================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended                     Commission file number 1-1225
      September 30, 2001

                       AMERICAN HOME PRODUCTS CORPORATION
                       ----------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                     13-2526821
           --------                                     ----------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

    Five Giralda Farms, Madison, N.J.                     07940
    ---------------------------------                     -----
(Address of principal executive offices)                (Zip Code)


Registrant's telephone number, including area code (973) 660-5000

     Indicate by check mark whether the registrant (1) has filed all reports
                  required to be filed by Section 13 or 15 (d)
                of the Securities Exchange Act of 1934 during the
            preceding 12 months (or for such shorter period that the
         registrant was required to file such reports), and (2) has been
            subject to such filing requirements for the past 90 days.

                                                     Yes  X        No
                                                     ------        --

The number of shares of Common Stock outstanding as of the close of business on
October 31, 2001:

                                                           Number of
                     Class                            Shares Outstanding
       ---------------------------------              ------------------
       Common Stock, $0.33-1/3 par value                 1,319,235,172

================================================================================

<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

                                      INDEX

                                                                        Page No.
                                                                        --------

Part I -  Financial Information                                              2

          Item 1.  Consolidated Condensed Financial Statements:

                   Consolidated Condensed Balance Sheets -
                      September 30, 2001 and December 31, 2000               3

                   Consolidated Condensed Statements of Operations -
                      Three and Nine Months Ended September 30,
                      2001 and 2000                                          4

                   Consolidated Condensed Statements of Changes in
                      Stockholders' Equity - Nine Months Ended
                      September 30, 2001 and 2000                            5

                   Consolidated Condensed Statements of Cash Flows -
                      Nine Months Ended September 30, 2001 and 2000          6

                   Notes to Consolidated Condensed Financial Statements    7-15

          Item 2.  Management's Discussion and Analysis of
                      Financial Condition and Results of Operations       16-25

Part II - Other Information                                                 26

          Item 1.  Legal Proceedings                                      26-29

          Item 6.  Exhibits and Reports on Form 8-K                         30

Signature                                                                   31

Exhibit Index                                                              EX-1



Items other than those listed above have been omitted because they are not
applicable.

                                       1
<PAGE>

                         Part I - Financial Information
                         ------------------------------

AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

The consolidated condensed financial statements included herein have been
prepared by American Home Products Corporation (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, the
consolidated condensed financial statements include all adjustments necessary to
present fairly the financial position of the Company as of September 30, 2001
and December 31, 2000, and the results of its operations, changes in
stockholders' equity and cash flows for the three months and nine months ended
September 30, 2001 and 2000. It is suggested that these consolidated condensed
financial statements and management's discussion and analysis of financial
condition and results of operations be read in conjunction with the financial
statements and the notes thereto included in the Company's 2000 Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q for the quarters ended March 31,
2001 and June 30, 2001.

In the 2000 fourth quarter, the Company sold a portion of its ownership in
Immunex Corporation (Immunex) common stock, which reduced the Company's
ownership interest below 50%. As a result, the financial results of Immunex,
which previously were consolidated in the financial results of the Company, were
deconsolidated and included in the financial results of the Company on an equity
basis retroactive to January 1, 2000. Accordingly, alliance revenue relating to
co-promotion agreements between the Company and Immunex was included in
pharmaceutical net revenue for both the 2001 and 2000 third quarters and first
nine months. The 2000 third quarter and first nine months financial results were
restated to reflect the deconsolidation of Immunex, which had no effect on
income from continuing operations.

As of January 1, 2001, the Company early adopted new authoritative accounting
guidance reflecting certain rebates and sales incentives (i.e., coupons and
other rebate programs) as reductions of revenues instead of selling and
marketing expenses. Financial information for all prior periods presented has
been reclassified to comply with the income statement classification
requirements of the new guidance.

                                       2
<PAGE>

<TABLE>

                           AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands Except Per Share Amounts)

<CAPTION>
                                                                   September 30,           December 31,
                                                                       2001                    2000
                                                                   -------------           ------------
<S>                                                                <C>                     <C>
ASSETS
Cash and cash equivalents                                             $2,005,109             $2,644,306
Marketable securities                                                  1,155,920                341,031
Accounts receivable less allowances                                    2,740,985              2,740,272
Inventories:
     Finished goods                                                      642,069                585,123
     Work in progress                                                    701,044                586,656
     Materials and supplies                                              457,679                359,948
                                                                   -------------           ------------
                                                                       1,800,792              1,531,727
Other current assets including deferred taxes                          2,210,498              2,923,475
                                                                   -------------           ------------
     Total Current Assets                                              9,913,304             10,180,811

Property, plant and equipment                                          8,409,821              7,578,233
     Less accumulated depreciation                                     2,652,275              2,543,409
                                                                   -------------           ------------
                                                                       5,757,546              5,034,824
Goodwill and other intangibles, net of accumulated
     amortization                                                      3,907,764              4,052,410
Other assets including deferred taxes                                  2,711,263              1,824,421
                                                                   -------------           ------------
     Total Assets                                                    $22,289,877            $21,092,466
                                                                   =============           ============

LIABILITIES
Loans payable                                                         $1,553,392                $58,717
Trade accounts payable                                                   845,182                595,233
Accrued expenses                                                       4,417,383              8,831,459
Accrued federal and foreign taxes                                        159,083                256,650
                                                                   -------------           ------------
     Total Current Liabilities                                         6,975,040              9,742,059

Long-term debt                                                         7,667,007              2,394,790
Other noncurrent liabilities                                           3,549,609              5,226,495
Accrued postretirement benefit obligations other than pensions           933,848                911,029

STOCKHOLDERS' EQUITY
$2.00 convertible preferred stock, par value $2.50 per share                  52                     55
Common stock, par value $0.33-1/3 per share                              439,392                437,258
Additional paid-in capital                                             4,138,964              3,952,457
Accumulated deficit                                                     (650,122)              (899,118)
Accumulated other comprehensive loss                                    (763,913)              (672,559)
                                                                   -------------           ------------
     Total Stockholders' Equity                                        3,164,373              2,818,093
                                                                   -------------           ------------
     Total Liabilities and Stockholders' Equity                      $22,289,877            $21,092,466
                                                                   =============           ============

The accompanying notes are an integral part of these consolidated condensed financial statements.
</TABLE>

                                       3
<PAGE>

<TABLE>

                                   AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
                                     CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                         (In Thousands Except Per Share Amounts)

<CAPTION>
                                                                    Three Months                     Nine Months
                                                                 Ended September 30,             Ended September 30,
                                                              --------------------------     ---------------------------
                                                                 2001            2000           2001             2000
                                                              ----------      ----------     -----------      ----------
<S>                                                           <C>             <C>            <C>              <C>
Net Revenue                                                   $3,736,250      $3,503,605     $10,401,846      $9,725,672
                                                              ----------      ----------     -----------      ----------
Cost of goods sold                                               879,922         845,259       2,469,566       2,398,293
Selling, general and administrative expenses                   1,278,108       1,275,512       3,855,031       3,682,669
Research and development expenses                                473,755         414,177       1,402,277       1,235,168
Interest expense (income), net                                    40,472         (11,794)         93,965          91,080
Other income, net                                                (83,281)        (37,853)       (179,145)       (111,316)
Litigation charge                                                950,000              -          950,000              -
Termination fee                                                       -               -               -       (1,709,380)
                                                              ----------      ----------     -----------      ----------

Income from continuing operations before
  federal and foreign taxes                                      197,274       1,018,304       1,810,152       4,139,158
Provision (benefit) for federal and foreign taxes                (54,798)        256,204         347,530       1,218,315
                                                              ----------      ----------     -----------      ----------
Income from continuing operations                                252,072         762,100       1,462,622       2,920,843
                                                              ----------      ----------     -----------      ----------

Discontinued Operations:
  Income from operations of agricultural products
    business (net of federal and foreign taxes of $57,289)            -               -               -          103,346
  Loss on disposal of agricultural products business
    (including federal and foreign tax charges of $855,248)           -               -               -       (1,572,993)
                                                              ----------      ----------     -----------      ----------

Loss from discontinued operations                                     -               -               -       (1,469,647)
                                                              ----------      ----------     -----------      ----------

Net Income                                                      $252,072        $762,100      $1,462,622      $1,451,196
                                                              ==========      ==========     ===========      ==========



Basic earnings per share from continuing operations                $0.19           $0.58           $1.11           $2.24
Basic loss per share from discontinued operations                     -               -               -            (1.13)
                                                              ----------      ----------     -----------      ----------
Basic earnings per share                                           $0.19           $0.58           $1.11           $1.11
                                                              ==========      ==========     ===========      ==========


Diluted earnings per share from continuing operations              $0.19           $0.58           $1.10           $2.21
Diluted loss per share from discontinued operations                   -               -               -            (1.11)
                                                              ----------      ----------     -----------      ----------
Diluted earnings per share                                         $0.19           $0.58           $1.10           $1.10
                                                              ==========      ==========     ===========      ==========


Dividends per share of common stock                                $0.23           $0.23           $0.69           $0.69
                                                              ==========      ==========     ===========      ==========

The accompanying notes are an integral part of these consolidated condensed financial statements.
</TABLE>

                                       4
<PAGE>

<TABLE>

                                      AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                            (In Thousands Except Per Share Amounts)
<CAPTION>
Nine Months Ended September 30, 2001:
                                          $2.00                                                 Accumulated
                                       Convertible                Additional                       Other            Total
                                        Preferred       Common     Paid-in      Accumulated    Comprehensive    Stockholders'
                                          Stock         Stock      Capital        Deficit          Loss             Equity
                                       -----------    ---------   ----------    -----------    -------------    -------------
<S>                                    <C>            <C>         <C>           <C>            <C>              <C>
Balance at January 1, 2001                    $55      $437,258   $3,952,457     ($899,118)       ($672,559)      $2,818,093

Net income                                                                       1,462,622                         1,462,622
Currency translation adjustments                                                                    (98,909)         (98,909)
Unrealized gains on derivative
     contracts                                                                                        2,700            2,700
Unrealized gains on marketable
     securities                                                                                       4,855            4,855
                                                                                                                ------------
     Comprehensive income                                                                                          1,371,268
                                                                                                                ------------

Cash dividends declared(a)                                                      (1,210,741)                       (1,210,741)
Common stock issued for stock options                     2,022      165,504                                         167,526
Conversion of preferred stock
     and other exchanges                       (3)          112       21,003        (2,885)                           18,227
                                       ----------     ---------   ----------    ----------     ------------     ------------
Balance at September 30, 2001                 $52      $439,392   $4,138,964     ($650,122)       ($763,913)      $3,164,373
                                       ==========     =========   ==========    ==========     ============     ============


Nine Months Ended September 30, 2000:
                                          $2.00                                                 Accumulated
                                       Convertible                Additional                       Other            Total
                                        Preferred       Common     Paid-in       Retained      Comprehensive    Stockholders'
                                          Stock         Stock      Capital       Earnings          Loss             Equity
                                       -----------    ---------   -----------   -----------    -------------    -------------
Balance at January 1, 2000                    $61     $434,639    $3,392,705    $3,000,827        ($613,485)      $6,214,747

Net income                                                                       1,451,196                         1,451,196
Currency translation adjustments                                                                    (76,413)         (76,413)
Unrealized gains on marketable
     securities                                                                                      13,519           13,519
                                                                                                                ------------
     Comprehensive income                                                                                          1,388,302
                                                                                                                ------------

Cash dividends declared(b)                                                      (1,200,723)                       (1,200,723)
Common stock acquired for treasury                      (2,472)      (16,316)     (374,289)                         (393,077)
Common stock issued for stock options                    3,610       298,624                                         302,234
Conversion of preferred stock
     and other exchanges                       (5)         121        26,692        (5,179)                           21,629
                                       ----------     --------    ----------    ----------     ------------      -----------
Balance at September 30, 2000                 $56     $435,898    $3,701,705    $2,871,832        ($676,379)      $6,333,112
                                       ==========     ========    ==========    ==========     ============      ===========

(a)  Includes the common stock cash dividend of $0.23 per share ($303,181 in the aggregate) declared on September 20, 2001
     and payable on December 1, 2001.

(b)  Includes the common stock cash dividend of $0.23 per share ($303,874 in the aggregate) and preferred stock cash
     dividend of $0.50 per share ($11 in the aggregate) declared on September 21, 2000 and payable on December 1, 2000.

The accompanying notes are an integral part of these consolidated condensed financial statements.
</TABLE>

                                       5
<PAGE>

<TABLE>
                           AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                             (In Thousands)
<CAPTION>
                                                                                   Nine Months
                                                                               Ended September 30,
                                                                           ---------------------------
                                                                              2001             2000
                                                                           ----------       ----------
Operating Activities
--------------------
<S>                                                                        <C>              <C>
Income from continuing operations                                          $1,462,622       $2,920,843
Adjustments to reconcile income from continuing operations to net cash
provided from (used for) operating activities of continuing operations:
   Litigation charge                                                          950,000               -
   Gains on sales of assets                                                  (141,360)        (186,832)
   Depreciation and amortization                                              433,173          384,064
   Deferred income taxes                                                       70,482          704,575
   Changes in working capital, net                                           (559,322)          (5,834)
   Diet drug litigation payments                                           (6,886,646)      (2,242,816)
   Deconsolidation of Immunex                                                      -          (236,768)
   Other items, net                                                          (205,017)        (145,263)
                                                                           ----------       ----------
Net cash provided from (used for) continuing operations                    (4,876,068)       1,191,969
Net cash provided from discontinued operations                                     -            82,196
                                                                           ----------       ----------
Net cash provided from (used for) operating activities                     (4,876,068)       1,274,165
                                                                           ----------       ----------

Investing Activities
--------------------
Purchases of property, plant and equipment                                 (1,274,654)        (890,567)
Proceeds from sale of the agricultural products business                           -         3,800,000
Proceeds from sales of assets                                                 308,862          214,475
Proceeds from sales and maturities of marketable securities                   195,300          320,292
Purchases of marketable securities                                         (1,010,189)        (500,357)
                                                                           ----------       ----------
Net cash provided from (used for) investing activities                     (1,780,681)       2,943,843
                                                                           ----------       ----------

Financing Activities
--------------------
Net proceeds from (repayments of) debt                                      6,770,322       (2,017,501)
Dividends paid                                                               (907,560)        (896,838)
Exercises of stock options                                                    167,526          302,234
Purchases of common stock for treasury                                             -          (393,077)
                                                                           ----------       ----------
Net cash provided from (used for) financing activities                      6,030,288       (3,005,182)
                                                                           ----------       ----------
Effect of exchange rate changes on cash balances                              (12,736)         (24,391)
                                                                           ----------       ----------
Increase (decrease) in cash and cash equivalents                             (639,197)       1,188,435
Cash and cash equivalents, beginning of period                              2,644,306        1,892,715
                                                                           ----------       ----------
Cash and cash equivalents, end of period                                   $2,005,109       $3,081,150
                                                                           ==========       ==========


Supplemental Information
------------------------
Interest payments                                                            $269,756         $312,009
Income tax payments, net of refunds                                           367,964          693,275

The accompanying notes are an integral part of these consolidated condensed financial statements.
</TABLE>

                                       6
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


Note 1.   Credit Facilities and Term Debt Financing
          -----------------------------------------

          In addition to the Company's existing $2,000.0 million credit
          facility, in March 2001 the Company obtained new credit facilities
          totaling $6,000.0 million. The new credit facilities include a
          $3,000.0 million, 364-day credit facility (which supports borrowings
          under the commercial paper program). Any borrowings under the credit
          facility that are outstanding upon its termination in March 2002 are
          extendible for an additional year. The portion of commercial paper
          outstanding at September 30, 2001 supported by the $3,000.0 million
          credit facility was classified as long-term debt since the Company
          intends, and has the ability, to refinance these obligations through
          the issuance of additional commercial paper or through the use of its
          $3,000.0 million credit facility as described above. The credit
          facility contains substantially identical financial and other
          covenants, representations, warranties, conditions and default
          provisions as the Company's existing $2,000.0 million credit facility,
          which terminates on July 31, 2002. Since the $2,000.0 million credit
          facility terminates in less than one year, commercial paper
          outstanding of $1,519.2 million, supported by this facility, was
          classified as current debt in Loans payable as of September 30, 2001.

          In addition, the new credit facilities included a $3,000.0 million,
          364-day bridge facility, which facility was terminated when the
          Company issued $3,000.0 million of Senior Notes (the "Notes") on March
          30, 2001. On March 30, 2001, the Company issued three tranches of
          Notes in a transaction exempt from registration under the Securities
          Act of 1933, as amended (the "Securities Act"), pursuant to Rule 144A,
          as follows:

               o   $500.0 million 5.875% Notes due March 15, 2004
               o   $1,000.0 million 6.25% Notes due March 15, 2006
               o   $1,500.0 million 6.70% Notes due March 15, 2011

          In connection with the Notes, the Company filed a Registration
          Statement on Form S-4 with the Securities and Exchange Commission
          (SEC) on April 27, 2001 in order to offer the holders of the Notes the
          ability to exchange the outstanding Notes for new notes with
          substantially identical terms, but which are registered under the
          Securities Act. The Company's Registration Statement was declared
          effective by the SEC on May 8, 2001. As of June 15, 2001, the date the
          offer to exchange the Notes concluded, substantially all the Notes had
          been exchanged for the new notes registered under the Securities Act.

          Interest on the Notes is payable semi-annually, on March 15 and
          September 15, and is subject to adjustment under certain
          circumstances. The Company entered into two $750.0 million notional
          amount interest rate swaps (or "the swaps") relating to the $1,500.0
          million 6.70% Notes. The interest rate swaps are contracts under which
          the Company converted the fixed rate on the $1,500.0 million 6.70%
          Notes to a floating rate of interest (the LIBOR swap rate) for the
          term of the swap agreements, which is the same term as the underlying
          debt. The interest rate swaps function as fair value hedges of the
          risk of changes in the fair value of the Notes attributable to changes
          in the benchmark interest rate (the LIBOR swap rate).

                                       7
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


          Any proceeds from commercial paper supported by the new credit
          facilities and the proceeds from the issuance of the Notes are being
          used for the Company's general corporate and working capital
          requirements, including payments related to the REDUX and PONDIMIN
          diet drug litigation.


Note 2.   Discontinued Operations
          -----------------------

          On March 20, 2000, the Company signed a definitive agreement with BASF
          Aktiengesellschaft (BASF) to sell the agricultural products business
          which manufactures, distributes and sells crop protection and pest
          control products worldwide. On June 30, 2000, the sale was completed
          and BASF paid the Company $3,800.0 million in cash and assumed certain
          debt. As a result, the Company recorded an after-tax loss on the sale
          of this business of $1,573.0 million or $1.19 per share-diluted and
          reflected this business as a discontinued operation in the 2000 first
          quarter.


Note 3.   Contingencies and Litigation Settlement
          ---------------------------------------

          The Company is involved in various legal proceedings, including
          product liability and environmental matters of a nature considered
          normal to its business. 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.

          On August 16, 2001, the United States Court of Appeals for the Third
          Circuit dismissed the appeal of the last remaining appellant
          challenging the District Court's approval of the REDUX and PONDIMIN
          diet drug litigation nationwide, class action settlement (or "the
          settlement"). Any petition to the United States Supreme Court to
          challenge the approval of the settlement must be filed by January
          2002. In the absence of, or following a denial of, any such petition,
          the settlement would become final.

          In the 2001 third quarter, the Company recorded an additional
          litigation charge of $950.0 million ($615.0 million after-tax or $0.46
          per share-diluted) in connection with the REDUX and PONDIMIN diet drug
          litigation. The charge covered the following:

               o    additional anticipated funding requirements for the
                    nationwide, class action settlement and estimated costs to
                    resolve the claims of any members of the settlement class
                    who in the future may exercise an intermediate or back-end
                    opt out right;
               o    additional administrative and litigation expenses; and
               o    additional costs anticipated with the resolution of the
                    claims of the remaining initial opt outs and primary
                    pulmonary hypertension claimants.

          In the 2000 fourth quarter, the Company recorded a $7,500.0 million
          litigation charge for the diet drug litigation, and recorded the
          initial litigation charge of $4,750.0 million, net of insurance, in
          the 1999 third quarter.

                                       8
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


          During the 2001 first nine months, payments to the nationwide, class
          action settlement funds, individual settlement payments, legal fees
          and other costs totaling $6,886.6 million were paid and applied
          against the litigation accrual. As of September 30, 2001, $2,228.9
          million of the litigation accrual remained.

          In the opinion of the Company, although the outcome of any legal
          proceedings cannot be predicted with certainty, the ultimate liability
          of the Company in connection with its legal proceedings will not have
          a material adverse effect on the Company's financial position but
          could be material to the results of operations or cash flows in any
          one accounting period.


Note 4.   Restructuring Program
          ---------------------

          In December 1998, the Company recorded a special charge for
          restructuring and related asset impairments of $321.2 million to
          recognize costs of the reorganization of its worldwide supply chains
          and U.S. distribution systems, and the globalization of certain
          business units. The restructuring will ultimately result in the
          elimination of approximately 3,900 positions worldwide offset, in
          part, by 1,000 newly created positions in the same functions at other
          locations. At September 30, 2001, approximately 3,700 positions had
          been eliminated, and two distribution centers owned by the Company and
          a leased distribution center had been closed. The Company anticipates
          closing a total of 14 manufacturing plants; eight were closed in 2000
          and two were closed during the first nine months of 2001. The Company
          currently anticipates closing the remaining facilities in 2002,
          assuming no further delays in regulatory approvals.

          The activity in the restructuring accruals was as follows:

<TABLE>
<CAPTION>
                                                        Personnel  Other Closure/
          (In thousands)                                  Costs      Exit Costs    Total
          --------------------------------------------  ---------  -------------- --------

          <S>                                           <C>        <C>            <C>
          Restructuring accruals at December 31, 2000     $6,249      $59,635     $65,884
          Cash expenditures                               (9,520)     (11,494)    (21,014)
          Redistributions                                 14,000      (14,000)         -
                                                        ---------  -------------- --------
          Restructuring accruals at September 30, 2001   $10,729      $34,141     $44,870
                                                        =========  ============== ========
</TABLE>

          During the 2001 second quarter, the Company made redistribution
          adjustments between categories to increase accrual balances for
          personnel costs by $14.0 million and decrease other closure/exit costs
          by $14.0 million. These redistributions were necessary due to higher
          than expected enhanced pension benefits and outplacement costs for
          non-U.S. employees, updated forecasts of employees within the affected
          facilities, and lower than expected other closure/exit costs. The
          original scope of the restructuring program remains substantially
          unchanged.

                                       9
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


Note 5.   Derivative Instruments and Foreign Currency Risk Management Programs
          --------------------------------------------------------------------

          As of January 1, 2001, the Company adopted Statement of Financial
          Accounting Standards (SFAS) Nos. 133 and 138, which require that all
          derivative financial instruments be measured at fair value and be
          recognized as assets or liabilities on the balance sheet with changes
          in the fair value of the derivatives recognized in either net income
          (loss) or accumulated other comprehensive income (loss), depending on
          the designated purpose of the derivative. The impact on the Company's
          financial results, upon the adoption of these pronouncements, was
          immaterial.

          On the date that the Company enters into a derivative contract, it
          designates the derivative as: (1) a hedge of the fair value of a
          recognized asset or liability (fair value hedge), (2) a hedge of a
          forecasted transaction or the variability of cash flows that are to be
          received or paid in connection with a recognized asset or liability
          (cash flow hedge), (3) a foreign currency fair value or cash flow
          hedge (foreign currency hedge) or (4) an instrument that is not
          designated for hedge accounting treatment. For derivative contracts
          that are designated and qualify as fair value hedges (including
          foreign currency 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. For derivative contracts that are designated and
          qualify as cash flow hedges (including foreign currency cash flow
          hedges), the effective portion of gains and losses on these contracts
          are 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. In certain circumstances
          the Company 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 Company does not hold any derivative instruments for
          trading purposes.

          The Company currently engages in two primary programs to manage its
          exposure to foreign currency risk, as well as interest rate swaps to
          manage its exposure to interest rate fluctuations. The derivative
          contracts outstanding as of September 30, 2001 are as follows:

            1. Short-term foreign exchange forward/currency swap contracts to
               manage foreign currency balance sheet exposures. These contracts
               do not have a hedging designation and are recorded at fair value
               with any gains or losses recognized in current period earnings.
               For the nine months ended September 30, 2001, the Company
               recorded a gain of $17.8 million in Other income, net relating to
               gains and losses on these foreign exchange forward/currency swap
               contracts. The $17.8 million consists of gains and losses from
               contracts settled during the 2001 first nine months, as well as
               contracts outstanding at September 30, 2001 that are marked to
               fair value.

          2.   Cash flow  hedging  program  to cover  currency  risk  related to
               intercompany  inventory sales  denominated in foreign  currencies
               through the purchase of primarily  foreign  currency put options.
               As of September 30, 2001,  $4.4 million ($2.7 million  after-tax)
               of gains  relating to the cash flow hedging  program was included
               in Accumulated other

                                       10
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


               comprehensive loss with the corresponding asset recorded in Other
               current assets including deferred taxes. The gains in Accumulated
               other comprehensive loss will be reclassified into the statement
               of operations when the intercompany inventory is sold to a third
               party. As such, the Company anticipates recognizing these gains
               during the next six months. The Company also purchases foreign
               currency put options outside of the cash flow hedging program to
               protect additional intercompany inventory sales. These put
               options do not have a hedging designation and are recorded at
               fair value with all gains or losses recognized in current period
               earnings immediately. For the nine months ended September 30,
               2001, the Company has recorded gains of $0.6 million in Other
               income, net relating to these foreign currency put options.
               Option contracts outstanding as of September 30, 2001 expire no
               later than March 25, 2002.

            3. Fair value interest rate swaps to manage interest rate exposures.
               The Company strives to achieve an acceptable balance between
               fixed- and floating-rate debt and has entered into effective fair
               value interest rate swaps on its $1,500.0 million 6.70% Notes to
               maintain that balance on total debt. The fair value interest rate
               swaps converted a portion of the Company's fixed-rate debt into
               floating-rate debt. Interest expense on the $1,500.0 million
               6.70% Notes is adjusted to include the payments made or received
               under the interest rate swap agreements. The fair value of the
               swaps relating to the $1,500.0 million 6.70% Notes, as of
               September 30, 2001, was an asset of $73.9 million and has been
               recorded in Other assets including deferred taxes with the
               corresponding adjustment recorded to the underlying 6.70% Notes
               in Long-term debt.


          Refer to the "Quantitative and Qualitative Disclosures about Market
          Risk" section on pages 24 and 25 for further discussion and
          disclosures relating to the Company's derivative instruments and
          foreign currency risk management programs.


Note 6.   Company Data by Operating Segment
          ---------------------------------

          The Company has three reportable segments: Pharmaceuticals, Consumer
          Health Care and Corporate. The Company's Pharmaceuticals and Consumer
          Health Care reportable segments are strategic business units that are
          managed separately because they manufacture, distribute and sell
          distinct products and provide services which require different
          technologies and marketing strategies.

                                       11
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


                                                    Net Revenue (1)
                                       -----------------------------------------
                                          Three Months           Nine Months
          ($ in millions)              Ended September 30,   Ended September 30,
                                       -------------------   -------------------
          Operating Segment              2001       2000        2001      2000
          --------------------         --------   --------   ---------  --------
          Pharmaceuticals (2)          $3,110.1   $2,856.3    $8,683.4  $7,982.6
          Consumer Health Care            626.1      647.3     1,718.4   1,743.1
                                       --------   --------   ---------  --------

          Total                        $3,736.2   $3,503.6   $10,401.8  $9,725.7
                                       ========   ========   =========  ========


                                           Income from Continuing Operations
                                                   Before Taxes (3)
                                       -----------------------------------------
                                          Three Months          Nine Months
          ($ in millions)              Ended September 30,   Ended September 30,
                                       -------------------   -------------------
          Operating Segment              2001       2000        2001      2000
          --------------------         --------   --------   ---------  --------
          Pharmaceuticals              $1,035.1     $862.6    $2,551.8  $2,155.6
          Consumer Health Care            182.5      198.3       418.6     425.7
                                       --------   --------   ---------  --------
                                        1,217.6    1,060.9     2,970.4   2,581.3
          Corporate (4)                (1,020.3)     (42.6)   (1,160.2)  1,557.9
                                       --------   --------   ---------  --------
          Total                          $197.3   $1,018.3    $1,810.2  $4,139.2
                                       ========   ========   =========  ========

          (1)  The Company early adopted new authoritative accounting guidance
               as of January 1, 2001 reflecting certain rebates and sales
               incentives (i.e., coupons and other rebate programs) as
               reductions of revenues instead of selling and marketing expenses.
               Financial information for all prior periods presented has been
               reclassified to comply with the income statement classification
               requirements of the new guidance. These reclassifications had no
               effect on net revenue growth rates between the periods presented.

          (2)  Effective January 1, 2000, the financial results of Immunex,
               which previously were consolidated in the results of the Company,
               were deconsolidated and included in the financial results of the
               Company on an equity basis. As a result, alliance revenue
               relating to co-promotion agreements between the Company and
               Immunex was included in pharmaceutical net revenue for both 2001
               and 2000. The 2000 third quarter and first nine months
               pharmaceutical net revenue was restated to reflect the
               deconsolidation.

          (3)  The third quarter results included goodwill amortization for 2001
               and 2000 as follows: Pharmaceuticals - $34.3 and $36.5, and
               Consumer Health Care - $5.9 and $8.0, respectively.

               The first nine months results included goodwill amortization for
               2001 and 2000 as follows: Pharmaceuticals - $103.0 and $112.1,
               and Consumer Health Care - $17.8 and $24.0, respectively.

          (4)  Corporate expenses for the 2001 third quarter and first nine
               months included an additional litigation charge of $950.0
               relating to the litigation brought against the Company regarding
               the use of the diet drugs REDUX or PONDIMIN. The charge related
               to the Pharmaceuticals operating segment.

               Corporate expenses for the 2000 first nine months included income
               of $1,709.4 resulting from the receipt of a $1,800.0 termination
               fee provided for under the merger agreement with Warner-Lambert
               Company offset, in part, by certain related expenses.

                                       12
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


Note 7.   Earnings per Share
          ------------------

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

<TABLE>
<CAPTION>
                                                                            Three Months                  Nine Months
                                                                         Ended September 30,          Ended September 30,
                                                                       -----------------------     ------------------------
          (In thousands except per share amounts)                        2001          2000           2001          2000
          ----------------------------------------------------------   ---------     ---------     ----------    ----------
<S>                                                                    <C>           <C>           <C>           <C>

          Income from continuing operations less preferred dividends    $252,072      $762,088     $1,462,590    $2,920,808
          Loss from discontinued operations                                  -             -              -      (1,469,647)
                                                                       ---------     ---------     ----------    ----------
          Net income less preferred dividends                           $252,072      $762,088     $1,462,590    $1,451,161
          Denominator:
            Average number of common shares outstanding                1,318,359     1,305,478      1,316,091     1,304,915
                                                                       ---------     ---------     ----------    ----------

          Basic earnings per share from continuing operations              $0.19         $0.58          $1.11         $2.24
          Basic loss per share from discontinued operations                  -             -              -           (1.13)
                                                                       ---------     ---------     ----------    ----------
          Basic earnings per share                                         $0.19         $0.58          $1.11         $1.11
                                                                       =========     =========     ==========    ==========


          Income from continuing operations                             $252,072      $762,100     $1,462,622    $2,920,843
          Loss from discontinued operations                                  -             -              -      (1,469,647)
                                                                       ---------     ---------     ----------    ----------
          Net income                                                    $252,072      $762,100     $1,462,622    $1,451,196
          Denominator:
            Average number of common shares outstanding                1,318,359     1,305,478      1,316,091     1,304,915
            Common share equivalents of outstanding stock
              options and deferred contingent common stock awards         13,183        15,523         14,010        15,786
                                                                       ---------     ---------     ----------    ----------
          Total shares                                                 1,331,542     1,321,001      1,330,101     1,320,701
                                                                       =========     =========     ==========    ==========

          Diluted earnings per share from continuing operations            $0.19         $0.58          $1.10         $2.21
          Diluted loss per share from discontinued operations                -             -              -           (1.11)
                                                                       ---------     ---------     ----------    ----------
          Diluted earnings per share                                       $0.19         $0.58          $1.10         $1.10
                                                                       =========     =========     ==========    ==========
</TABLE>


Note 8.   Accumulated Other Comprehensive Loss
          ------------------------------------

          Accumulated other comprehensive loss consists of changes in foreign
          currency translation adjustments, unrealized gains on derivative
          contracts, and unrealized gains on marketable securities. The
          following table sets forth the changes in each component and the
          applicable tax effect, if any. Reclassification adjustments represent
          items that are included in net income in the current period but
          previously were reported in Accumulated other comprehensive loss.

                                       13
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                 Nine Months Ended September 30, 2001
                                                                 ------------------------------------
          (In thousands)                                           Pre-tax       Tax       After Tax
          ----------------------------------------------------    ---------    -------     ---------
          <S>                                                     <C>          <C>         <C>

          Foreign currency translation adjustments                ($98,909)        -        ($98,909)
                                                                  --------     -------     ---------
          Unrealized gains on derivative contracts:
            Unrealized holding gains arising during the period      24,287       8,682        15,605
            Less: reclassification adjustments for gains
              realized in net income                                19,854       6,949        12,905
                                                                  --------     -------     ---------
            Net unrealized gains on derivative contracts             4,433       1,733         2,700

          Unrealized gains on marketable securities                  4,855         -           4,855
                                                                  --------     -------     ---------
          Other comprehensive loss                                ($89,621)     $1,733      ($91,354)
                                                                  ========     =======     =========
</TABLE>
          Foreign currency translation adjustments are not recorded net-of-tax
          because such adjustments relate to permanent investments in
          international subsidiaries.


Note 9.   Recently Issued Accounting Standards
          ------------------------------------

          In July 2001, the Financial Accounting Standards Board issued
          Statement Nos. 141 and 142. The new standards require the following:

          o    SFAS No. 141, Business Combinations, requires that all business
               combinations initiated after June 30, 2001 be accounted for using
               the purchase method; the pooling method of accounting has been
               eliminated. SFAS No. 141 supersedes Accounting Principles Board
               (APB) Opinion No. 16, Business Combinations, but does not change
               many of the provisions of APB Opinion No. 16, including the basic
               principles of the purchase method.

          o    SFAS No. 142, Goodwill and Other Intangibles, supersedes APB
               Opinion No. 17, Intangible Assets, and addresses how intangible
               assets that are acquired individually or with a group of other
               assets should be accounted for in financial statements upon their
               acquisition. The statement also addresses how goodwill and other
               intangibles should be accounted for after they have been
               initially recognized in the financial statements. With the
               adoption of SFAS No. 142, goodwill is no longer amortized over
               its estimated useful life, but is subject to at least an annual
               assessment for impairment by applying a fair-value-based test.
               The Company will adopt SFAS No. 142 as of January 1, 2002.


          In accordance with the adoption of SFAS No. 142, as of January 1,
          2002, the Company will cease amortizing goodwill and other
          intangibles, which will result in estimated lower annual Selling,
          general and administrative expenses of approximately $161.0 million
          ($153.0 million after-tax or $0.12 per share-diluted). The Company is
          currently assessing the impact the adoption of the additional
          requirements of SFAS No. 142 may have on its financial position,
          results of operations and cash flows.

                                       14
<PAGE>

               AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


          In April 2001, the Emerging Issues Task Force (EITF) reached a
          consensus on Issue No. 00-25, Vendor Income Statement Characterization
          of Consideration Paid to a Reseller of the Vendor's Products. EITF No.
          00-25 requires the cost of certain vendor consideration to be
          classified as a reduction of revenue rather than a marketing expense.
          The Company will adopt the provisions of EITF No. 00-25 as of January
          1, 2002. The adoption of EITF No. 00-25 will result in
          reclassifications of certain marketing expenses to revenues, and will
          have no effect on net income. The Company does not anticipate the
          adoption of this consensus to significantly affect the growth rate of
          net revenues.

                                       15
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


Results of Operations
---------------------

Effective January 1, 2000, the financial results of Immunex, which previously
were consolidated in the financial results of the Company, were deconsolidated
and included in the financial results of the Company on an equity basis.
Accordingly, alliance revenue relating to co-promotion agreements between the
Company and Immunex was included in pharmaceutical net revenue for both the 2001
and 2000 third quarter and first nine months. The 2000 third quarter and first
nine months financial results were restated to reflect the deconsolidation of
Immunex, which had no effect on income from continuing operations. In addition,
the Company early adopted new authoritative accounting guidance as of January 1,
2001 reflecting certain rebates and sales incentives (i.e., coupons and other
rebate programs) as reductions of revenues instead of selling and marketing
expenses. Financial information for all prior periods presented has been
reclassified to comply with the income statement classification requirements of
the new guidance. These reclassifications had no effect on net revenue growth
rates between the periods presented.

Worldwide net revenue for the 2001 third quarter and first nine months were both
7% higher compared with prior year levels. The increase in worldwide net revenue
for the 2001 third quarter and first nine months was due primarily to higher
U.S. sales of human pharmaceuticals. Excluding the negative impact of foreign
exchange, worldwide net revenue increased 9% for the 2001 third quarter and 10%
for the 2001 first nine months.

The following table sets forth worldwide net revenue results by operating
segment together with the percentage changes from the comparable period in the
prior year:

                                  Net Revenue
                            -------------------------
                                  Three Months
($ in millions)                Ended September 30,
                            -------------------------           % Increase/
Operating Segment              2001            2000              (Decrease)
--------------------        ---------        --------            ----------
Pharmaceuticals              $3,110.1        $2,856.3                9%
Consumer Health Care            626.1           647.3               (3%)
                            ---------        --------            ----------
Total                        $3,736.2        $3,503.6                7%
                            =========        ========            ==========


                                  Net Revenue
                            -------------------------
                                  Nine Months
($ in millions)                Ended September 30,
                            -------------------------           % Increase/
Operating Segment             2001             2000              (Decrease)
--------------------        ---------        --------            ----------
Pharmaceuticals              $8,683.4        $7,982.6                9%
Consumer Health Care          1,718.4         1,743.1               (1%)
                            ---------        --------            ----------
Total                       $10,401.8        $9,725.7                7%
                            =========        ========            ==========

                                       16
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


Pharmaceuticals
---------------

Worldwide pharmaceutical net revenue increased 9% for both the 2001 third
quarter and first nine months due primarily to higher sales of U.S. human
pharmaceuticals. Excluding the negative impact of foreign exchange, worldwide
pharmaceutical net revenue increased 11% for the 2001 third quarter and 12% for
the 2001 first nine months.

Worldwide human pharmaceutical net revenue increased 9% for both the 2001 third
quarter and first nine months due primarily to higher sales of PROTONIX (oral
and intravenous formulas introduced in the second quarter of 2000 and 2001,
respectively), PREVNAR (introduced in the 2000 first quarter), EFFEXOR XR,
CORDARONE and alliance revenue offset, in part, by lower sales of MENINGITEC,
ZIAC (due to generic competition) and generic products (discontinuance of
certain oral generics). Additionally, sales of PREMARIN products contributed to
the growth for the 2001 first nine months, but decreased during the 2001 third
quarter due primarily to timing of sales promotions. Sales of MENINGITEC, the
Company's meningococcal meningitis vaccine, decreased as compared to the prior
year, since it was used in 2000 to vaccinate nearly all children and adolescents
in the United Kingdom. The product is currently being launched in ten other
European countries; however, the Company does not currently anticipate that any
of these markets, individually, will provide sales volume equivalent to that
generated in the United Kingdom. Excluding the negative impact of foreign
exchange, worldwide human pharmaceutical net revenue increased 11% for the 2001
third quarter and 12% for the 2001 first nine months.

Worldwide animal health product net revenue increased 12% for the 2001 third
quarter and decreased 1% for the 2001 first nine months. The increase in the
2001 third quarter was due primarily to the domestic launch, in June 2001, of
ProHeart 6, a new single dose, canine heartworm preventative product that
provides six months of continuous heartworm protection. For the 2001 first nine
months, the decline in animal health product net revenue was due primarily to a
general weakening in the livestock markets globally and continuing concerns
about foot-and-mouth and mad-cow disease.


Consumer Health Care
--------------------

Worldwide consumer health care net revenue decreased 3% for the 2001 third
quarter and 1% for the 2001 first nine months due primarily to the impact of two
international non-core product divestitures which occurred earlier this year, as
well as lower sales of FLEXAGEN, ADVIL and DIMETAPP offset, in part, by
increased sales of ROBITUSSIN, CHAP STICK and CENTRUM products. Excluding the
negative impact of foreign exchange, worldwide consumer health care net revenue
decreased 2% for the 2001 third quarter and increased 1% for the 2001 first nine
months.

                                       17
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


The following table sets forth, the percentage changes in worldwide net revenue
by operating segment compared to the prior year, including the effect volume,
price and foreign exchange had on these percentage changes:

<TABLE>
<CAPTION>
                               % Increase (Decrease)                           % Increase (Decrease)
                         Three Months Ended September 30, 2001          Nine Months Ended September 30, 2001
                       ------------------------------------------    ------------------------------------------
                                           Foreign       Total                           Foreign       Total
                       Volume    Price    Exchange    Net Revenue    Volume    Price    Exchange    Net Revenue
                       ------    -----    --------    -----------    ------    -----    --------    -----------
Pharmaceuticals
--------------------
<S>                    <C>       <C>      <C>         <C>            <C>       <C>      <C>         <C>
United States            9%         4%         -             13%       12%        4%         -             16%
International            8%         -         (6%)            2%        5%        -         (7%)           (2%)
                        ---        ---        ---            ---       ---       ---        ---            ---
Total                    8%         3%        (2%)            9%        9%        3%        (3%)            9%
                        ===        ===        ===            ===       ===       ===        ===            ===

Consumer Health Care
--------------------
United States           (4%)        1%         -             (3%)      (1%)       2%         -              1%
International           (3%)        5%        (5%)           (3%)      (3%)       4%        (7%)           (6%)
                        ---        ---        ---            ---       ---       ---        ---            ---
Total                   (4%)        2%        (1%)           (3%)      (2%)       3%        (2%)           (1%)
                        ===        ===        ===            ===       ===       ===        ===            ===

Total
--------------------
United States            6%         4%         -             10%        9%        4%         -             13%
International            7%         -         (6%)            1%        4%        1%        (8%)           (3%)
                        ---        ---        ---            ---       ---       ---        ---            ---
Total                    6%         3%        (2%)            7%        7%        3%        (3%)            7%
                        ===        ===        ===            ===       ===       ===        ===            ===

</TABLE>

Cost of goods sold, as a percentage of Net revenue, decreased to 23.6% for the
2001 third quarter compared to 24.1% for the 2000 third quarter and decreased to
23.7% for the 2001 first nine months compared to 24.7% for the 2000 first nine
months. These decreases were due primarily to a favorable product mix in the
pharmaceuticals segment, as well as the effect of increased alliance revenue
earned in 2001 compared to 2000. There are no costs of goods sold relating to
alliance revenue and, therefore, any net revenue fluctuations impacted by
alliance revenue will also impact gross profit.

Selling, general and administrative expenses decreased to 34.2%, as a percentage
of Net revenue, for the 2001 third quarter compared to 36.4% for the 2000 third
quarter. For the 2001 first nine months, Selling, general and administrative
expenses, as a percentage of Net revenue, decreased to 37.1% compared to 37.9%
for the 2000 first nine months. The lower ratio of selling, general and
administrative expenses resulted from non-recurring launch expenses, primarily
selling and marketing, related to pharmaceutical product launches in 2000 and
lower co-promotion expenses relating to ZIAC, due primarily to reduced sales as
a result of generic competition.

Research and development expenses increased 14% for the 2001 third quarter
and first nine months due primarily to increased  headcount  and other  research
operating  expenses,  including  higher chemical and material costs, and ongoing
clinical  trials  offset,  in part, by lower costs  resulting from the timing of
payments pursuant to certain pharmaceutical collaborations and lower payments
under licensing agreements.

                                       18
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


The Company had Interest expense, net of $40.5 million for the 2001 third
quarter compared to Interest income, net of $11.8 million in the 2000 third
quarter. Interest expense, net increased 3% for the 2001 first nine months. The
increase in Interest expense, net was due primarily to higher weighted average
debt outstanding for both the 2001 third quarter and first nine months compared
with the same periods in the prior year. Weighted average debt outstanding
during the 2001 and 2000 third quarters was $8,466.0 million and $2,803.2
million, respectively. Weighted average debt outstanding during the 2001 and
2000 first nine months was $6,646.0 million and $4,186.4 million, respectively.
The higher total interest expense resulting from the increased weighted average
debt outstanding was favorably impacted by higher capitalized interest,
resulting from additional capital projects, recognized during the 2001 third
quarter and first nine months compared with the same periods in the prior year,
as well as lower interest rates on the debt outstanding, primarily commercial
paper.

Other income, net, increased for the 2001 third quarter and first nine months
due primarily to lower non-recurring charges, including costs incurred in the
2000 third quarter associated with a consent decree entered into with the U.S.
Food and Drug Administration (FDA), as well as higher equity income relating to
the Company's equity investment in Immunex offset, in part, by lower gains on
the sales of non-strategic assets. Additionally, contributing to increased Other
income, net, for the 2001 first nine months were lower non-recurring charges,
including payments for access to various pharmaceutical collaborations and costs
related to a product discontinuation in 2000 offset, in part, by an one-time
insurance recovery of environmental costs in 2000.

During the 2001 third quarter, the Company recorded an additional litigation
charge of $950.0 million ($615.0 million after-tax or $0.46 per share-diluted)
in connection with the REDUX and PONDIMIN diet drug litigation (see Note 3 to
the Consolidated Condensed Financial Statements).

The following table sets forth worldwide income from continuing operations
before taxes by operating segment together with the percentage changes from the
comparable periods in the prior year:

<TABLE>
<CAPTION>
                                                     Income from Continuing Operations
                                                              Before Taxes (1)
                             ----------------------------------------------------------------------------------
                                          Three Months                                Nine Months
                                       Ended September 30,                         Ended September 30,
                             ---------------------------------------     --------------------------------------
($ in millions)                                           % Increase                                 % Increase
Operating Segment              2001          2000         (Decrease)       2001          2000        (Decrease)
--------------------         --------      --------       ----------     --------      --------      ----------
<S>                          <C>           <C>            <C>            <C>           <C>           <C>
Pharmaceuticals              $1,035.1        $862.6           20%        $2,551.8      $2,155.6          18%
Consumer Health Care            182.5         198.3           (8%)          418.6         425.7          (2%)
                             --------      --------          ----        --------      --------         ----
                              1,217.6       1,060.9           15%         2,970.4       2,581.3          15%

Corporate (2)                (1,020.3)        (42.6)           -         (1,160.2)      1,557.9           -
                             --------      --------          ----        --------      --------         ----

Total (3)                      $197.3      $1,018.3          (81%)       $1,810.2      $4,139.2         (56%)
                             ========      ========          ====        ========      ========         ====
</TABLE>

                                       19
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


(1)  The third quarter results included goodwill amortization for 2001 and 2000
     as follows: Pharmaceuticals - $34.3 and $36.5, and Consumer Health Care -
     $5.9 and $8.0, respectively.

     The first nine months results included goodwill amortization for 2001 and
     2000 as follows: Pharmaceuticals - $103.0 and $112.1, and Consumer Health
     Care - $17.8 and $24.0, respectively.

(2)  Corporate expenses for the 2001 third quarter and first nine months
     included an additional litigation charge of $950.0 relating to the
     litigation brought against the Company regarding the use of the diet drugs
     REDUX or PONDIMIN. The charge related to the Pharmaceuticals operating
     segment.

     Corporate expenses for the 2000 first nine months included income of
     $1,709.4 resulting from the receipt of a $1,800.0 termination fee provided
     for under the merger agreement with Warner-Lambert Company offset, in part,
     by certain related expenses.

     Excluding the additional litigation charge from the 2001 third quarter and
     first nine months results and the termination fee from the 2000 first nine
     months results, Corporate expenses, net increased 65% and 39% for the 2001
     third quarter and first nine months, respectively.

(3)  Excluding the additional litigation charge from the 2001 third quarter and
     first nine months results and the termination fee from the 2000 first nine
     months results, total income from continuing operations before taxes
     increased 13% and 14% for the 2001 third quarter and first nine months,
     respectively.

During the 2001 third quarter and first nine months the Company experienced a
higher growth rate of worldwide pharmaceutical income from continuing operations
before taxes (20% and 18%, respectively) than the growth rate of net revenue (9%
for both periods) due primarily to improved margins relating to the human
pharmaceutical product mix, lower selling, general and administrative expenses,
as a percentage of net revenue, higher equity income relating to Immunex and
2000 other expenses that were non-recurring in 2001, including the consent
decree discussed earlier offset, in part, by lower gains on the sales of
non-strategic assets.

Worldwide consumer health care income from continuing operations before taxes
decreased 8% for the 2001 third quarter and 2% for the 2001 first nine months.
The 2001 third quarter and first nine months decrease was due primarily to lower
worldwide consumer health care sales.

Corporate expenses, net, excluding the additional litigation charge, increased
65% for the 2001 third quarter due primarily to increased interest expense
offset, in part, by lower general and administrative expenses. Corporate
expenses, net, excluding the additional litigation charge and Warner-Lambert
Company termination fee, increased 39% for the 2001 first nine months due
primarily to lower other income, net relating to a one-time insurance recovery
of environmental costs received in the 2000 first quarter offset, in part, by
lower general and administrative expenses in the 2001 first nine months.

Excluding the additional litigation charge taken in the 2001 third quarter, the
effective tax rate for continuing operations decreased to 24.4% for the 2001
third quarter compared with 25.2% for the 2000 third quarter. The effective tax
rate decreased to 24.7% for the 2001 first nine months compared to 25.5% for the
2000 first nine months (excluding the effect of the 2001 third quarter
additional litigation charge and 2000 Warner-Lambert Company termination fee).
The tax rate reduction occurring in the 2001 third quarter and first nine months
was due primarily to an increased benefit from manufacturing in lower taxed
jurisdictions.

                                       20
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


Consolidated Income and Diluted Earnings Per Share Results
----------------------------------------------------------

Income and diluted earnings per share from continuing operations for the 2001
third quarter were $252.1 million and $0.19, respectively. These amounts
included a charge of $950.0 million ($615.0 million after-tax or $0.46 per
share-diluted) in connection with the REDUX and PONDIMIN diet drug litigation.
Excluding the litigation charge, income and diluted earnings per share from
continuing operations for the 2001 third quarter were $867.1 million and $0.65,
respectively, compared to $762.1 million and $0.58 in the prior year,
representing increases of 14% and 12%, respectively. The increases in income and
diluted earnings per share from continuing operations for the 2001 third quarter
were due primarily to additional U.S. sales of human pharmaceuticals, improved
margins from favorable product mix and higher other income, net offset, in part,
by higher research and development expenses and interest expense.

Income and diluted earnings per share from continuing operations for the 2001
first nine months increased 15% and 14%, respectively, to $2,077.6 million and
$1.56 compared to $1,809.7 million and $1.37, respectively, for the same period
last year (excluding the 2001 third quarter litigation charge and 2000
Warner-Lambert Company termination fee received in the 2000 first quarter).
Income and diluted earnings per share from continuing operations for the 2000
first nine months included income of $1,111.1 million and $0.84, respectively,
resulting from the Warner-Lambert Company termination fee. The increases in
income and diluted earnings per share from continuing operations for the 2001
first nine months were due primarily to additional U.S. sales of human
pharmaceuticals, improved margins from favorable product mix and higher other
income, net offset, in part, by higher selling, general and administrative
expenses, and research and development expenses.


Euro Currency
-------------

As of January 1, 2001, 12 of the 15 member countries of the European Union
adopted the Euro as a new common legal currency. However, the legacy currencies
of the member countries are scheduled to remain legal tender as
sub-denominations of the Euro until January 1, 2002 (the transition period).
Critical areas impacted by the conversion to the Euro have been identified and
appropriate strategies developed, which are currently being implemented to
facilitate the adoption of the Euro and to facilitate business transactions
during the transition period. The costs related to the Euro conversion and
transition period will not have a material adverse effect on the Company's
financial position, results of operations or cash flows. However, the conversion
to the Euro may have competitive implications on the Company's pricing and
marketing strategies, the total impact of which is not known at this time.


Competition and Manufacturing
-----------------------------

The Company operates in the highly competitive pharmaceutical and consumer
health care industries. The Company is not dependent on any one patent-protected
product or line of products for a substantial portion of its net revenue or

                                       21
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


results of operations. PREMARIN, the Company's principal conjugated estrogens
product manufactured from pregnant mare's urine, and related products PREMPRO
and PREMPHASE (which are single tablet combinations of the conjugated estrogens
in PREMARIN and the progestin medroxyprogesterone acetate), are the leaders in
their categories and contribute significantly to net revenue and results of
operations. PREMARIN's natural composition is not subject to patent protection
(although PREMPRO has patent protection). The principal uses of PREMARIN,
PREMPRO and PREMPHASE are to manage the symptoms of menopause and to prevent
osteoporosis, a condition involving a loss of bone mass in postmenopausal women.
Estrogen-containing products manufactured by other companies have been marketed
for many years for the treatment of menopausal symptoms, and several of these
products also have an approved indication for the prevention of osteoporosis.
During the past several years, other manufacturers have introduced products for
the treatment and/or prevention of osteoporosis. New products containing
different estrogens than those found in PREMPRO and PREMPHASE and having many
forms of the same indications have also been introduced. Some companies have
attempted to obtain approval for generic versions of PREMARIN. These products,
if approved, would be routinely substitutable for PREMARIN and related products
under many state laws and third-party insurance payer plans. In May 1997, the
FDA announced that it would not approve certain synthetic estrogen products as
generic equivalents of PREMARIN given known compositional differences between
the active ingredient of these products and PREMARIN. Although the FDA has not
approved any generic equivalent to PREMARIN to date, PREMARIN will continue to
be subject to competition from existing and new competing estrogen and other
products for its approved indications and may be subject to generic competition
from either synthetic or natural conjugated estrogens products in the future. At
least one other company has announced that it is in the process of developing a
generic version of PREMARIN from the same natural source, and the Company
currently cannot predict the timing or outcome of these or any other efforts.

The Company has been experiencing inconsistent results on dissolution testing of
certain dosage forms of PREMARIN and is working with the FDA to resolve this
issue. Until this issue is resolved, supply shortages of one or more dosage
strengths may occur. Although these shortages may adversely affect PREMARIN
sales in one or more accounting periods, the Company believes that, as a result
of current adequate inventory levels and the Company's enhanced process
controls, testing protocols and ongoing formulation improvement project, overall
PREMARIN family sales will not be significantly impacted.


Liquidity, Financial Condition and Capital Resources
----------------------------------------------------

The Company used net cash for operating activities totaling $4,876.1 million
during the 2001 first nine months. Driving the cash outflows were payments of
$6,886.6 million relating to the diet drug litigation (see Note 3 to the
Consolidated Condensed Financial Statements) and an increase in inventories of
$308.3 million due primarily to production planning. These outflows more than
offset earnings generated during the period.

The Company used $2,284.8 million of cash for investments in property, plant and
equipment and marketable securities. The capital expenditures made during the

                                       22
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


2001 first nine months were consistent with the Company's commitment to expand
existing manufacturing and research and development facilities worldwide, and
build new biotechnology facilities. The Company received investment proceeds
through the sales and maturities of marketable securities and the sales of
non-strategic assets totaling $504.2 million.

As described in Note 1 to the Consolidated Condensed Financial Statements, the
Company obtained additional financing totaling $6,000.0 million in March 2001.
The new financing included a $3,000.0 million, 364-day credit facility (which
supports borrowings under the commercial paper program). Any borrowings under
the credit facility that are outstanding upon its termination in 2002 are
extendible for an additional year. In addition, the Company issued three
tranches of Notes in a transaction exempt from registration under the Securities
Act, pursuant to Rule 144A, as follows:

     o   $500.0 million 5.875% Notes due March 15, 2004
     o   $1,000.0 million 6.25% Notes due March 15, 2006
     o   $1,500.0 million 6.70% Notes due March 15, 2011

The interest rate payable on each series of Notes is subject to an increase of
 .25 percentage points per level of downgrade in the Company's credit rating by
Moody's or Standard & Poor's. However, the total adjustment to the interest rate
for the series of Notes cannot exceed two percentage points. There is no
adjustment to the interest rate payable on each series of Notes for the first
single level downgrade in the Company's credit rating by Standard & Poor's. In
the case of the $1,500.0 million 6.70% Notes, the interest rate in effect on
March 15, 2006 for such Notes will, thereafter, become the effective interest
rate until maturity on March 15, 2011. The Company would incur a total of
approximately $7.5 million of additional annual interest expense for every .25
percentage point increase in the interest rate. If Moody's or Standard & Poor's
subsequently increase the Company's credit rating, the interest rate payable on
each series of Notes is subject to a decrease of .25 percentage points for each
level of credit rating increase. The interest rate payable for the series of
Notes cannot be reduced below the original coupon rate of each series of Notes.

The $3,000.0 million, 364-day facility is combined with the Company's existing
$2,000.0 million five-year credit facility (termination date of July 31, 2002)
to provide $5,000.0 million of credit facilities to support the Company's
commercial paper program. The Company offers its commercial paper in a very
liquid market commensurate with its short term credit ratings from Moody's (P2)
and Standard & Poor's (A1). The net proceeds received from the combined Notes
and commercial paper supported by the credit facilities totaled $6,770.3
million. The Company is using the proceeds from the Notes and commercial paper
supported by the credit facilities for general corporate and working capital
requirements, including the capital expenditures identified above, and payments
related to the REDUX and PONDIMIN diet drug litigation.

The Company also used cash for financing activities related to dividend payments
of $907.6 million, which was partially offset by $167.5 million of cash provided
by stock option exercises.

Management remains confident that cash flows from operating activities and
available financing resources will be adequate to fund the Company's operations,

                                       23
<PAGE>



           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


pay opt out settlement payments and fund the nationwide, class action settlement
relating to the REDUX and PONDIMIN diet drug litigation, pay dividends, maintain
the ongoing programs of capital expenditures, and repay both the principal and
interest on its outstanding obligations, without requiring the disposition of
any significant strategic core assets or businesses.


Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------

The market risk disclosures appearing in the Company's 2000 Annual Report on
Form 10-K have not materially changed from December 31, 2000 except as follows:

     o    In conjunction with the Notes issued by the Company on March 30, 2001,
          the Company entered into interest rate swap agreements related to the
          $1,500.0 million 6.70% Notes due March 15, 2011.
     o    The interest rate swap agreements are contracts under which the
          Company converted the fixed rate of the $1,500.0 million 6.70% Notes
          to a floating rate of interest over the term of the interest rate swap
          agreements, which is the same term as the underlying debt.
     o    The interest rate swap agreements are effective fair value hedges, as
          the terms of the interest rate swaps are the same as the underlying
          debt and therefore the current market interest rate fluctuations on
          the debt will be completely offset by the effectiveness of the
          interest rate swap.

At September 30, 2001, the notional/contract amounts, carrying values and fair
values of the Company's financial instruments were as follows:

     ($ in millions)             Notional/
     Description              Contract Amount     Carrying Value     Fair Value
     ---------------------    ---------------     --------------     ----------
     Forward contracts (1)        $551.6                $4.7              $4.7
     Option contracts (1)          878.0                16.7              16.7
     Interest rate swaps         1,500.0                73.9              73.9
     Outstanding debt (2)        9,149.9             9,220.4           9,336.6

     (1)  If the value of the U.S. dollar were to increase or decrease by 10%,
          in relation to all hedged foreign currencies, the net receivable on
          the forward and option contracts would decrease or increase by
          approximately $74.3 million.

     (2)  If the interest rates were to increase or decrease by one percentage
          point, the fair value of the outstanding debt would increase or
          decrease by approximately $223.8 million.

The estimated fair values approximate amounts at which these financial
instruments could be exchanged in a current transaction between willing parties.
Therefore, fair values are based on estimates using present value and other
valuation techniques that are significantly affected by the assumptions used
concerning the amount and timing of estimated future cash flows and discount
rates that reflect varying degrees of risk. Specifically, the fair value of
forward contracts and interest rate swaps reflects the present value of the
future potential gain if settlement were to take place on September 30, 2001;

                                       24
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              Three Months and Nine Months Ended September 30, 2001


the fair value of option contracts reflects the present value of future cash
flows if the contracts were settled on September 30, 2001; and the fair value of
outstanding debt instruments reflects a current yield valuation based on
observed market prices as of September 30, 2001.


ENBREL Supply
-------------

ENBREL is a biological treatment for juvenile, early stage and moderate to
severe rheumatoid arthritis. ENBREL was discovered by Immunex and is being
co-promoted in North America by Immunex and the Company. The Company has
exclusive marketing rights to ENBREL outside of North America. Although the
market demand for ENBREL is increasing, the sales growth is currently
constrained by limits on the existing source of supply. This is anticipated to
continue until the retrofitting of a Rhode Island facility is completed and
approved, which is targeted to occur in the second half of 2002. There can be no
assurance, however, that any estimated date will prove to be accurate. If the
market demand continues to grow, there may be further supply constraints even
after the Rhode Island facility begins producing ENBREL. The current plan for
the longer term includes a new manufacturing facility, which is being
constructed in Ireland.


Cautionary Statements for Forward-Looking Information
-----------------------------------------------------

This Form 10-Q, including management's discussion and analysis set forth above,
contains certain forward-looking statements, including, among other things,
statements regarding the Company's results of operations, Euro currency,
competition, liquidity, financial condition and capital resources, PREMARIN,
ENBREL supply, MENINGITEC sales, foreign currency and interest rate risk, the
nationwide, class action settlement relating to REDUX and PONDIMIN, and
additional litigation charges related to REDUX and PONDIMIN including those for
opt outs. These forward-looking statements are based on current expectations of
future events that involve risks and uncertainties including, without
limitation, risks associated with the inherent uncertainty of pharmaceutical
research, product development, manufacturing, commercialization, economic
conditions including interest and currency exchange rate fluctuations, the
impact of competitive or generic products, product liability and other types of
lawsuits, the impact of legislative and regulatory compliance and obtaining
approvals, and patents. The Company assumes no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise. Certain factors which could cause the Company's actual
results to differ materially from expected and historical results have been
identified by the Company in Exhibit 99 to the Company's 2000 Annual Report on
Form 10-K, which exhibit is incorporated herein by reference.

                                       25
<PAGE>

                          Part II - Other Information
                          ---------------------------


Item 1.   Legal Proceedings
          -----------------

          The Company and its subsidiaries are parties to numerous lawsuits and
          claims arising out of the conduct of its business, including product
          liability and other tort claims, the most significant of which are
          described in the Company's Annual Report on Form 10-K for the year
          ended December 31, 2000 and Quarterly Reports on Form 10-Q for the
          periods ended March 31, 2001 and June 30, 2001.

          The Company continues to resolve the remaining claims of those
          individuals who have opted out of the Company's nationwide, class
          action settlement of the diet drug litigation involving REDUX or
          PONDIMIN (see Note 3 to the Consolidated Condensed Financial
          Statements).

          On July 10, 2001, the District Court of Jim Wells County, Texas for
          the 79th Judicial District entered a final judgment in the case of
          Lopez v. American Home Products Corporation, et al., No. 99-07-37723.
          The final judgment included $4,821,219 in compensatory damages,
          $3,392,438 in punitive damages and $968,206 in pre-judgment interest,
          for a total of $9,181,863. That judgment has now been vacated, the
          case dismissed with prejudice and the matter resolved.

          On August 28, 2001, the Chancery Division of the New Jersey Superior
          Court, Morris County, dismissed without prejudice Grill v. Stafford,
          et al., (No. MRS-L-164-98, N.J. Sup. Ct., Morris Cty.), a shareholder
          derivative suit against the Company, certain directors, a former
          director and officer of the Company, and certain officers of the
          Company which sought to recover any losses or damages sustained by the
          Company in connection with the withdrawal from the market of REDUX and
          PONDIMIN. The court also denied plaintiffs leave to replead their
          complaint with more particularity. Plaintiffs have filed an appeal of
          the dismissal.

          In the litigation involving the Company's DIMETAPP and ROBITUSSIN
          cough/cold products that contained the ingredient phenylpropanolamine
          ("PPA"), two additional putative class actions have been filed.
          Havard, et al. v. SmithKline Beecham, Inc., et al., No. 01-CV-532
          (U.S.D.C., M.D. La.) is a putative nationwide class action for
          personal injuries allegedly resulting from the ingestion of
          PPA-containing products. All federal cases involving PPA claims have
          now been transferred to the United States District Court for the
          Western District of Washington before United States District Judge
          Barbara Jacobs Rothstein. Horne, et al. v. American Home Products,
          Inc., et al., No. 01-CI-06749 (Cir. Ct., Jefferson Cty., KY) is a
          putative statewide class action seeking restitution and other economic
          relief. In addition to these and the previously reported putative
          class actions, there are a total of approximately 145 individual
          personal injury suits against the Company that have been filed
          alleging injury as a result of ingestion of PPA-containing products.
          The Company expects

                                       26
<PAGE>

          that additional PPA cases may be filed in the future against it and
          the other companies that marketed PPA-containing products. The Company
          intends to defend all such cases vigorously.

          The Company has been served with seven lawsuits, five of which are
          putative class actions, alleging that the cumulative effect of
          thimerosal, a preservative used in certain vaccines manufactured and
          distributed by the Company as well as by other vaccine manufacturers,
          causes severe neurological damage, including autism in children. The
          class actions are Doherty, et al. v. Aventis Pasteur, et al., No.
          325082, Super. Ct., San Francisco Cty., CA (nationwide class for
          medical monitoring, personal injuries and injunctive relief); Demos,
          et al. v. Aventis Pasteur, et al., No. 01-22544CA15, Cir. Ct., Dade
          Cty., FL (nationwide class for medical monitoring, personal injuries
          and injunctive relief against future sales); Cyr, et al. v. Aventis
          Pasteur, Inc., et al., No. 01-C-663, Super. Ct., Hillsborough Cty., NH
          (statewide class for personal injuries and injunctive relief); King,
          et al. v. Aventis Pasteur, Inc., No. 01-CV-1305, U.S.D.C., D. Ore.
          (nationwide class for personal injuries and injunctive relief); and
          Mead v. Aventis Pasteur, Inc., et al., No. 01-CV-1402, U.S.D.C., D.
          Ore. (nationwide class for medical monitoring). The Company expects
          that additional thimerosal cases may be filed in the future against it
          and the other companies that marketed thimerosal-containing products.
          The Company intends to defend all such cases vigorously.

          An agreement has been entered into to settle the Federal Trade
          Commission (FTC) administrative complaint (In Re: Schering-Plough
          Corporation, et al., Docket No. 9297) regarding the Company's
          settlement of a patent infringement litigation with Schering-Plough
          Corporation relating to the Company's generic version of
          Schering-Plough's K-Dur potassium supplement product. The terms of the
          settlement are confidential pending approval by the FTC. The
          settlement is not an admission of liability and was entered into to
          avoid the costs and risks of litigation.

          Following the filing of the administrative complaint by the FTC,
          numerous lawsuits were filed in federal and state courts alleging
          civil claims based on the same conduct alleged by the FTC. Currently,
          the Company is aware of approximately forty such lawsuits that have
          been filed against the Company. Thirty-eight of these lawsuits are
          currently pending in federal court. Twenty-nine of these federal cases
          have been consolidated as part of multidistrict federal litigation
          being conducted in the United States District Court for the District
          of New Jersey (K-Dur Antitrust Litigation, MDL 1419, D. N.J.). The
          remaining federal cases have been or will be subject to requests to
          include them as part of the multidistrict consolidated litigation. In
          two of these cases, plaintiffs allege to be direct purchasers of
          K-Dur, or claim to be assignees of direct purchasers of K-Dur. One of
          these direct purchaser cases is brought as a purported class action on
          behalf of direct purchasers of K-Dur nationwide. In thirty-seven
          cases, plaintiffs claim to be indirect purchasers or end-payors of
          K-Dur or to be bringing suit on behalf of such indirect purchasers;
          these indirect purchaser cases are brought as purported class actions

                                       27
<PAGE>

          on behalf of various groups of indirect purchasers. Some of these
          cases claim to be brought on behalf of indirect purchasers nationwide,
          while others of these cases purport to be brought on behalf of
          indirect purchasers from specified states or groups of states. One
          case is brought by the Commonwealth of Pennsylvania, through its
          Attorney General, on behalf of all departments, agencies, and bureaus
          of the Commonwealth who purchased K-Dur or reimbursed such purchases.

          Generally, plaintiffs claim that a 1998 settlement agreement between
          the Company and Schering-Plough that resolved a patent infringement
          action unlawfully delayed the market entry of generic competition for
          K-Dur, and that this caused plaintiffs and others to be required 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 restrained trade and constituted
          an agreement to allow Schering to monopolize the potassium chloride
          supplement markets.

          Based on these allegations, plaintiffs allege violations of federal
          and state antitrust laws, various other state statutes including
          unfair competition laws and consumer protection statutes, and under
          common law theories such as unjust enrichment. Plaintiffs seek various
          forms of relief including damages in excess of $100 million, treble
          damages, restitution, disgorgement, declaratory and injunctive relief,
          and attorneys' fees.

          On August 2, 2001, the United States District Court for the Southern
          District of Ohio granted in part and denied in part the Company's
          motion to dismiss the complaint filed in September 2000 by Duramed
          Pharmaceuticals, Inc. against the Company, alleging that the Company
          violated federal antitrust laws through alleged exclusionary practices
          involving the Company's managed care and pharmacy benefit management
          agreements relating to PREMARIN. Duramed, Inc. v. Wyeth-Ayerst
          Pharmaceuticals, Inc., No. C-1-00-735 (S.D. Ohio). The Company
          believes that its practices did not violate the antitrust laws and
          intends to vigorously defend this action.

          Following the filing of the Duramed case, five class action lawsuits
          have been filed on behalf of "end-payors" (defined as the last persons
          and entities in the chain of distribution) and direct purchasers in
          federal district court in Ohio, New Jersey, and California state court
          alleging that the Company violated federal and state antitrust laws
          through alleged exclusionary practices involving PREMARIN and the
          Company's contracts with managed care organizations and pharmacy
          benefit managers. Mattoon, et al. v. Wyeth-Ayerst Laboratories, Inc.,
          No. 1-01-CV-447 (W.D. Ohio); Forgue v. Wyeth-Ayerst Laboratories,
          Inc., et al., No. 1-01-CV-634 (S.D. Ohio); J.B.D.L. Corp. v.
          Wyeth-Ayerst Laboratories, Inc., et al., No. C-1-01-704 (S.D. Ohio);
          McDermott v. Wyeth-Ayerst Laboratories, Inc., et al., No. 01-CV-4690
          (D.N.J); and Blevins v. Wyeth-Ayerst Laboratories, Inc., et al., No.
          324380 (San Francisco Superior Ct.). The complaints seek injunctive

                                       28
<PAGE>

          relief, damages, and disgorgement of profits. The Company believes
          that its contracts involving PREMARIN do not violate state or federal
          laws and the Company will vigorously defend these lawsuits.

          On October 5, 2001 the U.S. District Court for the District of
          Columbia entered judgment in favor of the Company in Boca Investerings
          Partnership v. U.S. (No. 97-602, U.S.D.C., D.C.), in which the Company
          challenged the disallowance by the Internal Revenue Service (IRS) of a
          capital loss deduction in 1990 related to a partnership investment.
          The Court ordered the IRS to refund the tax paid, approximately $226
          million, together with interest. The IRS has until December 4, 2001 to
          appeal the decision. Since the decision is subject to appeal, the
          Company has not recognized this anticipated refund in the financial
          statements.

          In the opinion of the Company, although the outcome of any legal
          proceedings cannot be predicted with certainty, the ultimate liability
          of the Company in connection with its legal proceedings will not have
          a material adverse effect on the Company's financial position but
          could be material to the results of operations in any one accounting
          period.

                                       29
<PAGE>

Item 6.   Exhibits and Reports on Form 8-K
          --------------------------------

          (a)    Exhibits
                 --------

                 Exhibit No.  Description
                 -----------  -----------

                    (3.2)     The Company's By-laws, as amended to date.

                    (12)      Computation of Ratio of Earnings to Fixed Charges.




          (b)    Reports on Form 8-K
                 -------------------

                 None

                                       30
<PAGE>

                                    Signature
                                    ---------


    Pursuant to the requirements of the Securities Exchange Act of 1934, the
    Registrant has duly caused this report to be signed on its behalf by the
    undersigned thereunto duly authorized.

                       AMERICAN HOME PRODUCTS CORPORATION
                       ----------------------------------
                                  (Registrant)


                              By /s/ Paul J. Jones
                         ------------------------------
                                  Paul J. Jones
                         Vice President and Comptroller
                           (Duly Authorized Signatory
                          and Chief Accounting Officer)


    Date: November 14, 2001

                                       31
<PAGE>

                                  Exhibit Index
                                  -------------


Exhibit No.      Description
-----------      -----------

  (3.2)          The Company's By-laws, as amended to date.

  (12)           Computation of Ratio of Earnings to Fixed Charges.


                                      EX-1