施貴寶 (BMY) 2001 Q1 法說會逐字稿

Good day everyone and welcome to today's Bristol-Myers Squibb Company's first quarter result conference call. Today's call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to the Vice President of Investor Relations Mr. Timothy Cost. Mr. Cost, please go ahead, sir.

Thank you very much. Thanks operator. Good afternoon everybody. I appreciate your calling in. I know you are handling a lot of calls today. This is Timothy Cost. At our end of the line we have Frederic N. Schwartz our Senior Vice President and Chief Financial Officer, Richard J. Lane our President of Worldwide Medicine, Donald J. Hayden our Executive Vice President for strategy who also has e-business and Mead Johnson and John Alecor our Senior Director Investor Relations. By now, each of you should have seen the earnings release as well as the analysis, the volume price exchange analysis, results from the major operating units and all the key product sales. We put that on the web this morning and this call has little later in the day, so hopefully you have time to look that. Everything is also available on the website www.bms.com/ir including all the supporting financial analysis. Before we go to Frederic N Schwartz and his commentary, let me read what the lawyers are asking us to read, as always relative to say part of the language. During this call, we may make various remarks about the companies future expectations, plans, and prospects that constitute forward-looking statements or BREAK IN TAPE 00:01:24 under the Private Security Litigation Reform Act Of 1995. Actual results may differ material for those indicated by the forward-looking statements as a result of various important factors including those exhibited in exhibit 99 of the companies most recent annual or form 10-K in the periodic reports on form 10-Q.

These documents are available from the SEC, the BMS web site, or from investor relations. Any forward-looking statements represent our estimates only as of today, should not be relied upon as representing our estimates for any subsequent data. While, we may elect updates for forward-looking statements at some point of future, we specifically disclaim any obligation to do so, even for estimates change. That legal stuff said let me turn the call over to our Chief Financial Officer Frederic N Schwartz for some comments and your questions, thanks. Frederic N Schwartz.

Thanks Tim. Thanks everyone for joining this afternoon. I do look forward to the opportunity to meet each of you. I know Tim will be setting that up. Before I begin, I just want to alert you that we all planning to have an investor meeting on November 7, 2001. The investor meeting will highlight our R&D program. Tim will be providing you more information on that meeting. My comments this afternoon, will take about 15 minutes, and then we will provide time for questions and answers. Let me just go through an outline of what I will be speaking about. I will first go through our highlights, really highlights of my comments that I will be making, and then I will do a brief overview on our sales and earnings. I would like to spend most of our time on the sales by business. Our business and our franchise, and put the first quarter results that we issued this morning and our business contact. I will provide you an update on the divestitures and then I will have a brief wrap up.

One other comment is that all the financial information that I will be presenting to you is on a continuing operation phases. In September, when we announced the plan divestitures of Clairol and Zimmer, we went to a continuing operations, financial statement, and presentation. We restated our financial statements in our September release. We then continued that presentation in our fourth quarter presentation and also in our annual report, all the financial statements have been restated. Today's first quarter report continues to show continuing operation and again continuing operations includes the medicine business, the nutritional business, and the ConvaTec business. The continuing operation does not include the results of operations or the sales line from Zimmer or Clairol.

Now, as to the highlights. Just a brief comments on the sales, R&D, earnings per share, and cash flow. Sales for the company on a continuing operation basis increased 8% excluding foreign exchange. Worldwide pharmaceutical sales increased 10% excluding foreign exchange and domestic pharmaceutical sales were up 13%. During the quarter, one product Taxol had one generic competitor on the market. Our plans for the rest of the year reflect multiple generics on the market. BuSpar had no generics on the market during the first quarter we are seeing today multiple generic competitors on the market. As to Glucophage, we are going through a conversion process. We are putting additional resources on the conversion process and our plans for the year include a better conversion rate than what we saw in the first quarter.

As to the strength of our franchises, our Glucophage franchise in total. Our total metformin franchise sales increased 31% to $557 million. Our worldwide Pravachol sales increased 10% to $507 million and our Plavix sales increased 48% to almost $300 million. Our R&D expenditures increased 14% as we saw our pharmaceutical R&D increase 17%. As we invest in our late stage compounds, primarily Vanlev and Abilitat. As to our earnings per share, our earnings per share that we issued this morning for the first quarter was 63 cents fully diluted continuing operation, that is a 13% increase over last year. It is one penny over first call consensus estimates, and it is in line with what Peter R. Dolan and Charley A. Heimbold said to you back at our September analyst meeting. Our outlook for 2001 is that we are comfortable with current consensus estimates of $2.41 and that is also in line with what Charley A. Heimbold and Peter R. Dolan told you at the analyst meeting in September. Our cash flow was very positive. It is a very strong story as we returned shareholder value through our share repurchase programs and our dividends. We repurchased the $11.3 million shares for a total cost of $700 million; that is about $100 million more than we repurchased last year at this time. We ended up the quarter with $2.9 billion of cash; that is about $200 million more than we had at this time last year. Overall, my sense of the quarter is that it was well-executed quarter. Now, some comments for an overview of sales and earnings.

Sales increased 5%, 8% excluding exchange to $4.7 billion. Volume increased 5%, price increased 3%, and foreign exchange was unfavorable at 3% as we saw the weakening of the Euro and the strengthening of the Dollar. Pretax earnings increased 10% to $1.7 billion. Net earnings increased 10% to $1.2 billion, and as I mentioned earnings per share fully diluted basis, continuing operation increased 13% to $0.63 per share. Now, I would like to make some comments as to our businesses and to our franchises looking at total sales we reported for the quarter of $4.7 billion. Our worldwide medicines group makes up 85%-86% of the total revenue number. Our worldwide medicine sales were $4 billion, increased 6% on our reported basis, and increasing 9% excluding foreign exchange. Worldwide pharmaceutical sales increased 10% excluding foreign exchange, and domestic pharmaceutical sales increased 13%. A major business in our worldwide medicines business is our US business. It represents 70% of our worldwide medicines business. The total sales for the US medicine business were $2.8 billion and increased 12%. The two businesses included in this business is the primary care business and our Oncology-Immunology business. Primary care sales were $1.9 billion and increased a very strong 19%. Let me make some comments as to their franchises and to their products, but this time, as to market shares.

Our total metformin franchise, our total Glucophage franchise had a market share of 38.9 and since the beginning of this year increased by 2.3 points. We saw the total market share of the Glucophage family increasing. As we go through our conversion process, we saw our Glucophage IR shares at 27.1 coming down from the beginning of the year of 4.5 points and Glucophage XR increasing to 6.4 shares GlucovanceTM 00:09:18 increasing to 5.4 share. As I mentioned, we are putting additional resources on the conversion process, and we believe that this year the conversion rates will be stronger than what we saw in the first quarter. Plavix and Tequin had market shares that were all-time high. Plavix market share was 74.1 and Tequin was 4.1. For Tequin that has reached $2.5 million prescriptions in the United States as the Plavix in the mid-March at the American College of Cardiology was presented the cure study. This is a very significant important study for Plavix and a very important study for the treatment of cardiovascular disease.

Finally, as to Pravachol, we have seen it hold its own share at 13 on TRX or NRX basis. Some comments on our Oncology-Immunology business in the United States, sales increased 2% to $873 million. We saw our Paraplatin withdrawn sales increasing 27% to $165 million. OTN our oncology distribution business increased 32% to $322 million, and Taxol as expected had sales of about $180 million, a decline of 32%, decline of $70 million.

But, let me also tell you that Taxol international sales recorded sales of $150 million increasing 10% on a reported basis and excluding foreign exchange, Taxol international sales increased 20% and that 20% increase is inline with the rate of growth we saw last year. Some comments on our international business. Our total international business represents about 30% of the overall worldwide medicine sales. International sales were $1.1 billion and increased 4% excluding foreign exchange declined on a reported basis 4%. There were three significant regions in our international business. In Europe, we saw sales increasing 5% excluding foreign exchange to $685 million as we saw strong sales in the United Kingdom, Central, and Eastern Europe, and strong Pravachol sales in France. In our Asia-Pacific, Middle East, and South Africa region we saw sales increasing 11% excluding exchange with strong sales in Australia and China. And in Latin America-Canada region, we saw sales decline 9% excluding foreign exchange, as there is a lower sales in Latin America offset by Canadian sales increasing by 13%.

Before wrapping up on the medicines business, let me mention some compounds that are in our near-term pipeline. As to Vanlev, the trials are continuing. As to triglyceride, which you may know as Zomax that is the product we are in partnership with Novartis, it is awaiting approval at the SDA for irritable bowel syndrome. Abilitat, we are looking forward to a filing in the fourth quarter of this year and protease inhibitor is expected a filing in 2002.

Some comments on our non-medicines business. Our nutritional business increased 2% excluding foreign exchange to a little over $500 million. We saw domestic sales decline 6% and international sales excluding exchange increase 15%. And our largest franchise in the nutritional business is Enfamil, which increased 4% to about $212 million. ConvaTec had a very strong quarter, increasing 10% excluding exchange to about $170 million of sales. Domestic sales increased 12%, international sales increased 9%, and we saw that two major franchises is ostomy and wound care 00:13:13 both showing double-digit growth excluding foreign exchange. On that basis, ostomy sales increased 12% and wound care sales increased 11%. So, that is my summary of looking at the total sales for the first quarter by $4.7 billion. We also do track sales by product, by our franchises that are trending to having sales of $100 million for the entire year. There were 28 of these products in the first quarter that are trending to have sales of over $100 million for the year 2001. There are 22 medicines products, 4 nutritional products, and 2 ConvaTec products. 7 of these products have growth rates over 20%, 11 of them growth rates over 10%. There are two products Glucophage and Pravachol with sales in excess the $500 million in the first quarter, and one product clopidogrel Plavix that have sales of $300 million in the first quarter.

Let me now make some comments, as to the earnings statements. As I mentioned before, sales increased 8% excluding foreign exchange to 4.7 billion. Our cost of product sold increased 12% to $1.3 billion. As we saw a decline in our gross margin of 1.8 points. A little bit more than half of that decline is attributable to our OTN 00:14:37, our oncology distribution business, which has lower margins and we have seen that in last year as well we saw that trend. The other part is related to product mix, primarily declining Taxol sales. Marketing, selling, administrative, and other declined 12% to $834 million, in part due to foreign exchange, in part due to cost efficiencies and cost effectiveness. Advertising and product promoting of $377 million where approximally last years level. Research and development increased 14% to $508 million and pharmaceutical research and development increased 17% as we invested in our late stage compounds, primarily Vanlev and Abilitat. Pretax earnings from continuing operations increased 10% to $1.7 billion as we saw our pretax margin increase 1.6 points to 36%. Our income tax remained basically unchanged from the fourth quarter last year to this quarter, and our net earnings from continuing operations increased 10% to $1.2 billion. As we saw our net margins improve 1.1 point to 26.5%. And again, a fully diluted earnings per share on a continuing operations basis increased 13% to 63 cents per share.

Let me make some comments as to our businesses that we are planning to divest Clairol and Zimmer, and then I will provide you an update in terms of the divestiture process. Clairol recorded sales of approximately $460 million an increase of 5% excluding foreign exchange, with domestic sales increasing 3%, and the international sales increasing 8%; excluding foreign exchange. Hair care and hair color excluding foreign exchange basis, hair care 7%, hair color increased 5%, and their largest franchise in Clairol is herbal essences, which recorded sales of approximately $150 million and increased 13% excluding foreign exchange. Zimmer had a very strong quarter, increasing 13% excluding foreign exchange to $285 million in sales. Domestic sales were up 16% and international sales excluding exchange were up 10%. Looking at their major franchises and looking at the increase on excluding exchange basis, needs were up 16%, hips were 18%, and fracture was up 11%. Now as to divestiture process, the divestitures are on track. In September of last year when we had our analyst meeting, we indicated that divestitures would be completed by 12 months. Clairol was on track, we are in the process of receiving bids next month, and that remains on track. Zimmer is also on track, as you know, we have indicated that we will be doing a spin, we have filed a registration statement, and we are right now in the midst of registration process. So, the divestitures are on track as we announced back in September.

Let me just do a brief wrap-up to conclude my comments. Earnings per share on a fully diluted continuing operations basis 63 cents per share, 13% increase compared to last year. One penny over first quarter consensus estimate, inline with what we have said at the September analyst meeting. Our outlook for 2001, we are comfortable with current consensus estimates of $2.41. As per sales, sales overall for the company on a continuing operations basis increasing 8% excluding foreign exchange. Worldwide pharmaceutical sales increased 10% excluding exchange, and domestic pharmaceutical sales increased 13%. Research and development expenditures increased 14% and pharmaceutical R&D was up 17%. Cash flow was strong for the quarter as we returned value to our shareholders through our share repurchase program and our dividends. The divestitures are on track and again my overall sense of the quarter was that it was well-executed quarter. Tim that concludes my comments and back to you for Q&A.

Thanks Fred. We can use the same format we have on all of our previous calls for this Q&A session. You can punch in with your questions in just a moment. We would ask as usual that you try to hold yourself to one question or for some of you may be one line of questioning if you would, so we can touch on as many different subjects as we can. I hope you appreciate that we are glad to address all your issues, there are some obviously we cannot go into as much detail as you might like. But with that _____ 00:19:18 we will go finally go to the first question.

Thank you, Sir. Our question and answer session will be conducted electronically. If you would like to ask a question, please firmly press the * key, followed by the digit #1 on our touchtone telephone. We will come to you in the order that you signal and if you find that your question has been asked and answered before you could ask it, and you would like to remove yourself from the question thereafter, please firmly press the pound key. Again, if you would like to ask a question press the *key followed by the digit #1 and we will pause for just a moment or two. And for our first question we go to Steve Taggi with Merrill Lynch.

Yes, thanks and good afternoon. It seems clearly that all eyes are on Glucophage at this point. So, I was wondering whether you could comment on the complex interplay between the three products Glucophage so far mainly the Glucophage IR is coming and heavy and Glucophage XR and GlucovanceTM are coming in light and I would also hope that you would comment just on retention rate that we have seen so far on Glucophage XR, you indicated that resources were going up so, I am curious as to how many rupture throwing at the product, what is your current assumptions on generic competition and whether give away programs will continue and if you have any other programs lined up? Thanks.

Good question and let me try and give you a reasonably comprehensive answer and touch on your points and may be add a few others. But first, just a general observation I think that, we have done a number of things right for these brands the birth grade products, we have clearly been emphasizing switch all along but at the same time, I think there has been somethings we are not doing right. One of which was over emphasizing the interplay between the three, and one of things that we have been doing a lot research on our stepping back looking at now is that we want to treat Glucophage XR and GlucovanceTM as very different products and very different opportunities to challenge both Glucophage and opportunity for growth in the market. Let me touch on GlucovanceTM first because I really do want to talk about these as very different products. I think that early on we probably erred trying too hard to position GlucovanceTM as a switch product for patients already on Glucophage and glyburide. GlucovanceTM is really behaving very much like a new product and in fact it is an excellent new product, and we really need to position it as a new way to treat diabetes, and we are repositioning exactly along those lines. We have very good data there to talk about it as ideal therapy for starting new patients, and in fact we will have three very good abstracts presented at the ADA upcoming 21 on efficacy data that confirm the effect as the first step, the synergy, and one that also shows that it was not really an issue with hypoglycemia, which has been a concern for some doctors. One of the other mistakes, I think, we made early on ... well, we had three sales forces of about 600 plus one hospital sales force promoting these products. We had all sales forces promoting both products. One of the changes we are making as part of our repositioning effort for both GlucovanceTM and the kind of emphasis we want to have on XR is that we are adding additional sales forces effective immediately this week. We now have six sales forces promoting the products and no sales force will promote both products. There will be a number of sales forces promoting GlucovanceTM and they will not promote either Glucophage or Glucophage XR. Those sales forces will be strictly focussed on positioning GlucovanceTM as referred first step for treatment in diabetes and emphasizing its efficacy and tolerability advantages. Slipping over, we really have an opportunity to try GlucovanceTM much better we have been as a new product. Slipping over to XR likewise, I think that we have made a couple of mistakes there. First early on by having it in the same sales force with GlucovanceTM, there was some confusion amongst the sales force on which product they should be given priority too, when we asked to put in a more emphasis on XR, which we did back in early March they probably took the rival of GlucovanceTM for a while which is one of reasons I think it is so flattening and the GlucovanceTM share, and so sales force is strictly diverted to GlucovanceTM, and new positioning, new therapy and to increased resources. With Glucophage XR, we are going to have free sales forces on Glucophage XR, I am very pleased with what we saw with the March free program in terms of its impact on new prescriptions particularly weekly the little dip you saw there in New York share on a weekly basis was the one week we stopped the promotion of that free program we are going to extend the free program throughout the month of April. We are going to increase our promotion behind that, that will be increasing total investments spend behind GlucovanceTM in XR by about 35%. We have put more emphasis in the doctors offices on Glucophage XR as the switch product for Glucophage whether or not patients are on combination therapy, and the message there will be simply if you are using Glucophage, and you like Glucophage when you like to use it once a day to make it more convenient for your patients, if you would or you have to do is write XR you get group of the same product you know with the same profile once a day and less expensive for you patients. Sales force is going to drive that message extensively even as we continue the consumer campaign for Glucophage XR through the month of April. Further, in late April we will be looking at the two new programs two consumers for Glucophage XR and for GlucovanceTM. From GlucovanceTM we are going to look for a program, something to be effective this is based on final terms, and something to the effect of the GlucovanceTM challenge, if GlucovanceTM cannot get you to your HBI 1C goal by the end of three months, we will refund your money and we are also looking at ways to challenge consuming Glucophage come in for the Glucophage XR switch. Focus is much tighter, extensively increase in resources, extensive market research focussed on an understanding of what the executional components of our strategy need to be, we understand that, and we will be dealing with all on those. Did that answer please, Steve?

Yes thanks.

For our next question we go to Jamie Rubin with Morgan Stanley.

Thank you if I can just followup on some of these questions, Rick when do you plan any assumptions assumed generic competition and given that some of the positioning was not actually maximized potential of these products and now realizing that in putting strategy in place to rectify that, is there enough time and are you still comfortable with the 20% growth rate expectation that you had year marked for this year? Thanks.

Thank you Jamie. Let me answer the last question first. I am still comfortable with the 20%, I still think there is enough time we always assume generics late summer or early fall, and I think that is still our current assumption, obviously we have got to accelerate the switch from the IR to XR, and we got to reaccelerate growth of GlucovanceTM, but I am confident the program that we are putting in place will do that within the timeframe that we have.

And to our next question we go to Carl Zeiden with J. P. Morgan.

Thanks very much. I was wondering if you could give it an update on the legal situation for Taxol, I guess, the appeal wound up saying that two of the ten claims that were reasonably drawn out on summary judgment do need to be heard, so I am assuming you are going to have a full court case on those after all so, can you tell us what the timing of that is, and I guess, from a pragmatic perspective since the regulatory hurdles are gone and generic Taxol are on the market, what is the best case if you do aptly when on one of those clients? Thanks.

Carl, this is Don Hayden. It is unclear what the timing of all of that will be. It would probably go back to the trial cord and it is really unclear what the implications of that are, I think, the important point I guess that relates to our business right now is that we are basing our plan for the remainder of this year in going forward on the assumption that will have generic competition in the US. That is the planning basis, that is what we are working with, and we will pursue whatever avenues are available to us on the legal side.

Next question we go to Steve Tallow with SG Cowen.

I am wondering if you could speak to SG&A, A&P, and R&D trends for the full year given the somewhat unusual trend seen in Q1 and secondly what were the products that incurred price increases in Q1.

Let me just go through again in terms of the P&L. In general, we have not provided directions in terms of the individual line items for the year. What I tried to do is provide as I went through the earnings statement an overview so you had an idea what was taking place in each of the line items and basically in our marketing, selling, administrative you saw that we had cost efficiencies and cost effectiveness taking place for the reduction of 12% advertising and product promotion was basically at last year level. But let me just say a few words on research and development which increased 14%; I mentioned in pharmaceutical R&D increased 17%. As we saw last year total R&D for the company increased 10% and pharmaceutical R&D last year increased 14%. As we look over the year and as I look at the total plan for the year those more likely the type of rates for growth I will see for the whole year. So that is how we are looking at these three line items overall. I hope that answers your question and Tim is going to say some comments on pricing.

Steve on the pricing just for everyone, if you look at the volume price exchange rate that we give you in the worldwide medicines group the price index was +3 for the quarter as also +3 for the company. Once the price increases that you may not know about those we are listening with the Avapro, Avalide, which was a 5% increase in March and Pacquin, which was a 4% increase in March. If you go back to the January 24th fourth quarter call that we did, we mentioned that there were handful of price increases in early January and in case nobody wrote him down with Monopril at 5, Pravachol at 5.5, Plavix at 5, Glucophage at 8, Serzone at 6.9, BuSpar at 5 and Paraplatin at 7. Those were the exact numbers we gave you back on January 24th these are newer ones being Avapro and Paquin.

Thank you.

Thanks for the question, next one please.

Maria Goldstein with CIBC World Market.

Yeah. Thank you. May be Rick if you could just make some comments on when you anticipate being able to add some of the data from the cure study on to Plavix label?

Great question. We are undergoing an expedited review of the data ourselves working closely with the FPA. On the question obviously this is incredibly important study and may be one of the most robust statistical outcomes in a cardiovascular study in many years. The FDA is keenly interested in the study and working with this. This time we do not have all of the data yet. The investigators are working actively to get a study published in the New England Journal of Medicine which we are hopeful could happen within the next couple of months. We would expect to be in a position to be working with our french partners and Sano Fee to file sometimes this fall and hopeful that we will get a very quick review given the robustness of the data and the importance of the trial.

Thanks.

Thanks, Maria. Next question, please

One moment please. For our next question we go to Richard Belton with Capital Research Company.

My question has been answered.

Thanks, Rick, next question, please

One moment, please. Our next question from Marisa Alexandro with Janis.

Hi. I have two questions. First can you address the status of Maxipost and second can you address the side effect profile of the Abilitat. Are you seeing any wait or QT issues, you said you are going to file in the fourth quarter when will see these three data? Thanks.

Thanks Marisa. On Maxipost the second phase III Maxipost trial showed no significant difference in the overall efficacy or safety intolerability between Maxipost and Placebo. We are now in the process of analyzing the data, we are further, and we are going to review our options after that analysis is complete. As you know as we reported on the first Maxipost trial back in the first quarter. The second question was relative to aripiprazole. Rick the side effect issue.

At this point we do not think we are very pleased with the side effect profile we are seeing. We have not seen anything unusual or problematic and in fact think that its side effect profile would be one of its strength forces in the market place. We will be filing in the fourth quarter and frankly, when will be giving you the all the phase three data, I do not want to make a comment on that. Obviously some of that we are going to want keep close to the vest to respect to how we use it optimize our launch. There will be a study presented at the VAPAN in New Orleans in early May comparing aripiprazole to risperidone. So we had some peak at the some of the phase III data there.

Thanks. Next question, please

Our next question we go to Alan Zahorsky with Lichen Capital Management.

Yeah! It is for Fred, just ago back to the MG&A line. I know you obviously include interest income, expense and other items in that line as well. Can you touch base with on what the underlying selling and general administrative change was in the quarter, and what there were any unusual gains in that number that resulted in the decline?

There is really no unusual items in the marketing and selling administrative, and other selling itself is about at the same level we saw last year and the remaining part really comes through, as I said foreign exchange and cost efficiencies, cost effectiveness, but there are no unusual items in that item.

Thank you. Next question, please

Our next question we go to Jeff Chaplin with UBS Warburg.

Thank you. There are two quick questions. Given the decline in gross margins in the first quarter now with BuSpar then Glucophage going off. Should we assume that the rest of the year, we will see continued deterioration in gross margin from the first quarter level, then the second question is, given the large number of price increases in Q, any unusual buying pattens that we need to be aware of in Q2. Thanks.

I will take the question on the gross margin. Again we do not go out over the year to give you a projection of this line item, although today we did give a estimate on our earnings per share in terms of our comfort level with the Euro at $2.41. What I tried to do in going through and analyzing the cost of goods sold and indicating the decline in the margins for the quarter which were 1.8 points is to attribute more than half of it OTN as we have seen in prior years and prior periods, and also to say the remaining part with due to our product with declining Taxol sales. Now over the long term if we go beyond the year that we have some products losing exclusivity, we anticipate that our gross margins will improve. So on the long term we still believe that our gross margins will improve. We are looking at this year and this quarter you can see the effect of Taxol with one generic on the market in terms of the impact it had on our gross margin. Jeff, the second question was relative to wholesaler stocking levels.

Yes.

We look at very closely the wholesaler stocking inventories and we have looked at it very closely this quarter as well as previously. There are no unusual items that we see at this quarter compared to at yearend, everything we see is right on target, right consistent with our plans. So that unusual items that we see in the inventory level.

Thank you.

Thanks Jeff. Next question, please.

And for our next question we go to Greg Basket with Consumer Sale.

Hi. My question has been answered.

Thanks, Greg. Next question, please

Again if you question have been answered before I could ask it, please firmly press the pound key. One moment please. For our next question we go to LaN Yathy with Banc of America Securities.

Hi. Could you please give this in overview for Vanlev, what the time line is you expect to have some data released for us, as well as when we will see some data presented in some medical conferences, and when you expect introduction of the product?

Hi. Win, what I would like to simply say is at this point the active trial remain ongoing, nobody in the company is been on blinded as any of the results. As a result I am not going to speculate on any of that simply not in a position to report any thing today. And Lan, just to remind you we have been saying the Overt II trial, which is the congestive heart failure, is scheduled rap up early next year. Next question, please

We go next to Neil Swag with Ryan Beck and Company.

Good afternoon, everyone. Should I assume that Larzel has failed with the FDA, number one; number two in the whole Glucophage family of research, I do not think there was another combination I thought mentioned that is Glucophage with glipizide that I think you were going to file in the second of 2001 and try to get two years of marketing exclusivity. May be you can comment on that, and then I did not see within the release a product that was unusual and that the company was optimistic about and that was Vaniqa. Can we have what the sales were for that product in the first quarter? Thank you.

Thanks Neil. Let me just take the last one easily and I agree to probably address or so on the combination Vaniqa sales in the quarter was $11 million. I think if I take the other two you had one was the question on UFT Larzel and one was with the Glucophage glipizide combination.

As you are aware we have received a non-approvable letter from the FDA on Larzel. We do not agree with the FDA interpretation of the study results and are still going reviewing our options. With respect to your Glucophage glipizide question, yes those studies are under way. We see that as another exciting opportunity to act as a Glucophage franchise and our expectation is that will be doing that towards the end of the year.

For our next question we go to Tim Ku Yhoo with Credit Suisse First Boston.

Yes Good Afternoon. My questions concerns the Plavix, I was wondering if you could talk to the relative contribution of Sano Fee sales force behind that product, and how do you see their role changing over the 2002, 2003 period, as they start paying attention to Ambien which they will getting back from Pharmacia next year.

Tim can I just clarify, you were asking what role they play in selling the drug.

It well, yes, how large a commitment they have behind the Plavix?

If you are referring specifically to the United States, they were co promotion partners, they are great partners, they play a significant role they are extremely committed to the brand and I do not think that they are picking up the Ambien and promoting that product will affect in any way their commitment to Plavix or to the upside opportunity with this product. Both we and Sano Fee are extremely excited about how the brand has been doing and the new 00:43:43______ study and are both very committed to making this one of the successful brands in the history of the industry.

But not relative to their sales force commitment behind Plavix, it is continuing to grow as you would anticipate with their commitment is going to grow obviously behind the Ambien product line as well.

I have no concerns with their commitment with Plavix or their ability to support their commitment.

Thank you.

For our next question we go to Mark Striker with FSB.

I have two very quick questions one is how do you Pravachol 80 mg compared to Pravachol 40. I understand you filed the S&DA for that in February of this year. Could you tell us how you account it for the Glucophage XR free drug in March to those taken as a credit against sales, does that go with the SG&A line. Thank you.

I do not believe we came data public on the 80 mg. It is more effective, we are excited about it and would expect to use the data from the 80 mg to continue to position Pravachol in the market place as a highly effective product. We will have more to say about this specific efficacy data when we received the approval and launch it. Your second question was how do we account for the projects are?

It is really not significant at all in terms of our earnings statement, and I did see a couple of reports around that indicated it might be included in part of the 12% reduction. It is not driving the 12% reduction at all and it is just not significant in terms of our accounting in terms of what we did in any of the line items that we discussed.

We go next to Mario Carso with Lering spots.

Good Morning. One quick question with respect to the comment about multiple Taxol competitive expected this year, is the company under the impression that there is a supply constraint of both paclitaxel and Taxol in the market place?

We have no specific information on that nor have we entered any kind of speculation along those lines in our plan.

We go next to Bill Sendo with Resner RC

I hit the base a bit delayed of course but could elucidate more on some of the cost efficiencies and SG&A since you are adding more resources to the Glucophage family, therefore where is the cost efficiency is coming from, is it being switched from other products could you elucidate on that a little bit.

The line that we are talking about is the marketing selling administrative and other so it is a pretty broad line and includes just more than the selling line that we talked about earlier. Overall, embedded in all of the companies planning process is our cost efficiencies, cost effectiveness, productivity and we have done that very well over the years as you can see by today's results, we continue to do that very well. Peter, Dolan and I are very much proactive in terms of cost effectiveness and you are seeing that more so in the administrative and other and probably in the marketing, less so as in mentioned before, in the selling.

We go next to Dud Christopher with Prowell Leaders.

Thank you. My question has been answered. Thank you.

Again if your question has been answered please firmly press the pound key. We go next to Jim Baker with New Burger ______00:47:46.

I wanted an update on the drugs that Peter R. Ringrose talked to us last September. He said about a 11 drugs over being brought in a full development in 2001 and you did mention that protease inhibitor that in particular in Taco vir, ------ for a quinolone URA drugs may be we talk about some of the cancer drugs at the time as well as the Cox-2 inhibitor and erectile dysfunction drug and a hair growth drug. I want if you could bring an up-to-date on those?

Jim, are you interested in any changes, their time lines.

Yeah, particularly the changes, acceleration, as well as deceleration and any how confident these things all enter into full development this year. Which one is going to face lead this year or if there is any that kind of thing?

Let me just remind everyone before Rick could comment on it. What was mentioned in the meeting was the HIV protease inhibitor an Taco vir the hepatitis B drug that does for an quinolone the quinolone antibiotics the broad spectrum. CT LA-4 IG and LEA 29 live which were the two biologics for rheumatoid arthritis and organ transplantation they are never four drugs mentioned in for cancer the taxinalone, apathalone, that responding field transparent ACE inhibitor in the MMPI and then three drugs beyond that and full development of the Cox-2, the male erectile dysfunction, the hair growth drug before we could down add anything to that Fred did say upfront that we will have R&D meeting where Peter, Elias, Sigel, Bethsa and Berg and other are going to more detail, but Donald knows how much you want to go on beyond what we said so far.

I don't think we can add anything to beyond what Peter said back in the fall, but I think we will be prepared to dive into each of these deeply as possible and at the R&D meeting later this year.

We will have more to say Jim. Since we promised you, all you usually try to rap an hour when we take one more question before final comments from Fred.

That final question will be from Steve Donald with SG Cowen.

I was actually going to ask a question about in Taco vir. I think this year we expect two-year animal carcinogenicity data to come for us and I am wondering if that data has been generated yet and if not, when might it be revealed?

I think we are still on track Steve, to be completed and as soon as we know what it is we will let you know. Thank you.

Let me just conclude again in the day that my thoughts on the quarter; that it was a well executed quarter that we saw sales growing excluding foreign exchange 8%, a worldwide pharmaceutical sales growing 10% excluding exchange, domestic pharmaceutical sales up 13%. We saw R&D increase 14%, pharmaceutical R&D was up 17% and we saw earnings per share increase 13% to 63 cents per share on the fully diluted basis continuing operations one penny over consensus estimates. Our cash flow is strong, the divestitures that we have planned we are on track, and again my overall sense of the quarter was that it was well executed. Thanks everyone for joining us today. It was enjoyable and I would do look forward to meeting you. Ladies and Gentlemen this does conclude our conference call for today. You may disconnect at this time.