PFIZER INC

Biopharma

Pfizer CentreOne

See the Item 1. Business—Patents and Other Intellectual Property Rights section of our 2024 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

Third Quarter of 2025 vs. Third Quarter of 2024 and First Nine Months of 2025 vs. First Nine Months of 2024

Cost of Sales

Cost of sales decreased $1.1 billion in the third quarter of 2025, primarily due to:

•a favorable change in sales mix of $760 million, driven by lower sales of Comirnaty and Paxlovid, including the non-recurrence of a charge recorded in the third quarter of 2024 that was included in the 50% gross profit split with BioNTech and applicable royalty expenses;

•a favorable revision of our estimate of accrued royalties; and

•a decrease of $230 million due to lower amortization from the step-up of acquired inventory,

partially offset by:

•a $260 million unfavorable impact of foreign exchange.

The decrease in Cost of sales as a percentage of revenues in the third quarter of 2025 was primarily due to the factors mentioned above.

Cost of sales decreased $1.1 billion in the first nine months of 2025, primarily due to:

•a decrease of $540 million due to lower amortization from the step-up of acquired inventory;

•the non-recurrence of charges in the first nine months of 2024 that were included in the 50% gross profit split with BioNTech and applicable royalty expenses; and

•net favorable revisions to our estimate of accrued royalties.

The decrease in Cost of sales as a percentage of revenues in the first nine months of 2025 was primarily due to all the factors discussed above, partially offset by the non-recurrence of the Paxlovid favorable final adjustment of $771 million recorded in the first quarter of 2024 to the estimated non-cash Paxlovid revenue reversal recorded in the fourth quarter of 2023 and unfavorable sales mix.

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 Overview of Our Performance, Operating Environment, Strategy and Outlook—The Global Economic Environment––COVID-19 section for information about our COVID-19 products.

Selling, Informational and Administrative Expenses

Selling, informational and administrative expenses decreased $59 million in the third quarter and $824 million in the first nine months of 2025, primarily reflecting focused investments and ongoing productivity improvements as part of our cost realignment program that drove:

•a decrease of $260 million in the third quarter and $720 million in the first nine months in marketing and promotional spend on various products; and

•lower spending of $85 million in the third quarter and $370 million in the first nine months in corporate enabling functions,

partially offset by:

•increases of $260 million in the third quarter and $235 million in the first nine months due to a favorable adjustment of U.S. healthcare reform fees recorded in the third quarter of 2024 primarily related to Paxlovid and Comirnaty.

Research and Development Expenses

Research and development expenses decreased $52 million in the third quarter and $556 million in the first nine months of 2025 primarily driven by a net decrease in spending of $90 million in the third quarter and $590 million in the first nine months due to pipeline focus and optimization including the expansion of our digital capabilities, as well as lower compensation-related expenses.

Acquired In-Process Research and Development Expenses

Acquired in-process research and development expenses increased $1.4 billion in the third quarter and in the first nine months of 2025 primarily driven by a $1.35 billion charge related to an in-licensing agreement with 3SBio.

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

Realigning Our Cost Base Program––This program is expected to deliver total net cost savings of approximately $5.7 billion through 2027. The total net cost savings are composed of: (i) net cost savings of $4.5 billion expected to be achieved by the end of 2025, most of which was achieved by year-end 2024, and (ii) our additional anticipated net cost savings of $1.2 billion, primarily in SI&A, expected to be achieved by the end of 2027. In addition, we expect cost savings of approximately $500 million from the expansion of this program in the first quarter of 2025 related to our R&D re-organization to be fully realized by the end of 2026, with the savings expected to be reinvested in R&D programs by the end of 2026.

Manufacturing Optimization Program––The first phase of this multi phased program is on track to deliver approximately $1.5 billion in net cost savings by the end of 2027, contributing savings in the third quarter of 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 3. 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. Long-term improvement in gross margin will remain a key focus for the Company over the next few years.

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 the end of 2026. The one-time costs to generate these synergies are expected to be approximately $1.7 billion, incurred primarily from 2023 through 2025.

Other (Income)/Deductions—Net

The unfavorable period-over-period change of $275 million in the third quarter of 2025 was primarily driven by (i) an intangible asset impairment charge in the third quarter of 2025, (ii) lower net gains on equity securities, (iii) the non-recurrence of equity method income in the third quarter of 2024 from our previous investment in Haleon and (iv) higher charges for certain legal matters, partially offset by (v) a non-recurrence of a charge in the third quarter of 2024 related to the expected sale of one of our facilities resulting from the discontinuation of our DMD program and (vi) lower net interest expense.

The unfavorable period-over-period change of $180 million for the first nine months of 2025 was primarily driven by (i) higher charges for certain legal matters, (ii) higher intangible asset impairments, (iii) net losses on equity securities in 2025 versus net gains on equity securities in 2024, (iv) the non-recurrence of a realized gain on the partial sale of our previous investment in Haleon recorded in the first quarter of 2024 and (v) the non-recurrence of equity method income from our previous investment in Haleon, partially offset by (vi) lower net interest expense and (vii) a non-recurrence of a charge in the third quarter of 2024 related to the expected sale of one of our facilities resulting from the discontinuation of our DMD program. See Note 4.