Three Months Ended

(millions, except per common share data)

April 1, 
2007 

April 2, 
2006 

Revenues

$

12,474  

$

11,747 

Costs and expenses:

Cost of sales^(a)

1,887 

1,671 

Selling, informational and administrative expenses^(a)

3,361 

3,395 

Research and development expenses^(a)

1,665 

1,543 

Amortization of intangible assets

815 

825 

Acquisition-related in-process research and development charges

283 

-- 

Restructuring charges and acquisition-related costs

812 

299 

Other (income)/deductions - net

(402)

(256)

Income from continuing operations before provision for taxes on income and minority interests

4,053 

4,270 

Provision for taxes on income

689   

262 

Minority interests

3 

2 

Income from continuing operations

3,361 

4,006 

Discontinued operations:

Income from discontinued operations - net of tax

-- 

102 

Gains on sales of discontinued operations - net of tax

31 

3 

Discontinued operations - net of tax

31 

105 

Net income

$

3,392 

$

4,111 

Earnings per common share - basic:

Income from continuing operations

$

0.48 

$

0.55 

Discontinued operations - net of tax

-- 

0.01 

Net income

$

0.48 

$

0.56 

Earnings per common share - diluted:

Income from continuing operations

$

0.48 

$

0.55 

Discontinued operations - net of tax

-- 

0.01 

Net income

$

0.48 

$

0.56 

Weighted-average shares used to calculate earnings per common share:

Basic

7,051 

7,314 

Diluted

7,075 

7,348 

Cash dividends paid per common share

$

0.29 

$

0.24 

^(a)

Exclusive of amortization of intangible assets, except as disclosed in Note 10B. Goodwill and Other Intangible Assets: Other Intangible Assets.

(millions of dollars)

April 1, 
2007*

Dec. 31, 
2006**

ASSETS

Cash and cash equivalents

$

2,492 

$

1,827 

Short-term investments

19,978 

25,886 

Accounts receivable, less allowance for doubtful accounts

10,455 

9,392 

Short-term loans

462 

514 

Inventories

5,694 

6,111 

Prepaid expenses and taxes

3,231 

3,157 

Assets of discontinued operations and other assets held for sale

25 

62 

Total current assets

42,337 

46,949 

Long-term investments and loans

4,817 

3,892 

Property, plant and equipment, less accumulated depreciation

16,481 

16,632 

Goodwill

20,911 

20,876 

Identifiable intangible assets, less accumulated amortization

23,501 

24,350 

Other assets, deferred taxes and deferred charges

2,436 

2,138 

Total assets

$

110,483 

$

114,837 

LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term borrowings, including current portion of long-term debt

$

2,638 

$

2,434 

Accounts payable

2,037 

2,019 

Dividends payable

2 

2,055 

Income taxes payable

533 

6,466 

Accrued compensation and related items

1,679 

1,903 

Other current liabilities

6,412 

6,510 

Liabilities of discontinued operations and other liabilities held for sale

-- 

2 

Total current liabilities

13,301 

21,389 

Long-term debt

4,771 

5,546 

Pension benefit obligations

3,387 

3,632 

Postretirement benefit obligations

1,967 

1,970 

Deferred taxes

7,363 

8,015 

Other taxes payable

4,568 

-- 

Other noncurrent liabilities

2,638 

2,927 

Total liabilities

37,995 

43,479 

Shareholders' Equity

Preferred stock

124 

141 

Common stock

441 

441 

Additional paid-in capital

69,209 

69,104 

Employee benefit trust, at fair value

(583)

(788)

Treasury stock

(49,255)

(46,740)

Retained earnings

53,063 

49,669 

Accumulated other comprehensive income

(511)

(469)

Total shareholders' equity

72,488 

71,358 

Total liabilities and shareholders' equity

$

110,483 

$

114,837 

Three Months Ended

(millions of dollars)

April 1, 
2007 

April 2, 
2006 

Operating Activities:

Net income

$

3,392 

$

4,111

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

1,271 

1,351

Share-based compensation expense

141 

172

Acquisition-related in-process research and development charges

283 

-- 

Gains on disposal of investments, products and product lines

(10)

(77)

Income from discontinued operations

-- 

155 

Gains on sales of discontinued operations

(40)

(5)

Deferred taxes from continuing operations

(268)

(309)

Other deferred taxes

-- 

(5)

Other non-cash adjustments

61 

26 

Changes in assets and liabilities (net of businesses acquired and divested)

(3,587)

(1,458)

Net cash provided by operating activities

1,243 

3,961 

Investing Activities:

Purchases of property, plant and equipment

(329)

(418)

Purchases of short-term investments

(5,617)

(2,735)

Proceeds from redemptions of short-term investments

11,819 

10,438 

Purchases of long-term investments

(1,158)

(216)

Proceeds from redemptions of long-term investments

5 

4 

Purchases of other assets

(2)

(35)

Proceeds from sales of other assets

-- 

3 

Proceeds from the sales of businesses, products and product lines

7 

7 

Acquisitions, net of cash acquired

(463)

(1,440)

Other investing activities

9 

(177)

Net cash provided by investing activities

4,271 

5,431 

Financing Activities:

Increase in short-term borrowings, net

162 

826 

Principal payments on short-term borrowings

(729)

(8,056)

Proceeds from issuances of long-term debt

19 

1,035 

Principal payments on long-term debt

(58)

(1)

Purchases of common stock

(2,500)

(1,000)

Cash dividends paid

(2,032)

(1,743)

Stock option transactions and other

290 

173 

Net cash used in financing activities

(4,848)

(8,766)

Effect of exchange-rate changes on cash and cash equivalents

(1)

(4)

Net increase/(decrease) in cash and cash equivalents

665 

622 

Cash and cash equivalents at beginning of period

1,827 

2,247 

Cash and cash equivalents at end of period

$

2,492 

$

2,869 

Supplemental Cash Flow Information:

Cash paid during the period for:

Income taxes

$

2,424 

$

640 

Interest

170 

213 

First Quarter

(in millions)

April 1, 
2007 

April 2, 
2006 

Revenues

$

-- 

$

919 

Pre-tax income

$

-- 

$

155 

Provision for taxes on income

-- 

(53)

Income from operations of discontinued businesses - net of tax

-- 

102 

Pre-tax gains on sales of discontinued businesses

40 

5 

Provision for taxes on gains

(9)

(2)

Gains on sales of discontinued operations - net of tax

31 

3 

Discontinued operations - net of tax

$

31 

$

105 

First Quarter

(millions of dollars)

April 1,
2007

April 2,
2006

Implementation costs^(a)

$

174 

$

185

Restructuring charges^(b)

795 

294

Total AtS costs

$

969 

$

479

^(a)

For the first quarter of 2007, included in Cost of sales ($94 million), Selling, informational and administrative expenses ($49 million), and Research and development expenses ($31 million). For the first quarter of 2006, included in Cost of sales ($124 million), Selling, informational and administrative expenses ($39 million) and Research and development expenses ($22 million).

^(b)

Included in Restructuring charges and acquisition-related costs.

^(a)

Included in Other current liabilities and Other noncurrent liabilities.

First Quarter

(millions of dollars)

April 1, 2007

April 2, 2006

Net income

$

3,392 

$

4,111 

Other comprehensive income/(expense):

Currency translation adjustment and other

(128)

 310 

Net unrealized gains/(losses) on derivative financial instruments

9 

71 

Net unrealized gains/(losses) on available-for-sale securities

(4)

3 

Benefit plan adjustments

81  

(12)

Total other comprehensive income/(expense)

(42)

372 

Total comprehensive income

$

3,350 

$

4,483 

Instrument^(a)

Primary
Balance Sheet
Caption

^(b)

Hedge
Type

^(c)

Hedged or Offset Item

Notional Amount as of
April 1, 2007
(millions of dollars)

Maturity Date

Forward

Prepaid

CF

Yen available-for-sale investments

$ 1,607            

2007

Forward

OCL

--

Short-term foreign currency assets and liabilities^(d)

1,385            

2007

Forward

Prepaid

CF

Swedish available-for-sale investments

565            

2007

Forward

OCL

CF

Euro available-for-sale investments

459            

2007

^(a)

Forward = Forward-exchange contracts.

^(b)

The primary balance sheet caption indicates the financial statement classification of the fair value amount associated with the financial instrument used to hedge foreign exchange risk. The abbreviations used are defined as follows: Prepaid = Prepaid expenses and taxes and OCL = Other current liabilities.

^(c)

CF = Cash flow hedge.

^(d)

Forward-exchange contracts used to offset short-term foreign currency assets and liabilities are primarily for intercompany transactions in euros, Japanese yen, U.K. pounds, Canadian dollars and Australian dollars.

Instrument

Primary
Balance Sheet
Caption

^(a)

Hedge
Type

^(b)

Hedged Item

Notional Amount as of
April 1, 2007
(millions of dollars)

Maturity Date

Swaps

ONCL

CF

Available-for-sale investments

$ 646            

2009

^(a)

The primary balance sheet caption indicates the financial statement classification of the fair value amount associated with the financial instrument used to hedge interest rate risk. The abbreviation used is defined as follows: ONCL = Other noncurrent liabilities.

^(b)

CF = Cash flow hedge.

(millions of dollars)

April 1,
2007

Dec. 31,
2006

Finished goods

$

1,793

$

1,651

Work-in-process

2,766

3,198

Raw materials and supplies

1,135

1,262

Total inventories

$

5,694

$

6,111

(millions of dollars)

Pharmaceutical 

Animal 
Health 

Other 

Total

Balance, December 31, 2006

$

20,798 

$

61 

$

17 

$

20,876

Additions^(a)

-- 

33 

-- 

33

Other^(b)

2 

-- 

-- 

2

Balance, April 1, 2007

$

20,800 

$

94 

$

17 

$

20,911

^(a)

Primarily related to Embrex, Inc.

^(b)

Includes adjustments for certain purchase accounting liabilities and the impact of foreign exchange.

April 1, 2007

Dec. 31, 2006

(millions of dollars)

Gross 
Carrying 
Amount 

Accumulated 
Amortization 

Gross 
Carrying 
Amount 

Accumulated 
Amortization 

Finite-lived intangible assets:

Developed technology rights

$

32,712 

$

(13,199)

$

32,769 

$

(12,423)

Brands

1,016 

(425)

888 

(417)

License agreements

189 

(46)

189 

(41)

Trademarks

114 

(73)

113 

(73)

Other^(a)

511 

(274)

508 

(266)

Total amortized finite-lived intangible assets

34,542 

(14,017)

34,467 

(13,220)

Indefinite-lived intangible assets:

Brands

2,864 

-- 

2,991 

-- 

Trademarks

77 

-- 

77 

-- 

Other^(b)

35 

-- 

35 

-- 

Total indefinite-lived intangible assets

2,976 

-- 

3,103 

-- 

Total identifiable intangible assets

$

37,518 

$

(14,017)

$

37,570 

$

(13,220)

Total identifiable intangible assets, less accumulated amortization

$

23,501

$

24,350

^(a)

Includes patents, non-compete agreements, customer contracts and other intangible assets.

^(b)

Includes pension-related intangible assets.

Pension Plans

U.S. Qualified

U.S. Supplemental
(Non-Qualified)

International

Postretirement Plans

(millions of dollars)

2007 

2006 

2007

2006

2007 

2006  

2007 

2006 

Service cost

$

77 

$

94 

$

7 

$

11 

$

73 

$

74 

$

11 

$

12 

Interest cost

123 

112 

14 

15 

86 

74 

34 

32 

Expected return on plan assets

(190)

(161)

--  

-- 

(94)

(77)

(9)

(8)

Amortization of:

Actuarial losses

20 

31

12 

11

24 

26 

12 

9 

Prior service costs/(credits)

3 

2 

(1)

-- 

-- 

-- 

-- 

-- 

Curtailments and settlements - net

9 

4 

7 

(1)

(100)

2 

2 

3 

Special termination benefits

3 

6 

-- 

-- 

3 

4 

4 

3 

Less: amounts included in discontinued operations

--  

(4)

-- 

-- 

-- 

(4)

-- 

(1)

Net periodic benefit costs

$

45 

$

84 

$

39 

$

36

$

(8)

$

99 

$

54 

$

50 

First Quarter

(millions of dollars)

April 1, 
2007 

April 2, 
2006 

Stock option expense

$

103 

$

120 

Restricted stock unit expense

54 

40 

Performance share awards and performance-contingent share awards expense

(16)

12 

Share-based payment expense

141 

172 

Tax benefit for share-based compensation expense

(41)

(48)

Share-based payment expense, net of tax

$

100 

$

124 

First Quarter

(millions)

April 1, 
2007 

April 2, 
2006 

EPS Numerator - Basic:

Income from continuing operations

$

3,361

$

4,006

Less:  Preferred stock dividends - net of tax

1

1

Income available to common shareholders from continuing operations

3,360

4,005

Discontinued operations - net of tax

31

105

Net income available to common shareholders

$

3,391

$

4,110

EPS Denominator - Basic:

Weighted-average number of common shares outstanding

7,051

7,314

EPS Numerator - Diluted:

Income from continuing operations

$

3,361

$

4,006

Less:  ESOP contribution - net of tax

1

1

Income available to common shareholders from continuing operations

3,360

4,005

Discontinued operations - net of tax

31

105

Net income available to common shareholders

$

3,391

$

4,110

EPS Denominator - Diluted:

Weighted-average number of common shares outstanding

7,051 

7,314 

Common share equivalents: stock options, restricted stock units, stock issuable under employee compensation plans and convertible preferred stock

24

34

Weighted-average number of common shares outstanding and common share equivalents

7,075

7,348

•

The Pharmaceutical segment includes products that prevent and treat cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye disease, endocrine disorders and allergies.

•

The Animal Health segment includes products that prevent and treat diseases in livestock and companion animals.

First Quarter

(millions of dollars)

April 1, 
2007 

April 2, 
2006 

Revenues:

Pharmaceutical

$

11,581 

$

11,017 

Animal Health

586 

511 

Corporate/Other^(a)

307 

219 

Total revenues

$

12,474 

$

11,747 

Segment profit/(loss)^(b)

Pharmaceutical

$

6,480 

$

5,954 

Animal Health

137 

109 

Corporate/Other^(a)

(2,564)

^(c)

(1,793)

^(d)

Total profit/(loss)

$

4,053 

$

4,270 

^(a)

Corporate/Other includes our gelatin capsules business, our contract manufacturing business and a bulk pharmaceutical chemicals business, and transition activity associated with our former Consumer Healthcare business (sold in December 2006). Corporate/Other also includes interest income/(expense), corporate expenses (e.g., corporate administration costs), other income/(expense) (e.g., realized gains and losses attributable to our investments in debt and equity securities), certain performance-based and all share-based compensation expenses, significant impacts of purchase accounting for acquisitions, certain milestone payments, acquisition-related costs, intangible asset impairments and costs related to our AtS productivity initiative.

^(b)

Segment profit/(loss) equals income from continuing operations before provision for taxes on income and minority interests. Certain costs, such as significant impacts of purchase accounting for acquisitions, acquisition-related costs, costs related to our AtS productivity initiative and transition activity associated with our former Consumer Healthcare business, are included in Corporate/Other only. This methodology is utilized by management to evaluate our businesses.

^(c)

For the first quarter of 2007, Corporate/Other includes (i) significant impacts of purchase accounting for acquisitions of $1.1 billion, including acquired in-process research and development, intangible asset amortization and other charges, (ii) acquisition-related costs of $17 million, (iii) restructuring charges and implementation costs associated with the AtS productivity initiative of $969 million, (iv) all share-based compensation expense, and (v) transition activity associated with our former Consumer Healthcare business ($9 million income).

^(d)

For the first quarter of 2006, Corporate/Other includes (i) significant impacts of purchase accounting for acquisitions of $810 million, including intangible asset amortization and other charges, (ii) acquisition-related costs of $5 million, (iii) restructuring charges and implementation costs associated with the AtS productivity initiative of $479 million, (iv) gains on disposals of investments and other of $51 million and (v) a research and development milestone due to us from sanofi-aventis of approximately $118 million.

First Quarter

(millions of dollars)

April 1,
2007

April 2,
2006

% 
Change 

PHARMACEUTICAL

Cardiovascular and metabolic diseases

$

5,155

$

4,748

9%

Central nervous system disorders

1,245

1,644

(24)  

Arthritis and pain

749

641

17   

Infectious and respiratory diseases

913

937

(3)  

Urology

751

663

13   

Oncology

595

470

27   

Ophthalmology

366

337

9   

Endocrine disorders

245

246

(0)  

All other

1,164

1,007

16   

Alliance revenues

398

324

23   

Total Pharmaceutical

11,581

11,017

5   

ANIMAL HEALTH

586

511

15   

OTHER

307

219

40   

Total revenues

$

12,474

$

11,747

6   

•

Overview of Our Performance and Operating Environment. This section, beginning on page 20, provides information about the following: our business; our first-quarter 2007 performance; our response to recent challenges and opportunities in our operating environment; our strategic initiatives, such as acquisitions; and our productivity and cost savings program.

•

Revenues. This section, beginning on page 22, provides an analysis of our products and revenues for the first quarters of 2007 and 2006, as well as an overview of important product developments.

•

Costs and Expenses. This section, beginning on page 31, provides a discussion about our costs and expenses.

•

Provision for Taxes on Income. This section, beginning on page 32, provides a discussion of items impacting our tax provision for the periods presented.

•

Adjusted Income. This section, beginning on page 33, provides a discussion of an alternative view of performance used by management.

•

Financial Condition, Liquidity and Capital Resources. This section, beginning on page 37, provides an analysis of our balance sheets as of  April 1, 2007, and December 31, 2006, and cash flows for the first quarters of 2007 and  2006, as well as a discussion of our outstanding debt and commitments that existed as of April 1, 2007, and December 31, 2006. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer's future activities.

•

Outlook. This section, beginning on page 40, provides a discussion of our expectations for full-year 2007 and 2008.

•

Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 41, provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements set forth in this MD&A relating to our financial results, operations and business plans and prospects. Such forward-looking statements are based on management's current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances. Also included in this section is a discussion of Legal Proceedings and Contingencies.

First Quarter

(millions of dollars, except per common share data)

April 1, 
2007 

April 2, 
2006 

% Change

Revenues

$

12,474 

$

11,747 

6%

Cost of sales

1,887 

1,671 

13   

% of revenues

15.1 

%

14.2 

%

Selling, informational and administrative expenses

3,361 

3,395 

(1)  

% of revenues

26.9 

%

28.9 

%

Research and development expenses

1,665 

1,543 

8   

% of revenues

13.3 

%

13.1 

%

Amortization of intangible assets

815 

825 

(1)  

% of revenues

6.5 

%

7.0 

%

Acquisition-related in-process research and development charges

283 

-- 

*  

% of revenues

2.3 

%

*

Restructuring charges and acquisition-related costs

812 

299 

172  

% of revenues

6.5 

%

2.5 

%

Other (income)/deductions - net

(402)

(256)

56   

Income from continuing operations before provision for taxes on income and minority interests

4,053 

4,270 

(5)   

% of revenues

32.5 

%

36.3 

%

Provision for taxes on income

689 

262 

163   

Effective tax rate

17.0 

%

6.1 

%

Minority interests

3 

2 

28   

Income from continuing operations

3,361 

4,006 

(16)  

% of revenues

26.9 

%

34.1 

%

Discontinued operations - net of tax

31 

105 

(70)  

Net income

$

3,392 

$

4,111 

(18)  

% of revenues

27.2 

%

35.0 

%

Earnings per common share - basic:

Income from continuing operations

$

0.48 

$

0.55 

(13)  

Discontinued operations - net of tax

-- 

0.01 

*   

Net income

$

0.48 

$

0.56 

(14)  

Earnings per common share - diluted:

Income from continuing operations

$

0.48 

$

0.55 

(13)  

Discontinued operations - net of tax

-- 

0.01 

*   

Net income

$

0.48 

$

0.56 

(14)  

Cash dividends paid per common share

$

0.29 

$

0.24 

*  Calculation not meaningful

•

In the U.S., an appellate court decision that was contrary to three previous trial court rulings in Pfizer's favor led to the loss of exclusivity for Norvasc in the first quarter of 2007, six months earlier than expected. Although we strongly disagreed with this court decision, we responded immediately to mitigate losses by launching our own generic version of Norvasc. In addition, we continue to pursue all available legal remedies to seek to protect Norvasc through the six-month pediatric exclusivity period that expires in September 2007.

•

In Canada, a lower-court decision against Pfizer has created uncertainty regarding Lipitor's patent protection in Canada. We have appealed that decision.

•

In April 2007, we agreed with OSI Pharmaceuticals, Inc. (OSI) to terminate a 2002 collaboration agreement to co-promote Macugen, for the treatment of age-related macular degeneration, in the U.S. We also agreed to amend and restate a 2002 license agreement for Macugen, and to return to OSI all rights to develop and commercialize Macugen in the U.S. In return, OSI granted us an exclusive right to develop and commercialize Macugen in the rest of the world.

•

In the first quarter of 2007, we acquired BioRexis Pharmaceutical Corp., a privately held biopharmaceutical company with a number of diabetes candidates and a novel technology platform for developing new protein drug candidates and Embrex, Inc., an animal health company that possesses a unique vaccine delivery system known as Inovoject, which enables baby chicks to be vaccinated while inside their eggs. In connection with these and other small acquisitions, we recorded $283 million in Acquisition-related in-process research and development charges.

•

In February 2006, we completed the acquisition of the sanofi-aventis worldwide rights, including patent rights and production technology, to manufacture and sell Exubera, an inhaled form of insulin for use in adults with type 1 and type 2 diabetes, and the insulin-production business and facilities located in Frankfurt, Germany, previously jointly owned by Pfizer and sanofi-aventis, for approximately $1.4 billion in cash (including transaction costs). In connection with the acquisition, as part of our final purchase price allocation, we recorded $1.0 billion of developed technology rights, $218 million of inventory and $166 million of Goodwill, all of which have been allocated to our Pharmaceutical segment. The amortization of the developed technology rights is primarily included in Cost of sales. Prior to the acquisition, in connection with our collaboration agreement with sanofi-aventis, we recorded a research and development milestone due to us from sanofi-aventis of approximately $118 million ($71 million, after tax) in the first quarter of 2006 in Research and development expenses upon the approval of Exubera in January 2006 by the Food and Drug Administration (FDA).

First Quarter

% Change in Revenues

Worldwide

U.S.

International

World-

Inter-

April 1,

April 2,

April 1,

April 2,

April 1,

April 2,

wide

U.S.

national

(millions of dollars)

2007

2006

2007

2006

2007

2006

07/06

07/06

07/06

Pharmaceutical

$

11,581

$

11,017

$

6,468

$

6,312

$

5,113

$

4,705

5

2

9

Animal Health

586

511

264

229

322

282

15

15

14

Other

307

219

118

76

189

143

40

55

32

Total Revenues

$

12,474

$

11,747

$

6,850

$

6,617

$

5,624

^(a)

$

5,130

^(a)

6

4

10

(a)

Includes revenues from Japan of $752 million (6.0% of total revenues) and $711 million (6.1% of total revenues) for the first quarters of 2007 and 2006.

•

the solid aggregate performance of our broad portfolio of patent-protected medicines;

•

an aggregate year-over-year increase in revenues from new products launched since 2005 of approximately $456 million for the first quarter of 2007; and

•

a decrease in  rebates of approximately $144 million in both our government and non-government contracted businesses in the U.S., reflecting the continued impact of the Medicare Act, effective January 1, 2006, changes in product mix and the impact of our contracting strategies,

•

a decrease in revenues for Norvasc of $114 million, primarily due to the loss of U.S. exclusivity in the first quarter of 2007;

•

a continued decrease in revenues for Zoloft, primarily due to the loss of U.S. exclusivity in June 2006 and also due to the earlier loss of exclusivity in many European markets, of $633 million for the first quarter of 2007; and

•

a continued negative impact on revenues caused by the loss of U.S. exclusivity for Zithromax in November 2005 of $119 million for the first quarter of 2007.

•

in the U.S., Pharmaceutical revenues increased 2% in the first quarter of 2007 compared to the same period in 2006, primarily due to revenues from new products, as well as growth in Lipitor and Celebrex sales, and lower rebates in both our government and non-government contracted businesses in the U.S., reflecting the continued impact of the Medicare Act, changes in product mix and the impact of our contracting strategies, partially offset by the effect of the loss of exclusivity of Zithromax, Zoloft and Norvasc; and

•

in our international markets, Pharmaceutical revenues increased 9% in the first quarter of  2007 compared to the same period in 2006, primarily due to revenues from our new products, as well as growth in Lipitor and Celebrex sales, and the favorable impact of foreign exchange on revenues of $245 million (5.2%), partially offset by lower revenues from Zoloft and Zithromax due to the effect of the loss of exclusivity in many key international markets.

First Quarter

(millions of dollars)
Product

Primary Indications

April 1, 
2007 

%
Change
from
2006

Cardiovascular and
metabolic diseases:

Lipitor

Reduction of LDL cholesterol

$3,358 

8%

Norvasc

Hypertension

1,069 

(10)  

Chantix/Champix

Smoking cessation

162 

*  

Caduet

Reduction of LDL cholesterol and hypertension

146 

89   

Cardura

Hypertension/Benign prostatic hyperplasia

134 

6   

Central nervous
system disorders:

Lyrica

Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy

395 

106   

Geodon/Zeldox

Schizophrenia and acute manic or mixed episodes associated with bipolar disorder

216 

18   

Zoloft

Depression and certain anxiety disorders

146 

(81)  

Neurontin

Epilepsy and post-herpetic neuralgia

110 

(14)  

Aricept^(a)

Alzheimer's disease

85 

4   

Relpax

Migraine headaches

83 

26   

Xanax/Xanax XR

Anxiety/Panic disorders

75 

(8)  

Arthritis and pain:

Celebrex

Arthritis pain and inflammation, acute pain

598 

22   

Infectious and
respiratory diseases:

Zyvox

Bacterial infections

258 

39   

Vfend

Fungal infections

148 

26   

Zithromax/Zmax

Bacterial infections

131 

(49)  

Diflucan

Fungal infections

111 

4   

Urology:

Viagra

Erectile dysfunction

434 

11   

Detrol/Detrol LA

Overactive bladder

303 

17   

Oncology:

Camptosar

Metastatic colorectal cancer

229 

8    

Sutent

Advanced and/or metastatic renal cell carcinoma (mRCC) and refractory gastrointestinal stromal tumors (GIST)

102 

529   

Aromasin

Breast cancer

93 

33   

Ophthalmology:

Xalatan/Xalacom

Glaucoma and ocular hypertension

360 

7   

Endocrine disorders:

Genotropin

Replacement of human growth hormone

201 

2   

All other:

Zyrtec/Zyrtec-D

Allergies

461 

10   

Alliance revenues:

Aricept, Macugen, Mirapex, Olmetec, Rebif and Spiriva

Alzheimer's disease (Aricept), neovascular (wet) age-related macular degeneration (Macugen), Parkinson's disease (Mirapex), hypertension (Olmetec), multiple sclerosis (Rebif), chronic obstructive pulmonary disease (Spiriva)

398 

23   

^(a)

 Represents direct sales under license agreement with Eisai Co., Ltd.

*

 Calculation not meaningful.

Certain amounts and percentages may reflect rounding adjustments.

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Lipitor, for the treatment of elevated LDL-cholesterol levels in the blood, is the most widely used treatment for lowering cholesterol and the best-selling pharmaceutical product of any kind in the world, reaching about $3.4 billion in worldwide revenues in the first quarter of 2007, an increase of 8% compared to the same period in 2006. In the U.S., revenues of $2.1 billion represent growth of 8% over the previous year's first quarter. Internationally, Lipitor revenues in the first quarter of 2007 increased 8% compared to the same period in 2006.

The growth in Lipitor revenues was driven by a combination of factors, including pricing, lower rebates, U.S. statin market growth, and the favorable impact of foreign exchange, partially offset by a decline in U.S. Lipitor prescriptions. Lipitor revenue growth in the U.S. was also favorably impacted by 3%, as a result of wholesalers maintaining normal inventory levels in the first quarter of 2007, compared to lower levels in the first quarter of 2006. In the U.S., the volume of patients who switched from Lipitor to generic simvastatin following the entry of multiple generics was slightly greater than we had predicted, particularly in the managed-care environment. Toward the end of the quarter, there was some evidence that new prescriptions in the U.S. for Lipitor may be stabilizing. Over the next quarter, our focus will be on bringing Lipitor's switch rate volume back to 2006 levels. We have implemented comprehensive plans that we believe will strengthen Lipitor's market position, including physician and patient initiatives aimed at reducing the rate of switches to generics. In light of the interplay of prescription trends, market growth assumptions, branded and generic competitive dynamics, and payer pressures, we now project full-year 2007 worldwide revenue performance for Lipitor within a range of modest growth to a modest decline.

On March 5, 2007, Lipitor was approved by the FDA for five new indications in patients with clinically evident heart disease, thereby expanding the U.S. label from primary prevention in moderate-risk patients to include secondary prevention in high-risk patients. Lipitor is now the only cholesterol-lowering medicine approved for the reduction in risk of hospitalization due to heart failure. These new indications have been incorporated into promotional materials, including a new direct-to-consumer (DTC) advertising campaign, and support the incremental benefit and overall safety of using higher doses of Lipitor.

Emerging real-world data also support the value of Lipitor. In an analysis of a large U.S. managed-care database that was presented at the American Heart Association's 47th Annual Conference on Cardiovascular Disease Epidemiology and Prevention in March 2007, Lipitor patients achieved a significant 14% reduction in the risk of cardiovascular events, compared with patients taking simvastatin, even after adjustments for expected differences of Lipitor and simvastatin LDL lowering based on dose. These findings provide physicians with additional support as they make treatment decisions to achieve improved and cost-effective cardiovascular outcomes for their patients.

Patents protecting Lipitor in Canada are being challenged by various generic companies. One of those companies has been successful at the lower-court level, and we have appealed that decision, which we believe was wrongly decided. Lipitor sales in Canada would be adversely affected by generic competition if the Canadian courts or regulatory authorities allow generic competition in Canada before the expiration of our Lipitor patents. See Part II, Other Information; Item 1, Legal Proceedings, of this Form 10-Q for a discussion of certain patent litigation relating to Lipitor.

•

Norvasc, for treating hypertension, lost exclusivity in the U.S. in March 2007, six months earlier than expected, due to an appellate court decision that was counter to three previous trial court rulings in Pfizer's favor. Norvasc has also experienced patent expirations in many E.U. countries but maintains exclusivity in certain other  major markets, including Japan, Canada and Australia. Norvasc worldwide revenues in the first quarter of 2007 decreased 10% from the same period in 2006. See Part II, Other Information; Item 1, Legal Proceedings, of this Form 10-Q for a discussion of certain patent litigation relating to Norvasc.

•

Caduet, a single pill therapy combining Norvasc and Lipitor, recorded worldwide revenues of $146 million, an increase of 89% for the first quarter of 2007, compared to the same period in 2006. This was largely driven by a more focused message platform and a highly targeted consumer campaign in the U.S. Caduet was launched in the U.S. in May 2004 and continues to grow at significantly higher rates than the overall U.S. cardiovascular market, but with introduction of generic amlodipine besylate, in addition to increased competition, growth over the next several quarters may be impacted. During the first quarter of 2007, Caduet was launched in France, Australia and Taiwan. We now expect Caduet to launch in Spain in early 2008. See Part II, Other Information; Item 1, Legal Proceedings, of this Form 10-Q for a discussion of certain recent patent litigation relating to Caduet.

•

Chantix/Champix, the first new prescription treatment for smoking cessation in nearly a decade, became available to patients in the U.S. in August 2006, in select E.U. markets in December 2006 and in Canada in April 2007. Chantix/Champix is performing better than expected and continues to demonstrate strong uptake, with more than 100,000 new prescriptions worldwide per week in March 2007. In the U.S., an unbranded advertising campaign introduced earlier in 2007 is working to effectively develop the market, and branded advertising is planned for the third quarter of 2007. Our strategy for this innovative medicine is to build a sustainable, medically supported market over time and to seek to secure reimbursement--initiatives that we believe will drive future growth. Chantix/Champix recorded worldwide revenues of $162 million in the first quarter of 2007.

•

Exubera, the first inhaled human insulin therapy for glycemic control, received approvals from both the FDA and the European Commission for the treatment of adults with type 1 and type 2 diabetes in early 2006. Exubera represents a medical advance that offers patients a novel method of introducing insulin into their systems through the lungs. Since May 2006, Exubera has been launched in Germany, Ireland, the U.K. and in the U.S. Initial supplies of Exubera were available across the U.S. beginning in September 2006. We have been disappointed with the slow acceptance of Exubera. We find that more extensive market-development activities are now necessary. In response, we will apply our market experience from the past six months to seek to accelerate uptake of Exubera in 2007 and beyond with new field-force efforts in the U.S., educational outreach to physicians and a consumer advertising campaign. In addition, beginning in April 2007, we are now supporting Exubera with a sales force that has greater cardiovascular-related experience. We have also trained a number of diabetes educators, who are now in the field, engaging in clinical discussions to deliver the practical clinical guidance needed by physicians to help them understand the benefits of this innovative insulin-delivery system. These resources are in direct response to our customers' need for increased support in using a novel delivery device. Finally, we also plan to initiate branded direct-to-consumer advertising in mid-summer for Exubera in the U.S. We will continue to monitor the performance of Exubera, while we seek to effectively establish this important product and serve the millions of diabetics whose blood sugar is still uncontrolled on current therapy.

•

Zoloft, which lost exclusivity in the U.S. in June 2006 and earlier in many European markets, experienced an 81% worldwide revenue decline in the first quarter of 2007, compared to the same period in 2006. It is indicated for the treatment of major depressive disorder, panic disorder, obsessive-compulsive disorder (OCD) in adults and children, post-traumatic stress disorder (PTSD), premenstrual dysphoric disorder (PMDD) and social anxiety disorder (SAD). Zoloft is approved for acute and long-term use in all of these indications, with the exception of PMDD. Zoloft was launched in Japan in July 2006 for the indications of depression/depressed state and panic disorder.

On May 2, 2007, the FDA proposed that the existing blackbox warning on the labels of all antidepressants, including Zoloft, which describes an increased risk of suicidal thoughts and behavior in some children and adolescents, be expanded to include young adults to age 24, particularly during the first two months of treatment. The proposed label change also states that studies have not shown this increased risk in adults older than 24, that adults age 65 and older who are treated with antidepressants have a decreased risk of suicidal thoughts and behavior, and that depression and certain other psychiatric disorders are themselves the most important causes of suicide. We will implement this label change in accordance with the FDA's proposal. There is no established causal link between Zoloft and suicide or suicide attempt in adults, young adults or children.

•

Geodon/Zeldox, a psychotropic agent, is a dopamine and serotonin receptor antagonist indicated for the treatment of schizophrenia and acute manic or mixed episodes associated with bipolar disorder. It is available in both an oral capsule and rapid-acting intramuscular formulation. In the U.S., Geodon had a new prescription share of 6.8% for March 2007. In the first quarter of 2007, Geodon worldwide revenues grew 18%, compared to the same period in 2006. Geodon growth was driven by recognition of its efficacy by prescribers as clinical experience increased, and by a favorable metabolic profile.

•

Lyrica achieved $395 million in worldwide revenues in the first quarter of 2007, an increase of 106% over the same period in 2006, continuing its performance as one of Pfizer's most successful pharmaceutical launches. In September 2006, Lyrica was approved by the European Commission to treat central nerve pain, which is associated with conditions such as spinal injury, stroke and multiple sclerosis. In addition, in March 2006, it was approved by the European Commission to treat generalized anxiety disorder (GAD) in adults, thereby providing a new treatment option for the approximately 12 million Europeans living with GAD. As of February 2007, more than five million patients had been prescribed Lyrica since its introduction. Lyrica gained a 9.8% new prescription share of the total U.S. anti-epileptic market in March 2007. In December 2006, we submitted a supplemental New Drug Application with the FDA for the use of Lyrica to treat fibromyalgia.

•

Celebrex achieved a 22% increase in worldwide revenues in the first quarter of 2007, compared to the same period in 2006. In the U.S., Celebrex had a monthly new prescription share of 10.2% in March 2007.

In January 2007, Celebrex was approved in Japan for the treatment of osteoarthritis and rheumatoid arthritis. In February 2007, Celebrex was approved in Europe for the treatment of ankylosing spondylitis. In April 2007, we launched an innovative Celebrex television advertising campaign in the U.S. to re-initiate a productive patient-physician dialogue about treatment options for arthritis. The 2½-minute television advertisement opens by addressing cardiovascular (CV) safety first and clarifies misperceptions among arthritis sufferers about the risks and benefits of Celebrex and other prescription non-steroidal anti-inflammatory drugs. Future growth in demand for Celebrex will depend in part on the impact of DTC advertising, as well as continued successful execution of the "CV first" strategy by the new and refocused U.S. sales force. See Part II, Other Information; Item 1, Legal Proceedings, of this Form 10-Q for a discussion of certain patent litigation relating to Celebrex.

•

Zithromax/Zmax experienced a 49% decline in worldwide revenues in the first quarter of 2007 compared to the same period of 2006, reflecting the expiration of Zithromax's composition-of-matter patent in the U.S. in November 2005 and the end of Pfizer's active sales promotion in July 2005. In 2005, four generic versions of oral solid azithromycin were launched, including an authorized generic by Pfizer's Greenstone subsidiary. Additional generic formulations of azithromycin were launched during 2006.

•

Viagra remains the leading treatment for erectile dysfunction and one of the world's most recognized pharmaceutical brands, with more than 56% of U.S. total prescriptions in the erectile dysfunction market through March 2007. Viagra worldwide revenues grew 11% in the first quarter of 2007, compared to the same period in 2006. The growth in Viagra revenues was driven by a combination of factors, including pricing and erectile dysfunction market growth.

•

Detrol/Detrol LA, a muscarinic receptor antagonist, is the most prescribed medicine for overactive bladder, a condition that affects up to 100 million people around the world. Detrol/Detrol LA is an extended-release formulation taken once daily. Worldwide Detrol/Detrol LA revenues grew 17% to $303 million in the first quarter of 2007. Detrol/Detrol LA continues to lead the overactive bladder market and perform well in an increasingly competitive marketplace. In the U.S., Detrol/Detrol LA's new prescription share declined 1% to a 40.2% share for the first quarter of 2007. A strong clinical database, unparalleled access in managed care and Medicare, and a history of delivering positive patient outcomes have enabled Detrol/Detrol LA to remain the clear first-line antimuscarinic agent among both primary care physicians and urologists.

•

Camptosar is indicated as first-line therapy for metastatic colorectal cancer in combination with 5-fluorouracil and leucovorin. It is also indicated for patients in whom metastatic colorectal cancer has recurred or progressed despite following initial fluorouracil-based therapy. Camptosar is for intravenous use only. Worldwide revenues in the first quarter of 2007 increased 8% to $229 million, compared to the same period in 2006. The National Comprehensive Cancer Network (NCCN), an alliance of 21 of the world's leading cancer centers, has issued guidelines recommending Camptosar as an option across all lines of treatment for advanced colorectal cancer. We will lose U.S. exclusivity for Camptosar in 2008.

•

Sutent is an oral multi-kinase inhibitor that combines anti-angiogenic and anti-tumor activity to inhibit the blood supply to tumors and has direct anti-tumor effects. Sutent was approved by the FDA and launched in the U.S. in January 2006 for advanced renal cell carcinoma, including metastatic renal cell carcinoma, and gastrointestinal stromal tumors (GIST) after disease progression on, or intolerance to, imatinib mesylate. In the first quarter of 2007, the U.S. label was revised to include new first-line advanced renal cell carcinoma data. In January 2007, Sutent received full marketing authorization and extension of the indication to first-line treatment of advanced and/or metastatic renal cell carcinoma (mRCC), as well as approval as a second-line treatment for GIST, in the E.U. We believe that future growth of Sutent will be fueled by emerging new data in a range of potential new indications. More than 25 Sutent abstracts have been accepted for presentation at the American Society of Clinical Oncology (ASCO) annual meeting in June 2007. Sutent recorded $102 million in worldwide revenues in the first quarter of 2007, and had been used to treat approximately 15,000 patients worldwide as of March 2007.

•

Xalatan/Xalacom, a prostaglandin analogue used to lower the intraocular pressure associated with glaucoma and ocular hypertension, is the most-prescribed branded glaucoma medicine in the world. Clinical data showing its advantages in treating intraocular pressure compared with beta blockers should support the continued growth of this important medicine. Xalacom, the only fixed combination prostaglandin (Xalatan) and beta blocker, is available primarily in European markets. Xalatan/Xalacom worldwide revenues grew 7% in the first quarter of 2007, compared to the same period in 2006.

•

Zyrtec provides strong, rapid and long-lasting relief for seasonal and year-round allergies and hives with once-daily dosing. Zyrtec continues to be the most-prescribed antihistamine in the U.S. in a challenging market. Worldwide revenues increased 10% in the first quarter of 2007, compared to the same period in 2006. We will lose U.S. exclusivity for Zyrtec in December 2007. Since we sold our rights to market Zyrtec over-the-counter in connection with the sale of our Consumer Healthcare business, we expect no revenues from Zyrtec after the expiration of the U.S. patent in December.

First Quarter

(millions of dollars)

April 1,
2007

April 2,
2006

% Change

Livestock products

$

356

$

312

14%

Companion animal products

230

199

15   

Total Animal Health

$

586

$

511

15   

•

for livestock products, the continued good performance of Draxxin (single-dose anti-infective for cattle and swine) in Europe and North America, as well as revenues from Embrex, Inc., which we acquired in the first quarter of 2007;

•

for companion animal products, the good performances of Revolution (a parasiticide for dogs and cats), Rimadyl (for treatment of pain and inflammation associated with canine osteoarthritis and soft-tissue orthopedic surgery) and Convenia (first-in-class single-dose treatment antibiotic therapy for dogs and cats), launched during the first quarter of 2007 throughout Europe; and

•

the favorable impact of foreign exchange.