PFIZER INC

Biopharma

Pfizer CentreOne

See the Item 1. Business—Patents and Other Intellectual Property Rights section of our 2025 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 the primary indications or class of the selected products discussed above.

Costs and Expenses

Third Quarter of 2026 vs. Third Quarter of 2025 and First Nine Months of 2026 vs. First Nine Months of 2025

Cost of Sales

Cost of sales decreased $144 million in the third quarter of 2026, primarily due to:

•a $340 million favorable change in sales mix; and

•a $170 million favorable impact of foreign exchange,

•the non-recurrence of a favorable revision to our estimate of accrued royalties in the third quarter of 2025.

The decrease in Cost of sales as a percentage of revenues in the third quarter of 2026 was primarily due to the factors mentioned above.

Cost of sales increased $872 million in the first nine months of 2026, primarily due to:

•the non-recurrence of favorable revisions to our estimate of accrued royalties in the first nine months of 2025; and

•a $180 million unfavorable impact of foreign exchange,

•a $235 million favorable change in sales mix.

The increase in Cost of sales as a percentage of revenues in the first nine months of 2026 was primarily due to the non-recurrence of favorable revisions to our estimate of accrued royalties in the first nine months of 2025, partially offset by the favorable impact of changes in 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.

Selling, Informational and Administrative Expenses

Selling, informational and administrative expenses increased $93 million in the third quarter of 2026, primarily reflecting:

•an increase of $100 million in compensation-related expenses;

•an increase of $40 million due to a lower favorable adjustment of U.S. healthcare reform fees recorded in the third quarter of 2026 compared to the third quarter of 2025; and

•an increase of $20 million in implementation costs associated with our cost realignment program,

•a decrease of $80 million in marketing and promotional spend on various products from more targeted investments and ongoing productivity improvements.

Selling, informational and administrative expenses increased $19 million in the first nine months of 2026, primarily reflecting:

•an increase of $190 million in compensation-related expenses;

•a $100 million unfavorable impact of foreign exchange; and

•an increase of $95 million in implementation costs associated with our cost realignment program,

•lower spending of $190 million in corporate enabling functions; and

•a decrease of $120 million in marketing and promotional spend on various products from more targeted investments and ongoing productivity improvements.

Research and Development Expenses

Research and development expenses increased $469 million in the third quarter and $1.1 billion in the first nine months of 2026, primarily driven by:

•net increases in spending of $230 million and $610 million, respectively, in certain oncology and obesity product candidates, which was anticipated; and

•increases of $240 million and $300 million, respectively, in compensation-related expenses.

Acquired In-Process Research and Development Expenses

Acquired in-process research and development expenses decreased $722 million in the third quarter and $579 million in the first nine months of 2026, primarily reflecting a $650 million charge in the third quarter of 2026 related to an in-licensing and collaboration agreement with Innovent, compared to a $1.35 billion charge in the prior-year quarter 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––In the third quarter of 2026, we announced $1.0 billion of additional anticipated net cost savings associated with this program driven by further productivity enhancements from technology and simplification efforts across our commercial, R&D and enabling functions. These additional net savings are expected to further reduce costs in SI&A and be realized from 2027 through 2029. We previously announced that this program remains on track to deliver anticipated net cost savings of approximately $5.7 billion through 2026 ($5.1 billion achieved through 2025, and the remaining anticipated savings of $600 million, which are expected to be achieved by the end of 2026). With the additional anticipated savings, we now expect total net cost savings of approximately $6.7 billion from the program through 2029.

In addition, we have also achieved cost savings of approximately $500 million from our pipeline focus and optimization initiatives including the expansion of our digital capabilities, with the savings expected to be reinvested in R&D programs by the end of 2026.

Manufacturing Optimization Program––In the third quarter of 2026, we announced the next phase of this program designed to reduce our cost of goods sold. This phase is focused on network structure changes, product portfolio enhancements and additional operational efficiencies, and is expected to deliver additional savings of approximately $1.5 billion from 2027 through 2029. We previously announced that we remain on track to deliver anticipated net cost savings from the first phase of this program of approximately $1.5 billion by the end of 2027 (with approximately $1.3 billion of these net cost savings expected to be realized by the end of 2026). With the additional anticipated savings, we now expect total net cost savings of approximately $3.0 billion from the program through 2029.

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 Notes 3A and 3B. 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.

Metsera acquisition––In connection with our acquisition of Metsera, we are focusing our efforts on achieving an appropriate cost structure for the combined company. We expect to generate approximately $600 million 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 $700 million, incurred primarily from 2025 through 2027.

Other (Income)/Deductions—Net

The favorable period-over-period change of $229 million in the third quarter of 2026 was primarily driven by (i) the non-recurrence of an intangible asset impairment charge recorded in the third quarter of 2025, (ii) lower charges for certain legal matters, (iii) higher net gains on asset disposals and (iv) higher income from collaborations, out-licensing arrangements and sales of compound/product rights, partially offset by (v) net losses on equity securities in the third quarter of 2026 versus net gains on equity securities in the third quarter of 2025 and (vi) increases in fair value of our contingent consideration liabilities.

The unfavorable period-over-period change of $2.7 billion for the first nine months of 2026 was primarily driven by (i) intangible asset impairment charges, (ii) increases in fair value of our contingent consideration liabilities, and (iii) charges for certain legal matters, partially offset by (iv) a net gain in 2026 from the sale of our previous investment in ViiV. See Notes 4 and 7A.