禮來公司 (LLY) 2000 Q4 法說會逐字稿

Ladies and Gentlemen thank you for standing by and welcome to the Eli Lilly and Company 2000 fourth quarter and full year results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session with instructions being given at that time. If you should require assistance, please depress #0 followed by *. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Simon Harvard, Director of Investor Relations. Please go ahead sir.

Good morning, good afternoon, and good evening wherever you maybe in the world and thank you very much for joining us for Eli Lilly and Company's 2000 fourth quarter and full year results conference call. Each of you should have received the related earnings press release and the supporting materials for this call via fax, e-mail, or on the web site. Before we turn to the quarterly results, I would like to thank Patty Martin my predecessor for joining us on the call today, which is her last day in the Investor Relations department. For those of you who have not already heard, after almost four years in Investor Relations, Patty has been named Director of Women's health for Eli Lilly in our Product Group Area and we wish her well in her new role. Given the US submission late last year for Forteo following the fourth quarter and full year review, I have asked Bryce Carmine our Product Group President for Primary Care to join us to take questions you may have on the product. In addition to other products, he also has responsibility for Evista as well as for Cialis that we will be submitting for approval in the second half of this year. As always during this conference call, we anticipate making projections and forward-looking statements. These estimates are being made based upon our best judgments at this time and actual results may differ materially due to a variety of factors. You can find more information about those factors that may impact our results in our forms 10-Q and 10-K filed with the SEC. As you know, we now provide a live web cast for our conference call on via our lilly.com Internet site. If you are interested in accessing this web site, please log on to www.lilly.com. In addition to the live web cast, an internet-based replay will be available until February 1st following today's call. With that, let me now turn the subject to the fourth quarter and start by recapping some of the key events, which took place during the period.

In terms of the current products, in November as expected we received approval for the Prozac pediatric extension that will provide us with US market exclusivity until August 2nd of this year, assuming the Court of Appeals for the federal circuit upholds its ruling of August 9th last year. I will talk in a few minutes about where we are with the rehearing process. Zyprexa received regulatory approval from the Japanese Ministry of Health and Welfare for the treatment of schizophrenia in Japan, which will allow us to launch the product this year in the second largest market in the world for schizophrenia pending price negotiations. Also, continuing the expansion of the Zyprexa franchise in the US market, we also received approval from the FDA for long-term therapy and maintenance of treatment response for schizophrenia, the first antipsychotic to receive this indication. On the pipeline front, first we delivered on our promise to submit Forteo to the FDA for regulatory approval late last year and we would anticipate the launch sometime during Q4, 2001. Second, we moved erythovancin, which is glycopeptide for serious gram-positive infections into phase III trials bringing the total number of products in the late stage development to 10. Finally, Ely Lilly and Icof 04:13 successfully challenged Pfizer in the British High Court on their method of use patent surrounding the PD-5 inhibitor, as a result clearing the way for Cialis's entry into the UK market next year. Let us now turn to the results beginning with the fourth quarter and full year sales overview on slide 3. Please note that although we have no normalizing sales items for the fourth quarter of 2000, consistent with our past practice, we have adjusted comparisons with the same quarter in 1999 for the Y2-K buying which took place in Q4 of that year. In looking at our full year results, please remember that our Q1 sales results are normalized to add back the impact to product sales that were identifiable as Y2-K related buying.

For the fourth quarter worldwide sales grew 9% to $2.978 billion. For the full year worldwide sales grew 10% to $10.953 billion. This annual growth was the result of a 13% increase in volume, essentially flat global prices, and 2% unfavorable impact due to foreign exchange. These numbers do not add due to rounding. Prozac sales worldwide including Sarafem brand increased 6% in the quarter to $670 million. Full year sales declined 1% to $2.585 billion. Zyprexa sales were up a strong 22% in the quarter to $696 million as you can see full year sales grew 27% to $2.366 billion. Evista had another strong quarter growing 31% to $146 million. For the year Evista sales were up 61% to $522 million. Gemzar delivered sales of $160 million up 20% in the quarter. That brings its full year sales to $562 million, a growth rate of 24%. ReoPro declined 15% in the quarter to $106 million. Overall for the year sales were down 6% to $419 million. Finally, our Diabetes Care products again had a strong quarter growing 14% to $466 million. For the full year, Diabetes Care was up 25% to $1.784 billion. A brief normalized income statement for the quarter and the year is provided on slide 4. Fourth quarter gross margin, as a percentage of sales was exactly 81%, an improvement of 130 basis points over the same quarter of 1999. That brings gross margin for the year to 81.1%, an improvement of 210 basis points. Operating expenses grew 16% for the quarter resulting also in a 16% increase for the year. The sales gross margin and operating expense levels resulted in an operating income growth rate for the fourth quarter of 4% and for the year operating income grew 11%. Our non-operating income for the quarter resulted in a net contribution of $61 million and for the full year made a net contribution of $86 million. The tax rate remained flat at 22% for the quarter and for the full year. On the bottom line, Q4 diluted earnings per share grew to 70 cents, which represents 15% growth compared to normalize earnings per share of 61 cents in the fourth quarter of 1999.

For the full year, this brings our normalized earnings per share including adjusting for the impact of Y2-K to $2.65, a 16% increase over the 1999 earnings per share number of $2.28. Let us now look at these results in some more detail beginning with a closer look at product sales. As illustrated on slide 5, quarterly sales in Prozac and Sarafem increased 6% to $670 million driven by a 16% increase in the US and a decline of 34% in international markets. The 16% quarterly growth rate in the United States was positively affected for the most part by the reduction in excess inventories that took place in Q4 1999. Full year sales of Prozac and Sarafem declined 1% to $2.585 billion. US sales grew 7% and sales outside of the United States declined 31% driven by the patent expiration in the United Kingdom in the beginning of the year. The 7% growth in the US was also positively affected by the reduction in excess inventories in 1999. As we mentioned at the last earnings call, Sarafem is being tracked separately by IMS, so you will need to add both Prozac and Sarafem sales to obtain total market share for the fluoxetine molecule. This month we also received an approvable letter from FDA for 90 mg once weekly formulation of Prozac, which should help to improve compliance. This is the first once weekly antidepressant in the United States and we anticipate approval and launch in the near future. Following our October 6th combined petition for a panel rehearing and rehearing on bulk with the court of appeal at the Federal circuit, I would like to update you on where we are with the appeals process for the Prozac patent. You can see the whole process made out on slide 6. BA 10:15 filed its opposing pre-finale December with the court and therefore we anticipate a response from the court anytime. Should the rehearing be denied, then we have a further 90 days to petition to the US Supreme Court. The US Supreme Court would generally respond within 60 days of the filing. If we have to petition in the Supreme Court, we could expect a final decision on the hearing by May or June of this year, but it will depend obviously on timing. As expected, the Pediatric Extension for Prozac was granted by the US FDA on November 15th 2000 and it is our intention to continue to provide appropriate marketing and selling support for Prozac until the anticipated expiration on market exclusivity on August 2nd of this year. Zyprexa sales results are shown on slide 7. Sales were $696 million in the quarter up 22%. This result was driven by a growth of 22% both in the US and overseas.

For the first time in a quarter, Zyprexa became our number one selling product. For the year Zyprexa sales were $2.366 billion, an increase of 27% reflecting 23% growth in the US and 36% growth in overseas markets. As you know, the strategy for Zyprexa is to take advantage of the higher dose, higher value antipsychotic segments such as schizophrenia and bipolar disorder. Overall, Zyprexa US total prescription share grew 0.9 of a percentage point to 26.1% during the fourth quarter with acceleration taking place in November and December as promotional spend in activities were increased. This is a powerful illustration of our intention to further maximize the value of Zyprexa's superior efficacy and excellent safety profile with no issues of Q to C prolongations, EPS, or tardive dyskinesia in the face of potential new competition into the market. For the full year, Zyprexa gained 2.8% points of share and total prescriptions driven by games in the higher value, higher dose segments. Indeed since the improval for the bipolar mania indication in the first quarter of 2000, Zyprexa total script share has grown to 40% of antipsychotics used for this indication. The atypical antipsychotic cash market has grown 27% year to date. Zyprexa is the dominant leader in cash share for antipsychotics with a 47% share, driven by our number one position in schizophrenia and the leadership position we have recently established in bipolar. This reinforces the fact that looking simply at warm prescription data does not tell the entire Zyprexa higher dose, higher value story. As I mentioned previously, Zyprexa was also approved by the FDA for long-term therapy and maintenance of treatments responses in schizophrenia patients, which makes Zyprexa the only antipsychotic approved for this indication. This indication should contribute to Zyprexa's competitive advantage. Additionally on December 18th 2000, Lilly received regulatory approval from the Japanese Ministry of Health and Welfare for Zyprexa for the treatment of schizophrenia and we looked forward to the launch in this year pending price negotiations. For those of you who are also not aware, the rapid acting intramuscular formulation of Zyprexa will have an FDA Advisory Committee review on February 14th, 2001.

As you can see on slide 8, Evista sales for the quarter reached $146 million. These sales represented excellent growth of 31% in Q4 and pushed full year sales to $522 million up 61%. The osteoporosis treatment indication has been the primary contributor to growth in total script market share during 2000, which has now risen to 6.6% of the postmenopausal women's health market up from 5.4% at the end of 1999. Since its approval in the US for the treatments of osteoporosis in postmenopausal women 16 months ago, growth has also been driven by reimbursement for this indication in major European markets. On slide 9 you can see the Gemzar sales growth was 20% for the quarter for a total sales of $160 million. For the full year Gemzar sales grew 24% to $562 million. Growth has been driven largely by the non-small cell lung cancer indication, which in the US market now accounts for a quarter of first line usage. Gemzar has now been approved in 21 countries for bladder cancer including approvals from Spain and Australia during the fourth quarter. Despite no indications for bladder cancer in the US, Gemzar now has approximately half of the US markets for this indication driven by data released at the May ASCO Conference demonstrating that oncologists are recognizing the Gemzar plus cisplatin is significantly less toxic in bladder cancer patients than other current therapy. In addition, during the quarter we continued adding sales representatives that will result in 100 additional oncology representatives in the US to gain additional reach and call frequency with our key customers. This more than doubles our oncology sales force and it represents a significant increase in a highly concentrated market with a small number of prescribers. You can see on slide 10 that ReoPro sales declined 15% with sales of $106 million for the quarter. For the full year normalized ReoPro sales were down 6% versus the same period last year totalling $419 million. The decline in sales is due to the increasing competition in the US market place, which started earlier this year. Outside of the US, sales grew 16% for the year. The release of the Merck sponsored target data the American Heart Association meeting in November showed ReoPro to be superior to Aggrastat at 30 days. We are continuing also to aggressively market our message that we are produce the only drug in its class that significantly reduced its mortality at one year and three years and we are continuing for example, our investment in Phase III trials for AMI.

Turning now to Diabetes Care, total Diabetes Care revenues, which include primarily Humulin, Humalog and Actos grew 14% in the quarter to $466 million. During Q4, Humulin sales increased 1% to $293 million and Humalog sales reached $111 million up 52%. Lilly's revenue from Actos was $44 million for the quarter, 115% increase. In the US this revenue represents a royalty on end sales from Takeda as well as reimbursement for certain selling and marketing expenditures. Outside of the United States in those countries where we have marketing and selling rights, Lilly recorded huge sales of Actos and related costs and operating expenses on its income statement. For the full year, global diabetes care revenues grew 25% to $1.784 billion. This included 7% Humulin growth to $1.137 billion and 56% Humalog growth to $350 million. Included in this was Lilly's revenue from Actos, which was $223 million. Insulin sales continued to benefit from our upgrade strategy to provide patients with better glucose managements by switching them from Humulin to Humalog, Humalog fixed mixtures and state of the art Pen delivery systems, all of which carry price premiums over Humulin vials commensurate with the greater value they deliver to patients. US Humalog total script market share of injectable insulins has grown significantly during the year to 14.6% at the end of December. Also Pen delivery systems now represent 10.3% of the US injectable insulin market and Lilly share has doubled since the end of 1999 to 7.2% of total scripts. The Actos label has now being approved for Europe. Lilly has the rights to market Actos in several European markets including Spain. Slide 12 summarizes the sales amounts in growth rates of our leading pharmaceutical products plus animal health for the quarter. In addition to those products that I have already talked about, it should be noted that Humatrope declined 6% to $79 million in Q4 but was up 2% to $303 million for the full year. Also, worldwide sales of animal health products in the fourth quarter were a $197 million, an increase of 3% resulting in total sales for the year at $669 million up 6%. Excluding the effect of exchange rates, animal health sales grew 10% for the year.

Let me highlight a few elements of the geographic price rate volume analysis for sales growth for the quarter that you will find on slide 13. As you can see in Q4, overall global volumes increased 13%. Global prices were approximately flat and foreign exchange had an unfavorable impact of 4% resulting in 9% sales growth for the quarter adjusting for Y-2K related sales. In terms of the quarterly impact of foreign exchange, you can see that Europe was negatively impacted by 17% driven by the weakness of the Euro. Japan and other regions outside the United States were also negatively impacted. The strong presence of the US in our overall sales rating helped to partially offset overseas currency weakness, resulting in an overall negative rate impact of 4%. This negative impact was then partially offset by hedging activities. Finally you can see the break ups of the volume gained by regions and you can see here that we enjoyed strong volume growth in most regions of the world confirming the strength of our underlying business. For the full year overall global volumes increased 13%, global prices were essentially flat and foreign exchange rates had an unfavorable impact of 2%. These numbers, which were rounded, resulted in 10% top line growth for the year adjusting for Y-2K related sales. The next slide shows the quarterly improvement in our gross margin. For the quarter, the margin expanded by 130 basis points to 81%. This puts the full year gross margin at 81.1%, which represents 210 basis point improvement over 1999. The improvement in the quarter was driven primarily by two factors. First as we have explained in prior courses the continued strong growth in higher margin products such as Zyprexa, Evista, and Actos, while lower margin products such as ReoPro and anti-infectives continued to decline. Second, we are also experiencing benefits from expense controls as a result of our ongoing focus on procurement savings as well as production volume increases compared to the same period last year. Looking at slide 15, you can see the SG&A expense has increased 15% for the quarter to $944 million. This double-digit growth in SG&A expenses is being driven by increases in underlying selling and marketing expenses as administrative expenses decline. First we continue to expand our sales forces in the US and certain major European markets; examples of the 100 sales representatives that we are adding by March of this year to our oncology sales force, as well as the expansion in the Diabetes Care sales force in the United States. Outside of the US, a good example is the 100 retail representatives increase that we have made in Italy to boost our presence in that market.

Second we have been investing marketing expenses in Zyprexa to maximize the potential in the light of new potential competition as well as preparing for the launches of Zovant and Forteo anticipated for later this year. For the full year SG&A grew 17% to $3.228 billion for many of the same reasons that I have just mentioned for the quarter. Turning now to R&D shown on slide 16 for the fourth quarter, research and development expenses grew 17% to $545 million. For the full year R&D was $2.019 billion, up 13%. Looking at overall operating expenses, the combined growth rate for SG&A and R&D expenses were 16% for both the quarter and the full year. On slide 17, you will see the pipeline. Let me now update you on the R&D progress with our pipeline during the quarter. During the quarter, the number of potential new products in the final stages of testing or awaiting regulatory review advanced to 10. All 10 products remain on track. Forteo for osteoporosis was submitted for FDA approval late last year, Zovant for severe abscess is on track for submission during this quarter, Cialis for male rectal dysfunction, which we plan to submit in the second half of this year, tomoxetine for attention deficit, hyperactivity disorder which we also plan to submit by the end of this year, duloxetine for depression which we anticipate submitting late this year or early next year and Alimta for mesothelioma, duloxetine for urinary incontinence, protein kinase C beta inhibitor or PKC for the diabetic complications and macular edema and diabetic retinopathy, OXC for treatment resistant depression and erythrovancin for bacteremia, and both complicated and uncomplicated skin infections. With this lineup, I think you will see why we and many others who adopt this, as the best laid stage pipeline in the industry.

Slide 18 summarizes the fourth quarter non-operating income and deductions. This quarter, other income and deductions resulted in the net contribution of $61 million compared to a net deduction of $30 million in the same quarter of 1999, after taking out last year's impact from the proceeds from the Ceclor package infringement case. A considerable portion of the net contribution was due to net interest income exceeding net interest expense. The remainder was mainly related to a combination of a number of different items. For the full year, normalized non-operating income was a net contribution of $86 million driven almost entirely by interest income exceeding interest expense. As for the tax rate, it remained at 22% for the quarter in the year. In addition, by yearend we had completed $1.1 billion of the $3 billion share repurchase program that we announced earlier in 2000. Slide 19 shows the non-recurring items that impacted our reported results, but that will normalize out of the earnings in order to provide a clearer picture of our ongoing business. In the fourth quarter of 2000, there were no normalizing of events. For the full year earnings per share reconciliation reflects those normalizing items that we have discussed in prior quarters. These prior events include the sale of Kinetra, which impacted earnings per share by 20 cents. We also added back $90.7 million of Y2-K related sales, which added back 6 cents a share. Also included in your package for your reference, is the final slide that simply shows our quarterly earnings per share amounts on both the reported and the normalized basis for 1999 and 2000.

In summary, in addition to increasing to 10 the number of products in late stage registration trials or awaiting regulatory review, Lilly's fourth quarter highlights were 9% top line growth, 130 basis point expansion in gross margin, a 16% rise in operating expenses and a 15% increase in earnings per share. For the full year sales grew 10%, gross margin improved 210 basis points, operating expenses grew 16%, and earnings per share was $2.65 up 16%. With 2000 now behind us, I would like to update you on our 2001 expectations for the overall income statement. Assuming, the CAX C ruling stands and excluding any unusual items, overall we expect single digit top-line growth for the full year. However, our sales could decline in Q3 and Q4 as a result of the Prozac patent expiration. Taking out the Prozac sales, we anticipate mid teen growth for all other products for 2001. This underlying strong growth will be driven by first, our ability to continue to grow global sales of Zyprexa through new formulation such as the rapid-acting intramuscular formulation, the expansion of our bipolar mania franchise, and the continued conversion from typicals to atypical in overseas market. While we anticipate continued overall growth in the antipsychotic market, naturally our assumption is that the anticipated launch of Zeldox will have some impact on market share growth rates for Zyprexa and antipsychotics. Second, by continued growth in the Evista, Gemzar, and diabetes care, and third by the anticipated launch of Zovant in the fall. Although we anticipate the approval of Forteo this year, due to timing of the standard regulatory review its sales are unlikely to have any major impact on 2001 growth. Given the patent expiration of Prozac, we expect gross margins to contract to the range of 50-100 basis points for the full year. As we have mentioned previously, there is a lot of competition in the antidepressant market and it requires substantial marketing and selling resources. We will manage Prozac marketing and sales efforts in line with the continuing opportunity. However, we will shift certain sales and marketing antidepressant resources to our growth products. We are also keeping a tight rein on administrative expenses during this year, which we are calling year x. As you would expect performance-based compensation will fall in 2001 driven by a reduction in the value delivered through the Eva and Stock-round program. As a result, overall SG&A expenses should be in the low to mid single digits with the growth rates for underlying marketing and selling expenses for continuing products without Prozac being in the double digits.

Turning now to R&D, during the full year 2001, we shall invest sufficiently to fulfill the potential of the pipeline as well as prepare promptly for the launches of Forteo and Zovant. Assuming positive clinical outcome launches for Cialis and tomoxetine are planned for 2002 with additional launches being in early 2003 for Alimta for mesothelioma, duloxetine for depression and urinary incontinence and PKC in the European union. We shall also continue to expand our discovery research capability and related lab facilities. Overall, during 2001 we anticipate low double-digit R&D growth. Non-operating income should be a net contributor to income. In terms of other elements of the income statement, our tax rate is anticipated to stay at approximately 22%. In summary, we expect earnings per share growth in the single digits for the full calendar year and we are comfortable with the range $2.75-2.85. Given that we expect a decline in earnings per share in the third and fourth quarter year on year, we would anticipate strong earnings per share growth in the first half to result in single-digit growth for the year. We are therefore comfortable with the range of 71-73 cents for this quarter. Thank you for joining us for this discussion of the fourth quarter and year results of Eli Lilly and Company. As I mentioned, in addition to IR Group, we also have Bryce Carmine, Product President for Primary Care Products with us for Q&A. With that, I will hand the call over to AT&T.

Thank you. Ladies and gentlemen, at this time, if you wish to ask a question please depress the #1 on your touchtone phone. You will hear a tone indicating that you have been placed in queue. If your question is answered, you may remove yourself from queue by depressing the pound key. One moment please. Our first question comes from Tony Butler's line with Lehman Brothers. Please go ahead.

Yes. Good Morning. Thank you. Simon, anyway you can quantify a little bit better the impact that Zyprexa may have in Japan, Asia numbers, etc. Thanks.

Yeah, Tony, in terms of the Japanese market it is the second largest in the world, and the DOTs are about $860 million a year despite the fact that the population is about half that of the United States and or even slightly less than that. People tend to stay in institutions considerably longer than they do here in the United States.

The next question is from Bert Hazel's line from Robertson Stephens. Please go ahead.

Thanks. Can you give us an idea of specific price increases during the quarter, and I have one question regarding Alimta, are there any other indications to be included other than mesothelioma with the initial filing, and if not how long will it be until you quantify for other indications for that drug. Thanks.

Rob, would you like to take the pricing question?

Sure, Bert let me run down the price increases that we have for the quarter that the major price increase has included Evista, which was 4.7%. We had various price increases in our insulin product line including 6.5% for Humalog and Humulin(r), which was in 10, and then on December 15 we had a 3.9% increase in Zyprexa.

You as well take the question on Alimta.

Sure, for Alimta, Bert, yes, we are studying it in other solid tumors including lung cancer and breast cancer, but our first submission could possibly be as early as the end of this year for mesothelioma.

The next question is from Leonard Yoffe's line from Banc of America. Please go ahead.

Yeah, Other than the upcoming data on Zovant in February, could you please review for us, and what made your medical conferences, other pipeline products will be talked about in significant sessions?

Sure Len, in fact I am going to pass that question over to Bryce, because a lot of that relates to his products for Forteo and for Cialis.

For Forteo, certainly this is going to be early release in the near term in peer review journal, which was we are awaiting full confirmation, although at this point of the major pivotal data. That has already been presented at several conferences and will be picked up through the endocrine conference, and various other conferences focussed on osteoporosis this year. In addition, for Cialis there will be some release of information at the IUA meeting, and then also at some European urology meetings later on in the year.

In addition to that, Len, also as far as Zovant is concerned after the SECM meeting, there will be additional data release to help economic data at the American Thoracic Society sometime in Q2. Next question please.

The next question is from Barbara Ryan's line with DB Alex Brown. Please go ahead.

Good Morning. Thank you, just a couple of quick questions. #1. I think, Simon, you mentioned that Forteo would be launched in fourth quarter, so can we assume by your comments that it did not get an expedite review or you are still waiting to hear?

Bryce, would you like to take that question?

You know, we are anticipating a standard review at this point in time, and so we anticipate we would launch in the fourth quarter, but we are not expecting, that as Simon indicated that there would be significant sales recorded in this year. Next question please.

The next question is from Tom Burton's line with the Wall Street Journal. Please go ahead.

Two questions. One is, is there any place in the material that you have made available where you break up non-normalized sales comparisons, and secondly, if an when Alimta is approved for mesothelioma, are you expecting it to be used off label for other lung cancers?

Yeah, we do have a break up of it and I will be happy to provide to you, Tom, but the impact of Y2K sales was approximately $90 million and that would be the difference. I can have Terra Fox who works in the Media Relations to provide you the details in terms of Alimta on what was the question? ....yeah, I mean, clearly our strategy with Alimta on mesothelioma was to get it to the market as soon as possible, but our anticipation would be that it would be used first of all for that indication, and to the extent the doctors say for this activity in other tumors that might be used off label, but our goal was to get it on the market as soon as possible for mesothelioma. Next question please.

The next question is from Jennie Rubin's line from Morgan Stanley. Please go ahead.

Thank you for taking my question. I am wondering if you could talk about how you expect Alimta to affect the diabetes care business?

Yeah, Jennie. As far as Alimta is concerned, as you know, it is long-acting basal insulin which cannot be mixed with other insulins. It will definitely have its place in the market. However, insulin therapy is moving towards real-time insulins, and therefore, we are confident that our up-going strategy to real time insulins, which offer better convenience, and better glucose management will continue to be very successful. Next question please.

The next question is from James Terrell's line from Capital Research. Please go ahead.

Thank you. Simon, could you elaborate on that DOT that you mentioned regarding the drugs in Japan in terms of what the largest products are in terms of that DOT share, and then it looks like the other income line had about $61 million swing after tax using your tax rate, that is about 4 cents. Can you help us on this stand what the component to it is there?

Okay, I will take the question on the Japanese market and then Rob will answer the question on LID. As far as the $860 million DOTs in the Japanese market is concerned, for schizophrenia, my understanding is that it is one of the markets with the lowest level of atypicals that is in fact less than 10% of that number is for atypicals, and the rest will be for typicals. That is the kind of the break down. I do not know Bryce, I mean, during the four-month general management time whether you have any other comments on that? Bryce Carmine Just to emphasize your comment before Simon much of it seems institutional care and tends to patients therefore who as were treated in captivity.

And in terms of the other thing I would say the actual value of the market is about 52-53 billion yen, which equates, I think, in currency exchange rate, to approximately $450 million. Rob, would you also comment on the LID?

Sure, LID, clearly the driver was interest revenue over interest expense. However, on the other portions of other income there are many things that hit that line item James, including JV expenses as well as asset write down, investment revenue, investment losses, many, many miscellaneous income hit that piece, so it is hard to predict on a quarter-to-quarter basis, but to the extent that we had upside in other income, we reinvested that back in the business with strong growth in SG&A and R&D. Next question please.

The next question is from Steve Tie's line from Merrill Lynch. Please go ahead.

Hi. Good Morning. Simon, I was just wondering if you could just talk a little bit about this cut down in the Zyprexa sales growth rate in 4Q versus full year for 2000, and I was also wondering if you could just address the Zyprexa IM market, and the potential there in, you know, prescription levels for using the injectables in the market. Thanks.

I think, Steve, as far as the rate in Q4 it was about 23% both in the United States and overseas. The comment that I would make is I really think you should look at the market share data for what has happened in both November and December. We have grown overall for the year about 19% in scripts and we grew 27% in cash. It was a slightly slower number in Q4, but having these said, we increased our market share quite dramatically. We were up to 26.1% of total scripts. We were up to 28.5% of mean scripts in December, which is really a very strong performance and that is really being driven by the fact that we are investing very heavily to protect and to grow the Zyprexa franchise. As far as the RIM methods are concerned I am going to pass that over to Patty.

Hi, Steve, on the rapid acting remember that there are no atypical agents currently available, which is why the SEA would be having advisory committee review for Zyprexa on 14th February as well as for Zeldox on 15th February. The opportunity I cannot size it for you because there really is not a good competitor, what we see really is a huge entry for us into the hospital market to get patients established on therapy, and then switched over to Zyprexa as an oral therapy as they exit hospital, and clearly this will be retained very close attention to the QPC rise interval data in the comparison between ourselves and the competition. As we think we have got good clean data there that we think could be a competitive advantage in that market place. Next question please.

The next question is from Steis Collis' line with SG Cowen. Please go ahead.

I am wondering if you could address your Zyprexa expectations for 2001. It is a mid teen sales growth rate something you are comfortable with and furthermore embedded in that forecast is what expectations for the Zeldox label as well as Pfizer's coming into the market. Do you expect an entire Pfizer sales force to be put behind this as 700 representatives sell or more specialized sales force?

Steis, I think the first question I would say, in terms of the guidance for the year, as you will notice, we have not given any specific product guidance for Zyprexa this year. That pretty much is the result of the situation with regulation FD, which makes it pretty much in line with most of our major competitors. But, we do believe that there will be continued strong growth in the product. It is going to be driven by continuing to expand our presence from the bipolar mania area to rapid acting intramuscular, the launch in Japan, continued expansion overseas where atypicals typically have a lower percentage of the market. In terms of the Zeldox label, quite frankly I am not even willing to speculate on what may or may not be in there, and as far as Pfizer's commitment is concerned, I really cannot comment, because I do not know what their commitment is. I guess, you would have to ask them, but I will say that in terms of our commitment, it is very strong to this product. This we have said on numerous occasions. We have learnt from previous experiences where we did not, maybe, pay quite such attention to the competition. We are very focussed on the competition on this product and we feel very strongly that we are going to win through. Next question please.

The next question is from Tony Ferino's line from JP Morgan. Please go ahead.

Hi, It is Carl Siden with Tony Ferino of JP Morgan. I am hoping, can you give us a little bit more detail on the approvable status of the once-weekly Prozac, I know you cannot get into the specifics of the dialogue, but it seems like the timing for this product is critical relative to whether or not you can convert the current Prozac users to this product for generics around the market, I mean, do you have to do any additional clinical work, is this a big deal approvable or a little deal when you think of the outset. Thanks.

Carl, quite frankly, the situation is at the moment that we ________00:46:05. We are just in labeling negotiations and we would anticipate that they would be completed in the near future. However, overall I just want to make the point that it is an important addition for us to have to the Prozac portfolio that in the big picture of things, we have to remember that Prozac will be expiring in August of this year when we will be losing execution of the market activity then, so it is clearly time then to move on to the pipeline, and other new products as well as our growth products for the time we have. Next question please.

The next question is from Bert Hazel's line with Robertson. Please go ahead.

Thanks for the chance for another question. Regarding Actos in the diabetes pipeline, are you considering a study for prediabetic patients or impaired glucose tolerant patients with your partners at Tekada, and just a quick status update regarding preliminary insulin programs? What is your program with Dura, if you can give us any clarity at all, and if you give us an idea where your buckle delivery program fits in relative to the Dura program. Thanks very much.

In terms of the first Actos question, I am going to let Patty take that, and then I will take the question on the delivery systems.

You are flipping it over to me because we are all looking at each other and we do not know the answer. Quite honestly, the Actos question about further clinical trials, if I am not mistaken, actual clinical work ongoing is really in the hands of Tekada. I think you probably get a better answer from them, but that is something that I will follow up with Diabetes team, and get back to you on. I do know that they have an extensive clinical trial program designed and I cannot speak to that specific program.

In terms of the delivery systems we have an ongoing program as most of you know with Dura, inhaled insulin, and that program is ongoing. And in terms of the buckle delivery system, obviously, I guess the ultimate goal would be to jump almost from what we have today to oral insulin, and the buckle with the delivery through the lining of the mouth basically would achieve that. It is very early, in the stages of our collaboration. So, it is really premature to make any comments on timing at this point in time. Next question please.

The next question is from Barbara Ryan's line from DB Alex Brown. Please go ahead.

Thanks a lot. I was just wondering on this, if you are seeing any changes in the kinds of patients that you are getting on the drug with the treatment claims, we have seen a slowdown in the hormone replacement market, and if patients perhaps who are on that managed short term symptoms are then being converted over to Evista for maintenance or could you just give us the flavor for what you are seeing in the market place?

Yeah, Bryce, would you like to comment? Bryce Carmine Well, we have not seen very much change in terms of the average age of patients who are still, as I previously talked about, in the region of about 62 years of age, 63 years of age. So, the focus of use is still very heavily in terms of prevention, but also obviously we are picking up nicely some of the early treatment opportunity as well. Next question please.

The final question is from Steve Callis' line from SG Cowen. Please go ahead.

We know you said that you have filed Zovant this quarter. I am wondering if you like to narrow it down to a month, and secondly, would you like to discuss the profile of Cialis, how do you think it is different, and what you think the market is growing, etc?

Okay, the first question I will take in terms of Zovant, Steve, the answer is, we are on track for the quarter and we are going to narrow down the gap soon and in terms of the profile for Cialis, I will let Bryce to take that as he is the Product Group President for that too.

The trials that we are undertaking in Cialis are ongoing at this point. We have talked about the range of studies, which are being done. We clearly recognize the need to be able to provide substantial guidance for use of Cialis in cardiovascular patients, especially those on nitrates, that their diet is not all renewed, and certainly we are not at a point where we can speak to that at this stage. There is also a range of studies being focussed on onset of action, duration of years. They also are not complete at this point in time. Once the data is in, obviously we will begin to release that information in the Congress, as we had talked about it earlier on in this broadcast. We are very comfortable with the profile as we see it evolving at this point in time, and we are confident we will have a competitive molecule. With that, I would just like to close and Patty is going to have the last word given that it is her last day in the Investor Relations Department, I am going to let her close. Patty, over to you.

I think you all have lots to do with. It was great working with you. Thank you so much for your moral support through last four years in the IR department for Lilly, and just to tell you as for the stock prices for the end of the year, the target for Simon and Rob on the board here, and it is nice stock price, I think that if you hit it you will all be pleased, and I just want to have them have a great year and keep focusing on the end goal. Thanks to everybody and see you later.

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