Our Values

Integrity
Innovation
Respect for People
Customer Focus
Teamwork
Leadership
Performance
Community

Financial Highlights

Ensuring Access to Innovative Medicines

Table of Contents
2 Letter to Shareholders
5 Creating the Worlds Fastest-Growing
Pharmaceutical Company
8 Our Market-Leading Medicines
12 Our Global Presence
16 Our Commitment to R&D
18 Review of Operations
27 Our Community Activities
28 Financial Review
37 Managements Report
38 Audit Committees Report and
Independent Auditors Report
39 Consolidated Statement of Income
40 Consolidated Balance Sheet
41 Consolidated Statement of Shareholders Equity
42 Consolidated Statement of Cash Flows
43 Notes to Consolidated Financial Statements
61 Quarterly Consolidated Financial Data (Unaudited)
62 Financial Summary (1989 -1999)
63 Directors, Committees, and Officers
64 Corporate and Shareholder Information
65 Ensuring Access to Innovative Medicines

Year ended December 31

% Change
(millions, except per share data)
Total revenues
Income from continuing operations before provision for
taxes on income and minority interests
Provision for taxes on income
Discontinued operations net of tax
Net income
Research and development expenses
Property, plant and equipment additions
Cash dividends paid
Diluted earnings per common share
Cash dividends paid per common share
Shareholders equity per common share
Weighted average shares diluted
Number of common shares outstanding
(thousands)
Number of shareholders
Number of employees

1999

1998

1997

99/98

98/97

$16,204

$13,544

$11,055

20

23

4,448
1,244
(20)
3,179

2,594
642
1,401
3,351

2,867
775
131
2,213

71
94

(5)

(10)
(17)
972
51

2,776
1,561
1,148

2,279
1,198
976

1,805
878
881

22
30
18

26
36
11

.82

.85

.57

(4)

50

.30 2/3
2.36
3,884
3,847

.25 1/3
2.33
3,945
3,883

.22 2/3
2.10
3,909
3,883

21
1
(2)
(1)

12
11
1

147
51

105
46

87
41

40
11

21
12

Percentages may reflect rounding adjustments.

All data throughout this report have been restated to reflect the 1999 three-for-one stock split in the form of a 200% stock dividend.

About Pfizer
Pfizer Inc is a research-based global pharmaceutical company. We discover,
develop, manufacture, and market innovative medicines for humans and
animals. In 1999, Pfizer celebrated its 150th anniversary.

About the Cover

In Santa Ana, California, Dale and Arlene Post enjoy an outing with
their family, including daughter Jody, grandchildren Spencer and Emily,
and best friend Keeler. Both Dale and Arlene suffer from atrial fibrillation, a common form of irregular heartbeat, and rely on Tikosyn to
treat it. Approved in 1999, Tikosyn is the latest addition to Pfizers
broad cardiovascular portfolio.

Lifesaving drugs are an indispensable part

of modern medicine, President Clinton
said in his most recent State of the Union
address. And hes absolutely right.
Thats the main reason why Americans
are spending more on pharmaceuticals.
It has little to do with higher prices for
medicines. Pfizers price increases have
been less than the overall rate of inflation
since 1994, accounting for discounts to
federal buyers and Medicaid. What is
driving pharmaceutical spending growth
in the United States is a significant
increase in the utilization of medicines.
Medicines such as Lipitor, Zoloft, and
Celebrex mark significant improvements
over previous therapies, and more and
more Americans are relying on these and
dozens of other breakthrough pharmaceuticals to live longer and healthier lives.
The question before the nation now
is how best to provide access to these
medicines for the seniors who need them.
In developing such a policy, its important
to keep in mind that two thirds of seniors
already have prescription drug coverage.
Theres no need to revamp a system
thats already working for most of its
participants. But there is need to fine-tune
it so the remaining senior population
about 13 million people can also have
access to all FDA-approved medicines.
Pfizer supports a variety of approaches,
including:
Expanded Insurance Alternatives
These could be developed by private
insurers with subsidies given to lowincome elderly.
Tax Code Changes Credits or
deductions could subsidize the cost of
prescription drug insurance.
State-based Solutions Federal
grants to the 50 states could provide
funds to create drug-access programs
for low-income residents.
Whatever approach is adopted, its
essential that it preserve the research
pharmaceutical industrys capacity to
discover new medicines. Not only has
the industry significantly extended and
enhanced human life, its now poised to
enter a golden age of discovery that will

yield new drugs to treat virtually every

disease. Heavy-handed government
interference would stifle the discovery of
those new medicines by diminishing the
resources available for research.
And significant resources are required.
On average, it takes $500 million to bring
one new drug to market. Last year alone,
Pfizer invested about $2.8 billion to
discover new medicines. In the absence
of rigorous reinvestment, new drugs will
be delayed or simply go undiscovered.
In Canada, the government-controlled
health care system has depressed R&D
and resulted in significant delays in the
approvals of innovative medicines from
the United States. When governments set
the price of pharmaceuticals, bureaucrats
often use the
approval and reimbursement process
as a cost-savings
device by keeping
new products off
the markets. For
instance, six medicines recently introduced in the United
States, five of which have no therapeutic
alternative, are not available in Canada.
On average, Canadians wait a full year
longer than Americans before new
pharmaceuticals are approved and reimbursed by the government, if they are
approved at all. By delaying and denying
access to innovative medicines, the
Canadian health care system has narrowed
the range of medicines available to patients.
Yet, despite stringent government
control, Canadians still pay about the
same percentage of their income as
Americans to purchase pharmaceuticals.
While its true many things cost less in
Canada such as fast food, a quality
university education, and some pharmaceuticals its also true that Canadians
earn considerably less than Americans.
Nor have price controls improved
overall medical services in Canada. In a
recent survey, most Canadians polled
said their nations health care system was
in crisis. In another survey, 93% said
that improving health care should be the

Canadian governments top priority.

Frustrated with an overburdened public
health system, which now has surgery
waiting lists stretching for months,
many Canadians travel to the United
States to seek private care. While
American health care delivery is not
perfect, it is still the envy of the world.
Nonetheless, we must continue to
improve access. It must be adjusted to
meet the needs of those seniors who are
without prescription drug coverage, but
the issue is not one fundamentally of
prices. For its part, Pfizer has announced
that there will be no price increases for
three of its pharmaceuticals sold in the
U.S. market in 2000 and only a modest
3.1% increase for our other medicines.

What is driving pharmaceutical

spending growth in the United
States is a significant increase in
the utilization of medicines.
Our best estimate is that these price
changes, combined with the impact of
discounts to federal buyers and the
Medicaid program, will result in an
effective average price increase of 2.5%,
which is equal to the December 1999
Blue Chip Consensus forecast of the
change in the Consumer Price Index for
the year 2000.
We are on the threshold of a pharmaceutical revolution in the treatment of
disease. By pursuing in a spirit of
compromise and pragmatism proposals
that expand access while preserving
incentives for research, the United States
can provide prescription drug coverage
for seniors who need it and maintain our
status as the worlds leader in pharmaceutical innovation.
These issues will have tremendous
impact on the owners of Pfizer, not only
as shareholders but also as patients and
taxpayers. If youd like to learn more and
find out how you can become involved,
fill out and return either or both of the
attached response cards.
65

During the 1990s,

Pfizers revenues
grew by 284%.
Our growth has outpaced the
industry every year for the past
decade, and was more than double
the average in 1999.

1989
$4.2 billion

1999
$16.2 billion

To Our Shareholders

or Pfizer and our shareholders,

1999 was an exceptional year,
capping a decade of extraordinary
achievement. We ended the century
on a high note including our share of
the sales generated by our copromotion
activities, Pfizer became the worlds
number one pharmaceutical company in
prescription sales.
Over the last decade, our prescription
pharmaceutical revenue has quintupled,
our investment in R&D has sextupled,
our reported net income has more than
quadrupled, and the price of our stock
has increased more than ten times. The
growth of our pharmaceutical revenue
exceeded that of the industry every year
throughout the last decade, and in 1999,
it more than doubled the industry rate.
In 1999, total revenues topped $16.2
billion, up 20% over 1998. Excluding the
impact of a charge taken in the third
quarter related to Trovan inventories, of
certain significant prior-year charges, and
of the 1998 divestiture of the Medical
Technology Group, net income increased
by 29% to almost $3.4 billion, and
diluted earnings per share increased by
30% to 87 cents.

Pfizers exceptional performance

has substantially benefited our shareholders.
Our stock split four times in the 1990s:
three times on a two-for-one basis
in 1991, 1995, and 1997 and on a
three-for-one basis in 1999. This achievement is unprecedented in Pfizers history
and unequaled by any company in our
peer group.
In January of 1999, we announced a
first-quarter dividend of 22 cents (7.33
cents adjusted for the three-for-one stock
split), a 16% increase over 1998. This year,
we increased the first-quarter dividend to
9 cents, up 23% (adjusted for the threefor-one stock split) over the same quarter
the year before.
Driven by the success of our innovative
in-line and alliance products, Pfizer
Pharmaceuticals Groups revenues
increased 22% to $14.9 billion. In 1999,
Pfizer became the only company to have
participated in all three of the industrys
latest record-breaking launches. In 1997,
in concert with Warner-Lambert, the
company that discovered Lipitor, we
launched this innovative lipid-lowering
agent. In 1998, we introduced Pfizers
Viagra, the worlds leading treatment for
erectile dysfunction. In February 1999,

along with G.D. Searle & Co., the

pharmaceutical division of Monsanto
Company, we launched Celebrex, one of
the worlds leading treatments for arthritis,
which was discovered by Searle.
We set another record in 1999 when
Pfizer became the only company in our
industry to have seven medicines, including
those we copromote, each achieve annual
sales of $1 billion or more. The five medicines discovered by Pfizer in this group
Norvasc, Zoloft, Zithromax, Viagra, and
Diflucan grew at a combined annual
rate of 18%. Norvasc, with yearly sales
exceeding $3 billion, maintained its
position as the worlds number one antihypertensive. Zoloft continued to be a
leading antidepressant worldwide.
Zithromax retained its rank as the mostprescribed branded oral antibiotic in the
United States. Viagra remained the worlds
leading treatment for erectile dysfunction,
and Diflucan held the lead as the worlds
largest-selling prescription antifungal.
Unfortunately, we also experienced a
disappointment with Trovan. Although
this unique antibiotic has saved thousands
of lives, rare cases of unanticipated severe
liver injury associated with it resulted in
our relabeling Trovan in the United States
exclusively for use in serious infections
in institutional settings, and in its suspension in Europe.
In early October of 1999, the U.S.
Food and Drug Administration (FDA)
approved Tikosyn, Pfizers new medicine
for atrial fibrillation, and we anticipate
launching it in the first quarter of this year.
A few weeks later, we received an approvable letter from the FDA for Relpax, our
innovative remedy for migraines. In
December, Pfizers antidepressant Zoloft
became the first medicine approved by the
FDA for the treatment of posttraumatic
stress disorder, and by midyear, we expect
to refile our application for Zeldox, our
novel antipsychotic drug.

Despite challenging market conditions,

our Animal Health Groups sales increased
2% to $1.3 billion. These results were
fueled by the increasing popularity of
Rimadyl, a treatment for the relief of
pain and inflammation associated with
osteoarthritis in dogs; and by the launch of
Revolution, Pfizers new,
innovative antiparasitic
We set another record in 1999
for dogs and cats
when Pfizer became the only
hailed by many as the
company in our industry to have
most successful launch
in the history of the
seven medicines including those
animal health industry.
we copromote each achieve
Building on the
strong base provided by
annual sales of $1 billion or more.
our innovative pharmaceuticals for humans and animals, Pfizer
Total Revenues
(millions of dollars)
is forging ahead with an aggressive R&D
program. In 1999, we invested almost
Total revenues have
$2.8 billion in R&D, a 22% increase over
increased at a
compound annual
$16,204
1998. We currently have more than 200
growth rate of 19%
over
the
past
5
years.
$13,544
projects in discovery and development for
$11,055
humans and animals, and this year, we
$9,864
$8,684
expect to invest approximately $3.2 billion
in R&D.
To accommodate our extensive number
of projects in discovery and development,
and to provide the necessary support for
95
96
97
98
99
our in-line products, we have expanded
our research centers in Groton, Connecticut;
R&D Expenses
(millions of dollars)
Sandwich, England; and Nagoya, Japan.
We have also added to our field forces
Research and
development expenses
which are the key link between our
have increased at a
$2,776
research laboratories and the practicing
compound annual
growth rate of 22%
$2,279
physician. Since 1994, we have doubled
over the past 5 years.
$1,805
the number of our sales representatives
$1,567
in the United States, and in our industrys
$1,340
most prestigious survey, more than
10,000 doctors nationwide have recognized
the outstanding quality and training of
our sales force by ranking it number one
95
96
97
98
99
overall for five consecutive years.
Pfizer is advancing in every area. Our
fundamentals are strong. Our pipeline is
broad and deep, and our field forces are
second to none. Our company is increasingly
3

recognized as a world leader in the business community. In 1999, Forbes selected

Pfizer Company of the Year, and Working
Mother ranked Pfizer one of the 100 Best
Companies for Working Mothers. Just
last month, Fortune named Pfizer one of
the 100 Best Companies to Work For
and number one in our industry, and
Business Week ranked Pfizers board as one
of the 25 best in the world.
Pfizer takes an active role in corporate
governance, public policy debates, and
support of the community. In the current
discussions over Medicare, we have strongly
supported prescription drug coverage for
elderly Americans who do not have access
to pharmaceuticals. The statement on
page 65 suggests the measures that we
believe would provide the necessary coverage and also enable our industry to carry
out the R&D that saves, protects, and
enhances lives.
Commitment to the community at
every level is one of Pfizers eight core
values, and I believe that it grows naturally out of our humanitarian mission. This
commitment also plays an indispensable
role in promoting our outstanding performance. It helps us hire and retain the best
people. It helps us motivate our employees.
It enhances our companys reputation and
improves our relations with the public,
as well as with doctors, patients, and
others in the medical community. This
commitment also produces the kind of
trust and goodwill that are invaluable in
dealing with regulatory agencies and
government officials.

Obviously, one of the most important

events of 1999 was Pfizers proposal to
acquire Warner-Lambert. As you know, a
few weeks ago, we announced that Pfizer
and Warner-Lambert, the two fastestgrowing major companies in our industry,
would join forces to create what I believe
will be the best pharmaceutical company
in the world. The page following this
letter explains in greater detail how this
acquisition will benefit both you and the
shareholders of Warner-Lambert.
As we look toward a bright future,
I would like to say a word about succession
planning, which I believe is one of a
Chairmans most important duties. For
me, this has been made easier by the
extraordinary quality of senior managers
at Pfizer. On May 27, 1999, our board
elected Dr. Henry A. McKinnell president
and chief operating officer of Pfizer Inc.
He has done a superb job of managing
our acquisition of Warner-Lambert and
of planning the integration of our two
companies. Simultaneously, the board
elected Dr. John Niblack vice chairman
of our company.
As Pfizer enters the twenty-first
century, we have never been stronger and
our prospects have never been brighter.
In 1999, we celebrated 150 years of
excellence and innovation a proud
legacy that the outstanding people of
Pfizer are well prepared to take into the
next millennium.
William C. Steere, Jr.
Chairman of the Board and
Chief Executive Officer
February 14, 2000

Creating the Worlds Fastest-Growing

Pharmaceutical Company

ith net income growth of 20% per

year anticipated for 2000 to 2002 as
a stand-alone company, Pfizer was
in a strong position to continue our
successes of the 1990s. However, in late 1999, a
unique opportunity arose that would allow us
to achieve even faster earnings growth. Pfizer
made a bid in November 1999, subsequently
revised in February 2000, to merge with
Warner-Lambert, the only major pharmaceutical
company growing faster than we were.
Under terms of the agreement, Pfizer
will exchange 2.75 shares of Pfizer voting
common stock for each outstanding share of
Warner-Lambert voting stock. Approved by
the boards of both companies, the merger
agreement is conditional upon the use of
pooling-of-interests
Pfizer and Warner-Lambert
accounting, qualifying as a
represent a new competitive tax-free reorganization, the
approval of shareholders of
standard for our industry.
both companies, and the
usual regulatory approvals. It is expected to
close in mid-2000.
The new company will retain the name
Pfizer Inc. Up to eight independent directors
from Warner-Lamberts board of directors will
be invited to join Pfizers board. Mr. Steere will
be chairman and chief executive officer, and
Dr. McKinnell will be president and chief
operating officer. Three members of the
Warner-Lambert management team will join
Pfizers Corporate Management Committee.
Corporate headquarters will remain in New
York. The worldwide and U.S. pharmaceutical
division headquarters will also be in New York.
The Warner-Lambert Consumer Health Care
Division, along with the other consumer
businesses and selected additional functions,
will be located at Warner-Lamberts offices in
Morris Plains, New Jersey.
The new Pfizer will have annual revenues
in 2000 of approximately $31 billion, including
$24 billion in prescription pharmaceutical sales.

The combined pharmaceutical product lines of

the two companies represent significant depth
and breadth, including seven billion-dollar products. The new Pfizer will receive all revenues
from Lipitor, which is expected to achieve sales
in 2000 in excess of $5 billion. The company
will also have a significant presence in consumer
health care, confectionery products, and animal
medicines. The combined R&D operations will
have a worldwide scientific staff of more than
12,000 and $4.7 billion in anticipated annual
expenditures in 2000, the largest investment
in the industry. We expect the combined
company will have anticipated annual cost
savings and efficiencies of $1.6 billion by 2002
($200 million of these savings are expected to
be achieved in 2000, $1 billion in 2001, and
$1.6 billion in 2002). Diluted earnings per
share of the combined company over that
period are expected to accelerate from 20% for
Pfizer alone to 25% for Pfizer combined with
Warner-Lambert. These earnings projections
include the $1.6 billion of cost savings phased
in over this time period, but do not include
sales opportunities achievable by bringing
together the two organizations, anticipated
restructuring charges and transaction fees of
$1.7 billion to $2.2 billion, and the termination
fee paid by Warner-Lambert to American
Home Products Corporation.
The new Pfizer will have the industrys
broadest range of products that treat diseases
associated with cardiovascular risks, a significantly expanded program in treating central
nervous system disorders, a vastly expanded
portfolio of products for infectious diseases,
and important medicines in womens health.
The Pfizer and Warner-Lambert organizations will work together in a spirit of collaboration and mutual respect to capitalize on the
extraordinary opportunity now before us. The
combined talents of Pfizer and Warner-Lambert
people will make us not just bigger, but better.
5

By 2025, the number

in the
will double to
6

Athletes race toward the finish

line in the 200-meter dash at
the Pfizer-sponsored Senior
Games. Held in Orlando, Florida,
the 1999 event brought
together 12,000 men and
women ranging in age from
50 to 99. Not so long ago, the

notion of an Olympics for older

people would have been
unthinkable. Today, thanks in
part to pharmaceutical
companies like Pfizer, millions
of people realize that growing
old doesnt have to mean
slowing down.

of people
world age 65 and over
800 million.

ood health is the key to a good

life. To do the things you love to
do. To be productive at work. To
see your children have children.
Pfizer is committed to the pursuit of
medicines that help ensure good health,
and our products treat some of the worlds
most widespread diseases and conditions.

For example, several of the medicines

we offer treat risk factors for heart disease,
one of the worlds leading killers. Backed
by award-winning patient and physician
education programs, these drugs are helping
millions of people get to goal be it
lower blood pressure (Norvasc), lower
cholesterol (Lipitor), or controlled blood

Pfizer medicines keep millio

sugar levels (Glucotrol XL). Both Norvasc
and Lipitor had 1999 revenues in
excess of $3 billion,

ranking
them among the
worlds most successful
medicines of any kind.
Zoloft is a leading treatment
for depression, which is estimated to affect
more than 10% of the worlds population
about 600 million people. In 1999,
Zoloft was approved for posttraumatic
stress disorder (PTSD), a debilitating

What could be better than winning the World

Series? For New York Yankee second baseman
Chuck Knoblauch, it was having the chance
to share that victory with his father, Ray, a
victim of Alzheimers disease. In the 1998
season, my dad came out to the stadium and
took great joy in watching me play,
Knoblauch says. Im not sure he would have
been able to do that if he wasnt taking
Aricept. Thats why Im happy to be working
with Pfizer and Eisai on an awareness
campaign stressing the need for early
diagnosis and treatment. Discovered
and developed by Eisai Co., Ltd.,
and copromoted by Pfizer,
Aricept is the worlds leading
Alzheimers medicine.

condition triggered by exposure to an

extreme traumatic event. Approximately
half of all people will experience, witness, or
learn about such an event during their
lifetime; 10% to 20% of these people will
develop PTSD.

Seven of the medicines we offer generated

1999 revenues of over $1 billion. No other
pharmaceutical company has such a powerful
product portfolio.

ons healthy
throughout their lives.
Arthritis is another common condition
that Pfizer is helping to combat. In 1999,
G.D. Searle & Co. and Pfizer introduced
Celebrex, which delivers relief from
arthritis pain, inflammation, and stiffness.
Powered by an excellent efficacy and sideeffect profile, Celebrex set a new record as
the most successful U.S. product launch
in industry history.
Building on our years of expertise in
livestock products, Pfizer has also
established leadership in the fast-growing
category of medicines for pets. The bond
between people and their pets is extremely
powerful. A Gallup poll of dog owners,
for example, showed that 92% consider
their pet to be a member of the family.
Pfizers newest companion animal medicine
is Revolution (marketed as Stronghold in
Europe), the first and only product that
protects dogs and cats from both internal
and external parasites, including heartworms and fleas, with just a single monthly
topically applied dose. This unique medicine has enjoyed one of the most successful
launches in animal health industry history.

Global statistics are difficult to come by, but the high prevalence in
the United States of many diseases and the fact that so many
who suffer from them remain undiagnosed and untreated
underscores the importance of the work we are doing:
One in four has high blood pressure.
One in three has high cholesterol.
One in sixteen has diabetes.
One in six will suffer from depression.
One in six has arthritis.
One in ten over age 65 has Alzheimers disease.
Four in ten have allergies.
Half of all men 40 to 70 years old will experience
erectile dysfunction.

Carole Gatti has owned and

operated Floridas Winstar
Farm since 1988. She
relies on Pfizers animal
health products to
care for the horses
she boards, as well
as for her own pets,
including dachshunds
Odie and Samantha.

By 2003,rising
global pharmaceutical
than it is today.
10

demand will create a

market one third larger
The subways of Tokyo are
bursting with energy, even as
Japan wrestles with caring for
what is the worlds most rapidly
aging population. Pfizer began
doing business in Japan more
than 40 years ago, and today it
ranks as our second-largest
market, accounting for over
$1.2 billion in annual revenues.
In December, Pfizer Japan
achieved its Super 70 goal
growing revenues faster than

the overall Japanese market for

70 straight months. In fact,
Pfizer now ranks as the number
one non-Japanese-owned
pharmaceutical company.
The 1999 introduction of Viagra
and the Alzheimers medicine
Aricept, coupled with our plans
to launch several new medicines over the next few years,
should ensure continued
strong growth for Pfizer in this
important market.
11

he desire to live a healthy, productive life knows no borders. Pfizer

was one of the first in the industry
to recognize the tremendous
potential for success outside our home
country, and we now do business in more
than 150 countries.
While each market is unique, we
have been working to share best practices
on a global basis. In 1997, for example,
we launched the Alzheimers medicine
Aricept in the United States, along with
our copromotion partner Eisai. Aricept
quickly became the countrys most widely
prescribed Alzheimers treatment, as we
worked to educate patients, physicians, and
advocacy groups about this effective treatment for a terrible disease.

The following year, Aricept was introduced in Europe, where a similar strategy
yielded equally strong results. In 1999,
Aricept was launched in Japan, and Pfizer
and Eisai teams there met with their
counterparts from France and the United
States to learn from their success. The end
result is that well over a million people
around the world have now been helped
by this powerful medicine.
In 1998, Pfizer launched Viagra in the
United States, triggering what can only be
described as a global phenomenon. For all

Pfizer brings good health

to every corn
In 1999, Pfizer celebrated its 150th anniversary as an American company and marked a
number of international milestones as well.
Forty-five years in France, Sweden, the
Philippines, and the Netherlands. Forty years
in Finland, Norway, and Portugal. Thirty-five
years in Korea, Singapore, and Malaysia. Ten
years in China where DanLong Feng, who
works closely with the media and government, was Pfizers first employee. Today, a
decade later, she is excited about the role
Pfizer is playing in bringing better health
care to her country. More than 1.2 billion
people live here, she says. And they are
just as interested in living healthy lives as
people in every other part of the world.

12

the attention, however, Viagra and erectile

dysfunction (ED) are still frequently
misunderstood. Pfizer has been educating
men, doctors, and insurers that ED is a
common and treatable condition and one
that can often be traced to even more serious
medical problems, such as high blood
pressure, high cholesterol, and diabetes.
This strategy, conceived and executed
globally, enabled Viagra to top the billion
dollar sales mark in 1999, its first full
year on the market. More importantly, it
has helped more than six million men
and their partners in the United States
recapture an important part of their lives.

While direct-to-consumer advertising for

prescription pharmaceuticals is increasingly
common in the United States, it is still a new
concept in many other parts of the world.
Pfizer has pioneered the use of such ads to
raise awareness about erectile dysfunction, a
condition that affects an estimated 100 million
men and their partners worldwide. By showcasing the many faces of ED, Pfizer has taken
this condition out of the shadows and given
men the knowledge and the courage
they need to seek treatment.

Italy

Brazil

rner of the world.

We are a truly global company,
doing business in more than
150 countries. In 1999, our
revenues exceeded $100 million
in 12 different countries outside
the United States.

United States

13

The sequencing
will increase the number
14

The odds against bringing an

innovative new medicine to
market are daunting. New technologies are improving the
likelihood of success, however,
and that is good news for
pharmaceutical companies and
patients alike. Pfizer has long
been on the cutting edge of

drug discovery and is still there

today. By forging alliances with
leading biotech companies and
investing in new facilities of our
own, we are redefining the R&D
process. At our Discovery Technology Center in Cambridge,
Massachusetts, scientist Mark
Roth uses a state-of-the-art

machine that analyzes cells at

a rate of 10,000 per second and
sorts out only those that react to
a specific compound.This allows
us to identify promising new drug
targets roughly eight times faster
than conventional methods.

of the human genome

of drug targets
from 500 to 10,000.
15

Our pipeline is full of exciting candidates,

including several medicines in late-stage
development with peak annual sales
potential of more than $1 billion.

Pfizer is leading the

T
way to a h
remendous strides have been
made against dozens of diseases
during the past several decades,
but much work remains to be
done. While we celebrate victories over
twentieth-century scourges like smallpox
and polio, we also watch with concern
the growing global ranks of those confronting other dreaded illnesses, such
as diabetes and cancer.
Pfizer is committed to discovering the
wonder drugs of the twenty-first century,

At our research campus in

Groton, Connecticut, senior
scientist Barbara Foster is
part of a growing team of
Pfizer researchers working
to discover new cancer medicines. Pfizer has several
promising candidates in its
pipeline to prevent and treat
this disease. Because we all
know colleagues and friends
whose cancer did not
respond to current therapies,
we take the challenge of
finding effective new drugs
very seriously, Foster says.
Every day we come to
work wanting to win. Our
scientists take great pride in
doing their best, and in
doing so, we inspire each
other to meet the challenge
before us.

16

and we have assembled the strongest, most

consistently productive global research and
development operation in the industry to
do it. In the next few years alone, we expect
to launch as many as six new medicines
to treat diseases and conditions affecting
hundreds of millions of people.

Relpax, for example, our new medicine

to treat migraine headaches, is currently
under regulatory review. Relpax has
demonstrated powerful pain relief in
comparative trials against the current market
leader. Because of this, we believe Relpax
will be welcome news to the worlds 240
million migraine sufferers 85% of
whom are not treated with a prescription
medicine, despite the incapacitating nature
of these headaches.

We have new chemical entities in early

development to treat these conditions:
Alzheimers Disease
Anxiety
Arthritis
Asthma
Benign Prostatic Hyperplasia
Bone Restoration
Cancer
Chronic Obstructive Pulmonary Disease
Depression
Dermal Scarring
Diabetes
Erectile Dysfunction
Frailty

Head Trauma
Infection
Ischemic Reperfusion Injury
Lipid Modulation
Migraine
Nicotine Addiction
Obesity
Osteoporosis
Pain
Sleep Disorders
Stroke
Transplant Rejection
Wound Healing

a healthier tomorrow.
We are equally optimistic about the
prospects for a new inhaled insulin technology to treat diabetes that we are developing in collaboration with Aventis Pharma
and Inhale Therapeutic Systems, Inc. The
global incidence of diabetes is growing
rapidly, yet most people with the disease
are either undiagnosed or not adequately
controlling their blood sugar levels. This
new patient-friendly treatment option
provides the means by which patients may
better manage their diabetes and improve
control of this debilitating disease.
Inhaled insulin minimizes the need for
painful and inconvenient insulin injections
and thus removes the psychological barrier
to adequate administration of insulin.
Clinical trials have shown inhaled
insulin to be effective in and of itself as
well as in conjunction with oral medicines.
Phase III studies are now under way at 120
sites worldwide, and Pfizer and Aventis
Pharma are constructing a state-of-the-art
insulin plant in Frankfurt, Germany.
To further drive near-term growth, we
are exploring new uses and formulations

for many of our currently marketed

medicines. Zithromax, for example, has
been a very successful antibiotic for many
years. Today, Pfizer scientists are also
studying whether Zithromax might be
effective in preventing cardiac events in
post-heart-attack patients.
Looking farther into the future, Pfizer
has more drug candidates in early development than ever before. They cover a broad
range of therapeutic areas, including cancer,
post-menopausal disorders, frailty, and brain
injury caused by stroke or trauma.
Pfizer also leads the world in R&D
dedicated to animal health. Our pipeline
of product candidates, which has tripled
in number in the last three years, exploits
novel gene therapies and vaccine technologies and benefits from synergies with our
human health research. Between now and
2005, we estimate that our animal health
division will expand rapidly.

17

Review of
Operations
P

fizer completed its rise to the top of the

worldwide pharmaceutical rankings in
1999. Culminating a decade of extraordinary growth, the companys sales of
prescription drugs, including our share of the
sales of copromoted products, were the highest
in the industry.
Pfizers performance is characterized not
only by size, but also by superior growth. In 1999,
Pfizer had 20% revenue growth, the highest
among the worlds top 10 pharmaceutical
companies. Our pharmaceutical revenue growth
exceeded that of the industry every year this
decade, and in 1999 was more than two times
the industry rate.
Our profit margins expanded in 1999, as
we leveraged substantial recent investments in
sales, marketing, and R&D. For Pfizer, excluding

Worldwide Revenues of Therapeutic Lines and Major Products

% Change
(millions of dollars)
Worldwide Pharmaceuticals
Cardiovascular Diseases
Norvasc
Cardura
Procardia XL
Infectious Diseases
Zithromax
Diflucan
Unasyn
Sulperazon
Central Nervous System Disorders
Zoloft
Diabetes
Glucotrol XL
Viagra
Allergy
Zyrtec/Reactine
Arthritis/Inflammation
Feldene
Alliance Revenue
Consumer Health Care

1998

1997

99/98

98/97

$14,859 $ 12,230

1999

$ 9,726

+ 22

+ 26

3,806
2,217
626
822
2,475
821
881
346
139
1,553
1,507
234
175

273
265
271
236
316
584

+ 11
+ 18
+ 15
- 27
+ 11
+ 28
+ 9
+ 7
+ 19
+ 12
+ 11
+ 9
+ 16
+ 31
+ 32
+ 33
5
- 11
+ 139
+ 7

+
+
+
+
+
+
+
+
+
+

4,635
3,030
794
521
3,145
1,333
1,002
349
158
2,156
2,034
297
262
1,033
557
552
222
179
2,071
561

4,186
2,575
688
714
2,822
1,041
916
327
133
1,924
1,836
273
226
788
422
416
234
201
867
526

10
16
10
13
14
27
4
5
4
24
22
17
29

+ 55
+ 57
- 14
- 15
+ 175
- 10

Percentages may reflect rounding adjustments.

Certain prior year data have been reclassified to conform to the current year presentation.

18

the proposed merger with Warner-Lambert,

we expect further profit margin expansion, 16%
revenue growth, and 20% earnings per share
growth in 2000.
Pfizer set records in each of the past three
years with the most successful product launches in
pharmaceutical history Lipitor, Viagra, and
Celebrex. These three young blockbusters joined
seven strong growth products Norvasc, Zoloft,
Zithromax, Diflucan, Zyrtec, Aricept, and
Glucotrol XL to produce total company
revenue growth of 20% to $16.2 billion in 1999.
Each of these 10 products is number one or
number two in its field, with U.S. patent protection
until at least 2004.
Our pipeline of new products shows great
promise. One new product, Tikosyn, was approved
by the FDA, and another, Relpax, received an
approvable letter. We intend to refile Zeldox by
midyear, and filings of four other candidates are
expected by 2002. These seven late-stage products include four with peak annual sales potential
of a billion dollars or more Relpax, Zeldox,
valdecoxib, and inhaled insulin and two others
Vfend and darifenacin with sales potential
approaching this level. In addition, we anticipate
20 filings for supplemental indications or presentations of marketed products during this period. In
total, our pipeline of human medicines has more
than 90 programs in development to treat diseases
such as osteoporosis, frailty, cancer, head trauma,
stroke, diabetes, asthma, and erectile dysfunction.
Cardiovascular Diseases
Although substantial progress has been made
in recent decades, cardiovascular diseases (CVD)
remain the leading cause of death in the developed
world. Of the 2.3 million American deaths
every year, more than 41% are primarily attributable to CVD, and more than 60% have CVD as
a contributing cause.
Mortality rates from coronary heart disease
and stroke have been cut in half in the past
20 years, in part due to improved treatment of
hypertension. However, improvements have
stopped in recent years, and many of the 50 million
Americans afflicted by hypertension go undiagnosed or inadequately treated. The NHANES III
survey, for example, concluded that fewer than
70% of hypertensive patients were aware of their
condition, fewer than 55% were receiving
treatment, and fewer than 30% had their blood
pressure under control.

Pfizer markets Norvasc, the worlds largestselling medicine for hypertension and angina.
Sales of Norvasc increased 18% to over $3.0 billion
in 1999. Since its introduction in 1990, Norvasc
has had more than 12 billion patient days of
therapy worldwide. Its success has been driven by
its outstanding efficacy, once-daily dosing, consistent 24-hour control of hypertension and angina,
and excellent safety and tolerability. It is the
only drug in its class that can be safely used by
congestive heart failure patients.
The results of more than 190 clinical trials
support Norvascs profile. For example, in the
PREVENT clinical
trial, a three-year
study involving 825
patients with coronary artery disease,
patients receiving
Norvasc experienced significantly
fewer cardiovascular
procedures or events, such as angioplasties, bypass
surgeries, and hospitalizations for severe angina or
heart failure, compared to those receiving placebo.
Pfizer is currently undertaking a two-year,
3,000-patient study, CAMELOT, comparing
Norvasc with the ACE inhibitor enalapril in the
reduction of cardiovascular events and the
progression of atherosclerosis in patients with
coronary artery disease. Norvasc is also being
studied in the largest trial ever undertaken in
hypertension, the five-year, 43,000-patient
ALLHAT trial begun in 1994 under the auspices
of the National Heart, Lung, and Blood Institute.
The five-year, 18,000-patient ASCOT clinical
trial will test whether Norvasc and other newer
antihypertensive therapies can show reduced rates
of heart attacks compared with older therapies.
ASCOT will also examine whether combination of
the lipid-lowering agent Lipitor with Norvasc
reduces the rates of heart attacks.

Its made
a real difference
in my life.

Jessica Vance is a busy woman. She is a selfemployed event planner who enjoys painting,
hiking, dancing, and spending time with her
four grandchildren. Like millions of others, however, Jessica has high
blood pressure. Diagnosed in 1992, she tried several different antihypertensives, but none worked for her until she began taking Norvasc in 1998.
Its made a real difference in my life, Jessica says. I can concentrate on
building my business and doing the things I love without having to worry
about my health all the time.

Sales of Procardia XL for hypertension and

angina declined 27% to $521 million, due in part
to doctors increasing emphasis on Norvasc.
Sales of Cardura, an alpha blocker offering
clinicians and patients a unique, cost-effective
option for treating hypertension and benign
prostatic hyperplasia (BPH), increased 15% to
$794 million in 1999. Studies have found that
more than 40% of men diagnosed with BPH also
have hypertension. Cardura can be used to treat
patients with BPH who also have hyperlipidemia,
insulin resistance, and diabetes. Cardura patients
in the PREDICT trial, a one-year, 1,089-patient
study, experienced significantly better relief of
BPH symptoms than patients on finasteride. An
extended-release formulation, Cardura XL, which
has been launched in some European countries,
may reduce the need for dose titration.
Blood cholesterol levels are an important and
underappreciated risk factor for heart disease.
Studies have shown that a 1% decrease in
cholesterol levels leads to a 2% decrease in the
risk of heart disease.

19

Lipitor is the most-prescribed cholesterollowering product in the United States, receiving

more than 43% of weekly new prescriptions for all
cholesterol-lowering agents. Worldwide sales of
Lipitor, discovered and developed by the ParkeDavis Division of Warner-Lambert and copromoted
by Pfizer, totaled $3.7 billion in 1999.
In clinical studies, Lipitor, as an adjunct to
diet, has demonstrated the ability to significantly
reduce cholesterol levels. In fact, 72% of Lipitor
patients studied reached their National Cholesterol
Education Program goal for LDL cholesterol on
the 10 mg starting dose.
In the AVERT trial, Lipitor demonstrated a
36% reduction in the combined incidence of
cardiovascular events, such as death, nonfatal
heart attack, bypass surgery, revascularization,
and worsening angina, compared with patients
receiving angioplasty followed by usual care.
Pfizer and Warner-Lambert are continuing
a broad clinical program for Lipitor. The TNT
(Treating to New Targets) trial is a five-year
study enrolling 8,600 patients at 250 sites to
determine whether there are further benefits
to using higher doses of Lipitor to bring LDL
cholesterol below current guidelines.
Pfizer and Warner-Lambert have also begun
development programs for a single product that
combines the active ingredients of Lipitor and
Norvasc. In the United States, 27 million patients
suffer from both high blood pressure and high
cholesterol. With only about 15% of these
patients being treated for both conditions, a vast
number of patients may benefit from a single
combination therapy.
Pfizer will add to its cardiovascular product
line with the first-quarter 2000 launch of
Tikosyn. This product is indicated for conversion
to, and maintenance of, normal sinus rhythm in
highly symptomatic patients with atrial fibrillation (AF)/atrial flutter of greater than one week
duration. Pfizer has developed a comprehensive
program to educate institutions and health care
professionals on the required in-hospital initiation
of the drug and use of its unique dosing algorithm.
Patients with AF suffer from rapid and irregular
heartbeats in the upper chambers of the heart.
Many experience debilitating chest pain, shortness of breath, fatigue, and anxiety.

20

The American Stroke Association estimates

that 600,000 Americans suffer a stroke every
year, more than one quarter of whom die.
Neutrophil inhibitory factor (NIF), a biological
discovered by Corvas that is produced by the
canine hookworm, may be useful in preventing
brain damage that occurs in stroke. Pfizer is
conducting Phase II clinical trials of this compound and, pending their success, may accelerate
this products development.
Diabetes
People with diabetes are two to four times more
likely than non-diabetics to have heart disease
or suffer a stroke. Worldwide, the incidence of
diabetes is estimated to grow from 175 million
today to 240 million people in the next decade.
Glucotrol XL, Pfizers oral treatment for
Type 2 diabetes, stimulates the pancreas to release
insulin, with convenient once-daily dosing, no
weight gain, and no adverse effects on blood
lipids. Sales in 1999 rose 16% to $262 million.
We are developing an inhalable form of
insulin in collaboration with Aventis Pharma and
Inhale Therapeutic Systems. Our clinical data in
Type 1 diabetics show this patient-friendly
insulin delivery system to be as effective as subcutaneous injections of short-acting insulin. In Type
2 diabetes, we are demonstrating that inhaled
insulin can be used as monotherapy or as an
adjunct to oral hypoglycemic agents. The product, expected to be the first of its kind to reach
the market, is in Phase III clinical trials, with a
regulatory filing expected in 2001.
Pfizer is also pursuing an innovative approach
to treatment of Type 2 diabetes with the development of CP-368,296. This compound inhibits the
enzyme responsible for the release of glucose into
the blood from stored glycogen in the liver.
Clinical trials indicate that CP-368,296 causes a
highly significant dose-dependent decrease in fasting morning glucose levels after two weeks of
administration without the accompanying risk
of hypoglycemia.

Infectious Diseases
Pfizers Zithromax is the most-prescribed brandname oral antibiotic in the United States.
Worldwide sales grew 28% to $1.3 billion in
1999, driven by the products broad efficacy,
compliance advantages, favorable side-effect profile,
and a good-tasting liquid formulation for children.
Zithromax treats most respiratory infections in
adults and children with once-daily dosing for
just three to five days. It is also used for skin
infections in adults, middle ear infections and
strep pharyngitis in children, and a broad range
of other illnesses.
The 3,500-patient WIZARD study is testing
whether 600 mg of Zithromax taken once weekly
reduces cardiac events in post-heart-attack
patients with atherosclerosis who are positive for
previous Chlamydia presence. Chlamydia has been
observed in arterial plaques, where it may contribute to plaque instability, rupture, and heart
attack. Zithromaxs unique long tissue half-life
and high antichlamydial potency make it the
ideal agent for this condition. A new indication
for treatment of Mycobacterium avium complex and
a three-day dosing regimen for the U.S. market
are also in advanced development.

Diflucan, the worlds best-selling prescription antifungal product, achieved 9% growth in

sales to over $1.0 billion in 1999. This robust
growth after 12 years on the market reflects the
unique properties of Diflucan and the growing
medical need that it continues to fulfill. It treats
As a working mother at Pfizer, Nancy Knowles
understands the challenge of balancing the
demands of career and family especially when
one of her children is sick. Seen here at the
Pfizer Kids child care center in New York City
with Carly and Sean, Nancy says, Seans ear
infection was really slowing him down. Zithromax
has him laughing again. Zithromaxs efficacy
and convenient once-a-day-for-five-days dosing
has helped it become the most-prescribed
branded oral antibiotic in the
United States. Family-friendly
measures like our child
care center contributed to
Pfizer being named one of
the 100 Best Companies
to Work For by Fortune magazine and one of the
100 Best Companies for Working Mothers by
Working Mother magazine.

Zithromax
has Sean laughing
again.

21

systemic fungal infections, often present in

critically ill AIDS, cancer, transplant, and other
immunocompromised patients. Such infections
are difficult to diagnose and, if not treated early,
can result in high mortality. Diflucan is also
effective as an oral treatment for vaginal candidiasis and other non-life-threatening infections.
Pfizer is completing clinical testing of Vfend
(voriconazole), a powerful antifungal that it
expects to file with regulatory authorities during
2000. The compound is targeted to treat a broad
range of patients for invasive infections, including aspergillosis and candidiasis.
Sales of Trovan were $86 million in 1999.
In June 1999, based on reports of rare liver side
effects, European medical authorities suspended
the European Union licenses of Trovan for 12
months. In the rest of the world, including the
United States, the use of Trovan is limited to
serious infections in institutionalized patients.

It was a long,
hard road, says
Lyn Whitten,
reflecting upon
the past few years of her life. But today
Im better, a lot better. Lyn is one of more
than a million uninsured patients who have
received the most advanced Pfizer
medicines at no charge through our
Sharing the Care program. Following
the loss of a good job in Californias
aerospace industry and the
death of her mother, Lyn found
herself battling severe depression and anxiety, struggling to
make ends meet, and wondering where to turn for help. She
has been taking the antidepressant Zoloft for about a
year, and is gradually
getting her life back on
track. I owe thanks to
the many people who
have helped me
along the way, she
says. I feel truly
blessed.

Today Im better,
a lot better.

22

Central Nervous System Disorders

While diseases of the central nervous system can
be difficult to recognize, they have devastating
effects on peoples lives. About 18 million people
in the United States suffer from depression at any
given time, and up to 25% of women and up to
12% of men in the United States will experience
a major depression during their lives. Pfizers
Zoloft treats depression and panic disorder as well
as obsessive-compulsive disorder in adults and
children with strong efficacy and a favorable
safety and tolerability profile. The results of
outcomes research studies have demonstrated that
Zoloft patients have lower discontinuation rates
and better treatment compliance in comparison to
some other antidepressants.
In 1999, Zoloft became the second Pfizerdeveloped product to achieve $2 billion in annual
sales. An oral liquid dosage form, which provides
more convenient dosing in children and patients
who have difficulty swallowing pills, and an indication for posttraumatic stress disorder (PTSD)
were approved by the FDA in December 1999.
Approximately 8% of the population will suffer
from PTSD at some point in their lifetimes.
Pfizer is also testing Zoloft for social phobia and
pediatric depression.
Approximately 10% of people over 65 suffer
from Alzheimers disease, including 4 million
Americans. Aricept has been taken by more
than a million patients with mild-to-moderate
Alzheimers disease to enhance or maintain cognition. Discovered and developed by Eisai Co.,
Ltd., and copromoted by Pfizer,
the product preserves levels of
a neurotransmitter in the
brain. Total worldwide sales
grew 49% to $551 million
in 1999. Together with
our partner Eisai, we
recently concluded

two landmark one-year studies that demonstrate

Aricepts benefit in maintaining patient function
and delaying institutionalization. It is also the
subject of a three-year, 720-patient study
designed to investigate whether Aricept can delay
the onset of Alzheimers disease in patients with
mild cognitive impairment.
Clinical development of Zeldox, for the
manifestation of psychosis, advanced in 1999.
One psychotic disorder, schizophrenia, affects
approximately 1% of the worlds population. It is
characterized by symptoms such as hallucinations,
delusions, social withdrawal, and cognitive
impairment. Zeldox is effective in treating a
broad spectrum of symptoms, both in the short
and long term, causing little or no weight gain
and having a favorable effect on blood lipids. It
has a unique intramuscular form for initiation of
therapy for control of acute exacerbations.
Following consultation with the FDA, after
the agency issued a non-approvable letter for
Zeldox, we undertook a unique clinical trial to
characterize the modest electrocardiogram (ECG)
changes that were seen with the drug. Data from
this trial and the clinical development program
support the absence of a significant risk associated
with the ECG changes seen with Zeldox. We
anticipate refiling our new drug application for
Zeldox by midyear.
Migraine is one of the most common
medical problems, experienced by 18% of women
and 6% of men. In spite of the incapacitating
nature of migraines symptoms of which
include severe headache pain, nausea, and sensitivity
to light or sound the vast majority of sufferers
have never been diagnosed or treated with prescription medicines.
In October 1999, Pfizer received an approvable
letter from the FDA for Relpax, our new treatment
for migraine. Clinical data show that within an
hour of taking an oral dose of Relpax, up to 40%
of patients with moderate or severe migraine
experience significant or complete headache relief,
and up to 70% of patients experience relief
within two hours. The Relpax clinical program
consisted of seven controlled clinical trials, three of
which compared Relpax to the current leading
prescription treatment for migraine.
Brain trauma from motor vehicle accidents,
sports injuries, and other causes results in about
300,000 hospitalizations and 50,000 deaths

each year in the United States. Pfizers Phase II

compound CP-101,606 shows promise as a
treatment for brain trauma. If pivotal trials are
successful, this candidate has the potential for
accelerated development.
Metabolic Disorders
The National Institutes of Health estimate that
10 million Americans suffer from osteoporosis,
a disease characterized by deterioration of bone
mass. The Pfizer-developed compound lasofoxifene
has shown promise in prevention and treatment
of osteoporosis, lowering of harmful blood lipids,
and prevention of breast cancer. In Phase II clinical
trials, 0.25 mg of lasofoxifene increased bone
mineral density in the lumbar spine more than
60 mg of raloxifene after six months. Lasofoxifene
also lowered LDL cholesterol by 25%.
Loss of bone and muscle mass throughout life
can lead to frailty and greatly reduced quality of
life in the elderly. CP-424,391, a Phase II Pfizer
compound, has demonstrated good efficacy, safety,
and tolerability in increasing levels of the growth
hormone that preserves bone and muscle mass.
Arthritis
About one person in six suffers from arthritis.
Rheumatoid arthritis (RA) affects about 1% of
the population and results when the immune system attacks a persons own joints. Osteoarthritis
(OA) results from wear and tear on the joints.
Celebrex, a new pharmaceutical copromoted
by Pfizer and the G.D. Searle division of
Monsanto Company, which discovered the drug,
relieves the pain, inflammation, and stiffness of
OA and RA. In clinical trials, Celebrex was shown
to be as effective as the maximum recommended
dose of the prescription-strength nonsteroidal
anti-inflammatory drug (NSAID) naproxen in
treating arthritis pain and inflammation. Celebrex
works by inhibiting the enzyme cyclo-oxygenase-2
(COX-2), which plays a role in arthritis pain and
inflammation, without inhibiting cyclo-oxygenase-1
(COX-1), which helps maintain the stomach lining.
NSAIDs in general inhibit both COX enzymes, so
they treat arthritis pain and inflammation, but
may damage the stomach lining, potentially leading
to ulcers in some patients.

23

I just love seeing Ed

be himself again.
In New Yorks Central Park, Ed and Shaila Small
enjoy an afternoon of ice skating. The Smalls have
always been extremely active people, but Eds
arthritic knee was beginning to slow him down.
He began taking Celebrex in February 1999 and
has been feeling better ever since. I am the
director of a track and field center during the
week and keep busy during my days off, too, Ed
says. If my knee is holding me back, I cant live
my life. Shaila noticed the difference Celebrex
made right away. I could see how hard it was for
him to deal with the pain, she says. I just love
seeing Ed be himself again.

Cancer
Cancer is the second leading cause of death in
the United States, with 1.2 million new cases
and 600,000 deaths every year.
In December 1999, the FDA approved
Celebrex as the first COX-2 specific inhibitor
approved for treatment of familial adenomatous
polyposis (FAP), a rare and devastating genetic
disease characterized by the development of
hundreds to thousands of polyps in the colon and
rectum. Left untreated, virtually all patients with
FAP develop colorectal cancer by age 40 to 50.
Celebrex is being tested for several other cancers.

With sales of $1.5 billion in 1999, Celebrex

was the most successful drug launch in pharmaceutical industry history. In its first year, more
than 19 million prescriptions were written for
Celebrex worldwide.
Pfizer and G.D. Searle & Co. are actively
engaged in a program to broaden the clinical profile of Celebrex, including potential new uses for
treatment of pain and several types of cancer.
In addition, Pfizer and Searle are testing the
second-generation compound valdecoxib for
treatment of RA, OA, and pain.
24

Erectile Dysfunction
The 1998 launch of Viagra for erectile dysfunction
(ED) was one of the most talked-about medical
advances of our time. The product made further
progress in 1999, with a worldwide rollout and
sales topping $1 billion. Since launch, physicians
have written more than 17 million prescriptions
for Viagra for more than 6 million patients in the
United States alone. More than 150 million
tablets have been dispensed worldwide.
Viagra allows many men with ED to achieve
erections in response to sexual stimulation. It
improves erections in up to 82% of men who take
it, is effective in a broad range of patients, and
offers the convenience of a pill. At the 1999 annual
meeting of the American Urological Association,
Pfizer reported that 93% of 401 patients who
participated in a Viagra study remained satisfied
with the drug after two years.

Allergy
Pfizers antihistamine Zyrtec, marketed as Reactine
in Canada, provides strong, rapid, and long-lasting
relief for seasonal and perennial allergies and hives
with once-daily dosing. Sales in the United States
and Canada grew 33% to $552 million in 1999.
In two clinical studies conducted in an artificially
controlled pollen environment, Zyrtec began
working in about one hour, compared to about
three hours for Claritin. In a survey of 623 allergy
sufferers, 93% wanted fast relief most. Zyrtec is
the only prescription antihistamine approved for
children as young as two years old. Zyrtec syrup
is the most-prescribed antihistamine syrup in the
United States. A formulation with a decongestant
is in advanced development.
Urology
More than 50 million people in the United States,
Europe, and Japan suffer from overactive bladder, a
condition characterized by increased frequency and
urgency of bladder activity and incontinent events.
Pfizer expects its compound darifenacin to provide
a therapeutic profile superior to the therapies
currently available. Darifenacin progressed into
Phrase III testing during 1999.
Consumer Health Care
Pfizers Consumer Health Care Group (CHC)
markets a broad range of self-medication products.
CHC sales, which are reflected in pharmaceutical
sales, increased 7% in 1999 to $561 million.
Six of CHCs nine major brands including
BenGay for the pain of minor arthritis and muscle
aches, and Visine eye care products, which
provide fast relief for redness, dryness, and now
allergies are number one in their category.
Other CHC brands include Cortizone anti-itch
products, Desitin diaper rash products, Unisom
sleep aids, RID head lice treatments, Barbasol
shaving cream, and Plax pre-brushing dental rinse.

The division is also working today to plan

for future switches of prescription-only medicines
to over-the-counter (OTC) brands. With experience
gained by the successful OTC switch of Reactine
in Canada and Diflucan One in the United
Kingdom, Pfizer is well positioned to expand its
OTC portfolio in coming years.
Animal Health
Pfizers Animal Health Group (AHG) is a
global supplier of animal medicines unmatched
in product-line or geographic breadth. AHG
revenues grew 2% to $1.3 billion in 1999.
The $1.3 billion worldwide pet antiparasitic
market consists of medicines for external parasites
such as fleas and ticks, treatments for gastrointestinal worms, and heartworm preventatives.
Revolution, marketed as Stronghold in Europe, is
the first product to treat all three problems, and
its U.S. launch was one of the most successful in
the history of animal health. This once-a-month,
simple-to-administer topical liquid protects
What moves at 180 miles-per-hour and gets the red out
even faster? Its the new Visine-sponsored race car, which
is tearing up tracks across America in 2000 as part of the
NASCAR Busch
Grand National

Visine helps me stay

focused on the
checkered flag.

Series. A second car,

sponsored by Viagra,
is racing on NASCARs Winston Cup circuit. NASCAR auto
racing is the fastest-growing spectator sport in the world.
One fan of Visine is driver Matt Kenseth, who especially
likes the brands newest formulation, Visine Tears. My eyes
can get pretty dry, especially when we race in places like
Arizona and California, he says. Visine
helps me stay focused on the checkered flag.

25

provides relief from acute

and chronic pain associated
with osteoarthritis. A new
chewable form provides the
pet owner with greater convenience of administration.
Other important Pfizer
companion animal products
include Vanguard vaccines
for canine enteric disease,
Leukocell vaccines for feline
leukemia, Clavamox antiinfectives, and Anipryl for
Cushings disease and
Cognitive Dysfunction
Syndrome in dogs.
AHG produces leading antiparasitics, vaccines,
and anti-infectives for cattle, swine, and poultry.
Dectomax, AHGs largest-selling product, protects cattle, swine, and sheep from both internal
and external parasites, providing the broadest
spectrum of control available. It can be administered either by injection or topically. RespiSure/
Stellamune vaccines help prevent a type of
pneumonia and the related problems of slow
weight gain, decreased feed efficiency, and lack
of uniformity in size in swine.

Ezra and Ivan are

more than just my dogs.
Theyre my friends.

Lisa Neuman owns two dogs and cares for

dozens more every day as a veterinarian at
the Miracle
Mile Animal
Clinic in Ft.
Myers,
Florida. I know how important it is to
keep pets healthy, she says. Ezra and
Ivan are more than just my dogs. Theyre my friends. Dr. Neuman
protects them from harmful parasites inside and out with
Revolution, a new Pfizer medicine developed specifically for dogs
and cats. As a veterinarian, its great to be able to prescribe a single
product that does so many things so effectively. Its great as a pet
owner, too. One spot of Revolution a month on the back of their
necks, and these guys are good to go.

against internal and external parasites, including

heartworm, fleas, and ear mites in both dogs and
cats; American dog ticks and sarcoptic mange in
dogs; and hookworm and roundworm in cats.
There are nearly 53 million dogs and nearly 60
million cats in the United States alone. More than
half of all dogs and three-quarters of all cats are
not adequately protected against these parasites.
Since its introduction in 1997, nearly 5 million arthritic dogs worldwide have been treated
with Rimadyl. About 15% of all dogs suffer
from osteoarthritis, a condition characterized by
worsening pain, stiffness, and lameness. Rimadyl
26

A Helping Hand
I

n country after country, through the

donations of our medicines and the
volunteer efforts of our employees, Pfizer
is bringing improved health and
renewed hope to those in need.
In the United States, Pfizers largest
philanthropic program is Sharing the
Care, through which uninsured patients
receive our innovative medicines at
no charge.
I speak on behalf of all governors
when I say we are proud of Sharing the
Care and its commitment to helping
more than a million of the nations medically
underserved lead healthier, more productive lives,
said Thomas Carper, governor
of Delaware and 1999 chairman
of the National Governors
Association, which is partnering
with Pfizer on the program.
Access to medicines is no less of an issue
outside the United States, a fact tragically
illustrated by trachoma, a disease that has already
claimed the sight of 6 million people mostly
women and children and threatens a staggering
540 million more.
In 1998, Pfizer joined with the Edna
McConnell Clark Foundation to found the
International Trachoma Initiative. One of the
cornerstones of the program is Pfizers donation
of the antibiotic Zithromax to five developing
countries where the disease is endemic. We have
already provided more than a million doses of this
powerful medicine, which has proven to be the
most effective way to combat trachoma.
The donation of Zithromax will help us to
reduce significantly the number of new trachoma
cases in Morocco and save the sight of many
of our citizens, said Dr. Abdelwahed El Fassi,
Moroccos Minister of Public Health.
In addition to large-scale programs, Pfizer
employees continue to find hundreds of ways to
make the world a better place. Providing relief in

My own son is blind,

so I understand
how precious sight is.

Phat Tran, left,

and Chieck
Kieta work at
Pfizers plant in Brooklyn, New York, where our
trachoma-fighting antibiotic Zithromax is manufactured for shipment around the
world. Tran is a
native of Vietnam, Kieta of Malitwo of the five developing nations that Pfizer is working with to eliminate
this blinding disease. You can tell when people have
trachoma, says Kieta, who recently returned to Mali
for a visit. Their eyes are open, but they cannot see.
Theres great satisfaction in knowing you are making
a medicine that will help people in your homeland.
Tran agrees. My own son is blind, so I understand how
precious sight is, he says. Im very proud to be a
part of a company that is helping to fight blindness
around the world.

the wake of natural

disasters in Turkey,
Taiwan, Venezuela,
and the United States.
Aiding refugees in
war-torn Kosovo and
Indonesia. Bringing
smiles to the faces of
sick children around
the world. Visiting
classrooms to inspire
the scientists of tomorrow.
As one Pfizer employee said after a day of
volunteering with his family at a childrens
hospital in Atlanta, Georgia: My eight-year-old
son was impressed that Pfizer does more than
just make medicines for sick people; we also
help people by being there when needed. I
think that sums up who we are better than just
about anything.

27

Financial Review

Proposed Merger with Warner-Lambert Company

On February 7, 2000, we announced an agreement to merge
with Warner-Lambert Company (Warner-Lambert). Under
terms of the merger agreement, which has been approved by
the Board of Directors of both Pfizer and Warner-Lambert,
we will exchange 2.75 shares of Pfizer voting common stock
for each outstanding share of Warner-Lambert voting common
stock in a tax-free transaction valued at $98.31 per WarnerLambert share, or an equity value of $90 billion based on the
closing price of our stock on February 4, 2000 of $35.75 per
share. Customary and usual provisions will be made for
outstanding options and warrants.
The combined company, which will be called Pfizer Inc,
is expected to have (excluding any impact of anticipated
restructuring charges and transaction fees of $1.7 billion to
$2.2 billion):
compounded annual revenue growth of 13% and earnings
growth of 25% through 2002
$4.7 billion in annual research and development expenses
in 2000
anticipated annual cost savings and efficiencies of
$1.6 billion by 2002 ($200 million of these savings are
expected to be achieved in 2000, $1 billion in 2001 and
$1.6 billion in 2002)
diluted earnings per share of $.98 on a pro forma basis in
2000, $1.27 for 2001 and $1.56 for 2002 (these numbers
include the $1.6 billion of cost savings phased in over this
time period, but do not include any increased sales from
collaborative activities and the $1.8 billion termination
fee paid by Warner-Lambert to American Home
Products Corporation)
This transaction is subject to customary conditions,
including the use of pooling-of-interests accounting, qualifying
as a tax-free reorganization, shareholder approval at both
companies and usual regulatory approvals. The transaction is
expected to close in mid-2000.
The following financial review reflects the results of
operations and financial condition of Pfizer and does not consider
the impact of the proposed merger with Warner-Lambert.

Overview of Consolidated Operating Results

In 1999, total revenues grew 20% to $16,204 million, reflecting
the strong worldwide demand for our in-line products, as well
as our alliance products. Our operating results in 1999 were
impacted by the recording of a charge to write off certain Trovan

28

inventories. Our 1998 operating results reflect:

the sale of our Medical Technology Group (MTG)
the recording of certain significant charges associated
with adjustments to asset values, the exiting of certain
product lines, plant rationalizations, severance payments,
co-promotion payments to Searle, a contribution to The
Pfizer Foundation and other miscellaneous charges

Analysis of the Consolidated Statement of Income

% Change
(millions of dollars)

Net sales
Alliance revenue
Total revenues
Cost of sales
Selling, informational and
administrative expenses
% of total revenues
R&D expenses
% of total revenues
Other deductions net
Income from continuing
operations before taxes
% of total revenues
Taxes on income
Effective tax rate
Income from continuing
operations
% of total revenues
Discontinued
operations net of tax
Net income
% of total revenues

1999
$14,133
2,071

1998

1997 99/98 98/97

$12,677 $10,739
867
316

11
139

18
175

16,204
2,528

13,544
2,094

11,055
1,776

20
21

23
18

6,351
39.2%
2,776
17.1%
101

5,568
41.1%
2,279
16.8%
1,009

4,401
39.8%
1,805
16.3%
206

14

27

22

26

(90) 391

$ 4,448
27.5%
$ 1,244
28.0%

$ 2,594 $ 2,867
19.2%
25.9%
$ 642 $ 775
24.8%
27.0%

71

(10)

94

(17)

$ 3,199
19.7%

$ 1,950 $ 2,082
14.4%
18.8%

64

(6)

972

(5)

51

(20)
$ 3,179
19.6%

1,401

131

$ 3,351 $ 2,213
24.7%
20.0%

Percentages may reflect rounding adjustments.

Total Revenues
Total revenues increased 20% or $2,660 million in 1999 and
23% or $2,489 million in 1998. Revenue increases in both
years were primarily due to sales volume growth of our in-line
products and revenue generated from product alliances
(alliance revenue).
Revenue growth in 1999 was not significantly impacted
by foreign exchange. Total revenues grew by 26% in 1998
excluding the impact of foreign exchange.

Pfizer Inc and Subsidiary Companies

Elements of Total Revenue Growth

Volume has been the major
contributor to total revenue
growth in each of the last
19.6%
three years.

24.8%

14.0%

Volume
Price

0.5%

1.2%

1.6%

(3.5)%

(3.5)%

98

97

Currency

(0.5)%

99

introduction of Viagra accounts for 12 percentage points of the

1998 U.S. growth. Pharmaceutical revenue growth in 1999 was
not significantly impacted by foreign exchange. In 1998,
pharmaceutical revenue grew 29% excluding the impact of
foreign exchange. The currency impact on the 1998 revenue
growth reflects the strengthening of the dollar relative to the
Japanese yen, as well as several European and other Asian
currencies.
In 1999, we had seven products, including alliance
products, with sales to third parties in excess of $1 billion each.
The five Pfizer-discovered products in this group Norvasc,
Zoloft, Zithromax, Viagra and Diflucan grew at a combined
annual rate of 18% in 1999 and are patent-protected well into
this decade, or beyond.

Net Sales Major Pharmaceutical Products

% Increase

Percentage Change in Total Revenues

Pharmaceutical
1999 vs. 1998
1998 vs. 1997
Animal Health
1999 vs. 1998
1998 vs. 1997
Total
1999 vs. 1998
1998 vs. 1997

Volume

Price

21.1
28.1

0.5
1.0

(0.1)
(3.3)

2.4
(1.1)

4.9
0.6

1.2
2.4

(3.7)
(4.1)

19.6
22.5

19.6
24.8

0.5
1.2

(0.5)
(3.5)

Pharmaceutical

10%

92%

1999

Animal Health

12%

90%

1998

88%

1997

(millions of dollars)
% Change
99/98

Total

$4,635
3,030
794

$4,186
2,575
688

$3,806
2,217
626

11
18
15

10
16
10

Infectious Diseases:
Zithromax
Diflucan

3,145
1,333
1,002

2,822
1,041
916

2,475
821
881

11
28
9

14
27
4

Central Nervous System

Disorders:
Zoloft

2,156
2,034

1,924
1,836

1,553
1,507

12
11

24
22

Viagra

1,033

788

31

557
552

422
416

273
265

32
33

55
57

Allergy:
Zyrtec/Reactine

Certain prior year data have been reclassified to conform to the current year
presentation.

Total Revenues by Business Segment

8%

1997 99/98 98/97

Currency

21.5
25.8

(% of total revenue)

1998

Cardiovascular Diseases:
Norvasc
Cardura

Analysis of % Change

Total %
Change

1999

(millions of dollars)

% Change
98/97

% Change
97/96

$14,859
1,345

22
2

$12,230
1,314

26
(1)

$ 9,726
1,329

13
9

$16,204

20

$13,544

23

$11,055

12

Pharmaceutical revenues increased 22% to $14,859 million in

1999 and 26% to $12,230 million in 1998. In the U.S. market,
revenue growth was 21% in 1999 and 38% in 1998, while
international growth was 22% in 1999 and 10% in 1998. The

In June 1999, the European Unions Committee for

Proprietary Medicinal Products suspended the European Union
(EU) licenses of the oral and intravenous formulations of our
antibiotic Trovan for 12 months. In the rest of the world,
including the U.S., the use of Trovan is limited to serious
infections in institutionalized patients. As a result of these
limitations, Trovan net sales declined to $86 million in 1999
from $160 million in 1998. See Cost of sales for a discussion
of a charge recorded in 1999 to write off certain Trovan
inventories.
Alliance revenue was $2,071 million in 1999, reflecting
revenue associated with the co-promotion of Lipitor, Aricept
and our new alliance product, Celebrex.
In February 1999, we launched Celebrex with G.D. Searle
& Co. (Searle), the pharmaceutical division of Monsanto
Company, which discovered and developed the drug. Celebrex
is used for the relief of symptoms of adult rheumatoid arthritis
and osteoarthritis. During 1999, Celebrex achieved total global
sales of approximately $1.5 billion.

29

Pfizer Inc and Subsidiary Companies

Together with our alliance partner, the Parke-Davis

Division of Warner-Lambert, the company that discovered and
developed Lipitor, we co-promote this product in most major
world markets. During 1999, Lipitor achieved third-party sales
of approximately $3.7 billion.
These alliances allow us to co-promote or license these
products for sale in certain countries. Under the co-promotion
agreements, these products are marketed and promoted with
our alliance partners. We provide cash, staff and other resources
to sell, market, promote and further develop these products.
Revenue from co-promotion agreements is reported in the
Statement of Income as Alliance revenue.
Certain alliance agreements include additional provisions
that enable our product alliance partners the right to negotiate
to co-promote certain specified Pfizer-discovered products.
Rebates under Medicaid and related state programs
reduced revenues by $146 million in 1999, $150 million in
1998 and $99 million in 1997. The 1998 increase in rebates
reflects growth of in-line products and the introduction in
1998 of two products Trovan and Viagra. We also provided
to the federal government legislatively mandated discounts of
$95 million in 1999, $105 million in 1998 and $88 million
in 1997. Performance-based contracts also provide rebates to
several customers as a result of the increasing influence of
managed care groups on the pricing of our products.
In the fourth quarter of 1999, we sold the Bain de Soleil
sun care product line for $26 million in cash to ScheringPlough HealthCare Products, Inc. Proceeds from the sale
approximated the total of the carrying value of net assets
associated with this product line and selling costs. The sale of
Bain de Soleil will not have a material impact on our future
results of operations.
Animal Health net sales increased 2% to $1,345 million
in 1999 and decreased 1% to $1,314 million in 1998. Excluding
the impact of foreign exchange, net sales increased 6% in 1999
and 3% in 1998. The increase in net sales in 1999 was due to:
the performance of the companion animal business
partially offset by
the continuing weakness in the livestock market in the
U.S. and Europe
the decision of the European Commission to ban certain
antibiotic feed additives, including Stafac (virginiamycin)
in the EU after June 30, 1999
We do not expect the ban on sales of virginiamycin to have
a material effect on our future results of operations.
Sales of companion animal products increased by 30% in
1999 primarily due to the launch of Revolution and the growth
of Rimadyl. Revolution was approved in the U.S. in July 1999
as the first and only topically applied medication for dogs and
cats that is effective against heartworm, fleas and many other
parasites. Rimadyl is a treatment for the relief of pain and
inflammation associated with osteoarthritis in dogs.

30

Net sales decreased 1% in 1998 due to a weak livestock

market in the U.S. and poor Asian economies.

Total Revenues by Country

United States

(% of total revenue)

8%

Japan

7%

31%

9%

32%

61%

1999

All Other Countries

36%

61%

1998

55%

1997

(millions of dollars)
% Change
98/97

% Change
99/98

Total

% Change
97/96

$ 9,896
1,249
5,059

21
32
15

$ 8,205
943
4,396

35
(1)
9

$ 6,089
949
4,017

17
3
7

$16,204

20

$13,544

23

$11,055

12

Revenues were in excess of $100 million in each of 12

countries outside the U.S. in 1999. The U.S. was the only
country to contribute more than 10% to total revenues.

Percentage Change in Geographic Total Revenues

by Business Segment
% Change in Total Revenues
U.S.

Pharmaceutical
Animal Health
Total

International

99/98

98/97

21
14
21

38
3
35

99/98

98/97

22
(7)
18

10
(4)
8

Product Developments
We continue to invest in R&D to provide future sources
of revenue through the development of new products, as well
as through additional uses for existing in-line and alliance
products. Certain significant regulatory actions by, and filings
pending with, the U.S. Food and Drug Administration (FDA)
follow:
U.S. FDA Approvals
Product

Indication

Date Approved

Zoloft
Zoloft
Celebrex

Posttraumatic stress disorder (PTSD)

Oral liquid dosage form
Familial adenomatous polyposis
(a rare and devastating hereditary
disease that, left untreated, almost
always leads to colorectal cancer)
Atrial fibrillation

December 1999
December 1999
December 1999

Tikosyn

October 1999

Pfizer Inc and Subsidiary Companies

Zoloft is the first and only medicine to receive FDA

approval for the treatment of PTSD.
We have developed a comprehensive program to educate
institutions and health care professionals on the required inhospital initiation and dosing regimen for Tikosyn. We expect
to launch Tikosyn in the U.S. in the first quarter of 2000, and
it will be available to those prescribers and hospitals that have
participated in this educational program.
Pending U.S. New Drug Applications
Product

Indication

Date Filed

Relpax
Zeldox

Migraine headaches
Psychotic disorders
intramuscular dosage form
Psychotic disorders
oral dosage form

October 1998
December 1997

Zeldox

March 1997

In October 1999, we received an approvable letter from the

FDA for Relpax for the treatment of migraines. Regulatory
review is continuing in Europe.
We received a non-approvable letter from the FDA
for Zeldox in 1998. Analysis and interpretation of the results
of a recently completed study on the effects of Zeldox will be
included in an amended New Drug Application, which
we expect to file by midyear 2000.
Ongoing or planned clinical trials for additional uses and
dosage forms for our currently marketed products include:
Product

Indication

Norvasc

Pediatric hypertension

Zithromax Decrease cardiovascular risk in patients with

atherosclerosis (a process in which fatty substances are
deposited within blood vessels) caused by certain
infections
Treatment of mycobacterium avium complex
Accelerated dosing regimen (three-day treatment)

Ongoing or planned clinical trials for new product

development programs include:
Product

Indication

lasofoxifene

Prevention and treatment of osteoporosis

Prevention of breast cancer
Reduction of risk of coronary heart disease

Vfend (voriconazole)

Serious systemic fungal infections

darifenacin

Overactive bladder

inhaled insulin

Diabetes

valdecoxib (under
co-development
with Searle)

Osteoarthritis
Rheumatoid arthritis
Pain

Additional product development programs are in various

stages of discovery.
In 1998, we entered into worldwide agreements with
Aventis Pharma to manufacture insulin and co-develop and
co-promote inhaled insulin. Under the agreements, Aventis
Pharma and Pfizer will contribute expertise in the development
and production of insulin products, as well as selling and
marketing resources. We bring to the alliance our development
of inhaled insulin from our collaboration with Inhale
Therapeutic Systems, Inc. Together with Aventis Pharma we
are building a new insulin manufacturing plant in Frankfurt,
Germany, to support the product currently in development.
We have decided not to pursue further development of
ezlopitant for the treatment of chemotherapy-induced nausea
and vomiting in cancer patients, as well as Alond for the
treatment of diabetic neuropathy.

Costs and Expenses

Viagra

Female sexual arousal disorder

Zoloft

Pediatric depression
Social phobia

In 1999, we substantially completed the actions under the

restructuring plans announced in 1998.
In 1998, we recorded charges for the restructuring in
addition to charges for certain asset impairments. These pre-tax
charges were recorded in the 1998 Statement of Income as
follows:

Zyrtec

Decongestant formulation
Pediatric

(millions of dollars)

Total

COS*

SI&A*

R&D

OD*

$177
213

$68
18

$17

$1

$ 91
195

Lipitor

Broad cardiovascular-care clinical program

Aricept

Oral liquid dosage form

Restructuring charges
Asset impairments

Celebrex

Sporadic adenomatous polyposis

Pain

* COS Cost of sales; SI&A Selling, informational and administrative expenses; OD

Other deductions net.

Together with Warner-Lambert, we are jointly exploring

potential Lipitor line extensions and product combinations and
other areas of mutual interest. This includes a program to
develop a combination product that contains the cholesterollowering and antihypertensive medications in Lipitor and
Norvasc two of the worlds most widely prescribed medicines.

31

Pfizer Inc and Subsidiary Companies

The components of the 1998 restructuring charges follow:

Utilization
(millions of dollars)

Charges in 1998

1998

1999

Beyond

Property, plant
and equipment
Write-down of intangibles
Employee termination costs
Other

$ 49
44
40
44

$ 49
44
12
11

28
17

16

Total

$177

$116

$45

$16

As a result of the restructuring, our workforce was reduced

by approximately 500 manufacturing, sales and corporate
personnel. In 1998, restructuring charges of $90 million are
reflected in the pharmaceutical segment and $87 million are in
the animal health segment.
In 1998, we recorded an impairment charge of
$110 million in the pharmaceutical segment to adjust
intangible asset values, primarily goodwill and trademarks,
related to consumer health care product lines. These charges
resulted from significant changes in the marketplace and a
revision of our strategies.
As noted in our discussion of revenues, our animal health
antibiotic feed additive Stafac was banned throughout the EU,
resulting in 1998 asset impairment charges of $103 million
($85 million to adjust intangible asset values, primarily
goodwill and trademarks, and $18 million to adjust the
carrying value of machinery and equipment in the
pharmaceutical segment).
In 1999, revenues declined approximately $41 million
as a result of exiting certain product lines. In 1999, as a result
of the restructuring activities and the asset impairments,
we realized cost savings of approximately $39 million and a
reduction in amortization and depreciation expense of
approximately $12 million.
Cost of sales increased 21% in 1999 and 18% in 1998.
Based on our evaluation of the actions noted in our discussion
of revenues, we determined that it was unlikely that certain
Trovan inventories of finished goods, bulk, work-in-process
and raw materials will be used. Accordingly, in the third
quarter of 1999, we recorded a charge of $310 million in Cost of
sales to write off Trovan inventories in excess of the amount
required to support expected sales. Also included in Cost of sales
for 1999 is a benefit of $6.6 million related to the change in
accounting for the cost of inventories from the Last-in, firstout method to the First-in, first-out method. Excluding the
Trovan inventory charge and the benefit related to the
accounting change for inventories in 1999 and the asset
impairments and restructuring charges in 1998, cost of sales
increased 11%, comparable to the increase in 1999 net sales.
Excluding the 1998 asset impairments and restructuring
charges, cost of sales increased 13% in 1998 as compared to an
increase in net sales of 18%.

32

SI&A increased 14% in 1999 and 27% in 1998. These

increases reflect support for previously introduced products and
new products. Such support included substantial global
investments, begun in 1998, in our pharmaceutical sales force,
including the creation of a new U.S. primary-care sales force
and a new U.S. specialty sales force dedicated to rheumatology.
In addition, personnel increases in other specialty sales forces
in the U.S. and the expansion of international sales forces
contributed to the increase in SI&A. Our past investments in
SI&A are enabling us to maximize the financial return realized
from our products.
R&D increased 22% in 1999 and 26% in 1998. These
expenditures were necessary to support the advancement of
potential drug candidates in all stages of development
(from initial discovery through final regulatory approval). In
2000, we expect total R&D spending to be about $3.2 billion.
See Proposed Merger with Warner-Lambert Company for the
expected R&D spending in 2000 of a combined Pfizer/WarnerLambert entity.
Other deductions net decreased 90% in 1999 due to
the absence of certain significant charges recorded in 1998 of
$883 million.
Other deductions net increased substantially in 1998
primarily due to:
asset impairments $195 million
restructuring charges $91 million
co-promotion payments to Searle for rights to
Celebrex $240 million
a contribution to The Pfizer Foundation
$300 million
legal settlements involving the brand-name prescription
drug antitrust litigation $57 million
partially offset by
an increase in interest income on the investment of cash
generated from operations and the divestiture of MTG
foreign exchange effects
Our overall effective tax rate was 28.1% in 1999 and
35.4% in 1998. This decrease was due mainly to the 1998 gain
on the disposal of MTG being recognized in jurisdictions with
higher tax rates.
The effective tax rate for continuing operations was 28.0%
in 1999 and 24.8% in 1998. Significant charges in both 1999
and 1998 were recorded in jurisdictions with higher tax rates.
However, the level of these charges was greater in 1998 than in
1999. Excluding these charges in 1999 and 1998, the effective
tax rate was 28.4% in 1999 and 28.0% in 1998. This increase
in 1999 was primarily due to the mix of income by country.
We have received and are protesting assessments from the
Belgian tax authorities. For additional details, see note 9,
Taxes on Income, beginning on page 49.

Pfizer Inc and Subsidiary Companies

Discontinued Operations
In 1999, we agreed to pay a fine of $20 million to settle
antitrust charges involving our former Food Science Group.
This charge is reflected in Discontinued operations net of tax.
For additional details, see note 18, Litigation, beginning on
page 54.
During 1998, we exited the medical devices business with
the sale of our remaining MTG businesses:
Howmedica to Stryker Corporation in December for
$1.65 billion in cash
Schneider to Boston Scientific Corporation in September
for $2.1 billion in cash
American Medical Systems to E.M. Warburg, Pincus &
Co., LLC, in September for $130 million in cash
Valleylab to U.S. Surgical Corporation in January for
$425 million in cash
The net proceeds from these divestitures were used for
general corporate purposes, including the repayment of
commercial paper borrowings. Net income of these businesses
up to the date of their divestiture and divestiture gains are
included in Discontinued operations net of tax.

Net Income
Net income for 1999 decreased 5% from 1998. Diluted
earnings per share were $.82 and decreased by 4% from 1998.
Excluding the impact of the 1999 Trovan inventory charge and
certain significant charges and discontinued operations in 1998,
net income increased by 29% in 1999 over 1998. On that same
basis, diluted earnings per share were $.87 in 1999 and
increased by 30% over 1998. The 1998 pre-tax significant
charges related to:
asset impairments $213 million
restructuring charges $177 million
co-promotion payments to Searle $240 million
contribution to The Pfizer Foundation $300 million
other, which is primarily related to legal settlements
$126 million

Financial Condition, Liquidity and

Capital Resources
Our net financial asset position as of December 31 was as
follows:
1999

1998

1997

Financial assets*
Short- and long-term debt

$6,436
5,526

$5,835
3,256

$3,034
2,976

Net financial assets

$ 910

$2,579

(millions of dollars)

58

* Consists of cash and cash equivalents, short-term loans and investments, and longterm loans and investments.

Selected Measures of Liquidity and

Capital Resources

Cash and cash equivalents and

short-term loans and
investments (millions of dollars)*
Working capital (millions of dollars)
Current ratio
Shareholders equity per
common share**

1999

1998

1997

$4,715
2,006
1.22:1

$4,079
2,739
1.38:1

$1,704
2,448
1.49:1

$ 2.36

$ 2.33

$ 2.10

* Cash is managed jurisdictionally and is not always available to be used in every

location throughout the world. When necessary, we utilize short-term borrowings for
various corporate purposes.
** Represents shareholders equity divided by the actual number of common shares
outstanding (which excludes treasury shares and those held by the employee benefit
trusts).

The decrease in working capital from 1998 to 1999 was

primarily due to the following:
Decrease in Inventories due to the writeoff of Trovan
inventory
Increase in Short-term borrowings primarily to fund
common stock purchases of $2.5 billion
offset by
Net increase in Cash and cash equivalents and Short-term
investments mainly from profits earned overseas
Increase in Accounts receivable resulting from growth in
sales volume and higher alliance revenue receivables due to
sales growth of alliance products and the launch of
Celebrex in February 1999
Decrease in Income taxes payable

33

Pfizer Inc and Subsidiary Companies

The increase in working capital from 1997 to 1998 was

primarily due to the following:
Increase in Cash and cash equivalents and Short-term
investments due to the receipt of cash from the MTG
divestiture
Increase in Accounts receivable due to the alliance revenue
receivables and growth in sales volume
Increase in Inventories due to higher pharmaceutical
inventory levels as a result of new products
offset by
Decrease in Net assets of discontinued operations due to the
sale of the MTG businesses
Increase in Short-term borrowings due to an increase in
funding for common stock purchases at a higher average
price net of repayments made with cash received from the
MTG divestiture
Increase in Dividends payable related to the first-quarter
1999 dividend declared in December 1998
Increase in Income taxes payable primarily due to changes
in operations and the divestiture of the MTG businesses
Increase in Other current liabilities primarily due to
accrued charges associated with the divestiture of the
MTG businesses and our plan to exit certain product lines
The decline in the current ratio from 1998 to 1999 was
primarily due to higher short-term borrowings due to an
increase in funding for common stock purchases. The increase
in shareholders equity per common share in 1998 was
primarily due to growth in net income.

Summary of Cash Flows

(millions of dollars)

Cash provided by/(used in):

Operating activities
Investing activities
Financing activities
Discontinued operations
Effect of exchange-rate changes on
cash and cash equivalents
Net (decrease)/increase in cash
and cash equivalents

1999
$ 3,076
(2,768)
(1,127)
(20)

1998

1997

$ 3,282
(335)
(2,277)
4

$ 1,580
(963)
(981)
118

(27)

675

$ (273)

26
$ (813)

Net cash provided by operating activities decreased in

1999 primarily due to:
higher receivable levels related to increased sales and
alliance revenue
higher taxes paid
reduced by
higher income from continuing operations
Net cash provided by operating activities increased in
1998 primarily due to:
higher taxes payable associated with sales growth of
existing and new products as well as the MTG

34

divestitures, partially offset by tax benefits associated with

charges for asset impairment, restructuring, co-promotion
payments to Searle and the contribution to The Pfizer
Foundation
higher compensation related accruals
reduced by
higher receivable and inventory levels related to new
products
Net cash used in investing activities in 1999 changed
primarily due to:
the absence of proceeds from the sale of MTG which
occurred in 1998
increased purchases of property, plant and equipment
in 1999
Net cash used in investing activities decreased in 1998
primarily due to:
proceeds from the sale of the MTG businesses, some of
which accounts for our increase in short-term investments
reduced by
increased long-term investments
increased purchases of property, plant and equipment
Net cash used in financing activities decreased in 1999
primarily due to:
increased short-term borrowings for common stock
purchases
reduced by
higher dividend payments to our shareholders
Net cash used in financing activities increased in 1998
primarily due to:
the increase in common stock purchases at a
higher average price
higher dividend payments to our shareholders
reduced by
more cash received from employee stock option exercises
Under the current share-purchase program begun in
September 1998, we are authorized to purchase up to
$5 billion of our common stock. In 1999, we purchased
approximately 65.6 million shares of our common stock in
the open market for approximately $2.5 billion. Since the
beginning of this program, we have purchased 80.4 million
shares of our common stock for approximately $3 billion. In
September 1998, we completed a program under which we
purchased 79.2 million shares of our common stock at a total
cost of $2 billion. Purchased shares are available for general
corporate purposes.
We have available lines of credit and revolving-credit
agreements with a select group of banks and other financial
intermediaries. Major unused lines of credit totaled
approximately $1.5 billion at December 31, 1999.

Pfizer Inc and Subsidiary Companies

Our short-term debt has been rated P1 by Moodys

Investors Services (Moodys) and A-1+ by Standard and Poors
(S&P). Also, our long-term debt has been rated Aaa by
Moodys and AAA by S&P for the past 14 years. Moodys and
S&P are the major corporate debt-rating organizations and
these are their highest ratings.

Cash Dividends Paid Per Common Share

(dollars)

The 1999 cash dividends paid

represented the 32nd consecutive
year of dividend increases.

$.30 2/3
$.25 1/3
$.22 2/3
$.20

Forward-Looking Information and

Factors That May Affect Future Results

$.17 1/3

95

96

97

98

geographic location. PIBE continues to have S&Ps highest

short-term rating of A-1+.
The net income of PIBE is affected by changes in market
interest rates because of repricing and maturity mismatches
between its interest-sensitive assets and liabilities. PIBE is
currently asset sensitive (more assets than liabilities repricing
in a given period) and, therefore, we expect that in an
environment of increasing interest rates, net income would
increase. PIBEs asset and liability management reflects its
liquidity, interest-rate outlook and general market conditions.
For additional details regarding our banking operation, see
note 3, Financial Subsidiaries, beginning on page 44.

99

Dividends on Common Stock

Our dividend payout ratio, which represents cash dividends
paid per common share divided by diluted earnings per
common share, was approximately 37% in 1999, 30% in 1998
and 40% in 1997. In 1999, excluding the effect on net income of
the Trovan inventory charge, the dividend payout ratio was
approximately 35%. In 1998, excluding the effects on net
income of discontinued operations and charges for asset
impairment, restructuring, co-promotion payments to Searle and
the contribution to The Pfizer Foundation, the dividend payout
ratio was 38%. In December 1999, the Board of Directors
declared a first-quarter 2000 dividend of $.09. The first-quarter
2000 cash dividend will mark the 33rd consecutive year of
quarterly dividend increases.

Banking Operation
Our international banking operation, Pfizer International
Bank Europe (PIBE), operates under a full banking license
from the Central Bank of Ireland. The results of its operations
are included in Other deductions net.
PIBE extends credit to financially strong borrowers,
largely through U.S. dollar loans made primarily for short and
medium terms, with floating interest rates. Generally, loans
are made on an unsecured basis. When deemed appropriate,
guarantees and certain covenants may be obtained as a
condition to the extension of credit.
To reduce credit risk, PIBE has established credit approval
guidelines, borrowing limits and monitoring procedures.
Credit risk is further reduced through an active policy of
diversification with respect to borrower, industry and

The Securities and Exchange Commission encourages

companies to disclose forward-looking information so that
investors can better understand a companys future prospects
and make informed investment decisions. This annual
report and other written and oral statements that we make
from time to time contain such forward-looking statements
that set out anticipated results based on managements
plans and assumptions. We have tried, wherever possible, to
identify such statements by using words such as anticipate,
estimate, expects, projects, intends, plans, believes
and words and terms of similar substance in connection with
any discussion of future operating or financial performance.
We cannot guarantee that any forward-looking statement
will be realized, although we believe we have been prudent in
our plans and assumptions. Achievement of future results is
subject to risks, uncertainties and inaccurate assumptions.
Should known or unknown risks or uncertainties materialize, or
should underlying assumptions prove inaccurate, actual results
could vary materially from those anticipated, estimated or
projected. Investors should bear this in mind as they consider
forward-looking statements.
We undertake no obligation to publicly update forwardlooking statements, whether as a result of new information,
future events or otherwise.
Certain risks, uncertainties and assumptions are discussed
here and under the heading entitled Cautionary Factors That
May Affect Future Results in Item 1 of our annual report on
Form 10-K for the year ended December 31, 1999, which will
be filed at the end of March 2000.
Prior to the filing of Form 10-K, you should refer to the
discussion under the same heading in our quarterly report on
Form 10-Q for the quarter ended October 3, 1999, and to the
extent incorporated by reference therein, in our Form 10-K
filing for 1998. This discussion of potential risks and
uncertainties is by no means complete but is designed to
highlight important factors that may impact our outlook.
Competition and the Health Care Environment
In the U.S., many pharmaceutical products are subject to
increasing pricing pressures, which could be significantly
impacted by the current national debate over Medicare reform.

35

Pfizer Inc and Subsidiary Companies

If the Medicare program provided outpatient pharmaceutical

coverage for its beneficiaries, the federal government, through its
enormous purchasing power under the program, could demand
discounts from pharmaceutical companies that may implicitly
create price controls on prescription drugs. On the other hand,
a Medicare drug reimbursement provision may increase the
volume of pharmaceutical drug purchases, offsetting at least in
part these potential price discounts. In addition, managed care
organizations, institutions and other government agencies
continue to seek price discounts. Government efforts to reduce
Medicare and Medicaid expenses are expected to increase the use
of managed care organizations. This may result in managed care
influencing prescription decisions for a larger segment of the
population. International operations are also subject to price and
market regulations. As a result, it is expected that pressures on
pricing and operating results will continue.
Financial Risk Management
The overall objective of our financial risk management
program is to seek a reduction in the potential negative
earnings effects from changes in foreign exchange and interest
rates arising in our business activities. We manage these
financial exposures through operational means and by using
various financial instruments. These practices may change as
economic conditions change.

Foreign Exchange Risk

A significant portion of our revenues and earnings are exposed
to changes in foreign exchange rates. Where practical, we seek
to relate expected local currency revenues with local currency
costs and local currency assets with local currency liabilities.
Generally, we do not use financial instruments for trading
activities.
Foreign exchange risk is also managed through the use of
foreign currency forward-exchange contracts. These contracts
are used to offset the potential earnings effects from short-term
foreign currency assets and liabilities that arise during
operations. For additional details on foreign exchange
exposures, see note 4-D, Derivative Financial Instruments
Instruments Outstanding, on page 47.
In addition, foreign currency put options are purchased to
reduce a portion of the potential negative effects on earnings
related to certain of our significant anticipated intercompany
inventory purchases for up to one year. These purchased options
hedge Japanese yen versus the U.S. dollar.
Also, under certain market conditions, we protect
against possible declines in the reported net assets of our
subsidiaries in Japan and in countries that are a member of the
European Monetary Union. We do this through currency swaps
and borrowing in Japanese yen and borrowing in euros.
Our financial instrument holdings at year-end were
analyzed to determine their sensitivity to foreign exchange rate
changes. The fair values of these instruments were determined
as follows:
forward-exchange contracts and currency swaps net
present values
purchased foreign currency options foreign exchange
option pricing model
36

foreign receivables, payables, debt and loans changes in

exchange rates
In our sensitivity analysis, we assumed that the change
in one currencys rate relative to the U.S. dollar would not have
an effect on other currencies rates relative to the U.S. dollar.
All other factors were held constant.
If there were an adverse change in foreign exchange rates
of 10%, the expected effect on net income related to
our financial instruments would be immaterial. For additional
details, see note 4-D, Derivative Financial Instruments
Accounting Policies, on page 46.

Interest Rate Risk

Our U.S. dollar interest-bearing investments, loans and
borrowings are subject to interest rate risk. We invest and
borrow primarily on a short-term or variable-rate basis. We are
also subject to interest rate risk on Japanese yen and on euro
short-term borrowings. Under certain market conditions,
interest rate swap contracts are used to adjust interest-sensitive
assets and liabilities.
Our financial instrument holdings at year-end were
analyzed to determine their sensitivity to interest rate changes.
The fair values of these instruments were determined by net
present values.
In our sensitivity analysis, we used the same change in
interest rate for all maturities. All other factors were held
constant. If interest rates increased by 10%, the expected effect
on net income related to our financial instruments would be
immaterial.
International Markets
Thirty-nine percent of our 1999 revenues arise from
international operations and we expect revenue and net income
growth in 2000 to be impacted by changes in foreign
exchange rates.
Revenues from Asia comprised approximately 11% of total
revenues in 1999, including 8% from Japan.

European Currency
A new European currency (euro) was introduced in January
1999 to replace the separate currencies of 11 individual
countries. The major changes during its first year of existence
have occurred in the banking and financial sectors. The impact
at the commercial and retail level has been limited but is
expected to increase during the next two years through
December 31, 2001, when the separate currencies will cease to
exist. We are modifying systems and commercial arrangements
to deal with the new currency, including the availability of
dual currency processes to permit transactions to be
denominated in the separate currencies, as well as the euro. The
cost of this effort is not expected to have a material effect on
our businesses or results of operations. We continue to evaluate
the economic and operational impact of the euro, including its
impact on competition, pricing and foreign currency exchange
risks. There is no guarantee, however, that all problems have
been foreseen and corrected, or that no material disruption will
occur in our businesses.

Pfizer Inc and Subsidiary Companies

Tax Legislation
Pursuant to the Small Jobs Protection Act of 1996 (the Act),
Section 936 of the Internal Revenue Code (the U.S. possessions
corporation income tax credit) was repealed for tax years
beginning after December 31, 1995. The Act allows us to
continue using the credit against the tax arising from
manufacturing income earned in a U.S. possession for an
additional 10-year period. The amount of manufacturing
income eligible for the credit during this additional period is
subject to a cap based on income earned prior to 1996 in the
U.S. possession. This 10-year extension period does not apply
to investment income earned in a U.S. possession, the credit on
which expired as of July 1, 1996. The Act does not affect the
amendments made to Section 936 by the 1993 Omnibus
Budget Reconciliation Act, which provided for a five-year
phase-down of the U.S. possession tax credit from 100% to
40%. In addition, the Act permitted the extension of the R&D
tax credit through June 30, 1998. In 1998, this credit was
again extended to June 30, 1999, and in 1999, it was further
extended to June 30, 2004.

Litigation, Tax and Environmental Matters

Claims have been brought against us and our subsidiaries for
various legal and tax matters. In addition, our operations are
subject to international, federal, state and local environmental
laws and regulations. It is possible that our cash flows and
results of operations could be affected by the one-time impact
of the resolution of these contingencies. We believe that
the ultimate disposition of these matters to the extent not
previously provided for will not have a material impact on our
financial condition, results of operations or cash flows, except
where specifically commented on in note 18, Litigation,
beginning on page 54 and note 9, Taxes on Income,
beginning on page 49.

Recently Issued Accounting Standards

In June 1999, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS)
No. 137, Accounting for Derivative Instruments and Hedging
Activities Deferral of the Effective Date of FASB Statement
No. 133. This pronouncement requires us to adopt SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities, on January 1, 2001. SFAS No. 133 requires a
company to recognize all derivative instruments as assets or
liabilities in its balance sheet and measure them at fair value.
We do not expect the adoption of SFAS No. 133 to have a
material impact on our financial position, results of operations
or cash flows.

Managements Report

Year 2000
We have not experienced any operational problems as a result
of Year 2000 issues, and Year 2000 had no material effect on
our revenues. Although the transition from 1999 to 2000 did
not adversely impact our company, there can be no assurances
that we will not experience any negative effects or disruptions
in our businesses in the future as a result of Year 2000 issues.
The total cost of our Year 2000 Program was
$130 million, of which we incurred $94 million in 1999,
$31 million in 1998 and $5 million in 1997. These costs were
expensed as incurred, except for capitalizable hardware of
approximately $8 million in 1999, $4 million in 1998 and
$1 million in 1997 and were funded through operating cash
flows. Such costs did not include normal system upgrades and
replacements. Immaterial costs may be incurred in 2000 to
address remaining non-critical Year 2000 issues.

We prepared and are responsible for the financial statements

that appear on pages 39 to 61. These financial statements are
in conformity with generally accepted accounting principles
and, therefore, include amounts based on informed judgments
and estimates. We also accept responsibility for the preparation
of other financial information that is included in this
document.
We have designed a system of internal control to:
safeguard the Companys assets,
ensure that transactions are properly authorized, and
provide reasonable assurance, at reasonable cost, of the
integrity, objectivity and reliability of the financial
information.
An effective internal control system has inherent
limitations no matter how well designed and, therefore, can
provide only reasonable assurance with respect to financial
statement preparation. The system is built on a business ethics
policy that requires all employees to maintain the highest
ethical standards in conducting Company affairs. Our system
of internal control includes:
careful selection, training and development of financial
managers,
an organizational structure that segregates responsibilities,
a communications program which ensures that the
Companys policies and procedures are well understood
throughout the organization, and
an extensive program of internal audits, with prompt
follow-up, including reviews of separate operations and
functions around the world.

37

Pfizer Inc and Subsidiary Companies

Our independent certified public accountants,

KPMG LLP, have audited the annual financial statements in
accordance with generally accepted auditing standards. The
independent auditors report expresses an informed judgment
as to the fair presentation of the Companys reported operating
results, financial position and cash flows. Their judgment is
based on the results of auditing procedures performed and
such other tests that they deemed necessary, including their
consideration of our internal control structure.
We consider and take appropriate action on recommendations made by KPMG LLP and our internal auditors.
We believe that our system of internal control is effective
and adequate to accomplish the objectives discussed above.
W. C. Steere, Jr., Principal Executive Officer

management present, to discuss the results of their

examinations, the evaluations of the Companys internal
controls, and the overall quality of the Companys financial
reporting. In reliance on the reviews and discussions referred
to above, the Committee recommended to the Board of
Directors, and the Board has approved, that the audited
financial statements be included in the Companys Annual
Report on Form 10-K for the year ended December 31, 1999,
for filing with the Securities and Exchange Commission. The
Committee and the Board also have recommended, subject to
shareholder approval, the selection of the Companys
independent auditors.
G. B. Harvey, Chair, Audit Committee
February 14, 2000

D. L. Shedlarz, Principal Financial Officer

L. V. Cangialosi, Principal Accounting Officer
February 14, 2000

Audit Committees Report

The Audit Committee reviews the Companys financial
reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial
statements and the reporting process, including the system
of internal controls. In this context, the Committee has met
and held discussions with management and the independent
auditors. Management represented to the Committee that the
Companys consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and
the Committee has reviewed and discussed the consolidated
financial statements with management and the independent
auditors. The Committee discussed with the independent
auditors matters required to be discussed by Statement
of Auditing Standards No. 61 (Communication With Audit
Committees). In addition, the Committee has discussed with
the independent auditors, the auditors independence from the
Company and its management, including the matters in the
written disclosures required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees). The Committee discussed with the Companys
internal and independent auditors the overall scope and plans
for their respective audits. The Committee meets with the
internal and independent auditors, with and without

Independent Auditors Report

To the Shareholders and Board of Directors of Pfizer Inc:

We have audited the accompanying consolidated balance sheets
of Pfizer Inc and subsidiary companies as of December 31,
1999, 1998 and 1997 and the related consolidated statements
of income, shareholders equity and cash flows for each of the
years then ended. These consolidated financial statements are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are
free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An
audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Pfizer Inc and subsidiary companies at
December 31, 1999, 1998 and 1997, and the results of their
operations and their cash flows for each of the years then ended,
in conformity with generally accepted accounting principles.

New York, NY
February 14, 2000

38

Pfizer Inc and Subsidiary Companies

Consolidated Statement of Income

Year ended December 31

1999

1998

1997

$14,133
2,071

$12,677
867

$10,739
316

16,204

13,544

11,055

2,528
6,351
2,776
101

2,094
5,568
2,279
1,009

1,776
4,401
1,805
206

Income from continuing operations before provision

for taxes on income and minority interests
Provision for taxes on income
Minority interests

4,448
1,244
5

2,594
642
2

2,867
775
10

Income from continuing operations

Discontinued operations net of tax

3,199
(20)

1,950
1,401

2,082
131

(millions, except per share data)

Net sales
Alliance revenue
Total revenues
Costs and expenses:
Cost of sales
Selling, informational and administrative expenses
Research and development expenses
Other deductions net

Net income

$ 3,179

$ 3,351

$ 2,213

Earnings per common share basic

Income from continuing operations
Discontinued operations net of tax

.85
(.01)

.51
.37

.55
.04

.84

.88

.59

.82

.49
.36

.53
.04

.82

.85

.57

Net income
Earnings per common share diluted
Income from continuing operations
Discontinued operations net of tax
Net income
Weighted average shares basic
Weighted average shares diluted

3,775
3,884

3,789
3,945

3,771
3,909

See Notes to Consolidated Financial Statements which are an integral part of these statements.

39

Pfizer Inc and Subsidiary Companies

Consolidated Balance Sheet

December 31

1999

1998

739
3,703

$ 1,552
2,377

3,864
273

2,914
150

2,220
115

650
711
293

697
890
241

442
808
211

1,654

1,828

1,461

958

1,110

637
1,420

11,191
1,721
5,343

9,931
1,756
4,415

7,442
1,330
3,793

763
1,556

813
1,387

989
1,437

$20,574

$18,302

$14,991

$ 5,001
951
349
869
669
1,346

$ 2,729
971
285
1,162
614
1,431

$ 2,251
660

729
456
898

9,185
525
346
301
1,330

7,192
527
359
197
1,217

4,994
725
394
127
818

11,687

9,492

7,058

(millions, except per share data)

Assets
Current Assets
Cash and cash equivalents
Short-term investments
Accounts receivable, less allowance for doubtful accounts:
1999 $68; 1998 $67; 1997 $35
Short-term loans
Inventories
Finished goods
Work in process
Raw materials and supplies
Total inventories
Prepaid expenses and taxes
Net assets of discontinued operations
Total current assets
Long-term loans and investments
Property, plant and equipment, less accumulated depreciation
Goodwill, less accumulated amortization:
1999 $129; 1998 $109; 1997 $90
Other assets, deferred taxes and deferred charges
Total assets
Liabilities and Shareholders Equity
Current Liabilities
Short-term borrowings, including current portion of long-term debt
Accounts payable
Dividends payable
Income taxes payable
Accrued compensation and related items
Other current liabilities
Total current liabilities
Long-term debt
Postretirement benefit obligation other than pension plans
Deferred taxes on income
Other noncurrent liabilities
Total liabilities
Shareholders Equity
Preferred stock, without par value; 12 shares authorized, none issued
Common stock, $.05 par value; 9,000 shares authorized;
issued: 1999 4,260; 1998 4,222; 1997 4,165
Additional paid-in capital
Retained earnings
Accumulated other comprehensive expense
Employee benefit trusts
Treasury stock, at cost:
1999 413; 1998 339; 1997 283
Total shareholders equity
Total liabilities and shareholders equity
See Notes to Consolidated Financial Statements which are an integral part of these statements.

40

1997

877
712

213
5,416
13,396
(399)
(2,888)

210
5,506
11,439
(234)
(4,200)

207
3,101
9,349
(85)
(2,646)

(6,851)

(3,911)

(1,993)

8,887

8,810

7,933

$20,574

$18,302

$14,991

Pfizer Inc and Subsidiary Companies

Consolidated Statement of Shareholders Equity

(millions)

Employee
Additional
Common Stock
Benefit Trusts
Paid-In
Shares Par Value
Capital Shares Fair Value

Balance January 1, 1997

Restatement for the 1999 stock split

1,378
2,756

$ 69
138

$1,693
(138)

Balance January 1, 1997, as restated

Comprehensive income:
Net income
Other comprehensive expense
net of tax:
Currency translation adjustment
Net unrealized gain on availablefor-sale securities
Minimum pension liability

4,134

207

1,555

(36) $(1,488)
(72)

(108)

(1,488)

Accum.
Other ComTreasury Stock
Retained prehensive
Shares
Cost Earnings
Inc./(Exp.)

(87) $(1,482) $ 8,017

(175)

(262)

(1,482)

8,017

Balance December 31, 1997

Comprehensive income:
Net income
Other comprehensive expense
net of tax:
Currency translation adjustment
Net unrealized loss on availablefor-sale securities
Minimum pension liability

Balance December 31, 1998

Comprehensive income:
Net income
Other comprehensive expense
net of tax:
Currency translation adjustment
Net unrealized gain on availablefor-sale securities
Minimum pension liability

Balance December 31, 1999

145

6,954
2,213

(253)

(253)

20
3

20
3

343

1,177
26

4,165

207

3,101

13
(34)
1
(107)

(1,158)
(2,646)

(283)

68
(586)
7
(1,993)

26
26
9,349

(85)

3,351
(74)

(74)

(2)
(73)

(2)
(73)

745

1,633
27

4,222

210

5,506

(58)
5
(102)

(1,554)
(4,200)

2
(339)

(18)
(1,912)
12
(3,911)

91
27
11,439

(234)

3,179

(1,222)
35

526

(735)
119

4,260

$213

$5,416

13

1,312

(89) $(2,888)

(66)

(16)
(2,500)

(8)

(424)

(149)
3,202
(1,261)
730
(1,912)

(1,261)
3

7,933
3,351

(149)

55

(230)
1,983
(881)
411
(586)

(881)
29

Total other comprehensive expense

Total comprehensive income
Cash dividends declared
Stock option transactions
Purchases of common stock
Employee benefit trusts
transactions net
Other

$6,954

(230)

Total other comprehensive expense

Total comprehensive income
Cash dividends declared
Stock option transactions
Purchases of common stock
Employee benefit trusts
transactions net
Other

$ 145

2,213

Total other comprehensive expense

Total comprehensive income
Cash dividends declared
Stock option transactions
Purchases of common stock
Employee benefit trusts
transactions net
Other

Total

(413) $ (6,851) $13,396

8,810
3,179

(222)

(222)

81
(24)

81
(24)

(165)

(165)
3,014
(1,222)
513
(2,500)
153
119

$(399) $8,887

See Notes to Consolidated Financial Statements which are an integral part of these statements.

41

Pf i z e r I n c a n d S u b s i d i a r y C o m p a n i e s

Consolidated Statement of Cash Flows

Year ended December 31

1999

1998

1997

$ 3,199

$ 1,950

$2,082

542
310

286

489

323
22

428

83

(978)
(240)
68
61
(179)
7

(765)
(439)
(350)
628
951
473

(477)
(350)
(128)
(63)
(54)
59

(millions of dollars)

Operating Activities
Income from continuing operations
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization
Trovan inventory write-off
Asset impairments and restructuring charges
Deferred taxes and other
Changes in assets and liabilities, net of effect of businesses divested:
Accounts receivable
Inventories
Prepaid and other assets
Accounts payable and accrued liabilities
Income taxes payable
Other deferred items
Net cash provided by operating activities

3,076

3,282

Investing Activities
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Purchases net of maturities of short-term investments
Proceeds from redemptions of short-term investments
Proceeds from sales of businesses net
Purchases of long-term investments
Other investing activities

(1,561)
71
(8,633)
7,309
26
(322)
342

(1,198)
79
(5,845)
4,209
3,059
(752)
113

(878)
47
(221)
28
21
(74)
114

Net cash used in investing activities

(2,768)

(335)

(963)

Financing Activities
Repayments of long-term debt
Increase in short-term debt net
Proceeds from stock issuances
Purchases of common stock
Cash dividends paid
Stock option transactions and other

(4)
2,083
62
(2,500)
(1,148)
380

(202)
402

(1,912)
(976)
411

(269)
325

(586)
(881)
430

Net cash used in financing activities

(1,127)

(2,277)

(981)

Net cash (used in)/provided by discontinued operations

Effect of exchange-rate changes on cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

1,580

(20)

118

26

(27)

675
877

(273)
1,150

(813)
1,552

Cash and cash equivalents at end of year

739

$ 1,552

$ 877

Supplemental Cash Flow Information

Cash paid during the period for:
Income taxes
Interest

$ 1,293
238

$ 1,073
155

$ 809
149

See Notes to Consolidated Financial Statements which are an integral part of these statements.

42

Pfizer Inc and Subsidiary Companies

Notes to Consolidated Financial Statements

1 Significant Accounting Policies

A Consolidation and Basis of Presentation

The consolidated financial statements include the parent

company and all significant subsidiaries, including those
operating outside the U.S. Balance sheet amounts for the
international operations are as of November 30 of each year and
income statement amounts are for the full-year periods ending
on the same date. Substantially all unremitted earnings of
international subsidiaries are free of legal and contractual
restrictions. All significant transactions among our businesses
have been eliminated. We made certain reclassifications to the
1998 and 1997 financial statements to conform to the 1999
presentation.
In preparing the financial statements, we must use some
estimates and assumptions that may affect reported amounts
and disclosures. Estimates are used when accounting for
depreciation, amortization, employee benefits and asset
valuation allowances. We are also subject to risks and
uncertainties that may cause actual results to differ from
estimated results, such as changes in the health care
environment, competition, foreign exchange and legislation.
Forward-Looking Information and Factors That May Affect
Future Results, beginning on page 35, discusses these and
other uncertainties.
B Cash Equivalents

Cash equivalents include items almost as liquid as cash, such as

certificates of deposit and time deposits with maturity periods
of three months or less when purchased. If items meeting this
definition are part of a larger investment pool, we classify them
as Short-term investments.
C Inventories

We value inventories at cost or fair value, if lower. Cost is

determined as follows:
finished goods and work-in-process at average actual cost
raw materials and supplies at average or latest actual cost
In 1999, we changed the method of determining the cost
of all of our remaining inventories previously on the Last-in,
first-out (LIFO) method to the First-in, first-out (FIFO)
method. Those inventories consisted of U.S. sourced
pharmaceuticals and part of the animal health inventories. We
believe that the change in accounting for inventories from
LIFO to FIFO is preferable because inventory costs are stable
and substantially unaffected by inflation. The change in the
method of inventory costing resulted in a pre-tax benefit of
$6.6 million included in Cost of sales for 1999.

D Long-Lived Assets

Long-lived assets include:

property, plant and equipment These assets are recorded
at original cost and increased by the cost of any significant
improvements after purchase. We depreciate the cost
evenly over the assets estimated useful lives. For tax
purposes, accelerated depreciation methods are used as
allowed by tax laws.
goodwill Goodwill represents the difference between the
purchase price of acquired businesses and the fair value of
their net assets when accounted for by the purchase
method. We amortize goodwill evenly over periods not
exceeding 40 years. The average amortization period is
37 years.
other intangible assets Other intangible assets are
included in Other assets, deferred taxes and deferred charges.
We amortize these assets evenly over their estimated
useful lives.
We review long-lived assets to assess recoverability from
future operations using undiscounted cash flows. When
necessary, we record charges for impairments of long-lived
assets for the amount by which the present value of future cash
flows exceeds the carrying value of these assets.
E Foreign Currency Translation

For most international operations, local currencies are

considered their functional currencies. We translate assets and
liabilities to their U.S. dollar equivalents at rates in effect at
the balance sheet date and record translation adjustments in
Shareholders Equity. We translate Statement of Income accounts
at average rates for the period. Transaction adjustments are
recorded in Other deductions net.
For operations in highly inflationary economies, we
translate the balance sheet items as follows:
monetary items (that is, assets and liabilities that will
be settled for cash) at rates in effect at the balance sheet
date, with translation adjustments recorded in Other
deductions net
non-monetary items at historical rates (that is, those
rates in effect when the items were first recorded)

43

Pfizer Inc and Subsidiary Companies

F Product Alliances

We have agreements to promote pharmaceutical

products developed by other companies. Alliance revenue
represents revenue recorded under these co-promotion
agreements and is derived from the sale of products. The
revenue is earned when our co-promotion partners ship the
related goods and the sale is consummated with a third party.
Such revenue is based in most cases upon a percentage of our
co-promotion partners net sales. Selling, informational and
administrative expenses in most cases includes other expenses for
selling and marketing these products.
We have license agreements in certain foreign countries
for these products. When products are sold under license
agreements, we record Net sales instead of Alliance revenue and
record related costs and expenses in the appropriate caption in
the Statement of Income.
G Stock-Based Compensation

In accordance with Statement of Financial Accounting

Standards No. 123, Accounting for Stock-Based Compensation, we
elected to account for our stock-based compensation under
Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
The exercise price of stock options granted equals the
market price on the date of grant. In general, there is no
recorded expense related to stock options.
H Advertising Expense

We record advertising expense as follows:

production costs as incurred
costs of radio time, television time and space in
publications are deferred until the advertising first occurs

In 1997, we sold Strato/Infusaid to Horizon Medical

Products and Arrow International for $21 million in cash.
The contractual net assets identified as part of the
disposition of Valleylab, Schneider, AMS and Howmedica are
recorded as Net assets of discontinued operations at December 31,
1997. The net cash flows of our discontinued operations are
reported as Net cash (used in)/provided by discontinued operations.
Net assets of discontinued operations consisted of the
following:
1997

(millions of dollars)

Net current assets

Property, plant and equipment net
Other net noncurrent assets
and liabilities

$ 397
383

Net assets of discontinued operations

$1,420

640

Discontinued operations net of tax were as follows:

(millions of dollars)

1999

1998

1997

Net sales

$1,160

$1,449

Pre-tax income/(loss)
Provision for taxes on income

$(20)

92
57

$ 232
93

35

139

2,504

(11)

1,138

(3)

Income/(loss) from operations of

discontinued businesses net of tax
Pre-tax gain/(loss) on disposal of
discontinued businesses
Provision/(benefit) for taxes on
gain/(loss)
Gain/(loss) on disposal of discontinued
businesses net of tax

(20)

1,366

(8)

$1,401

$ 131

Advertising expense totaled $1,310 million in 1999,

$1,139 million in 1998, and $898 million in 1997.

Discontinued operations net of tax

2 Discontinued Operations

3 Financial Subsidiaries

In 1999, we agreed to pay a fine of $20 million to settle

antitrust charges involving our former Food Science Group,
divested in 1996. For additional details, see note 18,
Litigation.
In 1998, we completed the sale of the Medical Technology
Group (MTG) segment. Accordingly, the consolidated financial
statements and related notes reflect the results of operations
and net assets of the MTG businesses Valleylab, Schneider,
American Medical Systems (AMS), Howmedica and
Strato/Infusaid as discontinued operations. We completed the
sales of:
Howmedica to Stryker Corporation in December for
$1.65 billion in cash
Schneider to Boston Scientific Corporation in September
for $2.1 billion in cash
AMS to E.M. Warburg, Pincus & Co., LLC in September
for $130 million in cash
Valleylab to U.S. Surgical Corporation in January for
$425 million in cash

Our financial subsidiaries include Pfizer International Bank

Europe (PIBE) and a small captive insurance company. PIBE
periodically adjusts its loan portfolio to meet its business
needs. Information about these subsidiaries follows:

44

$(20)

Condensed Balance Sheet

(millions of dollars)

1999

1998

1997

Cash and interest-bearing deposits

Loans net
Other assets

$114
380
13

$103
433
15

$115
408
8

$507

$551

$531

$ 24
483

$ 97
454

$ 73
458

$507

$551

$531

Total assets
Certificates of deposit and
other liabilities
Shareholders equity
Total liabilities and
shareholders equity

Pfizer Inc and Subsidiary Companies

Condensed Statement of Income

1998

1997

Interest income
Interest expense
Other income net

1999
$27
(2)
8

$30
(2)
1

$29
(2)
13

Net income

$33

$29

$40

(millions of dollars)

4 Financial Instruments
Most of our financial instruments are recorded in the
Balance Sheet. Several derivative financial instruments
are off-balance-sheet items.
A Investments in Debt and Equity Securities

Information about our investments follows:

(millions of dollars)

1999

Trading securities

$ 113

Amortized cost and fair value of

held-to-maturity debt securities:*
Corporate debt
Certificates of deposit
Municipals
Other

1998
$

99

1997
$

The contractual maturities of the held-to-maturity and

available-for-sale debt securities as of December 31, 1999, were
as follows:
Years
(millions of dollars)

Held-to-maturity
debt securities:
Corporate debt
Certificates of deposit
Other
Available-for-sale
debt securities:
Certificates of deposit
Corporate debt
Total debt securities
Available-for-sale
equity securities
Trading securities

Within 1

Over 1
to 5

Over 5
to 10 Over 10

$3,590
443

$ 34
2
2

$3,624
445
19

370
91

75
150

445
241

$4,033

$499

$233

$9

$4,774

Total

290
113

Total investments

$5,177

3,624
445

19

2,306
670

21

626
655
56
104

Total held-to-maturity debt securities

4,088

2,997

1,441

Cost and fair value of available-for-sale

debt securities*

686

686

686

Cost of available-for-sale equity

securities
Gross unrealized gains
Gross unrealized losses

60
230

54
106
(8)

81
106
(4)

(millions of dollars)

1999

1998

1997

Floating-rate unsecured notes

Other borrowings and mortgages

$491
34

$491
36

$686
39

290

152

183

Total long-term debt

$525

$527

$725

$5,177

$3,934

$2,310

Current portion not included above

The weighted average effective interest rate on short-term

borrowings outstanding at December 31 was 4.3% in 1999,
3.7% in 1998 and 2.9% in 1997. We had approximately
$1.5 billion available to borrow under lines of credit at
December 31, 1999.
C Long-Term Debt

Fair value of available-for-sale equity

securities
Total investments

B Short-Term Borrowings

* Gross unrealized gains and losses are not significant.

These investments are in the following captions in the

Balance Sheet:
1999

1998

1997

Cash and cash equivalents

Short-term investments
Long-term loans and investments

$ 443
3,703
1,031

$ 660
2,377
897

$ 636
712
962

Total investments

$5,177

$3,934

$2,310

(millions of dollars)

The floating-rate unsecured notes mature on various dates

from 2001 to 2005 and bear interest at a defined variable rate
based on the commercial paper borrowing rate. The weighted
average interest rate was 6.1% at December 31, 1999. These
notes minimize credit risk on certain available-for-sale debt
securities that may be used to satisfy the notes at maturity. In
September 1998, we repaid $195 million of the outstanding
floating-rate unsecured notes prior to their scheduled maturity
by using the proceeds from the issuance of short-term
commercial paper.
Long-term debt outstanding at December 31, 1999,
matures as follows:
(millions of dollars)

2001

2002

2003

2004

After
2004

Maturities

$131

$161

$233

45

Pfizer Inc and Subsidiary Companies

D Derivative Financial Instruments

Purpose

Forward-exchange contracts, currency swaps and

purchased currency options are used to reduce exposure to
foreign exchange risks. Also, interest rate swap contracts are
used to adjust interest rate exposures.
Accounting Policies

We consider derivative financial instruments to be hedges

(that is, an offset of foreign exchange and interest rate risks)
when certain criteria are met. Under hedge accounting
for a purchased currency option, its impact on earnings is
deferred until the recognition of the underlying hedged item
(inventory) in earnings. We recognize the earnings impact
of the other instruments during the terms of the contracts,
along with the earnings impact of the items they offset.
Purchased currency options are recorded at cost and
amortized evenly to operations through the expected inventory
delivery date. Gains at the transaction date are included in the
cost of the related inventory purchased.
As interest rates change, we accrue the difference
between the debt interest rates recognized in the Statement
of Income and the amounts payable to or receivable from
counterparties under interest rate swap contracts. Likewise,
amounts arising from currency swap contracts are accrued as
exchange rates change.
The financial statements include the following items
related to derivative and other financial instruments serving as
hedges or offsets:
Prepaid expenses and taxes includes:
purchased currency options
Other current liabilities includes:
fair value of forward-exchange contracts
net amounts payable related to interest rate swap
contracts
Other noncurrent liabilities includes:
net amounts payable related to currency
swap contracts
Accumulated other comprehensive expense includes changes in
the:
foreign exchange translation of currency swaps and
foreign debt
fair value of forward-exchange contracts for net
investment hedges

46

Other deductions net includes:

changes in the fair value of foreign exchange contracts
and changes in foreign currency assets and liabilities
payments under swap contracts to offset, primarily,
interest expense or, to a lesser extent, net foreign
exchange losses
amortization of discounts or premiums on currencies
sold under forward-exchange contracts
Our criteria to qualify for hedge accounting are:
Foreign currency instruments must:
relate to a foreign currency asset, liability or an
anticipated transaction that is probable and whose
characteristics and terms have been identified
involve the same currency as the hedged item
reduce the risk of foreign currency exchange
movements on our operations
Interest rate instruments must:
relate to an asset or a liability
change the character of the interest rate by converting
a variable rate to a fixed rate or vice versa
The following table summarizes the exposures hedged
or offset by the various instruments we use:
Maximum Maturity in Years
Instrument

Forward-exchange
contracts

Exposure 1999

1998

1997

Foreign currency
assets and liabilities

.5

.5

.5

Net investments
Loans

4
.3

5
1

Purchased
currency options

Inventory purchases
and sales

.9

Interest rate swaps

Debt interest

Currency swaps

Pfizer Inc and Subsidiary Companies

Instruments Outstanding

The notional amounts of derivative financial instruments,

except for currency swaps, do not represent actual amounts
exchanged by the parties, but instead represent the amount
of the item on which the contracts are based.
The notional amounts of our foreign currency and interest
rate contracts follow:
(millions of dollars)

Foreign currency contracts:

Commitments to sell foreign
currencies, primarily in exchange
for U.S. dollars:
Euro*
U.K. pounds
Japanese yen
Irish punt*
Australian dollars
German marks*
Netherlands guilders*
French francs*
Other currencies
Commitments to purchase foreign
currencies, primarily in exchange
for U.S. dollars:
Euro*
U.K. pounds
Irish punt*
German marks*
Netherlands guilders*
Swiss francs
Other currencies

1999

$1,050
781
412
91
76
39

192

1998

482
298
61
98
50
316
216
201

1997

548
224
107
59
158
4
134
240

339
101
50
47

196

53
532
67
156
8
144

60
92
73
4
187
136

Total forward-exchange contracts

$3,374

$2,682

$2,026

Currency swaps:
Japanese yen
U.K. pounds

$ 829
40

$ 754
40

40

Total currency swaps

$ 869

$ 794

40

Purchased currency options,

primarily for U.S. dollars:
Japanese yen
German marks
French francs
Belgian francs
Other currencies

$ 393

30

$ 364

25

$ 198
130
46
29
61

Total purchased currency options

$ 423

$ 389

$ 464

Interest rate swap contracts:

Japanese yen
Swiss francs

$ 353

$ 321

$ 814
405

Total interest rate swaps

$ 353

$ 321

$1,219

*On January 1, 1999, members of the European Monetary Union were permitted to use
the new currency, the euro, or their old currency.

The Japanese yen for U.S. dollar currency swaps require

that we make interim payments of a fixed rate of 1.1% on the
Japanese yen payable and have interim receipts of a variable
rate based on a commercial paper rate on the U.S. dollar
receivable. These currency swaps replaced $625 million
of Japanese yen debt, which previously served as a hedge
of our net investments in Japan, as well as related interest
rate swaps.
The Japanese yen and Swiss franc interest rate swaps
effectively fixed the interest rate on floating rate debt as
follows:
the Japanese yen debt at 1.4% in 1999, 1998 and 1997
the Swiss franc debt at 2.1% in 1997
The floating interest rates were based on LIBOR rates
related to the contract currencies. In connection with the sale
of the Schneider Swiss subsidiary in 1998, we terminated the
Swiss franc interest rate swap contracts and ceased borrowing
Swiss francs.
E Fair Value

The following methods and assumptions were used to estimate

the fair value of derivative and other financial instruments at
the balance sheet date:
short-term financial instruments (cash equivalents,
accounts receivable and payable, forward-exchange
contracts, short-term investments and borrowings)
cost approximates fair value because of the short maturity
period
loans cost approximates fair value because of the short
interest reset period
long-term investments, long-term debt, forward-exchange
contracts and purchased currency optionsfair value is
based on market or dealer quotes
interest rate and currency swap agreementsfair value is
based on estimated cost to terminate the agreements
(taking into account broker quotes, current interest
rates and the counterparties creditworthiness)
The differences between fair and carrying values of our
derivative and other financial instruments were not material at
December 31, 1999, 1998 and 1997, except for a difference of
$230 million at December 31, 1999 for available-for-sale
equity securities.
F Credit Risk

We periodically review the creditworthiness of counterparties

to foreign exchange and interest rate agreements and do not
expect to incur a loss from failure of any counterparties
to perform under the agreements. In general, there is no
requirement for collateral from customers. There are
no significant concentrations of credit risk related to our
financial instruments. No individual counterparty credit
exposure exceeded 10% of our consolidated Shareholders Equity
at December 31, 1999.

47

Pfizer Inc and Subsidiary Companies

5 Comprehensive Income

7 Property, Plant and Equipment

Changes in accumulated other comprehensive income/

(expense) follow:

The major categories of property, plant and equipment follow:

(millions of dollars)

Balance
January 1,
1997
Period change
Balance
December 31,
1997
Period change
Balance
December 31,
1998
Period change
Balance
December 31,
1999

Currency
Translation
Adjustment

$ 174
(253)

(79)
(74)

Net
Accumulated
Unrealized
Other ComGain/(Loss) on Minimum prehensive
Available-ForPension
Income/
Sale Securities
Liability
(Expense)*

$ 40
20

60
(2)

$ (69)
3

(66)
(73)

$ 145
(230)

(85)
(149)

(millions of dollars)

Land
Buildings
Machinery and
equipment
Furniture, fixtures
and other
Construction in
progress

Useful
Lives
(years)

1999

1998

1997

3313

$ 174
2,008

$ 151
1,669

$ 126
1,534

820

3,040

2,685

2,459

3121 2

1,618

1,383

1,232

1,197

956

516

8,037

6,844

5,867

2,694

2,429

2,074

$5,343

$4,415

$3,793

Less: accumulated
depreciation
Total property, plant
and equipment

(153)
(222)

58
81

(139)
(24)

(234)
(165)

$(375)

$139

$(163)

$(399)

8 Other Deductions Net

The components of other deductions net follow:

* Income tax benefit for other comprehensive expense was $76 million in 1997,
$116 million in 1998 and $33 million in 1999.

6 Inventories
In June 1999, the European Unions Committee for Proprietary
Medicinal Products suspended the European Union licenses of
the oral and intravenous formulations of Trovan for 12 months.
Based on our evaluation of these events and related matters, we
determined that it was unlikely that certain Trovan inventories
of finished goods, bulk, work-in-process, and raw materials will
be used. Accordingly, in the third quarter of 1999, we recorded
a charge of $310 million ($205 million after-tax, or $.05 aftertax per diluted share) in Cost of sales to write off Trovan
inventories in excess of the amount required to support
expected sales.

(millions of dollars)

Interest income
Interest expense
Interest expense capitalized
Net interest income
Co-promotion payments to Searle
Contribution to The
Pfizer Foundation
Legal settlements involving the
brand-name prescription drug
antitrust litigation
Amortization of goodwill and other
intangibles
Net exchange (gains)/losses
Other, net
Other deductions net

1999

1998

1997

$(301)
236
(13)

$ (185)
143
(7)

$(156)
149
(2)

(78)

(49)
240

(9)

300

57

45
(16)
432

48
26
141

$1,009

$ 206

43
(20)
154
$ 101

In 1999, we substantially completed the actions under the

restructuring plans announced in 1998.
In 1998, we recorded charges for the restructuring in
addition to charges for certain asset impairments. The
components of these pre-tax charges follow:
(millions of dollars)

Total

COS*

SI&A*

R&D

OD*

Restructuring charges
Asset impairments

$177
213

$68
18

$17

$1

$ 91
195

* COS Cost of sales; SI&A Selling, informational and administrative expenses; OD

Other deductions-net.

48

Pfizer Inc and Subsidiary Companies

The components of the 1998 restructuring charges follow:

Utilization
(millions of dollars)

Charges in 1998

1998

1999

Beyond

Property, plant
and equipment
Write-down of intangibles
Employee termination costs
Other

$ 49
44
40
44

$ 49
44
12
11

28
17

16

Total

$177

$116

$45

$16

These charges resulted from a review of our global

operations to increase efficiencies and return on assets, thereby
resulting in plant and product line rationalizations. In addition
to the disposition of our MTG businesses, we exited certain
product lines including certain lines associated with our animal
health business and certain of our fermentation operations.
We wrote off assets related to the product lines we exited,
including inventory, intangible assetsprimarily goodwillas
well as certain buildings, machinery and equipment which we
do not plan to use or sell.
As a result of the restructuring, our work force was
reduced by approximately 500 manufacturing, sales and
corporate personnel. Employee termination costs represent
payments for severance, outplacement counseling fees, medical
and other benefits and a $5 million noncash charge for the
acceleration of nonvested employee stock options.
Other restructuring charges consist of charges for
inventory for product lines we have exited$12 million,
contract termination payments$9 million, facility closure
costs$7 million and environmental remediation costs
associated with the disposal of certain facilities$16 million.
In 1998, we recorded an impairment charge of
$110 million in the pharmaceutical segment to adjust
intangible asset values, primarily goodwill and trademarks,
related to consumer health care product lines. These charges
resulted from significant changes in the marketplace and a
revision of our strategies, including:
the decision to redeploy resources from personal care and
minor brands to over-the-counter switches of prescription
products
the withdrawal of one of our major over-the-counter
products in Italy
an acquired product line which experienced declines
in market share

In 1998, our animal health antibiotic feed additive, Stafac,

was banned, effective in mid-1999, throughout the European
Union, resulting in asset impairment charges of $103 million
($85 million was to adjust intangible asset values, primarily
goodwill and trademarks, and $18 million was to adjust the
carrying value of machinery and equipment in the
pharmaceutical segment).

9 Taxes on Income
Income from continuing operations before taxes consisted of
the following:
1999

1998

1997

United States
International

$2,557
1,891

$1,184
1,410

$1,215
1,652

Total income from continuing

operations before taxes

$4,448

$2,594

$2,867

(millions of dollars)

The provision for taxes on income from continuing

operations consisted of the following:
(millions of dollars)

United States:
Taxes currently payable:
Federal
State and local
Deferred income taxes

1999

1998

1997

$ 621
38
(72)

$ 344
24
(162)

$344
9
(23)

Total U.S. tax provision

587

206

330

International:
Taxes currently payable
Deferred income taxes

606
51

550
(114)

462
(17)

Total international tax provision

Total provision for taxes on income

657

436

445

$1,244

$ 642

$775

Amounts are reflected in the preceding tables based on the

location of the taxing authorities. As of December 31, 1999, we
have not made a U.S. tax provision of approximately
$1.9 billion for approximately $8.2 billion of unremitted
earnings of our international subsidiaries. These earnings are
expected, for the most part, to be reinvested overseas.
We operate a manufacturing subsidiary in Puerto Rico
that benefits from a Puerto Rican incentive grant in effect
through the end of 2002. Under this grant, we are partially
exempt from income, property and municipal taxes. For further
information on U.S. taxation of Puerto Rican operations, see
Tax Legislation on page 37.

49

Pfizer Inc and Subsidiary Companies

Reconciliation of the U.S. statutory income tax rate to our

effective tax rate for continuing operations follows:
(percentages)

1999

1998

1997

U.S. statutory income tax rate

Effect of partially tax-exempt
operations in Puerto Rico
Effect of international operations
All other net

35.0

35.0

35.0

(1.5)
(4.8)
(0.7)

(2.2)
(5.5)
(2.5)

(1.8)
(5.0)
(1.2)

28.0

24.8

27.0

Effective tax rate for continuing

operations

Deferred taxes arise because of different treatment between

financial statement accounting and tax accounting, known as
temporary differences. We record the tax effect of these
temporary differences as deferred tax assets (generally items
that can be used as a tax deduction or credit in future periods)
and deferred tax liabilities (generally items that we received
a tax deduction for, but have not yet been recorded in the
Statement of Income).
The tax effects of the major items recorded as deferred tax
assets and liabilities are:

(millions of dollars)

1999

1998

1997

Deferred Tax

Deferred Tax

Deferred Tax

Assets

Liabs. Assets

Liabs. Assets

Liabs.

169 $ 252
72
218

$189
60

Prepaid/deferred items $ 361 $ 197 $ 411 $

Inventories
471
109
322
Property, plant and
equipment
22
514
39
Employee benefits
544
131
391
Restructurings and

301
special charge*
244
Foreign tax credit

117
carryforwards
181
Other carryforwards
165

97
Unremitted earnings

335

All other
121
170
169

433
97

30
297

350
113

133

335
73

159
135

119

76

1,179

1,343
(27)

788

Total deferred taxes

$2,082 $1,456 $1,817 $1,179 $1,316

$788

Net deferred tax asset

$ 626

Subtotal
Valuation allowance

2,109 1,456 1,847

(27)

(30)

$ 638

$ 528

* Includes tax effect of the 1991 charge for potential future Shiley C/C heart valve
fracture claims.

These amounts, netted by taxing location, are in the

following captions in the Balance Sheet:
1997

Prepaid expenses and taxes

Other assets, deferred taxes and
deferred charges
Deferred taxes on income

$ 744

$ 809

$ 425

26
(197)

230
(127)

Net deferred tax asset

$ 626

$ 638

$ 528

50

Our pension plans cover most employees worldwide. Our

postretirement plans provide medical and life insurance
benefits to retirees and their eligible dependents.
Information regarding our pension and postretirement
benefit obligation follows:

(percentages)

1998

183
(301)

10 Benefit Plans

Pension

1999

(millions of dollars)

A valuation allowance is recorded because some items

recorded as foreign deferred tax assets may not be deductible
or creditable. The foreign tax credit carryforwards were
generated from dividends paid or deemed to be paid by
subsidiaries to the parent company between 1997 and 1999. We
can carry these credits forward for five years from the year of
actual payment and apply them to certain U.S. tax liabilities.
The Internal Revenue Service (IRS) has completed and
closed its audits of our tax returns through 1992. The IRS
completed its audits in January 2000 of our tax returns for
1993 through 1995. We are awaiting the agents final report for
those years. We do not expect any material adjustments to be
proposed.
In November 1994, Belgian tax authorities notified Pfizer
Research and Development Company N.V./S.A. (PRDCO),
an indirect, wholly owned subsidiary of our company, of a
proposed adjustment to the taxable income of PRDCO for
fiscal year 1992. The proposed adjustment arises from an
assertion by the Belgian tax authorities of jurisdiction with
respect to income resulting primarily from certain transfers
of property by our non-Belgian subsidiaries to the Irish branch
of PRDCO. In January 1995, PRDCO received an assessment
from the tax authorities for additional taxes and interest of
approximately $432 million and $97 million, respectively,
relating to these matters. In January 1996, PRDCO received
an assessment from the tax authorities, for fiscal year 1993, for
additional taxes and interest of approximately $86 million and
$18 million, respectively. The additional assessment arises from
the same assertion by the Belgian tax authorities of jurisdiction
with respect to all income of the Irish branch of PRDCO.
Based upon the relevant facts regarding the Irish branch of
PRDCO and the provisions of the Belgian tax laws and the
written opinions of outside counsel, we believe that the
assessments are without merit.
We believe that our accrued tax liabilities are adequate for
all years.

Weighted-average
assumptions:
Discount rate:
U.S. plans
International plans
Rate of compensation
increase:
U.S. plans
International plans

Postretirement

1999

1998

1997

1999

1998

1997

7.5
5.1

6.8
5.3

7.0
5.9

7.5

6.8

7.0

4.5
3.7

4.5
3.4

4.5
3.9

Pfizer Inc and Subsidiary Companies

The following tables present reconciliations of the benefit

obligation of the plans; the plan assets of the pension plans and
the funded status of the plans:

The components in the balance sheet consist of:

Pension
(millions of dollars)

Pension
(millions of dollars)

Change in benefit
obligation
Benefit obligation at
beginning of year
Service cost
Interest cost
Employee
contributions
Plan amendments
Plan net (gains)/losses
Foreign exchange
impact
Acquisitions
Divestitures
Curtailments
Settlements
Benefits paid
Benefit obligation at
end of year
Change in
plan assets
Fair value of plan
assets at beginning
of year
Actual return on plan
assets
Company
contributions
Employee
contributions
Foreign exchange
impact
Acquisitions
Divestitures
Settlements
Benefits paid
Fair value of plan
assets at end of year
Funded status:
Plan assets in excess
of/(less than)
benefit
obligation
Unrecognized:
Net transition asset
Net (gains)/
losses
Prior service
costs/(gains)
Net amount
recognized

1999

1998

Postretirement

1997

1999

1998

1997

$3,177 $2,674 $2,130 $ 286 $ 287 $ 285

169
151
105
7
10
7
192
181
145
18
20
19
9
13
87

6
15
354

6
274
240

28

(42)

(1)
(221)

36

(26)
(26)
(10)
(178)

(103)
3

(1)
(1)
(124)

2
(30)

(3)

(7)

Prepaid benefit cost

Accrued benefit
liability
Intangible asset
Accumulated other
comprehensive
income
Net amount
recognized

1999

1998

Postretirement

1997

1999

$ 537 $ 504 $ 499 $

1998

(655)
79

(562)
71

(362) (346)

53

317

249

143

1997

(359)

(394)

$ 278 $ 262 $ 333 $(346) $(359) $(394)

Information related primarily to International plans:

Pension

(20)

(10)

(18)

(17)

$3,411 $3,177 $2,674 $ 263 $ 286 $ 287

530

491

76

63

50

(23)
(13)
(165)

(57)
1

(1)
(107)

26

(34)
(1)
(206)

Pension plans with an accumulated benefit

obligation in excess of plan assets:
Fair value of plan assets
Accumulated benefit obligation
Pension plans with a benefit obligation in
excess of plan assets:
Fair value of plan assets
Benefit obligation

1999

1998

1997

$400
752

$323
693

$294
553

$496
949

$435
901

$422
774

At December 31, 1999, the major U.S. pension plan held

approximately 6.8 million shares of our common stock with a
fair value of approximately $220 million. The Plan received
approximately $2 million in dividends on these shares in 1999.
The assumptions used and the annual cost related to these
plans follow:

$3,194 $2,793 $2,410

464

(millions of dollars)

Pension

$3,528 $3,194 $2,793

Postretirement

(percentages)

1999

1998

1997

Weighted average
assumptions:
Expected return on
plan assets:
U.S. plans
International plans

10.0
7.3

10.0
8.1

10.0
7.5

1999

1998

1997

$ 7
18

$ 10
20

$ 7
19

(millions of dollars)

$ 117 $

17 $ 119 $(263) $(286) $(287)

(4)

(4)

(10)

(75)

(86)

(56)

(26)

(24)

248

310

(27)

(47)

(83)

240

$ 278 $ 262 $ 333 $(346) $(359) $(394)

Service cost
Interest cost
Expected return on
plan assets
Amortization of:
Prior service costs/
(gains)
Net transition asset
Net losses/(gains)
Curtailments and
settlements net*
Net periodic benefit
cost/(gain)

$169 $ 151 $ 105

192
181
145
(275)

(249)

(208)

19
(5)
12

24
(6)
10

34
(5)
2

(18)

(24)

(1)

(24)

(1)

28

(22)

$112 $ 139 $ 73

$ 7

$(17)

$ 1

* Includes approximately $12 million of special termination pension benefits for certain
MTG employees in 1998.

51

Pfizer Inc and Subsidiary Companies

An average increase of 6.9% in the cost of health care

benefits was assumed for 2000 and is projected to decrease over
the next five years to 5.2% and to then remain at that level.
A 1% change in the medical trend rate assumed for
postretirement benefits would have the following effects
at December 31, 1999:
(millions of dollars)

1% Increase

Total of service and interest

cost components
Postretirement benefit obligation

1% Decrease

$ 1
13

$ (1)
(12)

We have savings and investment plans for most employees

in the U.S., Puerto Rico, the U.K. and Ireland. Employees may
contribute a portion of their salaries to the plans and we match
a portion of the employee contributions. Our contributions
were $50 million in 1999, $48 million in 1998 and $43 million
in 1997.

11 Lease Commitments
We lease properties for use in our operations. In addition to
rent, the leases require us to pay directly for taxes, insurance,
maintenance and other operating expenses, or to pay higher
rent when operating expenses increase. Rental expense, net
of sublease income, was $158 million in 1999, $131 million in
1998 and $127 million in 1997. This table shows future
minimum rental commitments under noncancellable leases
at December 31, 1999:
After
(millions of dollars)

Lease commitments

2000

2001

2002

2003

2004

2004

$54

$45

$40

$29

$27

$286

12 Common Stock
We effected a three-for-one stock split of our common stock in
the form of a 200% stock dividend in 1999 and a two-for-one
split of our common stock in the form of a 100% stock
dividend in 1997. All share and per share information in this
report reflects both splits. Per share data may reflect rounding
adjustments as a result of the three-for-one split.
Under the current share-purchase program begun in
September 1998, we are authorized to purchase up to $5 billion
of our common stock. In 1999, we purchased approximately
65.6 million shares of our common stock in the open market at
an average price of $38 per share. Since the beginning of this
program, we have purchased 80.4 million shares of our
common stock for approximately $3 billion. In September
1998, we completed a program under which we purchased
79.2 million shares of our common stock at a total cost of
$2 billion. In 1998, we purchased approximately 57.8 million
shares of our common stock at an average price of $33 per share
under these share-purchase programs. Of the 57.8 million
shares repurchased in 1998, 14.8 million shares were
repurchased under the share-purchase program which started in
September 1998, for a total cost of $525 million.

52

13 Preferred Stock Purchase Rights

Preferred Stock Purchase Rights have a scheduled term
through October 2007, although the term may be extended or
the Rights may be redeemed prior to expiration. One right was
issued for each share of common stock issued by our company.
These rights are not exercisable unless certain change-incontrol events transpire, such as a person acquiring or
obtaining the right to acquire beneficial ownership of 15% or
more of our outstanding common stock or an announcement of
a tender offer for at least 30% of our stock. The rights are
evidenced by corresponding common stock certificates and
automatically trade with the common stock unless an event
transpires that makes them exercisable. If the rights become
exercisable, separate certificates evidencing the rights will be
distributed and each right will entitle the holder to purchase a
new series of preferred stock at a defined price from our
company. The preferred stock, in addition to preferred
dividend and liquidation rights, will entitle the holder to vote
with the companys common stock.
The rights are redeemable by us at a fixed price until
10 days, or longer as determined by the Board, after
certain defined events, or at any time prior to the expiration of
the rights.
We have reserved 3.0 million preferred shares to be issued
pursuant to these rights. No such shares have yet been issued.
At the present time, the rights have no dilutive effect on the
earnings per common share calculation.

14 Employee Benefit Trusts

In 1993, we sold 120 million shares of treasury stock to the
Pfizer Inc. Grantor Trust in exchange for a $600 million note.
The Trust was established primarily to fund our employee
benefit plans. In February 1999, the Trust transferred 10
million shares to us to satisfy the balance due on its note and
contributed its remaining 90 million shares to the newly
established Pfizer Inc. Employee Benefit Trust (EBT). The
Grantor Trust was then dissolved and the shares of the EBT
will now be used to fund employee benefit plans. The Balance
Sheet reflects the fair value of the shares owned by the EBT as a
reduction of Shareholders Equity.

Pfizer Inc and Subsidiary Companies

15 Earnings Per Share

The weighted average common shares used in the
computations of basic earnings per common share and earnings
per common share assuming dilution were as follows:
1999

1998

1997

$3,199
(20)

$1,950
1,401

$2,082
131

$3,179

$3,351

$2,213

3,775

3,789

3,771

(millions, except per share data)

Earnings:
Income from continuing operations
Discontinued operations net of tax
Net income
Basic:
Weighted average number of
common shares outstanding
Earnings per common share
Income from continuing operations
Discontinued operations net of tax
Net income
Diluted:
Weighted average number of
common shares outstanding
Common share equivalents
stock options and stock issuable
under employee compensation plans
Weighted average number of
common shares and common
share equivalents
Earnings per common share
Income from continuing operations
Discontinued operations net of tax
Net income

.85
(.01)

.51
.37

.55
.04

.84

.88

.59

The following table summarizes information concerning

options outstanding under the Plan at December 31, 1999:
(thousands
of shares)

Options Outstanding

$ 0 $10
10 15
15 20
20 40
over
40

85,308
36,677
35,486
48,730
66,904

3,789

3,771

109

156

138

3,884

3,945

3,909

.82

.49
.36

.53
.04

.82

.85

.57

Options to purchase 115 million shares were outstanding

during 1999 but were not included in the computation of
diluted earnings per share because the options exercise prices
were greater than the average market price of the common
shares.

16 Stock Option and Performance Awards

We may grant stock options to any employee, including
officers, under our Stock and Incentive Plan. Options are
exercisable after five years or less, subject to continuous
employment and certain other conditions and expire 10 years
after the grant date. Once exercisable, the employee can
purchase shares of our common stock at the market price on
the date we granted the option.
The Plan also allows for stock appreciation rights,
stock awards and performance awards. In 1999, shareholders
approved amendments to increase the shares available in
the Plan and to extend its term through 2008.

4.0
6.6
7.7
8.7
9.2

$ 6.40
12.42
18.34
35.18
42.07

84,401
34,439
21,145
14,114

$ 6.38
12.42
18.35
35.18

The following table summarizes the activity for the Plan:

Under Option

Shares

Weighted
Average Exercise
Price Per Share

Balance January 1, 1997

Granted
Exercised
Cancelled

105,042 259,284
(42,612) 42,612
(46,983)
1,959
(2,016)

$ 7.21
18.35
5.38
12.89

Balance December 31, 1997

Granted
Exercised
Cancelled

64,389 252,897
(52,860) 52,860
(54,888)
1,212
(1,257)

9.39
35.21
7.04
19.91

Balance December 31, 1998

Authorized
Granted
Exercised
Cancelled

12,741 249,612
165,000

(67,963) 67,963
(41,524)
2,928
(2,946)

15.32

42.07
9.57
35.41

112,706 273,105

22.63

(thousands of shares)

3,775

Options Exercisable

Weighted
Average Weighted
Weighted
Number Remaining Average
Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/99 Term (years)
Price at 12/31/99
Price

Balance December 31, 1999

Shares
Available for
Grant

Options granted in 1999 include options for 450 shares granted to every eligible
employee worldwide in celebration of our 150th Anniversary.
The tax benefits related to certain stock option transactions were $228 million in 1999,
$274 million in 1998 and $88 million in 1997.

The weighted-average fair value per stock option granted

was $13.57 for 1999 options, $11.31 for 1998 options and $5.59
for the 1997 options. We estimated the fair values using the
Black-Scholes option pricing model, modified for dividends
and using the following assumptions:

Expected dividend yield

Risk-free interest rate
Expected stock price volatility
Expected term until exercise (years)

1999

1998

1997

1.02%
5.26%
25.98%
5.75

1.02%
5.23%
26.29%
5.75

1.76%
6.23%
25.56%
5.50

53

Pfizer Inc and Subsidiary Companies

The following table summarizes results as if we had

recorded compensation expense for the 1999, 1998 and 1997
option grants:
1999

1998

1997

$3,179
2,750

$3,351
3,149

$2,213
2,087

.84
.73

.88
.83

.59
.55

.82
.71

.85
.80

.57
.53

(millions of dollars, except per share data)

Net income:
As reported
Pro forma
Basic earnings per share:
As reported
Pro forma
Diluted earnings per share:
As reported
Pro forma

18 Litigation

The Performance-Contingent Share Award Program

was established effective in 1993 to provide executives and
other key employees the right to earn common stock awards.
We determine the award payouts after the performance period
ends, based on specific performance criteria. Under the
Program, up to 120 million shares may be awarded. We
awarded approximately 2,276,000 shares in 1999,
approximately 1,959,000 shares in 1998 and approximately
1,347,000 shares in 1997. At December 31, 1999, program
participants had the right to earn up to 12.3 million additional
shares. Compensation expense related to the Program was
$64 million in 1999, $202 million in 1998 and $74 million
in 1997.
We entered into two forward-purchase contracts in 1998
and on maturity they were extended. These contracts offset the
potential impact on net income of our liability under the
Program. At settlement date we will, at the option of the
counterparty to the contract, either receive our own stock or
settle the contracts for cash. Other contract terms are as
follows:
Maximum Maturity
in Years
Number of Shares (thousands)

3,000
3,017

Per Share

1999

1998

$33.73
33.75

.9

.9

The financial statements include the following items

related to these contracts:
Prepaid expenses and taxes includes:
fair value of these contracts
Other deductionsnet includes:
changes in the fair value of these contracts

17 Insurance
We maintain insurance coverage adequate for our needs. Under
our insurance contracts, we usually accept self-insured
retentions appropriate for our specific business risks.

54

The Company is involved in a number of claims and

litigations, including product liability claims and litigations
considered normal in the nature of its businesses. These include
suits involving various pharmaceutical and hospital products
that allege either reaction to or injury from use of the product.
In addition, from time to time the Company is involved in, or
is the subject of, various governmental or agency inquiries or
investigations relating to its businesses.
In 1999, the Company pleaded guilty to one count of price
fixing of sodium erythorbate from July 1992 until December
1994, and one count of market allocation of maltol from
December 1989 until December 1995, and paid a total fine of
$20 million. The activities at issue involved the Companys
former Food Science Group, a division that manufactured food
additives and that the Company divested in 1996. The
Department of Justice has stated that no further antitrust
charges will be brought against the Company relating to the
former Food Science Group, that no antitrust charges will be
brought against any current director, officer or employee of the
Company for conduct related to the products of the former
Food Science Group, and that none of the Companys current
directors, officers or employees was aware of any aspect of the
activity that gave rise to the violations. Five purported class
action suits involving these products have been filed against
the Company; two in California State Court, and three in New
York Federal Court. The Company does not believe that this
plea and settlement, or civil litigation involving these
products, will have a material effect on its business or results of
operations.
On June 9, 1997, the Company received notice of the
filing of an Abbreviated New Drug Application (ANDA) by
Mylan Pharmaceuticals for a sustained-release nifedipine
product asserted to be bioequivalent to Procardia XL. Mylans
notice asserted that the proposed formulation does not infringe
relevant licensed Alza and Bayer patents and thus that approval
of their ANDA should be granted before patent expiration. On
July 18, 1997, the Company, together with Bayer AG and Bayer
Corporation, filed a patent-infringement suit against Mylan
Pharmaceuticals Inc. and Mylan Laboratories Inc. in the United
States District Court for the Western District of Pennsylvania
with respect to Mylans ANDA. Suit was filed under Bayer
AGs U.S. Patent No. 5,264,446, licensed to the Company,
relating to nifedipine of a specified particle size range. Mylan
has filed its answer denying infringement and a scheduling
order has been entered. On December 17, 1999, Mylan received
final approval from the FDA for its 30 mg. extended-release
nifedipine tablet. On March 16, 1999, the United States
District Court granted Mylans motion to file an amended
answer and antitrust counterclaims. All discovery on the
antitrust counterclaims is stayed pending resolution of the
patent misuse claims. On March 29, 1999, Mylan filed a
motion for summary judgment based on an adverse decision
against Bayer in Bayers litigation against Elan Pharmaceutical
Research Corp. which involved the same nifedipine particle size

Pfizer Inc and Subsidiary Companies

patent. Discovery has been essentially completed and the

parties dispositive motions were filed by an extended deadline
of July 19, 1999, including Pfizer and Bayers summary
judgment motion seeking to dismiss Mylans patent misuse
defenses and counterclaims. On December 13, 1999, Mylan
filed its opposition to plaintiffs motion for summary judgment
dismissing Mylans patent misuse defense and counterclaim,
and Bayer and the Company filed their opposition to Mylans
motion for summary judgment of non-infringement. The
parties reply memoranda in support of their motions were filed
on December 28, 1999.
On or about February 23, 1998, Bayer AG received notice
that Biovail Laboratories Incorporated had filed an ANDA for a
sustained-release nifedipine product asserted to be
bioequivalent to one dosage strength (60 mg.) of Procardia XL.
The notice was subsequently received by the Company as well.
The notice asserts that the Biovail product does not infringe
Bayers U.S. Patent No. 5,264,446. On March 26, 1998, the
Company received notice of the filing of an ANDA by Biovail
Laboratories of a 30 mg. dosage formulation of nifedipine
alleged to be bioequivalent to Procardia XL. On April 2, 1998,
Bayer and Pfizer filed a patent-infringement action against
Biovail, relating to their 60 mg. nifedipine product, in the
United States District Court for the District of Puerto Rico.
On May 6, 1998, Bayer and Pfizer filed a second patent
infringement action in Puerto Rico against Biovail under the
same patent with respect to Biovails 30 mg. nifedipine
product. These actions have been consolidated for discovery and
trial. On April 24, 1998, Biovail Laboratories Inc. brought suit
in the United States District Court for the Western District of
Pennsylvania against the Company and Bayer seeking a
declaratory judgment of invalidity of and/or non-infringement
of the 5,264,446 nifedipine patent as well as a finding of
violation of the antitrust laws. Biovail has also moved to
transfer the patent infringement actions from Puerto Rico to
the Western District of Pennsylvania. Pfizer has opposed this
motion to transfer and on June 19, 1998, moved to dismiss
Biovails declaratory judgment action and antitrust action in
the Western District of Pennsylvania, or in the alternative, to
stay the action pending the outcome of the infringement
actions in Puerto Rico. On January 4, 1999, the District Court
in Pennsylvania granted Pfizers motion for a stay of the
antitrust action pending the outcome of the infringement
actions in Puerto Rico. On January 29, 1999, the District
Court in Puerto Rico denied Biovails motion to transfer the
patent infringement actions from Puerto Rico to the Western
District of Pennsylvania. On April 12, 1999, Biovail filed a
motion for summary judgment also based in part on the
summary judgment motion granted to Elan in the Bayer v.
Elan litigation in the Northern District of Georgia. Pfizer and
Bayers response was filed on April 26, 1999. On September 20,
1999, the United States District Court in Puerto Rico denied
Biovails motion for summary judgment without prejudice to
their refiling after completion of discovery in the Procardia XL
patent-infringement litigation. The court set an expedited
discovery schedule with a deadline of December 30, 1999, to

complete discovery of parties and fact witnesses and February

29, 2000, to complete discovery of expert witnesses. On
December 20, 1999, the court extended the date to complete
fact discovery to January 28, 2000, and that of expert discovery
to March 15, 2000. A status conference with the court is
scheduled for March 17, 2000.
On April 2, 1998, the Company received notice from Lek
U.S.A. Inc. of its filing of an ANDA for a 60 mg. formulation
of nifedipine alleged to be bioequivalent to Procardia XL. On
May 14, 1998, Bayer and Pfizer commenced suit against Lek for
infringement of Bayers U.S. Patent No. 5,264,446, as well as
for infringement of a second Bayer patent, No. 4,412,986
relating to combinations of nifedipine with certain polymeric
materials. On September 14, 1998, Lek was served with the
summons and complaint. Plaintiffs amended the complaint on
November 10, 1998, limiting the action to infringement of
U.S. Patent 4,412,986. On January 19, 1999, Lek filed a motion
to dismiss the complaint alleging infringement of U.S. Patent
4,412,986. Pfizer responded to this motion and oral argument
has been held in abeyance pending a settlement conference. In
September 1999, a settlement agreement was entered into
among the parties staying this litigation until the expiration of
U.S. Patent No. 4,412,986 on November 2, 2000.
On February 10, 1999, the Company received a notice from
Lek U.S.A. of its filing of an ANDA for a 90 mg. formulation
of nifedipine alleged to be bioequivalent to Procardia XL. On
March 25, 1999, Bayer and Pfizer commenced suit against Lek
for infringement of the same two Bayer patents originally
asserted against Leks 60 mg. formulation. This case was also
the subject of a settlement conference. In September, 1999, a
settlement agreement was entered into among the parties
staying this litigation until the expiration of U.S. patent No.
4,412,986 on November 2, 2000.
On November 9, 1998, Pfizer received an ANDA notice
letter from Martec Pharmaceutical, Inc. for generic versions (30
mg., 60 mg., 90 mg.) of Procardia XL. On or about December
18, 1998, Pfizer received a new ANDA certification letter
stating that the ANDA had actually been filed in the name of
Martec Scientific, Inc. On December 23, 1998, Pfizer brought
an action against Martec Pharmaceutical, Inc. and Martec
Scientific, Inc. in the Western District of Missouri for
infringement of Bayers patent relating to nifedipine of a
specific particle size. On January 26, 1999, a second complaint
was filed against Martec Scientific in the Western District of
Missouri based on Martecs new ANDA certification letter.
Martec filed its response to this complaint on February 26,
1999. A hearing to determine claim scope is scheduled for
June 1, 2000.
Pfizer filed suit on July 8, 1997, against the FDA in the
United States District Court for the District of Columbia,
seeking a declaratory judgment and injunctive relief enjoining
the FDA from processing Mylans ANDA or any other ANDA
submission referencing Procardia XL that uses a different
extended-release mechanism. Pfizers suit alleges that extendedrelease mechanisms that are not identical to the osmotic pump
mechanism of Procardia XL constitute different dosage forms

55

Pfizer Inc and Subsidiary Companies

requiring the filing and approval of suitability petitions under

the Food Drug and Cosmetics Act before the FDA can accept
an ANDA for filing. Mylan intervened in Pfizers suit. On
March 31, 1998, the U.S. District Judge granted the
governments motion for summary judgment against the
Company. On July 16, 1999, the D.C. Court of Appeals
dismissed the appeal on the ground that since the FDA had not
approved any ANDA referencing Procardia XL that uses a
different extended-release mechanism than the osmotic pump
mechanism of Procardia XL, it was premature to maintain this
action, stating that Pfizer has the right to bring such an action
if, and when, the FDA approves such an ANDA. Subsequent to
FDAs final approval of Mylans ANDA, on December 18, 1999
Pfizer filed suit against FDA in the United States District
Court for the District of Delaware. The suit alleges that FDA
unlawfully approved Mylans 30 mg. extended release product
because FDA had not granted an ANDA suitability petition
reflecting a difference in dosage form from Procardia XL.
On March 31, 1999, the Company received notice from
TorPharm of its filing, through its U.S. agent Apotex Corp., of
an ANDA for 1 mg., 2 mg., 4 mg. and 8 mg. tablets alleged to
be bioequivalent to Cardura (doxazosin mesylate). The notice
letter alleges that Pfizers patent on doxazosin is invalid in view
of certain prior art references. Following a review of these
allegations, suit was filed in the United States District Court
for the Northern District of Illinois against TorPharm and
Apotex Corp. on May 14, 1999. The defendants requested a 90day period in which to file their answer. The request was
granted and TorPharm/Apotexs answer was filed by August
19, 1999. Discovery is in progress. On June 2, 1999, FDA was
notified that given the patent litigation and pursuant to
provisions of the Federal Food Drug and Cosmetic Act, the
FDA may not approve the TorPharm application for thirty
months from filing or resolution of the litigation.
On May 5, 1999, the Company filed an action against Sibia
Neurosciences, Inc. in the United States District Court for the
District of Delaware seeking a declaratory judgment that two
Sibia patents claiming reporter gene drug screening assays are
invalid, not infringed by the Company, and unenforceable due
to Sibias misuse of its patent rights in seeking certain license
terms. On May 27, 1999, Sibia Neurosciences, Inc. filed an
answer to the Companys declaratory judgment action in which
Sibia denies that a prior case or controversy existed, but admits
that a case or controversy does now exist regarding at least one
patent in suit, denies the invalidity, unenforceability and noninfringement of the patents in suit, and asserts various
jurisdictional and equitable defenses, affirmative defenses, and
lack of standing by the Company to assert patent misuse. Sibia
Neurosciences also filed a counterclaim alleging willful
infringement by the Company of one of the patents in suit. A
reply to that counterclaim denying Sibias allegation has been
filed. The parties submitted a joint status report to the court
on December 14, 1999, in which the parties agreed to complete
fact discovery by August 21, 2000, and commence trial on
January 8, 2001.

56

On May 19, 1999, Abbott Laboratories filed an action

against the Company in the United States District Court of the
Northern District of Illinois alleging that the Companys use,
sale or manufacture of trovafloxacin infringes Abbotts United
States Patent No. 4,616,019 claiming naphthyriding antibiotics
and seeking a permanent injunction and damages. An answer
denying these allegations was filed on June 9, 1999. Discovery
is in progress.
On December 17, 1999, the Company received notice of
the filing of an ANDA by Zenith Goldline Pharmaceuticals
for 50 mg. and 100 mg. tablets of sertraline hydrochloride
alleged to be bioequivalent to Zoloft. Zenith has certified to
the FDA that it will not engage in the manufacture, use or sale
of sertraline hydrochloride until the expiration of Pfizers U.S.
Patent 4,536,518, which covers sertraline per se and expires
December 30, 2005. Zenith has also alleged in its certification
to the FDA that the manufacture, use and sale of Zeniths
product will not infringe Pfizers U.S. Patent 4,962,128, which
covers methods of treating an anxiety-related disorder or
Pfizers U.S. Patent 5,248,699, which covers a crystalline
polymorph of sertraline hydrochloride. These patents expire in
November 2009 and August 2012, respectively. On January 28,
2000, the Company filed a patent infringement action against
Zenith Goldline and its parent Ivax Corporation in the United
States District Court for the District of New Jersey for
infringement of the 128 and 699 patents.
On February 1, 2000, the Company received notice of the
filing of an ANDA by Novopharm Limited for 50 mg, 100 mg,
150 mg and 200 mg tablets of fluconazole alleged to be
bioequivalent to DIFLUCAN. Novopharm has certified to the
FDA its position that the Companys U.S. Patent 4,404,216,
which covers fluconazole, is invalid. This patent expires in
January 2004. The Company is evaluating Novopharms notice.
In pre-existing litigation between Pioneer Hi-Bred
International, Inc. and DeKalb Genetics Corporation in the
United States District Court for the Southern District of Iowa,
the court granted on October 8, 1999 Pioneers motion to add
additional parties, including Pfizer Inc. and Monsanto Co. (the
present owner of DeKalb Genetics Corporation), as codefendant
parties. The amended complaint, which claims violations of the
federal Lanham Act and Iowa state law stemming from the
codefendants alleged use of Pioneers corn seed germplasm in
the development of competitive corn seed products, was served
on the Company on October 19. The Company filed its answer
on December 15, 1999.
On September 22, 1999, the jury in a trademarkinfringement litigation brought against the Company by
Trovan Ltd. and Electronic Identification Devices, Ltd. relating
to use of the TROVAN mark for trovafloxacin issued a verdict
in favor of the plaintiffs with respect to liability, holding that
the Company had infringed Trovan Ltd.s mark and had acted
in bad faith. Following a further damage trial, on October 12,
1999, the jury awarded Trovan Ltd. a total of $143 million in

Pfizer Inc and Subsidiary Companies

damages, comprised of $5 million actual damages, $3 million

as a reasonable royalty and $135 million in punitive damages.
The court held a hearing on December 27, 1999, on whether to
award the plaintiffs profits based on the Companys sales of
Trovan and, if so, the amount of same. The Companys motion
for mistrial remains outstanding.
As previously disclosed, a number of lawsuits and claims
have been brought against the Company and Shiley
Incorporated, a wholly owned subsidiary, alleging either
personal injury from fracture of 60 or 70 Shiley Convexo
Concave (C/C) heart valves, or anxiety that properly
functioning implanted valves might fracture in the future, or
personal injury from a prophylactic replacement of a
functioning valve.
In an attempt to resolve all claims alleging anxiety that
properly functioning valves might fracture in the future, the
Company entered into a settlement agreement in January 1992
in Bowling v. Shiley, et al., a case brought in the United States
District Court for the Southern District of Ohio, that
established a worldwide settlement class of people with C/C
heart valves and their spouses, except those who elected to
exclude themselves. The settlement provided for a Consultation
Fund of $90 million, which was fixed by the number of claims
filed, from which valve recipients received payments that are
intended to cover their cost of consultation with cardiologists
or other health care providers with respect to their valves. The
settlement agreement established a second fund of at least $75
million to support C/C valve-related research, including the
development of techniques to identify valve recipients who may
have significant risk of fracture, and to cover the unreimbursed
medical expenses that valve recipients may incur for certain
procedures related to the valves. The Companys obligation as
to coverage of these unreimbursed medical expenses is not
subject to any dollar limitation. Following a hearing on the
fairness of the settlement, it was approved by the court on
August 19, 1992, and all appeals have been exhausted.
Generally, the plaintiffs in all of the pending heart valve
litigations seek money damages. Based on the experience of the
Company in defending these claims to date, including
insurance proceeds and reserves, the Company is of the opinion
that these actions should not have a material adverse effect on
the financial position or the results of operations of the
Company. Litigation involving insurance coverage for the
Companys heart valve liabilities has been resolved.
The Companys operations are subject to federal, state,
local and foreign environmental laws and regulations. Under
the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended (CERCLA or Superfund),
the Company has been designated as a potentially responsible
party by the United States Environmental Protection Agency
with respect to certain waste sites with which the Company
may have had direct or indirect involvement. Similar
designations have been made by some state environmental
agencies under applicable state Superfund laws. Such
designations are made regardless of the extent of the Companys
involvement. There are also claims that the Company may be a

responsible party or participant with respect to several waste

site matters in foreign jurisdictions. Such claims have been
made by the filing of a complaint, the issuance of an
administrative directive or order, or the issuance of a notice or
demand letter. These claims are in various stages of
administrative or judicial proceedings. They include demands
for recovery of past governmental costs and for future
investigative or remedial actions. In many cases, the dollar
amount of the claim is not specified. In most cases, claims have
been asserted against a number of other entities for the same
recovery or other relief as was asserted against the Company.
The Company is currently participating in remedial action at a
number of sites under federal, state, local and foreign laws.
To the extent possible with the limited amount of
information available at this time, the Company has evaluated
its responsibility for costs and related liability with respect to
the above sites and is of the opinion that the Companys liability
with respect to these sites should not have a material adverse
effect on the financial position or the results of operations of the
Company. In arriving at this conclusion, the Company has
considered, among other things, the payments that have been
made with respect to the sites in the past; the factors, such as
volume and relative toxicity, ordinarily applied to allocate
defense and remedial costs at such sites; the probable costs to be
paid by the other potentially responsible parties; total projected
remedial costs for a site, if known; existing technology; and the
currently enacted laws and regulations. The Company
anticipates that a portion of these costs and related liability will
be covered by available insurance.
Through the early 1970s, Pfizer Inc. (Minerals Division)
and Quigley Company, Inc. (Quigley), a wholly owned
subsidiary, sold a minimal amount of one construction product
and several refractory products containing some asbestos. These
sales were discontinued thereafter. Although these sales
represented a minor market share, the Company has been
named as one of a number of defendants in numerous lawsuits.
These actions, and actions related to the Companys sale of talc
products in the past, claim personal injury resulting from
exposure to asbestos-containing products, and nearly all seek
general and punitive damages. In these actions, the Company
or Quigley is typically one of a number of defendants, and both
are members of the Center for Claims Resolution (the CCR),
a joint defense organization of sixteen defendants that is
defending these claims. The Company and Quigley are
responsible for varying percentages of defense and liability
payments for all members of the CCR. A number of cases
alleging property damage from asbestos-containing products
installed in buildings have also been brought against the
Company, but most have been resolved.
As of January 29, 2000, there were 57,328 personal injury
claims pending against Quigley and 26,890 such claims
against the Company (excluding those that are inactive or have
been settled in principle), and 68 talc cases against the
Company.
The Company believes that its costs incurred in defending
and ultimately disposing of the asbestos personal injury claims,

57

Pfizer Inc and Subsidiary Companies

as well as the property damage and talc claims, will be largely

covered by insurance policies issued by several primary
insurance carriers and a number of excess carriers that have
agreed to provide coverage, subject to deductibles, exclusions,
retentions and policy limits. Litigation against excess insurance
carriers seeking damages and/or declaratory relief to secure
their coverage obligations has now been largely resolved,
although claims against several of such insureds do remain
pending. Based on the Companys experience in defending the
claims to date and the amount of insurance coverage available,
the Company is of the opinion that the actions should not
ultimately have a material adverse effect on the financial
position or the results of operations of the Company.
In 1993, the Company was named, together with
numerous other manufacturers of brand-name prescription
drugs and certain companies that distribute brand-name
prescription drugs, in suits in federal and state courts brought
by various groups of retail pharmacy companies, alleging that
the manufacturers violated the Sherman Act by agreeing not to
give retailers certain discounts and that the failure to give such
discounts violated the Robinson Patman Act. A class action
was brought on the Sherman Act claim, as well as additional
actions by approximately 3,500 individual retail pharmacies
and a group of chain and supermarket pharmacies (the
individual actions) on both the Sherman Act and Robinson
Patman Act claims. A retailer class was certified in 1994 (the
Federal Class Action). In 1996, fifteen manufacturer
defendants, including the Company, settled the Federal Class
Action. The Companys share was $31.25 million, payable in
four annual installments without interest. Trial began in
September 1998 for the class case against the non-settlers, and
the District Court also permitted the opt-out plaintiffs to add
the wholesalers as named defendants in their cases. The District
Court dismissed the case at the close of the plaintiffs evidence.
The plaintiffs appealed and, on July 13, 1999, the Court of
Appeals upheld most of the dismissal but remanded on one
issue, while expressing doubts that the plaintiffs could prove
any damages.
Retail pharmacy cases also have been filed in state courts
in five states, and consumer class actions were filed in state
courts in fourteen states and the District of Columbia alleging
injury to consumers from the failure to give discounts to retail
pharmacy companies.
In addition to its settlement of the retailer Federal Class
Action (see above), the Company has also settled several major
opt-out retail cases, and along with other manufacturers: (1) has
entered into an agreement to settle all outstanding consumer
class actions (except Alabama, California and North Dakota),
which settlement is going through the approval process in the
various courts in which the actions are pending; and (2) has
entered into an agreement to settle the California consumer
case, which has been approved by the Court there.
The Company believes that these brand-name prescription
drug antitrust cases, which generally seek damages and certain
injunctive relief, are without merit.

58

The Federal Trade Commission opened an investigation

focusing on the pricing practices at issue in the above
pharmacy antitrust litigation. In July 1996, the Commission
issued a subpoena for documents to the Company, among
others, to which the Company responded. A second subpoena
was issued to the Company for documents in May 1997 and the
Company again responded. We are not aware of any further
activity.
FDA administrative proceedings relating to Plax are
pending, principally an industry-wide call for data on all antiplaque products by the FDA. The call-for-data notice specified
that products that have been marketed for a material time and
to a material extent may remain on the market pending FDA
review of the data, provided the manufacturer has a good faith
belief that the product is generally recognized as safe and
effective and is not misbranded. The Company believes that
Plax satisfied these requirements and prepared a response to the
FDAs request, which was filed on June 17, 1991. This filing, as
well as the filings of other manufacturers, is still under review
and is currently being considered by an FDA Advisory
Committee. The Committee has issued a draft report
recommending that plaque removal claims should not be
permitted in the absence of data establishing efficacy against
gingivitis. The process of incorporating the Advisory
Committee recommendations into a final monograph is
expected to take several years. If the draft recommendation is
ultimately accepted in the final monograph, although it would
have a negative impact on sales of Plax, it will not have a
material adverse effect on the sales, financial position or
operations of the Company.
On January 15, 1997, an action was filed in Circuit Court,
Chambers County, Alabama, purportedly on behalf of a class of
consumers, variously defined by the laws or types of laws
governing their rights and encompassing residents of up to 47
states. The complaint alleges that the Companys claims for
Plax were untrue, entitling them to a refund of their purchase
price for purchases since 1988. A hearing on Plaintiffs motion
to certify the class was held on June 2, 1998. We are awaiting
the Courts decision. The Company believes the complaint is
without merit.
Since December 1998, four actions have been filed, in state
courts in Houston, San Francisco, Chicago and New Orleans,
purportedly on behalf of statewide (California) or nationwide
(Houston, Chicago and New Orleans) classes of consumers who
allege that the Companys and other manufacturers advertising
and promotional claims for Rid and other pediculicides were
untrue, entitling them to refunds, other damages and/or
injunctive relief. The Houston case has been voluntarily
dismissed and proceedings in the San Francisco, Chicago and
New Orleans cases are still in early stages of the proceedings.
The Company believes the complaints are without merit.
In December, 1999 and January, 2000, two suits were filed
in California state courts against the Company and other
manufacturers of zinc oxide-containing powders. The first suit
was filed by the Center for Environmental Health and the
second was filed by an individual plaintiff on behalf of a

Pfizer Inc and Subsidiary Companies

purported class of purchasers of baby powder products. The

suits generally allege that the label of Desitin powder violates
Californias Proposition 65 by failing to warn of the presence
of lead, which is alleged to be a carcinogen. In January, 2000,
the Company received a notice from a California environmental
group alleging that the labeling of Desitin ointment and
powder violates Proposition 65 by failing to warn of the
presence of cadmium, which is alleged to be a carcinogen.
Several other manufacturers of zinc oxide-containing topical
baby products have received similar notices. The Company
believes that the labeling for Desitin complies with applicable
legal requirements.
In April 1996, the Company received a Warning Letter
from the FDA relating to the timeliness and completeness of
required post-marketing reports for pharmaceutical products.
The letter did not raise any safety issue about Pfizer drugs. The
Company has been implementing remedial actions designed to
remedy the issues raised in the letter. During 1997, the
Company met with the FDA to apprise them of the scope and
status of these activities. A review of the Companys new
procedures was undertaken by FDA in 1999. The Company and
Agency met to review the findings of this review and agreed
that commitments and remedial measures undertaken by the
Company related to the Warning Letter have been
accomplished. The Company agreed to keep the Agency
informed of its activities as it continues to modify its processes
and procedures.
During May and June, 1999, the FDA and the European
Unions Committee for Proprietary Medicinal Products (CPMP)
reconsidered the approvals to market Trovan, a broad-spectrum
antibiotic, following post-market reports of severe adverse liver
reactions to the drug. On June 9, the Company announced
that, regarding the marketing of Trovan in the United States, it
had agreed to restrict the indications, limit product
distribution, make certain other labeling changes and to
communicate revised warnings to health care professionals in
the United States. On July 1, Pfizer received the opinion of the
CPMP recommending a one-year suspension of the licenses to
market Trovan in the European Union. The CPMP opinion has
been finalized in a Final Decision by the European
Commission. Since June, 1999, three suits and several claims
have been received by the Company alleging liver injuries due
to the ingestion of Trovan. The majority of these claims have
been resolved without litigation. In June and July, 1999, two of
the lawsuits were filed in the Circuit Court, Hampton County,
South Carolina on behalf of a purported class of all persons who
received Trovan, seeking compensatory and punitive damages
and injunctive relief. One of the suits, seeking injunctive relief,
has been dismissed. No substantitive proceedings have yet
occurred in the other suit and the Company believes that it is
not properly maintainable as a class action, and will defend
against it accordingly.
In October 1999 the Company was sued in an action
seeking unspecified damages, costs and attorneys fees on behalf

of a purported class of people whose dogs had suffered injury or

death after ingesting Rimadyl, an antiarthritic medication for
older dogs. The suit, which was filed in state court in South
Carolina, is in the early pretrial stages. The Company believes
it is without merit.
During 1998, the Company completed the sale of all of the
businesses and companies that were part of the Medical
Technology Group. As part of the sale provisions, the Company
has retained responsibility for certain items, including matters
related to the sale of MTG products sold by the Company
before the sale of the MTG businesses. A number of cases have
been brought against Howmedica Inc. (some of which also
name the Company) alleging that P.C.A. one-piece acetabular
hip prostheses sold from 1983 through 1990 were defectively
designed and manufactured and pose undisclosed risks to
implantees. These cases have now been resolved. Between 1994
and 1996, seven class actions alleging various injuries arising
from implantable penile prostheses manufactured by American
Medical Systems were filed and ultimately dismissed or
discontinued. Thereafter, between late 1996 and early 1998,
approximately 700 former members of one or more of the
purported classes, represented by some of the same lawyers who
filed the class actions, filed individual suits in Circuit Court in
Minneapolis alleging damages from their use of implantable
penile prostheses. Most of these claims, along with a number of
filed and unfiled claims from other jurisdictions, have now
been resolved. The Company believes that most if not all of
these cases are without merit.
In June 1993, the Ministry of Justice of the State of Sao
Paulo, Brazil, commenced a civil public action against the
Companys Brazilian subsidiary, Laboratorios Pfizer Ltda.
(Pfizer Brazil) asserting that during a period in 1991 Pfizer
Brazil withheld sale of the pharmaceutical product Diabinese
in violation of antitrust and consumer protection laws. The
action sought the award of moral, economic and personal
damages to individuals and the payment to a public reserve
fund. In February 1996, the trial court issued a decision
holding Pfizer Brazil liable. The trial courts opinion also
established the amount of moral damages for individuals who
might make claims later in the proceeding and set out a
formula for calculating the payment into the public reserve
fund which could have resulted in a sum of approximately $88
million. Pfizer Brazil appealed this decision. In September
1999, the appeals court issued a ruling upholding the trial
courts decision as to liability. However, the appeals court
decision overturned the trial courts decision concerning
damages, ruling that criteria to apply in the calculation of
damages, both as to individuals and as to payment of any
amounts to the reserve fund, should be established only in a
later stage of the proceeding. The Company believes that this
action should not have a material adverse effect on the financial
position or the results of operations of the Company.

59

Pfizer Inc and Subsidiary Companies

19 Segment Information and Geographic Data

We operate in the following two business segments:
pharmaceutical including treatments for heart diseases,
infectious diseases, central nervous system disorders,
diabetes, arthritis, erectile dysfunction and allergies, as
well as self-medications
animal health products for food animals and companion
animals, including antibiotics, vaccines and other
veterinary items

Each separately managed segment offers different products

requiring different marketing and distribution strategies.
We sell our products primarily to customers in the
wholesale sector. In 1999, sales to our two largest wholesalers
accounted for 14% and 12% of total revenues. These sales were
concentrated in the pharmaceutical segment.
Revenues were in excess of $100 million in each of
12 countries outside the U.S. in 1999. The U.S. was the only
country to contribute more than 10% to total revenues. The
following tables present segment and geographic information:

Segment Information
(millions of dollars)

Pharmaceutical

Animal
Health

$14,859
12,230
9,726

$1,345
1,314
1,329

Total revenues

1999
1998
1997

Segment profit

1999
1998
1997

4,898(1)
3,574
3,129

Identifiable assets(4)

1999
1998
1997

9,723
7,987
6,464

2,144
2,109
2,197

Property, plant and equipment additions(4)

1999
1998
1997

1,387
991
687

Depreciation and amortization(4)

1999
1998
1997

438
386
337

67
(77)
112

Corporate/
Other

(517)(2)
(903)(2)
(374)(2)

Consolidated

$16,204
13,544
11,055
4,448(3)
2,594(3)
2,867(3)

8,707
8,206
6,330(5)

20,574
18,302
14,991

90
97
69

84
110
122

1,561
1,198
878

74
82
75

30
21
16

542
489
428

Consolidated

Geographic Data

Japan

All
Other
Countries

Total revenues

1999
1998
1997

$9,896
8,205
6,089

$1,249
943
949

$5,059
4,396
4,017

$16,204
13,544
11,055

Long-lived assets

1999
1998
1997

3,430
2,905
2,910

487
369
283

2,750
2,499
2,155

6,667
5,773
5,348

United
States(6)

(millions of dollars)

Includes $310 million charge to write off Trovan inventories.

Includes interest income/(expense) and corporate expenses. Corporate also includes other income/(expense) of the financial subsidiaries (see note 3,Financial Subsidiaries) and
certain performance-based compensation expenses not allocated to the operating segments.
(3)
Consolidated total equals income from continuing operations before provision for taxes on income and minority interests.
(4)
Certain production facilities are shared by various segments. Property, plant and equipment, as well as capital additions and depreciation, are allocated based on physical
production. Corporate assets are primarily cash, short-term investments and long-term loans and investments.
(5)
Includes net assets of discontinued operations.
(6)
Includes operations in Puerto Rico.
(1)
(2)

20 Subsequent Event
On February 7, 2000, we announced an agreement to merge
with Warner-Lambert Company (Warner-Lambert). Under
terms of the merger agreement, which has been approved by
the Board of Directors of both Pfizer and Warner-Lambert, we
will exchange 2.75 shares of Pfizer voting common stock for
each outstanding share of Warner-Lambert voting common
stock in a tax-free transaction valued at $98.31 per Warner60

Lambert share, or an equity value of $90 billion based on the

closing price of our stock on February 4, 2000 of $35.75 per
share. Customary and usual provisions will be made for
outstanding options and warrants.
This transaction is subject to customary conditions,
including the use of pooling-of-interests accounting, qualifying
as a tax-free reorganization, shareholder approval at both
companies and usual regulatory approvals. The transaction is
expected to close in mid-2000.

Pfizer Inc and Subsidiary

Companies

Quarterly Consolidated Financial Data (Unaudited)

Quarter
(millions of dollars, except per share data)

First

Second

Third

Fourth

$3,524
403

$3,298
481

$3,423
569

$3,887
619

Total revenues
Costs and expenses

3,927
2,778

3,779
2,751

3,992
3,025

4,506
3,202

Income from continuing operations before provision

for taxes on income and minority interests
Provision for taxes on income
Minority interests

1,149
333
1

1,028
298
1

967
265
1

1,304
348
2

701

954

1999
Net sales
Alliance revenue

Income from continuing operations

Discontinued operations net of tax

815

729
(20)

Net income

$ 815

$ 709

$ 701

$ 954

Earnings per common share basic

Income from continuing operations
Discontinued operations net of tax

.22

.19
(.01)

.19

.25

.22

.18

.19

.25

.21

.18

.18

.25

Net income
Earnings per common share diluted
Income from continuing operations
Discontinued operations net of tax

.21

.18

.18

.25

Cash dividends paid per common share

Net income

.07 13

.07 13

.08

.08

Stock prices
High
Low

$
$

48 1164
36 3364

$
$

50 364
31 3564

$
$

40 1116
32

$
$

42 14
32 316

1998
Net sales
Alliance revenue

$ 2,886
150

$ 3,114
198

$ 3,110
220

$ 3,567
299

3,036
2,294

3,312
2,468

3,330
2,628

3,866
3,560

Income from continuing operations before provision

for taxes on income and minority interests
Provision for taxes on income
Minority interests

742
206
1

844
249
1

702
186
1

306
1
(1)

Income from continuing operations

Discontinued operations net of tax

535
157

594
34

515
882

306
328
$ 634

Total revenues
Costs and expenses

Net income

692

628

$ 1,397

Earnings per common share basic

Income from continuing operations
Discontinued operations net of tax

.14
.04

.16
.01

.13
.24

.08
.08

.18

.17

.37

.16

.14
.04

.15

.13
.23

.07
.09

.36

.16

.06 13

.06 13

Net income
Earnings per common share diluted
Income from continuing operations
Discontinued operations net of tax

.18

.15

Cash dividends paid per common share

Net income

.06 13

.06 13

Stock prices
High
Low

$
$

32 12
23 1116

$
$

40 3764
32 18

$
$
$
$

40 1364
30 4364

$
$

42 6364
28 4364

All data reflects the 1999 three-for-one stock split.

As of January 31, 2000, there were 149,747 record holders of our common stock (symbol PFE).

61

Pfizer Inc and Subsidiary Companies

Financial Summary
Year Ended December 31

1999

(millions, except per share data)

Net sales
Alliance revenue

Net income
Effective tax rate continuing operations
Depreciation
Property, plant and equipment additions
Cash dividends paid

1997

1996

1995

1994

1993

1992

1991

1990

1989

$14,133 12,677 10,739 9,864 8,684 6,825 6,080 5,816 5,352 4,757 4,220
2,071
867
316

Total revenues
Research and development
Other costs and expenses
Divestitures, restructuring and unusual items net(1)
Income from continuing operations
before taxes and minority interests
Provision for taxes on income
Income from continuing operations before
cumulative effect of accounting changes
Discontinued operations net of tax
Cumulative effect of accounting changes

1998

16,204 13,544 11,055 9,864 8,684 6,825 6,080 5,816 5,352 4,757 4,220
2,776 2,279 1,805 1,567 1,340 1,036
880
776
654
545
449
8,980 8,671 6,383 5,769 5,327 4,212 3,822 3,829 3,675 3,288 3,045

741 (141) 300

$ 4,448 2,594 2,867 2,528 2,017 1,577

$ 1,244
642
775
758
609
445

637 1,352
106
368

$ 3,199 1,950 2,082 1,764 1,401 1,127

(20) 1,401
131
165
172
171

529
129

$ 3,179 3,351 2,213 1,929 1,573 1,298

658

723
141

924
235

726
171

981
579
113
143
(283)(2)

684
117

551
130

801

681

811

722

28.0% 24.8% 27.0% 30.0% 30.2% 28.2% 16.6% 27.2% 19.5% 25.4% 23.6%
473
420
363
309
277
236
206
209
183
167
160
1,561 1,198
878
690
635
620
575
592
505
466
388
1,148
976
881
771
659
594
536
487
437
397
364

As of December 31
Working capital(3)
Property, plant and equipment net
Total assets(3)
Long-term debt
Long-term capital(4)
Shareholders equity
Per common share data:
Basic:
Income from continuing operations
before effect of accounting changes
Discontinued operations net of tax
Net income
Diluted:
Income from continuing operations
before effect of accounting changes
Discontinued operations net of tax
Net income
Market value per share (December 31)
Return on shareholders equity
Cash dividends paid per share
Shareholders equity per share
Current ratio

$ 2,006
5,343
20,574
525
9,738
8,887

2,448
3,793
14,991
725
8,819
7,933

1,914
3,456
14,251
681
7,907
6,954

1,787
3,113
12,339
828
6,518
5,506

1,582
2,747
10,797
604
5,150
4,324

1,875
2,320
8,986
571
4,643
3,866

.85
(.01)

.51
.37

.55
.04

.47
.05

.38
.05

.31
.04

.14
.03

.84

.88

.59

.52

.43

.35

.17

.82

.49
.36

.53
.04

.46
.04

.37
.05

.30
.05

.14
.03

.82

.85

.57

.50

.42

.35

.17

2,749
1,994
9,346
571
5,453
4,719

1,978
2,061
9,387
393
5,725
5,026

.25
(.04)(2)
.21

.24
(.04)(2)
.20

1,920
1,808
8,782
189
5,643
5,092

2,026
1,565
8,099
181
5,034
4,536

.15
.03

.17
.03

.14
.03

.18

.20

.17

.14
.04

.17
.03

.14
.03

.18

.20

.17

$ 32.44 41.67 24.85 13.83 10.50 6.44 5.75 6.04 7.00 3.37 2.90
35.9% 40.0% 29.7% 31.0% 32.0% 31.7% 15.3% 16.6% 14.3% 16.6% 15.4%
$ .3023 .2513 .2223
.20 .1713 .1523
.14 .1213
.11
.10 .0913
$ 2.36 2.33 2.10 1.85 1.48 1.18 1.04 1.21 1.27 1.29 1.14
1.22:1 1.38:1 1.49:1 1.36:1 1.37:1 1.35:1 1.60:1 1.92:1 1.62:1 1.67:1 1.75:1

Weighted average shares used to calculate:

Basic earnings per share amounts
Diluted earnings per share amounts
Employees of continuing operations (thousands)
Total revenues per employee (thousands)

2,739
4,415
18,302
527
9,551
8,810

3,775 3,789 3,771 3,743 3,687 3,670 3,785 3,948 3,963 3,966 3,972
3,884 3,945 3,909 3,864 3,777 3,729 3,845 4,038 4,072 4,046 4,073
51
46
41
39
37
34
33
33
35
33
33
$

318

292

269

256

238

202

184

177

154

145

129

All financial information reflects the divestitures of our MTG and food science businesses as discontinued operations.
We have restated all common share and per share data for the 1999, 1997, 1995 and 1991 stock splits.
(1)
Divestitures, restructuring and unusual items net includes the following:
1993 Pre-tax charges of approximately $745 million and $56 million to cover worldwide restructuring programs, as well as unusual items and a gain of
approximately $60 million realized on the sale of our remaining interest in Minerals Technologies Inc.
1992 Pre-tax gain of $259 million on the sale of a business, offset by pre-tax charges of $175 million for restructuring, consolidating and streamlining.
In addition, it includes pre-tax curtailment gains of $57 million associated with postretirement benefits other than pensions of divested operations.
1991 A pre-tax charge of $300 million for potential future Shiley C/C heart valve fracture claims.
(2)
Accounting changes adopted January 1, 1992: SFAS No. 106 charge of $313 million or $.08 per share; SFAS No. 109 credit of $30 million or $.01 per share.
Per share amounts of accounting changes are included in per share amounts presented for discontinued operations.
(3)
Includes net assets of discontinued operations of our MTG businesses through 1997.
(4)
Defined as long-term debt, deferred taxes on income, minority interests and shareholders equity.

62

Directors, Committees, and Officers

Pfizers Board of Directors is frequently recognized as one of the best in the
United States. In 1999, for example, the Pfizer Board was named one of Five
Champion Boards by Corporate Board Member magazine. In 2000, Business
Week magazine named the Pfizer Board to its Top 25 Best Boards list.

Board of Directors
Michael S. Brown, M.D. (4)
Distinguished Chair Biomedical Sciences;
Regental Professor University of Texas
Southwestern Medical Center
M. Anthony Burns (1, 3)
Chairman and Chief Executive Officer
Ryder System, Inc.
W. Don Cornwell (2)
Chairman and Chief Executive Officer
Granite Broadcasting Corporation
George B. Harvey (2)
Former Chairman, President, and Chief
Executive Officer Pitney Bowes Inc.
Constance J. Horner (1, 4)
Guest Scholar The Brookings
Institution; Former Assistant to the
President of the United States

William C. Steere, Jr. (1)

Chairman and Chief Executive Officer
Pfizer Inc
Jean-Paul Valls, Ph.D. (2)
Chairman and Chief Executive Officer
Minerals Technologies Inc.

Elected Corporate Officers

William C. Steere, Jr.**
Chairman of the Board and Chief
Executive Officer
Henry A. McKinnell, Ph.D.**
President and Chief Operating Officer;
President
Pfizer Pharmaceuticals Group
John F. Niblack, Ph.D.**
Vice Chairman

Stanley O. Ikenberry, Ph.D. (1, 4)

President
American Council on Education

C. L. Clemente**
Executive Vice President Corporate
Affairs; Secretary and Corporate Counsel

Harry P. Kamen (4)

Former Chairman, President, and Chief
Executive Officer Metropolitan Life
Insurance Company

Karen L. Katen**
Senior Vice President; Executive Vice
President Pfizer Pharmaceuticals
Group and President
U.S. Pharmaceuticals

Thomas G. Labrecque (3)

Former Chairman
The Chase Manhattan Corporation
Henry A. McKinnell, Ph.D.
President and Chief Operating Officer
Pfizer Inc; President, Pfizer
Pharmaceuticals Group

Paul S. Miller**
Executive Vice President;
General Counsel
George M. Milne, Jr., Ph.D.**
Senior Vice President; President
Central Research

Dana G. Mead, Ph.D. (3)

Chairman Tenneco Automotive Inc.
and Pactiv Corporation

William J. Robison**
Executive Vice President
Employee Resources

John F. Niblack, Ph.D.

Vice Chairman Pfizer Inc

David L. Shedlarz**
Executive Vice President
Chief Financial Officer

Franklin D. Raines (2)

Chairman and Chief Executive Officer
Fannie Mae
Ruth J. Simmons, Ph.D. (2)
President Smith College

Loretta V. Cangialosi
Vice President and Controller
Gary N. Jortner
Vice President; Senior Vice President,
Product Development
Pfizer Pharmaceuticals Group
J. Patrick Kelly
Vice President; Senior Vice President,
Worldwide Marketing
Pfizer Pharmaceuticals Group
Alan G. Levin
Vice President and Treasurer
Craig Saxton, M.D.
Vice President; Executive Vice President
Central Research
Mohand Sidi Said
Vice President; Senior Vice President
Pfizer Pharmaceuticals Group and Area
President, Asia/Africa/Middle East
Frederick W. Telling, Ph.D.
Vice President Corporate Strategic
Planning and Policy
(1)

Executive Committee*

(2)

Audit Committee

(3)

Executive Compensation Committee

(4)

Corporate Governance Committee

All directors are alternate members of the

Executive Committee

**

Member, Corporate Management

Committee

Brian W. Barrett
Vice President; President
Animal Health Group
M. Kenneth Bowler, Ph.D.
Vice President
Federal Government Relations

63

Corporate and Shareholder Information

Stock Listings
Our Common Stock is listed on the New
York Stock Exchange. It is also listed on the
London, Paris, Brussels, and Swiss stock
exchanges. Our Common Stock is also
traded on various United States regional
stock exchanges.
Shareholder Services and Programs
All inquiries concerning shareholder
accounts and stock transfer matters,
including direct deposit of dividends and
the elimination of duplicate mailings of
Annual Reports, should be directed to
our Transfer Agent and Registrar:
First Chicago Trust Company,
a division of EquiServe
P.O. Box 2500
Jersey City, NJ 07303-2500
Telephone: (800) PFE 9393
Internet: www.fctc.com
Direct Purchase Program
You may purchase your first shares of
Pfizer directly through our Shareholder
Investment Program. Other features of
the Program include dividend reinvestment, weekly purchases of stock, and
automatic monthly investments by electronic bank debit. Contact First Chicago
at the address given on this page for a
Shareholder Investment Program
prospectus and enrollment form.
Form 10-K
Upon written request, we will provide
without charge to each shareholder a copy
of our Annual Report on Securities and
Exchange Commission Form 10-K for
the fiscal year ended December 31, 1999.
Requests should be directed to:
Secretary
Pfizer Inc
235 East 42nd Street
New York, NY 10017-5755
The report will also be available on
the Securities and Exchange
Commissions EDGAR database at
www.sec.gov/edgarhp.htm.

Annual Meeting of Shareholders

Our Annual Meeting will be held on
Thursday, April 27, 2000, at 10:00 a.m.,
in The Empire State Ballroom, The
Grand Hyatt, 42nd Street at Lexington
Avenue, New York City. Detailed information about the meeting is contained
in our Notice of Annual Meeting and
joint proxy statement/prospectus.
Political Action Committee
You can receive a copy of the report of
campaign contributions made by the
Companys Political Action Committee
in 1999 by contacting the office of the
Secretary, Pfizer Inc.

Help Lines
Consumers or health care professionals
who have questions about any of our
medicines should call: (800) 438 1985.
People interested in receiving literature
about us should call: (800) PFE 4717.
The Legend of Pfizer
The Legend of Pfizer, part of a series of
corporate profiles by Jeffrey L. Rodengen,
chronicles Pfizers evolution from a small
fine-chemicals company founded in 1849

1999 Environmental, Health and

Safety Report
Pfizer takes great pride in its environmental, health and safety performance.
A new report has been published detailing
the Companys efforts to protect the
environment and provide a safe and
healthy workplace for employees. You
can receive a copy of the report by
calling (800) PFE 4717.
to its current position as a world
leader in pharmaceuticals. This 160-page
book includes a foreword by Pfizer
Chairman William C. Steere, Jr., and is
illustrated with black-and-white and
color photography. You may purchase a
copy at discount from the publisher,
Write Stuff Syndicate, Inc., by calling
(800) 900 2665, or ordering online at
www.writestuffbooks.com. Mention
Pfizers Annual Report to receive 15%
off the $39.95 cover price.

All trademarks in this publication are or have

been used by Pfizer Inc, with the exception of the
following: Aricept is a trademark of Eisai Co., Ltd.;
Celebrex is a trademark of G.D. Searle & Co.,
a division of Monsanto Company; Lipitor is a
trademark of Warner-Lambert Company.
Design: Conceptual Annual Reports/Hoi L. Chu, NYC.
Photography: principal, Neil Selkirk; additional,
William Vzquez; Bruce Johnson; Stone Chad
Ehlers; PF Sports Images.
10 %
TOTAL RECOVERED FIBER

64

Our Values
Integrity
Innovation
Respect for People
Customer Focus
Teamwork
Leadership
Performance
Community

Financial Highlights

Ensuring Access to Innovative Medicines

Table of Contents
2 Letter to Shareholders
5 Creating the Worlds Fastest-Growing
Pharmaceutical Company
8 Our Market-Leading Medicines
12 Our Global Presence
16 Our Commitment to R&D
18 Review of Operations
27 Our Community Activities
28 Financial Review
37 Managements Report
38 Audit Committees Report and
Independent Auditors Report
39 Consolidated Statement of Income
40 Consolidated Balance Sheet
41 Consolidated Statement of Shareholders Equity
42 Consolidated Statement of Cash Flows
43 Notes to Consolidated Financial Statements
61 Quarterly Consolidated Financial Data (Unaudited)
62 Financial Summary (1989 -1999)
63 Directors, Committees, and Officers
64 Corporate and Shareholder Information
65 Ensuring Access to Innovative Medicines

Year ended December 31

% Change
(millions, except per share data)
Total revenues
Income from continuing operations before provision for
taxes on income and minority interests
Provision for taxes on income
Discontinued operations net of tax
Net income
Research and development expenses
Property, plant and equipment additions
Cash dividends paid
Diluted earnings per common share
Cash dividends paid per common share
Shareholders equity per common share
Weighted average shares diluted
Number of common shares outstanding
(thousands)
Number of shareholders
Number of employees

1999

1998

1997

99/98

98/97

$16,204

$13,544

$11,055

20

23

4,448
1,244
(20)
3,179

2,594
642
1,401
3,351

2,867
775
131
2,213

71
94

(5)

(10)
(17)
972
51

2,776
1,561
1,148

2,279
1,198
976

1,805
878
881

22
30
18

26
36
11

.82

.85

.57

(4)

50

.30 2/3
2.36
3,884
3,847

.25 1/3
2.33
3,945
3,883

.22 2/3
2.10
3,909
3,883

21
1
(2)
(1)

12
11
1

147
51

105
46

87
41

40
11

21
12

Percentages may reflect rounding adjustments.

All data throughout this report have been restated to reflect the 1999 three-for-one stock split in the form of a 200% stock dividend.

About Pfizer
Pfizer Inc is a research-based global pharmaceutical company. We discover,
develop, manufacture, and market innovative medicines for humans and
animals. In 1999, Pfizer celebrated its 150th anniversary.

About the Cover

In Santa Ana, California, Dale and Arlene Post enjoy an outing with
their family, including daughter Jody, grandchildren Spencer and Emily,
and best friend Keeler. Both Dale and Arlene suffer from atrial fibrillation, a common form of irregular heartbeat, and rely on Tikosyn to
treat it. Approved in 1999, Tikosyn is the latest addition to Pfizers
broad cardiovascular portfolio.

Lifesaving drugs are an indispensable part

of modern medicine, President Clinton
said in his most recent State of the Union
address. And hes absolutely right.
Thats the main reason why Americans
are spending more on pharmaceuticals.
It has little to do with higher prices for
medicines. Pfizers price increases have
been less than the overall rate of inflation
since 1994, accounting for discounts to
federal buyers and Medicaid. What is
driving pharmaceutical spending growth
in the United States is a significant
increase in the utilization of medicines.
Medicines such as Lipitor, Zoloft, and
Celebrex mark significant improvements
over previous therapies, and more and
more Americans are relying on these and
dozens of other breakthrough pharmaceuticals to live longer and healthier lives.
The question before the nation now
is how best to provide access to these
medicines for the seniors who need them.
In developing such a policy, its important
to keep in mind that two thirds of seniors
already have prescription drug coverage.
Theres no need to revamp a system
thats already working for most of its
participants. But there is need to fine-tune
it so the remaining senior population
about 13 million people can also have
access to all FDA-approved medicines.
Pfizer supports a variety of approaches,
including:
Expanded Insurance Alternatives
These could be developed by private
insurers with subsidies given to lowincome elderly.
Tax Code Changes Credits or
deductions could subsidize the cost of
prescription drug insurance.
State-based Solutions Federal
grants to the 50 states could provide
funds to create drug-access programs
for low-income residents.
Whatever approach is adopted, its
essential that it preserve the research
pharmaceutical industrys capacity to
discover new medicines. Not only has
the industry significantly extended and
enhanced human life, its now poised to
enter a golden age of discovery that will

yield new drugs to treat virtually every

disease. Heavy-handed government
interference would stifle the discovery of
those new medicines by diminishing the
resources available for research.
And significant resources are required.
On average, it takes $500 million to bring
one new drug to market. Last year alone,
Pfizer invested about $2.8 billion to
discover new medicines. In the absence
of rigorous reinvestment, new drugs will
be delayed or simply go undiscovered.
In Canada, the government-controlled
health care system has depressed R&D
and resulted in significant delays in the
approvals of innovative medicines from
the United States. When governments set
the price of pharmaceuticals, bureaucrats
often use the
approval and reimbursement process
as a cost-savings
device by keeping
new products off
the markets. For
instance, six medicines recently introduced in the United
States, five of which have no therapeutic
alternative, are not available in Canada.
On average, Canadians wait a full year
longer than Americans before new
pharmaceuticals are approved and reimbursed by the government, if they are
approved at all. By delaying and denying
access to innovative medicines, the
Canadian health care system has narrowed
the range of medicines available to patients.
Yet, despite stringent government
control, Canadians still pay about the
same percentage of their income as
Americans to purchase pharmaceuticals.
While its true many things cost less in
Canada such as fast food, a quality
university education, and some pharmaceuticals its also true that Canadians
earn considerably less than Americans.
Nor have price controls improved
overall medical services in Canada. In a
recent survey, most Canadians polled
said their nations health care system was
in crisis. In another survey, 93% said
that improving health care should be the

Canadian governments top priority.

Frustrated with an overburdened public
health system, which now has surgery
waiting lists stretching for months,
many Canadians travel to the United
States to seek private care. While
American health care delivery is not
perfect, it is still the envy of the world.
Nonetheless, we must continue to
improve access. It must be adjusted to
meet the needs of those seniors who are
without prescription drug coverage, but
the issue is not one fundamentally of
prices. For its part, Pfizer has announced
that there will be no price increases for
three of its pharmaceuticals sold in the
U.S. market in 2000 and only a modest
3.1% increase for our other medicines.

What is driving pharmaceutical

spending growth in the United
States is a significant increase in
the utilization of medicines.
Our best estimate is that these price
changes, combined with the impact of
discounts to federal buyers and the
Medicaid program, will result in an
effective average price increase of 2.5%,
which is equal to the December 1999
Blue Chip Consensus forecast of the
change in the Consumer Price Index for
the year 2000.
We are on the threshold of a pharmaceutical revolution in the treatment of
disease. By pursuing in a spirit of
compromise and pragmatism proposals
that expand access while preserving
incentives for research, the United States
can provide prescription drug coverage
for seniors who need it and maintain our
status as the worlds leader in pharmaceutical innovation.
These issues will have tremendous
impact on the owners of Pfizer, not only
as shareholders but also as patients and
taxpayers. If youd like to learn more and
find out how you can become involved,
fill out and return either or both of the
attached response cards.
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