2006, and lower interest rates,

partially offset by:

O lower asset impairment charges, primarily due to $1.8 billion, after-tax, in 2007 related to our decision to exit Exubera;

O the favorable impact of foreign exchange;

O savings related to our cost-reduction initiatives; and

O a payment recorded in 2007 to Bristol-Myers Squibb Company (BMS) in connection with our collaboration to develop and commercialize apixaban.

• Discontinued operations—net of tax were a gain of $78 million in 2008, compared with a loss of $69 million in 2007. (See further discussion in the “Our Strategic Initiatives—Strategy and Recent Transactions: Dispositions” section of this Financial Review.)

Our Operating Environment and Response to Key Opportunities and Challenges

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 Services. As market conditions change, we continue to monitor our liquidity position. We have 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, well-diversified, 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. (For further discussion of our financial condition, see the "Financial Condition, Liquidity and Capital Resources” section of this Financial Review.)

We and our industry continue to face significant challenges in a profoundly changing business environment, and we are taking steps to fundamentally change the way we run our businesses to meet these challenges, as well as to take advantage of the diverse and attractive opportunities that we see in the marketplace. In response to these challenges and opportunities, we are progressing on “our path forward” strategies for growth:

• Maximize revenues;

• Establish a more flexible cost base; and • Innovate our business model.

For details about our strategic initiatives, see the “Our Strategic Initiatives—Strategy and Recent Transactions” section of this Financial Review, and for details about our cost-reduction initiatives, see the “Our Cost-Reduction Initiatives” section of this Financial Review.

There are a number of industry-wide factors that may affect our business and they should be considered along with the information presented in the “Forward-Looking Information and Factors That May Affect Future Results” section of this Financial Review. Such industry-wide factors include pricing and access, intellectual property rights, product competition, the regulatory environment, pipeline productivity and the changing business environment. In addition to industry-specific factors, we, like other businesses, face the potential effects of the global economic recession. We cannot predict what impacts recent economic and financial market developments may have on our results of operations. Such developments could, among