risk Factors—Global Operations section of our 2024 Form 10-K, as well as the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our 2024 Form 10-K.

Global Trade Environment––Issued or future executive orders or other new or changes in laws, regulations or policy regarding tariffs or other trade policy, could have a material adverse effect on our business, earnings, cash flows, liquidity and financial guidance. The actual impact of new tariffs on our business would be subject to a number of factors including, but not limited to, restrictions on trade, the effective date and duration of such tariffs, countries included in the scope of tariffs, changes to amounts of tariffs, and potential retaliatory tariffs or other retaliatory actions imposed by other countries. Strategies intended to help mitigate the potential impacts on our business in the short-term have been implemented. We are continuing to evaluate opportunities and developing plans which are intended to help mitigate the potential long-term impact of tariffs on our business and operations. See the Item 1A. Risk Factors—Global Operations section of our 2024 Form 10-K.

COVID-19––In response to COVID-19, we developed Paxlovid and collaborated with BioNTech to jointly develop Comirnaty. As part of our strategy for COVID-19, we are continuing to make significant investments in breakthrough science. 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 certain pediatric patients. See the Product Developments section within MD&A.

In 2025, for Comirnaty, we expect vaccination rates and market share in commercial markets and revenue phasing similar to 2024, primarily concentrated in the second-half of the year. We have assumed no material U.S. policy changes for our vaccines portfolio in 2025 for purposes of our financial guidance, but see the Item 1A. Risk Factors—U.S. Healthcare Regulation section of our 2024 Form 10-K for a description of risks and uncertainties that could impact revenue from our portfolio of vaccines.

In 2025, for Paxlovid, we expect most revenue to be generated through commercial channels. We also expect utilization for Paxlovid to follow infection rates and stable market share. In 2025, we expect a higher proportion of revenue to be delivered in the second-half of the year and revenues may fluctuate based on the timing, duration and severity of COVID-19 cases.

For additional information on risks associated with our COVID-19 products, as well as COVID-19 intellectual property disputes, see the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment––COVID-19 section of the MD&A of our 2024 Form 10-K, Item 1A. Risk Factors—COVID-19, —Intellectual Property Protection and—Third-Party Intellectual Property Claims sections of our 2024 Form 10-K, as well as Note 17C in our 2024 Form 10-K, and Note 12A1 and the Forward-Looking Information and Factors that May Affect Future Results section of this Form 10-Q.

SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

For a description of our significant accounting policies, see Note 1 in our 2024 Form 10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1D); Fair Value (Note 1E); Revenues (Note 1G); Long-Lived Assets (Note 1M); Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Note 1N); Tax Assets and Liabilities and Income Tax Contingencies (Note 1Q); Pension and Postretirement Benefit Plans (Note 1R); and Legal and Environmental Contingencies (Note 1S).

For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions section within MD&A of our 2024 Form 10-K. See also Note 1C in our 2024 Form 10-K for a discussion about the risks associated with estimates and assumptions.