輝瑞 (PFE) 2003 Q4 法說會逐字稿

Thank you, Dr. , you may begin.

Hello everyone. Welcome to Pfizer's fourth quarter 2003 conference call and webcast. I'm Hank McKinnell, Chairman and CEO of Pfizer, speaking to you today from Davos, Switzerland, where the world economic forum is in progress. In today's global economy, and given Pfizer's worldwide presence, international meetings such as this, and the access they give us to opinion leaders and decision makers are increasingly important.

With me here in Davos is Chuck Hardwick, our Head of Corporate Affairs, participating in our call from our boardroom in New York City, are other members of Pfizer's leadership team, including our Chief Financial Officer, David Shedlarz, Karen Katen, President of Pfizer Global Pharmaceuticals, John [Lemmatina], President of Pfizer Global Research and Development, Peter [Core], Senior Vice President of Science and Technology, and Jeff Kindler, our General Counsel. We appreciate having all of you with us today, especially when so much of such importance is going so well within Pfizer.

While the quarterly performance report which we issued early this morning was, as usual, detailed and comprehensive, I expect that also, as usual, there are a number of questions you'd like to ask. We'll get to your questions shortly following a few observations about our performance. All of us on the Pfizer leadership team are very pleased with the results of the fourth quarter and full year. And with the quality of those results.

Once again I credit that success to our fellow colleagues worldwide, and thank them for their efforts, on behalf of the company. The results reflect what are now Pfizer hallmarks. Strong revenue growth, driven by existing and new products, continued investment in support of those products, and ongoing productivity initiatives, industry leading operational capabilities, and strong earnings growth. And the results offer clear evidence of our continuing business momentum.

Key milestones during the quarter included among others the FDA's approval of Inspra for heart failure in post-heart attack patients and VFEND, for the treatment of esophageal candidiasis. The FDA's acceptance of submissions for, pregabalin, for the treatment of epilepsy, neuropathic pain, and generalized anxiety disorder of GEODON for treating mania, and of Bextra for migraine.

The completion of the European regulatory submission of Caduet, our new therapy, dual therapy for reduction of cardiovascular risk, and the announcement of our planned acquisition of Esperion Therapeutics.

Equally importantly, our performance in the fourth quarter capped another exceptional year of progress and accomplishments for Pfizer. During 2003 we made substantial progress in the integration of Pharmacia, sustained the strong performance of our current major product, blunted the impact of competing products, continued the replenishment of our research pipeline, reinforced our network of development partnerships. Plus we extended our track record of delivering on our financial performance commitments.

More over we continued to demonstrate leadership and good corporate governance in expanding patient access to medicines, and promoting good corporate citizenship. As a result we enter 2004 with a powerful platform for growth, one built upon our unprecedented product line, our unrivaled operational capability, and our unique financial depth and flexibility.

Given that, we have today reconfirmed our strong performance expectations for 2004 and have left unchanged our previously communicated targets for 2004 revenue and adjusted diluted earnings per share, subject, of course, to the cautionary statements in our press release which David Shedlarz will repeat.

Looking forward, Pfizer remains uniquely well positioned to sustain our strong and balanced performance, develop and leverage future opportunities, reinforce our differentiation from others in the industry, and exploit our flexibility and proven abilities to execute, and that's an exciting prospect indeed.

We will continue to focus on what we do best, meeting unmet medical needs and bringing new and innovative medicines to patients worldwide. In doing so we will demonstrate the value of pharmaceuticals, provide solutions for physicians, patients, and providers, and help reduce the prevalence and high cost of disease. Through not only treatment but also wellness and prevention.

In doing so we will also advance our mission of becoming the world's most valued company to all our constituents. Now I would be happy to take your questions.

Thank you and at this time we're ready to begin the question-and-answer session. If you would like to ask a question please press star 1 on your touch-tone phone. You will be announced prior to asking your question. And again if you have a question press star 1. Our first question comes from David Buck. You may ask your question, and please state your company name.

Yes, it is Buckingham Research Group. First question is related to Caduet. Can you give us a sense of, Hank, any initial conversations you might have had with managed care related to positioning of the product, and is there some type of switch strategy that you would expect away from norvasc for the mixed population of hypertension and cholesterol elevation, and can you give us also some sense of what you see as the initiatives for the uninsured that were talked about in the State of the Union, what that holds for the farm industry and Pfizer specifically? Thanks.

Let me take the second one, and then I'll ask Karen to comment on the first. The State of the Union was very supportive of the Medicare prescription drug benefit, as signed into law which is very helpful since it is being attacked, obviously, for political reasons. The uninsured are the next challenge. Importation from Canada is not the answer for those we understand are having difficulty affording medicines they need. And assistance for the uninsured is certainly the next challenge. Now, I don't think anybody realistically expects legislation anytime soon, but certainly directionally it's the right message for patients around the country and for pharmaceutical companies. Karen, do you want to take on the first, on Caduet?

[Caduet's] product positioning is in the works. Obviously we're not announcing the launch date of that product. We don't know the launch date of that product. And our approach to all of our customers, including managed care, is one of the things we're crafting right now. So there's no real specific information to give you.

Okay.

What's really interesting from a medical standpoint is it looks from the clinical trial results that patients with elevated blood pressure, almost no matter what their cholesterol level, would benefit from dual therapy. Next question, please.

Thank you, our next question comes from Tim Anderson. You may ask your question. Please state your company name.

Tim Anderson at Prudential. Couple of questions. First is, just inventory levels across the franchise of products that you have, maybe in terms of months of sales, where were you maybe six or 12 months ago, where are you today? I know that at least Pharmacia had run higher than what you guys would consider normal inventory levels, but when I look at where the sales of a lot of these product came in for the quarter, it seems like it's substantially ahead of scrip growth across Pfizer products, and some Pharmacia products as well.

And, I know there was an out of cycle third quarter price increase as well as the usual January price increases. I'm just wondering if there might have been any sort of load-in.

And then second question, maybe for Hank, I'd just be very curious to get your take on overall industry fundamentals for the overall drug industry, not just Pfizer, but for everybody, are those fundamentals better today than they were let's say four or five years ago, looking forward for the next two or three years do you think those fundamentals get better, stay the same, or get worse?

On the inventory question it's always dangerous to compare sales growth to prescription growth because it's this year versus last year and you really need to understand whether we were trending inventories down or up and that can have quite an impact. Our goal is to bring inventories into line with our 0.5 to 0.75 target at the end of every quarter.

The exception to that, of course, was the Pharmacia inventory, which we did have to harmonize to our trade practices, which brought inventories down by approximately half a billion dollars, but Peter [Brant], is there anything unusual in the quarter that you see?

Not at all. The legacy Pfizer portfolio is at normal levels and that's both compared to historical levels and recent levels. And you're absolutely right about the legacy Pharmacia portfolio that has come down to Pfizer levels.

We don't play those kind of games, Tim. Next Question.

Next question comes from Mario Corso. You may ask your question, and please state your company name.

It's Leerink Swann. Quick question on the quarter. SG&A quarter over quarter took a jump? Is there something unusual there? Secondly, exubarin, I mean, clearly, the language in the press release, it's more positive, it's more being talked about. Reading the language it doesn't seem outlandish that it could be a 2004 FDA filing. Is that something that looks reasonable at this point? Thank you.

On exubarin we're not going to forecast a filing date. You all will be the first to hear, as soon as we file it. David or Peter on SG&A growth?

Yeah, just one statement I'd like to make before we talk about SG&A. The obligatory statement in terms of cautionary language. The discussions will include forward-looking statements. The actual results could differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ are discussed in our 2002 annual report on Form 10-K and on our periodic reports on Form 10-Q and 8-K.

In addition to this call we are likely to discuss 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 today This report is available on our website at www.Pfizer.com, and the for investors, SEC filings by Pfizer, section.

In terms of S G&A besides adding incremental expenditures that are attendant to the combination with Pharmacia, I would also note that SG&A at least on a reported basis also includes the legal charges related to both Rezulin and Neurontin. Those are the key driving factors beyond the organic growth in terms of support of our expansive franchise.

OK. There's the reason for the SG&A growth. Next question.

Next question comes from Ken Araki. You may ask your question. Please state your company name.

Thank you. Nomura Securities. I have two questions. First of all, the types of -- in terms of EPS guidance for 2004 you confirmed the previous guidance, but in spite of actually, recently you announced the $5 billion of buy-back and also today announcement the earnings release, it appeared to be upward revised [inaudible] Pharmacia, approximately $400 million. If so, why can you retain or confirm the previous guidance. Second question, in terms of the launch strategy of Inspra. What is the character of the launch strategy compared to traditional intensive medication in the case of Inspra, for example the target audience, target patient, the combo, or mono, or something. Thank you.

We announced towards the end of last year that we were in the middle of our budgeting process and we're not going to comment on guidance until the beginning of this year which we've just done. We are able to reconfirm our guidance. You're correct, a number of things moved around which is why we wanted to complete the planning process because -- before we said anything about guidance for 2004.

As usual, a number of things got better, a number of things got worse. The net of all that is we are comfortable with the previous guidance. The Inspra positioning and launch, Karen just came back from the Inspra launch last night. Karen maybe you could talk about the excitement of that.

We're in the middle of the Inspra launch for the United States and I was at the meeting yesterday, and very well, obviously, well attended by our cardiovascular reps as well as many of our primary-care reps. The target audience is defined by the patient population, and as you know the patient population in this case is heart failure patients post MI. A very well defined patient population. We have extraordinary clinical data to support the use of the product in those patients. I can tell you the reps were very excited about the availability of this product and their opportunity to deliver that message to their customers.

And major medical merit 15% reduction in mortality in that patient group, so it's a wonderful product opportunity.

That's right.

Thank you.

Next question, please.

Thank you. Our next question comes from Ken Kulju. You may ask your question, and please state your company name.

Yes, Credit Suisse First Boston.. First, there's an increase in the merger related cost synergies that you're expecting for '04, up to 3.4 billion from a prior 3 billion estimate. I was wondering if could you discuss where you're seeing the up side in the merger synergies, if you could review the, also the '05 target, and I also had a question about any possible R&D meeting and a feeling for when that could potentially be scheduled for this year. Thanks.

Well on the R&D meeting, general business update, we will do that sometime later this year. We haven't picked a date yet, quite frankly, given everything that's going on and the effort that goes into preparing for those, it may be later in the year. The merger related savings, we do expect more this year, in part because we're realizing those savings more rapidly than we had anticipated earlier. Any other comments on that, David?

No, I think that's one of the primary factors. It's a great marker in terms of how well the integration is going, with Pharmacia, but we're also finding opportunities across the board in terms of enhancing cost synergies at the same time, and they're coming anywhere from some of the G&A infrastructure straight through, leveraging the significant purchasing power of the company at the same time.

Okay. Thank you, Ken. Next question.

Thank you. Our next question comes from Jami Rubin You may ask your question, please state your company name.

Thank you. Jami Rubin, with Morgan Stanley. You reiterated your 54 billion revenue guidance for 2004. I'm wondering if you can talk about what's included in that. Specifically, I'm assuming it still includes a full year of Neurontin, I'd be curious to know what your assumptions are for Norvasc, should you lose the [inaudible] case what sort of variance, expectations we should assume, and lastly was wondering what sort of new product launches you were assuming in there for the 54 billion. Thanks.

Neurontin we assume for the full year. We're assuming current exchange rates. Norvasc we expect to maintain its current status for the year without new competition, and we don't normally telegraph our product launches to our competition. Thank you Jami next question.

Your next question comes from Steve Scala. You may ask your question and please state your company name

SG Cowen. Pfizer's had a string of brilliant end licensures with [esenotine], Indiplon, Spiriva, just to name a few. I'm not sure the P&L accounting has been described for these products, I'm wondering if you could do that, with respect to, are they going to be sales, alliance revenue, or alliance profits. Secondly what is the outlook for more deals in '04, will we see some, and in any particular areas that you'd like to cite.

Thank you for those comments, Steve. We are very pleased with our end-licensing activities. We certainly are not done yet. We do an analysis every year of our forecast versus our growth expectations and see every year that we do spend this year, $7.9 billion, which is approximately 15% of total industry research and development spending, so we have 85% out there we can look for other opportunities in, and we're not ashamed to do that and we have been very successful. And David you should probably highlight the accounting treatment. That may have been buried in the back somewhere.

The co-promotion expenses that we're anticipating on the basis of existing relationships in the past we have not deducted from adjusted earnings. In 2004 the $2.13 forecast you have, does deduct those expenses, so we've taken a conservative approach in terms of reducing the adjusted earnings for the expected co-promotion charges that we are going to incur on the basis of existing arrangements with third parties.

Now, the other side of that, of course, is when we've sold businesses or products in the past we've not added those into adjusted earnings. Going forward we will treat both differently and they do net, as you might imagine.

Thank you.

Thank you. Our next question comes from Tony Butler. You may ask your question and please state your company name.

Lehman Brothers. The outcome studies for Lipitor have been very strong and could clearly offer sales personnel with some new ammunition. Could you remind us of the timing of the filing of the ascot data and also comment as to whether or not you'll file cards and if you've had some discussion with the FDA about the potential for filing reversal. Thanks.

Yes that's a great question, Tony. We have long believed for decades that we add value to products as they progress through their life cycle. It also gives us wonderful access to physicians. If you ask a physician if he wants to talk about Lipitor the answer will be, oh, it's a wonderful product, I write a lot of it. If you have data which shows a 15 to 30% reduction in mortality post-MI, or whatever the latest data is you certainly got full attention.

We also tend to look a little bit backwards in the sense that we're aware of trials that are stopped early, results that are announced, we tend to forget that the studies need to be completed and closed out and analyzed, they need to be published, they need to be submitted, they need to be submitted to the FDA for labeling change and all of that takes time, so some things that we might think is kind of old news, in fact, is not yet in the label and, therefore, is not et in the hands of the sales force. Joe, it might be worthwhile summarizing the highlights of the three or four studies that are yet to come.

Yeah, this is Joe [petsco]. We have filed ascot. As you're aware ascot has some very interesting results as far as effect of the lowering of cholesterol levels with Lipitor, even with people with more or less normal cholesterol levels and people who have background hypertension. We have filed that and have been able to get the report together.

As Hank mentioned, this is true, so [indiscernible] was stopped early based on the results but we still have to finalize and close the data base, and finalize the result, so as we get the -- again,[indiscernible] was a diabetic group, again, who had a very good mortality improvement associated with lipid lowering, even those who had traditionally fairly good cholesterol levels, so it showed a lowering cholesterol levels even in what was considered fairly normal levels in diabetics showed a cardiovascular improvement on mortality.

Reversal, again, another study which shows one of the first studies ever show athero regression, -- or athero stabilization, I should say, on Lipitor compared to other statins, and again, as this study is finalized we will be following that. We have a whole series of studies ongoing, looking at stroke prevention, looking at morbidity, mortality, effects on the elderly. As these read out we will be filing. Any of these larger, morbidity, mortality studies for end point studies we're doing with Lipitor are geared to have filings when they complete.

I must admit we've been pleasantly surprised by clinical results in Lipitor every single time and there's more to come, so that should be good news. Next question, please.

Your next question comes from James Kelly. You may ask your question, and please state your company name.

Goldman Sachs. My question's for David and it has to do with the difference between the GAAP earnings and the adjusted earnings going into 2004. The number for the forecast for the GAAP earnings did change a little bit and I'm just interested in the components of what changed.

As we think about the adjustments that we're going to do in 2004, can you give us a rough sense of which portion of the P&L will they be hitting, what portion of it will be coming above the operating line at the merger expenses, at the amortization of intangibles, et cetera. Thank you.

The two factors are contributing to that. One is, actually good news on -- although the accounting is somewhat unkind, and that is it's contemplated that in a transaction the complexity and nature of Pharmacia, you have 12 months in order to finalize the valuation of intellectual property and other assets on behalf of the company. And we're in the process of finalizing that but in doing so we found that we even had greater value in terms of some of the underlying intangibles and intellectual property.

That's the good news. The bad news is that over the useful life of this property you have to amortize it back to the statement of income, now as you remember these are non-economic, non-cash charges. Nonetheless they do hit the P&L harder than we had anticipated in 2004, and the second factor is a slight change in the year to year seasonalization of the merger related costs, which are driving the synergies, and as the merger related synergies have gone up the costs have gone up as well. Thank you. Next.

Our next question comes from C. J. Sylvester, you may ask your question, and please state your company name.

Hi, thanks. UBS. Just to touch on Lipitor, you guys always tell us to focus on a full-year number. In looking at '03, inventories appear to be in line with '02, yet revenue growth of 9%, and prescription growth of 5%, so the question relates to how much of the discrepancy between the two was price and what was actually mix shift at the higher doses. If you can look out to 2004, what should we expect from price, and or mix, to swing either way.

Well, we'll take it either way. Pat, Peter, any comments?

Well, the numbers are, as you've just related them, and the difference probably can be accounted for by the two factors you just suggested. One would be the increase in the list of Lipitor, the other would be the movement of physician prescribing up the dosage range of Lipitor, which is a good thing.

Again, as was stated earlier all of these great outcome studies that are now beginning to come out are using higher doses of Lipitor, so we see a great benefit to patients and to the physicians that treat them by using higher doses. We've also been able to reconfirm in the same time, the safety of Lipitor used at all of those dosage ranges, so we would expect a continued movement of the products usage up the dosage range as physicians find greater and greater application to greater and greater numbers of patients. There will also be, as has already been announced, there will be some price impact this year as a result of a small inflation-adjusted increase in the Lipitor price.

And we have found the market is willing to pay for that increased benefit. Next question.

Our next question comes from Becky [Luchan]. You may ask your question, and please state your company name.

Hi everyone. I just wonder if you could talk to what's happening in Europe in terms of legislation for increased generic utilization, and also specifically in Germany, since Zocor goes generic, whether there's any pressure on Lipitor in the form of reference pricing. Is that just talk or is there some mechanism to pull that off? Thank you.

Well, Europe is not a very hospitable place for us although the European-wide Pharmacia -- pharmaceutical law is now in effect before the expansion of the EU, which would have made it much more difficult to get into law after the expansion, so that's very positive in that it gives us 10 plus one years on data exclusivity, the trade-off was some acceleration, [Bolar] type acceleration on generics, and for us that's a very good trade-off.

We're in debates with European payers much more extensively than the United States actually, because of the budget deficits that exist in Europe, and increasingly we're turning to new options. Germany is probably a good example.

This is a year of healthcare reform in Germany, it's the 5th in a row, and they continue to look for ways to reduce the cost of prescription pharmaceuticals, and we are in discussions with the German government now to try a different approach to be less restrictive in the use of modern pharmaceuticals and be held accountable for the impact on total healthcare costs, so it's a Florida-type program and is part of what I was referring to earlier about proving the value of pharmaceuticals. That's becoming particularly important to us. I think we're in a unique position to deal with that. Next question.

Thank you. Our next question comes from David Risinger. You may ask your question, and please state your company name.

Merrill Lynch. I had a few questions. First of all with respect to Spiriva can you update us whether you've refiled the data with the FDA and where that product stands?

Second question is on lasofoxifene, if you could update us on that pipeline product. And then the third, could you tell us a little bit more about the accounting assumptions for the divestitures that you've already announced. You're going to have a revenue loss, obviously, or a reduction, but also David Shedlarz mentioned a comment about how you'll be recording gains associated with divestitures in the operating earnings now, so if you could go through that in some detail that would be helpful also. Thank you.

That one is not quite what you think but we'll get to that in a minute. Spiriva is under review. We don't comment on progress of registration until we have approval, so you'll hear from that when we have that approval. Joe, could you update us on laso?

Yeah, lasofoxifene is the term, and we have ongoing studies looking at fracture rates and bone loss, and those studies are recruiting very well, some of them have finished recruiting and they're in follow-up stages. So, we're doing very well with the recruitment, we're doing very well with the finalization of the studies, so when the period of time looking at the fracture rate, and that's really what it is, fracture rate end point, that you need to file, for an interim for the U.S., and absolute fracture rate finalization of that study for Europe. When those are all completed we will be filing. So we're confident that these studies are moving along very well.

Just one small point on your Spiriva question. We were not asked to refile Spiriva anywhere. There's was one filing , it's being reviewed by the regulators around the world.

Spiriva is -- [inaudible] really responsible for this, and they've been involved in ongoing interactions with the FDA, addressing any queries that come up.

And it's been launched in many countries around the world, of course. David, could you explain the wrinkle on the divestitures already announced?

The likely divestitures, one has been announced, which is the legacy Pharmacia diagnostics business, the other one, which we're exploring strategic options, is likely to be divested as well, is the surgical ophthalmology business, and then over and beyond that we have some minor consumer product lines that we're likely to divest ourselves as well. In terms of the treatment from a forecast point of view, with the forecast for the revenues of $54 billion as well as the forecast for $2.13 assumes that we divest those businesses, so to say it another way, do not include any contribution in terms of revenues or income from those expected divestitures.

As it relates to the diagnostics business, which is likely to be consummated sometime during the first quarter of this year, the gain on that sale will go to goodwill, not the net income figure. So we've taken a fairly conservative approach to the forecast, eliminating both the revenues and the income from the expected divestitures.

Okay. Next question.

Thank you. Our next question comes from Burt Hazlett. You may ask your question, and please state your company name.

Sun Trust. My question's on Inspra. Could you remind of us the intellectual property protection on that drug, and is there a potential for a combination pill, there. And pregabalin, how much emphasis do you intend to pay on generalized anxiety over time with this novel therapy?

Karen? You want to take those two on.

I'll take the second one because I'm trying to figure out what the first one was. That's a huge potential indication for this important product and it will receive the full support of all the resources we can put against it, in order to make physicians and patients aware of the availability of, and this very, very prevalent condition. And Pat is going to answer the, I think the Inspra protection.

I think to our knowledge the intellectual property protection for Inspra in the United States is through 2009.

And there is opportunities for combination products, obviously, which would have further protection.

That's correct.

Okay. Next question.

Thank you. Our next question comes from Craig Baskin. You may ask your question, and please state your company name.

Hi, I'm at [Loomis Sales]. I'm having a little trouble understanding some of the accounting treatments, so I'm sorry to ask some of the questions again. With respect to the gains on the sales of businesses, those gains are going to be reported where?

Gain on the sale of the diagnostics business?

Yes.

This is within 12 months of acquiring the firm. We're required to take that as an adjustment to goodwill. It hits the balance sheet, not the income statement.

Okay.

Gain on the sale of businesses beyond the 12 months time horizon, in April of this year will hit the statement of income.

And that would be in the other income area?

Likely to be in the other income area.

OK, and may I ask one more question, please? Do you have an estimate of the total revenues that -- the revenues from the businesses that you expect to sell this year? Do you have an estimate of what those revenues would be?

Approximately $700 million.

Thank you very much.

Next.

Next question comes from Carl Seiden. You may ask your question, and please state your company name.

Thanks. I'm with JP. Morgan. Two questions if I could. You've been clear about the fact that your guidance includes an assumption that there's no generic competition for Neurontin this year. Wondering if you could just guide investors a little bit, if an investor chooses to be more conservative and assumes that there is generic competition for Neurontin at some point this year, should we assume that the gross profit hit is the EPS hit, or in that kind of a situation is there discretionary spending that you think you could change to offset that? That's question number one.

And number two, if I could, just to come back to a very early question about what looked like big sequential growth on SG&A, David, I think you characterized that as being due to some of the legal charges you've taken, but I'm not clear on that because I think in your Q and A section you talk about those expenses being in "Other" income and deductions net, and even when we work up to your adjusted EPS number, the SG&A that I think we should imply as part of that build, still shows a pretty robust fourth quarter, so I'm not sure if I'm understanding this. Thanks.

On SG&A the primary contributing factor is, you to have include Pharmacia and Pfizer together, and that's the key driver in terms of comparing it to legacy stand-alone Pfizer in the prior year. So that's one of the key drivers, and that's been pretty much the case across the entire year, since we've acquired the company.

And where did the legal cost go?

Legal, the Neurontin and the Rezulin legal costs may have gone into other deducts.

OK, so Carl, your understanding was correct, it is the comparison of the combined this year, versus Pfizer alone last year. Thanks for that clarification.

If you look at total expenses, they're both drivers in terms of the growth.

Okay. And with respect to Neurontin, yeah, the gross profit would be at risk. There is some modest discretionary spending reduction related to that, but not a lot at this point in its lifecycle.

Thank you.

Next question comes from Mara Goldstein. You may ask your question and please state your company name.

Yes, it's Mara Goldstein with CIBC. Your press release on Rezulin, your press release did say that roughly, I don't know, almost 40% of individuals who chose not to participate in the settlement have not filed claims against the company. Is there some statute of limitations surrounding when they can file?

And then secondarily, I'm just -- I just have a question on Cox 2'sEurope. I believe back in December the EU suggested stronger warning labels on Cox 2 with respect to cardiovascular and GI disease, and I think there's some decision forthcoming soon, and I was wondering if you might comment on that.

Jeff, could you comment on Rezulin? Lynn?

Sure Mara, first of all, the number of people that still have pending claims is closer to 20% of those that had been pending, and the settlements we're announcing today is about 80%.

And of those 20% that are left, I think it's important to note that most of them have actually not filed lawsuits and those that have, have cases in federal court. And it's -- you're right, many of these people may face statute of limitations issues in their cases but more importantly many, if not most of them, may prove to have claims that entirely lack merit.

In fact, one of the interesting things that developed here as we went about resolving the 35,000 cases we're talking about, is that the plaintiffs' attorneys, on review of their client lists, discovered literally thousands of claims on behalf of people that they could not locate, people that they could not establish ever took Rezulin, and people that they could not establish were ever injured by it.

So, I would caution you not to get caught up in this numbers game because the gross number of cases that are filed or pending is really no evidence of how many serious case there are.

And Joe Petschko, on Cox 2 labeling in Europe?

The [inaudible] they conclude that there was some modification that they wanted of current labeling, so it looked really at the current GI cardiovascular labeling and made some minor modifications. However, we do not have the final opinion announced for the European Commission or the labels of competitive product. We're comfortable right now with what's been added, but we don't know how this translates into the competitors' labels until the final announced opinion [inaudible] comes out some time early this year.

So you don't think it will be a class change in label?

I think Joe just said we don't know. We are, however, extremely comfortable with the data, so we'll to have wait until there's a decision.

Okay, Thanks.

Next question, please

Next question comes from Bill Sandow . You may ask your question and please state your company name.

R C M. Congratulations on a strong quarter. I noticed in your release that you mentioned the FDA has accepted your filing for pregabalin, and I also saw that you broke out specifically, for the first time, to me at least, the neuropathic pain indication you're seeking, one of them is diabetic neuropathy. Are there any other drugs for this labeled indication, and if not does, this mean that you'll get a priority review for at least this indication?

Joe Petschko?

We're not aware of other drugs that have this indication. We don't really comment right now on the review status. As I said before, the interactions going well with the FDA, and the drug has been accepted for filing, and we're interacting with the FDA right now.

Okay, next question.

Our next question comes from Scott Henry. You may ask your question, and please state your company name

Yes, I'm from Oppenheimer. Two quick questions. The first, if you could comment on the net pricing environment for Lipitor, if we kind of add in the price increases and subtract out the discounts, and the second question, with regards to foreign exchange, it's pretty easy to figure out the impact on the sales line. I'm wondering if you could comment on the magnitude of impact on the gross margin line.

Okay. Pat Kelly on the net pricing environment for Lipitor.

The net pricing environment for Lipitor is such that we believe that based on the benefits this product provides to physician and patients, that it is priced appropriately to those benefiting, and that we will accrue the benefit that comes from increased use of the product and increased pool of patients. Beyond that we can't comment on any kind of calculation of what we offer in terms of other kinds of price.

And David on foreign exchange impact on production margin?

Beyond characterizing the impact of foreign exchange at the top line, we do not characterize it elsewhere in the P&L. I will tell you, though, on a relative basis it had a bigger negative impact on cost of goods than it had a relative favorable impact on the revenues.

That's always a difficult question because it -- the foreign exchange impact goes through product costs and you usually have a lag, so the impact on the top line is immediate, the impact on product cost is lagged, and it's always a bit of a mystery. Next question.

Next question comes from David Moskowitz. You may ask your question and please state your company name.

Friedman, Billings, Ramsey. Thank you. I wanted to talk about the cholesterol market, the growth characteristics. We've seen an acceleration, or reacceleration in growth there. Could you talk about what's driving that, in particular could you talk about why it was essential flat to down in the first half of last year, and then obviously Lipitor's performance has been strong and has been a market growth in that segment. Could you give us your view on why you think Crestor's launch is being kept at bay?

Pat Kelly?

We would agree with your analysis that the crestor launch is being kept at bay, which is where it belongs. In general, I think the -- any growth in the cholesterol market in general, reflects and, in fact, underreflects the reality that there are still many hundreds of thousands, if not millions, of patients with elevated cholesterol that are still not diagnosed and if diagnosed are not treated to goal.

And we still have the agent available in Lipitor that is best able to get the largest number of patients safely to their cholesterol goals. So that's the fundamental growth factor we think in the market.

The ups and downs that have occurred over the past year reflect the kind of dynamics between generic availability, some of the older products, the increasing use of some combination products, or products in combination in general, as well as increased concerns around the safety of some sets, all balanced by the increasingly powerful clinical benefit and safety record of Lipitor.

Okay. And now for our final question.

And our last question comes from Cecil [Godman]. You may ask your question, and please state your company name.

Yes, Hi. Highland Capital. Thank you very much for taking the question, and I appreciate this. Dave, I wanted to go, in trying to go through the forensics of pulling back and getting the operating numbers where you got on the earnings per share number, is there a way in looking at this that you could actually just share with us on an operating basis what your cost expenses are, and your SG&A number when we make these adjustments? Because what I've seen out of the street, I've seen four examples, and they're all four different. Would you help us at all there?

You have a pretty rich reconciliation between the GAAP and adjusted figures which are included.

Right.

In your package, and you have the consolidated statement of income, you have, then, some notes to that, on the next page you have a full page worth of material which will allow you to go through that calculation in great detail, especially footnote number 7 sitting on that page, which highlights to you the adjustments that were made, and also if you take a look at the footnotes it tells you exactly where in the statement of income that would be impacted. So if you use that construct, you'll end up in the right place.

Okay.

With that we conclude today's conference call. We appreciate your interest and more importantly your support of Pfizer. Thank you all.

Thank you.