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Pfizer Reports Fourth-Quarter And Full-Year 2012 Results; Provides 2013 Financial Guidance

Reported cost of sales as a percentage of revenues decreased 1.4 percentage points to 21.1% in the fourth quarter of 2012, compared to the same period in 2011, reflecting the aforementioned factors.

2. Change in Reported Selling, Informational & Administrative (SI&A) Expenses and Reported Research & Development (R&D) Expenses

Reported SI&A expenses decreased 7% in fourth-quarter 2012 and 12% in full-year 2012, compared to the same periods in 2011. The decreases were primarily due to savings generated from a reduction in the field force and a decrease in promotional spending, both partially in response to product losses of exclusivity and more streamlined corporate support functions, as well as the favorable impact of foreign exchange of 1% in the fourth quarter of 2012 and 2% in full-year 2012, partially offset by costs associated with the potential separation of Zoetis employees, net assets and operations from Pfizer.

Reported R&D expenses decreased 17% in fourth-quarter 2012 and 13% in full-year 2012, compared to the same periods in 2011, primarily due to savings generated by the discontinuation of certain therapeutic areas and R&D programs in connection with our previously announced cost-reduction and productivity initiatives, which were partially offset in full-year 2012 by a $250 million payment to AstraZeneca in the third quarter of 2012 to obtain the exclusive global over-the-counter rights to Nexium.

3. Other Deductions – Net
($ in millions) Fourth-Quarter   Full-Year
2012       2011   2012       2011  

Interest income (a)
$ (108 )   $ (125 ) $ (383 )   $ (456 )
Interest expense (a) 373       396   1,524       1,681  
Net interest expense 265 271 1,141 1,225
Royalty-related income (116 ) (122 ) (469 ) (569 )

Net (gain)/loss on asset disposals
(7 ) 32 (52 ) (15 )
Certain legal matters, net (b) 206 165 2,220 784
Certain asset impairment charges (c) 366 277 927 902
Costs associated with the potential separation of Zoetis (d) 32 33 125 33
Other, net 2       41   139       139  
Other deductions ––net $ 748     $ 697     $ 4,031     $ 2,499  

(a) Interest income decreased in both periods in 2012 due to lower average cash balances and lower interest rates earned on investments. Interest expense decreased in both periods in 2012 due to lower debt balances and the effective conversion of some fixed-rate liabilities to floating-rate liabilities.

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