were allowed to continue. Extensive analyses were undertaken of all total joint replacements reported in studies of tanezumab. The results of these analyses and the conclusions drawn were provided to the FDA. On March 12, 2012, the FDA's Arthritis Advisory Committee met to discuss the future development of nerve growth factor inhibitors, including tanezumab. The Committee voted that there is a role for the ongoing development of nerve growth factor inhibitors in conditions such as osteoarthritis and for the management of pain associated with conditions other than osteoarthritis for which there are no agents with demonstrated analgesic effect. We submitted a Clinical Hold Complete Response to the FDA on July 31, 2012. On August 28, 2012, the FDA removed the clinical hold completely from the tanezumab program for all indications. On December 14, 2012, the FDA placed a new partial clinical hold on the development of nerve growth factor inhibitors, including tanezumab. The partial clinical hold was based on peripheral nervous system effects observed in animal studies conducted with nerve growth factor inhibitors by other companies. Current and future studies of tanezumab in cancer pain are not affected by this partial clinical hold. We intend to work with the FDA to determine the appropriate path forward.

Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the “Our Business Development Initiatives” section of this Financial Review.

COSTS AND EXPENSES

Cost of Sales

     Cost of sales decreased 19% in 2012, compared to 2011, primarily due to:

• lower purchase accounting charges, primarily reflecting the fair value adjustments to acquired inventory from Wyeth and King that was subsequently sold;

• lower costs related to our cost-reduction and productivity initiatives and acquisition-related costs, as well as the benefits generated from the ongoing productivity initiatives to streamline the manufacturing network;

• reduced manufacturing volumes related to products that lost exclusivity in various markets; and

• the favorable impact of foreign exchange of 3%, partially offset by:

• an unfavorable shift in geographic, product and business mix due to products that lost exclusivity in various markets.

2011 v. 2010

Cost of sales decreased 5% in 2011, compared to 2010, primarily due to:

• lower purchase accounting charges, primarily reflecting the fair value adjustments to acquired inventory from Wyeth that was subsequently sold; and

• savings associated with our cost-reduction and productivity initiatives, partially offset by:

 • •

the addition of costs from legacy King’s operations;

the Puerto Rico excise tax (for additional information, see the “Provision for Taxes on Income” section of this Financial Review);

• a shift in geographic and business mix; and

• the unfavorable impact of foreign exchange of 2% in 2011.

Selling, Informational and Administrative (SI&A) Expenses

Year Ended December 31,

        • savings generated from a reduction in the field force and a decrease in promotional spending, both partly in response to product losses of exclusivity;

• more