2005

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Our Financial Review is provided in addition to the accompanying consolidated financial statements and footnotes to assist readers in understanding Pfizer’s results of operations, financial condition and cash flows. The Financial Review is organized as follows:

• Overview of Consolidated Operating Results. This section provides a general description of Pfizer’s business; an overview of our 2005 performance; a summary of our new productivity initiative; information about our operating environment; and a discussion of our expectations for 2006.

• Accounting Policies. This section, beginning on page 5, discusses those accounting policies that are considered important in understanding Pfizer’s financial statements. For additional accounting policies, including those considered to be critical accounting policies, see Notes to Consolidated Financial Statements—Note 1, Significant Accounting Policies.

• Acquisitions and Dispositions. This section, beginning on page 9, discusses significant acquisitions and dispositions made by Pfizer during 2005, 2004 and 2003.

• Analysis of the Consolidated Statement of Income. This section, beginning on page 11, provides an analysis of our products and revenues for the three years ended December 31, 2005; an overview of important product developments; a discussion about our costs and expenses; an analysis of the financial statement impact of our discontinued operations and dispositions during the period; and a discussion of Adjusted income, an alternative view of performance used by management.

• Financial Condition, Liquidity and Capital Resources. This section, beginning on page 27, provides an analysis of our balance sheet as of December 31, 2005 and 2004, and cash flows for the three years ended December 31, 2005, as well as a discussion of our outstanding debt and commitments that existed as of December 31, 2005. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund Pfizer’s future commitments.

• Recently Issued Accounting Standards. This section, beginning on page 30, discusses accounting standards that we have not yet adopted and the expected impact to Pfizer upon adoption.

• Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 31, 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 report relating to the financial results, operations and business prospects of the Company. 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 are discussions of Financial Risk Management, Foreign Exchange Risk, Interest Rate Risk and Legal Proceedings and Contingencies.

Overview of Consolidated Operating Results

Our Business

We are a research-based, global pharmaceutical company that discovers, develops, manufactures and