I. Company Profile

In 1849, cousins Charles Pfizer and Charles Erhart founded Charles Pfizer & Company in a

red brick building in Brooklyn, NY. Pfizer Inc. (Pfizer), incorporated on June 2, 1942, is a

research-based, global biopharmaceutical company. The Company manages its operations

through five segments: Primary Care; Specialty Care and Oncology; Established

Products and Emerging Markets; Animal Health and Consumer Healthcare, and

Nutrition.

The Company’s diversified global healthcare portfolio includes human and animal biologic

and small molecule medicines and vaccines, as well as nutritional products and consumer

healthcare products. The Company's Animal Health business unit discovers, develops and

sells products for the prevention and treatment of diseases in livestock and companion

animals.

Primary Care operating segment includes revenues from human pharmaceutical products

primarily prescribed by primary-care physicians, and may include products in the therapeutic

and disease areas, such as Alzheimer’s disease, cardiovascular (excluding pulmonary arterial

hypertension), erectile dysfunction, genitourinary, depressive disorder, pain, respiratory and

smoking cessation. Examples of products in this segment include Celebrex,

Chantix/Champix, Lipitor, Lyrica, Premarin, Pristiq and Viagra. Revenues from

biopharmaceutical products contributed approximately 86% of its total revenues during

the year ended December 31, 2011.

Established Products and Emerging Markets operating segment comprises the Established

Products business unit and the Emerging Markets business unit. Established Products

generally includes revenues from human prescription pharmaceutical products that have lost

patent protection or marketing in certain countries and/or regions. This business unit also

excludes revenues generated in emerging markets. Examples of products in this business unit

include Arthrotec, Effexor, Medrol, Norvasc, Protonix, Relpax and Zosyn/Tazocin. Emerging

Markets includes revenues from all human prescription pharmaceutical products sold in

emerging markets, including Asia (excluding Japan and South Korea), Latin America, Middle

East, Africa, Central and Eastern Europe and Turkey.

Animal Health and Consumer Healthcare operating segment comprises the Animal Health

business unit and the Consumer Healthcare business unit. Animal Health includes worldwide

revenues from products and services to prevent and treat disease in livestock and companion

animals, including vaccines, parasiticides and anti-infectives. Consumer Healthcare includes

worldwide revenues from non-prescription products in the therapeutic categories, such as

dietary supplements, pain management, respiratory and personal care. Products marketed by

Consumer Healthcare include Advil, Caltrate, Centrum, ChapStick, Preparation H and

Robitussin.

Nutrition operating segment includes revenues from a line of infant and toddler nutritional

products sold outside the United States and Canada. Examples of products in this segment

include the S-26 and SMA product lines, as well as formula for infants. Nutrition products

include infant milk formula brands for newborns and toddlers: Gold line includes brands S-26

and/or SMA (brand names vary slightly from country to country), and in 2011, the Company

launched its super-premium Illuma brand.

2000

Pfizer and Warner-Lambert merge to form the new Pfizer, creating the world's fastest-

growing major pharmaceutical company.

William C. Steere

Hank McKinnel

2001-2006

Jeff Kindler

2006-2010

Ian C. Read

2011-Now

PFIZER’S TIMELINE

THE LEADERS

2001

William C. Steere, Jr. announces his retirement as CEO on January 1, 2001. Henry A.

McKinnell, Jr., Ph.D. succeeds William C. Steere, Jr. as Chairman and Chief Executive

Officer.

In June 2001, Hank McKinnell announces a new mission for Pfizer—to become the

world's most valued company to patients, customers, colleagues, investors, business

partners, and the communities where we work and live

2002

Pfizer becomes the first U.S. pharmaceutical company and first top-ten company on the New

York Stock Exchange to join the U.N. Global Compact. Pfizer invests an industry leading

$5.1 billion in research and development

2003

Pfizer invests more than $7.1 billion in research and development.

2004

On April 16, 2003 Pfizer Inc and Pharmacia Corporation combine operations, bringing

together two of the world´s fastest-growing and most innovative companies.

2005

Pfizer Inc is selected by Dow Jones and Co. to be included in the Dow Jones Industrial

Average, which is the best-known stock market barometer in the world.

2006

In July 2006, the Pfizer Board of Directors names Jeffrey B. Kindler Chief Executive Officer.

Kindler succeeds Hank McKinnell, who will remain Chairman of the Board until his

retirement in February, 2007.

2007

Pfizer launches an online site to provide up-to-date, user-friendly information on the status of

its U.S. post-marketing commitments - studies conducted after a medicine receives regulatory

approval and designed to provide additional information about the medicine's safety, efficacy

or optimal use. This initiative is the first of its kind for a pharmaceutical company.

2008

Jeff Kindler, Chairman and CEO of Pfizer, announces the next step in the company's

evolution and outlines the company's plan to establish smaller operating units designed to

enhance innovation and accountability, while drawing upon the advantages of Pfizer's scale

and resources. These customer-focused business units allow Pfizer to better anticipate and

respond to customers' and patients' needs, as well responds to changes in the marketplace.

2009

On October 15, 2009, Pfizer acquires Wyeth, creating a company with a broad range of

products and therapies that touch the lives of patients and consumers every day and at every

stage of life.

2010

Pfizer announces a diversified R&D platform named Pfizer Worldwide Research and

Development, supporting excellence in small molecules, large molecules and vaccine

research and development. As apart of the acquisition of Wyeth in 2009, Pfizer initially

implemented a two-division structure for research and development (BioTherapeutics and

PharmaTherapeutics) to ensure the progress and steady integration of both legacy

organizations. Due to the speed and effectiveness of that integration, Pfizer progresses to this

new model while maintaining the same breadth and research programs.

2011

On January 31, the Company acquired a 92.5% interest in King Pharmaceuticals, Inc. (King).

On February 28, Pfizer acquired the remaining interest in King. On August 1, 2011, the

Company completed the sale of its Capsugel business.

In October, it acquired Icagen, Inc.

In December, the Company acquired the consumer healthcare business of Ferrosan Holding

A/S.

In December, the Company acquired Excaliard Pharmaceuticals, Inc.

COMPANY ADDRESS

Pfizer Inc

235 East 42nd Street

NEW YORK   NY   10017-5755

P: +1212.7332323

F: +1302.6555049

OFFICERS AND EXECUTIVES

Name Title

Mr. Ian C. Read Chairman & Chief Executive Officer

Dr. Olivier

BrandicourtPresident & General Manager-Emerging Markets

Mr. Frank A. D'Amelio Chief Financial Officer & EVP-Business Operations

Mr. Sarma Vadlamani Senior Scientist-Research & Development

Ms. Polly Murphy

VP-Business Development, Research &

Development

OVERALL

Beta: 0.74

Market Cap (Mil.): $203,281.91

Shares Outstanding (Mil.): 7,185.64

Dividend: 0.24

Yield (%): 3.39

FINANCIALS

  PFE.N Industry Sector

P/E (TTM): 22.46 27.99 27.84

EPS (TTM): 1.26 -- --

ROI: 6.04 5.89 5.73

ROE: 11.62 7.57 7.22

COMPETITORS

COMPETITORS  Price Change

The Procter & Gamble Company (PG.N) $77.58 +0.47

Johnson & Johnson (JNJ.N) $79.45 +0.59

GlaxoSmithKline plc (GSK.L) 1,507.00p -11.50

Novartis AG (NOVN.VX) CHF67.25 0.00

Sanofi SA (SASY.PA) €77.21 -0.61

Merck & Co., Inc. (MRK.N) $44.12 +0.42

AstraZeneca plc (AZN.L) 3,048.50p +8.50

Abbott Laboratories (ABT.N) $33.81 +0.27

Eli Lilly & Co. (LLY.N) $55.30 +0.51

Bristol Myers Squibb Co. (BMY.N) $39.87 +0.53

II. Case Overview

Four previous letters to shareholders are presented in this case study:

In the 2000 annual report, former CEO Bill Steere discussed Pfizer’s rise to

industry prominence with the acquisition of Warner-Lambert and his pending

retirement.

In the 2003 annual report, new CEO Hank McKinnell discussed Pfizer’s

performance goals and its acquisition of Pharmacia, which gave it control of anti-

arthritis drug Celebrex.

In the 2005 annual report, McKinnell discussed his decision to keep Celebrex on

the market with “black box” health warnings.

In the 2006 annual report, Kindler, who replaced McKinnell as Pfizer’s CEO in

July that year, wrote his first letter to shareholders. This was a difficult letter.

Notwithstanding Pfizer’s disappointing financial performance, McKinnell had

retired with a compensation package of almost $200 million, triggering protests

from the media, public interests groups, and shareholders.

And In February 2009, Pfizer had agreed to acquire Wyeth for $68 billion—an acquisition

aimed at building both Pfizer’s pipeline and shareholder value.

III. Analysis of 2000 Annual Report

Several years earlier, Pfizer made a deal to co-market Lipitor, a blockbuster new anti-

cholesterol drug developed by Warner-Lambert. Lipitor played a crucial role in Pfizer’s

progression from a small chemicals company to a global pharmaceutical powerhouse. Pfizer

reaped 40% of Lipitor profits and Lipitor’s sales estimated would pass $10 billion.

In November 1999, American Home Products announced $72 billion merger with Warner-

Lambert. Pfizer immediately countered with a higher offer and after months of intense

negotiation Pfizer prevailed with an acquisition price of $90 billion. The New York Times

called it “one of the drug industry’s nastiest takeover battles”.

Why did Pfizer acquire Warner-Lambert?

When American Home Products announced $72 billion merger with Warner-Lambert,

Pfizer’s revenue from Lipitor was threatened. According to analysts statements Pfizer

immediately acquired Warner-Lambert mainly for the cholesterol-

lowering drug Lipitor, which went on to become the world's best-selling

drug. But according to Pfizer’s judgment, the acqusition will accelerate Pfizer’s growth and

pfizer’s post-merger pipeline not only benefited from full control of Lipitor, but also from

Warner-Lambert’s chest of successful consumer products, including well-known brands such

as Benadryl, Halls, Listerine, Lubriderm, Schick, Sudafed, and Visine.

Pfizer accounted for the Warner-Lambert acquisition using the “pooling-of-interests”

method. But on April 21, 1999, the Financial Accounting Standards Board banned the

pooling-of-interests method.

Pfizer achieved total reported revenues of $29.6 billion,

representing 8% growth over 1999. Revenue increases

becase of sales volume growth of Pfizer in-line products

and revenue generated from product alliances. Net income grew 25% to $6.5 billion,

excluding certain significant items and merger-related costs.

Pfizer’s 2000 human pharmaceuticals revenues increased 10% to $24.027 billion, inluding

the effects of foreign exchange and the withdrawals. And Pfizer’s 2000 consumen products

increased 1% to $5.547 billion.

Eight of Pfizer products achieved global revenues of at least $1 billion each. The eight

billion- dollar products—Lipitor, Norvasc, Celebrex, Zoloft, Zithromax, Neurontin, Viagra,

and Diflucan—represent 74% of Pfizer’s human pharmaceutical revenues. Celebrex, one

discovered and developed by Pharmacia and copromoted by Pfizer, remained the number one

branded antiarthritic medicine in the world. But still, Lipitor remained the largest-selling

medication in the world for cholesterol reduction with 2000 sales exceeding $5 billion.

In 2000, Pfizer invested $4.4 billion in research

and development, and this year Pfizer expected to

boost that total to approximately $5 billion—more

than any other company in any industry.

Eventhough 2000 was the worst year for stocks

since 1981, Pfizer ended the year with a market

capitalization of $290 billion, representing a 44%

increase over 1999.

Pfizer accounted for the Warner-Lambert acquisition using the “pooling-of-interests”

method. It would be much different with the more common “purchase” method. Pfizer

would have been required to record the full purchase price of $90 billion as an asset and

charge the excess of purchase price over assets acquired (“goodwill”) as an expense in future

accounting periods. By avoiding goodwill write-downs, the pooling method would allow

Pfizer to show higher profits in future years. In addition, return-on-asset and return-on-equity

ratios would be calculated with a deflated denominator.

Return On Equity = Net Income/Shareholder’s Equity

= $3.726 billion/$16.076 billion

= 24,8%

Return On Asset = Net Income/Total Asset

= $3.726 billion/$33.150 billion

= 11,11%

Some analysts expressed concern on Pfizer’s Warner-Lambert acqusition. They said while

the merger will allow Pfizer to extend its high-growth period, adding Warner-Lambert has

done little to address the underlying pipeline concerns.