2010

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

Our Business

Our mission is to apply science and our global resources to improve health and well-being at every stage of life. We strive to set the standard for quality, safety and value in the discovery, development and manufacturing of medicines for people and animals. Our diversified global healthcare portfolio includes human and animal biologic and small molecule medicines and vaccines, as well as nutritional products and many of the world’s best-known consumer products. Every day, we work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We also collaborate with other biopharmaceutical companies, healthcare providers, governments and local communities to support and expand access to reliable, affordable healthcare around the world. 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.

Our 2010 Performance

Revenues increased 36% in 2010 to $67.8 billion, compared to $50.0 billion in 2009, due to the inclusion of revenues from legacy Wyeth products for a full year in 2010 compared to part of the year in 2009, which favorably impacted revenues by $18.1 billion or 37%, and the favorable impact of foreign exchange, which increased revenues by approximately $1.1 billion, or 2%, partially offset by the net revenue decrease from legacy Pfizer products of $1.4 billion, or 3%.

Income from continuing operations was $8.3 billion in 2010 compared to $8.6 billion in 2009, reflecting:

• the inclusion of a full year of expenses associated with the legacy Wyeth operations in 2010, compared to part of the year in 2009;

• the impact of purchase accounting adjustments primarily related to the Wyeth acquisition on Cost of sales and Amortization of intangible assets;

• impairment charges of $2.1 billion (pre-tax) primarily related to certain intangible assets acquired as part of the Wyeth acquisition and one legacy Pfizer product, Thelin (see further discussion in the “Costs and Expenses––Other (Income)/Deductions––Net” section of this Financial Review and Notes to Consolidated Financial Statements—Note 2. Acquisition of Wyeth, Note 3B. Other Significant Transactions and Events: Asset Impairment Charges, Note 6. Other (Income)/Deductions––net and Note 12B. Goodwill and Other Intangible Assets: Other Intangible Assets);

• higher net interest expense, mainly due to the issuance of debt in connection with the acquisition of Wyeth and the addition of legacy Wyeth debt, as well as lower interest income due to lower interest rates coupled with lower average investment balances;

• an additional charge of $1.3 billion (pre-tax) for asbestos litigation related to our wholly owned subsidiary Quigley Company, Inc. (see Notes to Consolidated Financial Statements––Note 19. Legal Proceedings and Contingencies);

• lower revenues for legacy Pfizer products;

• a write-off of Wyeth-related inventory of $212 million (pre-tax) (which includes a purchase accounting fair value