When I first wrote to you as Chairman three years ago, we had just made the necessary but painful decision to end our late-stage development program for torcetrapib due to safety concerns. That program offered a potential new treatment for the millions of people living with cardiovascular disease—which still remains the world's number one killer, despite all the medical advances and increased knowledge about healthier lifestyles over the last few decades.

Several months later, we made another difficult decision—this time to withdraw Exubera from the market. The world's first inhalable insulin, this novel technology offered a medical advance to treat diabetes. But it was not accepted by the people we hoped would use it, prescribe it or pay for it.

These two medical programs sought to address urgent challenges to global health, and they had strong scientific merit when they began years earlier. That's why billions of dollars were invested in them over a long period of time.

These two outcomes—disappointing for patients and our colleagues, and expensive for our shareholders—brought into sharp focus several truths about the biopharmaceutical business:

• People around the world continue to suffer from unmet medical needs—so society must continue to make the significant but risky investments necessary to find cures and treatments to meet those needs.
  Biopharmaceutical companies are uniquely able to make those investments and, therefore, policymakers must continue to preserve and enhance an environment that encourages companies like ours to invest capital in the pursuit of medical innovation;
• Drug discovery and development is enormously expensive and inherently risky—so those of us who are stewards of your capital must invest it wisely.
  We must take prudent risks; rigorously apply hurdle rates appropriate for the nature of the specific investment; recognize that not every investment will succeed in this business; carefully monitor our investments; and, importantly, know when to stop funding projects that are not meeting their goals. Our job, of course, is to achieve for you, over time, an appropriate return for those investments as a whole; and
• It is unwise to rely on one or two blockbuster drugs (whether on the market or still in the pipeline) for a disproportionate amount of our future revenue and profit. We must take a balanced approach to the risks and rewards represented by the different types of product and market opportunities presented by today's biopharmaceutical business.

Our Path Forward

And so, as I reported in my letter to you after my first full year as Chairman and CEO, we adopted a different course than we had taken in the recent past.

We called it Our Path Forward and it has five strategies:

• Refocus and optimize our patent-protected portfolio;
• Find and capitalize on new opportunities for established products;
• Grow in emerging markets;
• Grow our diversified businesses; and
• Instill a culture of innovation and continuous improvement.

We have pursued these strategies aggressively and the Wyeth transaction accelerated our progress toward each one:

• In our patent-protected portfolio, we narrowed the focus of our research to those therapeutic areas where we can invest to win. These are the diseases where the medical needs are greatest, where the science is most promising, and where Pfizer's capabilities are strongest. They include oncology, pain, inflammation, Alzheimer's disease, psychoses and diabetes. In addition, thanks in significant part to the Wyeth acquisition, we have increased our emphasis on biotherapeutics and vaccines. When we updated our pipeline in late January of this year, we announced that we had 133 programs in development, including 27 biologics and six vaccines, up from 16 biologics and one vaccine when we updated the pipeline a year earlier;
• We made Pfizer's first significant investments in generic medicines and are turning a historically declining business—consisting of products that have lost their exclusivity—into a platform for future profitable growth. We did this by creating a focused, accountable, high-performing Established Products unit with a culture all its own. This business operates with the speed and agility demanded by its unique marketplace. We now have approximately 600 products in our Established Products portfolio. While the results in this unit will vary, it generated year-over-year operational revenue growth for the first time in the fourth quarter of 2009;
• Similarly, we created an Emerging Markets Business Unit to seize opportunities in the fastest-growing biopharmaceutical markets in the world. We have made the right kinds of investments in the right markets—those in which we are in a premier competitive position as a result of our historical presence, the breadth of our portfolio, and our strong relationships with local partners. As a result, this business produced double-digit revenue growth in many markets during 2009, led by China, India, Brazil and Russia;
• We now have a portfolio of profitable, growing diversified businesses that closely complement our core biopharmaceutical businesses. The combination of Pfizer and Wyeth brought together leading animal health, consumer health, nutrition and capsule manufacturing businesses that produce profitable growth—and that together offer a range of treatments and preventive measures for every stage of life for people and animals; and
• We are continuously reducing our costs, improving our productivity and making our cost structure more flexible. During 2007 and 2008, we reduced our total cost base by $2.8 billion, on a constant-currency basis versus 2006. This was achieved in large part by reducing the workforce from 98,000 to 81,900; and by decreasing the number of manufacturing and R&D sites by more than 40 percent—from 78 to 46 and from 15 to nine, respectively. All told, the total real estate footprint was reduced by more than 35 percent. We announced further cost reduction plans in January 2009 in conjunction with the Wyeth acquisition. We aim to achieve additional savings of approximately $7 billion before making focused investments in growth opportunities, yielding net cost savings of between $4 billion and $5 billion after those reinvestments by 2012, on a constant-currency basis. We will continue to improve every aspect of our productivity and the efficiency with which we deploy your capital. Our solid track record on this score provides confidence in our ability to both return that capital to shareholders as well as to make disciplined investments in the many growth opportunities before us—in marketed products as well as in new products and new markets.

Pursuing Health Solutions in Diverse Ways

Together, all of these changes have produced a very different company today from what we were when I first wrote to you three years ago.

We remain, of course, a biopharmaceutical company driven by scientific innovation. But we now pursue health solutions in numerous and diverse ways:

• For people as well as animals;
• Through research in small molecules, large molecules and vaccines;
• Through prescription as well as over-the-counter medicines;
• Through patent-protected, generic and "branded generic" medicines;
• Through human nutritional supplements and vitamins;
• Through primary care, specialty care, and oncology treatments and cures; and
• In the developed world as well as in the developing world.