施貴寶 (BMY) 2006 Q3 法說會逐字稿

Welcome to third quarter 2006 earnings release conference call of Bristol-Myers Squibb.

This call is being recorded.

Now at this time, I'd like to turn the call over to John Elicker, Vice President, Investor Relations.

Mr. Elicker, please go ahead.

Thank you, Dwayne.

Good morning, everyone.

Thanks for joining us on the call this morning to review our third quarter results.

With me this morning I have Jim Cornelius, our CEO, Andrew Bonfield, our CFO.

Jim and Andrew will have prepared remarks and then we'll go to Q&A.

Joining us for Q&A , in addition to Jim and Andrew, are Lamberto Andreotti, the President of our Pharmaceuticals business and Elliott Sigal, our Chief Scientific Officer.

Before I turn it over to Jim, let me take care of the legal requirements.

During this call, we may make various remarks about the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provisions act -- Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in the Company's most recent annual report on form 10-K and in our periodic reports on form 10-Q.

These documents are available from the SEC, the Bristol-Myers website or from Bristol-Myers Investor Relations.

In addition, any forward-looking statements represent our estimates only as of today and shouldn't be relied upon as representing our estimates as of any subsequent date.

While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

With that, let me turn the call over to Jim.

Thank you, John.

Good morning, everyone.

Before turning the call over to Andrew for a review of our financial performance in the quarter, I'd like to provide a few introductory comments about me, my role and priorities during this interim period and the Company's strategy and direction.

First, let me give you a bit of background on myself.

As you probably know, I was chairman of the Guidant Corporation for 12 years following its spin-off in 1994 from Eli Lilly, where I previously served as CFO and board member.

I am very proud to say we were successful in building quite a strong business at Guidant.

From the IPO to it's sale earlier this year, revenue increased from $775 million to $3.6 billion.

This is done on the strength of two leading innovative cardiovascular franchises, one in stents for vascular disease and the other for rhythm disturbances of the heart's electrical system.

Since I started full-time here six weeks ago, after having been a Bristol-Myers Squibb board member for two years, I have spent most of my time getting to know the business and the people.

I want to say this at the outset.

I've been truly impressed by the people in the Company, who are some of the most committed and dedicated individuals I've met during my 40 year medical industry career.

I've been using my time to meet with my direct reports, other senior executives, with operating heads of the businesses, brand teams and R&D teams.

I think my prior med tech experience has allowed me to get up to speed very quickly, so I'll share with you a few of my observations.

First, we have a sound strategy in place to maximize shareholder value and we have a strong management team that is focused on executing that strategy.

Second, we have a great group of core pharmaceutical products with excellent growth prospects and they are complimented by a stable and profitable health-care business.

Third, we have a very good late-stage pipeline, one of the best in the industry, from my perspective.

Fourth, we have an opportunity to work harder on lowering our cost base, accelerating some of the efforts in this area that we already discussed with you.

I think all of these factors should provide an opportunity for us to accelerate revenue and earnings growth.

We're now focused on planning and budgeting for 2007.

And we'll have more to say about this in late January when we also provide full year 2007 earnings guidance.

Finally, let me comment on the search for a new permanent CEO.

Jim Robinson, our board chairman, is leading this effort.

The process is organized and underway.

I know the board's search committee is looking at a range of well-qualified internal and external candidates, and we expect them to move with deliberate speed and consideration to identify the best person for that job.

Until then, I'm fully engaged as CEO, looking forward to working with the leadership team here to move the Company ahead.

I believe Bristol-Myers Squibb has a promising, exciting future as we continue to execute our strategy and maximize our pipeline, all with the aim of building shareholder value.

Now I'd like to turn the call over to Andrew.

Thank you, Jim.

I'd like to discuss the third quarter results and then we will go to your questions.

As you have seen from our release, fully diluted earnings per share from continuing operations for the quarter was $0.17, negatively impacted by $0.05 of specified items.

These charges relate primarily to manufacturing restructuring, asset impairment related to ENSAM, a tax specified item to reflect in estimate of a prior year item, partially offset by the reversal of the Apotex reserve and insurance recoveries.

Excluding specified items, fully diluted earnings per share on a non-GAAP basis were $0.22.

The full reconciliation of GAAP to non-GAAP earnings per share are posted on our website.

Sales from continuing operations were $4.2 billion, down 13% compared to the third quarter last year.

Overall, we saw a positive 1% impact from price, a positive 1% impact from foreign exchange and a negative 15% impact from volume.

Excluding the impact from the launch of generic clopidogrel, which we estimate to be between $525 and $600 million, sales would have been down by approximately 1%.

Worldwide Pharmaceutical sales were down 17% to $3.2 billion, significantly impacted by the Apotex launch and the loss of U.S. and international exclusivity of PRAVACHOL.

Sales in our U.S.

Pharmaceutical business were down 22% to $1.6 billion.

Excluding the impact of the Apotex launch, U.S.

Pharmaceutical would have been up by approximately 5%.

While U.S.

PLAVIX sales were down 43% in the quarter, we are pleased that total script growth for the molecule remains strong at plus-14% for the quarter.

With Sanofi, we continue to provide full support behind the brand in order to continue driving growth although we did defer some A&P spend to the fourth quarter.

We expect the generic impact to continue into the fourth quarter and partially into 2007.

Excluding PLAVIX, the U.S. business had a good quarter.

Key products ABILIFY, REYATAZ, ERBITUX and BARACLUDE had a strong quarter, with sales up $149 million or 35%.

While EMSAM has been a disappointment, newly launched products, ORENCIA and SPRYCEL are doing well, with sales of $34 million and $11 million, respectively.

The launch for ATRIPLA also helped to boost the sales of the SUSTIVA franchise.

Looking down the profit and loss account, excluding specified items in both periods, the gross margin decreased by 3.1% to 66.5%.

This was due to the impact from lower PLAVIX sales in the quarter, lost exclusivity, including PRAVACHOL, and the reclassification of expenses from general and administrative expense to cost of goods sold, that I talked about in the last quarter's call.

We expect that lower PLAVIX volumes will have a negative 0.5% impact on gross margins for the year, which we now expect to be down between 1.5 and 2% from 2005 levels.

Marketing, selling and administration expenses decreased 8% for the quarter, driven by a reduction in U.S. sales force and the reclassification I mentioned a moment ago.

We still expect marketing, selling and administration expenses to be slightly down compared to 2005 levels.

Advertising and promotional expense was down 18%, reflecting the impact from the divestiture of our consumer medicines business last year, the elimination of spending behind certain products such as PRAVACHOL, TEQUIN, and CEFZIL and deferred PLAVIX spending.

We'll continue to invest in our growth drivers and new product launches throughout the year and expect A&P spend to be down in the high single digits for the remainder of the year.

Excluding specified items, research and development expense for the quarter increased by 10% to $739 million.

This increase was primarily driven by spending on increased resources behind development projects, including our late-stage pipeline development spending on Saxagliptin, Ipilimumab, Ixabeplione, and Belatacept, as well as continued development for ORENCIA and SPRYCEL.

Our current expectation is for R&D to grow in the low mid teens range, as this is priority of investment for the Company.

The effective tax rate from continuing operations before minority interests and income taxes and excluding specified items was 23.7%.

We expect the full-year rate to be at the low end of the 22 to 24% range I talked about last quarter.

This assumes the benefit from the R&D tax credit and no impact from the resolution tax audits, which we now expect to be resolved in 2007.

Net debt decreased to $3 billion from $3.1 billion at the end of June.

This is mainly driven by positive cash flows.

We expect net debt to increase in the fourth quarter, due to the cash flow impact from lower PLAVIX sales.

As you have seen in our press release, we are increasing our full year 2006 non-GAAP guidance to $1.02 to $1.07 per share and $0.97 to $1.02 on a GAAP basis.

As you think about the fourth quarter and moving into 2007, there are a number of factors to keep in mind.

Firstly, the loss of exclusivity of PRAVACHOL in the U.S. and France will continue in the fourth quarter and into 2007.

We have also recently began seeing generic competition for TAXOL in Japan.

While we expect the impact from generic clopidogrel to continue into 2007, we also expect to see some sales in the fourth quarter and regain full market exclusivity in 2007.

We will continue to invest behind key and newly launched products, and hope to launch both ORENCIA and SPRYCEL in the European Union.

Investment in R&D and the strength of our late-stage pipeline will remain a priority.

If ongoing clinical trials for both ORENCIA and SPRYCEL for new indications and Phase III programs, Ixabepilone, Saxagliptin, Ipilimumab, Vinflunine and Belatacept.

We have just transitioned Apixaban into Phase III and hope to move our SGLT2 Inhibitor for Type-2 diabetes into Phase III next year.

Finally, we will remain focused on our cost base, as we are in the process of developing a 2007 business plan.

In summary, our third quarter performance was significantly impacted by the Apotex launch.

Our growth drivers, newly-launched products and other healthcare businesses are performing well.

We have adjusted our 2006 GAAP and non-GAAP guidance.

With that, I'll hand back to John for the Q&A session.

Thanks, Andrew.

Dwayne, I think we're ready to go to Q&A.

I would just remind everybody that in addition to Jim Cornelius and Andrew, we have with us Lamberto Andreotti and Elliott Sigal here to handle any questions that you might have.

Dwayne, I think we're ready to go to Q&A.

[OPERATOR INSTRUCTIONS] Our first question is from David Risinger with Merrill Lynch.

Yes, thanks very much.I have two questions.

First, Jim, I was wondering if you could comment on your expected timing to announce a CEO hire?

And also your consideration of take-over and merger proposals?

And then separately, Elliott, I was hoping you could Apixaban's bleeding profile.

And when you're going to be disclosing the Phase II data?

Thank you.

On the question of a permanent CEO, as I said before, Jim Robinson, our chairman, working with the committee chairman of the other committees of the board, has begun that process.

They have engaged one of the world's top executive search firms, Egon Zehnder International, and that process is absolutely underway.

On the M&A front, my words to employees have been, we're not for sale.

The longer I'm here the more confident I become that Bristol-Myers Squibb has a wonderful future as an independent company.

Obviously, the board would take -- any offers would have to be considered under their fiduciary duties, David.

That will what we would do, anyway, in the even that there was any M&A that was received.

David, this is Elliott.

You asked a question about Apixaban.

As you know, this is our oral factor 10-A inhibitor in antithrombosis.

We have been excited about it.

It has a rapid onset of action and the potential, because of the mechanism, to have a wide therapeutic ratio and offer an opportunity as an alternative, in certain cases, to [subquheprin] or to importantly, warfarin, an important indication such as preventing clots in the leg going to the lung as well atrial fibrillation, which is a major cause of stroke.

You asked about our data, we earlier this year completed Phase II data, very extensive dose ranging trial, measuring safety and efficacy after surgery of the knee and looking at preventing deep vein thrombosis.

In December, at the American Society of Hematology, will be presenting that Phase II data on both safety and efficacy in a wide range of doses.

We'll also give some information about our Phase III plans.

We have moved into Phase III in prevention of deep vein thrombosis and are moving into Phase III in atrial fibrillation.

Thanks, David.

Dwayne, can we go to the next question, please?

Yes.

Our next question, then, is James Kelly, Goldman Sachs.

Thank you and good morning.

I had a question -- two questions.

First on Apixaban, in the Phase III program, are you targeting noninferiority against those agents or going for superiority in those indications?

And then on PLAVIX, can you discuss where the wholesalers sit with stocking?

I know that the months of inventory are inside -- are inside the press release, but how are they looking at it?

And if you can give some color on price increases with PLAVIX to get a sense for how we should think about the fourth quarter and first quarter of next year?

Yes, on the level of wholesale inventory -- the level of inventory did rise to around 1.5 months.

But actually in dollar terms, it actually fell in the quarter, Jim.

As you know, with a generic -- most generics go direct to customers, either to the retail chains themselves, or to the mail-order companies.

Not much of that inventory is held by them.

So it's difficult for us to get information as to what is held within the wholesaler chain.

As we have indicated, we did see some sales in the quarter and we expect to see some sales in the fourth quarter.

Where the inventory is held, it is very difficult to ascertain and what level that there is.

And we obviously are trying, we have some information, but we obviously would like to improve the reliability of that information before we talk to you about that.

Yes, Jim, you asked about the design of the Phase III trials.

I'd like, at the American Society of Hematology, to be sure that when you see our Phase II data ,you understand our strategy in Phase III.

But to answer your question more directly; clearly, a new agent must show superior benefit/risk and it is a balance between benefit and risk.

And mechanisticly, we have a agent that has a wider therapeutic window and therefore, we have an opportunity to show improvement, in some cases of the efficacy and improvement in other cases of the bleeding rate.

Coumadin, for example, is one of the most common causes that people in the United States come to an emergency room, to attend to either monitoring or bleeding, in that case.

And we're after an improved benefit/risk ratio in every indication.

And our clinical trials will be designed accordingly.

Yes, and this is Lamberto -- going back to PLAVIX, two things.

One is, we continue to support PLAVIX full speed.

And we are extremely proud of the 14% growth of total prescriptions of clopidogrel in the third quarter.

This is in line with what we have seen before.

And this confirms that what we have been doing behind PLAVIX to support PLAVIX and to have it back to a higher growth rate than in the past is successful.

About the pricing, we will keep our options open and obviously, we will wait for the pricing of whatever product in our portfolio, we can see the dynamics of the market and we will make the decisions at the right time.

Thanks for the questions, Jim.

Dwayne, can we go to the next question?

Yes.

It is Tim Anderson, Prudential Equity Group.

Thank you.

On Saxagliptin, wondering when we might expect a filing in the U.S. ?

And is that a drug you'll take to market on your own?

With your previous product, muraglitazar, you obviously signed up a partner.

With ORENCIA, can you give us an update on what percent of patients are biologic naive?

I think you 10% last quarter.

And in Apixaban versus the Bayer product, can you compare and contrast what you see so far?

On partnering for Saxagliptin, Tim, obviously we'll review that and keep our options open around what we do around the commercialization.

As you know, it is part of our strategy to look at commercialization partners in primary-care areas.

And -- but no decisions have been made about that at this point in time.

So, Tim, you asked about Saxagliptin, of course, we're very excited about the promise for the DPP4 class in general.

Jenuvia's approval only highlights that potential for a new class.

We do believe that new agents, if they live up to their promise, will replace older agents.

And there is increasing, growing, unmet need in diabetes.

The profile of Saxagliptin so far, we're excited about.

We don't have a specific date yet for the filing.

We will be keeping you informed of that.

We are pleased we have a once-daily formulation and a broad Phase III program.

We're going to be getting in Phase III data over different periods of time.

Over this year and over next year, we will be describing our clinical data at scientific meetings and we'll be filing -- we will be assessing our filing date, clearly.

We will be a possible third entrant.

We understand the differentiation that is required.

We see opportunities for differentiating and we're designing our clinical program, accordingly.

But it is early to describe some of that.

Apixaban, you asked a question.

We're pleased with, again, the potential for an improved therapeutic window to optimize benefit/risk.

And there is -- we were pleased with what buyers see for the class, but we do think there are opportunities to differentiate.

And we are moving competitively forward in that vein.

And I will take your question on ORENCIA, 20% -- according to market research, we have 20% of the ORENCIA patients on naive to biologic therapy.

The remaining 80%, half and half, half on that have been treated with two or more on [TCNFs] and the other half are -- have ORENCIA, the second [TNF].

So it has been treating only one TNF before.

This is market research that we have so far and that we continue to update.

Thanks, Tim.

Dwayne, can we go to the next question, please?

Certainly.

And it is from Roopesh Patel, UBS.

Thank you.

I have a couple of questions.

First on PLAVIX.

I wonder if you can give us a rough sense of the impact from any pricing action that you took immediately following the launch of the generic product, on PLAVIX's sales going into 2007, relative to the outlook before the launch of the generic version of PLAVIX?

And then separately on ABILIFY, it appears that it's market share has been largely flat since March, can you comment on what is influencing that?

Whether or not you expect anything to change?

And if so, what?

Thank you.

Roopesh, on the discounts we offered to third parties, very few people actually did take those up.

They were not material in the quarter and they would not be expected to be material next year.

Obviously, we need to get into negotiations with managed-care next year relating to pricing.

Those negotiations are very -- it's very early stage, yet.

We can't assess the impact of that yet, at this point of time.

You asking about ABILIFY, we see some small growth with market share.

And we have initiated a number of initiatives to accelerate that growth.

We, you may know that we have expanded on DTC campaign on bipolar and moved out from various type of media now.

Even more important is, we have now a global campaign supporting ABILIFY, focusing on assisting the prescribing physicians to identify the most appropriate stations for ABILIFY -- for the ABILIFY therapy.

We are also getting ready to launch ABILIFY IM, intramuscular, which is another form that might have an interest -- will be interesting for specific populations to the market.

And we continue to develop ABILIFY for -- in additional indications and we have a couple of formulations under development.

So a whole plan to accelerate the growth for other prescriptions for ABILIFY in the U.S.

Thanks, Roopesh.

Dwayne, can we go to the next question?

Yes.

It is from Catherine Arnold with Credit Suisse.

Thanks a lot.

Two questions.

One, could you tell us if the primary driver of raising your guidance was your more current evaluation of the PLAVIX impact?

And what the other major factors may have been in this decision?

And, secondly, do you expect the press and attention on late stent thrombosis to drive more use of PLAVIX, either through better compliance or longer duration?

Catherine, on the guidance -- the guidance increase was partly due to the PLAVIX impact.

We have seen some sales -- if you remember, when we made the announcement on the 28th, we actually did indicate that we expected no sales of PLAVIX for the remainder of the year.

So that has been part of it.

We have also seen -- continued to see some cost savings as we focused the business on the [work-right] program.

Those are continued to come through and benefited us in the third quarter.

And we will obviously keep our focus on that as we go through the remainder of the year.

And, finally, we have seen some favorability in the tax rate as well, which has helped.

Those are the three main factors driving the change in guidance.

Catherine, this is Elliott.

You asked about stent thrombosis and PLAVIX Mechanisticly, let me -- before Lamberto comments, let me say that clearly the manufacturers of these devices have recommended and have clinical data -- they recommend the use of PLAVIX.

That is where the clinical data comes from, to prevent a clot forming on the stent.

We don't have data on the duration of therapy.

There has been increasing concern about this phenomena.

And there will be an advisory committee called by the FDA, to discuss this and to discuss therapies and guidance.

With regard to the feedback in the market or any other information, Lamberto?

Yes, it is clear that this is an opportunity for PLAVIX.

And I consider it, Catherine, as one of the various opportunities that exists outside there, to expand the use of PLAVIX and extend the duration of therapy.

So it is not the major driving strength behind the future growth of PLAVIX, but it is a positive component of it's potential growth.

Thanks, Catherine.

Dwayne, could we go to the next question?

Yes.

It is Jami Rubin from Morgan Stanley.

Thank you.

I have a couple of questions.

Firstly, on SPRYCEL.

I wonder if you can give us some color on the early feedback you're getting from doctor?

And if you could help us think about the launch curve as we move into 2007?

Specifically, I'm wondering how widely adopted you think the -- some of the diagnostic tools that detect residual leukemia in Gleevec patients are used?

And to what extent that might drive a faster switch from Gleevec to SPRYCEL?

And my second question relates to ORENCIA, the sales this quarter of $34 million -- wondering if there is still some supply constraints?

Or if that is -- if you think that is truly reflective of patient demand?

Thanks.

I can take both.

On ORENCIA, we don't have any supply constraints.

And we have -- we are -- we see the performance of the product in the market in line with our [inaudible] expectations.

There is nothing that we are considering from -- of negative, on either supply side or the performance of the product side.

We anticipate -- well, we see the majority of the early usage of ORENCIA in patients that are inadequate responders to the anti-[GNF] therapy.

We know that we need to assist hematologists and identify patients that are more -- most appropriate for the treatment of ORENCIA.

And these are the patients that -- include the patients that could be getting therapy of ORENCIA instead of switching to a second or third anti-GNF.

And this requires some time, some good work and I think we are doing that good work.

In terms of SPRYCEL, it's pretty early to reach conclusions.

We see early success and we see good penetration in patients that are intolerant to Gleevec.

We continue to work at the education of physicians on the importance of achieving the response in the patients that are not responding to Gleevec.

And we continue to work at a developmental [inaudible] in the present indications and in the additional indications.

Jami, I'll just add, I think there is an opportunity to change medical practice with regard to the advent of the diagnostics.

We're going to have to wait and see.

We're certainly working with the FDA on this.

And it's every bit a part of our plans.

But I think it is early to tell, either market or from a regulatory standpoint.

We are pleased with our progress with SPRYCEL on the development front.

We have had a CHMP, that is a European positive opinion.

And do hope to have a European approval by the end of November.

And at ASH, at the American Society of Hematology, we'll have 28 abstracts, 11 oral presentations and 14 posters all being planned for discussions.

We'll have our ongoing studies in patients with incomplete responses to Gleevec.

And we'll have exploratory status -- studies from MD Anderson and FirstLine Therapy.

We have a plan to start more definitive FirstLine studies next year.

And because this compound has activity that Gleevec doesn't have, in another important pathway, we've expanded our focus on solid tumors.

We've selected breast and prostate as initial tumors to determine activity.

These studies will use molecular diagnostics and we'll have some preliminary data, soon.

We're starting the Phase II studies in those two cancers by the year and hope to have data over '07 to talk about.

Thanks, Jami.

Dwayne, next question, please.

It is Steve Scala with Cowen.

Thank you.

Can you tell us what portion of PLAVIX Q3 sales were generated prior to the launch of generics?

The Q3 PLAVIX number appears quite large, given nearly two months of generic competition.

And relatedly, assuming it is still scheduled, what is Bristol's conviction in your ability to prevail in the October 3st preliminary injunction appeal hearing?

Steve, on the Q3 sales, I mean, the impacts of generic competition was around -- about as we indicated, between $525 and $600 million for sales.

Sales have been running at about $1 billion dollars a quarter.

We were just under $500 million this quarter.

There was some -- don't forget, Apotex only launched on the -- I think it was announced to launch on the 5th of August, so we had just over a month.

Plus then, we have seen some supplies past that time.

Obviously, on the appeal of the preliminary injunction, our verbal arguments will be heard on the 31st of October.

Obviously, we were very pleased about getting the original preliminary injunction.

I'm not going to speculate on the likely outcome of that appeal.

Thanks.

Dwayne, can we go to the next question, please?

Certainly.

It is Barbara Ryan, Deutsche Bank.

Good morning, thanks for taking my question.

And I don't want to belabor this point, you may have said all you can say about it.

But if you look at the forecast that you've given us to what the generic impact was in the quarter to PLAVIX, the $525 to $600 million, what you reported in terms of sales and then what you're suggesting in terms of some sales in the fourth quarter; it seems as though we would see the generic supply diminished going into 2007.

So we sort of talking about whether it's January 15th or February 12th.

If you can give us some order of magnitude?

It doesn't appear by the comments that, if you put all these together, that we're talking about a persistent problem beyond, let's say, the middle of the first quarter of next year.

I just wonder if you can comment on that at all?

Barbara, obviously the difficulty is knowing exactly how much generic clopidogrel is out there.

Obviously, what we all are focused -- we have seen some sales, as we've indicated in Q3, we expect to see some sales in Q4.

Currently, the generic is pulling about 75% -- 70 to 75% of all scripts.

There will be a work-out through this period of time.

And probably, the best bet we could make at this point in time is, sometime in the first quarter it is likely to be through, but there may be some residual beyond that.

It really does depend about where the actual inventory is held and how those are ekked out in the marketplace.

At the end of the day, I think we will start to expect to see the majority of sales filled by branded sales, probably by the end of the first quarter next year.

Thanks, Barbara.

Can we go to the next question, Dwayne?

Yes.

It is Chris Schott, Banc of America Securities.

Great, thank you.

Two quick questions here.

You commented earlier on U.S.

ABILIFY trends, can you comment on the international uptake?

It seems like we've had, now, about four quarters of relatively modest sequential growth.

Any markets in particular that we should we focusing on there?

What do you think you can do to reaccelerate that business?

And then, if you can talk for a second about the generic TAXOL impact on your Japanese business?

Can you just quantify how large Japan is as a percentage -- with regards to TAXOL?

And how severe of an erosion you're expecting there?

Thanks.

Okay.

Lamberto -- on the ABILIFY European sales.

I have fresh information because I came back from Europe last night [inaudible].

While the overall antipsychotic market in Europe slowed during 2005 and beginning 2006, we have now seen a reacceleration of the market.

And this is true in particular in the UK.

And the growth of ABILIFY now, continues to outpace the competition.

We continue to gain market share.

And you want to focus your attention to some of the markets where our performance is even better than the average and I speak about the UK now, Italy and Sweden.

The shift away from the use of typical antipychotics in favor of atypical antipychotics in Europe is slow, it's a known fact, but this shift is happening.

And we remain very focused on assisting European doctors that are using atypic antipsychotics to identify those patients that are the most appropriate patients for the treatment with ABILIFY.

Our redirection of the support of ABILIFY marketing and safe plan in Europe seems to be giving results.

And there more -- even more than in the U.S., we continue to emphasize the importance of the efficacy of our product ABILIFY, and insist on the different metabolic effect profile versus the competitors.

On TAXOL sales.

TAXOL in Japan -- in total international sales, TAXOL in the quarter were about $137 million.

The vast majority of those now are actually in Japan and they have actually been growing.

So the issue with TAXOL and generic entry into Japan is one, the rate of growth will diminish, and two, you would expect to see a price cut as a result of generic increase.

We expect to see those sales start to decline.

The decline will not be as great as you would have seen in the U.S. for a product like TAXOL, but we expect to loss growth and as you move to a decline next year.

It is far from being the generic decline model that you see in the U.S. in Europe.

And we have new indications, we continue to support TAXOL in Japan and the combination of what we're doing behind the product in terms of clinical work, marketing work, will be offsetting the effects of the generic launch by one company in Japan.

Okay.

Thanks, Chris.

Dwayne, I think we have time for two more questions.

All right.

And it is Chris Shibutani, JP Morgan.

Thanks very much.

With regard to the PLAVIX franchise, a competitor developing [inaudible] released some data recently comparing the response rates versus the standard doses for PLAVIX.

I understand that you and your partner have been doing some work to do trials comparing at the higher doses of PLAVIX.

Can you comment about when we might be able to expect to see some of those results and how those are progressing?

Secondly, on the DBB4 Saxagliptin, it would appear that you would be potentially the third on the market, can you give us a sense for if you might be able to differentiate, if there is, either in terms of the compound or your strategy, whether you are doing any coformulations with other drugs?

And perhaps what timing of that would be?

Thank you.

Yes, the first question was on PLAVIX data and the current trial that we're doing to expand the information on how to optimize the delivery of PLAVIX even further.

We will -- we're working hard to have that trial information at the American College of Cardiology in '08, which would be a relevant timing with regard to any possible introduction of Prasugrel.

The medical utility for Prasugrel in unknown.There are continued reports of clinical measurements that don't have any validation with regard to their clinical utility.

So with the Phase I and Phase II data, including the healthy volunteer data on these clinical measurements, it is still uncertain how Prasugrel will perform with regard to clinical outcomes.

It is very uncertain, with regard to the measurement of inhibition of platelet aggregation, whether this will lead to increased efficacy with Prasugrel, increased bleeding or both.

And therefore we do await the conclusion of Phase III trial.

If there is approval of Prasugrel, it will be in very specific indications, acute indications.

We have taken great care to study patients to really illustrate the clinical utility of this drug.

There have been over 100,000 patients -- clinical experience and 41 million patients treated worldwide.

We have both acute and chronic indications in peripheral artery disease, stemi, non-stemi acute coronary syndrome in recent stroke and it is recommended in treatment guidelines.

We will continue to improve our understanding of true clinical outcomes with PLAVIX as we have done recently, with recent approvals.

You asked about DPP4.

As I said earlier, we think this class has great promise, in which case patients in treatments will need options in this class.

The first agent, Jenuvia, has been approved.

We see the need to differentiate, we see opportunities to differentiate, but until we see more clinical data on the first two entrants and more of our Phase III data, it is early to speculate on that differentiation.

But there is ample opportunity to do so to provide patients and physicians with options in this class.

Thanks, Chris.

And Dwayne, can we go to our last question?

Certainly, it is from Seamus Fernandez, Leerink Swann.

Thank you very much.

A couple of questions here.

One on Apixaban, it looks like competitor, [Rendic], the factor 2A inhibitor, is moving very quickly through clinical trials.

And I was just wondering if you could -- ?

Seamus?

Seamus, we're having a really hard time hearing you.

Oh, I'm sorry.

Hold on one second.

Can you hear me now?

Yes, thank you.

Okay, great.The question was actually on a competitor, Rendic, the factor 2A inhibitor from Beringer-Ingelheim, which looks like it's moving very quickly through clinical trials and could be a competitor to Aprixaban and the factor 10s.

Can you just describe what your thought are on the factor 10s versus the factor 2As?

And what the advantages of going after factor 10A versus 2A might be?

Separately, on Saxagliptin, can you just give us and remind us about the impact of hitting DPP8 and 9?

And how specific Saxagliptin is to -- for DPP4 versus 8 and 9?

Thanks very much.

Okay.

Thank you.

I think, Elliott, you should take that.

Or perhaps, Andrew?

This is Elliott Sigal, I'm happy to take those questions and see if I can answer them adequately.

I think you're talking about Beringer's approach as a direct thrombin inhibitor.

Yes.

And the -- this is an important distinction going more upstream with factor 10A, which from preclinical data and from the theory, we think offers a great opportunity. 10A inhibitors act more at the generation of thrombin rather than trying to absorb all the thrombin and blunt its action throughout the body.

And I believe this leads to -- certainly, in preclinical situations with a narrower therapeutic window.

And as I said before, it's very important to achieve maximum benefit/risk ratio in this area, so avoid as much bleeding, deliver as much efficacy.

So we're firmly behind the theory of 10A inhibition for that theoretical reason.

We think it will manifest itself in clinical trials which we're designing specifically to show that.

Although there is some progress in this field, the major opportunities are in atrial fibrillation and acute coronary syndrome.

Although very important opportunities in the earlier indications.

Although we may be following those other two compounds in DVT, we think we're head-to-head in the area of atrial fibrillation and we've done more work in acute coronary syndrome.

This is a competitive field, huge opportunity and we have to get the right compound for the patients.

With regard to Saxagliptin, it is really too early to say with regard to any clinical relevance of specificity as monitored by DPP8 and DPP9's.

We are pleased with the degree of specificity we have.

We are pleased with our clinical data.

It is again, early days.

We're getting Phase III data.

We think this is an important class and a lot to learn from this class.

Great.

Thanks, Seamus.

And thanks everybody for your questions.

I'd like to turn it back to Jim Cornelius for some closing remarks.

Again, thank you very much for your time this morning.

I'd like to reiterate that I feel confident we're on the right track here.

And we look forward to a continuing dialog in January when we'll have more to say about 2007 outlook.

Thanks, again.