425

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): March 13, 2009

PFIZER INC.

(Exact name of registrant as specified in its charter)

Delaware	1-3619	13-5315170
(State or other	(Commission File	(I.R.S. Employer
jurisdiction of	(Number)	Identification No.)
incorporation)

235 East 42nd Street	10017
New York, New York	(Zip Code)

(Address of principal executive offices)

Registrant's telephone number, including area code:

(212) 573-2323

Not Applicable

(Former Name or Former Address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[x] Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events

As previously announced, Pfizer Inc., a Delaware corporation (the “Company”), Wagner Acquisition Corp., a Delaware corporation and direct wholly-owned subsidiary of the Company (“Merger Sub”), and Wyeth, a Delaware corporation, entered into a definitive Agreement and Plan of Merger dated as of January 25, 2009 (the “Merger Agreement”).Pursuant to the Merger Agreement and subject to the conditions set forth therein, Merger Sub will merge with and into Wyeth, with Wyeth surviving as a wholly-owned subsidiary of the Company (the “Merger”). The Merger is subject to Wyeth shareholder approval, governmental and regulatory approvals, the satisfaction of certain conditions related to the debt financing for the transaction, and other usual and customary closing conditions.

The preliminary unaudited pro forma condensed combined financial information reflecting the Merger and Wyeth’s audited historical consolidated financial statements and related notes are attached hereto as Exhibits 99.1 and 99.2.

Forward Looking Statements

This Current Report on Form 8-K (including information included or incorporated by reference herein) includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, statements about the benefits of the proposed merger between Pfizer and Wyeth, including future financial and operating results, the combined company's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Pfizer's and Wyeth's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Neither Pfizer nor Wyeth undertake any obligation to update publicly or revise any forward-looking statements.  The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from the proposed merger of Pfizer and Wyeth will not be realized, or will not be realized within the expected time period, due to, among other things, the impact of pharmaceutical industry regulation and pending legislation that could affect the pharmaceutical industry; the ability to obtain governmental and self-regulatory organization approvals of the merger on the proposed terms and schedule; the failure of Wyeth stockholders to approve the merger; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions; Pfizer's and Wyeth's ability to accurately predict future market conditions; dependence on the effectiveness of Pfizer's and Wyeth's patents and other protections for innovative products; the risk of new and changing regulation and health policies in the U.S. and internationally and the exposure to litigation and/or regulatory actions. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Pfizer's 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 27, 2009, Wyeth's 2008 Annual Report on Form 10-K filed with the SEC on February 27, 2009, included in the “Risk Factors” section of each of these filings, and each company's other filings with the SEC available at the SEC's Internet site (http://www.sec.gov).

Additional Information

In connection with the proposed Merger, the Company will file with the SEC a Registration Statement on Form S-4 that will include a proxy statement of Wyeth that also constitutes a prospectus of the Company.  Wyeth will mail the proxy statement/prospectus to its stockholders.  The Company and Wyeth urge investors and security holders to read the proxy statement/prospectus regarding the proposed Merger when it becomes available because it will contain important information.  You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC’s website (www.sec.gov).  You may also obtain these documents, free of charge, from the Company’s website, www.pfizer.com, under the tab “Investors” and then under the tab “SEC Filings”.  You may also obtain these documents, free of charge, from Wyeth’s website, www.wyeth.com, under the heading “Investor Relations” and then under the tab “Financial Reports/SEC Filings”.  The Company, Wyeth and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from Wyeth stockholders in favor of the Merger.  Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the Wyeth stockholders in connection with the proposed Merger will be set forth in the proxy statement/prospectus when it is filed with the SEC.  You can find information about the Company’s executive officers and directors in its definitive proxy statement filed with the SEC on March 13, 2009.  You can find information about Wyeth’s executive officers and directors in its definitive proxy statement filed with the SEC on March 14, 2008.  You can obtain free copies of these documents from the Company and Wyeth using the contact information above.

Item 9.01 Financial Statements and Exhibits

(d)	Exhibits
	23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm of Wyeth
	99.1	Wyeth’s Audited Historical Consolidated Financial Statements and Related Notes
	99.2	Pfizer’s preliminary Unaudited Pro Forma Condensed Combined Financial Statements and Related Notes

SIGNATURE

Under the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the authorized undersigned.

PFIZER INC.

By:/s/ Matthew Lepore

      Matthew Lepore

      Vice President, Chief Counsel – Corporate Governance,

      and Assistant General Counsel

Dated: March 13, 2009

EXHIBIT INDEX

Exhibit No.	Description
23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm of Wyeth
99.1	Wyeth’s Audited Historical Consolidated Financial Statements
99.2	Pfizer’s preliminary Unaudited Pro Forma Condensed Combined Financial Statements

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-140989 and No. 333-141729) and Form S-8 (No. 2-87473, No. 33-34139, No. 33-38708, No. 33-44053, No. 33-49631, No. 33-53713, No. 33-55771, No. 33-56979, No. 33-02061, No. 333-36371, No. 333-50899, No. 333-76839, No. 333-90975, No. 333-39606, No. 333-59660, No. 333-59654, No. 333-104581, No. 333-104582, No. 333-110571, No. 333-111333, No. 333-114852, and No. 333-140987) of Pfizer of our report dated February 26, 2009 relating to the financial statements of Wyeth, which appears in this Current Report on Form 8-K.

\s\ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Florham Park, New Jersey

March 13, 2009

EX-99.1

Exhibit 99.1

Wyeth's Audited Historical Consolidated Financial Statements and Related Notes

Consolidated Balance Sheets	2
Consolidated Statements of Operations	3
Consolidated Statements of Changes in Stockholders’ Equity	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6 – 46
Report of Independent Registered Public Accounting Firm	47

1

Consolidated Balance Sheets

(In thousands except share and per share amounts)

December 31,	2008			2007
Assets
Cash and cash equivalents	$	10,015,877		$	10,453,879
Marketable securities		4,529,395			2,993,839
Accounts receivable less allowances (2008 — $187,593 and 2007 — $160,835)		3,646,439			3,528,009
Inventories		2,996,428			3,035,358
Other current assets including deferred taxes		2,293,201			2,972,513
Total Current Assets		23,481,340			22,983,598
Property, plant and equipment:
Land		173,739			182,250
Buildings		8,502,055			7,921,068
Machinery and equipment		6,798,449			6,170,239
Construction in progress		1,403,237			1,947,624
		16,877,480			16,221,181
Less accumulated depreciation		5,679,269			5,149,023
		11,198,211			11,072,158
Goodwill		4,261,737			4,135,002
Other intangibles, net of accumulated amortization (2008 — $372,872 and 2007 — $298,383)		421,686			383,558
Other assets including deferred taxes		4,668,750			4,142,966
Total Assets	$	44,031,724		$	42,717,282
Liabilities
Loans payable	$	913,245		$	311,586
Trade accounts payable		1,254,369			1,268,600
Accrued expenses		4,426,444			5,333,528
Accrued taxes		256,365			410,565
Total Current Liabilities		6,850,423			7,324,279
Long-term debt		10,826,013			11,492,881
Pension liabilities		1,601,289			501,840
Accrued postretirement benefit obligations other than pensions		1,777,315			1,676,126
Other noncurrent liabilities		3,802,842			3,511,621
Total Liabilities		24,857,882			24,506,747
Contingencies and commitments (Note 15)
Stockholders’ Equity
$2.00 convertible preferred stock, par value $2.50 per share; 5,000,000 shares authorized		22			23
Common stock, par value $0.33 1/3 per share; 2,400,000,000 shares authorized (1,331,553,581 and 1,337,786,109 issued and outstanding, net of 91,115,031 and 84,864,647 treasury shares at par, for 2008 and 2007, respectively)		443,851			445,929
Additional paid-in capital		7,483,549			7,125,544
Retained earnings		12,868,799			10,417,606
Accumulated other comprehensive income (loss)		(1,622,379	)		221,433
Total Stockholders’ Equity		19,173,842			18,210,535
Total Liabilities and Stockholders’ Equity	$	44,031,724		$	42,717,282

The accompanying notes are an integral part of these consolidated financial statements.

2

Consolidated Statements of Operations

(In thousands except per share amounts)

Year Ended December 31,	2008		2007			2006
Net Revenue	$	22,833,908	$	22,399,798		$	20,350,655
Cost of goods sold		6,247,767		6,313,687			5,587,851
Selling, general and administrative expenses		6,838,359		6,753,698			6,501,976
Research and development expenses		3,373,213		3,256,785			3,109,060
Interest (income) expense, net		24,942		(90,511	)		(6,646	)
Other (income) expense, net		11,540		(290,543	)		(271,490	)
Income before income taxes		6,338,087		6,456,682			5,429,904
Provision for income taxes		1,920,254		1,840,722			1,233,198
Net Income	$	4,417,833	$	4,615,960		$	4,196,706
Basic Earnings per Share	$	3.31	$	3.44		$	3.12
Diluted Earnings per Share	$	3.27	$	3.38		$	3.08

The accompanying notes are an integral part of these consolidated financial statements.

3

Consolidated Statements of Changes in Stockholders’ Equity

(In thousands except per share amounts)

	$2.00 Convertible Preferred Stock			Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at January 1, 2006	$	37		$	447,783		$	5,097,228		$	6,514,046		$	(64,725	)	$	11,994,369
Net income											4,196,706						4,196,706
Currency translation adjustments														565,745			565,745
Unrealized losses on derivative contracts, net														(6,060	)		(6,060	)
Unrealized gains on marketable securities, net														4,157			4,157
Minimum pension liability adjustments, net														(41,234	)		(41,234	)
Comprehensive income, net of tax																	4,719,314
Adoption of FASB Statement No. 158, net														(1,130,549	)		(1,130,549	)
Cash dividends declared:
Preferred stock (per share: $2.00)											(26	)					(26	)
Common stock (per share: $1.01)											(1,358,743	)					(1,358,743	)
Common stock acquired for treasury					(4,477	)		(42,818	)		(617,284	)					(664,579	)
Common stock issued for stock options					4,372			490,648									495,020
Stock-based compensation expense								393,330									393,330
Issuance of restricted stock awards					688			85,490									86,178
Transfer of restricted stock award accruals to equity								63,171									63,171
Tax benefit from exercises of stock options								55,263									55,263
Other exchanges		(9	)		51			(35	)								7
Balance at December 31, 2006	$	28		$	448,417		$	6,142,277		$	8,734,699		$	(672,666	)	$	14,652,755
Net income											4,615,960						4,615,960
Currency translation adjustments														771,971			771,971
Unrealized losses on derivative contracts, net														(18,340	)		(18,340	)
Unrealized losses on marketable securities, net														(47,602	)		(47,602	)
Pension and postretirement benefit plans														188,070			188,070
Comprehensive income, net of tax																	5,510,059
FASB Statement No. 158 measurement date transition											(3,471	)					(3,471	)
Adoption of FIN 48											(295,370	)					(295,370	)
Cash dividends declared:
Preferred stock (per share: $2.00)											(20	)					(20	)
Common stock (per share: $1.06)											(1,423,474	)					(1,423,474	)
Common stock acquired for treasury					(8,794	)		(97,222	)		(1,210,718	)					(1,316,734	)
Common stock issued for stock options					5,554			683,049									688,603
Stock-based compensation expense								367,529									367,529
Issuance of restricted stock awards					727			1,541									2,268
Tax benefit from exercises of stock options								28,386									28,386
Other exchanges		(5	)		25			(16	)								4
Balance at December 31, 2007	$	23		$	445,929		$	7,125,544		$	10,417,606		$	221,433		$	18,210,535
Net income											4,417,833						4,417,833
Currency translation adjustments														(837,558	)		(837,558	)
Unrealized gains on derivative contracts, net														174,653			174,653
Unrealized losses on marketable securities, net														(64,883	)		(64,883	)
Pension and postretirement benefit plans														(1,116,024	)		(1,116,024	)
Comprehensive income, net of tax																	2,574,021
Cash dividends declared:
Preferred stock (per share: $2.00)											(18	)					(18	)
Common stock (per share: $1.14)											(1,520,275	)					(1,520,275	)
Common stock acquired for treasury					(3,995	)		(48,433	)		(446,347	)					(498,775	)
Common stock issued for stock options					793			96,484									97,277
Stock-based compensation expense								314,342									314,342
Issuance of restricted stock awards					1,118			1,268									2,386
Tax benefit (reduction) from exercises/cancellations of stock options								(5,651	)								(5,651	)
Other exchanges		(1	)		6			(5	)								—
Balance at December 31, 2008	$	22		$	443,851		$	7,483,549		$	12,868,799		$	(1,622,379	)	$	19,173,842

The accompanying notes are an integral part of these consolidated financial statements.

4

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,	2008			2007			2006
Operating Activities
Net income	$	4,417,833		$	4,615,960		$	4,196,706
Adjustments to reconcile net income to net cash provided by operating activities:
Diet drug litigation payments		(997,946	)		(481,581	)		(2,972,700	)
Seventh Amendment security fund disbursement		590,462			—			400,000
Net gains on sales and dispositions of assets		(166,351	)		(59,851	)		(28,545	)
Write-down of investment securities, net		187,948			14,299			37,859
Depreciation		928,565			842,725			761,690
Amortization		79,009			75,954			41,350
Stock-based compensation		314,342			367,529			393,330
Change in other assets (including deferred income taxes)		34,170			789,455			592,165
Pension provision		346,412			338,779			354,531
Pension contributions		(924,111	)		(330,749	)		(271,909	)
Changes in working capital, net:
Accounts receivable		(336,911	)		(1,624	)		(238,764	)
Inventories		(230,121	)		(337,173	)		(7,910	)
Other current assets		692,030			(181,456	)		(39,037	)
Trade accounts payable and accrued expenses		141,335			169,514			70,868
Accrued taxes		(131,424	)		60,379			(7,536	)
Other items, net		327,763			(6,481	)		(27,721	)
Net Cash Provided by Operating Activities		5,273,005			5,875,679			3,254,377
Investing Activities
Purchases of intangibles and property, plant and equipment		(1,408,999	)		(1,390,668	)		(1,289,784	)
Purchase of a business		(300,000	)		—			—
Proceeds from sales of assets		202,428			121,716			69,235
Purchase of additional equity interest in affiliate		—			(221,655	)		(102,187	)
Purchases of marketable securities		(3,526,203	)		(2,534,216	)		(2,239,022	)
Proceeds from sales and maturities of marketable securities		1,769,037			1,422,488			915,339
Net Cash Used for Investing Activities		(3,263,737	)		(2,602,335	)		(2,646,419	)
Financing Activities
Proceeds from issuance of long-term debt		—			2,500,000			—
Repayments and repurchases of debt		(421,258	)		(120,806	)		(12,100	)
Other borrowing transactions, net		(6,790	)		(5,717	)		47,334
Dividends paid		(1,520,293	)		(1,423,494	)		(1,358,769	)
Purchases of common stock for Treasury		(498,775	)		(1,316,734	)		(664,579	)
Exercises of stock options		98,074			716,896			515,853
Net Cash Provided by/(Used for) Financing Activities		(2,349,042	)		350,145			(1,472,261	)
Effect of exchange rate changes on cash and cash equivalents		(98,228	)		52,079			26,723
Increase (Decrease) in Cash and Cash Equivalents		(438,002	)		3,675,568			(837,580	)
Cash and Cash Equivalents, Beginning of Year		10,453,879			6,778,311			7,615,891
Cash and Cash Equivalents, End of Year	$	10,015,877		$	10,453,879		$	6,778,311

The accompanying notes are an integral part of these consolidated financial statements.

5

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying consolidated financial statements include the accounts of Wyeth and subsidiaries (the Company). All per share amounts, unless otherwise noted in the footnotes and quarterly financial data, are presented on a diluted basis; that is, based on the weighted average number of outstanding common shares and the effect of all potentially dilutive common shares (primarily unexercised stock options, stock awards and contingently convertible debt).

Use of Estimates: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require the use of judgments and estimates made by management. Actual results may differ from those estimates.

Description of Business: The Company is a U.S.-based multinational corporation engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in three primary businesses: Wyeth Pharmaceuticals (Pharmaceuticals), Wyeth Consumer Healthcare (Consumer Healthcare) and Fort Dodge Animal Health (Animal Health). Pharmaceuticals includes branded human ethical pharmaceuticals, biotechnology products, vaccines and nutritional products. Pharmaceuticals products include neuroscience therapies, musculoskeletal therapies, vaccines, nutritional products, anti-infectives, women’s health care products, hemophilia treatments, gastroenterology drugs, immunological products and oncology therapies. Consumer Healthcare products include pain management therapies, including analgesics and heat wraps, cough/cold/allergy remedies, nutritional supplements, and hemorrhoidal care and personal care items sold over-the-counter (OTC). Animal Health products include vaccines, pharmaceuticals, parasite control and growth implants. The Company sells its diversified line of products to wholesalers, pharmacies, hospitals, governments, physicians, retailers and other health care institutions located in various markets in 145 countries throughout the world.

On January 26, 2009, the Company announced that it had entered into a merger agreement with Pfizer Inc. (Pfizer) and a wholly owned subsidiary of Pfizer, pursuant to which the Pfizer subsidiary will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Pfizer. Under the terms of the merger agreement, each outstanding share of the Company’s common stock, other than shares of restricted stock (for which holders will be entitled to receive cash consideration pursuant to separate terms of the merger agreement) and shares of common stock held directly or indirectly by the Company or Pfizer (which will be canceled as a result of the proposed merger), and other than those shares with respect to which appraisal rights are properly exercised and not withdrawn, will be converted into the right to receive $33.00 in cash, without interest, and 0.985 shares of common stock of Pfizer. The proposed merger has been approved by the Board of Directors of both companies and remains subject to approval by the Company’s stockholders, as well as certain additional conditions and approvals of various regulatory authorities. There are no assurances that the proposed merger with Pfizer will be consummated on the expected timetable (during the second half of 2009) or at all. See Note 17 for further information on this merger agreement.

Wholesale distributors and large retail establishments account for a large portion of the Company’s Net revenue and trade receivables, especially in the United States. The Company’s top three wholesale distributors accounted for approximately 29%, 32% and 31% of the Company’s Net revenue in 2008, 2007 and 2006, respectively. The Company’s largest wholesale distributor accounted for approximately 11%, 13% and 14% of net revenue in 2008, 2007 and 2006, respectively. The Company continuously monitors the creditworthiness of its customers.

The Company has three products that accounted for more than 10% of its net revenue during one or more of the past three years: Effexor, which comprised approximately 17%, 17% and 18% of the Company’s Net revenue in 2008, 2007 and 2006, respectively; Enbrel, including the alliance revenue recognized from a co-promotion arrangement with Amgen, which comprised approximately 17%, 14% and 12% of the Company’s Net revenue in 2008, 2007 and 2006, respectively; and Prevnar, which comprised approximately 12% and 11% of the Company’s Net revenue in 2008 and 2007, respectively.

Cash Equivalents consist primarily of U.S. Treasury and agency securities, U.S. government money market funds, commercial paper, fixed-term deposits and other short-term, highly liquid securities with maturities of three months or less when purchased and are carried at cost. The carrying value of cash equivalents approximates fair value due to their short-term, highly liquid nature.

Marketable Securities: The Company invests in marketable debt and equity securities, which are classified as available-for-sale. Available-for-sale securities are marked-to-market based on the fair values of the securities determined in accordance with Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS No. 157), with the unrealized gains and losses, net of tax, reported as a component of Accumulated other comprehensive income (loss). Impairment losses are charged to income for other-than-temporary declines in fair value. Realized gains and losses on sales of available-for-sale securities are computed based upon amortized cost adjusted for any other-than-temporary declines in fair value. Premiums and discounts are amortized or accreted into earnings over the life of the available-for-sale security. Dividend and interest income is recognized when earned. As of December 31, 2008, the Company owns no investments that are considered to be held-to-maturity or trading securities.

6

Inventories are valued at the lower of cost or market primarily under the first-in, first-out method.

Inventories at December 31 consisted of:

(In thousands)	2008		2007
Finished goods	$	995,810	$	989,357
Work in progress		1,540,456		1,584,547
Materials and supplies		460,162		461,454
Total	$	2,996,428	$	3,035,358

Property, Plant and Equipment is carried at cost. Depreciation is provided over the estimated useful lives of the related assets, principally on the straight-line method, as follows:

Buildings	10 - 50 years
Machinery and equipment	3 - 20 years

The construction of pharmaceutical manufacturing facilities typically includes costs incurred for the validation of specialized equipment, machinery and computer systems to ensure that the assets are ready for their intended use. These costs are primarily recorded in Construction in progress and subsequently reclassified to the appropriate Property, plant and equipment category when the related assets have reached a state of readiness. Depreciation of such validation costs begins at the same time that depreciation begins for the related facility, equipment and machinery, which is when the assets are deemed ready for their intended purpose.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based on projected undiscounted cash flows associated with the affected assets. A loss is recognized for the difference between the fair value and the carrying amount of the asset. Fair value is determined based on market quotes, if available, or other valuation techniques.

Goodwill and Other Intangibles: Goodwill is defined as the excess of cost over the fair value of net assets acquired. Goodwill and other intangibles are subject to at least an annual assessment for impairment by applying a fair value-based test. Other intangibles with finite lives continue to be amortized. See Note 6 for further detail relating to the Company’s goodwill and other intangibles balances.

Derivative Financial Instruments: The Company currently manages its exposure to certain market risks, including foreign exchange and interest rate risks, through the use of derivative financial instruments and accounts for them in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133), SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities” (SFAS No. 138), and SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (SFAS No. 149).

On the date that the Company enters into a derivative contract, it designates the derivative as a:

(1) Fair Value Hedge. For derivative contracts that are designated and qualify as fair value hedges, the derivative instrument is marked-to-market with gains and losses recognized in current period earnings to offset the respective losses and gains recognized on the underlying exposure. The Company’s interest rate swaps qualify as fair value hedges and have been recorded in Other assets including deferred taxes or Accrued expenses with the corresponding offset recorded to the respective underlying Notes in Loans payable/Long-term debt; or

(2) Foreign Currency Cash Flow Hedge. For derivative contracts that are designated and qualify as foreign currency cash flow hedges, the effective portion of gains and losses on these contracts is reported as a component of Accumulated other comprehensive income (loss) and reclassified into earnings in the same period the hedged transaction affects earnings. Any hedge ineffectiveness on cash flow hedges is immediately recognized in earnings. Ineffectiveness is minimized through the proper relationship of the hedging derivative contract with the hedged item.

The Company also enters into derivative contracts that are not designated as hedging instruments. These derivative contracts are recorded at fair value with the gain or loss recognized in current period earnings. The cash flows from each of the Company’s derivative contracts are reflected as operating activities in the consolidated statements of cash flows. The Company does not hold any derivative instruments for trading purposes. See Note 10 for a further description of the Company’s specific programs to manage risk using derivative financial instruments.

Currency Translation: The majority of the Company’s international operations are translated into U.S. dollars using current foreign currency exchange rates with currency translation adjustments reflected in Accumulated other comprehensive income (loss).

7

Revenue Recognition: Revenue from the sale of Company products is recognized in Net revenue when goods are shipped and title and risk of loss pass to the customer. Provisions for product returns, cash discounts, chargebacks/rebates, customer allowances and consumer sales incentives are provided for as deductions in determining Net revenue. These provisions are based on estimates derived from current promotional program requirements, wholesaler inventory data and historical experience.

Revenue under co-promotion agreements from the sale of products developed by other companies, such as the Company’s arrangement with Amgen to co-promote Enbrel (in the United States and Canada) is recorded as alliance revenue, which is included in Net revenue. Alliance revenue, which is primarily Enbrel, is based upon a percentage of the co-promotion partners’ gross margin. Such alliance revenue is earned when the co-promoting company ships the product and title and risk of loss pass to a third party. There is no cost of goods sold associated with alliance revenue, and the selling and marketing expenses related to alliance revenue are included in Selling, general and administrative expenses. Enbrel alliance revenue totaled $1,204.7 million, $999.8 million and $919.0 million for 2008, 2007 and 2006, respectively.

In 2006, the Company began participating in the U.S. Pediatric Vaccine Stockpile program. As a result, the Company began recognizing revenue from the sale of its Prevnar vaccine to the U.S. government in accordance with Securities and Exchange Commission Interpretation, “Commission Guidance Regarding Accounting for Sales of Vaccines and BioTerror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile.” Net revenue recorded by the Company under the Pediatric Vaccine Stockpile program for 2008, 2007 and 2006 was $32.8 million, $44.9 million and $14.2 million, respectively.

Sales Deductions: The Company deducts certain items from gross sales, which primarily consist of provisions for product returns, cash discounts, chargebacks/rebates, customer allowances and consumer sales incentives. In most cases, these deductions are offered to customers based upon volume purchases, the attainment of market share levels, government mandates, coupons or consumer discounts. These costs are recognized at the later of (a) the date at which the related revenue is recorded or (b) the date at which the incentives are offered. Chargebacks/rebates are the Company’s most significant deduction from gross sales and relate primarily to U.S. sales of pharmaceutical products provided to wholesalers and managed care organizations under contractual agreements or to certain governmental agencies that administer benefit programs, such as Medicaid. While different programs and methods are utilized to determine the chargeback or rebate provided to the customer, the Company considers both to be a form of price reduction. Chargeback/rebate accruals included in Accrued expenses at December 31, 2008 and 2007 were $657.1 million and $738.0 million, respectively.

Advertising Costs are expensed as incurred and are included in Selling, general and administrative expenses. Advertising expenses worldwide, which are composed primarily of television, radio and print media, were $721.4 million, $782.4 million and $729.6 million in 2008, 2007 and 2006, respectively.

Shipping and Handling Costs, which include transportation to customers, transportation to distribution points, warehousing and handling costs, are included in Selling, general and administrative expenses. The Company typically does not charge customers for shipping and handling costs. Shipping and handling costs incurred by the Company were $265.4 million, $260.4 million and $241.6 million in 2008, 2007 and 2006, respectively.

Stock-Based Compensation Costs are recorded in compliance with SFAS No. 123R, “Share-Based Payment” (SFAS No. 123R). This statement requires all share-based payments, including grants of employee stock options, to be recognized in the statement of operations as compensation expense (based on their fair values) over the vesting period of the awards. See Note 13 for further discussion.

Research and Development Expenses are expensed as incurred. Upfront and milestone payments made to third parties in connection with research and development collaborations are expensed as incurred up to the point of regulatory approval. Milestone payments made to third parties upon or subsequent to regulatory approval are capitalized and amortized over the remaining useful life of the respective intangible asset. Amounts capitalized for such payments are included in Other intangibles, net of accumulated amortization.

8

Earnings per Share: The following table sets forth the computations of basic earnings per share and diluted earnings per share:

(In thousands except per share amounts) Year Ended December 31,	2008		2007		2006
Numerator:
Net income less preferred dividends	$	4,417,815	$	4,615,940	$	4,196,680
Denominator:
Weighted average common shares outstanding		1,333,033		1,342,552		1,345,386
Basic earnings per share	$	3.31	$	3.44	$	3.12
Numerator:
Net income	$	4,417,833	$	4,615,960	$	4,196,706
Interest expense, net of tax, on contingently convertible debt		24,678		33,948		30,009
Net income, as adjusted	$	4,442,511	$	4,649,908	$	4,226,715
Denominator:
Weighted average common shares outstanding		1,333,033		1,342,552		1,345,386
Common stock equivalents of outstanding stock options, deferred contingent common stock awards, performance share awards, service-vested restricted stock awards and convertible preferred stock(1)		7,718		14,889		11,777
Common stock equivalents of assumed conversion of contingently convertible debt		16,715		16,901		16,890
Total shares (1)		1,357,466		1,374,342		1,374,053
Diluted earnings per share(1)	$	3.27	$	3.38	$	3.08

(1) At December 31, 2008, 2007 and 2006, 139,825, 95,138 and 77,298 shares of common stock, respectively, related to options outstanding under the Company’s Stock Incentive Plans were excluded from the computation of diluted earnings per share, as the effect would have been antidilutive.

Recently Issued Accounting Standards: In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141R, “Business Combinations” (SFAS No. 141R). SFAS No. 141R changes the accounting and financial reporting for business combinations consummated after January 1, 2009. The Company will comply with SFAS No. 141R requirements beginning with its first quarter 2009 reporting.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent. SFAS No. 160 became effective for Wyeth on January 1, 2009. Adoption of SFAS No. 160 will not have a material effect on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB ratified Emerging Issues Task Force (EITF) 07-1, “Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1 provides guidance for determining if a collaborative arrangement exists and establishes procedures for reporting revenue and costs generated from transactions with third parties, as well as between the parties within the collaborative arrangement, and provides guidance for financial statement disclosures of collaborative arrangements. EITF 07-1 became effective for the Company on January 1, 2009. The adoption of EITF 07-1 will not have a material effect on the Company’s consolidated financial position or results of operations, and the Company will comply with disclosure requirements beginning with its first quarter 2009 reporting.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (SFAS No. 161). SFAS No. 161 expands the disclosure requirements of SFAS No. 133 to include how and why an entity uses derivative instruments, the accounting treatment for derivative instruments and hedging activity under SFAS No. 133 and related guidance, and how derivative instruments and hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 became effective for the Company on January 1, 2009, and the Company will comply with the additional disclosure requirements beginning with its first quarter 2009 reporting.

In April 2008, the FASB issued FASB Staff Position (FSP) 142-3, “Determination of the Useful Life of Intangible Assets” (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS Statement No. 142, “Goodwill and Other Intangible Assets.” FSP 142-3 became effective for the Company on January 1, 2009. The adoption of FSP 142-3 will not have a material effect on the Company’s consolidated financial position or results of operations.

9

In May 2008, the FASB issued FSP Accounting Principles Board Opinion (APB) 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (FSP APB 14-1). FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 became effective for the Company on January 1, 2009. The adoption of FSP APB 14-1 will not have a material effect on the Company’s consolidated financial position or results of operations.

In December 2008, the FASB issued FSP 132R-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets (FSP 132R-1). FSP 132R-1 specifies that disclosures about plan assets in a defined benefit pension or other postretirement plan are to provide users of the financial statements with an understanding of the significant details of the plan, including the major categories of plan assets, an explanation of how investment decisions are made, the inputs and valuation techniques used to measure the fair value of plan assets and any significant concentrations of risk within plan assets. FSP 132R-1 will be effective for the Company on December 31, 2009 and the Company will comply with the additional disclosure requirements beginning with its 2009 year end reporting.

Reclassifications: Certain reclassifications have been made to the December 31, 2007 and 2006 consolidated financial statements and accompanying notes to conform to the December 31, 2008 presentation.

2. Other Transactions

Acquisitions

In September 2008, the Company’s Consumer Healthcare division completed the acquisition of ThermaCare, a leading OTC heat wrap. The transaction was accounted for under the purchase method in accordance with SFAS No. 141, “Business Combinations,” and the purchase price was allocated to tangible assets, patents, intangible assets and goodwill.

Co-development and Co-commercialization Agreements

During 2008, 2007 and 2006, the Company entered into collaboration and licensing agreements with various companies, of which the amounts incurred were neither individually, nor in the aggregate, significant.

Equity Purchase Agreement

In April 2007, the Company completed the acquisition of the remaining 20% of an affiliated entity in Japan, formerly held by Takeda Pharmaceutical Company Limited, bringing the Company’s ownership to 100%. The purchase price for the remaining 20% was $221.7 million. In April 2006, the Company increased its ownership of the affiliated entity from 70% to 80% for a purchase price of $102.2 million. The purchase price of each buyout was based on a multiple of the entity’s net sales in each of the buyout years.

Net Gains on Sales and Dispositions of Assets

For the years ended December 31, 2008, 2007 and 2006, net pre-tax gains on sales and dispositions of assets totaled $166.4 million, $59.9 million and $28.5 million, respectively, and were included in Other (income) expense, net. For the year ended December 31, 2008, the net pre-tax gain on sales and dispositions of assets consisted primarily of a gain of $104.7 million on the sale of a manufacturing facility in Japan and a $71.1 million gain on the sales of various product rights. For the years ended December 31, 2007 and 2006, the net pre-tax gains on sales and dispositions of assets consisted primarily of gains on the sales of various product rights of $79.4 million and $44.1 million, respectively.

The net assets, sales and profits related to these divested assets, individually or in the aggregate, were not material to any business segment or to the Company’s consolidated financial statements.

3. Productivity Initiatives

In 2008, the Company continued its productivity initiatives by launching Project Impact, a company-wide program designed to initially address short-term fiscal challenges, particularly the significant loss of sales and profits resulting from the launch of generic versions of Protonix. Longer term, Project Impact will include strategic actions designed to fundamentally change how the Company conducts business as it adapts to the continuously changing business climate. Prior to 2008, the Company had other global productivity initiatives in place.

10

The Company recorded the following net charges related to its productivity initiatives for the years ended December 31:

(In thousands except per share amounts)	2008			2007		2006
Personnel costs	$	397,023		$	30,395	$	93,543
Accelerated depreciation and plant write-downs		92,745			197,780		87,739
Other closure/exit costs (1)		81,897			45,225		37,298
Total productivity initiatives charges (2)		571,665			273,400		218,580
Gain on asset sale(3)		(104,655	)		—		—
Net productivity initiatives charges		467,010			273,400		218,580
Net productivity initiatives charges, after-tax	$	348,930		$	194,400	$	154,438
Decrease in diluted earnings per share	$	0.26		$	0.14	$	0.11

(1) Includes consulting fees incurred in connection with developing the productivity initiatives of approximately $34.4 million, $10.1 million and $3.3 million for 2008, 2007 and 2006, respectively.

(2) 2008 charges were primarily severance and other employee-related costs resulting from an approximate 7% reduction in workforce during the year. 2007 charges primarily related to manufacturing site network consolidation initiatives. 2006 charges included costs related to the change in the Company’s primary care selling model and efficiency improvements to the Company’s global support functions.

(3) Represents the net gain on the sale of a manufacturing facility in Japan.

The net productivity initiatives charges were recorded as follows:

(In thousands)	2008			2007		2006
Cost of goods sold	$	242,445		$	244,354	$	129,200
Selling, general and administrative expenses		296,091			28,778		78,033
Research and development expenses		33,129			268		11,347
Total productivity initiatives charges		571,665			273,400		218,580
Other income, net		(104,655	)		—		—
Net productivity initiatives charges	$	467,010		$	273,400	$	218,580

Net productivity initiatives charges are recorded in the Corporate segment. The following table sets forth net productivity initiatives charges as they relate to the Company’s reportable segments:

(In thousands) Segment	2008			2007		2006
Pharmaceuticals	$	516,701		$	259,505	$	197,951
Consumer Healthcare		36,708			9,735		11,494
Animal Health		6,703			4,160		9,135
Corporate		11,553			—		—
Total productivity initiatives charges		571,665			273,400		218,580
Gain on asset sale - Pharmaceuticals		(104,655	)		—		—
Net productivity initiatives charges	$	467,010		$	273,400	$	218,580

The following table summarizes the net productivity initiatives charges, payments made and the reserve balance at December 31, 2008:

	Changes in Reserve Balance
(In thousands) Productivity Initiatives	Reserve at December 31, 2007		Total Net Charges 2008			Net Payments/ Non-cash Charges			Reserve at December 31, 2008
Personnel costs	$	154,564	$	397,023		$	(191,884	)	$	359,703
Accelerated depreciation and plant write-downs		—		92,745			(92,745	)		—
Other closure/exit costs		116,030		81,897			(191,740	)		6,187
Gain on asset sales		—		(104,655	)		104,655			—
Total	$	270,594	$	467,010		$	(371,714	)	$	365,890

At December 31, 2008, the reserve balance for personnel costs related primarily to committed employee severance obligations and other employee-related costs associated with the Company’s productivity initiatives. These amounts are expected to be paid over the next 24 months. It is expected that additional costs will be incurred under the Company’s productivity initiatives over the next several years.

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4. Marketable Securities

The carrying cost, gross unrealized gains (losses) and fair value of available-for-sale securities by major security type at December 31, 2008 and 2007 were as follows:

(In thousands) At December 31, 2008	Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Available-for-sale:
Commercial paper	$	223,238	$	595	$	—		$	223,833
Certificates of deposit		167,772		358		(218	)		167,912
U.S. Treasury and agency securities		1,909,176		9,250		(11	)		1,918,415
Corporate debt securities		1,727,869		985		(77,473	)		1,651,381
Asset-backed securities		206,392		—		(22,934	)		183,458
Mortgage-backed securities		400,042		3,368		(36,089	)		367,321
Equity securities		15,043		4,315		(2,283	)		17,075
Total marketable securities	$	4,649,532	$	18,871	$	(139,008	)	$	4,529,395
(In thousands) At December 31, 2007	Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Available-for-sale:
Commercial paper	$	191,648	$	13	$	(17	)	$	191,644
Certificates of deposit		123,470		118		(126	)		123,462
U.S. Treasury and agency securities		270,419		2,523		(28	)		272,914
Corporate debt securities		1,464,012		8,813		(27,611	)		1,445,214
Asset-backed securities		445,150		494		(21,764	)		423,880
Mortgage-backed securities		515,714		1,620		(10,106	)		507,228
Equity securities		24,782		7,798		(3,083	)		29,497
Total marketable securities	$	3,035,195	$	21,379	$	(62,735	)	$	2,993,839

The following table summarizes the Company’s marketable securities that have been in an unrealized loss position for less than 12 months and those that have been in an unrealized loss position for 12 months or more:

	Less than 12 Months					12 Months or More					Total
(In thousands) At December 31, 2008	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale:
Certificates of deposit	$	25,651	$	(166	)	$	9,047	$	(52	)	$	34,698	$	(218	)
U.S. Treasury and agency securities		8,309		(11	)		—		—			8,309		(11	)
Corporate debt securities		607,342		(18,593	)		825,598		(58,880	)		1,432,940		(77,473	)
Asset-backed securities		33,213		(3,390	)		115,685		(19,544	)		148,898		(22,934	)
Mortgage-backed securities		100,263		(29,244	)		66,335		(6,845	)		166,598		(36,089	)
Equity securities		3,376		(2,212	)		28		(71	)		3,404		(2,283	)
Total marketable securities	$	778,154	$	(53,616	)	$	1,016,693	$	(85,392	)	$	1,794,847	$	(139,008	)

The marketable securities that have been in an unrealized loss position for 12 months or more as of December 31, 2008, had an unrealized loss of less than $25.0 million as of December 31, 2007. The Company’s investments that had been in a continuous unrealized loss position for 12 months or longer as of December 31, 2007 were not significant. The Company has determined that the marketable securities that have been in an unrealized loss position for 12 months or more are not other than temporarily impaired because the Company has the ability and intent to hold these marketable securities until a recovery of fair value, which may be maturity, and these marketable securities continue to meet interest and principal payment obligations.

The Company’s net realized losses on its investments for the years ending December 31, 2008 and 2007 were $187.9 million and $14.3 million, respectively. Included in realized net losses on marketable securities for 2008 were write-downs of approximately $68.7 million related to Lehman Brothers and Washington Mutual bonds.

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The contractual maturities of debt securities classified as available-for-sale at December 31, 2008 were as follows:

(In thousands)	Cost		Fair Value
Available-for-sale:
Due within one year	$	3,095,546	$	3,089,288
Due one year through five years		1,032,379		962,569
Due five years through 10 years		49,302		45,537
Due after 10 years		457,262		414,926
Total	$	4,634,489	$	4,512,320

The Company monitors its investments with counterparties with the objective of minimizing concentrations of credit risk. The Company’s investment policy places limits on the amount and time to maturity of investments with any individual institution. The policy also requires that investments are only made with highly rated corporate and financial institutions.

5. Fair Value Measurements

Effective January 1, 2008, the Company adopted SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements. In February 2008, the FASB issued FSP 157-2, “Partial Deferral of the Effective Date of Statement 157,” which deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008.

The Company uses the following methods for determining fair value in accordance with SFAS No. 157. For assets and liabilities that are measured using quoted prices in active markets for the identical asset or liability, the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs (Level 1). Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data (Level 2). For all remaining assets and liabilities for which there are no significant observable inputs, fair value is derived using an assessment of various discount rates, default risk, credit quality and the overall capital market liquidity (Level 3).

The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the consolidated balance sheet:

			Fair Value Measurements at December 31, 2008 Using
(In thousands) Description	Balance at December 31, 2008		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities available-for-sale	$	4,529,395	$	17,075	$	4,485,360	$	26,960
Option and forward contracts		177,105		—		177,105		—
Interest rate swaps		520,817		—		520,817		—
Other		138,104		—		138,104		—
Total assets	$	5,365,421	$	17,075	$	5,321,386	$	26,960
Liabilities:
Option and forward contracts	$	13,645		—	$	13,645		—
Other		8,042		—		8,042		—
Total liabilities	$	21,687		—	$	21,687		—

The following table presents the changes in fair value for assets that have no significant observable inputs (Level 3):

(In thousands)	Level 3 Marketable Securities Available-for-Sale
Balance at January 1, 2008	$	119,747
Total losses (realized/unrealized):
Included in Other (income) expense, net		(7,804	)
Included in other comprehensive income		(2,389	)
Net purchases, sales, issuances and settlements		(32,176	)
Net transfers out		(50,418	)
Balance at December 31, 2008	$	26,960

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6. Goodwill and Other Intangibles

Goodwill is required to be tested at least annually for impairment at the reporting unit level utilizing a two-step methodology. The initial step requires the Company to determine the fair value of each reporting unit and compare it with the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss would be recognized. However, if the carrying value of this unit exceeds its fair value, the goodwill of the unit may be impaired. The amount, if any, of the impairment then would be measured in the second step. Goodwill in each reporting unit is tested for impairment during the fourth quarter of each year. Reporting units are the Company’s operating business segments for which the Company has developed discounted cash flow models for impairment testing purposes. The Company determined there was no impairment of the recorded goodwill for the three years ended December 31, 2008, 2007 and 2006.

The Company’s Other intangibles, net of accumulated amortization was $421.7 million in 2008 and $383.6 million in 2007, the majority of which are licenses having finite lives that are being amortized over their estimated useful lives generally ranging from five to 10 years.

Total amortization expense for intangible assets was $79.0 million, $76.0 million and $41.4 million in 2008, 2007 and 2006, respectively. Annual amortization expense expected for the years 2009 through 2013 is as follows:

(In thousands)	Amortization Expense
2009	$	78,600
2010		77,800
2011		77,500
2012		56,800
2013		49,500

The changes in the carrying value of goodwill by reportable segment for the years ended December 31, 2008 and 2007 were as follows:

(In thousands)	Pharmaceuticals			Consumer Healthcare			Animal Health			Total
Balance at January 1, 2007	$	2,807,705		$	583,844		$	534,189		$	3,925,738
Addition		157,048			—			—			157,048
Currency translation adjustments		50,118			1,229			869			52,216
Balance at December 31, 2007		3,014,871			585,073			535,058			4,135,002
Addition		—			168,000			—			168,000
Currency translation adjustments		(40,192	)		(407	)		(666	)		(41,265	)
Balance at December 31, 2008	$	2,974,679		$	752,666		$	534,392		$	4,261,737

7. Debt and Financing Arrangements

The Company’s debt at December 31 consisted of:

(In thousands)	2008		2007
Notes payable:
4.125% Notes due 2008	$	—	$	300,000
6.700% Notes due 2011		1,500,000		1,500,000
5.250% Notes due 2013		1,500,000		1,500,000
5.500% Notes due 2014		1,750,000		1,750,000
5.500% Notes due 2016		1,000,000		1,000,000
5.450% Notes due 2017		500,000		500,000
7.250% Notes due 2023		250,000		250,000
6.450% Notes due 2024		500,000		500,000
6.500% Notes due 2034		750,000		750,000
6.000% Notes due 2036		500,000		500,000
5.950% Notes due 2037		2,000,000		2,000,000
Floating rate convertible debentures due 2024		898,742		1,020,000
Pollution control and industrial revenue bonds:
5.10%-5.80% due 2008-2018		47,150		57,150
Other debt:
0.25%-5.72% due 2008-2024		22,549		19,758
Fair value of debt attributable to interest rate swaps		520,817		157,559
Total debt		11,739,258		11,804,467
Less current portion		913,245		311,586
Long-term debt	$	10,826,013	$	11,492,881

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The fair value of outstanding debt as of December 31, 2008 and 2007 was $11,872.8 million and $12,032.2 million, respectively. At December 31, 2008, the aggregate maturities of debt during the next five years and thereafter were as follows:

(In thousands)
2009	$	913,245
2010		1,535
2011		1,642,443
2012		1,003
2013		1,625,002
Thereafter		7,556,030
Total debt	$	11,739,258

Revolving Credit Facility

The Company maintains a $3 billion revolving credit facility with a group of banks and financial institutions that matures in August 2012. The credit facility agreement requires the Company to maintain a ratio of consolidated adjusted indebtedness to adjusted capitalization not to exceed 60%. The proceeds from the credit facility may be used for the Company’s general corporate and working capital requirements and for support of the Company’s commercial paper, if any. At December 31, 2008 and 2007, there were no borrowings outstanding under the credit facility, nor did the Company have any commercial paper outstanding.

Notes and Debentures

On March 3, 2008, the Company repaid $300.0 million of 4.125% Notes that matured.

On March 27, 2007, the Company issued $2,500.0 million of Notes in a transaction registered with the Securities and Exchange Commission. These Notes consisted of two tranches, which pay interest semiannually on April 1 and October 1, as follows:

• $2,000.0 million 5.95% Notes due 2037

• $500.0 million 5.45% Notes due 2017

On December 16, 2003, the Company issued $1,020.0 million aggregate principal amount of Debentures due January 15, 2024. Interest on the Debentures accrues at the six-month London Interbank Offering Rate (LIBOR) minus 0.50%. At December 31, 2008 and 2007, the interest rate on the Debentures was 2.62% and 4.89%, respectively. The Debentures contain a number of conversion features that include substantive contingencies. The Debentures were initially convertible by the holders at an initial conversion rate of 16.559 shares of the Company’s common stock for each $1,000 principal amount of the Debentures, which was equal to an initial conversion price of $60.39 per share. The conversion rate is subject to adjustment as a result of certain corporate transactions and events, including the payment of increased common stock dividends. During the 2007 fourth quarter, the conversion rate was adjusted to 16.6429 shares of common stock for each $1,000 principal amount of the Debentures, which was equal to an adjusted conversion price of $60.09 per share, resulting in an increase of 85,578 shares of common stock reserved for the Debentures. During the 2008 fourth quarter, the conversion rate was adjusted further to 16.7356 shares of common stock for each $1,000 principal amount of the Debentures, which is equal to an adjusted conversion price of $59.75 per share, resulting in an increase of an additional 87,187 shares of common stock reserved for the Debentures. The holders may convert their Debentures, in whole or in part, into shares of the Company’s common stock under any of the following circumstances: (1) during any calendar quarter commencing after March 31, 2004 and prior to December 31, 2022 (and only during such calendar quarter) if the price of the Company’s common stock is greater than or equal to 130% of the applicable conversion price for at least 20 trading days during a 30-consecutive trading day period; (2) at any time after December 31, 2022 and prior to maturity if the price of the Company’s common stock is greater than or equal to 130% of the applicable conversion price on any day after December 31, 2022; (3) if the Company has called the Debentures for redemption; (4) upon the occurrence of specified corporate transactions such as a consolidation, merger or binding share exchange pursuant to which the Company’s common stock would be converted into cash, property or securities; or (5) if the credit rating assigned to the Debentures by either Moody’s Investors Service (Moody’s) or Standard & Poor’s (S&P) is lower than Baa3 or BBB-, respectively, or if the Debentures no longer are rated by at least one of these agencies or their successors (the Credit Rating Clause).

Upon conversion, the Company has the right to deliver, in lieu of shares of its common stock, cash or a combination of cash and shares of its common stock. The Company may redeem some or all of the Debentures at any time on or after July 20, 2009 at a purchase price equal to 100% of the principal amount of the Debentures plus any accrued interest. Upon a call for redemption by the Company, the holder of each $1,000 Debenture may tender such Debentures for conversion. The holders have the right to require the Company to purchase their Debentures for cash at a purchase price equal to 100% of the principal amount of the Debentures plus any accrued interest on July 15, 2009, January 15, 2014 and January 15, 2019 or upon a fundamental change as described in the Debentures. As of December 31, 2008, the Debentures have been recorded in Loans payable due to the fact that the holders have the right to require the Company to repurchase their Debentures on July 15, 2009. In accordance with EITF No. 04-8, the Company has included an additional 16,715,313 shares outstanding related to the Debentures in its diluted earnings per share calculation for 2008 (see Note 1).

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During the 2008 fourth quarter, the Company repurchased in the open market and retired $121.3 million of the $1,020.0 million aggregate principal amount of the Debentures, resulting in a decrease of 2,021,958 shares of common stock reserved for the Debentures.

The Credit Rating Clause described above has been determined to be an embedded derivative as defined by SFAS No. 133. In accordance with SFAS No. 133, embedded derivatives are required to be recorded at their fair value. Based upon an external valuation, the Credit Rating Clause did not have a significant fair value at December 31, 2008 and 2007.

Interest Rate Swaps

The Company entered into the following interest rate swaps, whereby the Company effectively converted the fixed rate of interest on certain Notes to a floating rate, which is based on LIBOR. See Note 10 for further discussion of the interest rate swaps.

		Notional Amount (In thousands)
Hedged Notes Payable	Swap Rate	2008		2007
$1,750.0 million 5.500% due 2014	6-month LIBOR in arrears + 0.6110%	$	750,000	$	750,000
	6-month LIBOR in arrears + 0.6085%		650,000		650,000
	6-month LIBOR in arrears + 0.6085%		350,000		350,000
1,500.0 million 6.700% due 2011	3-month LIBOR + 1.0892%		750,000		750,000
	3-month LIBOR + 0.8267%		750,000		750,000
1,500.0 million 5.250% due 2013	6-month daily average LIBOR + 0.8210%		800,000		800,000
	6-month daily average LIBOR + 0.8210%		700,000		700,000
500.0 million 6.450% due 2024	6-month LIBOR in arrears + 1.0370%		250,000		250,000
300.0 million 4.125% due 2008	6-month daily average LIBOR + 0.6430%		—		150,000
	6-month daily average LIBOR + 0.6430%		—		150,000

Interest (Income) Expense, net

The components of Interest (income) expense, net are as follows:

(In thousands) Year Ended December 31,	2008			2007			2006
Interest expense	$	561,790		$	696,583		$	570,247
Interest income		(467,348	)		(707,494	)		(505,493	)
Less: Amount capitalized for capital projects		(69,500	)		(79,600	)		(71,400	)
Interest (income) expense, net	$	24,942		$	(90,511	)	$	(6,646	)

Interest payments in connection with the Company’s debt obligations for the years ended December 31, 2008, 2007 and 2006 amounted to $605.8 million, $642.5 million and $553.9 million, respectively.

8. Other Liabilities

Other noncurrent liabilities includes reserves for the Redux and Pondimin diet drug litigation (see Note 15) and reserves relating to income taxes, environmental matters, product liability and other litigation, employee benefit liabilities and minority interests.

The Company has responsibility for environmental, safety and cleanup obligations under various federal, state and local laws, including the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund. It is the Company’s policy to accrue for environmental cleanup costs if it is probable that a liability has been incurred and the amount can be reasonably estimated. In many cases, future environmental-related expenditures cannot be quantified with a reasonable degree of accuracy. Environmental expenditures that relate to an existing condition caused by past operations that do not contribute to current or future results of operations are expensed. As investigations and cleanups proceed, environmental-related liabilities are reviewed and adjusted as additional information becomes available. The aggregate environmental-related accruals were $253.2 million and $269.1 million at December 31, 2008 and 2007, respectively. See Note 15 for discussion of contingencies.

The Company has an Executive Incentive Plan (EIP) and Performance Incentive Award Program (PIA), which provide financial awards to employees based on the Company’s operating results and the individual employee’s performance. Substantially all U.S. and Puerto Rico exempt employees, who are not subject to other incentive programs, and key international employees are eligible to receive cash awards under PIA, with our most highly compensated executives receiving awards under the EIP. The accrual for EIP and PIA awards for 2008, 2007 and 2006 was $249.7 million, $253.8 million and $236.8 million, respectively, and is included within Accrued expenses.

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9. Pensions and Other Postretirement Benefits

Plan Descriptions

Pensions

The Company sponsors retirement plans for most full-time employees. These defined benefit and defined contribution plans cover all U.S. and certain international locations. Benefits from defined benefit pension plans are based primarily on participants’ compensation and years of credited service. Generally, the Company’s contributions to defined contribution plans are based on a percentage of each employee’s contribution.

The Company maintains 401(k) savings plans that allow participation by substantially all U.S. employees. Most employees are eligible to enroll in the savings plan on their hire date and can contribute between 1% and 50% of their base pay. The Company provides a matching contribution to eligible participants of 50% on the first 6% of base pay contributed to the plan, or a maximum of 3% of base pay. Employees can direct their contributions and the Company’s matching contributions into any of the funds offered. These funds provide participants with a cross section of investing options, including a Company common stock fund. All contributions to the Company’s common stock fund, whether by employee or employer, can be transferred to other fund choices daily.

Total pension expense for both defined benefit and defined contribution plans for 2008, 2007 and 2006 was $346.4 million, $338.8 million and $354.5 million, respectively, of which pension expense for defined contribution plans for 2008, 2007 and 2006 totaled $104.1 million, $102.6 million and $98.8 million, respectively.

Other Postretirement Benefits

The Company provides postretirement health care and life insurance benefits for certain retirees from most U.S. locations and Canada. Most full-time employees become eligible for these benefits after attaining specified age and satisfying service requirements.

Pension Plan Assets

U.S. Pension Plan Assets

Pension plan assets to fund the Company’s qualified defined benefit plans’ obligations are invested in accordance with certain asset allocation criteria and investment guidelines established by the Company’s Investment Committee (a Board-appointed committee that replaced the Company’s Pension and Retirement Committees in April 2008).

The Company’s U.S. qualified defined benefit pension plans’ (the Plans) asset allocation, by broad asset class, was as follows as of December 31, 2008 and 2007, respectively:

	Target Asset Allocation Percentage as of December 31,				Percentage of Plan Assets as of December 31,
Asset Class	2008		2007		2008		2007
U.S. equity		35%		35%		26%		34%
Non-U.S. equity		25%		25%		18%		28%
U.S. and international fixed income and cash		30%		30%		45%		28%
Alternative investments		10%		10%		11%		10%

The Plans’ assets totaled $3,377.6 million and $4,213.3 million at December 31, 2008 and 2007, respectively. At December 31, 2008 and 2007, the Plans’ assets represented approximately 85% and 84% of total worldwide plan assets, respectively. Investment responsibility for these assets is assigned to outside investment managers under the supervision of the Company’s Investment Committee, and participants do not have the ability to direct the investment of these assets. Each of the Plans’ asset classes is broadly diversified by security, market capitalization (e.g., exposure to large cap and small cap), industrial sector and investment style (i.e., exposure to growth and value). Historically, the Company has attempted to maintain asset class exposure in line with prevailing target asset allocation percentages through monthly rebalancing toward those targets. The significant price declines experienced by global equity markets in 2008, combined with cash contributions totaling $500.0 million that were made by the Company in November and December 2008 that were not reallocated to the Plans’ equity asset classes as of December 31, 2008, were the primary causes of the deviations between the Plans’ actual allocation percentages and the target mix as of December 31, 2008. The Investment Committee continues to monitor the Plans’ allocation percentages in relation to the applicable asset mix targets and takes into account the economic and financial market environment in determining an appropriate rebalancing strategy.

Within U.S. equity, the Plans use a combination of enhanced index and active investment strategies. Investment vehicles utilized within these categories include both separately managed accounts and diversified funds. The Plans’ active investment managers are prohibited from investing in the Company’s common stock.

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The Plans’ non-U.S. equity composite is invested primarily in mature or developed markets using active investment strategies and separately managed accounts. The Plans’ exposure to emerging or developing markets is achieved through investment in diversified funds.

U.S. and international fixed income assets are invested largely in securities categorized as investment grade using active investment strategies, and investment vehicles utilized include separately managed accounts and diversified funds. The Plans, however, do maintain modest exposure to below investment grade debt, specifically, high-yield U.S. fixed income and emerging market debt. The Plans’ separate fixed income account managers are prohibited from investing in debt securities issued by the Company. At December 31, 2008, the Plans held $400.7 million in mortgage-backed securities within its fixed income assets, the majority of which were U.S. agency securities. The Plans’ exposure to mortgage-backed securities did not result in a disproportionately negative impact on Plan asset performance in 2008. The alternative investments (e.g., hedge funds, real estate and private equity) are split equally between two outside investment managers. Investment vehicles utilized within these categories include both diversified funds and direct limited partnership investments.

The Plans’ assets are managed with the objectives of minimizing pension expense and cash contributions over the long term. With the assistance of an outside investment consultant, asset-liability studies are performed approximately every five years, and the Plans’ target asset allocation percentages are adjusted accordingly. The investment managers of each separately managed account are prohibited from investing in derivative securities, except for currency hedging activities, which are permitted within the Plans’ non-U.S. asset classes. With respect to the diversified funds in which the Plans invest, the investment guidelines permit derivative securities in the portfolio, but the use of leverage (e.g., margin borrowing) is prohibited. With respect to alternative investments, however, the use of leverage is permitted.

Investment performance is reviewed on a monthly basis in total, as well as by asset class and individual manager, relative to one or more appropriate benchmarks. On a quarterly basis, the investment consultant performs a detailed statistical analysis of both investment performance and portfolio holdings. Formal meetings are held with each investment manager at least once per year to review investment performance and to ascertain whether any changes in process or turnover in professional personnel have occurred at the management firm.

Non-U.S. Pension Plan Assets

At December 31, 2008 and 2007, the Company’s non-U.S. defined benefit pension plan assets totaled $602.8 million and $818.8 million, respectively, which represented approximately 15% and 16% of total worldwide plan assets at December 31, 2008 and 2007, respectively. The Company’s United Kingdom (U.K.) and Canadian plan assets in the aggregate totaled $380.7 million and $543.4 million at December 31, 2008 and 2007, respectively, and represented approximately 63% of the non-U.S. total plan assets at December 31, 2008 compared with approximately 66% of the non-U.S. total plan assets at December 31, 2007. At December 31, 2008, the non-U.S. defined benefit plans’ investments in mortgage-backed securities were not significant.

The following table presents the Company’s U.K. and Canadian pension plan asset allocation, by broad asset class, as of December 31, 2008 and 2007, respectively:

	Percentage of U.K. Plan Assets as of December 31,				Percentage of Canadian Plan Assets as of December 31,
Asset Class	2008		2007		2008		2007
U.K./Canadian equity		21%		43%		26%		32%
Non-U.K./Non-Canadian equity		30%		14%		29%		39%
U.K./Canadian fixed income and cash		49%		43%		45%		29%

U.K. defined benefit pension assets totaled $276.1 million and $392.4 million at December 31, 2008 and 2007, respectively, which represented approximately 7% and 8% of total worldwide plan assets at December 31, 2008 and 2007, respectively. Investment responsibility is assigned to outside investment managers, and participants do not have the ability to direct the investment of these assets. Each of the U.K. plan’s asset classes is broadly diversified and invested primarily in index based funds.

Canadian defined benefit pension assets totaled $104.6 million and $151.0 million at December 31, 2008 and 2007, respectively, which represented approximately 3% of total worldwide plan assets at December 31, 2008 and 2007, respectively. Investment responsibility is assigned to outside investment managers, and participants do not have the ability to direct the investment of these assets. Each of the Canadian plan’s asset classes is broadly diversified and actively managed.

Plan Obligations, Plan Assets, Funded Status and Periodic Cost

The Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (SFAS No. 158), as of December 31, 2006. As a result of adopting SFAS No. 158, a charge of $1,130.5 million was made to Accumulated other comprehensive income (loss) as of December 31, 2006.

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The amounts in Accumulated other comprehensive income (loss) that are expected to be recognized as components of net periodic benefit cost during the 2009 fiscal year are as follows:

(In thousands)	Pension		Postretirement			Total
Prior service cost (credit)	$	3,326	$	(47,288	)	$	(43,962	)
Net unrecognized actuarial loss		212,676		49,792			262,468
Transition obligation		443		—			443

The Company uses a December 31 measurement date for its defined benefit pension plans. The change in the benefit obligation for the Company’s defined benefit pension plans for 2008 and 2007 was as follows:

(In thousands)	Pensions						Other Postretirement Benefits
Change in Benefit Obligation	2008			2007			2008			2007
Benefit obligation at January 1	$	5,502,400		$	5,446,675		$	1,775,126		$	1,697,511
Service cost		201,760			213,930			52,896			57,424
Interest cost		332,278			312,583			109,136			102,808
Amendments and other adjustments		243			83,226			(29,291	)		(71,065	)
Net actuarial loss (gain)		207,583			(241,678	)		101,220			81,157
Special termination benefits		20,446			—			—			—
Benefits paid		(593,445	)		(373,105	)		(118,517	)		(100,799	)
Currency translation adjustment		(99,681	)		60,769			(10,540	)		8,090
Benefit obligation at December 31	$	5,571,584		$	5,502,400		$	1,880,030		$	1,775,126

The increase in the benefit obligation for pensions was due to an actuarial loss primarily resulting from the decrease in the discount rate as described in the “Plan Assumptions” section contained herein. Also contributing to the increase was additional termination benefits paid to individuals affected by the Company’s productivity initiatives. The higher costs were partially offset by increased benefit payments primarily resulting from planned headcount reductions due to the Company’s productivity initiatives. The prior year actuarial gain was primarily due to the increase in the discount rate.

The change in the benefit obligation for other postretirement benefit plans included an actuarial loss due to the decrease in the discount rate, as described in the “Plan Assumptions” section contained herein. The gains attributable to plan amendments and other adjustments reflect increases in prescription drug co-payments and medical out-of-pocket and plan deductibles by retirees.

The change in plan assets for the Company’s defined benefit pension plans for 2008 and 2007 was as follows:

(In thousands)	Pensions						Other Postretirement Benefits
Change in Plan Assets	2008			2007			2008			2007
Fair value of plan assets at January 1	$	5,032,094		$	4,662,030		$	—		$	—
Actual return on plan assets		(1,169,585	)		397,888			—			—
Adjustments		—			71,555			—			—
Company contributions		820,058			228,170			118,517			100,799
Benefits paid		(593,445	)		(373,105	)		(118,517	)		(100,799	)
Currency translation adjustment		(108,778	)		45,556			—			—
Fair value of plan assets at December 31	$	3,980,344		$	5,032,094		$	—		$	—

The Company made contributions to the U.S. qualified defined benefit pension plans of $664.6 million and $171.5 million in 2008 and 2007, respectively. The contributions were made to fund a portion of the current pension expense for the U.S. qualified defined benefit pension plans, as well as to offset a portion of investment losses experienced in 2008. The current portion of the pension liability at December 31, 2008 and 2007 was approximately $25.1 million and $35.1 million, respectively.

There were no plan assets for the Company’s other postretirement benefit plans at December 31, 2008 and 2007, as postretirement benefits are funded by the Company when claims are paid. The current portion of the accrued benefit liability for other postretirement benefits was approximately $102.7 million and $99.8 million at December 31, 2008 and 2007, respectively.

The Company expects to contribute approximately $440.0 million to its qualified defined benefit pension plans and make payments of approximately $103.0 million for its other postretirement benefits in 2009.

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Amounts relating to our defined benefit pension and postretirement benefit plans, which are included in the consolidated balance sheet, are as follows:

(In thousands)	Pensions and Postretirement Benefits
Amounts Recognized in the Consolidated Balance Sheets	2008			2007
Other assets including deferred taxes	$	35,168		$	65,889
Pension liability		(1,626,408	)		(536,964	)
Postretirement benefit obligations		(1,880,030	)		(1,775,126	)
Accumulated other comprehensive income (loss)		(2,197,349	)		(1,081,325	)

Net periodic benefit cost for the Company’s defined benefit pension plans and other postretirement benefit plans for 2008, 2007 and 2006 was as follows:

(In thousands)	Pensions									Other Postretirement Benefits
Components of Net Periodic Benefit Cost	2008			2007			2006			2008			2007			2006
Service cost	$	201,760		$	213,930		$	193,124		$	52,896		$	57,424		$	49,070
Interest cost		332,278			312,583			282,764			109,136			102,808			95,074
Expected return on plan assets		(412,323	)		(404,174	)		(360,046	)		—			—			—
Amortization of prior service cost (credit)		3,842			8,822			10,635			(46,288	)		(41,970	)		(38,997	)
Amortization of transition obligation		465			706			455			—			—			—
Recognized net actuarial loss		70,601			104,411			129,540			46,349			53,034			52,689
Special termination benefits		20,446			—			—			—			—			—
Settlement (gain) loss		25,290			(83	)		(745	)		—			—			—
Net periodic benefit cost	$	242,359		$	236,195		$	255,727		$	162,093		$	171,296		$	157,836

Net periodic benefit cost for pensions increased slightly as a result of special termination benefits and settlement losses associated with the Company’s productivity initiatives, partially offset by lower actuarial losses for the year due to the increase in the discount rate.

Net periodic benefit cost for other postretirement benefits was lower in 2008 compared with 2007 due primarily to the adoption of plan amendments resulting in lower service cost amortizations and lower recognized losses due to favorable plan experience.

Estimated Future Benefit Payments

The Company expects to pay the following in benefit payments related to its defined benefit pension plans and other postretirement benefit plans, which reflect expected future service, as appropriate. Expected payments for other postretirement benefits have been reduced by the Medicare Part D subsidy.

(In thousands)	Pensions		Other Postretirement Benefits		Medicare Part D Subsidy
2009	$	303,700	$	102,700	$	11,300
2010		327,200		107,700		12,300
2011		344,000		112,800		13,200
2012		373,000		116,100		14,100
2013		399,100		119,500		15,000
2014-2018		2,387,300		646,100		75,000

Plan Assumptions

Weighted average assumptions used in developing the benefit obligations at December 31 and net periodic benefit cost for the U.S. pension and postretirement plans were as follows:

	Pensions			Other Postretirement Benefits
Benefit Obligations	2008	2007	2006	2008	2007	2006
Discount rate	6.25%	6.45%	5.90%	6.25%	6.45%	5.90%
Rate of compensation increase	4.00%	4.00%	4.00%	—	—	—
	Pensions			Other Postretirement Benefits
Net Periodic Benefit Cost	2008	2007	2006	2008	2007	2006
Discount rate	6.45%	5.90%	5.65%	6.45%	5.90%	5.65%
Rate of compensation increase	4.00%	4.00%	4.00%	—	—	—
Expected return on plan assets	8.75%	9.00%	9.00%	—	—	—

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The discount rate assumption relating to U.S. pension plan and other postretirement benefit liabilities is determined on an annual basis by the Company, with input from an outside actuary. The process by which the assumed discount rate is developed attempts to match the projected stream of benefit payments to the yields provided by high-quality corporate bonds (i.e., those rated Aa3 or better by Moody’s) at all points across the yield curve at the applicable measurement date. In developing the assumed discount rate, the rates at each point on the yield curve are weighted based on the proportion of benefit payments expected to be paid at that point on the curve relative to the total.

The expected return on assets of the Plans is determined on an annual basis by the Company, with input from an outside investment consultant. The Company maintains a long-term investment horizon (e.g., 10 years or more) in developing the expected rate of return assumption, and the impact of current/short-term market factors is not permitted to exert a disproportionate influence on the process. While long-term historical returns are a factor in this process, consideration also is given to forward-looking factors, including, but not limited to, the following:

• Expected economic growth and inflation;

• The forecasted statistical relationship (i.e., degree of correlation, or co-movement) between the various asset classes in which the Plans invest;

• Forecasted volatility for each of the component asset classes;

• Current yields on debt securities; and

• The likelihood of price-earnings ratio expansion or contraction.

Finally, the expected return on plan assets does not represent the forecasted return for the near term; rather, it represents a best estimate of normalized capital market returns over the next decade or more, based on the target asset allocation in effect.

The assumed health care cost trends for the Company’s other postretirement benefit plans for 2008, 2007 and 2006 are as follows:

	Other Postretirement Benefits
Assumed Health Care Cost Trend	2008	2007	2006
Health care cost trend rate assumed for next year	9.00%	9.00%	9.00%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.00%	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2015	2014	2011

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

(In thousands)	1 Percentage- Point Increase		1 Percentage- Point Decrease
Effect on annual service and interest cost	$	27,603	$	(22,048	)
Effect on postretirement benefit obligation		254,655		(209,367	)

10. Derivative Instruments and Foreign Currency Risk Management Programs

Derivative financial instruments are measured at fair value and are recognized as assets or liabilities on the balance sheet with changes in the fair value of the derivatives recognized in either Net income or Accumulated other comprehensive income (loss), depending on the timing and designated purpose of the derivative. The fair value of forward contracts, currency option contracts and interest rate swaps reflects the present value of the contracts, taking into consideration counterparty credit risk, at December 31, 2008.

The Company currently engages in two primary programs to manage its exposure to intercompany and third-party foreign currency risk. The two programs and the corresponding derivative contracts are as follows:

1. Short-term foreign currency forward contracts and swap contracts are used as economic hedges to neutralize month-end balance sheet exposures. These contracts essentially take the opposite currency position of that projected in the month-end balance sheet to counterbalance the effect of any currency movement. These derivative instruments are not designated as hedges and are recorded at fair value with any gains or losses recognized in current period earnings. The Company recorded a net gain of $154.7 million in 2008 and a net loss of $32.4 million and $85.8 million in 2007 and 2006, respectively, in Other (income) expense, net related to gains and losses on these foreign currency forward contracts and swap contracts. These amounts consist of gains and losses from contracts settled during 2008, 2007 and 2006, as well as contracts outstanding at December 31, 2008, 2007 and 2006 that are recorded at fair value. The related cash flow impact of these derivatives is reflected as cash flows from operating activities.

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2. The Company uses foreign currency options and forward contracts in its cash flow hedging program to partially cover foreign currency risk related to international intercompany inventory sales. These instruments are designated as cash flow hedges, and, accordingly, any unrealized gains or losses are included in Accumulated other comprehensive income (loss) with the corresponding asset or liability recorded on the balance sheet. The Company recorded an after-tax net gain of $146.0 million in 2008 and after-tax net losses of $28.7 million and $10.3 million for 2007 and 2006, respectively, in Accumulated other comprehensive income (loss) with the corresponding asset/liability recorded in Other current assets including deferred taxes/Accrued expenses related to these cash flow hedges. The unrealized net gains in Accumulated other comprehensive income (loss) will be reclassified into the consolidated statement of operations when the inventory is sold to a third party. The Company anticipates recognizing the 2008 net gains during the next 12 months. In 2008, 2007 and 2006, the Company recognized net losses of $75.2 million, $13.9 million and $16.4 million, respectively, related to cash flow hedges on inventory that was sold to third parties. These losses are included in Other (income) expense, net. Option and forward contracts outstanding as of December 31, 2008 expire no later than September 2009.

The Company also has entered into the following effective fair value interest rate swaps to manage interest rate exposures:

				Fair Value
(In thousands)	Maturity Date	Notional Amount		Assets (Liabilities)
Hedged Notes Payable				2008		2007
$1,750,000, 5.500%	2014	$	750,000	$	82,301	$	21,149
	2014		650,000		73,524		16,485
	2014		350,000		39,945		9,021
1,500,000, 6.700%	2011		750,000		68,563		42,814
	2011		750,000		67,540		42,377
1,500,000, 5.250%	2013		800,000		65,113		7,774
	2013		700,000		59,155		6,276
500,000, 6.450%	2024		250,000		64,676		12,845
300,000, 4.125%	2008		150,000		—		(245	)
	2008		150,000		—		(937	)
Total				$	520,817	$	157,559

These interest rate swaps effectively convert the fixed rate of interest on these Notes to a floating rate. Interest expense on these Notes is adjusted to include the payments made or received under the interest rate swap agreements. The fair value of these swaps has been recorded in Other assets including deferred taxes or Accrued expenses with the corresponding offset recorded to the respective underlying Notes in Loans payable/Long-term debt. There was no hedge ineffectiveness recorded by the Company in the consolidated statement of operations in 2008, 2007 or 2006.

11. Income Taxes

The components of the Company’s Income before income taxes based on the location of operations were:

(In thousands) Year Ended December 31,	2008		2007		2006
U.S.	$	3,092,674	$	3,677,087	$	2,486,467
Non-U.S.		3,245,413		2,779,595		2,943,437
Income before income taxes	$	6,338,087	$	6,456,682	$	5,429,904

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The Provision for income taxes consisted of:

(In thousands) Year Ended December 31,	2008		2007		2006
Current:
Federal	$	707,307	$	645,579	$	229,348
State		89,560		5,774		(8,293	)
Foreign		699,068		724,565		390,857
Current provision for income taxes		1,495,935		1,375,918		611,912
Deferred:
Federal		327,326		293,656		671,386
State		32,837		131,951		(33,454	)
Foreign		64,156		39,197		(16,646	)
Deferred provision for income taxes		424,319		464,804		621,286
Total provision for income taxes	$	1,920,254	$	1,840,722	$	1,233,198

Net deferred tax assets were reflected on the consolidated balance sheets at December 31 as follows:

(In thousands)	2008			2007
Net current deferred tax assets	$	1,308,523		$	1,527,537
Net noncurrent deferred tax assets		2,070,566			1,645,647
Net current deferred tax liabilities		(12,891	)		(13,508	)
Net noncurrent deferred tax liabilities		(213,088	)		(158,835	)
Net deferred tax assets	$	3,153,110		$	3,000,841

Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred tax assets result principally from the recording of certain accruals and reserves that currently are not deductible for tax purposes, from an elective deferral for tax purposes of research and development costs, from loss carryforwards and from tax credit carryforwards. Deferred tax liabilities result principally from the use of accelerated depreciation for tax purposes.

The components of the Company’s deferred tax assets and liabilities at December 31 were as follows:

(In thousands)	2008			2007
Deferred tax assets:
Diet drug product litigation accruals	$	381,914		$	790,408
Product litigation and environmental liabilities and other accruals		729,981			592,309
Postretirement, pension and other employee benefits		1,750,711			1,252,411
Net operating loss (NOL) and other carryforwards		44,788			45,910
State tax NOL and other carryforwards, net of federal tax		135,625			111,025
State tax on temporary differences, net of federal tax		175,829			180,748
Restructuring		91,053			81,045
Inventory reserves		600,190			449,340
Investments and advances		137,157			71,550
Property, plant and equipment		51,480			54,462
Research and development costs		245,174			324,650
Intangibles		83,508			122,113
Other		26,816			27,611
Total deferred tax assets		4,454,226			4,103,582
Deferred tax liabilities:
Tax on earnings which may be remitted to the United States		(205,530	)		(205,530	)
Depreciation		(709,870	)		(568,480	)
Pension and other employee benefits		(9,260	)		(25,874	)
Intangibles		(132,438	)		(136,815	)
Investments		(22,675	)		(23,767	)
Other		(102,253	)		(41,343	)
Total deferred tax liabilities		(1,182,026	)		(1,001,809	)
Deferred tax asset valuation allowances		(12,309	)		(7,689	)
State deferred tax asset valuation allowances, net of federal tax		(106,781	)		(93,243	)
Total valuation allowances		(119,090	)		(100,932	)
Net deferred tax assets	$	3,153,110		$	3,000,841

23

Deferred taxes for net operating losses and other carryforwards principally relate to federal and foreign net operating losses and tax credits that have various carryforward periods. Although not material, valuation allowances have been established for certain foreign deferred tax assets as the Company has determined that it was more likely than not that these benefits will not be realized. The Company has not established valuation allowances related to its net federal or foreign deferred tax assets of $2,960.7 million as the Company believes that it is more likely than not that the benefits of these assets will be realized.

As of December 31, 2008, the Company had deferred state tax assets for net operating loss carryforwards and tax credit carryforwards, net of federal tax, of $135.6 million and net deferred state tax assets for cumulative temporary differences, net of federal tax, of $175.8 million. Valuation allowances of $106.8 million have been established for state deferred tax assets, net of federal tax, related to net operating losses, credits and accruals as the Company determined it was more likely than not that these benefits will not be realized. The change in the valuation allowance in 2008 was due to adjustments relating to pension and other postretirement benefits included in Accumulated other comprehensive income (loss). In the third quarter of 2006 the Company released a previously established valuation allowance against state deferred tax assets of $70.4 million, net of tax ($0.05 per share-diluted) recorded within the Provision for income taxes.

As of December 31, 2008, income taxes were not provided on unremitted earnings of $13,322.3 million expected to be permanently reinvested internationally. If income taxes were provided on those earnings, such taxes would approximate $2,711.0 million.

The difference between income taxes based on the U.S. statutory rate and the Company’s provision was due to the following:

(In thousands) Year Ended December 31,	2008			2007			2006
Provision at U.S. statutory tax rate	$	2,218,330		$	2,259,839		$	1,900,467
Increase (decrease) in taxes resulting from:
Puerto Rico, Ireland and Singapore manufacturing operations		(344,793	)		(391,458	)		(546,544	)
Research tax credits		(69,925	)		(67,500	)		(64,115	)
Refunds of prior year taxes		(24,188	)		(4,836	)		(24,258	)
State taxes, net of federal taxes:
Provision		79,559			101,487			79,496
Valuation allowance adjustment		—			(10,513	)		(106,631	)
Restructuring/special charges		49,185			16,690			12,361
All other, net		12,086			(62,987	)		(17,578	)
Provision at effective tax rate	$	1,920,254		$	1,840,722		$	1,233,198

The tax benefit attributable to the effect of Puerto Rico manufacturing operations is principally due to a government grant in Puerto Rico that reduces the tax rate on most of the Company’s income from manufacturing operations in Puerto Rico from 39% to a range of 0% to 2% through 2023.

Total income tax payments, net of tax refunds, in 2008, 2007 and 2006 amounted to $1,440.2 million, $1,138.7 million and $621.2 million, respectively.

The Company files tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In 2007, the Company completed and effectively settled an audit for the 1998-2001 tax years with the Internal Revenue Service (IRS). Taxing authorities in various jurisdictions are in the process of reviewing the Company’s tax returns. Except for the California Franchise Tax Board, where the Company has filed protests for the 1996-2003 tax years, taxing authorities are generally reviewing tax returns for post-2001 tax years, including the IRS, which has begun its audit of the Company’s tax returns for the 2002-2005 tax years. Certain of these taxing authorities are examining tax positions associated with the Company’s cross-border arrangements. While the Company believes that these tax positions are appropriate and that its reserves are adequate with respect to such positions, it is possible that one or more taxing authorities will propose adjustments in excess of such reserves and that conclusion of these audits will result in adjustments in excess of such reserves. An unfavorable resolution for open tax years could have a material effect on the Company’s results of operations or cash flows in the period in which an adjustment is recorded and in future periods. The Company believes that an unfavorable resolution for open tax years would not be material to the financial position of the Company; however, each year the Company records significant tax benefits with respect to its cross-border arrangements, and the possibility of a resolution that is material to the financial position of the Company cannot be excluded.

24

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (FIN No. 48), on January 1, 2007. As a result of the adoption, the Company recognized a $295.4 million increase in the liability for unrecognized tax benefits, interest and penalties across all jurisdictions, which were accounted for as a charge to Retained earnings on January 1, 2007. The Company’s gross unrecognized tax benefits at December 31, 2008 and December 31, 2007 were $1,185.5 million and $956.7 million, respectively. If these gross unrecognized tax benefits were recognized, there would be a net favorable impact on the Provision for income taxes of $975.9 million and $807.6 million at December 31, 2008 and 2007, respectively. A reconciliation of the change in gross unrecognized tax benefits during 2008 and 2007 is as follows:

(In thousands) Gross Unrecognized Tax Benefits	2008			2007
Balance at January 1	$	956,642		$	1,174,410
Additions relating to the current year		191,829			148,214
Additions relating to prior years		152,369			91,782
Reductions relating to prior years		(30,035	)		(40,035	)
Settlements during the year		(85,266	)		(266,603	)
Reductions due to lapse of statute of limitations		—			(151,126	)
Balance at December 31	$	1,185,539		$	956,642

The Company does not expect any significant changes to the above gross unrecognized tax benefits during the next 12 months.

The Company recognizes interest and penalties relating to gross unrecognized tax benefits as a component of Provision for income taxes. The Company had $319.4 million and $288.0 million of accrued interest and penalties as of December 31, 2008 and 2007, respectively.

12. Capital Stock

There were 2,400,000,000 shares of common stock and 5,000,000 shares of preferred stock authorized at December 31, 2008 and 2007, respectively. Of the authorized shares of preferred stock, there is a series of shares (8,971 shares and 9,467 shares outstanding at December 31, 2008 and 2007, respectively), which is designated as $2.00 convertible preferred stock. Each share of the $2.00 series is convertible at the option of the holder into 36 shares of common stock. This series may be called for redemption at $60.00 per share plus accrued dividends.

Changes in outstanding common stock during 2008, 2007 and 2006 were as follows:

(In thousands except shares of preferred stock)	2008			2007			2006
Balance at January 1		1,337,786			1,345,250			1,343,349
Issued for stock options		2,381			16,663			13,152
Purchases of common stock for treasury		(10,692	)		(25,800	)		(13,016	)
Issued for stock awards and conversions of preferred stock
(496, 1,617 and 3,631 shares in 2008, 2007 and 2006, respectively)		2,079			1,673			1,765
Balance at December 31		1,331,554			1,337,786			1,345,250

On January 27, 2006, the Company’s Board of Directors approved a share repurchase program allowing for the repurchase of up to 15,000,000 shares of the Company’s common stock. The Company repurchased 13,016,400 shares of common stock during 2006. On January 25, 2007, the Company’s Board of Directors amended the previously authorized share repurchase program to allow for future repurchases of up to 30,000,000 shares of common stock, inclusive of 1,983,600 shares of common stock that remained under the prior authorization. On September 27, 2007, the Company’s Board of Directors further amended the program to allow for repurchases of up to $5,000.0 million of the Company’s common stock inclusive of $1,188.2 million of repurchases executed between January 25, 2007 and September 27, 2007 under the prior authorization. As of December 31, 2008, the remaining authorization for future repurchases under the amended program was $3,268.1 million. The share repurchase program has no time limit and may be suspended for periods or discontinued at any time.

Treasury stock is accounted for using the par value method. Shares of common stock held in treasury at December 31, 2008, 2007 and 2006 were 91,115,031, 84,864,647 and 77,342,696, respectively. The Company did not retire any shares held in treasury during 2008, 2007 and 2006.

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13. Stock-Based Compensation

The Company adopted the provisions of SFAS No. 123R effective January 1, 2006. SFAS No. 123R requires all share-based payments, including grants of employee stock options, to be recognized in the statement of operations as compensation expense (based on their fair values) over the vesting period of the awards. The Company selected the modified prospective method as prescribed under SFAS No. 123R, which requires companies (1) to record compensation expense for the unvested portion of previously issued awards that remain outstanding at the initial date of adoption and (2) to record compensation expense for any awards issued, modified or settled after the effective date of the statement.

The following table summarizes the components and classification of stock-based compensation expense:

(In thousands except per share amounts) Year Ended December 31,	2008		2007		2006
Stock options	$	86,551	$	126,140	$	170,778
Restricted stock unit awards		69,307		41,916		43,818
Performance-based restricted stock unit awards		50,013		76,657		62,309
Stock-based compensation expense, after-tax	$	205,871	$	244,713	$	276,905
Pharmaceuticals	$	218,144	$	266,703	$	274,691
Consumer Healthcare		19,117		24,186		27,030
Animal Health		8,570		10,884		11,023
Corporate		68,511		65,756		80,586
Total stock-based compensation expense	$	314,342	$	367,529	$	393,330
Cost of goods sold	$	29,280	$	37,143	$	30,794
Selling, general and administrative		189,671		223,219		249,712
Research and development		95,391		107,167		112,824
Total stock-based compensation expense		314,342		367,529		393,330
Tax benefit		108,471		122,816		116,425
Stock-based compensation expense, after-tax	$	205,871	$	244,713	$	276,905
Decrease in diluted earnings per share	$	0.15	$	0.18	$	0.20

The fair value of issued stock options is estimated on the date of grant utilizing a Black-Scholes option-pricing model that incorporates the assumptions noted in the table below. Expected volatilities are based on implied volatilities from traded options on the Company’s stock and historical volatility of the Company’s stock price. The weighted average fair value of the options granted in 2008, 2007 and 2006 was determined using the following assumptions:

Year Ended December 31,	2008	2007	2006
Expected volatility of stock price	28.6%	20.1%	24.3%
Expected dividend yield	3.2%	2.1%	2.1%
Risk-free interest rate	3.3%	4.6%	5.0%
Expected life of options	6 years	6 years	6 years
Weighted average fair value of stock options granted	$10.21	$12.64	$12.92

Based on available guidance, the Company believes blended volatility rates that combine market-based measures of implied volatility with historical volatility rates are a more appropriate indicator of the Company’s expected volatility. The expected life of stock options is estimated based on historical data on exercises of stock options and other factors to estimate the expected term of the stock options granted. The expected dividend yields are based on the forecasted annualized dividend rate. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term similar to the expected life of the options. In addition, the Company applies an expected forfeiture rate when amortizing stock-based compensation expenses. The estimate of the forfeiture rate is based primarily upon historical experience of employee turnover. As actual forfeitures become known, stock-based compensation expense is adjusted accordingly.

The Company has several Stock Incentive Plans that provide for the granting of stock options, service-vested restricted stock unit awards and performance-based restricted stock unit awards. Under the Stock Incentive Plans, awards may be granted with respect to a maximum of 225,000,000 shares (of which 37,000,000 shares may be used for service-vested restricted stock unit and performance-based restricted stock unit awards). At December 31, 2008, there were 54,639,614 shares available for future grants under the Stock Incentive Plans, of which up to 16,258,442 shares were available for service-vested restricted stock unit and performance-based restricted stock unit awards.

26

During 2005, the Company implemented the Long Term Incentive Program (LTIP), which replaced the stock option program in effect at that time. Under the LTIP, eligible employees receive a combination of stock options, service-vested restricted stock units and/or performance-based restricted stock units. Stock options are granted with an exercise price equal to the market value of the Company’s common stock on the date the option is granted. Stock options vest ratably over a three-year period and have a contractual term of 10 years. The service-vested restricted stock units generally are converted to shares of common stock subject to the awardee’s continued employment on the third anniversary of the date of grant. The performance share unit awards granted in 2006 are composed of units that may be converted to shares of common stock (one share per unit) (up to 200% of the award) based on the achievement of certain performance criteria related to a future performance year (i.e., 2008 for a 2006 award) and on achievement of a second multi-year performance criterion; namely, Wyeth’s Total Shareholder Return ranking compared with that of an established peer group of companies for the period January 1, 2006 through December 31, 2008. Similarly, performance-based restricted stock unit awards granted in 2007 also are composed of units that may be converted to shares of common stock (one share per unit) (up to 200% of the award) based on certain performance criteria related to a future performance year (i.e., 2009 for a 2007 award) and for most awardees on the achievement of a second multi-year performance criterion; namely, Wyeth’s Total Shareholder Return ranking compared with that of an established peer group of companies for the period January 1, 2007 through December 31, 2009. However, for certain of the Company’s executive officer awardees, the Compensation and Benefits Committee retains discretion to apply criteria in addition to, or in lieu of, the Total Shareholder Return ranking to reduce the amount of the award earned on account of the performance criteria for the future performance year.

The fair value of performance-based restricted stock unit awards is estimated on the grant date utilizing the Monte Carlo pricing model. This pricing model, which incorporates assumptions about stock price volatility, dividend yield and risk-free rate of return, establishes fair value through the use of multiple simulations to evaluate the probability of the Company achieving various stock price levels and to determine the Company’s ranking within its Total Shareholder Return performance criteria. However, for certain executive officers for which the Compensation and Benefits Committee retains discretion to apply criteria in addition to, or in lieu of, Wyeth’s Total Shareholder Return ranking, the fair value of performance-based restricted stock unit awards is estimated on the grant date utilizing the grant date stock price, discounted for the dividend yield. Similarly, the fair value of service-vested restricted stock unit awards is estimated on the grant date utilizing the grant date stock price, discounted for the dividend yield over the restricted period.

Some of the Stock Incentive Plans permit the granting of stock appreciation rights (SARs), which entitle the holder to receive shares of the Company’s common stock or cash equal to the excess of the market price of the common stock over the exercise price when exercised. At December 31, 2008, 2007 and 2006, there were no outstanding SARs.

Stock option information related to the plans was as follows:

Stock Options	2008			Weighted Average Exercise Price		2007			Weighted Average Exercise Price		2006			Weighted Average Exercise Price
Outstanding at January 1		143,134,236		$	51.46		150,988,314		$	50.04		154,950,739		$	49.13
Granted		12,334,654			44.42		11,853,706			55.62		12,527,320			48.21
Canceled/forfeited		(13,219,429	)		51.26		(3,044,952	)		52.76		(3,338,102	)		50.04
Exercised (2008 — $34.19 to $48.22 per share)		(2,385,211	)		40.79		(16,662,832	)		41.33		(13,151,643	)		37.64
Outstanding at December 31		139,864,250			51.04		143,134,236			51.46		150,988,314			50.04
Exercisable at December 31		119,039,312		$	51.51		118,217,254		$	51.66		119,360,854		$	51.47

The total intrinsic value of options exercised during 2008 was $12.3 million. As of December 31, 2008, the total remaining unrecognized compensation cost related to stock options was $115.4 million, which will be amortized over the respective remaining requisite service periods ranging from one month to three years. The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2008 was $12.2 million and $11.8 million, respectively.

The following table summarizes information regarding stock options outstanding at December 31, 2008:

	Options Outstanding					Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$32.03 to 39.99		5,076,381	4.2 years	$	35.26		4,954,801	$	35.28
40.00 to 49.99		61,716,061	6.5 years		43.41		47,209,933		42.83
50.00 to 59.99		41,540,155	3.6 years		56.36		35,342,925		56.45
60.00 to 65.32		31,531,653	2.0 years		61.53		31,531,653		61.53
		139,864,250					119,039,312

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A summary of service-vested restricted stock unit and performance-based restricted stock unit awards activity as of December 31, 2008 and changes during the 12 months ended December 31, 2008 is presented below:

Service-Vested and Performance-Based Restricted Stock Units	Number of Nonvested Units			Weighted Average Grant Date Fair Value
Outstanding units at January 1, 2008		10,517,910		$	48.38
Granted/Earned		4,497,977			42.92
Distributed		(3,283,334	)		44.08
Forfeited		(718,110	)		48.64
Outstanding units at December 31, 2008		11,014,443		$	47.41

As of December 31, 2008, the total remaining unrecognized compensation cost related to service-vested restricted stock unit and performance-based restricted stock unit awards amounted to $130.8 million and $66.8 million, respectively, which will be amortized over the respective remaining requisite service periods ranging from one month to four years.

At the April 24, 2008 Annual Meeting of Stockholders, the stockholders approved the 2008 Non-Employee Director Stock Incentive Plan under which directors receive only deferred stock units. This plan replaced the 2006 Non-Employee Director Stock Incentive Plan. Awards representing a maximum of 300,000 shares may be granted under the 2008 Non-Employee Director Stock Incentive Plan to new and continuing directors beginning in 2008. For the year ended December 31, 2008, 32,593 deferred stock units were issued from this plan.

At the April 27, 2006 Annual Meeting of Stockholders, the stockholders approved the 2006 Non-Employee Director Stock Incentive Plan, under which directors receive both stock options and deferred stock units. This plan replaced the Stock Option Plan for Non-Employee Directors and the 1994 Restricted Stock Plan for Non-Employee Directors and provided stock option and deferred stock units to continuing and new non-employee directors beginning in 2006. At December 31, 2008, a total of 73,500 options and 25,200 deferred stock units was granted, and no further grants will be issued from this plan.

Under the Stock Option Plan for Non-Employee Directors, a maximum of 250,000 shares was authorized for grant to non-employee directors at 100% of the fair market value of the Company’s common stock on the date of the grant. Options no longer will be issued from this plan, under which a total of 226,000 stock options was granted and remained outstanding as of December 31, 2008.

Under the 1994 Restricted Stock Plan for Non-Employee Directors, a maximum of 100,000 restricted shares may be granted to non-employee directors. The restricted shares granted to each non-employee director are not delivered until prior to the end of a five-year restricted period. At December 31, 2008, 46,400 shares were available for future grants. Non-employee directors who joined the Board of Directors prior to April 27, 2006 will continue to receive their annual grants under this plan up to the maximum allowable shares (for each non-employee director, 4,000 restricted shares in the aggregate in annual grants of 800 shares); however, non-employee directors who joined the Board of Directors on or after April 27, 2006 will not receive grants of restricted shares under this plan.

14. Accumulated Other Comprehensive Income (Loss)

The components of Accumulated other comprehensive income (loss) are set forth in the following table:

(In thousands)	Foreign Currency Translation Adjustments(1)			Net Unrealized Gains (Losses) on Derivative Contracts (2)			Net Unrealized Gains (Losses) On Marketable Securities (2)			Minimum Pension Liability Adjustments			Pension and Postretirement Benefit Plans (2)			Accumulated Other Comprehensive Income (Loss)
Balance January 1, 2006	$	25,604		$	(4,282	)	$	11,565		$	(97,612	)	$	—		$	(64,725	)
Period change		565,745			(6,060	)		4,157			(41,234	)		—			522,608
Adoption of SFAS No. 158		—			—			—			138,846			(1,269,395	)		(1,130,549	)
Balance December 31, 2006		591,349			(10,342	)		15,722			—			(1,269,395	)		(672,666	)
Period change		771,971			(18,340	)		(47,602	)		—			188,070			894,099
Balance December 31, 2007		1,363,320			(28,682	)		(31,880	)		—			(1,081,325	)		221,433
Period change		(837,558	)		174,653			(64,883	)		—			(1,116,024	)		(1,843,812	)
Balance December 31, 2008	$	525,762		$	145,971		$	(96,763	)	$	—		$	(2,197,349	)	$	(1,622,379	)

(1)

Income taxes generally are not provided for foreign currency translation adjustments, as such adjustments relate to permanent investments in international subsidiaries.

(2)

Deferred income tax assets (liabilities) provided for net unrealized (losses) gains on derivative contracts at December 31, 2008, 2007 and 2006 were $(78,600), $15,444 and $5,569, respectively; for net unrealized gains (losses) on marketable securities at December 31, 2008, 2007 and 2006 were $22,640, $9,476 and $(7,656), respectively; and for pension and postretirement benefit plans at December 31, 2008, 2007 and 2006 were $1,255,388, $617,964 and $774,323, respectively.

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15. Contingencies and Commitments

Contingencies

The Company is involved in various legal proceedings, including product liability, patent, commercial, environmental and antitrust matters, of a nature considered normal to its business (see Note 8 for discussion of environmental matters), the most important of which are described below. It is the Company’s policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. Additionally, the Company records insurance receivable amounts from third-party insurers when recovery is probable.

Prior to November 2003, the Company was self-insured for product liability risks with excess coverage on a claims-made basis from various insurance carriers in excess of the self-insured amounts and subject to certain policy limits. Effective November 2003, the Company became completely self-insured for product liability risks.

Accruals for product liability and other legal proceedings, except for the environmental matters discussed in Note 8, amounted to $1,406.2 million and $2,540.7 million as of December 31, 2008 and 2007, respectively. The Company also has receivables from insurance companies for these matters amounting to $241.9 million and $334.4 million as of December 31, 2008 and 2007, respectively.

Like many pharmaceutical companies in the current legal environment, the Company is involved in legal proceedings, including product liability, patent litigation, and suits and investigations relating to, among other things, pricing practices and promotional activities brought by governments and private payors, which are significant to its business, complex in nature and have outcomes that are difficult to predict. Product liability claims, regardless of their merits or their ultimate outcomes, are costly, divert management’s attention, may adversely affect the Company’s reputation and demand for its products, and may result in significant damages. Patent litigation, if resolved unfavorably, can injure the Company’s business by subjecting the Company’s products to earlier than expected generic competition and also can give rise to payment of significant damages or restrictions on the Company’s future ability to operate its business. Investigations and/or suits brought by governments and/or private payors, regardless of their merits, are costly, divert management’s attention and may adversely affect the Company’s reputation and demand for its products and, if resolved unfavorably, result in significant payments of fines or damages.

The Company intends to vigorously defend itself and its products in the litigation described below and believes its legal positions are strong. However, from time to time, the Company may settle or decide no longer to pursue particular litigation as it deems advisable. In light of the circumstances discussed above, it is not possible to determine the ultimate outcome of the Company’s legal proceedings, and, therefore, it is possible that the ultimate outcome of these proceedings could be material to the Company’s results of operations, cash flows and financial position.

Product Liability Litigation

Diet Drug Litigation

The Company has been named as a defendant in numerous legal actions relating to the diet drugs Pondimin (which in combination with phentermine, a product that was not manufactured, distributed or sold by the Company, was commonly referred to as “fen-phen”) or Redux, which the Company estimated were used in the United States, prior to their 1997 voluntary market withdrawal, by approximately 5.8 million people. These actions allege, among other things, that the use of Redux and/or Pondimin, independently or in combination with phentermine, caused certain serious conditions, including valvular heart disease and primary pulmonary hypertension (PPH).

On October 7, 1999, the Company announced a nationwide class action settlement (the nationwide settlement) to resolve litigation brought against the Company regarding the use of the diet drugs Redux or Pondimin. The nationwide settlement covered all claims arising out of the use of Redux or Pondimin, except for PPH claims, and was open to all Redux or Pondimin users in the United States. As originally designed, the nationwide settlement was comprised of two settlement funds to be administered by an independent Settlement Trust. Fund A (with a value at the time of settlement of $1,000.0 million plus $200.0 million for legal fees) was created to cover refunds, medical screening costs, additional medical services and cash payments, education and research costs, and administration costs. Fund A was fully funded by contributions by the Company. Fund B (which was to be funded by the Company on an as-needed basis up to a total of $2,550.0 million, plus interest) would compensate claimants with significant heart valve disease. Any funds remaining in Fund A after all Fund A obligations were met were to be added to Fund B to be available to pay Fund B injury claims. In December 2002, following a joint motion by the Company and plaintiffs’ counsel, the Court approved an amendment to the settlement agreement, which provided for the merger of Funds A and B into a combined Settlement Fund to cover all expenses and injury claims in connection with the nationwide settlement. The merger of the two funds took place in January 2003. Pursuant to the Seventh Amendment to the settlement agreement, which became effective on May 16, 2006, the Company has committed an additional $1,275.0 million to fund a new claims processing structure and a new payment schedule for claims for compensation based on Levels I and II, the two lowest levels of the five-level settlement matrix. Payments under the nationwide settlement may continue, if necessary, until 2018.

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The Company was required to establish a security fund as part of agreements entered into by the Company relative to the Settlement Trust. As of December 31, 2008, the balance in the security fund was $940.2 million, which is included in Other assets including deferred taxes. The amounts in the security fund are owned by the Company and will earn interest income for the Company while residing in the security fund. The Company will be required to deposit an additional $180.0 million in the security fund if the Company’s credit rating, as reported by both Moody’s and S&P, falls below investment grade. In addition, the Company was required to establish a security fund in connection with the Seventh Amendment. The amounts in the Seventh Amendment security fund are owned by the Company and will earn interest income for the Company while residing in the Seventh Amendment security fund. As of December 31, 2008, the amount in the Seventh Amendment security fund was $255.0 million and was included in Other assets including deferred taxes.

The nationwide settlement agreement gave class members the right to opt out of the settlement after receiving certain initial settlement benefits if they met certain medical criteria. Approximately 63,000 class members who chose to leave the nationwide settlement subsequently filed lawsuits against the Company. As of December 31, 2008, the Company had settled approximately 99% of these claims.

As of December 31, 2008, the Company was a defendant in approximately 55 pending lawsuits in which the plaintiff alleges a claim of PPH, alone or with other alleged injuries. During the course of settlement discussions, certain plaintiffs’ attorneys have informed the Company that they represent additional individuals who claim to have PPH, but the Company is unable to evaluate whether any such additional purported cases of PPH would meet the nationwide settlement agreement’s definition of PPH, a precondition to maintaining such a lawsuit.

On October 10, 2008, a jury in the Philadelphia Court of Common Pleas hearing the case of Crowder, et al. v. Wyeth, et al., No. 06-00972, returned a verdict in favor of the Company at the close of the first phase of a reverse-bifurcated PPH trial; the trial therefore did not continue to the second, liability, phase. The jury found that plaintiffs had not proved that the use of Pondimin by the plaintiffs’ decedent had caused the PPH that led to her death. Prior to the start of the trial, the court had ruled that plaintiffs could not pursue a claim for punitive damages in the case. Plaintiffs are appealing the verdict in favor of the Company.

On October 22, 2008, a jury in New Jersey Superior Court, Bergen County, hearing the case of Stribling v. Wyeth Inc., et al., No. BER-L-2352-07 MT, in which plaintiff alleged that her use of Pondimin had caused PPH, returned a verdict in favor of the plaintiff and assessed total compensatory damages of $3.0 million against the Company. Prior to the start of the trial, the court had ruled that plaintiff could not pursue a claim for punitive damages in the case. The Company is appealing the verdict for the plaintiff.

The Company continues to work toward resolving the claims of individuals who allege that they have developed PPH as a result of their use of the diet drugs and intends to vigorously defend those PPH cases that cannot be resolved prior to trial. Additional PPH trials are scheduled for 2009.

The Company has recorded pre-tax charges in connection with the Redux and Pondimin diet drug matters, which, as of December 31, 2008, totaled $21,100.0 million. Payments to the nationwide class action settlement funds, individual settlement payments, legal fees and other items were $1,167.1 million, $481.6 million and $2,972.7 million for 2008, 2007 and 2006, respectively.

The remaining diet drug litigation accrual is classified as follows at December 31:

(In thousands)	2008		2007
Accrued expenses	$	291,183	$	1,458,309
Other noncurrent liabilities		800,000		800,000
Total litigation accrual	$	1,091,183	$	2,258,309

The $1,091.2 million reserve balance at December 31, 2008 represents management’s best estimate, within a range of outcomes, of the aggregate amount required to cover diet drug litigation costs, including payments in connection with the nationwide settlement, claims asserted by opt outs from the nationwide settlement, PPH claims, and the Company’s legal fees related to the diet drug litigation. It is possible that additional reserves may be required in the future, although the Company does not believe that the amount of any such additional reserves is likely to be material.

Hormone Therapy Litigation

The Company is a defendant in numerous lawsuits alleging injury as a result of the plaintiffs’ use of one or more of the Company’s hormone or estrogen therapy products, including Premarin and Prempro. As of December 31, 2008, the Company was defending approximately 8,700 actions brought on behalf of approximately 10,800 women in various federal and state courts throughout the United States (including in particular the United States District Court for the Eastern District of Arkansas and the Philadelphia Court of Common Pleas) for personal injuries, including claims for breast cancer, stroke, ovarian cancer and heart disease, allegedly resulting from their use of Premarin or Prempro. These cases were filed following the July 2002 stoppage of the hormone therapy subset of the Women’s Health Initiative study.

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In addition to the individual lawsuits described above, numerous putative class actions have been filed on behalf of current or former Premarin or Prempro users in federal and state courts throughout the United States and in Canada. Plaintiffs in these cases generally allege personal injury resulting from their use of Premarin or Prempro and are seeking medical monitoring relief and purchase price refunds as well as other damages. The Company opposes class certification. Many of these plaintiffs have withdrawn or dismissed their class allegations. Only three putative class actions remain pending: a West Virginia state court case seeking certification of a statewide purchase price refund class (White v. Wyeth, et al., No. 04-C-127, Cir. Ct., Putnam County, W.V.), a California federal court case seeking certification of a statewide purchase price refund class (Krueger v. Wyeth, No. 03-cv-2496R, U.S.D.C., S.D. Cal.), and a putative Canadian nationwide personal injury class action (Stanway v. Wyeth, et al., No. S87256, Supreme Court, British Columbia, Canada). A class certification hearing in the White case was begun in 2008 but has been adjourned to a date not yet set in 2009. On February 19, 2008, prior to a hearing on plaintiffs’ class certification motion, the Krueger court denied plaintiffs’ motion without prejudice; no further activity has occurred since that time. No class certification hearing date has been scheduled in the Stanway matter.

One other putative class action was dismissed during 2008. Plaintiffs dismissed the putative province-wide personal injury class action that was pending in Alberta, Canada. Alcantara v. Wyeth, et al., No. 0601-00926, Court of Queens Bench of Alberta, Judicial District of Calgary, Canada.

On October 10, 2007, in Rowatt, et al. v. Wyeth, et al., No. CV04-01699, Second District Court, Washoe County, Nevada, a case in which three plaintiffs alleged that they had developed breast cancer as a result of their use of Premarin and/or Prempro, the jury returned a verdict in favor of the plaintiffs, awarding a total of $134.5 million in compensatory damages. On October 12, 2007, the Court determined that the jury had erroneously included damages of a punitive nature in its compensatory verdict and permitted the jury to re-deliberate on the compensatory award. The jury returned a new compensatory verdict in favor of the plaintiffs that totaled approximately $35.0 million. Following a brief evidentiary/argument phase, the jury was then instructed to deliberate for a third time on October 15, 2007 on the question of punitive damages. It did so, returning a verdict for plaintiffs totaling $99.0 million in punitive damages. On February 5, 2008, the trial court denied the Company’s motions for a new trial or for judgment notwithstanding the verdict. On February 19, 2008, the trial court entered an order remitting the total compensatory verdict for the three plaintiffs to $22.8 million and remitting the total punitive award to $35.0 million. On May 7, 2008, the Company filed a supersedeas bond in the amount of $72.3 million to secure its appeal of the judgment to the Nevada Supreme Court. The Company believes that it has strong arguments for reversal or further reduction of the awards on appeal due to the significant number of legal errors made during the trial and in the charge to the jury and due to a lack of evidence to support aspects of the verdict.

On February 25, 2008, a jury in the United States District Court for the Eastern District of Arkansas returned a verdict in favor of the plaintiff in Scroggin v. Wyeth, et al., No. 4:04CV01169 WRW, finding the Company and co-defendant Upjohn jointly and severally liable for $2.75 million in compensatory damages. On March 6, 2008, that jury awarded $19.36 million in punitive damages against the Company and $7.76 million in punitive damages against Upjohn. On April 9, 2008, the Company filed motions for judgment notwithstanding the verdict or for a new trial. With respect to the compensatory damage award, those motions were denied in an order dated April 10, 2008. On July 8, 2008, the court granted motions by the Company and Upjohn for judgment as a matter of law on the issue of punitive damages and vacated the punitive damage awards. The Company has appealed the compensatory verdict to the United States Court of Appeals for the Eighth Circuit, and the plaintiff has appealed from the punitive damages ruling.

Of the 31 hormone therapy cases alleging breast cancer that have been resolved after being set for trial, 24 now have been resolved in the Company’s favor (by voluntary dismissal by the plaintiffs (14), summary judgment (6), defense verdict (3) or judgment for the Company notwithstanding the verdict (1)), several of which are being appealed by the plaintiffs. Of the remaining seven cases, four such cases have been settled; one resulted in a plaintiffs’ verdict that was vacated by the court and a new trial ordered (which plaintiffs have appealed); and two (Rowatt and Scroggin) resulted in plaintiffs’ verdicts that the Company is appealing. Additional cases have been voluntarily dismissed by plaintiffs before a trial setting. Additional trials of hormone therapy cases are scheduled for 2009. Individual trial results depend on a variety of factors, including many that are unique to the particular case, and the Company’s trial results to date, therefore, may not be predictive of future trial results.

In November 2008, the Nevada Attorney General filed suit against Wyeth and Pfizer under the Nevada Deceptive Trade Practices Act, alleging that the companies made false and misleading representations about the quality, safety and efficacy of hormone therapy products (State of Nevada v. Wyeth, et al., No. A575980, Dist. Ct., Clark Cty., NV). The complaint seeks, inter alia, injunctive relief, restitution, attorneys’ fees and treble damages. A leading plaintiffs’ firm in the product liability litigation is co-counsel with the Nevada Attorney General. This matter has been removed to federal court, but a motion to remand is pending.

As the Company has not determined that it is probable that a liability has been incurred and an amount is reasonably estimable, the Company has not established any litigation accrual for its hormone therapy litigation. As of December 31, 2008, the Company has recorded $174.3 million in insurance receivables relating to defense and settlement costs of its hormone therapy litigation. The insurance carriers that provide coverage that the Company contends is applicable have either denied coverage or have reserved their rights with respect to such coverage. The Company believes that the denials of coverage are improper and intends to enforce its rights under the terms of those policies.

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Thimerosal Litigation

The Company has been served with approximately 390 lawsuits, on behalf of approximately 1,000 vaccine recipients, alleging that the cumulative effect of thimerosal, a preservative used in certain childhood vaccines formerly manufactured and distributed by the Company as well as by other vaccine manufacturers, causes severe neurological damage and/or autism in children. Twelve of these lawsuits were filed as putative nationwide or statewide class actions in various federal and state courts throughout the United States, including in Massachusetts, Florida, New Hampshire, Oregon, Washington, Pennsylvania, New York, California and Kentucky, seeking medical monitoring, a fund for research, compensation for personal injuries and/or injunctive relief. No classes have been certified to date, and all but one of the putative class actions have been dismissed, either by the court or voluntarily by plaintiffs. In the one remaining case, in Kentucky, the court dismissed all claims except plaintiffs’ fraud claim, which has been stayed.

To date, the Company generally has been successful in having these cases dismissed or stayed on the ground that the minor plaintiffs have failed to file in the first instance in the United States Court of Federal Claims under the National Childhood Vaccine Injury Act (Vaccine Act). The Vaccine Act mandates that plaintiffs alleging injury from childhood vaccines first bring a claim under the Vaccine Act. At the conclusion of that proceeding, plaintiffs may bring a lawsuit in federal or state court, provided that they have satisfied certain procedural requirements.

In July 2002, the Court of Federal Claims established an Omnibus Autism Proceeding with jurisdiction over petitions in which vaccine recipients claim to suffer from autism or autism spectrum disorder as a result of receiving thimerosal-containing childhood vaccines or the measles, mumps and rubella (MMR) vaccine. There currently are approximately 4,900 petitions pending in the Omnibus Autism Proceeding. The Court recently heard six test cases on claimants’ theories that either thimerosal-containing vaccines in combination with the MMR vaccine or thimerosal-containing vaccines alone can cause autism or autism spectrum disorder (a further group of three test cases on the theory that MMR vaccine alone can cause autism or autism spectrum disorder were not pursued at claimants’ request on the belief that the three test cases on the combination theory would also cover the evidence for MMR alone). On February 12, 2009, the Court rejected the three cases brought on the theory that a combination of MMR and thimerosal-containing vaccines caused claimants’ conditions. The Court in each case found that the scientific evidence against a connection between the vaccines and autism was significantly stronger than the evidence presented by the claimants. Decisions on the three test cases involving thimerosal-containing vaccines alone are expected later this year.

Under the terms of the Vaccine Act, if a claim is adjudicated by the Court of Federal Claims, a claimant must formally elect to reject the Court’s judgment if the claimant wishes to proceed against the manufacturer in federal or state court. Also under the terms of the Vaccine Act, if a claim has not been adjudicated by the Court within 240 days of filing, the claimant has 30 days to decide whether to opt out of the proceeding and pursue a lawsuit against the manufacturer. Upon a claimant’s motion, this 30-day window may be suspended for 180 days, allowing the claimant to withdraw once 420 days have passed. After this window has passed, if a claimant wishes to retain the right to sue a manufacturer at a later date, the claimant must remain in the Court of Federal Claims until a final decision is obtained. Of the approximately 1,000 vaccine recipients who have sued the Company, 718 have filed petitions with the Court of Federal Claims. Of those 718, 310 have withdrawn from the Court of Federal Claims, although not all of them have properly exhausted their remedies under the Vaccine Act.

In addition to the claims brought by or on behalf of children allegedly injured by exposure to thimerosal, certain of the approximately 390 pending thimerosal cases have been brought by parents in their individual capacities for loss of services and loss of consortium of the injured child. These claims are not currently covered by the Vaccine Act. Additional thimerosal cases may be filed in the future against the Company and the other companies that marketed thimerosal-containing products.

In thimerosal litigation directly against the Company outside of the Omnibus Autism Proceeding, the first trial was expected to take place in November 2007 in Blackwell, et al. v. Sigma Aldrich, Inc., et al., No. 24-C-04-004829 (Baltimore City Circ. Ct., MD). The Blackwell trial date was adjourned by the court so that it could conduct an evidentiary hearing on the qualifications and opinions of the parties’ respective expert witnesses. On December 21, 2007, the court granted the Company’s motion to preclude plaintiffs’ expert witnesses from testifying that exposure to thimerosal-containing vaccines can cause autism. On February 8, 2008, the court granted the Company’s motion for summary judgment. Plaintiffs have appealed both orders. This matter is set for oral argument during the March 2009 term of the Maryland Court of Appeals.

Effexor Litigation

The Company has been named as a defendant in a multi-plaintiff suit, Baumgardner, et al. v. Wyeth, No. 2:05-CV-05720, U.S.D.C., E.D. Pa., on behalf of 10 plaintiff families alleging personal injury damages as the result of a family member’s use of Effexor. Plaintiffs allege that Effexor caused various acts of suicide, attempted suicide, hostility and homicide in adults and/or children or young adults taking the product. Plaintiffs seek an unspecified amount of compensatory damages.

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The Company also is defending approximately 15 individual product liability lawsuits and has reached tolling agreements with another seven claimants in various jurisdictions alleging personal injuries, including, among other alleged injuries, wrongful death from suicide or acts of hostility allegedly resulting from the use of Effexor. In one of these cases, Giles v. Wyeth Inc., et al., No. 04-cv-4245-JPG, a jury in the United States District Court for the Southern District of Illinois returned a verdict in favor of the Company on July 24, 2007. The plaintiff had alleged that plaintiff’s decedent committed suicide after ingesting Effexor. Plaintiff appealed the case to the United States Court of Appeals for the Seventh Circuit and on February 12, 2009, that court unanimously affirmed the defense verdict. In another Effexor case with similar allegations, Dobbs v. Wyeth Pharmaceuticals, No. CIV-04-1762-D, the United States District Court for the Western District of Oklahoma entered judgment dismissing plaintiff’s failure to warn claims on January 18, 2008 on the basis of federal preemption. The court has stayed plaintiff’s remaining claims, and plaintiff has filed a notice of appeal to the United States Court of Appeals for the Tenth Circuit.

ProHeart 6 Litigation

Two putative class action lawsuits are pending involving the veterinary product ProHeart 6, which Fort Dodge Animal Health voluntarily recalled from the U.S. veterinary market in September 2004 and reintroduced to the market in June 2008. The putative class representative in Dill, et al. v. American Home Products, et al., No. CJ 2004 05879 (Dist. Ct., Tulsa Cty., OK) seeks to represent a nationwide class of individuals whose canines have been injured or died as a result of being injected with ProHeart 6. The plaintiffs are seeking compensatory damages for their alleged economic loss and punitive damages. The plaintiff in Rule v. Fort Dodge Animal Health, Inc., et al., No. 06-10032-DPW (U.S.D.C., D. Mass.), is seeking economic damages on behalf of herself and all other Massachusetts residents who purchased and had their pets injected with ProHeart 6. On May 12, 2008, the plaintiffs pursuing a third putative class action, Jones v. Fort Dodge Animal Health, No. 01 2005 CA 00761 (Cir. Ct., Alachua County, Florida), elected to dismiss that case with prejudice.

Patent Litigation

Enbrel Litigation

On April 20, 2006, Amgen filed suit against ARIAD Pharmaceuticals, Inc., et al., in the United States District Court of Delaware seeking a declaratory judgment that making, using, selling, offering for sale and/or importing into the United States Enbrel does not infringe United States Patent No. 6,410,516, owned by ARIAD, and that such patent is invalid. The Company and Amgen co-promote Enbrel in the United States, but the Company was not originally named as a party to that suit. ARIAD claims that its patent covers methods of treating disease by regulation or inhibition of NF-(kappa) B, a regulatory pathway within many cells. On April 17, 2007, ARIAD amended its Answer to add the Company as a party to the lawsuit and allege that Enbrel infringes ARIAD’s patent. ARIAD sought unspecified damages and further alleged that the Company willfully infringed that patent, entitling ARIAD to enhanced damages. Under its co-promotion agreement with Amgen for the co-promotion of Enbrel, the Company has an obligation to pay a portion of any patent litigation expenses related to Enbrel in the United States and Canada as well as a portion of any damages or other monetary relief awarded in such patent litigation. On December 12, 2007, the Court granted ARIAD’s request to dismiss its claims against the Company without prejudice. On September 19, 2008, the Court granted Amgen’s motion for summary judgment that Enbrel does not infringe that patent, and on October 3, 2008, the Court entered final judgment in favor of Amgen. ARIAD has appealed the judgment. The Company continues to believe that ARIAD’s patent is invalid, unenforceable and not infringed by Enbrel.

Protonix Litigation

The Company has received notifications from multiple generic companies that they have filed Abbreviated New Drug Applications (ANDA) seeking U.S. Food and Drug Administration (FDA) approval to market generic pantoprazole sodium 20 mg and 40 mg delayed release tablets. Pantoprazole sodium is the active ingredient used in Protonix. The Orange Book lists two patents in connection with Protonix tablets. The first of these patents covers pantoprazole. This compound patent protection, including the associated pediatric exclusivity, expires in January 2011. The other listed patent is a formulation patent and, together with the associated pediatric exclusivity, expires in June 2017. The Company’s licensing partner, Altana Pharma AG (Altana) (since acquired by Nycomed GmbH (Nycomed)), is the owner of these patents.

In May 2004, Altana and the Company filed suit against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries, Ltd. (collectively, Teva) in the United States District Court for the District of New Jersey alleging that Teva’s filing of an ANDA seeking FDA approval to market generic pantoprazole sodium tablets infringed the compound patent. As a result of the filing of that suit, final FDA approval of Teva’s ANDA was automatically stayed until August 2, 2007. On April 13, 2005, Altana and the Company filed suit against Sun Pharmaceutical Advanced Research Centre Ltd. and Sun Pharmaceutical Industries Ltd. (collectively, Sun) in the United States District Court for the District of New Jersey alleging that Sun’s filing of an ANDA seeking FDA approval to market generic pantoprazole sodium tablets infringed the compound patent. As a result of that suit, final FDA approval of Sun’s ANDA was automatically stayed until September 8, 2007. On August 4, 2006, Altana and the Company filed suit against KUDCO Ireland, Ltd. (Kudco) in the United States District Court for the District of New Jersey alleging that Kudco’s filing of an ANDA seeking FDA approval to market generic pantoprazole sodium tablets infringed the compound patent. As a result of that suit, final FDA approval of Kudco’s ANDA was automatically stayed until January 25, 2009. These litigations seek declaratory and injunctive relief against infringement of this patent prior to its expiration. These cases have been consolidated into a single proceeding pending before the United States District Court for the District of New Jersey.

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Teva’s and Sun’s ANDA for pantoprazole sodium tablets were finally approved by the FDA on August 2, 2007 and September 10, 2007, respectively. In anticipation of potential final approval of those ANDAs, on June 22, 2007, the Company and Nycomed filed a motion with the Court seeking a preliminary injunction against both Teva and Sun that would prevent them from launching generic versions of Protonix until the Court enters a final decision in the litigation. On September 6, 2007, the Court denied the motion. The Court determined that Teva had raised sufficient questions about the validity of the patent to preclude the extraordinary remedy of a preliminary injunction. The Court did not conclude that the patent was invalid or not infringed and emphasized that its findings were preliminary. The Company and Nycomed have appealed the Court’s denial of the preliminary injunction. The case will now proceed to trial, and the Court stated that, in order to establish that the patent is invalid at trial, the generic companies would need to meet a higher burden of proof, clear and convincing evidence.

In December 2007, Teva launched a generic pantoprazole tablet “at risk.” Sun also launched a generic pantoprazole tablet “at risk” in late January 2008. Following Teva’s “at risk” launch and as a result of its impact on the market, the Company launched its own generic version of Protonix tablets in January 2008. The Company and Nycomed have filed amended complaints seeking to recover lost profits and other damages resulting from Teva’s and Sun’s patent infringement and have requested a jury trial. The Company and Nycomed expect trial in this matter to occur no earlier than the second quarter of 2010. The Company and Nycomed intend to continue to vigorously enforce their patent rights and will continue to seek court orders prohibiting further sales of generic pantoprazole prior to expiration of the pantoprazole compound patent. The Company and Nycomed continue to believe that the pantoprazole patent is valid and enforceable and that the patent will withstand the challenges by these generic companies.

The Company also has received notice of ANDA filings for generic pantoprazole sodium tablets that acquiesced to the listed compound patent and challenged only the listed formulation patent. To date, the Company has not filed suit against those challengers. Any of those challengers could in the future modify their respective ANDA filings to challenge the compound patent. The Company also has filed suit against certain of the generic companies that have filed applications seeking FDA approval to market generic pantoprazole sodium 40 mg base/vial I.V. in the United States.

Effexor Litigation

On March 24, 2003, the Company filed suit in the United States District Court for the District of New Jersey against Teva alleging that the filing of an ANDA by Teva seeking FDA approval to market 37.5 mg, 75 mg and 150 mg venlafaxine HCl extended release capsules infringes certain of the Company’s patents and seeking declaratory and injunctive relief against infringement of these patents prior to their expiration. Venlafaxine HCl is the active ingredient used in Effexor XR (extended release capsules). The patents involved in the litigation relate to methods of using extended release formulations of venlafaxine HCl. These patents expire in 2017. Teva asserted that these patents are invalid and/or not infringed. In December 2005, the Company settled this litigation with Teva. This settlement became effective on January 13, 2006.

Under the terms of the settlement, Teva is permitted to launch generic versions of Effexor XR (extended release capsules) and Effexor (immediate release tablets) in the United States pursuant to the following licenses:

• A license (exclusive for a specified period and then non-exclusive) under the Company’s U.S. patent rights permitting Teva to launch an AB rated, generic version of Effexor XR (extended release capsules) in the United States beginning on July 1, 2010, subject to earlier launch based on specified market conditions or developments regarding the applicable patent rights, including the outcome of other generic challenges to such patent rights; and

• An exclusive license under the Company’s U.S. patent rights permitting Teva to launch an AB rated, generic version of Effexor (immediate release tablets) in the United States beginning on June 15, 2006, subject to earlier launch based on specified market conditions.

In connection with each of these licenses, Teva has agreed to pay the Company specified percentages of profit from sales of each of the Teva generic versions. These sharing percentages are subject to adjustment or suspension based on market conditions and developments regarding the applicable patent rights.

The Company and Teva also executed definitive agreements with respect to generic versions of Effexor XR (extended release capsules) in Canada. As a result of the introduction of additional generic competition in Canada in the 2007 fourth quarter, the Company’s royalty from Teva on its Canadian sales of generic extended release venlafaxine HCl capsules has been suspended.

The above description is not intended to be a complete summary of all of the terms and conditions of the settlement. Many of the terms of the settlement, including the dates on which Teva may launch generic versions of the Company’s Effexor XR (extended release capsules) and Effexor (immediate release tablets) products and the terms of the Company’s sharing in Teva’s gross profits from such generic versions, are subject to change based on future market conditions and developments regarding the applicable patent rights, including the outcome of other generic challenges. There can be no assurance that Effexor XR (extended release capsules) will not be subject to generic competition in the United States prior to July 1, 2010.

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Since the Teva settlement, the Company has settled two suits against other generic companies that have filed ANDAs seeking FDA approval to market venlafaxine HCl extended release capsules, as well as a suit against a company that filed an application with the FDA pursuant to 21 U.S.C. 355(b)(2), also known as a 505(b)(2) application, seeking approval to market venlafaxine HCl extended release tablets (described below). The Company has also granted a covenant not to sue to another generic company (described below).

On July 16, 2008, pursuant to a settlement agreement between the parties, the United States District Court for the District of Delaware entered a consent judgment and dismissed the suit filed by the Company against Impax Laboratories, Inc. (Impax). That suit alleged that the filing by Impax of an ANDA seeking FDA approval to market 37.5 mg, 75 mg and 150 mg venlafaxine HCl extended release capsules infringes the same three patents at issue in the previously settled Teva litigation. Under the agreement, the Company has granted Impax a license that would permit Impax to launch its generic capsule formulation of Effexor XR (extended release capsules) on or after June 1, 2011, subject to earlier launch in limited circumstances, but in no event earlier than January 1, 2011. Impax will pay the Company a specified percentage of profit from sales of this generic product. The parties also have agreed that Impax will utilize its neurology-focused sales force to co-promote Pristiq.

On November 3, 2008, pursuant to a settlement agreement between the parties, the United States District Court for the Central District of California entered a consent judgment and dismissed the lawsuits filed by the Company against Anchen Pharmaceuticals, Inc. (Anchen). In those suits, the Company alleged that the filing by Anchen of an ANDA seeking FDA approval to market 37.5 mg, 75 mg and 150 mg venlafaxine HCl extended release capsules infringes the same three patents at issue in the previously settled Teva litigation. Under the agreement, the Company has granted Anchen a license that would permit Anchen to launch a generic capsule version of Effexor XR (extended release capsules) on or after June 1, 2011, subject to earlier launch in limited circumstances, but in no event earlier than January 1, 2011. In connection with the license, Anchen will pay the Company a specified percentage of profit from sales of the generic product.

The Company has seven suits pending against the following additional generic companies that have filed applications seeking FDA approval to market generic versions of venlafaxine HCl in the United States:

Generic Filer	Expiration of 30-Month Stay*	Court	Anticipated Trial Date
Lupin Ltd. and Lupin Pharmaceuticals, Inc.	July 29, 2009	U.S.D.C., D. Md.	May 2009
Sandoz Inc.	November 14, 2009	U.S.D.C., E.D.N.C.	Not yet scheduled
Mylan Pharmaceuticals Inc.	November 23, 2009	U.S.D.C., N.D.W.V.	October 2009
Wockhardt Limited	December 26, 2009	U.S.D.C., C.D. Cal.	September 2010
Biovail Corporation, Biovail Laboratories International SRL and Biovail Technologies, Ltd.	November 15, 2010	U.S.D.C., D. Del.	Not yet scheduled
Apotex Inc. and Apotex Corp.	January 10, 2011	U.S.D.C., S.D. Fla.	June 2009
Torrent Ltd. and Torrent Inc.	June 1, 2011	U.S.D.C., D. Del.	Not yet scheduled

* Pending an earlier court decision holding the patents at issue invalid or not infringed.

Following its launch of a generic version of venlafaxine HCl capsules in Canada, ratiopharm Inc. (ratiopharm) sued Wyeth and Wyeth Canada on October 24, 2007 in Federal Court in Canada, contending that ratiopharm’s marketing approval to sell generic venlafaxine HCl capsules in Canada had been wrongfully delayed over 18 months as a result of an abbreviated patent infringement proceeding brought by Wyeth and Wyeth Canada against ratiopharm in February 2006, which was dismissed on August 1, 2007. Ratiopharm is seeking damages based on alleged lost sales of its generic venlafaxine HCl capsules and other unspecified products for the time period in question. The Company believes that its Canadian patent covering extended release formulations of venlafaxine HCl, and methods of their use, is valid and has been infringed by ratiopharm. On December 6, 2007, the Company filed a Statement of Defence and Counterclaim denying that ratiopharm is entitled to damages and asserting that ratiopharm’s product infringes or infringed the Company’s patents.

In early 2008, the Company and Osmotica Pharmaceutical Corp. (Osmotica) settled the lawsuit brought by the Company against Osmotica in the United States District Court for the Eastern District of North Carolina. In that suit, the Company alleged that the filing by Osmotica of an application with the FDA pursuant to 21 U.S.C. 355(b)(2), also known as a 505(b)(2) application, seeking approval to market 37.5 mg, 75 mg, 150 mg and 225 mg venlafaxine HCl extended release tablets infringes two of the same patents at issue in the previously settled Teva litigation. Under the terms of the settlement, the Company granted Osmotica a license under certain of its patents pursuant to which Osmotica is required to pay the Company a royalty on its sales of extended release venlafaxine tablets. In May 2008, the FDA approved Osmotica’s tablet product but did not rate it as therapeutically equivalent, also referred to as AB rated, to Effexor XR (extended release capsules). Therefore, Osmotica’s tablet product ordinarily will not be substitutable for Effexor XR (extended release capsules) at the pharmacy level. Osmotica launched its tablet product in October 2008.

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In addition, on August 29, 2007, the Company received notice that Sun filed an ANDA seeking FDA approval to market venlafaxine HCl extended release tablets before the expiration of the Company’s patents at issue in the above-mentioned litigations. Sun asserted that these patents are not infringed and are invalid. Based upon Sun’s assertions and a review of Sun’s filing, the Company decided not to file suit against Sun and has provided Sun with a covenant not to sue limited to the product defined in Sun’s ANDA and the same three patents involved in the other litigations. On November 25, 2008, the FDA granted a citizen petition filed by Osmotica asking the agency to reject Sun’s pending ANDA for venlafaxine extended release tablets referencing Effexor XR (extended release capsules) on the ground that the proper reference drug for Sun’s ANDA should be Osmotica’s tablet product, not Effexor XR (extended release capsules). Pursuant to the FDA’s ruling, Sun will be required to withdraw its current ANDA and submit a new ANDA referencing Osmotica’s approved venlafaxine extended release tablet product and showing bioequivalence to that product, should Sun still wish to pursue approval of an extended release venlafaxine tablet.

ReFacto/Xyntha Litigation

On February 15, 2008, Novartis Vaccines and Diagnostics, Inc. (Novartis) filed suit against the Company and a subsidiary of the Company in the United States District Court for the Eastern District of Texas. The lawsuit alleges that the manufacture, use, sale, offer for sale, importation and/or exportation of the Company’s ReFacto product infringes United States Patent Nos. 6,060,447 and 6,228,620 B1. The complaint seeks damages, including treble damages, for alleged willful infringement. The Company answered that the two patents asserted by Novartis are invalid and not infringed and that Novartis’ claims are barred by laches and estoppel. On October 24, 2008, Novartis filed an amended Complaint, alleging that Xyntha, the Company’s recently approved recombinant factor VIII product, also infringes these two patents.

On May 16, 2008, a subsidiary of the Company filed suit in the United States District Court for the District of Delaware against Novartis seeking a declaration that the Company’s U.S. Patent No. 4,868,112 and Novartis’ U.S. Patent Nos. 6,060,447 and 6,228,620 claim the same or substantially the same inventions and that the Company was the first to invent this subject matter. The suit also seeks a declaration that the Novartis patents are invalid as a result of the Company’s priority of invention.

Prempro Litigation

On September 27, 2007, two lawsuits were filed against the Company in Canada involving the Company’s patent applications concerning low-dose estrogen/progestin combinations. Wolfe v. Wyeth et al., Federal Court, Canada, File No. T-1742-07, and Wolfe et al. v. Wyeth et al., Superior Court of Justice, Ontario, Canada, File No. 55541. The Company markets such a combination as Prempro in the United States and other countries. In those suits, Dr. Wolfe, an individual, claims to be either the sole or a joint inventor of these applications. The action in the Canadian Federal Court asks that the Court decide the inventorship of patents relating to the Company’s current Prempro formulations. The action in the Superior Court of Ontario seeks an order declaring Dr. Wolfe to be the owner of the patent applications and seeks damages of approximately C$100.0 million for breach of contract, breach of confidence and breach of fiduciary duty, as well as approximately C$25.0 million in punitive damages. On February 15, 2008, the Company filed a declaratory judgment action against Dr. Wolfe in the U.S. District Court for the Eastern District of Pennsylvania arguing that Dr. Wolfe’s claims in the Superior Court are barred by the statute of limitations or asking for a declaration that no breach had occurred. Wyeth v. Wolfe, 2:08-cv-00754 (E.D. Pa.). In August 2008, the U.S. District Court ruled that Dr. Wolfe’s claims in the Ontario action are barred by the statute of limitations. The Company has asked the Superior Court of Ontario to dismiss Dr. Wolfe’s claims. The Company believes that Dr. Wolfe’s claims are without merit.

Pristiq Interference Proceeding

On November 13, 2008, the United States Patent and Trademark Office declared an interference between Wyeth U.S. Patent No. 7,291,347 and a patent application owned by Sepracor. The Company’s patent, one of the patents listed in the Orange Book for Pristiq, relates to oral dosage forms containing the active ingredient in Pristiq (O-desmethylvenlafaxine succinate). The interference proceeding will determine whether Wyeth scientists or Sepracor scientists were the first to invent the claimed subject matter, in this case, oral dosage forms containing Pristiq’s active ingredient. An interference relating to the active ingredient also may be declared between a separate Wyeth patent and a separate Sepracor patent application.

Commercial Litigation

Merger-Related Litigation

The Company and members of its Board of Directors have been named in lawsuits filed in federal and state court in New Jersey and in the Delaware Chancery Court seeking to rescind the Company’s merger agreement with Pfizer. The suits generally allege that the Company and its directors breached their fiduciary duties in entering into the merger agreement without regard to the fairness of the agreement to the Company’s shareholders and in failing to obtain the best possible value for the Company’s shares. Pfizer is also named as a defendant in some of these suits and is charged with aiding and abetting the Company directors’ alleged breaches. In addition to rescission of the merger agreement, the suits generally seek a permanent injunction preventing the consummation of the merger until the Company defendants have completed a process for the sale or auction of the Company that produces the best possible consideration for the Company’s shares. The Company intends to contest such litigation vigorously.

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Pristiq-Related Litigation

On November 14, 2007, a putative class action was filed alleging that the Company and Robert Essner, the Company’s former Chairman of the Board and Chief Executive Officer, made false and/or misleading statements about the safety of Pristiq and failed to disclose hepatic and cardiovascular events seen in the Pristiq clinical trials, all in violation of Section 10(b) of the Securities Exchange Act of 1934 (the 1934 Act) and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the 1934 Act. Plaintiff claimed to have purchased Wyeth securities during the alleged class period (January 31, 2006 through July 24, 2007) and to have been damaged by the drop in the Company’s share price following the announcement of the FDA’s approvable letter for Pristiq for the treatment of vasomotor symptoms (VMS) on July 24, 2007. City of Livonia Employees’ Retirement System, et al. v. Wyeth, et al., No. 07-CV-10329, U.S.D.C., S.D.N.Y. In April 2008, plaintiffs filed an Amended Complaint which, inter alia, named several additional employee defendants and shortened the class period by approximately six months (the new class period beginning on June 26, 2006). A motion to dismiss the Amended Complaint has been filed and is awaiting a decision from the court.

On November 20, 2007, a shareholder derivative suit alleging breach of fiduciary duty, waste of corporate assets, unjust enrichment and violations of the 1934 Act relating to the FDA’s July 2007 approvable letter for Pristiq was filed against 16 current and former directors and officers of the Company. Staehr, et al. v. Essner, et al., No. 07-CV-10465, U.S.D.C., S.D.N.Y. Pursuant to an agreement between the parties, the derivative action will be stayed until such time as the court decides the motion to dismiss filed by the Company in the securities class action.

On February 27, 2008, an additional lawsuit was filed relating to the Company’s receipt of the approvable letter for the Pristiq VMS indication. Herrera, et al. v. Wyeth, et al., No. 08-cv-04688, U.S.D.C., S.D.N.Y., is a putative class action brought under the Employee Retirement Income Security Act of 1974, as amended (ERISA). The lawsuit, which was originally filed in federal court in New Jersey but which was subsequently transferred with the consent of all parties to the United States District Court for the Southern District of New York, alleges breach of fiduciary duty by Wyeth, the Wyeth Savings Plan Committee, the Wyeth Savings Plan-Puerto Rico Committee, the Wyeth Retirement Committee and eight current and former corporate officers and committee members for offering the Wyeth Common Stock Fund as an investment alternative to participants in the Wyeth Savings Plan, the Wyeth Union Savings Plan and the Wyeth Savings Plan-Puerto Rico. The complaint alleges that the individuals and committees permitted investment in the Wyeth Common Stock Fund notwithstanding their knowledge of cardiovascular and hepatic adverse events seen in clinical trials undertaken in connection with the Company’s New Drug Application (NDA) for Pristiq for VMS, that the defendants knew or should have known that those events would likely delay or prevent approval of the Pristiq VMS NDA, and that defendants failed to assure disclosure of those issues in the Company’s public statements about Pristiq. Plaintiff also alleges claims for breaches of the duties of loyalty and prudence under ERISA against each of the defendants. An Amended Complaint was filed in September 2008, and motions to dismiss the Amended Complaint were filed in December 2008. Briefing on those motions is not yet complete.

Average Wholesale Price Litigation

The Company, along with numerous other pharmaceutical companies, currently is a defendant in a number of lawsuits, described below, brought by both private and public persons or entities in federal and state courts throughout the United States in which plaintiffs allege that the Company and other defendant pharmaceutical companies artificially inflated the Average Wholesale Price (AWP) of their drugs, which allegedly resulted in overpayment by, among others, Medicare and Medicare beneficiaries and by state Medicaid plans. Plaintiffs involved in these lawsuits generally allege that this alleged practice is fraudulent, violates the Sherman Antitrust Act and constitutes a civil conspiracy under the federal Racketeer Influenced and Corrupt Organizations Act.

The Company is a defendant in two private class actions, Swanston v. TAP Pharmaceuticals Products, Inc., et al., No. CV2002-004988, Sup. Ct., Maricopa Cty., AZ; and International Union of Operating Engineers, et al. v. AstraZeneca PLC, et al., No. MON-L-3136-06, Super. Ct., Monmouth Cty., NJ, filed on behalf of Medicare beneficiaries who make co-payments, as well as private health plans and ERISA plans that purchase drugs based on AWP. The Swanston case is a putative statewide class action. The parties have been engaged in motion practice attempting to determine the extent to which the defendants, claims and drugs in this matter overlap those in the Multi-District Litigation (MDL) proceeding described below (to which the Company is not a party). A class certification hearing has been set for April 1, 2009. In 2008, the named plaintiff in the International Union of Operating Engineers matter, a putative nationwide class action, announced that it would not proceed with the case. The court dismissed the case without prejudice but vacated that order four months later when plaintiffs’ counsel attempted to substitute in two new union plaintiffs. Defendants were granted leave to file an interlocutory appeal of the vacation order by the New Jersey Appellate Division. That appeal will be argued in the first quarter of 2009.

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The Company also is a defendant in six AWP matters filed by state Attorneys General: State of Alabama v. Abbott Laboratories, Inc., et al., No. CV 2005-219, Cir. Ct., Montgomery Cy., AL; The People of Illinois v. Abbott Laboratories, Inc., et al., No. 05CH0274, Cir. Ct., Cook Cty., IL; State of Iowa v. Abbott Laboratories, Inc., et al., Case No. 4:07-cv-00461-JAJ-CFB, U.S.D.C., S.D. Iowa; State of Kansas ex. rel. Steve Six as Attorney General for the State of Kansas v. Wyeth, Inc., et al., No. 08CV2124-7, Dist. Ct., Wyandotte Cty., KS; State of Mississippi v. Abbott Laboratories, Inc., et al., No. C2005-2021, Chancery Ct., Hinds Cty., MS; and State of Utah v. Apotex Corporation, et al., No. 080907678, 3d Jud. Dist. Ct., Salt Lake Cty., UT. In each of these cases, the plaintiff alleges that defendants provided false and inflated AWP, Wholesale Acquisition Cost and/or Direct Price information for their drugs to various national drug industry reporting services. The Alabama, Illinois and Mississippi cases were removed to federal court in November 2006 but have since been remanded to state court. The Iowa case was removed to federal court and has been conditionally transferred to MDL proceedings taking place in the United States District Court for the District of Massachusetts under the caption: In re: Pharmaceutical Industry AWP Litigation, MDL 1456. The Illinois case, which was a previously dismissed case brought against a former subsidiary of the Company that manufactured generic pharmaceutical products and numerous other manufacturers, was subsequently reinstated. The trial court had dismissed the case on the ground that the plaintiff, the State of Illinois, does not reimburse for generic products based on AWP and that there was, therefore, no factual basis to keep the generic manufacturers in the suit. The state subsequently filed a Second Amended Complaint, and the generic manufacturers again moved to dismiss. The court denied that motion on September 8, 2008. A motion to dismiss was filed in the State of Utah case and the court recently ruled that the state had not pled its complaint with sufficient particularity. It allowed the state to amend its complaint within 45 days, consistent with the court’s opinion.

A total of 49 New York counties and the City of New York have filed AWP actions naming the Company and numerous other pharmaceutical manufacturers as defendants. All of these actions were removed to federal court, and 46 of the cases have been transferred to the MDL proceedings, where they have joined in a Consolidated Complaint, filed in June 2005, that asserts statutory and common law claims for damages suffered as a result of alleged overcharging for prescription medication paid for by Medicaid. The claims of the three remaining counties (Erie, Oswego and Schenectady) were remanded to state court and have now been consolidated at the state level; they will be assigned to a single judge in New York Supreme Court, Erie County.

Other Pricing Litigation

The Company is one of numerous defendants named in a putative class action lawsuit, County of Santa Clara v. Astra USA, Inc., et al., No. C 05 3740-WHA, U.S.D.C, N.D. Cal., allegedly filed on behalf of entities covered under Section 340B of the Public Health Service Act, 42 U.S.C. §256b (Section 340B). Section 340B requires that certain pricing discounts be provided to charitable institutions and provides methods for the calculation of those discounts. Plaintiff alleges that each defendant violated these statutory pricing guidelines and breached the Pharmaceutical Pricing Agreement that it entered into with Centers for Medicare & Medicaid Services, to which the applicable plaintiff is not a party. The complaint seeks an accounting, damages for breach of contract as a third-party beneficiary and unjust enrichment damages. Plaintiff requests a judgment requiring defendants to disclose their Best Prices (as defined under the Medicaid Drug Rebate statute) and Section 340B ceiling prices and injunctive relief. On February 14, 2006, the District Court granted defendants’ motion to dismiss all four of plaintiff’s causes of action but allowed plaintiff 15 days to attempt to replead its California False Claims Act cause of action with more specificity. Plaintiff did so, and defendants moved to dismiss the amended complaint, which was dismissed by the court in its entirety without leave to amend on May 17, 2006. Plaintiff filed a motion for leave to file a third amended complaint, which motion was denied on July 28, 2006, and the case was dismissed with prejudice. On appeal, the United States Court of Appeals for the Ninth Circuit reversed the trial court’s dismissal and remanded the case for further proceedings. The sole issue on appeal was whether covered §340B entities are “intended third-party beneficiaries” of the Pharmaceutical Pricing Agreements between the U.S. Secretary of Health and Human Services (HHS) and each of the defendant pharmaceutical manufacturers. The Ninth Circuit ruled that covered §340B entities are such beneficiaries and therefore have the right to sue for reimbursement of allegedly excess payments; they were not, however, entitled to challenge as false or inaccurate the reported Average Manufacturer Prices (AMP) reported to HHS for each drug. Upon remand, the district court entered a protective order precluding discovery into the calculation of defendants’ AMPs, but then sua sponte certified the question of the scope of allowable discovery for interlocutory appeal to the Ninth Circuit. The Ninth Circuit has now accepted that appeal, and briefing will take place during the second quarter of 2009.

Government Investigations

Since 2005, the Company and current and former employees of the Company have been served with a series of subpoenas from the United States Attorney’s Office for the District of Massachusetts seeking documents and testimony relating to the Company’s promotional practices with respect to Protonix, as well as the Company’s pricing of Protonix oral tablets and I.V. products and Premarin (including the Company’s quarterly calculations of the AMP and Best Price for Protonix oral tablets and I.V. products and the baseline AMP for Premarin). AMP (as defined under the Medicaid Drug Rebate statute) and Best Price are used to calculate rebates due to state Medicaid programs from the Company under that statute. Numerous current and former employees of the Company and one non-employee consultant have testified before the grand jury. The Company is producing documents responsive to the subpoenas on a rolling basis and is continuing to cooperate with the investigation. In addition, on October 1, 2008, the Company received a shareholder demand, made pursuant to Delaware corporate law, to inspect the books and records of the Board of Directors for the period from January 1, 2000 to date insofar as they relate to this grand jury investigation.

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In March 2007, Wyeth received two subpoenas from the Office of the Delaware Attorney General requesting information relating to sales by the Company under the Nominal Pricing exception to the Medicaid Drug Rebate Best Price regulations. On various occasions, the Company sold certain of its products, including Protonix, Premarin and others, at nominal prices. Similarly, in March 2008, Wyeth received a letter from the Office of the Michigan Attorney General requesting documents related to any nominal pricing agreements concerning Wyeth for the period January 1, 1999 to date.Information was provided to these states in accordance with these requests. Since that time, the Office of the Delaware Attorney General has indicated that it is conducting its investigation on behalf of itself and several other states under the umbrella of the National Association of Medicaid Fraud Units in coordination with the Department of Justice. Those investigations are ongoing.

Qui Tam Litigation

On December 1, 2008, the United States District Court for the District of Massachusetts granted the relator’s Fed. R. Civ. P. Rule 41(a) Notice of Voluntary Dismissal Without Prejudice and Request for Court Approval in United States ex rel. Antone, et al. v. McKesson Corporation, et al., No. 03-11984-RWZ (U.S.D.C., D. Ma.), a qui tam action alleging violations of the federal False Claims Act (FCA) and of the FCAs of 15 states named as plaintiffs, including Illinois and Texas. The Company along with several other pharmaceutical manufacturers and other entities were named as defendants in the complaint, in which the relator alleged that the defendants engaged in a fraudulent repackaging scheme that defrauded the states’ Medicaid programs. The United States Attorney’s Office, District of Massachusetts, declined to intervene in this matter, and the case was dismissed.

On February 10, 2009, the United States District Court for the District of Massachusetts unsealed portions of a qui tam complaint that includes the Company as a defendant (not including the name of the relator who originally filed the case). United States ex rel. v. Amgen, et al. Civil Action No. 06-10972WGY. The allegations in the complaint relate principally to another company’s alleged off-label promotion of two prescription drugs, one of which (Enbrel) is co-marketed by the Company. To date, the Department of Justice has not made a decision as to whether to intervene in this matter, and it has not sought any information from the Company.

Contract Litigation

Trimegestone. The Company is the named defendant in a breach of contract lawsuit brought by Aventis in the Commercial Court of Nanterre in France arising out of an October 12, 2000 agreement between the Company and Aventis relating to the development of hormone therapy drugs utilizing Aventis’ trimegestone (TMG) progestin. In the 2000 agreement, the Company agreed to develop, manufacture and sell two different hormone therapy products: a product combining Premarin with TMG and a product combining 17 beta-estradiol and TMG, referred to as Totelle. The Company terminated the agreement in December 2003. Plaintiff alleges that the termination was improper and seeks monetary damages in the amount of $579 million, as well as certain injunctive relief to ensure continued marketing of Totelle, including compelling continued manufacture of the product and the compulsory licensing of Totelle trademarks. The Company believes that the termination was proper and in accordance with the terms of the agreement. On January 13, 2009, a three-judge tribunal rendered its decision in favor of the Company. Aventis has filed an appeal from the Commercial Court’s decision.

Antitrust Matters

K-Dur 20. In 2001, plaintiffs claiming to be direct and indirect purchasers of K-Dur 20, a potassium chloride product manufactured by Schering-Plough Corporation (Schering), filed numerous lawsuits in federal and state courts throughout the United States challenging as anticompetitive the Company’s 1998 settlement of certain patent litigation between Schering and ESI Lederle, a former division of the Company, which had sought approval to market a generic version of K-Dur 20. These lawsuits followed the issuance of an administrative complaint by the Federal Trade Commission (FTC) in which similar allegations were made. The Company settled with the FTC in April 2002. The settlement of the FTC action was not an admission of liability, did not involve any payment of money, and was entered to avoid the costs and risks of litigation in light of the Company’s previously announced exit from the oral generics business.

Generally, plaintiffs claim that the 1998 settlement agreement between the Company and Schering resolving the patent infringement action unlawfully delayed the market entry of generic competition for K-Dur 20 and that this caused plaintiffs and others to pay higher prices for potassium chloride supplements than plaintiffs claim they would have paid without the patent case settlement. Plaintiffs claim that this settlement constituted an agreement to allow Schering to monopolize the potassium chloride supplement markets in violation of federal and state antitrust laws, various other state statutes and common law theories such as unjust enrichment.

Currently, the Company is aware of approximately 45 private antitrust lawsuits that have been filed against the Company based on the 1998 patent case settlement. Many of these lawsuits were consolidated and coordinated as part of multi-district federal litigation in the United States District Court for the District of New Jersey, In re K-Dur Antitrust Litigation, MDL 1419, U.S.D.C., D.N.J. Two of the cases were brought by or on behalf of direct purchasers of K-Dur. The Company has settled both of these cases, one of which was brought on behalf of a national class of direct purchasers and the other of which was brought by various direct purchasers that had opted out of the direct purchaser class action.

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In all of the other cases, plaintiffs claim to be indirect purchasers or end payors of K-Dur 20 or to be bringing suit on behalf of such indirect purchasers and seek to certify either a national class of indirect purchasers or classes of indirect purchasers from various states. These complaints seek various forms of relief, including damages in excess of $100 million, treble damages, restitution, disgorgement, declaratory and injunctive relief, and attorneys’ fees. Approximately half of these cases were filed in various federal courts. In April 2008, plaintiffs in these federal indirect purchaser cases voluntarily dismissed their claims following the federal court’s decision denying their motion for class certification. The remaining indirect purchaser cases were filed in various state courts around the country. Some of these state court cases have been dismissed, while some of these cases, which seek certification of various indirect purchaser classes, remain pending. There are currently 17 state court cases pending. The Florida Attorney General’s Office has initiated an inquiry into whether the Company’s settlement with Schering violated Florida’s antitrust laws. The Company has provided documents and information sought by the Attorney General’s Office.

Miscellaneous. The Company has been named as a defendant, along with other pharmaceutical manufacturers, in a civil action pending in California Superior Court in Alameda County, alleging that the defendant companies violated California law by engaging in a price fixing conspiracy that was carried out by, among other allegations, efforts to charge more for their prescription drugs sold in the United States than the same drugs sold in Canada, Clayworth v. Pfizer, et al., No. RG04-172428, Super. Ct., Alameda Cty., CA. The Trial Court overruled defendants’ demurrer to the Third Amended Complaint and held that plaintiffs’ conspiracy claims are adequately alleged. The Trial Court sustained the demurrer with respect to unilateral price discrimination claims. Defendants answered the Third Amended Complaint on July 15, 2005. Defendants moved for summary judgment in September 2006. The Trial Court granted defendants’ motion for summary judgment and entered judgment on January 4, 2007. Plaintiffs’ appeal to the Court of Appeal of the State of California, First Appellate District, was denied on July 25, 2008. Plaintiffs filed a petition for review in the California Supreme Court, which was granted on November 19, 2008.

The Company has been named as a defendant, along with other pharmaceutical manufacturers, wholesalers, two individuals from wholesaler defendant McKesson, and a wholesaler trade association, in a civil action filed in federal district court in New York by RxUSA Wholesale, Inc., RxUSA Wholesale, Inc. v. Alcon Labs, et al., No. CV-06-3447, U.S.D.C., E.D.N.Y. Plaintiff RxUSA Wholesale alleges, in relevant part, that the pharmaceutical manufacturer defendants individually refused to supply plaintiff with their respective pharmaceutical products and also engaged in a group boycott of plaintiff in violation of federal antitrust laws and New York state law. The complaint seeks treble damages, declaratory and injunctive relief, as well as attorneys’ fees. Defendants have moved to dismiss the Complaint. The motion is pending.

The Company was named as a defendant, along with its marketing partner on Protonix, Altana (since acquired by Nycomed), in a lawsuit filed in federal court in New Jersey, by two direct purchasers of Protonix, purporting to represent a putative class of direct purchasers of Protonix. Dik Drug Company, et al. v. Altana Pharma AG, et al., Civil Action No. 07-5849 (JLL/CCC), U.S.D.C., D.N.J. Plaintiffs allege that the Company and Altana have violated the federal antitrust laws by engaging in a scheme to block generic competition to Protonix, including procuring the patent that covers the active ingredient in Protonix, pantoprazole, by fraud on the United States Patent and Trademark Office and wrongfully listing the patent in the Orange Book. Plaintiffs further allege that the Company and Altana instituted baseless patent infringement litigation against two potential generic competitors to keep a lower-priced substitute from the market. The complaint seeks treble damages, declaratory relief and costs, including attorneys’ fees. In addition, two actions have been brought against the Company, Altana and Nycomed by indirect purchasers of Protonix, purporting to represent putative national classes of indirect purchasers of Protonix. Fawcett v. Altana, et al., Civil Action No. 07-6133 (JLL), and Painters’ District Council No. 30 v. Altana, et al., Civil Action No. 07-6150 (JLL). Both actions have been filed in federal court in New Jersey. Plaintiffs in these actions allege various violations of federal and state antitrust laws, as well as violations of various state consumer protection statutes. Like plaintiffs in the Dik Drug case, these plaintiffs allege that defendants engaged in a course of anticompetitive conduct intended to secure an unlawful monopoly through procurement of an unenforceable patent and to extend that alleged unlawful monopoly by preventing entry of generics. The complaints seek declaratory and injunctive relief, damages, as well as restitution, disgorgement, constructive trust and unjust enrichment. All three antitrust cases have been consolidated and stayed pending resolution of the underlying patent litigation.

On January 16, 2008, the European Commission announced a sector-wide competition law inquiry into the pharmaceutical industry. EU Pharmaceuticals Sector Inquiry, Case No. COMP/D2/39.514. This investigation was launched by unscheduled inspections at the European offices of a number of branded and generic pharmaceutical companies, including the Company’s U.K. offices. The Commission stated publicly that it has no indication that specific companies have violated the competition laws.

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Regulatory Proceedings

Effexor Proceedings

In April 2003, a petition was filed with the FDA by a consultant on behalf of an unnamed client seeking the FDA’s permission to submit an ANDA for venlafaxine extended release tablets utilizing the Company’s Effexor XR (extended release capsules) capsules as the reference product. Such permission is required before a generic applicant may submit an ANDA for a product that differs from the reference product in dosage form or other relevant characteristics. In August 2003, the Company submitted comments on this petition, raising a number of safety, efficacy and patient compliance issues that could not be adequately addressed through standard ANDA bioequivalence studies and requested the FDA to deny the petition on this basis. In March 2005, the FDA granted the petition. In April 2005, the Company requested that the FDA reconsider its decision to grant the petition and stay any further agency action. However, as noted above, after accepting the filing of an ANDA from Sun for venlafaxine extended release tablets referencing Effexor XR (extended release capsules) in August 2007, the FDA ruled in November 2008 that the Sun ANDA must be withdrawn on the ground that its proper reference drug should be Osmotica’s venlafaxine extended release tablet product, not Effexor XR (extended release capsules) (see Patent Litigation – Effexor Litigation). As part of that ruling, the FDA stated that the outcome made it unnecessary to address the issues raised in the Company’s petition for reconsideration.

The Company is cooperating in responding to a subpoena served on the Company in January 2004 from the U.S. Office of Personnel Management, Office of the Inspector General, requesting certain documents related to Effexor. The subpoena requests documents related principally to educating or consulting with physicians about Effexor, as well as marketing or promotion of Effexor to physicians or pharmacists, from January 1, 1997 to September 30, 2003. Other manufacturers of psychopharmacologic products also have received subpoenas.

Zosyn Proceedings

In November 2005, Sandoz Inc. (Sandoz) filed a petition with the FDA requesting a determination that the Company’s previous formulation of Zosyn (piperacillin and tazobactam for injection) had not been discontinued for reasons of safety and effectiveness and requesting the FDA’s permission to submit ANDAs referencing the discontinued formulation. In January 2006, the Company submitted a comment requesting the FDA to deny the Sandoz petition on the grounds that (1) proposed generic products are not legally permitted to use discontinued formulations of existing products as reference drugs and (2) approval of a generic version of Zosyn that lacks the inactive ingredients in the current formulation of Zosyn would be contrary to FDA regulations and the public health. The matter is pending before the FDA.

In April 2006, the Company filed a petition with the FDA asking the FDA to refrain from approving any application for a generic product that references Zosyn unless the generic product complies with the U.S. Pharmacopeia standards on particulate matter in injectable drugs and exhibits the same compatibility profile as Zosyn, particularly with respect to compatibility with Lactated Ringer’s Solution and the aminoglycoside antibiotics amikacin and gentamicin. The Company further requested that in the event the FDA chooses to approve a generic product that did not exhibit the same compatibility profile as Zosyn, the FDA would condition such approval upon the applicant’s implementation of a risk minimization action plan to address the confusion that would necessarily arise as a result of such difference. The matter is pending before the FDA.

Other third parties also have submitted petitions and comments to the FDA related to this matter, all of which are pending before the agency.

In December 2008 and January 2009, the Company received notice that five generic companies each have filed ANDAs seeking FDA approval to market generic versions of Zosyn. These notices alleged that the generic products do not infringe the Company’s patents. The Company is investigating these allegations. The Company believes that these ANDAs relate to the prior formulation of Zosyn.

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Consent Decree

The Company’s Wyeth Pharmaceuticals division, a related subsidiary, and an executive officer of the Company are subject to a consent decree entered into with the FDA in October 2000 following the seizure in June 2000 from the Company’s distribution centers in Tennessee and Puerto Rico of a small quantity of certain of the Company’s products then manufactured at the Company’s Marietta, Pennsylvania facility. The seizures were based on FDA allegations that certain of the Company’s biological products were not manufactured in accordance with current Good Manufacturing Practices (cGMP) at the Company’s Marietta and Pearl River, New York facilities. The consent decree, which has been approved by the United States District Court for the Eastern District of Tennessee, does not represent an admission by the Company or the executive officer of any violation of the U.S. Federal Food, Drug, and Cosmetic Act or its regulations. As provided in the consent decree, an expert consultant conducted a comprehensive inspection of the Marietta and Pearl River facilities, and the Company has identified various actions to address the consultant’s observations. As of September 1, 2005, the Company had ceased manufacturing operations at its Marietta facility, decommissioned such facility and sold such facility to another company. On January 12, 2007, based on the Company’s completion of the corrective actions identified by the expert consultant for the Pearl River facility, the expert consultant’s certification of such completion, and the corrective actions completed by the Company following the FDA’s inspection of the Pearl River facility in August 2006, the FDA issued a letter pursuant to the consent decree confirming that the Pearl River facility appears to be operating in conformance with applicable laws and regulations and the relevant portions of the consent decree. As a result, there is no longer a requirement for review by the expert consultant of a statistical sample of the manufacturing records for approved biological product prior to distribution of individual lots. The consent decree now requires the Pearl River facility to undergo a total of four annual inspections by an expert consultant to assess its continued compliance with cGMPs and the consent decree. The first two such inspections have been completed, and in both instances, the expert consultant found the facility to be operating in a state of cGMP compliance.

Environmental Matters

The Company is a party to, or otherwise involved in, legal proceedings under the U.S. Comprehensive Environmental Response, Compensation and Liability Act and similar state and foreign laws directed at the cleanup of various sites, including the Bound Brook, New Jersey site, in various federal and state courts in the United States and other countries. The Company’s potential liability in these legal proceedings varies from site to site. As assessments and cleanups by the Company proceed, these liabilities are reviewed periodically by the Company and are adjusted as additional information becomes available. Environmental liabilities inherently are unpredictable and can change substantially due to factors such as additional information on the nature or extent of contamination, methods of remediation required and other actions by governmental agencies or private parties.

MPA Matter

The Company’s Wyeth Medica Ireland (WMI) subsidiary has received a Statement of Claim filed in the Irish High Court in Dublin by Schuurmans & Van Ginneken, a Netherlands-based molasses and liquid storage concern. Plaintiff claims it purchased sugar water allegedly contaminated with medroxyprogesterone acetate (MPA) from a WMI sugar water manufacturing effluent that was to have been disposed of by a third party. Plaintiff originally sought compensation in the amount of approximately €115 million for the contamination and disposal of up to 26,000 tons of molasses allegedly contaminated with MPA and for compensation on behalf of an unspecified number of its animal feed customers who are alleged to have used contaminated molasses in their livestock feed formulations. During discovery in 2008, plaintiff further particularized its losses as totaling approximately €24 million, exclusive of interest and legal fees. WMI has provided plaintiff bank guarantees in the amount of €28.6 million as security for the amounts claimed by plaintiff in its Statement of Claim. WMI also is subject to a number of other lawsuits seeking damages relating to alleged contamination of pigs with MPA.

In November 2006, WMI was served with criminal summonses charging WMI with 18 violations of the Waste Management Act and WMI’s Integrated Pollution Prevention and Control License in connection with five specifically identified shipments of MPA-contaminated sugar water waste from WMI’s Newbridge, Ireland facility. The Company thereupon initiated proceedings in the Irish High Court in Dublin challenging the right of the Director of Public Prosecutions (DPP) and the Irish Environmental Protection Agency to prosecute the alleged violations of WMI’s Integrated Pollution Prevention and Control License. WMI’s challenge was denied by the High Court, and WMI then appealed the High Court’s decision to the Supreme Court of Ireland, where the matter is now pending. The criminal prosecution of the five summonses alleging breach of WMI’s Integrated Pollution Prevention and Control License and, in effect, the entire prosecution in the local Circuit Court have been stayed pending resolution of the Supreme Court appeal.

Tax Matters

In 2002, a Brazilian Federal Public Attorney sought to contest a 2000 decision by the Brazilian First Board of Tax Appeals, which had found that the capital gain of the Company from its divestiture of its oral health care business was not taxable in Brazil. In current U.S. dollars, the claim is for approximately $124 million. The Company has timely filed a response in this action; and, other than procedural activities, no further action has been taken with respect to the Company in this matter.

42

Commitments

The Company leases certain property and equipment for varying periods under operating leases. Future minimum rental payments under non-cancelable operating leases with terms in excess of one year in effect at December 31, 2008 were as follows:

(In thousands)
2009	$	123,900
2010		98,400
2011		81,000
2012		67,000
2013		54,300
Thereafter		96,700
Total rental commitments	$	521,300

Rental expense for all operating leases was $176.7 million, $182.4 million and $163.9 million in 2008, 2007 and 2006, respectively.

Other

As part of its business, the Company has made and will continue to make significant investments in assets, including inventory, plant and equipment, which relate to potential new products and potential changes in manufacturing processes or reformulations of existing products. The Company’s ability to realize value on these investments is contingent on, among other things, regulatory approval and market acceptance of these new products, process changes and reformulations. In addition, several of the Company’s existing products are nearing the end of their compound patent terms. If the Company is unable to find alternative uses for the assets supporting these products, these assets may need to be evaluated for impairment and/or the Company may need to incur additional costs to convert these assets to an alternate use. The Company’s productivity initiatives may involve the acceleration of the impairment of these assets and/or the incurrence of additional costs to convert these assets to alternate uses. Earlier than anticipated generic competition for these products also may result in excess inventory and associated charges.

16. Company Data by Segment

The Company has four reportable segments: Pharmaceuticals, Consumer Healthcare, Animal Health and Corporate. The Company’s Pharmaceuticals, Consumer Healthcare and Animal Health reportable segments are strategic business units that offer different products and services. The reportable segments are managed separately because they develop, manufacture, distribute and sell distinct products and provide services that require differing technologies and marketing strategies.

The Pharmaceuticals segment develops, manufactures, distributes and sells branded human ethical pharmaceuticals, biotechnology products, vaccines and nutritional products. Products include neuroscience therapies, musculoskeletal therapies, vaccines, nutritional products, anti-infectives, women’s health care products, hemophilia treatments, gastroenterology drugs, immunological products and oncology therapies.

The Consumer Healthcare segment develops, manufactures, distributes and sells OTC health care products that include pain management therapies, including analgesics and heat wraps, cough/cold/allergy remedies, nutritional supplements, and hemorrhoidal care and personal care items.

The Animal Health segment develops, manufactures, distributes and sells biological and pharmaceutical products for animals that include vaccines, pharmaceuticals, parasite control and growth implants.

Corporate is primarily responsible for the audit, controller, treasury, tax and legal operations of the Company’s businesses and maintains and/or incurs certain assets, liabilities, income, expenses, gains and losses related to the overall management of the Company that are not allocated to the other reportable segments.

The accounting policies of the segments described above are the same as those described in “Summary of Significant Accounting Policies” in Note 1. The Company evaluates the performance of the Pharmaceuticals, Consumer Healthcare and Animal Health reportable segments based on income (loss) before income taxes, which includes gains on the sales of non-corporate assets and certain other items. Corporate includes interest expense and interest income, gains/losses on investments in marketable securities and other corporate assets, certain litigation provisions, net productivity initiatives charges and other miscellaneous items.

43

Company Data by Reportable Segment

(In millions) Year Ended December 31,	2008			2007			2006
Net Revenue by Principal Products
Pharmaceuticals:
Effexor	$	3,927.9		$	3,793.9		$	3,722.1
Prevnar		2,715.5			2,439.1			1,961.3
Enbrel
Outside U.S. and Canada		2,592.9			2,044.6			1,499.6
Alliance Revenue - U.S. and Canada		1,204.7			999.8			919.0
Nutritionals		1,633.9			1,443.0			1,200.8
Zosyn/Tazocin		1,264.0			1,137.2			972.0
Premarin family		1,070.4			1,055.3			1,050.9
Hemophilia family		950.1			767.5			663.2
Protonix family(1)		806.4			1,911.2			1,795.0
Other		2,859.6			3,030.4			3,100.3
Total Pharmaceuticals		19,025.4			18,622.0			16,884.2
Consumer Healthcare		2,720.6			2,736.1			2,530.2
Animal Health		1,087.9			1,041.7			936.3
Total	$	22,833.9		$	22,399.8		$	20,350.7
Income (Loss) before Income Taxes
Pharmaceuticals	$	6,651.4		$	6,164.5		$	5,186.4
Consumer Healthcare		482.7			519.2			516.2
Animal Health		195.7			194.1			163.7
Corporate(2)		(991.7	)		(421.1	)		(436.4	)
Total(2)	$	6,338.1		$	6,456.7		$	5,429.9
Depreciation and Amortization Expense
Pharmaceuticals	$	878.1		$	800.5		$	719.9
Consumer Healthcare		38.5			35.1			20.0
Animal Health		44.1			32.6			32.7
Corporate		46.9			50.5			30.4
Total	$	1,007.6		$	918.7		$	803.0
Expenditures for Long-Lived Assets(3)
Pharmaceuticals	$	1,218.2		$	1,410.6		$	1,228.3
Consumer Healthcare		366.9			72.2			35.3
Animal Health		43.6			42.4			37.2
Corporate		80.3			84.5			72.0
Total	$	1,709.0		$	1,609.7		$	1,372.8
Total Assets
Pharmaceuticals	$	19,042.4		$	18,814.9		$	17,171.6
Consumer Healthcare		2,081.1			1,833.4			1,492.9
Animal Health		1,538.3			1,569.4			1,430.0
Corporate		21,369.9			20,499.6			16,384.2
Total	$	44,031.7		$	42,717.3		$	36,478.7

44

Company Data by Geographic Segment

(In millions) Year Ended December 31,	2008		2007		2006
Net Revenue from Customers(4)
United States	$	10,714.6	$	11,637.7	$	11,054.4
United Kingdom		1,114.6		1,083.2		999.5
Other international		11,004.7		9,678.9		8,296.8
Total	$	22,833.9	$	22,399.8	$	20,350.7
Long-Lived Assets(3)(4)
United States	$	8,139.3	$	8,211.2	$	8,075.9
Ireland		3,816.6		3,902.3		3,435.9
Other international		3,925.7		3,833.3		3,290.3
Total	$	15,881.6	$	15,946.8	$	14,802.1

(1) Protonix family net revenue for 2008 reflects revenue from both the branded product, $394.9, and the Company’s own generic version, $411.5, which was introduced in January 2008 in response to the “at risk” launch of infringing generic products. See Note 15 for discussion of Protonix litigation.

(2) 2008, 2007 and 2006 Corporate included net charges of $467.0, $273.4 and $218.6, respectively, relating to the Company’s productivity initiatives (see Note 3).

(3) Long-lived assets consist primarily of property, plant and equipment, goodwill, other intangibles and other assets, excluding deferred taxes, net investments in equity companies and various financial assets.

(4) Other than the United States and the United Kingdom, no other country in which the Company operates had net revenue of 5% or more of the respective consolidated total. Other than the United States and Ireland, no other country in which the Company operates had long-lived assets of 5% or more of the respective consolidated total. The basis for attributing net revenue to geographic areas is the location of the customer.

17. Merger Agreement with Pfizer

On January 26, 2009, the Company announced it had entered into a definitive merger agreement with Pfizer, a Delaware corporation, and a wholly owned Delaware subsidiary of Pfizer. Pursuant to the merger agreement and subject to the conditions set forth therein, the Pfizer subsidiary will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Pfizer.

As a result of the merger, each outstanding share of the Company’s common stock, other than shares of restricted stock (for which holders will be entitled to receive cash consideration pursuant to separate terms of the merger agreement), and shares of common stock held directly or indirectly by the Company or Pfizer (which will be canceled as a result of the proposed merger), and other than those shares with respect to which appraisal rights are properly exercised and not withdrawn, will be converted into the right to receive $33.00 in cash, without interest, and 0.985 validly issued, fully paid and non-assessable shares of common stock of Pfizer. Under the terms of the merger agreement, in the event that the number of shares of common stock of Pfizer issuable as a result of the merger would exceed 19.9% of the outstanding shares of common stock of Pfizer immediately prior to the closing of the merger, the stock portion of the merger consideration will be reduced so that no more than 19.9% of the outstanding shares of common stock of Pfizer become issuable in the merger, and the cash portion of the merger consideration will be increased by a corresponding amount.

The completion of the merger is subject to certain conditions, including, among others (i) adoption of the merger agreement by the Company’s stockholders, (ii) the absence of certain legal impediments to the consummation of the merger, (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and obtaining antitrust approvals in certain other jurisdictions, (iv) subject to certain materiality exceptions, the accuracy of the representations and warranties made by the Company and Pfizer, respectively, and compliance by the Company and Pfizer with their respective obligations under the merger agreement, (v) declaration of the effectiveness by the Securities and Exchange Commission of the Registration Statement on Form S-4 to be filed by Pfizer, and (vi) the lenders providing Pfizer with debt financing in connection with the merger shall not have declined to provide such financing at closing due to the occurrence of a Parent Material Adverse Effect (as defined in the merger agreement) or due to Pfizer failing to obtain (A) an unsecured long-term obligations rating of at least “A2” (with stable (or better) outlook) and a commercial paper credit rating of at least “P-1” (which rating shall be affirmed) from Moody’s and (B) a long-term issuer credit rating of at least “A” (with stable (or better) outlook) and a short-term issuer credit rating of at least “A-1” (which rating shall be affirmed) from S&P Ratings Group (it being understood that an unsecured long-term obligations rating of higher than “A2” and a long-term issuer credit rating of higher than “A” shall satisfy the foregoing condition, as applicable, irrespective of whether or not such rating(s) are subject to “negative watch” or “negative outlook”) (the Specified Financing Condition).

45

A copy of the joint press release announcing the transaction was filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Security and Exchange Commission on January 26, 2009. A copy of the merger agreement was filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 29, 2009.

There are no assurances that the proposed transaction with Pfizer will be consummated on the expected timetable (during the second half of 2009) or at all. The merger agreement contains specified termination rights for the parties. If the merger agreement is terminated in certain circumstances where the Company receives an acquisition proposal that the Board of Directors of the Company determines is, or is reasonably likely to lead to, a Superior Proposal (as defined in the merger agreement), then the Company would be required to pay Pfizer a termination fee of (i) $1.5 billion if such proposal is received during the first 30 days following execution of the merger agreement or (ii) $2.0 billion if such proposal is received after the first 30 days following execution of the merger agreement. The Company would also be required to pay Pfizer a termination fee of $2.0 billion if (1) the merger agreement is terminated due to either the failure of the Company’s shareholders to approve the merger or the Company’s breach of the merger agreement, and, in each case, certain additional circumstances occur, and (2) within 12 months following such termination, the Company enters into a definitive agreement with a third party with respect to certain extraordinary transactions or certain extraordinary transactions are consummated. In addition, if as a result of an Intervening Event (as defined in the merger agreement) the Company’s Board of Directors changes its recommendation that its shareholders approve the merger, then Pfizer could terminate the merger agreement, in which case the Company would be required to pay Pfizer a $2.0 billion termination fee and reimburse Pfizer for up to $700.0 million of expenses incurred by Pfizer in connection with the merger.

If all conditions to the merger agreement are satisfied other than the Specified Financing Condition and Pfizer does not consummate the merger within the period specified in the merger agreement, then the merger agreement may be terminated by the Company, in which case Pfizer would be required to pay the Company a termination fee of $4.5 billion.

46

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Wyeth:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in stockholders' equity and cash flows present fairly, in all material respects, the financial position of Wyeth and its subsidiaries at December 31, 2008 and December 31, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 9 and 11 to the consolidated financial statements, the Company changed the manner in which it accounts for pensions and other postretirement benefits in 2006 and the manner in which it accounts for uncertainty in income taxes in 2007.

\s\ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Florham Park, New Jersey

February 26, 2009

47

EX-99.2

Exhibit 99.2

PFIZER INC. AND WYETH

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL STATEMENTS

The Unaudited Pro Forma Condensed Combined Statement of Income combines the historical consolidated statements of income of Pfizer Inc. (“Pfizer”) and Wyeth, giving effect to the merger of Wyeth and Wagner Acquisition Corp., a wholly owned subsidiary of Pfizer, as if it had occurred on January 1, 2008.  The Unaudited Pro Forma Condensed Combined Balance Sheet combines the historical consolidated balance sheets of Pfizer and Wyeth, giving effect to the merger as if it had occurred on December 31, 2008.  We have adjusted the historical consolidated financial information to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, and (3) with respect to the statement of income, expected to have a continuing impact on the combined results.  The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.  In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the:

· separate historical financial statements of Pfizer as of and for the year ended December 31, 2008 and the related notes included in Pfizer’s Annual Report on Form 10-K for the year ended December 31, 2008; and

· separate historical financial statements of Wyeth as of and for the year ended December 31, 2008 and the related notes included in Wyeth’s Annual Report on Form 10-K for the year ended December 31, 2008.

We present the unaudited pro forma condensed combined financial information for informational purposes only.  The pro forma information is not necessarily indicative of what our financial position or results of operations actually would have been had we completed the merger at the dates indicated.  In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.  There were no material transactions between Pfizer and Wyeth during the periods presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.

We prepared the unaudited pro forma condensed combined financial information using the acquisition method of accounting under existing U.S. GAAP standards, which are subject to change and interpretation.  Pfizer has been treated as the acquirer.  The acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement.  Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information.  Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the accompanying Unaudited Pro Forma Condensed Combined Financial Statements and Pfizer’s future results of operations and financial position.

The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that we may achieve with respect to the combined company or the costs to integrate the operations of Pfizer and Wyeth or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.

- 1 - -

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2008

(IN MILLIONS, EXCEPT PER SHARE DATA)	Pfizer Inc.		Wyeth		Pro Forma Adjustments			Pro Forma Combined
Revenues	$	48,296		22,834					71,130
Cost and expenses:
Cost of sales		8,112		5,906					14,018
Selling, informational and administrative expenses		14,537		6,542					21,079
Research and development expenses		7,945		3,309					11,254
Amortization of intangible assets		2,668		79		2,845	(a)		5,592
Acquisition-related in-process research and development charges		633		31					664
Restructuring charges and acquisition-related costs		2,675		467					3,142
Other deductions-net		2,032		142		3,016	(b)		5,190
Income from continuing operations before provision for taxes on income, minority interests and cumulative effect of a change in accounting principles		9,694		6,358		(5,861	)		10,191
Provision for taxes on income		1,645		1,920		(1,960	)(c)		1,605
Minority interests		23		20					43
Income from continuing operations	$	8,026		4,418		(3,901	)		8,543
Income from continuing operations per common share – basic	$	1.19		3.31					1.06
Income from continuing operations per common share – diluted	$	1.19		3.27					1.06
Weighted average shares used to calculate earnings per common share amounts:
Basic		6,727		1,333		(20	)		8,040
Diluted		6,750		1,357		(45	)		8,062
Cash dividends paid per common share	$	1.28		1.14

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements.  The pro forma adjustments are explained in Note 6. Pro Forma Adjustments.

- 2 - -

UNAUDITED PRO FORMA CONDENSED COMBINED

BALANCE SHEET

AS OF DECEMBER 31, 2008

(IN MILLIONS)	Pfizer Inc.			Wyeth			Pro Forma Adjustments				Pro Forma Combined
ASSETS
Cash and cash equivalents	$	2,122			10,016			(10,016	)	(d)		2,122
Short-term investments		21,609			4,529			(12,431	)	(d)		13,707
Accounts receivable, less allowance for doubtful accounts		8,958			3,647							12,605
Short-term loans		824										824
Inventories		4,381			2,996			4,600		(e)		11,977
Taxes and other current assets		5,034			2,293			(1,300	)	(c)		6,027
Assets held for sale		148										148
Total current assets		43,076			23,481			(19,147	)			47,410
Long-term investments and loans		11,478										11,478
Property, plant and equipment, less accumulated depreciation		13,287			11,198							24,485
Goodwill		21,464			4,262			6,641		(f)		32,367
Identifiable intangible assets, less accumulated amortization		17,721			422			50,478		(g)		68,621
Other assets, deferred taxes and deferred charges		4,122			4,669			178		(c), (h)		8,969
Total assets	$	111,148			44,032			38,150				193,330
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term borrowings, including current portion of long-term debt	$	9,320			913							10,233
Accounts payable		1,751			1,254							3,005
Dividends payable		2,159										2,159
Income taxes payable		656			256			1,165		(c)		2,077
Accrued compensation and related items		1,667			431							2,098
Other current liabilities		11,456			3,996			747		(c)		16,199
Total current liabilities		27,009			6,850			1,912				35,771
Long-term debt		7,963			10,826			22,634		(i)		41,423
Pension benefit obligations		4,235			1,601							5,836
Postretirement benefit obligations		1,604			1,778							3,382
Deferred taxes		2,959			213			16,150		(c)		19,322
Other taxes payable		6,568			1,505							8,073
Other noncurrent liabilities		3,070			1,993							5,063
Total liabilities		53,408			24,766			40,696				118,870
Minority interests		184			92							276
Preferred stock		73										73
Common stock		443			444			(378	)	(j)		509
Additional paid-in capital		70,283			7,483			9,229		(k)		86,995
Employee benefit trust		(425	)									(425	)
Treasury stock		(57,391	)									(57,391	)
Retained earnings		49,142			12,869			(13,019	)	(l)		48,992
Accumulated other comprehensive income/(expense)		(4,569	)		(1,622	)		1,622		(m)		(4,569	)
Total shareholders’ equity		57,556			19,174			(2,546	)			74,184
Total liabilities and shareholders’ equity	$	111,148			44,032			38,150				193,330

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements.  The pro forma adjustments are explained in Note 6. Pro Forma Adjustments.

- 3 - -

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

1. Description of Transaction

On January 25, 2009, Pfizer Inc., Wagner Acquisition Corp., a wholly-owned subsidiary of Pfizer, and Wyeth entered into an Agreement and Plan of Merger (the “merger agreement”), pursuant to which, subject to the terms and conditions set forth in the merger agreement, Wyeth will become a wholly-owned subsidiary of Pfizer (the “merger”).  The merger agreement provides that each issued and outstanding share of Wyeth common stock will be converted into the right to receive a combination of $33.00 cash, without interest, and 0.985 of a share (the “exchange ratio”) of Pfizer common stock (the “merger consideration”) in a taxable transaction.  Pfizer will not issue more than 19.9% of its outstanding common stock at the acquisition date in connection with the merger.  The exchange ratio will be adjusted if it would result in Pfizer issuing in excess of 19.9% of its outstanding common stock as a result of the merger.  In such circumstance, the exchange ratio will be reduced to the minimum extent necessary so that the number of shares of Pfizer common stock issued or issuable as a result of the merger will equal 19.9% of its outstanding common stock and the cash portion of the mergerconsideration will be increased by an equivalent value (based on the volume weighted average price of Pfizer common stock for the five consecutive trading days ending two days prior to the effective time of the merger, as such prices are reported on the NYSE Transaction Reporting System).  Pfizer and Wyeth currently do not anticipate that any adjustment to the exchange ratio will be required.Accordingly, Pfizer does not believe that a potential adjustment to the merger consideration as described above will have a material effect on the pro forma financial statement balances.

 Each outstanding stock option under Wyeth’s stock incentive plans, whether or not vested and exercisable, will become fully vested and exercisable immediately prior to the effective time of the merger, and then at the effective time of the merger will be cancelled and converted into the right to receive an amount in cash, without interest and less any applicable tax, equal to the excess, if any, of: (i) the per share value of the merger consideration, minus the per share exercise price of the option, multiplied by (ii) the total number of shares of Wyeth common stock underlying the option.  The “per share value of the merger consideration” is equal to the sum of (x) the cash portion of the merger consideration, plus (y) the market value of the stock portion of the merger consideration (determined based on the volume weighted average of the price of Pfizer common stock for the five consecutive trading days ending two days prior to the time the merger becomes effective, as such prices are reported on the NYSE Transaction Reporting System).  If the per share exercise price of any Wyeth stock option is equal to or greater than the per share value of the merger consideration, then the stock option will be cancelled without any payment to the stock option holder.

Also at the effective time of the merger, generally each outstanding share of restricted stock, each outstanding deferred stock unit (“DSU”) and each outstanding restricted stock unit (“RSU”), including performance share unit awards (but excluding certain RSUs that constitute deferred compensation, as discussed below), will vest and then will be cancelled and converted into the right to receive an amount in cash equal to the per share value of the merger consideration in respect of each share of Wyeth common stock into which the vested portion of such outstanding restricted stock, DSU and RSU award, as applicable, would otherwise be convertible (except that with respect to any performance share unit award, which by the terms of the award agreement pursuant to which it was granted provides for a lesser percentage of such performance share unit award to become vested upon the effective time of the merger, such performance share unit award will only become vested as to such percentage (with the remaining unvested portion being cancelled without payment)).  These cash amounts will be paid out within ten business days after the effective time of the merger in accordance with the terms of the applicable plans.  However, at the effective time of the merger, each outstanding RSU that constitutes deferred compensation under Section 409A of the Internal Revenue Code ("IRC") will, as of the effective time of the merger, be converted into the right to receive the merger consideration in respect of each share of Wyeth common stock into which such RSU would otherwise be convertible.  Such merger consideration will be deposited into a trust, the cash portion of the merger consideration will accrue interest at a designated market rate, the stock portion of the merger consideration will accrue dividends in the form of additional shares of Pfizer common stock in the same amount and at the same time as dividends are paid on Pfizer common stock, and these amounts will be paid out in accordance with the applicable payment schedules provided for under the applicable stock incentive plan, award agreement and/or deferral elections made by the holders of such RSUs.  For purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we have assumed that there are no RSU awards that cannot be immediately settled due to tax law restrictions.

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

Upon completion of the merger, each share of Wyeth $2 Convertible Preferred Stock, par value $2.50 per share, issued and outstanding immediately prior to completion of the merger will be converted into the right to receive one share of a new series of Pfizer preferred stock having the same powers, designations, preferences and rights (to the fullest extent practicable) as the shares of the Wyeth $2 Convertible Preferred Stock.  It is expected, however, that Pfizer will request Wyeth to, whereupon Wyeth will, redeem its outstanding $2 Convertible Preferred Stock prior to the completion of the merger in which case Pfizer will not have to issue any preferred stock in connection with the merger.

The merger is subject to Wyeth shareholder approval, governmental and regulatory approvals, the satisfaction of certain conditions related to the debt financing for the transaction, and other usual and customary closing conditions.  The merger is expected to be completed at the end of the third quarter or during the fourth quarter of 2009.

2. Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting and was based on the historical financial statements of Pfizer and Wyeth.  Certain reclassifications have been made to the historical financial statements of Wyeth to conform with Pfizer’s presentation, primarily related to the presentation of amortization expense of intangible assets, acquisition-related in-process research and development charges, restructuring charges, net interest income, minority interests expense, accrued compensation-related liabilities and noncurrent tax liabilities. Included in Wyeth’s restructuring charges of $467 million for the year ended December 31, 2008 is a net gain on the sale of a manufacturing facility in Japan of $105 million.

The acquisition method of accounting is based on Statement of Financial Accounting Standard (SFAS) No. 141R, Business Combinations, which we adopted on January 1, 2009 and uses the fair value concepts defined in SFAS No. 157, Fair Value Measurements, which we have adopted as required.  We prepared the unaudited pro forma condensed combined financial information using the acquisition method of accounting, under these existing U.S. GAAP standards, which are subject to change and interpretation.

SFAS No. 141R requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the fair value of in-process research and development be recorded on the balance sheet regardless of the likelihood of success as of the acquisition date.  In addition, SFAS No. 141R establishes that the consideration transferred be measured at the closing date of the merger at the then-current market price; this particular requirement will likely result in a per share equity component that is different from the amount assumed in these Unaudited Pro Forma Condensed Combined Financial Statements.

SFAS No. 157 defines the term ‘fair value’ and sets forth the valuation requirements for any asset or liability measured at fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures.  Fair value is defined in SFAS No. 157 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”  This is an exit price concept for the valuation of the asset or liability.  In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability.  Fair value measurements for an asset assume the highest and best use by these market participants.  As a result of these standards, we may be required to record assets which we do not intend to use or sell (defensive assets) and/or to value assets at fair value measures that do not reflect Pfizer’s intended use of those assets.  Many of these fair value measurements can be highly subjective and it is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

Under the acquisition method of accounting, the assets acquired and liabilities assumed will be recorded as of the completion of the merger, primarily at their respective fair values and added to those of Pfizer.  Financial statements and reported results of operations of Pfizer issued after completion of the merger will reflect these values, but will not be retroactively restated to reflect the historical financial position or results of operations of Wyeth.

Under SFAS No. 141R, acquisition-related transaction costs (i.e., advisory, legal, valuation, other professional fees) and certain acquisition-related restructuring charges impacting the target company are not included as a component of consideration transferred but are accounted for as expenses in the periods in which the costs are incurred.  Total acquisition-related transaction costs expected to be incurred by Pfizer are estimated to be $150 million and are reflected in these Unaudited Pro Forma Condensed Combined Financial Statements as a reduction to cash and retained earnings.  The Unaudited Pro Forma Condensed Combined Financial Statements do not reflect any acquisition-related restructuring charges incurred in connection with the merger but these charges are expected to be in the range of approximately $6-8 billion dollars.  These costs will be expensed as incurred.  We have made no adjustment for anticipated acquisition-related transaction costs to be incurred by Wyeth, which are estimated to be approximately $135 million.

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

3. Accounting Policies

Upon consummation of the merger, Pfizer will review Wyeth’s accounting policies.  As a result of that review, it may become necessary to harmonize the combined entity’s financial statements to conform to those accounting policies that are determined to be more appropriate for the combined entity.  The Unaudited Pro Forma Condensed Combined Financial Statements do not assume any differences in accounting policies.

4. Estimate of Consideration Expected to be Transferred

The following is a preliminary estimate of consideration expected to be transferred to effect the acquisition of Wyeth:

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)	Conversion Calculation		Estimated Fair Value		Form of Consideration
Number of shares of Wyeth common stock outstanding as of December 31, 2008		1,331.6
Multiplied by Pfizer’s stock price as of March 11, 2009 multiplied by the exchange ratio of 0.985 ($12.79*0.985)	$	12.60	$	16,778	Pfizer common stock
Number of shares of Wyeth common stock outstanding as of December 31, 2008		1,331.6
Multiplied by cash consideration per common shareoutstanding	$	33.00		43,943	Cash
Number of shares of Wyeth $2 Convertible Preferred Stock outstanding at December 31, 2008(a)		--
Multiplied by the exchange ratio of one share of Pfizer convertible preferred stock at a par value of $2.50 per share				--	Pfizer newly created convertible preferred stock
Number of shares of Wyeth stock options vested and unvested as of December 31, 2008 expected to be cancelled and exchanged for a cash payment		56.1
Multiplied by the difference between the per share value of the merger consideration and the weighted-average option exercise price of in-the-money options	$	3.81		214	Cash
Number of outstanding shares of restricted stock and each outstanding deferred or restricted stock unit, including performance share unit awards, as of December 31, 2008, expected to be cancelled		11.0
Multiplied by the per share value of the merger consideration	$	45.60		502	Cash
Estimate of consideration expected to be transferred(b)			$	61,437

(a) Number and amount of Wyeth $2 Convertible Preferred Stock outstanding round to zero in the presentation format.  Actual shares outstanding and whole dollar amounts are: 8,971 shares of outstanding Wyeth $2 Convertible Preferred Stock at a $2.50 par value per share, totaling $22 thousand.  It is expected that Pfizer will request Wyeth to, whereupon Wyeth will, redeem its outstanding $2 Convertible Preferred Stock prior to the completion of the merger.  However, for purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we have not assumed redemption of the $2 Convertible Preferred Stock prior to the completion of the merger.

(b) The estimated consideration expected to be transferred reflected in these Unaudited Pro Forma Condensed Combined Financial Statements does not purport to represent what the actual consideration transferred will be when the merger is consummated.  In accordance with SFAS No. 141R, the fair value of equity securities issued as part of the consideration transferred will be measured on the closing date of the merger at the then-current market price.  This requirement will likely result in a per share equity component different from the $12.60 assumed in these Unaudited Pro Forma Condensed Combined Financial Statements and that difference may be material.  For example, if Pfizer’s stock price on the closing date of the merger, increased or decreased by 40% from the price assumed in these Unaudited Pro Forma Condensed Combined Financial Statements, the consideration transferred would increase or decrease by about $7 billion.

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

5. Estimate of Assets to be Acquired and Liabilities to be Assumed

The following is a preliminary estimate of the assets to be acquired and the liabilities to be assumed, reconciled to the estimate of consideration expected to be transferred:

(IN MILLIONS)
Book value of net assets acquired at December 31, 2008	$	19,174
Adjusted for:
Elimination of existing goodwill and intangible assets		(4,684	)
Adjusted book value of net assets acquired	$	14,490
Adjustments to:
Inventory(a)		4,600
Property, plant and equipment(b)		--
Identifiable intangible assets(c)		50,900
Debt(d)		(134	)
Non-contractual contingencies(e)		--
Taxes(f)		(19,322	)
Goodwill(g)		10,903
Estimate of consideration expected to be transferred	$	61,437

(a) As of the acquisition date, inventories are required to be measured at fair value, which we believe will approximate net realizable value.  We do not have sufficient information at this time as to the specific finished goods on hand, the stage of completion of work-in-progress inventories (which inventories represent approximately 50% of total inventories, as disclosed in Wyeth’s 2008 annual report) or the types and nature of raw materials and supplies.  However, for purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we have estimated the fair value adjustment by referencing selected acquisition transactions in the life science, consumer and animal health sectors (because such sectors are the sectors in which Wyeth operates) and relying on those inventory valuation trends.

(b) As of the acquisition date, property, plant and equipment is required to be measured at fair value, unless those assets are classified as held-for-sale on the acquisition date.  The acquired assets can include assets that we do not intend to use or sell, or that we intend to use in a manner other than their highest and best use.  We do not have sufficient information at this time as to the specific nature, age, condition or location of the land, buildings, machinery and equipment, and construction-in-progress, as applicable, and we do not know the appropriate valuation premise, in-use or in-exchange, as the valuation premise requires a certain level of knowledge about the assets being evaluated as well as a profile of the associated market participants.  All of these elements can cause differences between fair value and net book value.  For purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we referenced selected acquisition transactions in the life science, consumer and animal health sectors (because such sectors are the sectors in which Wyeth operates) and observed that fair value adjustments that increase property, plant and equipment can be significant and noted that the estimated remaining useful lives of the underlying assets can range from 10 to 15 years.  We also note that reductions to book value are possible.  However, we do not believe that we have sufficient information at this time to permit us to provide an estimate of fair value or the associated adjustments to depreciation and amortization.  For each $1 billion of fair value adjustment that changes property, plant and equipment, there could be a change in depreciation expense approximating $100 million, assuming a weighted-average useful life of 10 years.

(c) As of the acquisition date, identifiable intangible assets are required to be measured at fair value and these acquired assets could include assets that we do not intend to use or sell or that we intend to use in a manner other than their highest and best use.  For purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we have assumed that all assets will be used and that all assets will be used in a manner that represents the highest and best use of those assets, but we have not assumed the achievement of any market participant synergies.  We have excluded the consideration of synergies because we do not consider them to be factually supportable, a required condition for these pro forma adjustments.

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

The fair value of identifiable intangible assets is determined primarily using the “income method,” which starts with a forecast of all the expected future net cash flows.  Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other relevant laws and regulations, there are significant limitations regarding what Pfizer can learn about the specifics of the Wyeth intangible assets and any such process will take several months to complete.  We estimate the number of distinct intangibles acquired could be in the hundreds.

At this time, we do not have information as to the amount, timing and risk of cash flows of all of these intangible assets, particularly those assets still in the research and development phase.  Some of the more significant assumptions inherent in the development of intangible asset values, from the perspective of a market participant, include: the amount and timing of projected future cash flows (including revenue, cost of sales, research and development costs, sales and marketing expenses, and working capital/contributory asset charges); the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset, as well as other factors.  However, for purposes of these Unaudited Pro Forma Condensed Combined Financial Statements and using publicly available information, such as historical product revenues, Wyeth’s cost structure, and certain other high-level assumptions, we have estimated the fair value of the identifiable intangible assets and their weighted-average useful lives as follows:

	Estimated Fair Value	Estimated Useful Life
Developed technology – finite-lived	$30.9 billion	11 years
Brands – finite-lived	3.3 billion	20 years
Brands – indefinite-lived	5.0 billion	NA
In-process R&D – indefinite-lived	11.7 billion	Unknown*
Total	$50.9 billion

*       In-process research and development assets are initially recognized at fair value and are classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the acquisition date, these assets will not be amortized into earnings; instead these assets will be subject to periodic impairment testing.  Upon successful completion of the development process for an acquired in-process research and development project, we will make a determination as to the useful life of the asset; at that point in time, the asset would then be considered a finite-lived intangible asset and we would begin to amortize the asset into earnings.

(d) As of the acquisition date, debt is required to be measured at fair value.  The fair value of long-term debt is disclosed in Wyeth’s 2008 annual report and this disclosure is the basis for our adjustment.  Using publicly available information, we believe the disclosed amount is reasonable.

(e) As of the acquisition date, non-contractual contingencies are required to be measured at fair value, if it is more-likely-than-not that a liability has been incurred as of the acquisition date.  As disclosed in Wyeth’s 2008 annual report, Wyeth is “involved in various legal proceedings, including product liability, patent, commercial, environmental and antitrust matters, of a nature considered normal to its business.”  However, we do not have sufficient information to evaluate these legal contingencies under a more-likely-than-not standard, to value them under a fair value standard or to estimate a range of outcomes, although based on disclosures in Wyeth’s 2008 annual report, we believe the upper-end of any such range of any such contingencies could be significant.

On February 25, 2009, the Financial Accounting Standards Board (“FASB”) agreed to issue a FASB Staff Position to amend the guidance in SFAS No. 141R to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated.  If fair value of such an asset or liability cannot be reasonably estimated, the asset or liability would be recognized in accordance with SFAS No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss.  The FASB Staff Position is expected to be issued in March 2009, and when issued, it is expected that the amended guidance will be applicable to the accounting for the merger between Pfizer and Wyeth.

In addition, Wyeth has recorded provisions for uncertain tax positions.  Income taxes are exceptions to both the recognition and fair value measurement principles of SFAS No. 141R; they continue to be accounted for under the guidance of SFAS No. 109, Accounting for Income Taxes, as amended, and related interpretative guidance.  As disclosed in Wyeth’s 2008 annual report, these assessments involve “complex judgments about future events and rely on estimates and assumptions by management.”

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(f) As of the acquisition date, we will provide deferred taxes and other tax adjustments as part of the accounting for the acquisition, primarily related to the estimated fair value adjustments for acquired inventory and intangibles (see Note 6. Pro Forma Adjustments, items e and g).  In addition, we will provide deferred taxes on Wyeth’s unremitted earnings for which no taxes have been previously provided, as it is Pfizer’s current intention to repatriate these earnings as opposed to permanently reinvesting them overseas.  The amount of these deferred taxes, as calculated by Wyeth, is disclosed in their 2008 annual report and this disclosure is the basis for our repatriation adjustment.

(g) Goodwill is calculated as the difference between the acquisition date fair value of the consideration expected to be transferred and the values assigned to the assets acquired and liabilities assumed.  Goodwill is not amortized.

6. Pro Forma Adjustments

This note should be read in conjunction with Note 1. Description of Transaction; Note 2. Basis of Presentation; Note 4. Estimate of Consideration Expected to be Transferred; and Note 5. Estimate of Assets to be Acquired and Liabilities to be Assumed.  Adjustments included in the column under the heading “Pro Forma Adjustments” represent the following:

(a)    To record an estimate of intangible asset amortization.

(b)    To record the following adjustments:

(IN MILLIONS)
Amortization of the fair value increase to debt	$	(11	)
Additional expense on incremental debt to finance the merger(*)		2,246
Estimate of forgone interest income on the combined company’s cash and cash equivalents and short-term investments used in the merger(**)		781
Total	$	3,016

(*) On March 12, 2009, Pfizer entered into a $22.5 billion bridge term facility with certain lenders in connection with the financing of a portion of the consideration expected to be transferred.  The bridge term facility has a term of 364 days beginning from the date the acquisition closes and provides Pfizer with unsecured financing in a total principal amount up to $22.5 billion.  The bridge term facility is expected to be refinanced using proceeds obtained through permanent financing from issuances of Pfizer debt and/or equity securities.  For purposes of these unaudited pro forma condensed combined financial statements, we have assumed that Pfizer would borrow the entire $22.5 billion available under the bridge term facility to partially fund the acquisition.  We have also assumed that Pfizer would exit the bridge term facility over the nine months following the completion of the merger by replacing it with permanent debt financing.  For purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we have assumed that the amounts outstanding under the bridge term facility bear interest at LIBOR, plus an estimated margin ranging from 300 - 400 basis points and that the permanent debt financing would bear interest at 6.25%.

We have estimated additional interest expense of $1,296 million on assumed borrowings under the bridge term facility and expected permanent debt financing, which we have assumed will be put in place over the nine months following the completion of the merger to refinance the bridge term facility. We made the following interest rate assumptions:

· we estimated interest expense on the bridge term facility using LIBOR in effect as of March 11, 2009, which was 1.32594%, plus an estimated margin of 300 basis points for the first three months after funding, 350 basis points for the next three months and 400 basis points for the three months after that; and

· we estimated  interest expense on the permanent replacement debt using an assumed interest rate of 6.25%.

In addition to interest on the amounts outstanding under the bridge term facility, we expect to pay various fees associated with this bridge financing.  For purposes of the Unaudited Pro Forma Condensed Combined Statement of Income, we have estimated that Pfizer could incur fees of $950 million under the bridge term facility, and we have included these fees in the adjustment to pro forma debt expense.

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For purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we have assumed that Pfizer would not incur extension fees associated with the bridge term facility since Pfizer does not expect to extend the maturity date of the bridge term facility.

The fees that Pfizer will ultimately pay can vary significantly from what is assumed in these Unaudited Pro Forma Condensed Combined Financial Statements, and will depend on the actual timing and amount of borrowings and repayments under the bridge term facility, the actual mix of permanent debt/equity financing, the actual fixed/floating mix of permanent debt financing, and Pfizer’s credit rating, among other factors.

If LIBOR were to increase or decrease by .125% from the rate we have assumed in estimating the pro forma adjustment to interest expense, pro forma interest expense could increase or decrease by about $8 million.

(**) For purposes of these unaudited pro forma condensed combined financial statements, we estimated the forgone interest income of the combined entity as follows:

· We assumed the loss of Wyeth’s entire interest income in 2008 of $467 million under the assumption that all of Wyeth’s cash and short-term investments would be used to partially fund the merger; and

· We assumed the loss of approximately $314 million of Pfizer’s interest income on short-term investments, under the assumption that a portion of these investments will be used to partially fund the merger.  Our estimate is based on a weighted-average annual interest rate realized in 2008 of 4%.

 (c) To record an estimate of the tax impacts of the acquisition on the balance sheet and income statement, primarily related to the additional expense on incremental debt to finance the merger, estimated fair value adjustments for acquired inventory, intangibles and debt (see items b, e, g and i), repatriation decisions and the assumed utilization of deferred tax attributes, as applicable.  We generally assumed a 30% tax rate when estimating the tax impacts of the acquisition.  However, we assumed a 39% tax rate when estimating the tax impacts of the additional expense on incremental debt to finance the merger since we assumed it would be taxed at the estimated combined effective federal and state rate for the U.S.  Although not reflected in these Unaudited Pro Forma Condensed Combined Financial Statements, the effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-acquisition activities, including repatriation decisions, cash needs as well as the geographical mix of income.

(d) To record the cash portion of the transaction consideration estimated to be $44,659 million and to record estimated payments of $150 million for Pfizer’s acquisition-related transaction costs and $138 million to fund deferred compensation plans at Wyeth upon merger.  The cash is expected to be sourced from a combination of bank financing ($22,500 million), available cash and cash equivalents ($10,016 million) and the sale or redemption of certain short term investments ($12,431 million).

(e)

To adjust acquired inventory to an estimate of fair value.  Pfizer’s cost of sales will reflect the increased valuation of Wyeth’s inventory as the acquired inventory is sold, which for purposes of these Unaudited Pro Forma Condensed Combined Financial Statements, we have assumed will occur within the first year post-acquisition.  There is no continuing impact of the acquired inventory adjustment on the combined operating results and as such is not included in the Unaudited Pro Forma Condensed Combined Statement of Income.

(f)

To adjust goodwill to an estimate of acquisition-date goodwill, as follows:

(IN MILLIONS)
Eliminate Wyeth’s historical goodwill	$	(4,262	)
Estimated transaction goodwill		10,903
Total	$	6,641

(g) To adjust intangible assets (including in-process research and development intangibles) to an estimate of fair value, as follows:

(IN MILLIONS)
Eliminate Wyeth’s historical intangible assets	$	(422	)
Estimated fair value of intangible assets acquired		50,900
Total	$	50,478

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(h) Includes $138 million to fund deferred compensation plans at Wyeth upon merger.

(i) To record the Pfizer debt incurred to effect the acquisition and to adjust the Wyeth debt to an estimate of fair value, as follows:

(IN MILLIONS)
Establish incremental bank loan to effect the merger(*)	$	22,500
Estimated fair value increase to debt assumed		134
Total	$	22,634

(*) On March 12, 2009, Pfizer entered into a $22.5 billion bridge term facility with certain lenders in connection with the financing of a portion of the consideration expected to be transferred.  The bridge term facility has a term of 364 days beginning from the date the acquisition closes and provides Pfizer with unsecured financing in a total principal amount up to $22.5 billion.  The bridge term facility is expected to be refinanced using proceeds obtained through permanent financing from issuances of Pfizer debt and/or equity securities.  For purposes of the Unaudited Pro Forma Condensed Combined Balance Sheet, we assumed that Pfizer would borrow the entire $22.5 billion under the bridge term facility to partially fund the acquisition.  In the Unaudited Pro Forma Condensed Combined Balance Sheet, we presented the borrowings under the bridge term facility as long-term debt under the assumption that we have the intent and ability to replace the bridge term facility with permanent, long-term debt financing.

(j) To record the common stock portion of the transaction consideration, at par, and to eliminate Wyeth common stock, at par, as follows:

(IN MILLIONS)
Eliminate Wyeth common stock	$	(444	)
Issuance of Pfizer common stock		66
Total	$	(378	)

(k) To record the common stock portion of the transaction consideration, at fair value less par, and to eliminate Wyeth additional paid-in-capital, as follows:

(IN MILLIONS)
Eliminate Wyeth additional paid-in capital	$	(7,483	)
Issuance of Pfizer common stock		16,712
Total	$	9,229

(l) To eliminate Wyeth retained earnings, and to record estimated acquisition-related transaction costs of Pfizer, which are not expected to be recurring expenses, as follows:

(IN MILLIONS)
Eliminate Wyeth retained earnings	$	(12,869	)
Estimated acquisition-related transaction costs assumed to be non-recurring		(150	)
Total	$	(13,019	)

We have made no adjustment for anticipated acquisition-related transaction costs to be incurred by Wyeth, which are estimated to be approximately $135 million.

(m) To eliminate Wyeth accumulated other comprehensive expense.

The Unaudited Pro Forma Condensed Combined Financial Statements do not present a combined dividend per share amount. On March 3, 2009, Pfizer paid a first quarter 2009 dividend of $0.32 per common share.  In January 2009, Pfizer announced that, effective with the dividend to be paid in the second quarter of 2009, its quarterly dividend per share will be reduced to $0.16 ($0.80 per share annualized for 2009).  Following the first quarter of 2009, Pfizer will not declare or pay a quarterly dividend in excess of $0.16 per common share prior to consummation of its merger with Wyeth and any future payment of Pfizer’s quarterly dividend is subject to future approval and declaration by Pfizer’s Board of Directors.  Wyeth’s current quarterly dividend for the first quarter of 2009 is $0.30 per common share ($1.20 per common share annualized).  Wyeth will not declare or pay a quarterly dividend in excess of $0.30 per common share prior to consummation of its merger with Pfizer and any future payment of Wyeth’s quarterly dividend is subject to future approval and declaration by Wyeth’s Board of Directors.  The dividend policy of the combined company will be determined by its Board of Directors following the merger.

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The unaudited pro forma combined basic and diluted earnings per share for the period presented are based on the combined basic and diluted weighted-average shares.  The historical basic and diluted weighted average shares of Wyeth were assumed to be replaced by the shares expected to be issued by Pfizer to effect the merger.

The Unaudited Pro Forma Condensed Combined Financial Statements do not reflect the expected realization of annual cost savings of $4 billion by 2012.  These savings are expected in selling, informational and administrative functions, research and development and manufacturing.  Although management expects that cost savings will result from the merger, there can be no assurance that these cost savings will be achieved.  The Unaudited Pro Forma Condensed Combined Financial Statements do not reflect estimated acquisition-related restructuring charges associated with the expected cost savings, which could be in the range of approximately $6-8 billion dollars and which will be expensed as incurred.

7. Forward-looking Statements

These Unaudited Pro Forma Condensed Combined Financial Statements may be deemed to be forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995.  Forward-looking statements are typically identified by the words "believe," "expect," "anticipate," "intend," "estimate" and similar expressions.  Such statements may include, but are not limited to, statements about the benefits of the proposed merger between Pfizer and Wyeth, including future financial and operating results, the combined company's plans, objectives, expectations and intentions and other statements that are not historical facts.  These forward-looking statements are based largely on management's expectations and are subject to a number of risks and uncertainties.  Actual results could differ materially from these forward-looking statements.  Neither Pfizer nor Wyeth undertake any obligation to update publicly or revise any forward-looking statements.  The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from the proposed merger of Pfizer and Wyeth will not be realized, or will not be realized within the expected time period, due to, among other things, the impact of pharmaceutical industry regulation and pending legislation that could affect the pharmaceutical industry; the ability to obtain governmental and self-regulatory organization approvals of the merger on the proposed terms and schedule; the failure of Wyeth shareholders to approve the merger; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions; Pfizer's and Wyeth's ability to accurately predict future market conditions; dependence on the effectiveness of Pfizer's and Wyeth's patents and other protections for innovative products; the risk of new and changing regulation and health policies in the U.S. and internationally and the exposure to litigation and/or regulatory actions.  Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Pfizer's 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 27, 2009, Wyeth's 2008 Annual Report on Form 10-K filed with the SEC on February 27, 2009, included in the “Risk Factors” section of each of these filings, and each company's other filings with the SEC available at the SEC's Internet site (http://www.sec.gov).

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