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 24, provides information about the following: our business; our performance during the first quarter of 2009; our operating environment; our strategic initiatives; and our cost-reduction initiatives.

· Revenues. This section, beginning on page 29, provides an analysis of our products and revenues for the first quarters of 2009 and 2008, as well as an overview of important product developments.

· Costs and Expenses. This section, beginning on page 38, provides a discussion about our costs and expenses.

· Provision for Taxes on Income. This section, on page 40, provides a discussion of items impacting our tax provision for the periods presented.

· Adjusted Income. This section, beginning on page 40, provides a discussion of an alternative view of performance used by management.

· Financial Condition, Liquidity and Capital Resources. This section, beginning on page 44, provides an analysis of our balance sheets as of March 29, 2009 and December 31, 2008 and cash flows for the first quarters of 2009 and 2008, as well as a discussion of our outstanding debt and commitments that existed as of March 29, 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 Pfizer's future activities.

· Outlook. This section, beginning on page 48, provides a discussion of our expectations for full-year 2009.

· Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 49, 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.

                                                                  First Quarter
(millions of dollars, except per common share          Mar. 29,       Mar. 30,
data)                                                      2009           2008       % Change

Revenues                                             $   10,867     $   11,848             (8 )

Cost of sales                                             1,408          1,986            (29 )
% of revenues                                              13.0 %         16.8 %

Selling, informational and administrative expenses        2,876          3,492            (18 )
% of revenues                                              26.5 %         29.5 %

Research and development expenses                         1,705          1,791             (5 )
% of revenues                                              15.7 %         15.1 %

Amortization of intangible assets                           578            779            (26 )
% of revenues                                               5.3 %          6.6 %

Acquisition-related in-process research and
development charges                                           -            398           (100 )
% of revenues                                                 - %          3.4 %

Restructuring charges and acquisition-related
costs                                                       554            178            212
% of revenues                                               5.1 %          1.5 %

Other (income)/deductions - net                             (57 )         (333 )          (82 )

Income from continuing operations before provision
for taxes on income                                       3,803          3,557              7
% of revenues                                              35.0 %         30.0 %

Provision for taxes on income                             1,074            763             41

Effective tax rate                                         28.2 %         21.5 %

Income from continuing operations                         2,729          2,794             (2 )
% of revenues                                              25.1 %         23.6 %

Discontinued operations - net of tax                          1             (4 )            *

Net income before allocation to noncontrolling
interests                                                 2,730          2,790             (2 )
% of revenues                                              25.1 %         23.5 %

Less: Net income attributable to noncontrolling
interests                                                     1              6            (78 )

Net income attributable to Pfizer Inc.               $    2,729     $    2,784             (2 )
% of revenues                                              25.1 %         23.5 %

Earnings per common share - basic:
Income from continuing operations attributable to
Pfizer Inc.
common shareholders                                  $     0.41     $     0.41              -
Discontinued operations - net of tax                          -              -              -
Net income attributable to Pfizer Inc. common
shareholders                                         $     0.41     $     0.41              -

Earnings per common share - diluted:
Income from continuing operations attributable to
Pfizer Inc.
common shareholders                                  $     0.40     $     0.41             (2 )
Discontinued operations - net of tax                          -              -              -
Net income attributable to Pfizer Inc. common
shareholders                                         $     0.40     $     0.41             (2 )

Cash dividends paid per common share                 $     0.32     $     0.32

* Calculation not meaningful. Certain amounts and percentages may reflect rounding adjustments.

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 January 26, 2009, we announced that we entered into a definitive merger agreement under which we will acquire Wyeth in a cash-and-stock transaction valued on that date at $50.19 per share, or a total of $68 billion. While we have taken actions and incurred costs associated with the pending transaction that are reflected in our financial statements, the acquisition of Wyeth will not be reflected in our financial statements until consummation. (See also the "Our Strategic Initiatives - Strategy and Recent Transactions" and "Costs and Expenses - Acquisition-Related Costs" sections of this MD&A).

Our First Quarter Performance

Revenues in the first quarter of 2009 decreased 8% to $10.9 billion, compared to
the same period in 2008. The significant product and alliance revenue impacts on
revenues for the first quarter of 2009, compared to the same period in 2008, are
as follows:

                               First Quarter
                           Increase/
                          (decrease)       % Change
(millions of dollars)          09/08          09/08

Lipitor(a)              $       (416 )          (13 )
Zyrtec/Zyrtec D(b)              (117 )         (100 )
Chantix/Champix(c)              (100 )          (36 )
Camptosar(b)                     (83 )          (43 )
Celebrex                         (47 )           (8 )
Norvasc(d)                       (32 )           (6 )
Detrol/Detrol LA                 (24 )           (8 )
Geodon/Zeldox                    (11 )           (5 )
Genotropin                        (9 )           (4 )
Viagra                            (6 )           (1 )
Xalatan/Xalacom                    2              -
Vfend                              8              5
Sutent                            12              7
Zyvox                             24              9
Lyrica                           102             17
Alliance revenues                 94             19

(a) Lipitor has been impacted by 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.

(c) Chantix/Champix has been negatively impacted by the changes to its label in 2008.

(d) Norvasc lost U.S. exclusivity in March 2007.

Foreign exchange unfavorably impacted revenues by approximately $640 million, or 5%, compared to the first quarter of 2008.

In the U.S., revenues decreased 10% compared to the first quarter 2008, while international revenues decreased 7% compared to the first quarter of 2008.

The impact of rebates in the first quarter of 2009 decreased revenues by approximately $950 million, compared to approximately $900 million in the first quarter of 2008. The increase in rebates was due primarily to the impact of our contracting strategies with both government and non-government entities in the U.S. (See further discussion in the "Revenues - Pharmaceutical Business Revenues" section of this MD&A).

· the decrease in total revenues due to the unfavorable impact of foreign exchange, among other factors;

· the decrease in other income/deductions;

· the increase in the effective tax rate; and

· costs incurred in connection with the pending Wyeth acquisition;

partially offset by:

· savings related to our cost-reduction initiatives; and

· the elimination of acquisition-related in-process research and development charges in 2009 compared to $398 million

in the first quarter of 2008.

In the first quarter of 2008, we expensed Acquisition-related in-process research and development charges (IPR&D) related to our acquisitions of CovX and Coley Pharmaceutical Group, Inc. related to our Pharmaceutical segment and two smaller acquisitions related to our Animal Health segment. (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 Financial Accounting Standards Board Statement of Financial Accounting Standards No. 141R, Business Combinations, as amended, beginning January 1, 2009, IPR&D related to future acquisitions will be recorded on our consolidated balance sheet as indefinite-lived intangible assets. We made no acquisitions in the first quarter of 2009.

We have also made significant progress with our cost-reduction and transformation 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.)

Our Operating Environment

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, where health insurers and benefit plans are imposing formulary restrictions in favor of generics, which is affecting products such as Lipitor, Lyrica, Celebrex, and Geodon; in addition patients, experiencing the effects of the weak economy and facing increases in co-pays, are sometimes delaying treatments or skipping doses to reduce their costs. 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 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 MD&A.)

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 businesses. In order to meet these challenges and capitalize on opportunities in the marketplace, we are taking steps to change the way we operate our Pharmaceutical and other businesses. Effective January 1, 2009, we changed our operating model within the Pharmaceutical segment, which is now 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.

We will continue to aggressively defend our patent rights against increasing incidents of infringement whenever appropriate. (For more detailed information about Lipitor, Norvasc, Zyrtec, Camptosar and other significant products, see further discussion in the "Revenues - Pharmaceutical - Selected Product Descriptions" section of this MD&A). (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.)

These and other industry-wide 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 most significant business-development transactions during the first quarter 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 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 that we expect will enhance our biologic portfolio. 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.

The following transactions were not completed as of the end of the first quarter of 2009, and our consolidated financial statements as of March 29, 2009 do not assume their completion. However, we have incurred costs related to the pending acquisition of Wyeth that are reflected in our financial statements.

· On April 16, 2009, we announced that we entered into an agreement with GlaxoSmithKline plc (GSK) to create a new company focused solely on research, development and commercialization of HIV medicines. We and GSK will contribute product and pipeline assets to the new company. The new company will have a broad product portfolio of 11 marketed products, including innovative leading therapies such as GSK's Combivir and Kivexa products and our Selzentry/Celsentri (maraviroc) product. The company will have a pipeline of six innovative and targeted medicines, including four compounds in Phase 2 development. The new company will contract R&D and manufacturing services directly from GSK and us and will also enter into a new research alliance agreement with GSK and us. Under this new alliance, the new company will invest in our and GSK's programs for discovery research and development into HIV medicines. The new company will have exclusive rights of first negotiation in relation to any new HIV-related medicines developed by either GSK or us. We will initially hold a 15% equity interest in the new company, and GSK will hold an 85% equity interest. The equity interests will be adjusted in the event that specified sales and regulatory milestones are achieved. Our equity interest in the new company could vary from 9% to 30.5%, and GSK's equity interest in the new company could vary from 69.5% to 91%, depending upon the milestones achieved with respect to the original pipeline assets contributed by us and by GSK to the new company. Each company may also be entitled to preferential dividend payments to the extent that specific sales thresholds are met in respect of the marketed products and pipeline assets originally contributed. We will account for our share of the new company as an equity method investment. The closing of the transaction and commencement of the new company's business is conditional upon certain matters, including receiving certain regulatory and tax clearances, and no material adverse change occurring in respect of either GSK's or our HIV business prior to closing. We and GSK will conduct consultations with works councils in accordance with applicable employment legislation. The transaction is expected to close in the fourth quarter of 2009.

· On January 26, 2009, we announced that we entered into a definitive merger agreement under which we will acquire Wyeth in a cash-and-stock transaction valued on that date at $50.19 per share, or a total of $68 billion. The Boards of Directors of both Pfizer and Wyeth have approved the transaction. Under the terms of the merger agreement, each outstanding share of Wyeth common stock will be converted into the right to receive $33 in cash and 0.985 of a share of Pfizer common stock, subject to adjustment as set forth in the merger agreement. Each outstanding Wyeth stock option, and each outstanding share of Wyeth restricted stock, deferred stock unit award and restricted stock unit award, will be exchanged for cash in accordance with the terms of the merger agreement. In addition, the merger agreement provides that each share of Wyeth $2 convertible preferred stock will be exchanged for a newly created class of Pfizer preferred stock having substantially the same rights as the Wyeth $2 convertible preferred stock. However, on April 23, 2009, Wyeth announced that it will affect a full redemption of its outstanding $2 convertible preferred stock effective on July 15, 2009. As a result, we will not issue any preferred stock in connection with the merger.

We expect the Wyeth transaction will close at the end of the third quarter or during the fourth quarter of 2009, subject to Wyeth shareholder approval, governmental and regulatory approvals, the satisfaction of the conditions related to the debt financing for the transaction, and other usual and customary closing conditions. We believe that the combination of Pfizer and Wyeth will create the world's premier biopharmaceutical company and will meaningfully deliver on Pfizer's strategic priorities in a single transaction. The combined entity will be one of the most diversified in the industry and will enable us to offer patients a uniquely broad and diversified portfolio of biopharmaceutical innovation through patient-centric units.

We expect to achieve annual cost savings of approximately $4 billion by the end of 2012 related solely to this transaction. We expect we will incur acquisition-related restructuring charges and integration costs associated with the expected cost savings, which we estimate could be in the range of approximately $6 billion to $8 billion, and which will be expensed as incurred.

We expect to fund the acquisition through a combination of cash, stock, short-term borrowings and long-term debt. (See Notes to Condensed Consolidated Financial Statements - Note 8B. Financial Instruments: Short-Term Borrowings, Note 8C. Financial Instruments: Long-Term Debt and Note 8G. Financial Instruments: Credit Covenants.)

The merger agreement with Wyeth prohibits us from making acquisitions, except for acquisitions for which cash consideration does not exceed $750 million in the aggregate prior to the completion of the transaction without Wyeth's consent. In addition, the 364-day bridge term loan credit agreement that we entered into on March 12, 2009 (bridge credit agreement) in connection with the pending Wyeth acquisition prohibits us from purchasing U.S. domestic businesses for cash consideration in excess of $500 million in the aggregate or international businesses for cash consideration in excess of $2.5 billion in the aggregate until the commitment expires or is terminated and all loans under the agreement, if any, have been paid. (For further discussion of the bridge credit agreement, see the "Financial Condition, Liquidity and Capital Resources" section of this MD&A and Notes to the Condensed Consolidated Financial Statements - Note 8B. Financial Instruments: Short-Term Borrowings and Note 8G. Financial Instruments: Credit Covenants).

Our Cost-Reduction Initiatives

During 2008, we completed the cost-reduction and transformation initiatives that were launched in early 2005, broadened in October 2006 and expanded in January 2007. These initiatives were designed to increase efficiency and streamline decision-making across the company and change the way we run our businesses to meet the challenges of a changing business environment, as well as take advantage of the diverse opportunities in the marketplace.

We have generated net cost reductions through site rationalization in R&D and manufacturing, streamlining organizational structures, sales force and staff function reductions, and increased outsourcing and procurement savings. These and other actions have allowed us to reduce costs in support services and facilities.

As part of this new cost-reduction initiative, we intend to reduce our total worldwide workforce by approximately 10%. Reductions will span sales, manufacturing, research and development, and administrative organizations. In the first quarter of 2009, we reduced our workforce by approximately 1,650 colleagues. This decline was net of new colleagues hired in expanding areas of our business, primarily in emerging markets. We also intend to reduce our facilities square footage by approximately 15%. We expect to incur costs related to this new cost-reduction initiative of approximately $6 billion, pre-tax, of which $1.5 billion was recorded in 2008 and $331 million was recorded in the first quarter of 2009.

Projects in various stages of implementation include:

Pfizer Global Research and Development (PGRD)

· Creating a More Agile and Productive Organization-In January 2009, we announced that we plan to reduce our global research staff. We expect these reductions, which are part of the planned 10% total workforce reduction discussed above, will be completed during 2009.

After a review of all our therapeutic areas, in 2008, we announced our decision to exit certain disease areas-anemia, atherosclerosis/hyperlipidemia, bone health/frailty, gastrointestinal, heart failure, liver fibrosis, muscle, obesity, osteoarthritis (disease-modifying concepts only) and peripheral . . .