Introduction

Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and footnotes to assist readers in understanding Pfizer's results of operations, financial condition and cash flows. The MD&A is organized as follows:

? Overview of Our Performance and Operating Environment. This section, beginning on page 28, provides information about the following: our business; our performance during the third quarter and first nine months of 2009; our operating environment; our strategic initiatives; and our cost-reduction initiatives.

? Revenues. This section, beginning on page 34, provides an analysis of our products and revenues for the three- and nine- month periods ended September 27, 2009 and September 28, 2008, as well as an overview of important product developments.

? Costs and Expenses. This section, beginning on page 43, provides a discussion about our costs and expenses.

? Provision for Taxes on Income. This section, on page 46, provides a discussion of items impacting our tax provision for the periods presented.

? Adjusted Income. This section, beginning on page 46, provides a discussion of an alternative view of performance used by management.

? Financial Condition, Liquidity and Capital Resources. This section, beginning on page 50, provides an analysis of our balance sheets as of September 27, 2009 and December 31, 2008 and cash flows for the first nine months of 2009 and 2008, as well as a discussion of our outstanding debt and commitments that existed as of September 27, 2009, and December 31, 2008. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund our future activities.

? Outlook. This section, beginning on page 54, provides a discussion of our expectations for full-year 2009, among other things.

? Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 55, 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.

Components of the Condensed Consolidated Statements of Income follow:

                                                  Three Months Ended                             Nine Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER          Sept. 27,       Sept. 28,           %         Sept. 27,       Sept. 28,            %
COMMON SHARE DATA)                             2009            2008      Change              2009            2008       Change
Revenues                                $    11,621     $    11,973          (3 ) %   $    33,472     $    35,950           (7 ) %

Cost of sales                                 1,789           2,122         (16 )           4,953           6,397          (23 )
% of revenues                                  15.4 %          17.7 %                        14.8 %          17.8 %

Selling, informational and
administrative expenses                       3,282           3,523          (7 )           9,508          10,878          (13 )
% of revenues                                  28.2 %          29.4 %                        28.4 %          30.3 %

Research and development expenses             1,632           1,885         (13 )           5,032           5,642          (11 )
% of revenues                                  14.0 %          15.7 %                        15.0 %          15.7 %

Amortization of intangible assets               594             621          (4 )           1,755           2,063          (15 )
% of revenues                                   5.1 %           5.2 %                         5.2 %           5.7 %

Acquisition-related in-process
research and development charges                 --              13        (100 )              20             567          (96 )
% of revenues                                    -- %           0.1 %                         0.1 %           1.6 %

Restructuring charges and
acquisition-related costs                       193             366         (47 )           1,206           1,113            8
% of revenues                                   1.7 %           3.1 %                         3.6 %           3.1 %

Other (income)/deductions - net                 160             721         (78 )             175             221          (21 )

Income from continuing operations
before provision for taxes on income          3,971           2,722          46            10,823           9,069           19
% of revenues                                  34.2 %          22.7 %                        32.3 %          25.2 %

Provision for taxes on income                 1,092             463         136             2,952           1,251          136

Effective tax rate                             27.5 %          17.0 %                        27.3 %          13.8 %

Income from continuing operations             2,879           2,259          27             7,871           7,818            1
% of revenues                                  24.8 %          18.9 %                        23.5 %          21.7 %

Discontinued operations - net of tax              2              25         (90 )               6              38          (84 )

Net income before allocation to
noncontrolling interests                      2,881           2,284          26             7,877           7,856           --
% of revenues                                  24.8 %          19.1 %                        23.5 %          21.9 %

Less: Net income attributable to
noncontrolling interests                          3               6         (44 )               9              18          (49 )
Net income attributable to Pfizer
Inc.                                    $     2,878     $     2,278          26       $     7,868     $     7,838           --

% of revenues                                  24.8 %          19.0 %                        23.5 %          21.8 %

Earnings per common share - basic:
Income from continuing operations
attributable to
Pfizer Inc. common shareholders         $      0.43     $      0.34          26       $      1.17     $      1.16            1
Discontinued operations - net of tax             --               -           -                --               -           --
Net income attributable to Pfizer
Inc. common
   shareholders                         $      0.43     $      0.34          26       $      1.17     $      1.16            1

Earnings per common share - diluted:
Income from continuing operations
attributable to
Pfizer Inc. common shareholders         $      0.43     $      0.33          30       $      1.16     $      1.16           --
Discontinued operations - net of tax             --            0.01        (100 )              --               -           --
Net income attributable to Pfizer
Inc. common
   shareholders                         $      0.43     $      0.34          26       $      1.16     $      1.16           --

Cash dividends paid per common share    $      0.16     $      0.32                   $      0.64     $      0.96

Certain amounts and percentages may reflect rounding adjustments.

OVERVIEW OF OUR PERFORMANCE AND OPERATING ENVIRONMENT

Our Business

We are a global, research-based company applying innovative science to improve world health. Our efforts in support of that purpose include the discovery, development, manufacture and marketing of safe and effective medicines; the exploration of ideas that advance the frontiers of science and medicine; and the support of programs dedicated to illness prevention, health and wellness, and increased access to quality healthcare. Our value proposition is to demonstrate that our medicines can effectively prevent and treat disease, including the associated symptoms and suffering, and can form the basis for an overall improvement in healthcare systems and their related costs. Our revenues are derived from the sale of our products, as well as through alliance agreements, under which we co-promote products discovered by other companies.

On October 15, 2009, we completed our acquisition of Wyeth in a cash-and-stock transaction valued, based on the closing market price of Pfizer's common stock on that date, at $50.40 per share of Wyeth common stock, or a total of approximately $68 billion. We have taken certain actions and incurred certain costs associated with the transaction prior to the acquisition closing date that are reflected in our financial statements. However, the assets acquired and liabilities assumed from Wyeth, the consideration paid to acquire Wyeth, as well as the results of Wyeth's operations, are not reflected in our Condensed Consolidated Financial Statements as of and for the three and nine month periods ended September 27, 2009. For additional information see the "Our Strategic Initiatives - Strategy and Recent Transactions" and "Costs and Expenses - Acquisition-Related Costs" sections of this MD&A.

Our 2009 Performance

Revenues in the third quarter of 2009 decreased 3% to $11.6 billion compared to
the same period in 2008. Revenues in the first nine months of 2009 decreased 7%
to $33.5 billion compared to the same period in 2008. The significant human
pharmaceutical product, alliance revenue and Animal Health impacts on revenues
for the third quarter and first nine months of 2009, compared to the same
periods in 2008, are as follows:

                                           Three Months Ended                     Nine Months Ended
                                        Sept. 27,
                                         2009 vs.                          Sept. 27, 2009
                                        Sept. 28,                                     vs.
                                             2008                          Sept. 28, 2008
                                        Increase/                  %            Increase/                 %
(millions of dollars)                  (decrease)             Change           (decrease)            Change
Lipitor(a)                          $        (289 )               (9 ) %   $         (996 )             (11 ) %
Norvasc(b)                                    (74 )              (13 )               (215 )             (13 )
Camptosar(b)                                  (40 )              (33 )               (175 )             (39 )
Chantix/Champix(c)                            (27 )              (15 )               (142 )             (21 )
Zyrtec/Zyrtec D(b)                             --                 --                 (125 )            (100 )
Celebrex                                      (23 )               (4 )               (111 )              (6 )
Viagra                                        (43 )               (8 )                (89 )              (6 )
Detrol/Detrol LA                              (15 )               (5 )                (56 )              (6 )
Xalatan/Xalacom                               (14 )               (3 )                (53 )              (4 )
Sutent                                         20                  9                   44                 7
Revatio                                        16                 18                   78                33
Lyrica                                         33                  5                  149                 8
Alliance revenues                             121                 21                  250                15
Animal Health                                 (30 )               (4 )               (179 )              (9 )

(a) Lipitor was unfavorably impacted primarily by foreign exchange, as well as competitive pressures and other factors.

(b) Zyrtec/Zyrtec D lost U.S. exclusivity in late January 2008, at which time we ceased selling this product. Camptosar lost U.S. exclusivity in February 2008 and in Europe in July 2009. Norvasc lost exclusivity in Japan in July 2008.

(c) Chantix/Champix has been negatively impacted by changes to its label in 2008 and additional label changes in July 2009 (see "Revenues - Pharmaceutical - Selected Product Descriptions" section of this MD&A).

Foreign exchange unfavorably impacted revenues by approximately $610 million, or 5%, in the third quarter of 2009 and approximately $2.3 billion, or 6%, during the first nine months of 2009, compared to the same periods in 2008. Revenues in the third quarter and first nine months of 2009 compared to the year-ago periods were favorably impacted by a $217 million adjustment in the third quarter and first nine months of 2008 related to prior years' liabilities for product returns.

In the U.S., revenues decreased 2% in the third quarter of 2009 and 6% in the first nine months of 2009, compared to the same periods in 2008, reflecting, in part, continued generic competition, loss of exclusivity for certain products and increasing managed care pricing pressures and formulary restrictions. International revenues decreased 4% in the third quarter of 2009 and 8% in the first nine months of 2009, compared to the same periods in 2008, reflecting the negative impact of foreign exchange, partially offset by operational growth in these markets.

The impact of rebates in the third quarter of 2009 decreased revenues by approximately $898 million, compared to approximately $825 million in the prior-year third quarter. The impact of rebates in the first nine months of 2009 decreased revenues by approximately $2.8 billion, compared to approximately $2.5 billion for the first nine months of 2008. The increase in rebates in each of the periods was due primarily to the impact of our contracting strategies with both government and non-government entities in the U.S.

For further discussion of our pharmaceutical products and revenues, see the "Revenues - Pharmaceutical Business Revenues" section of this MD&A.

Income from continuing operations for the third quarter of 2009 was $2.9 billion, compared to $2.3 billion in the third quarter of 2008, and $7.9 billion in the first nine months of 2009, compared to $7.8 billion in the first nine months of 2008.

The increases were primarily due to:

? the after-tax charge of $640 million resulting from agreements to resolve certain litigation involving the Company's non-steroidal anti-inflammatory (NSAID) pain medicines in the year-ago quarter;

? lower costs associated with implementing our Pfizer cost reduction initiatives;

? savings related to our Pfizer cost-reduction initiatives; and

? lower acquisition-related in-process research and development charges of $20 million in the first nine months of 2009 compared to $567 million in the first nine months of 2008;

partially offset by:

? the decrease in revenues reflecting, in particular, the unfavorable impact of foreign exchange;

? the increase in the effective tax rate, net of a $174 million favorable income tax adjustment in the third quarter of 2009, attributable mainly to increased tax costs associated with certain business decisions executed to finance the acquisition of Wyeth as well as the non-recurrence of favorable income tax adjustments that were recorded during the first nine months of 2008;

? higher interest expense, mainly due to the issuance of approximately $24 billion in senior unsecured notes in the first half of 2009 to partially finance the acquisition of Wyeth, as well as lower interest income; and

? costs incurred in connection with the Wyeth acquisition.

We have made significant progress with our Pfizer cost-reduction initiatives, launched in early 2005, which are broad-based, company-wide efforts to improve performance and efficiency (see further discussion in the "Our Cost-Reduction Initiatives" section of this MD&A).

During the first nine months of 2009, we expensed Acquisition-related in-process research and development charges (IPR&D) of $20 million related to a 2008 acquisition (see further discussion in the "Our Strategic Initiatives - Strategy and Recent Transactions: Acquisitions, Licensing and Collaborations" section of this MD&A). As a result of adopting the provisions of a new accounting standard issued by the Financial Accounting Standards Board (FASB) related to business combinations, beginning January 1, 2009, IPR&D related to acquisitions after adoption will be recorded on our consolidated balance sheet as indefinite-lived intangible assets. No acquisitions were consummated in the first nine months of 2009.

Our Operating Environment

General Economic Conditions

While the global recession has affected our business, the impact so far has been consistent with the expectations reflected in our financial guidance for 2009 (see the "Outlook" section of this MD&A). The impact on our human pharmaceutical business has been largely in the U.S. market, affecting products such as Lipitor, Celebrex and Lyrica. Health insurers and benefit plans continue to impose formulary restrictions in favor of generics. We believe that patients, experiencing the effects of the weak economy and facing increases in co-pays, are sometimes switching to generics, delaying treatments or skipping doses to reduce their costs. The recession has also increased the number of patients in the Medicaid program, under which sales of pharmaceuticals are subject to substantial rebates and, in many states, to formulary restrictions limiting access to brand-name drugs. Our Animal Health business also has been impacted by the recession, which has adversely affected global spending on veterinary care.

Despite the challenging financial markets, Pfizer maintains a strong financial position. We have a strong balance sheet and excellent liquidity that provides us with financial flexibility. Our long-term debt is rated high quality and investment grade by both Standard & Poor's and Moody's Investors Service. As market conditions change, we continue to monitor our liquidity position. We have taken and will continue to take a conservative approach to our investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, investment-grade available-for-sale debt securities. As a result, we continue to believe that we have the ability to meet our financing needs for the foreseeable future (see further discussion in the "Financial Condition, Liquidity and Capital Resources" section of this MD&A).

Industry-Specific Challenges

In addition to general economic conditions, we and other pharmaceutical companies continue to face significant industry-specific challenges in a profoundly changing business environment, as explained more fully in Pfizer's Annual Report on Form 10-K for the year ended December 31, 2008. Industry-wide factors, including pharmaceutical product pricing and access, intellectual property rights, product competition, the regulatory environment, pipeline productivity and the changing business environment, can significantly impact our operations. In order to meet these challenges and capitalize on opportunities in the marketplace, we have taken, and continue to take steps to change the way we operate our Pharmaceutical and other operations.

Effective January 1, 2009, we changed our operating model within the Pharmaceutical segment, which during the first nine months of 2009 was comprised of five customer-focused units-Primary Care, Specialty Care, Oncology, Established Products and Emerging Markets-with clear, single points of accountability to enable the segment to more effectively anticipate and respond to the diverse needs of physicians, customers and patients. As in the past, the Pharmaceutical segment continues to be managed inclusive of our research and manufacturing organizations and supported by administrative functions.

Generic competition and patent expirations significantly impact our business. We lost exclusivity for Camptosar in the U.S. in February 2008 and in Europe in July 2009 and for Norvasc in the U.S. in March 2007 and in Japan in July 2008. As expected, significant revenue declines followed. Zyrtec/Zyrtec D lost its U.S. exclusivity in late January 2008, at which time we ceased selling this product. Lipitor began to face competition in the U.S. in 2006 from generic pravastatin (Pravachol) and generic simvastatin (Zocor), in addition to other competitive pressures. The volume of patients who start on or switch to generic simvastatin continues to negatively impact Lipitor prescribing trends, particularly in the managed-care environment. Generic competition is also adversely impacting revenues in the U.S. for certain other products, including Celebrex and Lyrica.

We will continue to aggressively defend our patent rights against increasing incidents of infringement whenever appropriate. For more detailed information about our significant products, see discussion in the "Revenues - Pharmaceutical
- Selected Product Descriptions" section of this MD&A. Also, see Part II - Other Information; Item 1. Legal Proceedings, of this Form 10-Q for a discussion of certain recent developments with respect to patent litigation.

U.S. Policy Issues

Healthcare reform in the U.S., if enacted, could have a significant impact on our business. Although we cannot predict the outcome of pending and possible future U.S. healthcare reform initiatives, we remain committed and actively engaged in discussions to reform healthcare in a way that expands coverage for those currently uninsured, does not erode coverage for those currently insured, improves quality, rewards innovation and provides value for patients. During the second quarter of 2009, the Pharmaceutical Research and Manufacturers of America (PhRMA), of which we are a member, announced an $80 billion commitment over the next decade to support healthcare reform in the U.S. Among other things, that commitment includes reducing the cost of medicines for seniors and disabled Americans who are affected by the coverage gap in the Medicare prescription drug program. The PhRMA commitment is intended to be part of any federal healthcare reform legislation in the U.S.

Comprehensive tax reform in the U.S., if enacted, also could have a significant impact on our business. Although we cannot predict the outcome of pending and possible future U.S. tax reform proposals, we remain engaged in discussions with policymakers. Specifically, if legislation were enacted that ends the deferral of U.S. taxation of income earned overseas by U.S. companies, it may adversely impact our ability to compete against other companies in our industry, many of which are not based in the U.S.

These and other factors that may affect our businesses should be considered along with information presented in the "Forward-Looking Information and Factors That May Affect Future Results" section of this MD&A.

Our Strategic Initiatives - Strategy and Recent Transactions

Acquisitions, Licensing and Collaborations

We are committed to capitalizing on new growth opportunities by advancing our new-product pipeline and maximizing the value of our in-line products, as well as through opportunistic licensing, co-promotion agreements and acquisitions. Our business-development strategy targets a number of growth opportunities, including biologics, vaccines, oncology, diabetes, Alzheimer's disease, inflammation/immunology, pain, psychoses (schizophrenia) and other products and services that seek to provide valuable healthcare solutions. Some of our more significant business-development transactions during the first nine months of 2009 and 2008 are described below:

? In the first quarter of 2009, we entered into a five-year agreement with Bausch & Lomb to co-promote prescription pharmaceuticals in the U.S. for the treatment of ophthalmic conditions. The agreement covers prescription ophthalmic pharmaceuticals, including our Xalatan product and Bausch & Lomb's Alrex®, Lotemax® and Zylet® products, as well as Bausch & Lomb's investigational anti-infective eye drop, besifloxacin ophthalmic suspension, 0.6%, which is currently under review by the U.S. Food and Drug Administration (FDA).

? In the second quarter of 2008, we acquired Encysive Pharmaceuticals Inc. (Encysive), a biopharmaceutical company whose main asset is Thelin, which is used for the treatment of pulmonary arterial hypertension. The cost of acquiring Encysive, through a tender offer and subsequent merger, was approximately $200 million, including transaction costs. Upon our acquisition of Encysive, Encysive's change of control repurchase obligations under its outstanding $130 million 2.5% convertible notes were triggered and, as a result, Encysive repurchased the convertible notes in consideration for their par value plus accrued interest in June 2008. In addition, in the second quarter of 2008, we acquired Serenex, Inc. (Serenex), a privately held biotechnology company, whose main asset is SNX-5422, an oral Heat Shock Protein 90 (Hsp90) for the potential treatment of solid tumors and hematological malignancies and an extensive Hsp90 inhibitor compound library, which has potential uses in treating cancer, inflammatory and neurodegenerative diseases. In connection with these acquisitions, through third-quarter 2008, we recorded approximately $170 million in Acquisition-related in-process research and development charges and approximately $450 million in intangible assets.

? In the first quarter of 2008, we acquired CovX, a privately held biotherapeutics company specializing in preclinical oncology and metabolic research and the developer of a biotherapeutics technology platform. Also in the first quarter of 2008, we acquired all the outstanding shares of Coley Pharmaceutical Group, Inc. (Coley), a biopharmaceutical company specializing in vaccines and drug candidates designed to fight cancers, allergy and asthma disorders, and autoimmune diseases, for approximately $230 million. In connection with these and two smaller acquisitions related to Animal Health, we recorded approximately $398 million in Acquisition-related in-process research and development charges in the first nine months of 2008. In the first nine months of 2009, we resolved a contingency associated with CovX and recorded $20 million in Acquisition-related in-process research and development charges.

The following transactions were not completed as of the end of the third quarter of 2009, and our consolidated financial statements as of September 27, 2009 do not assume their completion. However, we have incurred certain costs related to the acquisition of Wyeth that are reflected in our financial statements:

? On October 15, 2009 (the acquisition date), we acquired all of the outstanding equity of Wyeth in a cash-and-stock transaction, valued at approximately $68 billion, in which each share of Wyeth common stock outstanding, with certain limited exceptions, was cancelled and converted into the right to receive $33.00 in cash without interest and 0.985 of a share of Pfizer common stock. The stock component was valued at $17.40 per share of Wyeth common stock based on the closing market price of Pfizer's common stock on the acquisition date, resulting in a total merger consideration value of $50.40 per share of Wyeth common stock. While Wyeth is now a wholly owned subsidiary of Pfizer, the merger of local Pfizer and Wyeth entities may be pending or delayed in various jurisdictions and integration in these jurisdictions is subject to completion . . .