輝瑞 (PFE) 2003 Q3 法說會逐字稿

Hello everyone and welcome to Pfizer's third quarter conference call and web cast.

I'm Hank McKinnell, Chairman and CEO of Pfizer here in New York with members of our company's leadership team.

Thank you for being with us, especially on this very busy day of multiple earnings announcements.

Given the comprehensive nature of our just issued quarterly performance report, I will begin by simply noting the obvious.

This was another terrific quarter for Pfizer.

One which reinforces our platform for sustained growth, and strengthens our capability for improving the health of patients worldwide.

With, that I will now ask David Shedlarz our Chief Financial Officer to highlight our financial results and future expectations; to be followed by Karen Katen, President of Pfizer Global Pharmaceuticals to review the performance of our major pharmaceutical products.

Thereafter, I will briefly address our second press release of this morning announcing our new human health care organization before responding to your questions.

So David, would you please begin?

Thanks, Hank.

We are very pleased with the results of the third quarter which displayed Pfizer's traditional financial hallmarks, strong revenue growth driven by existing and new products, ongoing investments in support of those products, profit margin expansion-stemming from operating leverage and productivity initiatives, and strong earnings growth.

But the quarter also reflected the unique character of 2003.

A year with many moving parts.

Impacted by the timing and the dynamics of the Pharmacia acquisition.

Third quarter 2003 adjusted diluted earnings per share are 47 cents was three cents higher than previously estimated and evidenced growth of 21% over the prior year.

Our current estimates for the fourth quarter of 2003 for adjusted diluted earnings per share is 51 cents.

This is three cents lower than previously estimated.

Primarily due to the timing of spending between the third and fourth quarters.

We continue to anticipate 2003 adjusted diluted earnings per share of $1.73 for the full year, as previously estimated.

We now expect 2003 diluted earnings per share on a GAAP basis of 72 cents.

As a reminder, adjusted income and adjusted diluted earnings per share are defined as reported net income or loss and reported diluted earnings or loss per share excluding the impact of purchase accounting for the Pharmacia acquisition, certain significant items, merger-related costs, and the cumulative effect of a change in accounting principle.

Our previously communicated targets for 2004 included revenue of about $54 billion, merger related cost synergies of about $3 billion, adjusted diluted earnings per share of $2.13, and diluted earnings per share on a GAAP basis of $1.77.

As is customary, the company's currently refining the details of its 2004 operating plan and will provide investors with a more comprehensive overview of 2004 early next year.

All in all, our operating strengths and unique financial flexibility put us in a very solid position to continue to deliver on major life setting medicines to patients; as well as, strong financial performance to investors.

Of course, I need to remind you that this afternoon's discussion includes forward-looking statements.

Actual results could differ materially from those projected in the forward-looking statements.

The factors that could cause actual results to differ are discussed in our 2002 annual report on form 10-K and in our periodic reports on form 10-Q and form 8-K, if any.

Also, in this call, we have discussed and/or will be discussing financial and other information as well as some non-GAAP financial measures in talking about Pfizer's performance.

You can find the reconciliation of those measures to the most directly comparable GAAP financial measures in our current report on form 8-K, dated October 22nd.

This report is available on our web site at www.Pfizer.com, in the For Investors SEC Filing by Pfizer section.

And now I would like to introduce Karen Katen.

Thank you, David.

Good morning -- good afternoon, everyone.

Pharmaceutical revenues through the third quarter year-to-date exceeded $27 billion, reflecting our ability to continually achieve performance despite the intense challenges in our operating environment.

In this quarter, these challenges came from new competition in key markets, as well as increasingly aggressive payer cost controls.

We've reinforced our position as a global industry leader in every major worldwide market.

This performance is the direct result of a sharp focus on our established products; effective management of our expanded portfolio of important new matters; and continued emphasis on meeting the needs of health care customers and, of course, patients.

In the third quarter, 14 products remain number one in their respective therapeutic categories, more than any other company.

Eight of the world's 25 top-selling medicines and seven products with more than $1billion in sales each, year-to-date, are marketed by Pfizer.

Over 1 billion prescriptions are written for our products each year.

The current quarter performance was fundamentally driven by our ability to support and grow our expanded portfolio.

A portfolio that now reflects the full integration of Pharmacia's products.

Given the broad range of therapeutic areas and market sizes, now represented within our portfolio, we are achieving growth to an effective balance of product support needs.

We will continue to advance medicines that treat chronic illnesses within the therapeutic categories that affect large patient populations.

However, we will also strengthen our commitment to medicines that serve small populations and meet critical, more targeted patient needs.

In terms of Pfizer's largest medicines, ongoing scientific data for Lipitor shows that it remains unsurpassed in it's effectiveness and safety in lowering LDL cholesterol.

Lipitor leadership is apparent in it's 22% worldwide sales growth in the third quarter and 16% worldwide growth year-to-date.

Pfizer also outpaced the U.S. market this quarter in audited sales for three key therapeutic categories, selective Cox 2 inhibitors for pain, in antibiotics, and in cardiovascular medicines.

The recent approval of Inspira for congestive heart failure by the FDA further expands the reach and breadth of Pfizer's cardiovascular franchise.

Despite new competition in the lipid lowering and erectile dysfunction markets during the third quarter, our products retained a strong leadership position; supported by strong safety and efficacy data.

Today Lipitor new prescriptions and sales market share in the U.S. and Europe have not been significantly affected by competitive entries.

In fact, Lipitor remains the best-selling medicine in the world, and continues to demonstrate solid reputation with prescribers as the statin that can be most trusted across all dosing levels.

Viagra now faces new branded pharmaceutical competition in the worldwide ED market.

Viagra market share remains strong with 85% share of new prescriptions as of mid-October.

With it's solid record of efficacy and safety, Viagra continues to set the therapeutic standards; demonstrated by sales performance and customer satisfaction around the world.

We are also sharpening our focus on the needs of patients who aren't served by broad market therapies.

Through new products and partnerships, Pfizer has significantly expanded it's product portfolio to include medicines that treat, important medical needs in smaller patient populations.

Examples include Vfend, a novel antifungal; our entire oncology portfolio, including Campus RLN and Aromacin; an expanded neuro science portfolio that we further enhanced by the approval of Pregablin; and our comprehensive opthalmology portfolio which now includes Zithromax and Zalitan and will expand to include Macugen which Pfizer will copromote with Eyetech.

This quarter, this month in fact, Organon announced on October 20th that we have entered into a global agreement for the exclusive worldwide development and commercialization of their product Asenapine, a potential new psychotropic medication for the treatment of a variety of disorders.

It is beginning phase three trials, has completed phase two in schizophrenia and bipolar disorder.

We are excited this compound not only because of the positive phase two data; but also because it amplifies our portfolio, and it's important therapeutic categories and offers potential of being best in class in the antipsychotic marketplace.

We are well positioned to face new competition and address more medical needs for a wide variety of patient populations.

Not just with leading medicines as I already told you; but also with innovative access and health management programs to improve health care delivery and patient health outcomes.

Now I would like to turn things back to Hank.

Thank you, Karen.

Before turning to your questions, I would like to discuss our announcement this morning of a new approach to managing our human health care business.

Over the past 10 years, we've moved from a mid-sized pharmaceutical company to the world's largest.

We are using the leverage of our expanded scale and scope, but we must also be able to make decisions quickly, and ensure that our heads of our main operations are in agreement and alignment.

Today, we announce a new decision-making structure for Pfizer.

Pfizer Human Healthcare.

This organization brings the leaders of our R&D, commercial, manufacturing, and licensing and development organizations together into one decision making group under my direct leadership.

Our goal as a business that is aligned end-to-end, from the earliest stage of discovery, through to final distribution.

I believe that this organization will help us work both faster, and smarter.

It is one-stop shopping if you will for all the major decisions that need to be made in managing our present and future health care portfolio.

This organization is made up of the most experienced, successful management team in the industry.

As you know, we also today announced new roles for two senior executives, Peter Corr and John LaMattina.

I've asked Peter to focus on two areas, the inlicensing of compounds through partnership and the formation of alliances; and Pfizer's scientific policies.

Pfizer is already the partner of choice in alliances.

But clearly, we must expand that lead so that we can supplement the growth generated by the products we discover in development.

John LaMattina will be responsible as President of Pfizer Global Research and Development for continuing the improvement in our research productivity.

We want to have a research team that is not only acknowledged as the biggest, but also the best.

Both John and Peter will join me, Karen Katen and our manufacturing head, John Mitchell, on our knew newly formed Pfizer Human Healthcare leadership team to build the end-to-end health care business that we want.

Over the past three years, we've integrated both Warner Lambert and Pharmacia.

There is more work to be done, of course, but we have pursued the integrations with, what I believe is, unprecedented excellence in execution.

That excellence is reflected in the performance we've delivered quarter after quarter.

Now, with even more focus, a more streamlined organization, better alignment, and clearer channels of decision making;

I'm very excited with what we can do in human health care, as well as, in consumer health and animal health.

I certainly believe that Pfizer is in position to fully capitalize on global trends towards greater access to ever better health care and that we will be among the best in building shareholder value in a sustainable fashion.

Now before moving to your questions, I would like to ask Jeff Kindler, our General Counsel, to provide background to a number of patent issues that we're addressing.

Jeff?

Thank you, Hank and good afternoon, everyone.

As you know, the generic companies have mounted a number of legal challenges to our patents as well as those of our competitors.

As Hank has said this is quite simply a broad-based attempt by these companies to try to appropriate our intellectual property for their own commercial benefit.

Unfortunately, given the way the system works, these companies can now challenge us at little cost and little risk.

They get as many free shots as they want to take.

And they have virtually nothing to lose.

It is important to realize that the premise of many of these cases is that the patent office has been improperly issuing patents.

So it's worth remembering that each and every patent granted by the patent office is subject to a lengthy and thorough and expert review that can last as much as 10 years.

It is a pain-staking process, as it should be.

And as a result of this expert and careful review, the issuance of a patent carries a presumption of validity which the generic companies are trying to overcome in these lawsuits.

We had a perfect example of the kinds of things I'm talking about just this week.

In February, 2000, Pfizer received a notice letter from a generic company called Novopharm challenging the validity of our basic Phluconozal patent expiring in January, 2004; the patent for Diflucan.

The challenge contained no new issues that had not been fully examined and considered by the U.S. patent office, in it's thorough examination of Pfizer's patent application prior to grant.

Nevertheless, Pfizer was obligated to essentially retry these issues over again in court.

And so on March 10, 2000, Pfizer filed suit in the U.S. district court for the northern district of Illinois.

After two years of costly litigation, Pfizer was awarded summary judgment on February 14, 2002.

And a month later, Novopharm conceded that Pfizer's patent was valid and infringed and the case was dismissed.

But less than a month later, Pfizer received a new notice letter from a different generic, Ranbaxy, challenging Pfizer's Gluconsal patent on essentially the same grounds so we filed suit in May of last year.

This Monday, two days ago, Pfizer has learned that Ranbaxy has now conceded before the U.S. district court for the district of New Jersey that they do not plan to continue with their patent challenge due to the imminent expiration of Pfizer's patent.

So not only are generics allowed to challenge the validity of any and all patents that have undergone a rigorous technical full examination by the U.S. patent office; but regardless of how many times the research-based company prevails in litigation, any number of additional generic companies can challenge the patent on identical grounds.

In other words regardless of how many free shots the generics take, we have to respond, and in this case, we have now prevailed twice.

Our legal responses will continue to be very aggressive.

Our recent victory in the U.S. district court for the district of New York against Teva related to Accupril is another example.

Of course, I can't predict the outcome of any particular case; but I do think a balanced perspective is appropriate given what goes into obtaining a pharmaceutical patent in the first place.

Thank you, Jeff.

Now to your questions.

Thank you at this point we are ready to begin the question and answer session.

If you would like to ask a question, please press star one, on your touch-tone phone.

You will be announced prior to asking your question.

Again, to ask a question, press star one.

Our first question comes from CJ Sylvester.

You may ask your question and please state your company name.

Sorry, UBS.

I was just wondering, first, on the 505 B 2 issue, I'm sorry if you touched on this, I may have missed it.

Sorry, you're breaking up.

You could try again?

Can you hear me now?

You can hear me?

No.

Try again.

That's about as good as it is going to get.

Hello?

Yes, try again.

We're losing you.

Sorry.

On the 505 B 2 issue, can you hear me?

Yes.

The FDA came out last week, no changes to the law.

Is this something that Pfizer will aggressively try to get into the courts, and on that avenue, will you attempt to sue the FDA?

Secondly on some product oriented issues, if you could touch on the strength we've seen in Lipitor, what you guys are doing in the marketplace, perhaps to increase the compliance rates on this product, and what the current compliance rate is for Lipitor?

And lastly, on the Organon deal, it appears to be me that drug has been in phase two for the past five years.

Anything that would have held that drug up in terms of development?

And what you think the advantages of that drug over the current atypicals would be?

Okay.

Thank you.

Jeff, on the 505 B?

Sure, Hank, let me give a little background for the benefit of everybody listening.

As you know we filed a citizens petition with the FDA, contending the agency cannot prove Doctor Ready's application without improperly relying on the proprietary data we submitted in our Norvasc MDA.

We've also as you know sued Doctor Ready for patent infringement, in a case that is now on appeal to the Court of Appeals for the federal circuit.

As you indicated the FDA recently denied our petition and related petitions filed by Bio and Torpharm.

We are looking at our legal options and we continue to believe that FDA cannot rely on our proprietary data to approve the application.

So in answer to your question, yes, we do intend to challenge the FDA's decision.

Importantly, the FDA did confirm that the Doctor Ready product would not be AB rated.

And therefore, could not be automatically substitutable for Norvasc.

So even if Doctor Ready prevails in the patent litigation, and even if it it's application is approved by the FDA it would not be AB rated and therefore could not be automatically substitutable for Norvasc.

Now, even though the FDA denied our petition on legal grounds, the agency did say in their decision that there may be significant policy issues with their own process.

FDA acknowledged that the types of products at issue, New Salts, do not provide any new therapeutic benefit and may undermine incentives for innovation and they have therefore called for an examination, a re-examination of their policy and we will continue to urge the agency to modify their position.

Separately in the patent litigation against Doctor Ready, the trial court held that the extension of our patent term out through 2006 only covers the specific salt form that we market as Norvasc; and that Doctor Ready's alternative salt form would not infringe.

We strongly believe that decision was wrong and have appealed to the court of appeals, the case was argued on July 9 and a decision is expected sometime this year.

The 505 B 2 decision was disappointing, but one that left a very large welcoming home for us to continue to fight going forward.

I will ask Pat Kelly to comment on Lipitor's strength in the face of new competition.

I must say this is pleasing but not surprising given the product characteristics.

Pat?

We're continuing to establish the position of Lipitor, that it has benefited from, for a long time in this market; by emphasizing that it, and it alone, is the power that you can trust to get your patients with elevated cholesterol to goal.

And there are obviously two parts to that particular sentence.

One is the power, ie. there is no product that's been demonstrated to be more effective in getting patients to goal.

And then the power you can trust.

Which indicates that based on fairly recent publication and reanalysis of all of the safety database around Lipitor, indicates that there is no increased incidence of any adverse effects as you go up the dosage range.

And that the product in general maintains a very favorable safety profile.

As it relates to the question on compliance, the thing to note is that for all product use medications, and for cholesterol medications in general, the compliance rate is abysmal.

It needs to be much better.

Is that people need to stay on these medications for as long as their doctor has prescribed them.

We are currently working with just about every major pharmacy benefit manager as well as retail pharmacy chain to ensure that patients that begin on Lipitor are given the appropriate follow-up to ensure that they continue to take that medication.

And we're seeing -- beginning to see some improvements.

However, we have a long way to go so we will continue to keep at it.

Okay.

Thank you, pat.

With respect to Asenapine from Organon, it is correct that compound has been in phase two for a number of years.

We, of course, had access to ought of that data, those studies are now complete.

That gives us the understanding, the knowledge, and the confidence to proceed to phase three with what we believe potentially could be a best in class compound.

Joe Feczko, do you have anything to add?

Just that during this time period we're working on developing a proprietary formulation that significantly increased bio availability and activity, so we're -- that is the formulation right now that we're taking forward.

Success with the new formulation was a key part of this.

Okay.

Next question?

Thank you, our next question comes from Timothy Anderson.

You may ask your question and please state your company name.

Hi, Tim Anderson at Prudential.

On the model, you know, you beat the quarter but you're saying that the full year number, '03, is the same, suggesting that there is going to be some higher spending in 4 Q. If I annualize that higher spending I'm just wondering what that kind of suggests about 2004.

And kind of on the same topic, if I look at gross margins, they're about the same as they were in the second quarter.

You know, as they were in the third quarter.

And we're kind of wondering if that is roughly the rate we should use for 2004.

All this basically comes down to me trying to figure out earnings in '04.

Especially because you're not, you know, exactly reconfirming previous guidance, and I'm just wondering if the previous number could be at risk here, given all that's, you know, basically happening in the global pharma marketplace, Merq had talked about those things today, you guys started off the call by talking about the challenges as well, and just part of that, one last question is, is any part of the '04 kind of reanalysis have to do with something new on the raunt in generic timing?

Thank you.

We're in the middle of preparing our plans for '04.

Those should be complete towards the end of this year.

We expect to give you further guidance early next year.

We are assuming validity of the Neurontin patent.

We expect to prevail.

Just remember on the spending rates between third and fourth quarter, the spending rate for the year remains the same.

We're seeing additional savings in the third quarter, which we expect to be offset in the fourth.

In part due to spending in response to competitive challenges.

So I don't see anything in the spending run rates which would have any effect on '04 but you're -- your kind of underlying question here, we will get back to early next year.

Next question?

Thank you the next question comes from Ken Araki, ask your question and please state your company name.

Nomura Securities.

Thank you for taking my question.

I have a question, with the third quarter Lipitor sales and the Zoloft sales.

It seems to be pretty strong.

Did you have any specific inventor issue?

Thank you.

Lipitor and Zoloft sales in the third quarter reflected underlying -- reflected underlying demand.

We don't have incentives for trade distribution.

In fact, many of you are looking at this issue and other companies I'm sure, we've always stood out in the sector as managing wholesale inventory levels to about .6 months it varies a little bit depending on new product launches and that's exactly where we are today, so there has been no effect on sales in the quarter by incentive programs which we've never had, and inventory stocking changes.

Thank you.

Next question, please?

Thank you our next question comes from Richard Evans.

You may ask your question and please state your company name.

Yes, Sanford Bernstein.

Thank you for taking the question.

If I could just go one layer deeper.

Broader than Lipitor and Zoloft in inventory, we've saw a number of products, that reported sales significantly in excess of prescription drugs, so if it wasn't a change in inventory, can you help us understand what are the other obviously potential variables for the major drivers there?

And second just on Pregablin, now that we are about to see the filing, can you characterize what the delay was?

What incremental information you provided to the agency?

And what degree of comfort we can take that the safety profile in Pregablin is going to be similar to the drugs it will compete with.

Thanks.

Thank you, Richard.

On inventory levels, this is always an exceptionally difficult analysis when you're looking at growth rates, because growth rates are this quarter versus last quarter.

And to fully understand that, you have to understand what happened this quarter but also what happened in the quarter a year ago.

We don't actually match growth rates every quarter.

We get ourselves to the targeted inventory levels every quarter.

And we've accomplished that throughout this year.

What you see in changes in growth rate may well reflect variations over whether we were trending down or trending up in the prior -- the prior year.

But these are very minor changes.

The one thing you might have missed in the quarter is there is a small price increase effect but that had worked through by the end of the quarter, and of course during the quarter, we were bringing down the Pharmacia inventory levels to harmonize them with our practices; but Peter is there anything else we missed here?

I think just to add a little bit to that, I think obviously you're absolutely right.

If you look at the revenue growth for a number of our key products, in the U.S. in particular, in the third quarter and compare it to total prescription growth, it appears as if there is quite a gap.

But to Hank's point, I think if you look on a year- to-date basis, through three quarters, that gap goes away, in particular when you take into account the price increases that Hank referred to.

Going back to even a quarter ago, we had a number of our major products, Lipitor being a good example where we're seeing exactly the reverse trend; where TRXs were growing faster than the revenue in the second quarter.

As you get later in the year which we obviously are now, things wash out on a year to date basis.

But there is no impact on our reported numbers from changes in inventory that is anything significant other than the significant reductions in Pharmacia inventory levels.

And o Pregablin, yes, we are filing the balancing act we did here, was between early filing; which we clearly could have done earlier, versus a more complete submission with broader -- broader claims and better supporting data.

We now think we're at the point where we have a complete submission, we're very optimistic about the package we're submitting, and looking forward to approval with the best possible labeling.

But Joe Feczko do you have anything to add?

Just that we, as you said, Hank, we are now filing for an add-on epilepsy, generalized anxiety disorder, and neuropathic pain claims and it was also to put together the-as discussed previously at the R&D conferences; put together the full carcinogenesis package that we were requested to put together, to answer some questions that the FDA had on our carcinogenesis study.

Okay.

Next question?

Thank you.

Our next question is from Carl Seiden.

You may ask your question and please state your company name.

Thanks very much.

And I'm with J.P. Morgan.

A couple of questions, if I could.

David, I think the company talked about cost synergies in the quarter of around $400 million and $600 million to date.

And if I'm thinking about this right, if you do absolutely no incremental cost cuts over the course of the fourth quarter, you'll repeat that $400 million savings; and, thereby, already achieve your $1 billion target for the year, so I'm assuming there is upside to that, assuming that there is more and more every quarter.

And I'm also curious whether or not you could tell us for the cost cuts to date, roughly how that shakes out over cost of goods, SG&A, and R&D.

My second topic is just wondering when you're planning on filing a supplemental NDA for Lipitor for Ascot Cards or reversal.

And last, if I could, I thought there was an expectation for us to get a little bit more explicit guidance on the clinical status of Exubera and while there was commentary on it I didn't hear anything new.

I'm wondering if you have anything to add to that product status.

Thank you.

David on the synergies.

Your observation is right on.

We have had close to $600 million dollars worth of cost synergies on a year-to-date basis.

I think it is a great marker in terms of how well the integration is going, from an operating point of view.

We have changed slightly our posture in terms of cost synergies for this year.

If you note we say at least $1 billion, we would hope also to beat that probably by not that much; but again I think it is a great marker in terms of how well the integration effort is going.

As you would imagine, just given the sheer scope of activity in terms of bringing the two companies together it is coming through on both the G & A, R&D, as well as the commercial side of the business.

It is pretty pervasive in terms of types of things we're doing and doing successfully to realize the integration of the two companies.

Okay.

And Joe Feczko on Lipitor SNDAs?

We've actually filed the Ascot data looking for label changes and as far as cards or reversals are concerned, those studies are just reporting out now.

We just had the DSMV statement on cards and reversal will be presented at the American heart Association meeting.

So until that's, really, those studies are more finalized we can't really submit them.

Remember those studies were stopped early, and when you stop a study early you announce it which is why you aware of it, but then you have to complete the data analysis, the publication, amend the SNDA filing.

We've done that with Ascot, clearly cards and reversal we're trying to get in as soon as we can.

And Peter you had some comments on the regulatory interactions on Exubera?

We're having some very positive interactions with the regulators in the EU, in fact across the EU, and continue to interact positively with the FDA on this product.

As we've mentioned, we have two year studies, controlled studies in type one or type two diabetics that's ongoing, we'll read-out soon; and then we have two additional large trials, one in type one diabetics and one in type two, 800 patients each; that will read-out at their two-year mark as well so we're working with how we would go ahead with the filing with all of that data and when that safety data will come in.

And you know, it is different in the U.S. than it is in Europe.

So we're working through those issues.

So Carl, as soon as we're ready to file, we will let you know but it is looking positive.

Next question, please.

Thank you.

Sisla Carmen you may ask your question and please state your company name.

Yes, Highland Capital.

Thank you.

If you would comment a little bit, I'm seeing a little bit of some momentum in the-on Capitol Hill as far as open market access with some bills out there gaining momentum; not to necessarily have the Medicare bill, which we thought would happen, but possibly opening and reimportation issues.

Just wondering what your thoughts were with what looks like to me a back doorway of price controls coming in and yet we still have nothing that addresses the access for the uninsured which is somewhere well over 60 million people and just wondering what your thoughts are from the hill.

I will give you my thoughts on the hill but let me start by saying we, too, are concerned about access to medicine.

And in fact, this is what underlies our Pfizer share card program.

Where any low income senior, less than about two times the poverty level, can have access to a 30-day supply of any Pfizer medicine for a flat $15 fee, for each one-month prescription.

And I think we're now up to 450,000 in that program.

Is that the latest numbers?

And I forget how many prescriptions.

3 million.

3 million prescriptions to 450,000 low income seniors.

So this is a very important program, having a very important impact in an area we, too, agree is critical; which is access to medicine.

What is happening on Capitol Hill at the moment, on the Medicare bill, which does potentially include the reimportation issue, the -- it is in conference, as you know, having passed both the house and the Senate, the conferies is a good group, they certainly understand the issues they're very dedicated to getting legislation passed, very committed to incentives for innovation for the industry.

They're meeting twice a day.

Starting at 7:00 a.m. in the morning and again at 3:00 in the afternoon.

They're making progress.

A number of issues are being resolved.

Their hope is to have a bill out of conference by the end of November, mid-November, late November, which could then be voted on.

Now whether they can craft a bill which passes both the house and the Senate is as yet unknown.

My guess is, it is going to be a very close issue.

If that bill fails to pass, then I think we do face a challenge on some variation of an importation bill, reimportation, which is what people are calling this, would not be a problem for the industry, quite frankly, because most of these drugs are not manufactured in the United States, and exported and then reimported.

They are manufactured elsewhere.

In fact, you have seen from a recent FDA customs study, that 88% of the more than 1,000 packages they inspected, more than 88% were counterfeit or unapproved in the United States.

So this is particularly bad policy, something that we would fight very aggressively on safety grounds, if none others; but you're correct, it is a back door attempt to import wage and price controls from countries like Canada and France.

And that's something we also think is very bad policy.

I'm frankly optimistic that given the energy going into the conference, that we will see a bill that will be enacted into law this year, which will resolve the importation issue.

I think everybody recognizes it is time to put politics aside and put the patient first, and that seems to be happening; so I'm kind of optimistic about where we are.

Next question?

Thank you.

James Kelly, you may ask your question and please state your company name.

Thank you, Goldman Sachs.

The question is on Inspira and on life cycle management which seems a little interesting given the launch is still pending.

But when I take a look at the intellectual property around Inspira, the -- it seems that the patent on the molecule comes off in the next year or so, NC exclusivity comes off around 2007 and all of those points that Jeff talked about could come up pretty quickly here.

What is the strategy on this product as well as getting Inspira itself alone into the CHF and hypertension market?

Do we see it being combined with Accupril, I think you talked about ace inhibitors and calcium channel blockers, how should we see it in the next few years.

Pat, can you talk about the strategy here?

Sure.

We're quite excited about Inspira, given its recent approval by the FDA for use in congestive heart failure.

And in fact, we are so excited that we have been able to accelerate our manufacturing schedule.

So that we will be able to make this product available into the market sooner than we expected.

Sometime we hope by the end of November.

So we are putting the product out as fast as we possibly can.

And we believe that because of the profound benefit, again to remind you of that, that it demonstrated a 15% additional reduction in morbidity and mortality, above and beyond standard-based therapy for this disease, means that this is an important product in the area of heart failure.

So again, we're pushing it out the door as fast as we can get it made.

It will be in the trade and available to physicians for their prescription by the end of this year at the latest.

The patent status and the exclusivity status for the product is, as you have indicated, quite complicated.

But we have every belief that we will be able to maintain exclusivity even under attack, as Jeff has already indicated, we believe through 2008, for this product.

So again, we believe that given the benefit that it provides to patients, the rapidity with which we think we will be able to get it out in the market, we will be quite successful with Inspira going forward.

There is of course patent restoration and possible pediatric extension issues here, so we're not done; but 2008 is a pretty good start.

Next question?

Thank you.

Mara Goldstein you may ask your question and please state your company name.

It is Mara Goldstein with CIBC World Markets.

Two product related questions.

The first is on Aromacin, since you mentioned it in the breakout on the your Q&A you can talk about what your follow-up studies are and how long in duration those studies are planned for?

And then on Geodon, does the licensing agreement of Organon propose an FCC issue for Geodon?

We're breaking up.

You said is that the two, Aromacin and Geodon in relation to the Organon compound?

Yes, please.

Thank you.

Joe on Aromacin.

We are continuing to study it in breast cancer and breast cancer survival; and in light of some of the recent, this question may be in response to I guess it was asked because of some of the recent publications in -- about recent stoppages and clinical trials with other related breast cancer therapies.

We are also doing very long-term five-year studies, we're in discussion right now with the various steering committees on how the new data actually impacts on those study designs; but we're also looking at prevention, long-term studies of prevention of breast cancer after treatment with Tamoxifen.

And Pat, on the Geodon status and the Organon compound strategy?

Right.

Well, the relationship, the partnership with Organon just recently announced anticipates that question.

And indeed, it is also incorporates the fact that there is plenty of room, not only in this particular relationship, for both of these compounds.

There is plenty of room in the marketplace for all compounds in this area, it is important to note that this is, even with novel therapies like Geodon and others, this is an unmet medical need.

There is a substantial number of schizophrenic patients that continue not to demonstrate improvement on the existing agents.

So we think there is a great potential for both of these products to happily coexist in this market and in fact our relationship with Organon allows for that coexistence.

And I'm sure you haven't missed the point that labeling discussion is now under way with Geodon and our recent agreement with Organon underscore our seriousness of leading in this product category.

Next question?

Thank you, Steve Scala, you may ask your question and please state your company name.

SG Cowen, thank you.

Several questions, first on Asenapine, it is still not clear what characteristics you saw in phase two that would make this best in class.

Are these efficacy or side effect advantages.

Secondly, it is not clear whether you will be recording sales of the product.

And third, back on importation, should importation without verification be passed?

Could drug companies be required to sell an unlimited amount to Canadian wholesalers or other intermediates, or would the industry still have the right to limit shipments as some are now doing?

Okay.

Phase two data on did.

Without going into a lot of detail, because again we have to confirm a lot of work in the phase three program for filing, but the improved formulation that Organon developed gives better blood levels and improves efficacy than was seen with the previous formulation.

Some of their head-to-head studies do point to being very, very competitive and best in class on efficacy and on the safety parameters.

And like we were saying, Pat was saying before about the category, all these atypicals have slightly different receptor binding patterns, and because of that, different -- faced with different -- with schizophrenia and bipolar disorder seem to respond differently to some of these different medications.

So we're very optimistic right now that the data to date will allow us to tease out these differentiation factors and have a best in class product.

And I believe the accounting under the agreement is to report alliance revenue in proportion to the profit share that is in the agreement.

With respect to importation, if I understood your question, Steve, we're kind of breaking out in sound reception here, I guess Congress could pass any kind of a law they wanted.

I'm not sure that the Congress of the United States could take away our patent and trademark rights in Canada.

That would be an interesting question.

But ultimately, this is not about supplying unlimited quantities in Canada so they can be imported into the United States.

Many of the web sites that claim to be Canadian, over 50%, in fact, are the ones we've looked at, are registered to fictitious persons and fictitious addresses in the United States and are registered in countries like Brazil and Belize and India.

So you might think you're ordering these drugs from Canada, in fact they have nothing to do with Canada.

We're also seeing some organized crime involvement in this traffic.

And I think you will see in the series -- series of articles, the Washington Post is publishing, which reflects a one-year investigation of this.

I think are you going to see this is pretty nasty business; and I don't think Congress, even given the political advantages that might be present here, could in any sense of good consciousness pass into law importation without the safety standards.

Frankly, both as an agent and U.S. regulatory authorities the FDA and HealthCanada are calling for.

So I wouldn't be too worried about a worse case example here.

I think the politics of this are much more serious than the potential financial or revenue -- revenue impact.

Next question?

Thank you, Ken Kulju you may ask your question and please state your company name.

Yes, Credit Suisse First Boston.

Just wanted to talk a bit more about your assessments on Cresstor's early entry into the marketplace.

Has there been any change in your promotional message?

Any early observations on the prescription update -- uptake would be helpful.

And then just secondly, has there been any time line established for the movement of the CETP inhibitor into phase three?

Thanks.

Let me address the last one first.

I think we're going into phase three.

That's one of the three we advanced into full phase three development in the third quarter.

And it is the -- is in fact the largest phase three program that we, or anybody else, has ever entered into; so that one, clearly, we're making a major investment behind.

Pat on Cresstor, early data which I understand is lagging Zetia so far?

Yes, and I guess that would be an indicator to us, at least of initial marketplace interest in this compound.

Again, as Hank just alluded to, the uptake on Cresstor is, so far from what we're seeing in the scripts, is at a rate that is less than Zetia just achieved in the marketplace, and beyond that, it is significantly less than the uptake seen for Lipitor when it launched several years ago.

And I think basically that reflects a market-based reality that is setting in, which is that Cresstor might or might not offer some efficacy benefits; but there's way too much baggage that comes along with the product to inspire all the trial that would be necessary to generate greater movement in the new prescriptions.

In answer to whether we're doing anything differently.

No, we continue to do that which has gotten Lipitor to be the world's most frequently used prescription product, as well as number one lipid lowering agent, and that is, is that nothing offers the same optimal balance of effectiveness, and safety.

And pat's comments on the early U.S. experience is very similar to what we've seen in the international markets.

Where Cresstor has been on the market for six months or more and Karen, you have some of that data?

Yes, in the -- in Canada, where Cresstor has been on the market for six months it has achieved 2.3% of total RXs; in the U.K. after five months, 1.6%; in the Netherlands after six months, 5.4%; and that was the most successful market for Cresstor to date.

And Pat just told you the U.S. experience.

So the growth is fairly slow.

And not overwhelming.

But of course we've been telling you this for quite some time.

Next question?

Thank you.

Mario Corso you may ask your question and please state your company name.

Leerink, Swann & Company.

A couple of quick questions.

Is there any update on the Neurontin patent case?

And in terms of the P&L in the third quarter, or at least the sales numbers, it looked like alliance revenue dipped quarter over quarter, I'm just kind of wondering what is going up within the makeup of alliance revenue on a go forward basis.

And then another question on the Asenapine, how would you envision once this product gets approved slotting it alongside of Geodon or what does this mean for Geodon's fate?

Thanks.

Jeff on the Neurontin patent?

There really isn't anything new to report.

The summary judgment motions are still pending.

We have no indication when the court might rule on them, nor do we have a date for trial.

The deadline for discovering -- for discovery concerning Apatex is March 1st and that discovery is continuing and the case proceeds.

Okay.

David on alliance revenue, are you still digging for that?

Yeah, I don't think there is anything highly abnormal quarter to quarter with alliance revenue.

You are going to get some variation quarter to quarter on the natural basis depending upon the mix of income we get from the various outstanding arrangements we have and the different natures we have, in terms of the contractual arrangement at the same time.

And positioning of Geodon versus Asenapine;

I guess my answer would be number one and number two. [ Laughter ]

Well, or both number one.

I mean again, I think as we've already indicated, this is a market that is marked by significant unmet medical needs, so there is plenty of opportunity we think for both these products and we think they will be both complimentary in the marketplace.

Let us look at the phase three data first before --

Thank you, Bert Hazlett you may ask your question and please state your company name.

SunTrust, please.

I have a couple of items.

First on Geodon and the atypical class labeling, you've challenged FDA's request there.

What path are you headed down with FDA?

Second issue is Canadian importation.

Is that affecting operations currently?

And if so, if you have any quantification, that would be helpful.

And last, just on CDP 870 for RA, I'm trying to gauge your level of corporate enthusiasm for that product, if you could comment, thank you.

Okay.

Thank you.

Geodon, class labeling, Joe?

Yeah, we've gone back to the FDA on the request for class labeling, and have disagreed with their analysis of the situation.

And as they said, you know, there was very little data on Geodon to support that, that labeling.

So we've gone back with a package of information we're pulling together to file with them, with the aim of having actually differential labeling on that issue.

That will be going in shortly.

Let me just add to that.

The FDA's decision on class labeling, as I understand it, was based on a VA retrospective study.

Geodon was not in that study.

And to the contrary, we have data which shows quite a different response with Geodon, so we think we we have very solid grounds for improved labeling with Geodon versus others in the class; and due to our sound problems here, I kind of missed your question on Canadian importation.

Could you try again?

Sure.

Is that affecting operations currently?

And if so, can you quantify it at all?

Ian Reed's is here who managing that area.

Ian?

We believe the importation from Canada is minimal.

It is around between 40 and 60 million prior to our actions to control supply.

We expect to see it in single digits within a few months.

Forty to 60 million per year at the peak and bringing to down obviously because of the need to safeguard the supply of medicines in Canada.

CDP 870, Joe?

Studies are ongoing.

We are in the process of working with our partners at Celltech to analyze it.

So it is premature right now to say, we're waiting for several studies to read-out.

Okay.

We have time for one last question.

Our last question comes from Jami Rubin.

You may ask your question and please state your company name.

Thanks.

Morgan Stanley.

Hank, I'm wondering if you could talk about how you do intend to fight the citizens petition issue with FDA.

Since FDA turned it down presumably they're now free to go ahead and approve Emlodepine maleate, but if the appellate court decision upholds the lower district court decision, what are your options out there?

And I kind of think this is an important precedent setting case for the industry and maybe you can comment on that as well.

And I do think you had mentioned at one point that Waxman Hatch had -- was -- included the protection to salt versions of drugs and obviously the FDA is looking at it differently, thanks.

Waxman Hatch says the patent should be extended for the product and all it's salts.

It seems pretty clear to me what it means, the lower court didn't see it that way.

That is what the appeal is all about and there is plenty of litigation between where we are today and resolution of this issue but Jeff, maybe a little more on the decision itself?

Well, the decision just issued, and it was a denial of the petition by us as well as other parties-Bio and Torpharm.

And I think everyone who was a petitioner in it has the intention of challenging the decision, and exactly when and how that is done is still under review.

But we have every intention of challenging the decision in court.

We have the right to do that.

And this was, if you will, just the first round of this issue.

So we will be pursuing that.

In addition, the agency has invited the possibility of a public comment on the whole overall policy, which they themselves have questioned in their decision.

So that's another forum in which to address this.

And in addition to all that, we have the patent litigation going on.

So there is quite a few legal avenues here.

Not to mention, if it comes to that-legislative fixes and ultimately winning in the marketplace, if it comes to that.

But I think we have quite a few more rounds of legal avenues to pursue before this is anywhere near over.

And this is an important issue, not only for Pfizer, but also the industry.

You're correct in that.

And I think for that reason, where we are today will not be where we are a year or more from now.

With that, we conclude today's conference call.

Again, we appreciate your time and your support of Pfizer.

Thank you all.