輝瑞 (PFE) 2003 Q1 法說會逐字稿

Hello everyone and welcome to our first quarter conference call and webcast. I'm Hank McKinnell, Chairman and CEO of Pfizer here today in New York with members of Pfizer's leadership team. Thank you all for being with us as we mark the beginning of a new chapter in our history of our country and another solid quarter.

It's been an eventful and successful three months since our last conference call highlighted by our acquisition of Pharmacia. With the closing we moved from planning to independent grating Pharmacia's organization and operations. As we noted in our release, we look forward to updating investors on the progress of the interest reigns at a meeting in June. The date of that meeting will be announced in may. We also look forward to your questions today which we'll get to have shortly. But first, I would like to offer some brief observations. Then I'll ask Karen Katen, Executive V.P. and President of Pfizer Pharmaceuticals to review the significant business developments of the quarter. Then Jeff Kindler, General Counsel will discuss Neurontin and Norvasc patent issues which we have been asked about. And then David Shedlarz, Chief Financial Officer will highlight key aspects of our financial performancians.

We do not plan to discuss 2003 or 2004 guidance at this meeting but will do so in June. For the first quarter we again delivered solid operating results.

Those results were driven by the breadth and depth of our product portfolio which got broader and deeper and the effectiveness of our global organization. They highlight our operating momentum and continue to differentiate us within the industry. They underscore our competitive strength as we move forward.

We also are mindful the strength of our business performance is what enables us to continue our vital work of finding cures to meet the needs of millions of patients around the world. And that strength is also essential to our efforts to improve patient access to innovative medicines either through our Diflucan partnership program in Africa the -- or our U.S. patient assistance initiatives including the Pfizer for living share card and our sharing the care program for low income uninsured patients.

Last Wednesday on day one of the new combined company, my first order of business was to thank the hundreds of people and dozens of teams who carried out our integration planning and led us through the regulatory approval process. My second job was to welcome 40,000 new Pfizer colleagues whose arrival makes us 130,000 strong with a presence in over 150 nations.

My third task was to remind everyone in our worldwide organization of the compelling and unparallelled opportunities that are now within our reach, and of our determination to pursue them rapidly and effectively. These are exciting times for Pfizer with much to accomplish as we pursue our goal of becoming the world's most valued company to all our stake holders, including you, our investors. Now, Karen Katen.

Thank you, Hank. It's been a busy quarter.

In the global pharmaceuticals business we see continuing demand for our products and recognition from our customers of the value they provide. Revenue growth was driven by both leading inline product portfolio which includes eight of the top 25 selling products in the world as well as critical new medicines launched in markets around the globe.

In the first quarter major products including Lipitor, Neurontin, Viagra, Zithromax, Zyrtec achieved double digit revenue growth. Zithromax and Zyrtec were particularly strong with 35% and 33% reported growth. Lipitor the world's best selling medicine realized over $2 billion in sales.

Neurontin, Zithromax, Zoloft and Norvasc each achieved sales greater than $500,000 each. In addition to Lipitor several other products sustained their number one worldwide rank. Including Neurontin, Viagra, Aricept, Norvasc, Celebrex, Zithromax and Diflucan.

We continue to introduce important new medicines globally and enhance the growth potential of our current portfolio. Product introductions, new indications and important new clinical data occurring during the first quarter include the U.S. launch of Relpax in March.

This launch continues the worldwide rollout of our innovative medicine for the treatment of migraine. It is available in 25 markets including Japan and throughout Europe.

Relpax has shown superior efficacy and effectiveness. It's making headway in the market after one month on the market.

Spiriva, the first once a day inhaled treatment specifically for chronic obstructive pulmonary disease or COPD was discovered -- co promoted by Pfizer and Boehringer Ingelheim. It was launched in Spain, Australia, Spain and South Africa bringing the number of countries to which this medicine is available to 16. COPD is the largest killer in the world.

In the U.S. alone there are over 17 million people with COPD, and less than half have been diagnosed. Over 500 million people suffer from COPD worldwide.

We submitted a supplemental filing in this quarter for the use of Zithromax in sinusitis. The most common form of upper respiratory tract infection.

We also submitted a filing in the European Union for pregabalin, an asjunctive therapy testify therapy in epilepsy. Our colleagues at Pharmacia submitted a supplementy NDA for Inspra in the U.S. [ INAUDIBLE ] Based on the very positive results of the study. These results were published last year in the New England journal of medicine and presented last month at the ACC in a late breaking session and showing significant reduction in mortality for post MI patients.

Zoloft received approval in the U.S. for social anxiety disorder making it the first and only selective serotonin reuptake inhibitor in the U.S. for long-term treatment of this often debilitating and quite common condition. With the approval of it Zoloft treats the full compliment of anxiety disorders, panic, generalized and social.

Powerful clinical results from the Angelo-Scandinavian Cardiac Outcomes Trial that are known as ASCOT, provides an important growth opportunity for Lipitor.

In this landmark clinical trial the nearly 20,000 patients with normal or mildly elevated cholesterol levels who took Lipitor had 36% fewer fatal coronary events and non-fatal heart attacks than patients treated with placebo.

Importantly Lipitor treated patients also experienced a 27% reduction in fatal and non-fatal strokes, as well as a 21% reduction in cardiovascular events and procedures. Physicians have been very impressed with the data as it shows strong benefit in patients that heretofore were not always treated. Because the benefit to patients was clearly shown much more quickly than in other similar studies ASCOT was stopped two years earlier be anticipated.

When you add these impressive results to those of the trial with nor vast can the stage is set for the market changeling introduction of our dual therapy product combining Lipitor and Norvasc. Up to one-half of patients who have hypertension also have high cholesterol. That's about 27 million people in the United States alone. Another event in the quarter was the signing of agreement with.

In an agreement with Daiichi Pharmaceutical, we obtained an exclusive license for a product an antibiotic called DK 507 K, a novel extended spectrum quinolone antibiotic which in phase one trials for both oral and IV admin treatments respiratory and other similar infections.

Viagra celebrated its five year anniversary of the U.S. launch. Worldwide more than 20 million patients have been treated. There's also been studied in more than 120 clinical trials. Over 1 billion tablets have been sold and today around the world 7 Viagra tablets are taken every minute. Viagra is the proven standard of care for ED and has shown its ability to alleviate unmet medical need among men with this condition. More than 80% of men who use Viagra want to use it again.

The Pfizer for Living Share Card celebrated its one year anniversary. This access program provides a 30-day supply of Pfizer medicines for $15 to low income uninsured Medicare patients. Over 320,000 people have enrolled in this program, filling over 1.6 million prescriptions.

As we move forward with Pharmacia, we are bringing together two strong and complimentary product portfolios. Our combined portfolios in pipeline give us unprecedented therapeutic reach and an even greater ability to respond to medical need now and in the future. The addition of cancer, ophthalmology and [inaudible] products to our portfolio gives us new growth and relationship opportunities.

We will be the leaders in medicine in all major geographic markets positioned to expand our lead why areship in all front. In markets across Europe such as Spain, the UK, Germany and the Nordic countries we have moved from among the top five positions based on sales solidly into the number one slot as a result of the acquisition. Patients want and need the healthcare services and the medicines that will enable them to live longer, healthier lives. That is exactly what we at Pfizer can and will deliver.

Now we'll hear from Jeff Kindler, General Counsel.

Thank you, Karen. I'll provide you with a brief update on the new Neurontin and Norvasc patent litigations. Starting with Neurontin.

In our consolidated [ INAUDIBLE ] a Conference before the magistrate presiding over pretrial proceedings is scheduled for this Thursday, April 24. The magistrate may or may not set a trial date at that time.

Discovery against one defendant is still continuing, and summary judgment motions filed by the defendants remain pending. We do not know when they will be decided by the judge. That's the status of Neurontin .

Now I will talk about Norvasc. Our litigation against Dr. Ready in December of last year the District Court degreed with Dr. Ready's argument after February 2003 our basic product patent limited to the specifically approved that we market. [ INAUDIBLE ] And that Ready's. [ INAUDIBLE ] Product which Pfizer also invented and tested as partly of our clinical trials is not covered during the extended term of the patent. This decision remains in place, Dr. Ready could market its product which would not be AB rated and substitutable for Norvasc being after August 26, 2003. We have appealed this decision to the Court of Appeals for the federal circuit and have been granted an expeditied review.

We continue to believe strongly the District Court was wrong and the Court of Appeals should reverse and hold that Dr. Ready's product cannot be sold until 2007. We also have a citizens -- seeking to preclude approval of Ready's product based on our belief that it is unlawful for the FDA to use or rely on data or findings in our Norvasc NMD -- via a so-called paper NDA. We await FDA's response to our petition.

Finally, we also have a patent infringement action against my LAN who filed an NDA seeking a[inaudible] for a generic product. They have not presented any arguments that were not previously considered by the patent office and we think they would be ill advised to launch until after the conclusion of litigation. Although we expect to prevail. If they were to do so, we would seek damages and testify relief to the full extent available. The case is in the discovery phase.

As I said they have not presented any arguments that were not fully considered by the U.S. Patent Office. That is the basis for our optimism we will prevail.

Thank you. Now David Shedlarz.

Thank you, Jeff. Good afternoon. Our financial performance during the quarter gain reflected Pfizer's hallmarks. Revenue growth driven by existing and new products. Ongoing investments in support of marketed and prospective profits.

Profit margin expansion stemming -- strong earnings growth. Total revenues exceeded $8.5 million. This revenue growth of 10% relative to the prior year coupled with operating expense growth on adjusted basis of 8% produced an improved profit margin.

Reduction in the effect of tax rate and the number of shares outstanding contributed to growth in adjusted income of 13% to over $2.7 billion and a growth in adjusted earnings per share of 15% to 45 cents. Adjusted income and adjusted druted earnings per share are defined as reported net income and reported diluted earnings per share expectively excluding certain significant items, merger related costs and the cumulative effect of change in accounting principle.

Reported net income for the pert increased 138% to nearly $4.7 billion and reported diluted earnings per share grew 145% to 76 cents per share. Reported net income and diluted earnings per share include an after tax gain of $2.2 billion and 36 cents respectively, both associated with the sale of the Adams Confex area and Schick Wilkinson Sword shaving product businesses and two product lines.

Revenue growth was led by the company's human pharmaceutical operations which achieved nirs quarter revenues of approximately $7.5 billion up 11%. Animal health grew 13% and consumer healthcare declined 7%.

As we move rapidly to integrate Pharmacia into our operations, we will be in a position to capture the revenue and expense synergies between the two companies, focus our assets and efforts intensely on our core businesses and continue to find long-term R&D at a rate that will sustain our leadership far into the future.

Going forward, we will also be much less dependant on any individual product, therapeutic category, or market which will substantially increase operating flexibility. In addition, we will continue to maintain a solid financial position. Our strong operating cash flow, and well managed balance sheet have earned Pfizer's triple A ratings from both Standard & Poors and Moody's.

Only 7 non-financial companies in the world have such ratings and Pfizer has had them for 17 years. And we have an active share repurchase program under which we expect to purchase about $13 billion of our stock during 2003. Including more than $11 billion during the remainder of this year.

I need to remind you that in afternoon's conference call may include forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ are discussed in our 2002 annual report on form 10K and in our periodic reports on form 10Q and 8 K, if any.

I also need to remind you that we are discussing financial and other information as well as some non-GAAP financial measures in talking about Pfizer's performance. You can find the remember consolidation of those measures in our current report on form 8 K dated April 22 of this year which is available on our website at WWW.Pfizer.com in the investors SEC filing sections.

Q-and-A if you would like to ask a question press star one. You will be announced prior to asking your question. To withdraw your question press star 2 once again if you would like to ask a question, please press star 1 on your touch tone phone. Our first question comes from Timothy Anderson. Please state your company name.

Prudential Securities. Couple questions. On inspy row launch timing should we, I guess safely assume that this is going to launch later in the year, after you have a heart failure indication officially approved by the FDA and it would not make sense to launch with a hypertension label ahead of that?

And the second is just a broad question. I guess Hank would be the best one. This whole issue of paragraph 4 filings, you know, you have been pretty vocal about it. Basically being generic companies stealing intellectual property.

I don't think we have enough precedent to say, you know, which of these paragraph 4 challenges are going to materialize into something negative for the branded industry. Where do you see this heading as we go forward for the next couple of years?

Obviously you guys are taking the agency to task on 505 B2 filings. Maybe you can talk about that whole generic challenge issue.

Kelly who heads our U.S. business on the INSPO launch.

The answer to your question is that we will launch the product as soon as it's gained approval from the FDA for the heart failure indication.

Okay. And on the patent system, I guess my feelings are kind of summed up by the fact that we went through much public criticism, threatened legislation in Congress and FTC investigation that ended up concluding that out of 2,000 patent products that had gone generic since the legislation was passed into law the FTC concluded that six of them were questionable and quite frankly, we might even agree with that. What we are seeing, on the other hand, is a number of generic companies, some based in independenta where they are free to steal our technology, they are taking that business model here to the United States and they are taking free shots at our patent portfolio, many cases products that have been on the market for a relatively short period of time, and are many years away from normal patent expiring. The patent law is a balance between incentives for invasion, and I'm still befuddled by the fact that if you invent a cure for cancer you get 10 to 12 years if you invent a device that turns on your windshield wipers automatically you get 20 years. I think society has things a little wrong. Also balanced against that is the need to control healthcare costs. That was the hax wach man compromise. I think what some generic companies are doing is to my mind abuse of the patent system. It's something that needs to be addressed in the legislative process. Jeff, maybe you are as outraged as I am. Maybe you have some observations here rchlts.

I can't improve on what you said, Hank. I can only mention we are seeing cases where gentlemen nature already rejected by the patent office and you have seen quotes in the newspaper last week in which generic companies have ak yjed that they feel they have nothing to lose by bringing a lawsuit but the legal fees. Therefore it's very much a part of their business strategy to hire lawyers rather than scientists in order to advance their business.

That really was an outrageous statement. It clearly is bad public policy. These people are stealing from us, from our investors, and most importantly from patients who need the cures of the future. So I think it's outrageous behavior. Good question, Tim, thank you.

Thank you we have a question from Carl Siden. Please state your company name.

Thanks very much. I'm with J.P. Morgan. One is a follow-up on the inspo question that was just asked. I'm wondering whether you grant an expedited review for the indication. Second question, I guess for David Shedlarz. David, you've identified the foreign exchange impact on the top line. Can you give us some kind of feeling for how much of that fell down to a bottom line benefit? Maybe a last more general question, the IMS data has indicated that January, February and March were quite light from a total prescription growth perspective. I'm wondering about your thoughts on that phenomenon, do you see a fundamental real slowdown in the U.S. prescription drug market or do you think there's some other more temporary --

You squeezed in three questions, Carl, thank you. Karen on the [inaudible]regulatory status.

I'd prefer Joe answer it.

It wasn't our filing, but Joe will answer tharchblths.

We actually have been granted priority review by the FDA for that.

I didn't know that. That's good news. David on foreign exchange?

Yes. Carl, as you would expect, while the foreign exchange impact is quite favorable at the revenue lines, it's just about offset in terms of the impact on expenses. It's slightly favorable on the bottom line, but much less so than the impact which is associated with the top line which is about $250 million. That's because we incure expenses, significant expenses in the same countries that we generate those revenues.

Okay. Finally on the strip growth question.

No, I don't think there's a fundamental change here. Something's going on which I don't think anybody's adequately analyzed or explained yet.

But pretty clearly in any of these major markets where there's two to three times the number of patients who would benefit from therapy who are not being treated, or not being treated to goal, pharmaceutical markets will continue to grow at high rates for many years into the future, and if you add demographics on top of that, I don't think we are seeing any fundamental change.

So what's going on here? Clearly there's been a slowdown in strip growth and it's not just the first quarter. You can trace it back earlier than that. I guess my list would be something like weather, war, the economy, Claritin going OTC, Premarin script growth change qles, imports from Canada.

Few new products, increased co-pays and maybe bad data. I have not seen a good analysis of how much of that is accounting for what. I suspect it's cumulative and all of that is having some kind of an effect. But in time here, I do think we have to return to more normal script growth.

If you look by market, it's kind of interesting. We are still seeing 8 to 10% or better growth in lipid lowering Alzheimer himself anti epileptics, anti sigh could thics, anti -- HIV. We are in all those markets. Where the markets are declining allergy and menopause are both declining.

We seem to be gaining both growth and share in the allergy. Why the cardiovascular market is only growing 4% in the first carrot or oral hypo glycemics is a minister to me. I think we have to look at a root cause analysis.

I think that would lead you to believe this is temporary and look a little more indepth at individual market categories. But this mix of positive and negative growth rates, is -- except for cardiovasculars which is a big one for us is probably okay with us.

Thank you.

Barbara Ryan you may ask your question. Please state your company name.

Good afternoon. Deutsche Banc. Thank you. Both of mine have been answered. But I thought, maybe Hank you could update us as you did last quarter on what is happening with your disease management program in Florida. I think that I understand that you have, in fact, saved the state of Florida money, and if you could tie that in with what you believe may happen with the pain versus the pharma industry in the Supreme Court, specifically as they are waiting for Tommy Thompson to give the go ahead or not.

Let me ask Peter Corr to, who is head of finance and business development within our global pharmaceutical business to update you on the results. Then I'll come back and adpres the other half of that. Peter.

In terms of our initiative the healthy state initiative, we have at this point in time over 13,000 high risk individuals in four disease states enrolled in our program and over 86,000 individuals in total enrolled in the program. We will have final claims data coming in for the first year of the program in about a month from now. So we do not have definitive dollar savings based on claims data at this point in time, but the preliminary look at that done by the state of Florida, as well as an outside agency looks quite favorable. Quite honestly more than we had anticipated and more than Florida anticipated in the first year. Not the total program, but the first thing of the program. [ INAUDIBLE ] What we have seen are definitive markers of behavior modification changes, as well as health state uses improvement in areas such as asthma, diabetes, con Jess testify heart failure and hypertension.

Thank you.

Barbara, on the broader question, all states are facing a budgets crisis of one level or another from severe to have severe. The Medicaid program is obviously one of the targets, part of the problem.

Drug spending within Medicaid varies by states, but it varies from say 7 to 12%. So clearly drug costs are not the greatest part of this. States have major efforts under way to cut spending in Medicaid and in pharmaceuticals, but from our perspective, there are smart ways to do that and there are dumb ways to do that.

Clearly, Florida we are demonstrating with the state of Florida that our approach, which does not involve rationing of access to modern medicines or price controls pro dpuses better health outcomes, lower costs and by the way, greater compliance and drug use. So that's a win-win for everybody. Main is trying to do it through price controls and our view is that is illegal. Which is what we are going to find out from the Supreme Court.

Thank you. We have a question from Ken kul yu.

Credit Suisse First Boston. First on spi reefa. I was wondering if you could clear up the nature of the discussions you are having with the FDA on getting that drug commercialized in the U.S. and also if you could touch on pre gab u Lynn. It looks like you want to supplement your European filing with the GAD data. Could you update us on status of discussions with the FDA on additional toxicology work, et cetera?

Let me ask Joe Feczko who heads our clinical development function to respond to the SPIRIVA and Pete pet to comment on the other.

The SPIRIVA we have the approval letter. And is usually the way with these kind of filings for inhaled drugs there's a series of questions to be answered for the CMC. But what we are working very closely with our farther ners who discovered and developed it they are handling most of the interactions with the FDA right now and we are working with them. We are responding to them. It's an ongoing process with the agency to address those issues. We can't give a hard data on anything right now.

Peter?

In regarding pre gab Lynn, as you know, we filed in the European Union last month for add on epilepsy and for newer pathic pain. We made a decision not to file for general anxiety disorders because of the need for much more comparative data in Europe.

In the U.S., we have finalized the package on the talks situations tee which we now know is uniquely related to the mouse, not seen in the rat or other species. We are compiling all of that, talking with the agency, and as soon as we resolve any issues that are on their mind, then we'll go ahead and file for it in the U.S. For all three indications, I might add.

Thank you.

Thank you. We have a question from Larry Smith. Please state your company name.

Gerard Klauer.

[PAUSE IN CAPTIONING] We don't really understand it because the data would suggest not only the data, but the undiagnosed population would suggest that there is much more market opportunity out there. It could be the -- as Hank mentioned earlier the litany of things that are going on, not only the data, but the undiagnosed population would suggest that there is much more market opportunity out there. It could be the -- as Hank mentioned earlier the litany of things that are going on, including higher co-pays, the -- some companies including higher co-pays, the -- some companies are taking their retirees off of healthcare benefits, and so that's another economic factor. There seems to be some chill on willingness to spend discretionary income even on needed medicine. So that's . 36% reduction in fatal and nonfatal heart attacks in patients who wouldn't normally be treated is pretty compelling to me.

Thank you. Jamie Ruben you may ask your question. Please state your company name.

Morgan Stanley. Question for David. It's technical. The 255 million in co-promotion expenses, the co-promotion and other expenses related to I took and knew krin biosciences that was included in other deductions net, but it looks like that 255 million was then taken out when adjusted for the 45 cents.

Can you you confirm that? And my second question is to Karen my question about Lipitor it looks like the previous few quarters Lipitor U.S. revenue growth exceeded prescription trends and yet this quarter U.S. revenue growth came in below prescription trends. Was there any stocking or de-stocking this quarter which would have explained the slowdown? Thanks.

No stocking effects I'll answer that question first. No stocking difference.

Sales are in line with script growth.

Jamie, you are precisely correct the co-promotion charges and intellectual property rights payments are pulled out of the calculation of the 45 cents. In fact right behind the statement of income in the press release you'll see a nice outline of all the see Thames that were deleted from the reported GAAP earnings of the company.

Thank you. Jim Kelly you may ask your question.

Goldman Sachs. Thank you very much for taking my question. This is a question thinking about share count and the share repurchase going forward. Are you able, at this time, David, to talk about what level of shares will be coming in relative to -- womg in relative to delusion operation exercise from pharmacia and how much of that will be absorbed as we try to think what our share count should be going forward --

The amount of shares coming in in terms of the transaction are approximately 1.7 billion. And the share repurchase obviously we are targeting $13 billion worth of share repurchase this year. That will, at current prices, add up to probably about a half a billion worth of shares being repurchased into the company. So that's kind of the dynamics. Obviously the number of shares we actually purchase will be Dee pen dent upon the share price of the company over the course of the year.

There will be some exercising of outstanding options by pharmacia employees, particularly those who might be leaving the company. There may be a bit of a pick-up. But I don't think that would be -- we don't really know. My guess is that wouldn't have a massive impact on this.

I think the 1.7, $1.8 billion range kind of covers not only the exchange, but also the number of options being transferred as well.

Thank you very much.

Thank you. Steve Skaula, you may ask your question. Please state your company name.

SG-Cowen. Thank you. I have three questions. I know you are not reporting Celebrex and Bextra sales but I was wondering if you could tell us general views of trends and whether there's any inventory in the channels that's excessive. Secondly can you update is on. [ INAUDIBLE ] Lastly, what did your earlier research on 'em load Penn male yait show you with respect to the toxicity of that particular salt on the kidney?

With respect to Celebrex and Bextra sales, they will not be reported. Pharmacia is not reporting the first quarter. With respect to inventory levels, we, of course, won't know that until we have the data from all the wholesalers at the end of the month.

There will, of course, as we have stated earlier than a harmony of trade practices from pharmacia's levels which were about middle of the pack in the industry, to our trade practices, which are the lowest in the industry. So there will be a one-time adjustment of inventories. We don't have -- won't have that finalized until may. We'll detail that for you in the June meeting. The ex Yuba Ray filing, Peter?

Yes. Where we are with EXUBERA right now, we have major studies continuing on. In fact in the type one diabetics, looking at pulmonary safety with revised end points. We've looked at data and it looks fine going forward.

We haven't seen any further progression in lung function and it was very modest statistically to begin with, and, in fact, was deemed not to be childrencally relevant but on the other hand we want to look longer term. We'll have discussions with both of the studies that are ongoing.

And we are in discussions with the FDA, and also in Europe regarding a planned filing going forward. We are not really predicting a filing date at this point.

And with respect to the IMLODAPINE saults we switched from the MALEATE to the BESOLATE to the other for a very good reason. That's all I can remember, Joe, unless you know more.

There's a variety of things. It behaved better for the manufacturing of the -- We got though choose and we picked the best one.

Thank you.

Thank you. Kenneth Nober you may ask your question.

AG Edwards. Thanks for taking the call. Much of the rules are one question or people just getting around them. My spir question is inpi Ray, to some degree I'm a little surprised you are waiting for the CHF approval. My question is you might be taking a month or two to put your spin and I mean that positively, your major force behind the marketing and that would be only losing four months if you get a six month review which is not so bad. But I wanted a confirmation that you will be marketing with your major force for both hypertension and CHF, not just CHF or mostly CHF. I know that's somewhat competitive but I wondered if you could deal with that. And the second question if I could on Zoloft if there's anything you can say about not negative performance but not as good as I would expect going forward in the U.S. especially and I'm wondering what guidance, even if not numbers what you think can happen if you think this is a bit of an anomaly for Zoloft in the U.S.?

Well for competitive reasons we are not going to difficult skus inpi Ray -- with respect to Zoloft, Peter, do you have any comments?

Well, I think that our comment would be that we continue to have a great deal of optimism that Zoloft can maintain and extend its market leading position. It is the number one overall product in the depression SSRI market.

Number one in psychiatry, we are launching the social anxiety disorder indication which is a very important addition to our class meeting portfolio of anxiety indications. And we have data in the full range of patients, full age range of patients, and we believe that we have fundamental benefit that will continue to persuade positions that this is the SSRI to choose when treating depression and anxiety disorders.

Thank you. We have a ske from Scott Kay. Please state your company name.

Bank America securities. Thank you very much for taking my call. Just a follow-up to the statten class.

We're having trouble hearing you, Scott.

Okay. Is that any better?

A little bit.

How's that? I think I got it now. Sorry. Just a follow-up to the cholesterol class and Lipitor. I mean recently there's been kind of an in prescription there's been a tick-up in the weekly prescriptions forever change I don't know what's happened there but it looks like there's been a significant spike-up in the class in general.

And then, what is -- I don't know if Pat can answer this or just in general regarding stattins and tie international and what the sentiment is as far as the spillover from bay core or the fear or perception of fear of tie trading or starting at a higher dose which would kind have been a counter message to the potential of zero core that's going to be eventually on the market perhaps in the third quarter of '04. So any thoughts on that would be great.

Pat?

Well, basically starting at the beginning, I think you're -- you correctly noticed that there is a very recent uptick in prescriptions in the stattin class.

I think that's more intick testify of the fact that these things are subject to fluctuates in the data which means that we should not necessarily go running screaming that the market's falling out, or that it's all of a sudden exploding in growth. We continue to foresee strong and consistent growth in the cholesterol class, primarily because there are still so many patients that are undiagnosed and untreated, and even those that are treated are not successfully treated to goal. So there is profound opportunity.

We think that opportunity is accent waited by the world class results in the Ascot trial which we think presents a compelling case for the benefit of Lipitor. Around the notion of dosing, we really can't comment as to the degree to write there are -- which there are dose related effects associated with any of the issues that might be in the market place.

What we do know is that Lipitor recently was approved for the full range of its doses, as starting doses. Which we take as further indication of the fact that this is a strongly safe and effective product used at its full dosage range.

That provides us with a great competitive benefit that we continue to exploit. It also provides us with the opportunity to persuade physicians that there is no compelling, unmet medical needs that cannot be mass met with Lipitor.

I would add on Baycol, there has been a pressed use of stattins in the European market where the impact of the BAYCOL withdrawal was felt more dramatically. In the U.S. that doesn't seem to be the case. But it is -- it does create a problem and kind of puts a cloud over the class which we think the Ascot -- all the recent trial data will clear up.

Thank you. We have a question from David Moss could witnesses. Please state your company name.

Friedman, Billings, Ramsey. And I would say, Hank we did publish something on the prescription trends and I think there is a year-over-year comparison effect which was just being indicated in the stattin market that you should add to your list of items which we also agree with.

But my questions are, number one, the divestitures that we could see out of the farm eea business, particularly lower gross margin businesses, could you comment on that? In addition, there has been a lot of pressure from the states that's something we are worried about in relation to the industry.

As a leader in the industry, can you talk about, you know, how you are handling that, in particular in Michigan where we count you now have about 9500 employees. Are you in a position of strength now with that particular state?

Well, on the divestments, we normally make the decision first and then the announcement so we have nothing to announce. With respect to Michigan I'm meeting the Governor tomorrow. I have talked to her earlier about her Medicaid program taking the approach I outlined earlier. They certainly welcomed us.

They did also announce publically, so I can comment on it a $625 million tax package for us. I would prefer access in a pharma friendly state to tax incentives, frankly. I wouldn't say we are in a position of strength, but they certainly return our phone calls and are willing to meet request us.

Sounds like a plan. Thank you.

Thank you. CJ Sylvester please state your company name.

Hi. UBS Warburg. Thanks for tag the question. I guess a question for Karen. In terms of looking at the portfolio of products that pharmacia currently has, relatively lackluster trends for a host of them whether it be. [ INAUDIBLE ] Just want to go through the strategy in terms of reinvigorating that group of products and if you have any strategies behind that you could elaborate on, that would be great.

We are working on specific strategies for all those products. We believe putting the power of the field forces we have around the world which are ranked number one in virtually every market behind these products which have really been underresourced we believe will generate more growth for what you call lackluster performance.

In some of these in particular are exciting oncology the ophthalmology area where we really had no presence. If you recall Pharmacia had strong specialist presence and they did well. They didn't have the primary care field force of the size to generate the blockbuster growth that you need. So that's -- we feel that we have strategies and marketing plans for all of these, and are quite excited and our field force quite excited about supporting them with their full muscle.

So we should expect some acceleration within those brands?

That's the goal. And I should add that the sales force under Pat Kelly's leadership has been restructured, restaffed. We have had phenomenal acceptance of offers just judging from my own random e-mails there's lots of enthusiasm for being part of the Pfizer organization. The initial training is -- the launch meeting is next week.

The training sessions.

First training sessions, launch in June. Launch in June. So they launch in June. So early signs from the integration of the sales force are we're going to do this even more successful than we did last time.

Thanks.

Thank you. David Risinger you may ask your question. Please state your company name.

Yes. Merrill Lynch. The question is with respect to inventory in the channel by our calculations there was over $120 million in de-stocking which would have limited your U.S. revenue growth by a couple of percentage points this quarter. Could you comment on that, please?

There's no way you can know that. We won't know that until the end of this month, and even then the data is not great.

You make these decisions looking out the back window of the car because what you're trying to do is match sales to the wholesaler to sales out of the wholesaler and there's a 30-day lag in that. So you have two months of good data and one month of estimate and you don't get confirmation until the end of this month.

So our goal is to manage to normal levels. We normally do that plus or minus a very small range. So I suspect that's truth quarter, which we will confirm to ourselves the end of this month. But we don't see anything that indicates stocking or de-stocking. That's been our policy for many years.

Thank you. Ken Racky, you may ask your question. Please state your company name.

P.. [ INAUDIBLE ] I have two questions. First question is could you please tell us a little bit color a little bit the performance for Zithromax, the past several quarters growth rate for Zithromax was relatively stable level, but this first quarter extremely high performance. Could you please tell us -- .

[ INAUDIBLE ] The second question is the new Ron tin issues. The discussion of the code will be started this Thursday. So could you please indicate us when the final decision from the code will be issued? Thank you.

Okay. Pat on Zithromax.

On Zithromax. As you noted, there have been fairly good and consistent and stable Zithromax growth trends which I think are impressive and the fact that the market itself has declined in the U.S. for antibiotics, and that growth was a little greater than is normal in the first quarter and that does reflect the fact that we did see some run up in inventory in the U.S. in anticipation of the respiratory tract infection season which, as you know, generally occurs in this first quarter on into parts of the second quarter.

And so there was some buying by the wholesalers in anticipation of many patients needing Zithromax for treatment of respiratory tract infections.

And Jeff, when will that court make a decision?

I'm afraid I can't answer that. The Court will make a decision when the Court decides to make a decision. The hearing or the conference on Thursday is a pretrial conference, and there may be some scheduling decisions made at that time, and the court will, at some point, decide that pending summary judgment motions and set the trial date but we don't know when that will be.

Thank you, Jeff. With that question we conclude today's conference call. Thank you for being with us.