輝瑞 (PFE) 2002 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Pharmacia Corporation's first quarter earnings release. At this time all participants have been placed on a listen-only mode and then the floor will be open for your questions and comments following the presentation. It is now my pleasure to hand this over to your host, Mr.

, Senior Vice President, Corporate Affairs.

Thank you, operator.

Good morning, everybody. This is

. Thanks for dialing into our call this morning. I would like to remind everyone on the call that we're Webcasting this morning as we do with all of our quarterly sales earning conference calls. These calls can be accessed at our Web site, www.pharmacia.com.

Before proceeding, counsel is asking me to refer you to the final page of our release this morning for information regarding any forward-looking statements made during the call today. The release is now available on all the major wires as well as on First Call. It can also be accessed via our Web site.

For those of you who are interested, the Monsanto conference call will be later this morning at 10:00 a.m. Also it's been our past practice that the earnings result discussed during the call are on an adjusted basis, excluding items such as restructuring, merger related costs and certain one-time large transactions previously made public.

Just specific to this call, we work to make our remarks somewhat shorter and more focused on key product performance and key issues, so we've left a bit more time for your questions before the market opens.

But so you know, we do plan to wrap this up in time for the market opening. Joining us this morning for the call in our P-Pack headquarters are Fred Hassan, our Chairman and CEO,

, President of our Global Prescription Business, and

, our Chief Financial Officer. With that, I'll turn the call over now to Fred Hassan for opening remarks.

Thank you,

, and good morning.

We're right on track with our earlier EPS guidance for both our pharmaceutical business and our auxiliary. We'll focus in this call on our pharmaceutical business. As

mentioned, the Monsanto call will be later this morning.

We achieved solid sales growth across a broad range of products. Our key growth drivers continue to demonstrate strong market performance. In particular, we are pleased with the strength of our growing

portfolio.

will be telling you more in a moment about the expanding leads that we're building over our competitors in the

arena.

As you know, this month we've begun the full U.S. launch of

, our exciting new entry into the

market. Early feedback from doctors and patients about

is encouraging. In addition to

, we're now launching Dynostat, our injectable

therapy in several international markets, and this gives me a real -- I mean, this is really an exciting lineup of three distinct

treatments for physicians.

We have said before that one of our key strategies is to lead in the areas where we compete. Our growing global leadership in the

category is one example of how we're delivering on that strategy. So is our global leadership with

for glaucoma, with Camptosar for colorectal cancer, with our global leadership with Detrol and Detrol LA for overactive bladder and with Genotropin for growth hormone deficiency.

Not only do we lead with these products, but we have products with long exclusivity. In fact, the only significant product to lose exclusivity for the rest of this decade is Camptosar, expected in 2008.

We are also encouraged by our product flow, in particular

.

is currently under ST review for the treatment of potential hypertension and is being studied for use in heart failure. It's already showing prominence as a novel new treatment for hypertension and heart failure.

As you may know,

is a real innovation.

is the first selective endostroma blocker. This means it can bring a significant improvement to existing treatment programs. Strategically, we continue to build Pharmacia as a focused pharmaceutical company.

We demonstrated this in the first quarter through the sale of our minority interest in

. We are also on track with a plan to spin off our Monsanto business in the fourth quarter. We're investing the proceeds of the

deal and other inflows to build a long-term strength of this company.

Our priorities for the use of these proceeds are number one, organic growth; number two, product acquisition; number three, share buy-back; and number four, debt reduction. We have significant opportunity for organic growth from our existing pipeline and our product portfolio. For example, we expect to launch three of our key growth drivers, Detrol LA, Celebrex, and

, in Japan over the next few years.

As you are aware we recently submitted our filings for Detrol LA in Japan. The launch of these three important products in the critical Japanese market will be a major driver of growth for the company. In the United States we'll be investing in products such as

,

and Delcom to supplement our organic growth.

We are also investing in a continuing flow of external product innovation. In this area, we've emerged as one of the leaders among our peer companies over the past year. During this time, we've brought in three products with significant potential, CDP870 for rheumatoid arthritis,

for anxiety, and

which we announced yesterday.

is a very potent and highly selective oral PD for inhibitor for asthma and COPD. There is an important opportunity for a new orally delivered treatment in this area. We expect the

to further increase our relevance to our primary care customers while also opening a new channel to respiratory specialists and pulmonologists.

Beyond investing in organic growth and accessing external innovations, we continue to execute sound financial management strategies to share repurchases and debt reduction. As you know, we've made steady progress in reducing costs and investing in areas that will pay off for long term.

Specifically products and R&D investments. In summary, we're committed to a strategy to create sustainable long-term double-digit earnings growth. In fact, I would suggest that we are well placed in our industry to achieve this goal. And now, let me turn it over to

.

Thank you, Fred.

Good morning. We have some good things to talk about today, with exciting developments on both inline products and pipeline products. For the quarter, our global prescription sales total $2.7 billion, up six percent excluding

, and an eight percent increase excluding the impact of foreign currency. Throughout my remarks this morning, when I'm discussing product sales, I'll refer to percentage sales growth in local currency, which is the best measure for actual product performance.

The U.S. experienced strong growth of 16 percent, excluding

. Total U.S. sales comparisons were not significantly impacted by trade buying patterns, however specific products such as Celebrex and Camptosar were impacted by trade buy-out, as we brought to your attention during our fourth quarter earnings call.

We now have six core growth drivers with the launch of

. First quarter sales of our core growth drivers including Celebrex,

, the Detrol family, Xalatan, Camptosar and Cybex totals $1.2 billion worldwide, up seven percent versus the same period last time. The core growth products in total now represent 46 percent of our total prescription sales.

The established products such as Genotropin, Fragmin, Allent,

and Mirapex recorded sales in the quarter of $464 million, an increase of 26 percent versus last year. These established and yet growing products now represent 18 percent of total prescription sales.

The totals of these growth and established products comprise about two-thirds of total prescription sales, growing at 12 percent. Our remaining product portfolio also increased slightly, achieving sales in the quarter of nearly $1 billion. This is an exciting time for the Pharmacia

portfolio, with two new launches, as Fred mentioned --

in the U.S. and Dynostat in several international markets.

Sales for our new

portfolio, now consisting of Celebrex and

, total $665 million, up over three percent. We have a very strong

portfolio, and

is off to a great start. Despite a tough competitive environment, global Celebrex growth continues to outpace the growth rate in the arthritis and pain market.

Celebrex continues to maintain its status as the world's best selling arthritis drug, leading all

and audited fills, as well as in new and total prescriptions. Celebrex has delivered on the Cox2 promise of efficacy and safety and can be used without limitations in the vast majority of patients.

First quarter global sales for Celebrex total $607 million, a decrease of six percent due to two major factors, the U.S. planned trade buyout I previously mentioned, and unfavorable comparisons that we'll see for this quarter and next in key markets like France where we had exclusive reimbursement in the first half of 2001.

In the U.S., Celebrex leads with a TRX

share of 52 percent, about six points ahead of

. Sales total $458 million, a two percent decline. In addition, Celebrex and

have received strong endorsement from the American Pain Society. Their new guidelines recommend the use of Celebrex and the other

over older NSAIDS as first line prescription therapy for the treatment of moderate to severe pain and inflammation.

More than 80 million patients worldwide have taken Celebrex and we have seen no cardiovascular signal with Celebrex, nor has the

requested any further cardiovascular studies of Celebrex or

.

Our next major growth driver,

, for rapid powerful relief of arthritis pain, was officially launched April 15th in the U.S. following a very successful early experience program that began in February.

Patient and physician feedback from those participating in the early experience trial has been extremely positive. In fact, more than 98 percent of physicians said they expect their use of

to increase. Among patients, over 90 percent said they would strongly recommend

to a friend.

The positive weekly trends seen in prescription share are particularly notable among key prescriber segments, including rheumatologists and orthopedic surgeons. Rheumatologists are a group that we consider leading indicators of future adoptions, and they're showing the highest

adoption rate, with a weekly new Rx

share of nearly 12 percent already.

We've also expanded our

portfolio in Europe with the launch of our injectable

Dynastat. In the past two weeks we launched Dynastat in the UK and Mexico. Additional launches in major EU countries are expected throughout 2002. With this approval, Pharmacia now has the broadest array of

and the only oral and injectable formulation.

Xalatan continues to be the world's top selling prescription medication for the treatment of glaucoma, more than double the closest competitor. Worldwide sales of Xalatan, including Xalacom in Europe for the first quarter, totaled $220 million, and included some trade buy-in.

Xalatan is the global leader with a 35 percent market share. The growth of Xalatan comes by the very competitive market and the launch of two new prostaglandin in the U.S. one year ago. In Japan, Xalatan remains the number one glaucoma product, recently recording a new high of 33 percent value market share at the end of March. In Europe, we expect to deliver sustained growth for Xalatan, with two recent major events.

The approval of Xalatan for first line therapy, making Xalatan the only prostaglandin approved for first line use and the launch of Xalacom, our combination product to treat progressive glaucoma. These two events significantly expand the use of Xalatan at both ends of the spectrum of therapy.

Xalatan first line for newly diagnosed patients and Xalacom for late stage glaucoma therapy. Moving to our oncology franchise, total sales for Camptosar for the first quarter of this year totaled $91 million, a decline of 33 percent versus last year, impacted by the fourth quarter buy-in and first quarter trade work down.

Following the positive FDA Advisory Committee decision at the end of 2001, Camptosar's position has been reaffirmed and usage has returned to previous levels. Building from its strong leadership position in colorectal cancer, Camptosar continues to demonstrate that it is a very powerful agent in the treatment of other solid tumors.

The Journal of Clinical Oncology reported results of a phase two study of Camptosar in patients with advanced pancreatic cancer showing significant survival advantage. And you might recall there was also an important Camptosar publication in The New England Journal of Medicine in January on results of a Phase 3 study of Camptosar, demonstrating survival benefits in patients with small cell lung cancer.

At the upcoming

meeting in May, there will be about 150 clinical abstracts for Camptosar including promising new data on breast cancer. In addition, there will be early phase two data on the use of Celebrex in the treatment of non-small cell lung cancer. That means that it may someday be proven that Celebrex can be used to treat cancer in addition to its already FDA approved use to prevent a pre-cancerous condition from developing into cancer.

Turning to Detrol, the Detrol family is on track to become another billion-dollar franchise for Pharmacia. The launch of Detrol LA has lifted the growth trajectory of Detrol in the U.S. as well as in Europe. First quarter global sales were $174 million, up 30 percent, and included some trade buy-ins. Detrol remains the top selling brand for the treatment of OAB worldwide.

Now I'd like to add a few comments on two exciting new pipeline products.

, the first selective aldosterone blocker or SAB for hypertension is currently undergoing a standard review at the FDA. As Fred said,

is also on track for submission in Japan later this year.

is especially well suited for the large Japanese market due to its special effects in salt hypertension, which is very prevalent in Asian populations.

In addition, our post MI and early heart failure trial emphasis is expected to complete by year-end or in early 2003.

will bring a major innovation to the treatment of hypertension. Hypertension is a complex disease with many pathways contributing to the disease. To date, one that has been unaddressed is the hormone aldosterone.

In the 1980's the medical community recognized the value of A's inhibition in treating hypertension and heart failure. In the 1990's the A2 inhibitors were introduced. Today aldosterone is beginning to be recognized as the critical third element in the

aldosterone system.

Aldosterone clearly plays a major negative role in hypertension and secondarily in damaging target organs such as the kidney, heart and blood vessels. As the only agent specifically designed to selectively block aldosterone,

may have broad utility not only in hypertension but in heart failure and beyond.

The emerging profile of

was recently revealed at the important American College of Cardiology Annual Meeting. This profile suggests that in addition to providing effective blood pressure control,

may also provide protection to key organs such as the kidney and the heart. At the upcoming American Society of Hypertension Meeting in May, we expect to see additional data, which further reveals the safety and efficacy of

in patients with hypertension.

may be used alone as a first line agent in populations like African Americans, salt sensitive patients, diabetics and the elderly.

is very effective at controlling systolic as well as diastolic hypertension with a very benign side effect profile. In the elderly particularly, systolic hypertension contributes to significantly more death than does diastolic hypertension.

Data also demonstrates that

can be successfully combined with any of the major categories of the anti-hypertensive medications when added control is required for patients already on another therapy.

Importantly, over 50 percent of all treated patients with hypertension remain uncontrolled despite the use of medications. Now more than 55 percent of patients in the U.S. take more than one medication to control their blood pressure and this segment is growing substantially,

especially as evidence shows that even small increases in blood pressure have a large negative impact on cardiovascular health. Because

can be used alone or in combination with many other agents, we think

will be an important addition to the anti-hypertensive market and we are very excited to be entering this new area.

The second pipeline product I want to highlight is

, with a new and novel mechanism for the treatment of asthma and COPD. From what we have seen in the phase two data,

has the potential to be superior to existing therapies. So of course that needs to be confirmed in the upcoming Phase 3 trials. Treatment paradigm are evolving and there is a demand for an oral once a day product that can be used alone or in combination with inhaled steroids.

To summarize my remarks, when we look at our competitive position in the industry, we see an exciting group of patent protected products. We are launching new products in both the U.S. and Europe. Our portfolio is performing well worldwide.

Fueling this growth are our now six growth drivers, Celebrex,

, Xalatan, Detrol LA, Camptosar and Cytox, all with many years of growth and exclusivity ahead. With

we have another potential growth driver currently under review at the FDA, and as Fred mentioned, we continue to have good product flow from in-licensing agreements. Thank you, and now I'll turn the call over to Chris Coughlin.

Thank you,

.

Good morning, everyone. Before I review our operating performance for the quarter, I want to remind all of you that we no longer consolidate the results of our Monsanto subsidiary. Monsanto is reported as a discontinued business as we continue with our plan to spin off this company to our shareholders in the fourth quarter of this year.

As you have already heard, Monsanto is holding its conference call later this morning to review their first quarter results. So I won't discuss the

results in great detail here this morning. I will say that Monsanto's operating results for the quarter were in line with our expectations with reported net income after minority interest increasing by 26 percent.

On an adjusted basis, if we were to include the results of Monsanto, total earnings per share for Pharmacia was 37 cents for the quarter versus 32 cents last year. Of that 37 cents of EPS, 31 cents related to our pharmaceutical business and six cents for Monsanto.

Now I will go back to discussing our core pharmaceutical business. Reported sales in the first quarter decreased three percent. This decline resulted from no longer recording sales of

. Exporting

in foreign exchange continuing sales increased seven percent in the quarter while the sales of our prescription business increased eight percent.

Our U.S. Rx business remains strong with a 16 percent growth when excluding

. Our international sales decreased five percent. Sales outside the United States were negatively impacted by foreign exchange as well as mandated price reductions in Japan. As

mentioned, we also faced difficult comparisons in the first quarter versus last year in certain major markets where Celebrex had exclusive reimbursement at that time.

Our gross margin improved by 100 basis points to 78 percent for the first quarter versus a year ago. This reflects the impact of improved product mix. Our research and development costs increased by five percent in the quarter. The increased results from our clinical development programs in Japan on the products Fred mentioned earlier, as well as our clinical programs in the United States.

SG&A increased one percent over the first quarter of last year. SG&A as a percentage of sales increased 160 basis points to 44.6 percent of sales, reflecting the impact of not reporting sales of

in the quarter. Under the new accounting regulations which take affect this year, we no longer amortize goodwill.

Amortization in the first quarter of 2001 was approximately $30 million. The EPS impact of this change was approximately two cents per share this quarter, as we estimate the full year impact to be from six cents to seven cents per share.

In all other net, we reported income of $87 million versus an expense of $11 million in 2001. This was primarily due to the change in accounting for our share of the

profits in the first quarter of 2002. In the first quarter of last year 2001, we consolidated

results and reported a profit sharing payment to

as an expense.

This quarter it was just the opposite. We did not consolidate sales but received a profit sharing payment for our share of the

earnings. This payment was reported as other income.

As we discussed in our last call, our earnings per share from

was approximately $.04 in the first quarter of 2002 and $.05 in the first quarter of 2001. As you know, we completed our

transfer on April 16th of this year. We received a one-time payment of $671 million last week which will be reported in our second quarter results.

The first quarter will be the final period of earnings contribution to us from

. In the first quarter, the tax rate improved to 24.5 percent from our 2001 year-end rate of 25 percent. As noted in our release, we are reporting certain non-recurring items this quarter.

These are $20 million for merger and restructuring costs and a $773 million pretax gain from the sale of our stake in

. Including these items and the income from our Monsanto business, our total reported EPS was 84 cents for the quarter versus 19 cents a share last year.

Looking at the full year, we remain confident in our previous EPS guidance of $1.52 to $1.57 for our continuing business. This guidance does not include the income from the one-time payment related to the

transfer I mentioned earlier, nor does it include the gain reported here from the sale of

or merger and restructuring charges.

So in summary, we are pleased with the results this quarter. In addition, with the completion of the sale of

this quarter and the planned spinoff of Monsanto in the fourth quarter, we continue to focus our efforts and resources in our pharmaceutical business.

Our financial condition has improved significantly in the two years since our merger. As Fred indicated, we continue to utilize those financial resources for supporting organic growth, accessing external innovation, stock buy-back programs and debt reductions. And now I'll turn the call back over to

.

Thanks very much,

.

Before we start the Q&A session, if I could go over two quick items in case we lose anyone at the end of the call. One, the replay number for this call, if you're interested, 973-341-3080, and the PIN number is 3196180.

That out of the way, the only ground rule for the Q&A, if we could, is if most of you who call in could please focus on one subject or one question and we'll be glad to take all your follow-up questions which you naturally have off-line, through the investor relations team. With that,

, we're ready for the first question.

Thank you.

The floor is now open for questions. If you have a question or a comment, we ask you to please press one followed by four on your touch-tone telephone at this time. If you would like to remove yourself from the queue, you may do so by pressing the pound key.

We do ask all participants to please pick up their handsets while posing their questions to ensure optimum sound quality. Again, that's one followed by four for questions at this time. Thank you. Our first question is coming from Ken Anderson of Prudential Securities. Please state your question.

Hi. I have some questions on the Cox2 franchise. The first question is can you break out the Parataxic pills in Europe? Second question is the XU.S. impact of, you know, at least what is here in the States, cardiovascular concerns that is often viewed as a class affect, but I'm looking at the international trend sales for Celebrex,

you know, it's down for the quarter, and I'm wondering if that's a trend that continues and how much cardiovascular concerns play into that? And then the last Cox2 question is, can you give some specifics on just what you can and cannot say about the recent

label changes?

Thanks,

. We'll go with

.

Okay, a couple of comments on that,

. First of all, Parataxic in Europe is only launching now, so there are no sales reported yet for first quarter. That will begin with April, essentially moving forward as far as I know. XU.S., the cardiovascular impact, was also significant, but I think the major difference we've seen is that it's taken a little bit longer for the market to recover outside of the U.S.

There were particular impacts in France and in Spain but at the same time, in Spain especially, there was some additional government reimbursement issues that affected the category. It's important to remember, as you know, that this is not a category phenomenon, it's a specific issue to the

molecule and does not affect Celebrex and now or

.

But you will continue to see difficult comparisons for Celebrex this quarter and next because France and Australia did not have reimbursement for

in the early part of the year last year. So that, I think, is the majority of what you're seeing, is the impact of the negative comparisons due to reimbursements. Overall in the

label, I have to say this is a good thing for the category that that issue is now resolved. It certainly reaffirms that the

do have a positive GI profile.

You might remember that Celebrex actually met the same endpoints in the class trial that

met in the bigger trial. So it's good to now have that finally included in the label. I think the cardiovascular section does reflect what we've expected for some time and I think physicians are well aware now that there is a potential issue with

in hypertension,

and since about 40 percent of the patients who have arthritis also have concomitant hypertension, there is really no reason to be using

in any of those patients. So we see this as a very good development for Celebrex and also for

, which is a powerful product that we think should replace

in the treatment of arthritis. I think I covered your questions.

Thanks,

, for your questions. Next one, please.

Thank you. Our next question is coming from

of Merrill Lynch. Please state your question.

Hi. Good morning. You know, I was just wondering -- just two issues that I'd like you to review. One, why is it so difficult to control inventory levels on Celebrex? It seems like other companies, you know, are doing a better job.

And two, I detected some confusion about indemnification and exposure to the litigation concerning

, and I just want to confirm that there are two layers of indemnification to Pharmacia on that? Thank you very much.

Thanks,

. Why don't we take the Celebrex question to

first and then we do have our general counsel here, assuming there might have been an interesting legal question. So we'll go to

first on Celebrex.

, Celebrex inventory levels are behaving quite normally. You might recall, we had a trade buy-in in the fourth quarter which is then accompanied by the expected buy-out in first quarter. So there really are no Celebrex inventory issues.

, you have to be aware that in the present environment with the short term rates being at two percent, it's enormously profitable for the trade to buy-in that kind of a cost of capital. So we do try very hard to keep it tight but you can imagine the enormous pressure every time there is a pricing action that the trade would want to be very aggressive, and we do try our best.

, on the next question, let me turn it over to

, our general counsel.

, let me be clear how this works. Pharmacia is a defendant in the

PCB proceeding, pending down in Alabama. However we have a contractual commitment, a contractual undertaking from Solutio in which they have agreed to indemnify and hold harmless Pharmacia, formerly known as Monsanto Company, in that proceeding.

So that's why they are running the defense, and as you know, they have publicly stated both in their own conference calls as well as in their press releases that they believe they have adequate financial wherewithal as well as access to insurance to cover any liability arising in the

matter.

Secondly, we have as part of the potential spin or as part of the initial IPO and ultimately the spin to occur in the fourth quarter of this year, we have an agreement with Monsanto Company, i.e. New Monsanto, in which they have contractually undertaken to indemnify Pharmacia for any liability not covered by Solutio. So the order of payment if you will, in very practical terms on Solutio matters, is Solutio in the first instance and New Monsanto to the extent Solutio is unable to pay. Does that clarify that?

Great,

. Thanks for that question. Appreciate it. Thanks,

. Next question, please, Mandy.

Thank you. The next question is coming from

of the Leland Fund. Please state your question.

Thank you. Just quickly on the Cox2s, is there any change to the expectations for the market growth and market share for this year relative to what was outlined at the analyst meeting late last year? Thanks.

If you look at the market growth right now, it's essentially on track to what we had anticipated. I think with the resolution of the potential significant negative event in the

label, this is actually good news that it was not as severe as it might have been. So I expect that the market will continue to show recovery, as it has steadily since the fall.

It's essentially back to the levels that it experienced earlier last year and I think now with the launch of

, our portfolio will continue to broaden and grow substantially. So we're looking towards continued recovery throughout the year.

Thanks,

. Next question please.

Thank you. The next question is coming from

at Bank of America. Please state your question.

Thank you. Could you just tell us, given that you mentioned there was some trade buy-ins in the quarter, what you think the expenses of buy-outs for those respective products might be in the second quarter? And also if you wouldn't mind commenting on any affects you're seeing from initiatives by states in the Medicaid area to be able to bring down prices?

Thanks,

.

I think, Chris.

Yeah, just on the question of buy-ins, as you know we do have price increases at various times on different products during the year. I would say that the products where we had some buy-ins in the first quarter, not significant or different than in most other quarters, and I would say that it's less than $100 million.

The second part of the question is relative to Medicare reimbursement.

At this point, we are being in touch with a number of states, as many in the industry are. Most of those discussions are actually fairly constructive and could in fact result in broader access and coverage for patients who have not previously had the same level of access. So overall we're not seeing any significant negatives. Recall, we have a very strong portfolio, a very broad portfolio, and a portfolio with a high degree of exclusivity. So we think we're actually well positioned in these discussions.

Thanks,

. Next question, please, Mandy.

Thank you. The next question is coming from

of JP Morgan. Please state your question.

Thanks very much. I have what I guess is a marketing strategy question. I'm curious about how you guys are thinking about the tradeoff between taking advantage of excess capacity to market more GP products, which I guess is what is implied by the

deal,

versus the need to have expertise in that therapeutic class that you might be moving into, because obviously you do not have any existing expertise in respiratory, and I'm wondering how that similar trade off works with

, where I think you've talked at least about the possibility of co-promoting that product because of the, just because of your lack of cardiovascular expertise as well.

And then totally separately, if I could, just one final question.

, when you talked about marketing the cardiovascular differences between Celebrex and

, this time you only mentioned the hypertension difference and didn't really touch the heart attack or stroke issue. Is that reflective of what your sales force is doing now as well and is that a change? Thanks.

Thanks,

. We'll call that one question, barely.

You are right that we have a focused strategy to broaden our presence in the primary care market, and so

is a great addition because it will allow us to do that. One of our historic strengths, and one that we've continued very well, though, is that we are a very, very strong company in a range of specialty businesses.

So while we don't participate today in the respiratory specialists, we think that we certainly can participate there well and strongly as we have in many other specialties, and as you will recall, our partner

is already a strong presence in that marketplace as well.

So we're quite well positioned to address that. Looking at

in terms of cardiovascular presence, as you know and indicated, we are continuing to evaluate options as to whether or not to partner the product and there is no decision at this point to make. And in terms of

,

I think the best thing I can say is that we have been discussing in quite a bit of detail for over a year now the actual profile of

with regard to cardiovascular concerns and I think that we've been pretty consistent quarter after quarter and I thought it was finally time to move on but we've felt that the profile that we suggested is certainly validated by FDA and I think more and more physicians are becoming well aware of it.

Great. Thanks,

. Next question please.

Thank you. The next question is coming from

of Credit Suisse First Boston. Please state your question.

Yes. Just doubling back on

, I was wondering if you could talk about specific abstracts that you're most excited about at the upcoming Ash meeting.

There are going to be a number of different studies that will be presented there. I don't have the abstracts right here but there will be additional data similar to what's been presented at ACC that will further fill out the profile of the product.

Yeah, Fred, we didn't want to front run the abstract book or the Ash organization, but it's likely there will either be a conference call that the IR team will run from the site, or something onsite. There's a handful that we'll be talking about at that time. Next question, please.

Thank you. Our next question is coming from

of Morgan Stanley. Please state your question.

Thank you. Sorry, I do have two questions.

One is on Camptosar. I'm wondering if you could quantify the size of the buy-out and if we are now in looking at the second quarter going forward, if we're now at normal inventory levels?

And the second question has to do with

and the company's plan to add an additional pain indication. Where you are with that? And I'm just curious to know,

, what your thoughts are on Merck's DUR on

decision to withdraw to add an additional pain indication? Thanks.

Thanks,

.

In terms of Camptosar, at this point it's essentially normalized. It's certainly running below levels of where it's been in the past, so we think that pretty much the buy-out has taken place this quarter.

, the pain indication as you know we have been required to generate some additional data so discussions on actual protocol and finalizing that are still ongoing with FDA.

It's important that there is complete alignment on Parataxic as well as

before the studies begin. So hopefully that will be shortly, but that's the stage where we are now.

And finally obviously I'm sure you've spoken to Merck about the

withdraw. While this certainly creates a great opportunity for us to solidify our strong lead with a broad portfolio, my recollection is that there is a very small number of patients who suffer from

. So we also have studies underway but certainly would not have considered it something worthy of withdrawing an NDA for.

Great. Thanks,

. Next question.

One moment.

Operator?

One moment, please. Sir? Our next question is coming from

of AG Edwards.

Hi there. It's

from AG Edwards. I was curious if you could comment on

versus Celebrex.

So far it would appear that we're not seeing cannibalization, I think Pfizer mentioned that, and how you're marking the two and the play-off and what you expect going forward with how much it will expand the market share of Pharmacia and Pfizer in total versus how much cannibalization of Celebrex? Thanks.

Our goal is to grow our portfolio and have a broad position in the market and obviously grow our total share. So our expectation and our hope is that

will begin to give up business specifically to

but that

will gain business from both the NSAIDS and from

.

Now the early data are too thin to really predict from. It is very encouraging, but as you know, the official launch was only in mid April. From our point of view, there is an 80 percent of the market opportunity out there so we're going to continue to broaden our presence and while Celebrex is a great product for everyday pain and arthritis with a wonderful efficacy and tolerability profile,

we think

presents a very different product to the market because of its rapid, powerful relief for arthritis pain. And again, our expectation is, given the clean cardiovascular profile for both products, that

particularly should be able to take significant share from

over time.

Thanks,

. Next question, please.

Thank you. The next question is coming from

of UBS Warburg.

Hi, thanks. Just, if we could get back to Camptosar. I guess the question really is what was the magnitude of stocking it and really what was, with the growth rate of last year, what was that inflated by? And secondly, if you could just talk about the IP litigation on

and any presentations you will be making at

coming up in a couple of weeks.

Thanks,

. Let's start with the Camptosar, the magnitude of the stocking issue.

Yeah. Again, I think we haven't specifically given the stocking byproduct that we had in total in the fourth quarter as we indicated about $100 million to $150 million on all products. I don't think the Camptosar sales were inflated last year as again, in year-on-year you have a number of these pricing changes, which affect inventory levels. So I think generally when you look over a 12-month period, you get a pretty fair representation of true growth.

Thanks,

. On the IP litigation issue

, let me turn it back to

, our General Counsel.

Just briefly, there has been two

or IP related litigations in the ophthalmology field where pharmacy intellectual property has been acknowledged as valid and enforceable.

There are three remaining proceedings; one where

is a defendant where we are seeking to enforce our intellectual property as infringed scheduled for trial this fall. A similar proceeding with Allergan where we contend that Lumigan product infringes our intellectual property, also scheduled for trial in Delaware this fall. And lastly there is a case brought by Par Pharmaceuticals against, actually, an ANDA filed by Par where they're contending that our intellectual property is invalid.

We have filed a lawsuit against them for infringement and as a result of that, we've received the automatic stay provided for under Hatch-Waxsmith.

Thanks,

, for that question. Operator, let's go to the next one, please.

Thank you. The next question is coming from

of Nordia Securities. Please state your question.

Yes. Thank you very much. I have a question regarding the calculations of earnings per share. You reported 31 cents a share for continued business. I assume that includes those reports from

in the first quarter.

And also I assume that the 31 cents is to be compared to the $1.52 to $1.57 you estimate for the full year. Now the question is first, is that correct the way I have interpreted it, the way you see it? And secondly, how do you handle

in first quarter in that case?

Thanks,

. Chris?

Yes,

. No, your analysis is correct. The 31 cents does include our operating results from

of four cents, which is included in the $1.52 to $1.57. The gain on

, which amounts to about 49 cents a share, is not included in that, again the $1.52 to $1.57 is our continuing business estimate, so that 49 cents would be above and beyond that, and it's just a one-time event.

Thank you,

. Next question, please.

Thank you. The next question is coming from

of SG Cowen. Please state your question.

Thank you. The top end of the guidance range implies that the next three quarters will show an earnings growth rate just a bit below that of Q1. Given the trends in the quarter franchises and in considering the

impact, it looks like the top end might be a bit of a challenge.

So perhaps you could outline, you know, one or two or three significant factors that need to happen to get you to that top end, such as perhaps significant acceleration in key franchises or whatever? Secondly, do you perceive the spin-off of Medco from Merck a neutral or a positive for Celebrex and the

market?

Thanks,

.

I could take a crack at the question. I think what you see is a very good result on the

franchise. I was personally at the launch meeting on

, and the enthusiasm level is very high, so we are pretty excited about the

. Also be aware that about 35 percent of our operating profit comes from the non-

categories.

We have about ten products that are growing products in the pharmacy and Upjohn franchise, the old P&U franchise. So they're all growing very nicely. We have probably the best overall portfolio in the industry when it comes to growing products. So we feel pretty good about the rest of the year. Maybe

, you may have some other comments.

I would say that that's right and I think we're comfortable in that range. And again with the

launch underway, it's difficult to get more specific than the range that we've provided.

Thanks,

. Next question, please.

Thank you. The next question is coming from

of

. Please state your question.

Good morning everyone. My questions relate to

end. It is rolling out in Europe and what impact do you think

will have on the EU side? And then, maybe someone could just quickly offer the appropriate NDA filing date for

for congestive heart failure and what year

might have a U.S. NDA filing? Thank you.

OK,

. Thanks.

?

OK. In terms of our Arcoxia, there are a couple comments I would make about the impending launch in Europe. First and foremost, the challenge in the European market has been to get the

to begin to breakthrough the NSAIDS barriers, so I'm all in favor of any additional

coming in to help accomplish that.

It really is still a significantly lower penetration in Europe than in the U.S., so there is a lot of work yet to be done to convert the older NSAIDS to the earlier newer

. Now that said, as you probably are aware,

launched in Europe prior to Celebrex.

In most countries Celebrex was the second entry in and very shortly thereafter we took the significant lead and became the number one

in Europe. So I'm not concerned about not having

in first.

is a very strong product and I think it will do extremely well.

Recall we have another very, very important attribute in the European market, which is that Dynostat will already be launched before

comes to the market and that will give us the only combination of the two products that work together as the IV and oral. Meaning the Paradoxic is essentially the injectable that's been converted to Valdocoxid. So with Dynostat and

, we have an IV and an oral which doesn't exist in any other

franchise, so that will be a major advantage for us.

In terms of

, as I recall the heart failure filing is expected to be roughly a year following the hypertension filing. But recall that depends very much on the outcomes of the ecesis trial, and since it is a mortality trial, obviously that's a little bit more difficult to predict than other endpoints.

And the last one was on your sense on

? You haven't given any specifics on

relative to filing date.

I don't believe we've divulged that yet. I understand there are discussions about our partner filing in Europe this year. But I don't believe we've given any specific date.

Good. Thanks,

. As we move towards market open, why don't we take two more questions please, operator?

Thank you. The next question is coming from

of

. Please state your question.

Yes. Good morning. You've resumed reporting on the

franchise sales, does this signal that you're putting more emphasis now behind that franchise in preparation for

hypertension market?

Thanks,

.

I would say that there's no -- don't read anything into -- again, we're just listing out our major products. Certain sales levels continue to do well.

Just being transparent in our reporting,

. With that, why don't we go to the last question please, and then we'll wrap up.

Thank you. The last question is coming from

of Goldman, Sachs. Please state your question.

Great. Thank you. Good morning. CDP 870 has the Phase 3 program begun, do you think you can give us an update on that? And also if you had the sales levels for where

was in the quarter, that would be great. Thanks.

Thanks,

.

OK. I'll let

answer the Axer question, and it's a very good question,

. We're very tired about CDP 870. We still haven't started the Phase 3 trial and there is a very good reason for that.

When it comes to Biotech products, you have to be absolutely sure that the Phase 3 material is going to be the same as the commercial material. So we're working hard on it and we're looking forward to starting the Phase 3 trial later this year.

In terms of Axer, I don't have a specific number in front of me, but what I can tell you is that it's beginning to do very well and we have, in fact, I'm sorry, the number has just been given and it's $3.7 million for the quarter. The market share has tripled from the beginning of the quarter till the exit rate. So we're starting to see a nice acceleration there, very good managed care access and now the beginning of a real pull through program.

Thanks,

. Thanks for everyone on the call. We appreciate all the questions. We got through 20 of them. We're trying to make these calls crisper. We appreciate your participation. Any follow-ups, please call the IR team,

, the VP of IR at 908-901-7015 or

, the Director of IR at 908-901-7028. Thanks again for calling in. We look forward to speaking with you again soon.

Thank you for your participation, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.