輝瑞 (PFE) 2004 Q1 法說會逐字稿

Thank you Dr. McKinnell, you may begin.

Hello, everyone and welcome to Pfizer's 2004 conference call and Web cast.

I'm Hank McKinnell, Chairman and CEO of Pfizer.

I'm joined this afternoon by several members of our companies leadership here in New York.

You will be hearing from several members of this all-star team during the call.

As always, thank you for being with us.

We begin 2004 on a very positive note.

I'm very pleased with our financial results which David Shedlarz, our Chief Financial Officer, will discuss briefly.

With the performance of our inline products, with one exception which I suspect we'll discuss.

And more importantly, longer term, the wealth of positive clinical support for our marketed products which Karen Katen, President of Pfizer Global Pharmaceuticals will discuss.

During the quarter we also achieved many important milestones in bringing the next generation of Pfizer medicines to patients, which John LaMattina, President of Pfizer Global Research and Development will discuss.

David?

Thank you, Hank and good afternoon, everyone.

Pfizer has a strong platform for growth in 2004.

First quarter revenues grew 47% to nearly $12.5 billion.

Revenue growth was driven by the inclusion of post-acquisition results of Legacy Pharmacia products and strong performances across a broad range of products and the weakening of the U.S. dollar relative to other currencies.

The prior year results represent Legacy Pfizer only given the April 16th, 2003 close of the Pharmacia acquisition.

Pfizer reported net income in the quarter of over $2.3 billion, or 30 cents per diluted share.

The operating results of the [INAUDIBLE] in-vitro allergy and autoimmune diagnostic testing business, European Generics businesses, surgical ophthalmology products and certain non-core European consumer healthcare products have been reclassified as discontinued operations.

As a result of this restatement, Pfizer's first quarter 2004 and first quarter of 2003 revenues are reduced by $150 million, and $19 million respectively.

Reported net income and reported die earnings about per share also included non-cash charges of about $1.5 billion, relating to purchase accounting for the acquisitions of Pharmacia, Esperion and two Animal Health businesses.

Also reflected merger-related costs of $160 million, and a certain significant item of $19 million.

All on an after-tax basis.

Excluding these items and discontinued operations, adjusted net income grew 58% to about $4 billion.

And adjusted diluted earnings per share increased 27% to 52 cents compared to the first quarter of last year.

With the solid first quarter behind us, our targets for strong financial performance throughout 2004 remain unchanged.

Revenue of about $54 billion, adjusted income of $16.3 billion, and adjusted diluted earnings per share of $2.13.

Achievements of these targets, of course, is subject to the many variables, including foreign exchange, cited in the disclosure notice in our core performance report.

Also unchanged is the accounting implicit in those targets.

Our stated targets for 2004 have always been based and continue to be based upon the definitions of adjusted income, and adjusted diluted earnings per share reflected in first quarter 2004 financial reporting.

As such, they exclude the contribution of planned divestitures and include the expense of milestone payments to development partners.

For comparison purposes, first quarter 2003 adjusted income, and adjusted diluted earnings per share have been restated to conform to the 2004 format.

We continue to project merger-related cost synergies in 2004 of about $3.4 billion, and we plan to spend about $7.9 billion in research and development during the year as well.

Our current targets for 2004 reported net income of $11.9 billion and for 2004 reported diluted earnings per share of $1.55 reflect additional in-process research and development expenses for Esperion and for two Animal Health acquisitions of $955 million, which were reported in the first quarter.

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 2003 annual report on Form 10-K and our periodic reports on Form 10-Q and 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 for the most directly comparable GAAP financial matters in our current report on Form 8-K, dated April 20th, 2004.

This report is available on our Web site, at www.Pfizer.com in the Foreign Investors SEC filings by Pfizer section.

And now Karen Katen.

Thank you David.

Good afternoon, everyone.

Pfizer Pharmaceuticals continued its strong performance in the first quarter. 11 products including Lipitor, Norvasc, Celebrex, Zoloft and Zyrtech and Xalatan each achieved revenues of more than a quarter billion dollars.

Our cardiovascular portfolio continues to benefit from the significant investment in clinical research we have generated to support the value of our medicines.

Lipitor, the world's largest selling pharmaceutical, generated revenues in the quarter of $2.5 billion, ahead 19%.

Quarterly revenue for Norvasc, the fourth largest selling medicine and largest selling anti-hypertensive in the world grew 16% to reach $1.1 billion for the quarter.

Four of the world's 11 best selling medicines are commercialized by Pfizer and 14 of our medicines lead their therapeutic categories.

We are aggressively rounding out our portfolio of blockbusters with clusters of specialty products focused on meeting urgent medical needs such as Multiple Sclerosis, oncology and opthalmology.

Our largest product, Lipitor, maintains its position as a leading statin worldwide.

This leadership is built on a solid record of efficacy, safety and customer trust strengthened by an expanding clinical database.

I'm sure have you all seen the extraordinary stream of new data that arrived in the first quarter.

Among recent new studies highlighting Lipitor effectiveness and safety, the reversal study published in "Jama" shows that aggressive lipid lowering with Lipitor, unlike moderate lipid lowering with Pravacohl stops progression of osteosclerosis in people with coronary heart disease.

In the proven study funded by Bristol-Myers Squibb, Lipitor proved more effective than Pravacohl in lowering heart attack victims cholesterol levels, increasing survival and preventing other cardiovascular events reinforcing the results of the reversal trial.

In January, our unique new medicine Caduet, duel therapy of Norvasc and Lipitor became the first medicine approved by the FDA for the simultaneous treatment of high blood pressure and high cholesterol.

The two leading risk factors for heart disease which, of course is the leading cause of death in the United States.

Approximately 30 million people in the U.S. have both conditions; although, fewer than 10% have achieved their recommended treatment goals.

Caduet will be available in multiple dosages to offer doctors and healthcare givers a variety of treatment options.

We plan to begin presenting the Caduet data and value to doctors in the U.S. next month.

On January 30th, the same day as the Caduet approval, the FDA also approved the Spiriva handy haler, for chronic once-daily treatment of broncho spasms associated Chronic Obstructive Pulmonary Disease.

Spiriva is being co-promoted by Pfizer and Boehringer Ingelheim, whom as you know is were the product originated, and it's doing well in more than 40 markets.

The U.S. induction of Spiriva is planned for mid-year '04.

The intergroup Exemestane study, Exemestane is the generic of Aromasin.

A recent clinical trial for breast cancer, published in "The New England Journal of Medicine" found that patients switching to Aromasin, which of course is Exemestane, after two to three years of Tamoxifen therapy, experienced a 32% reduction in the risk of recurrence of breast cancer at three years, as opposed to those continuing on Tamoxifen.

The study was stopped early because of the significant clinical benefits of Aromasin.

Based on these results, we will ask the FDA to change the label for Aromasin to include earlier use for women with breast cancer.

Our company, continues to lead the worldwide pharmaceutical industry, not only through our portfolio of leading medicines but also through our initiatives to help patients get access to the medicine that they need.

Under Pfizer's innovative program, Florida Healthy State, more than 110,000 Medicaid patients suffering from asthma, hypertension, heart failure, diabetes and related conditions have received personalized counseling, health education, and home health aids.

Florida has seen as a result important improvements in patient health metrics and has been able to reduce its Medicaid spending.

This integrated approach encourages the appropriate use of medicines and helps to reduce other healthcare costs, while improving patient care, and health outcomes.

We have now introduced a similar program in the UK through a pilot partnership with the National Health Service that is designed to improve the health of elderly patients suffering from congestive heart failure.

Through our leading medicines and efforts to ensure that patients get those medicines when they need them, we are striving to help millions more overcome barriers to achieving good health.

In the U.S., the Pfizer for Living sharecard has helped more than a half million people get affordable access to medicine with nearly 5 million prescriptions filled to date.

Response to the program from sharecard members has been and continues to be overwhelmingly favorable.

Now, John LaMattina.

Thanks, Karen.

First quarter of 2004 was a period of major achievement for R&D.

We continue to accomplish key regulatory objectives and we expect additional milestones throughout 2004.

We are making steady progress towards our unprecedented goal of filing 20 major NDAs in the five-year period ending in 2006.

Among the quarter accomplishments, in February Pfizer and Aventis applied in the EU for marketing approval of Exubera, our inhaled insulin product for the treatment of type one and type two diabetes.

Exubera will be the first new route of administration of insulin in the last 80 years since insulin injections were first introduces.

Also in February, Pfizer and Altana applied the EU for marketing approval of Daxas which is expected to be the first PD-4 inhibitor approved for both COPD and asthma.

During the quarter Pfizer filed supplemental NDAs for labeling changes for Geodon and for use of Fragmin in the treatment and prevention of venus thrombo-embolism and cancer patients.

And Viagra has been granted [ INAUDIBLE ] drug status in the EU for the treatment for pulmanary arterial hypertension.

As you heard from Karen our spectacular results with Lipitor as demonstrated in studies such as reversal, card and prove it, are changing medical practice in treating high levels of LDL.

Similarly, we are heavily committed to what we believe is the next frontier of cardiovascular medicine, that of ACL elevation.

We have tangibly demonstrated this commitment with our recently completed acquisition of Esperion Therapeutics and our internals of torcetrapib/Lipitor combination program to distinct yet complimentary approaches to treating low ACL.

Our Esperion division is exploring large molecules such as ETC-216 for use in Post-MI patients and [ INAUDIBLE ] syndrome.

On the small molecule front the combination of our cholesterol [ INAUDIBLE ] protein inhibitor, [ INAUDIBLE ], with Lipitor will provide a chronic use therapy with a promise of drastically reducing cardiovascular disease, a major burden on the healthcare system.

Finally, we continue to drive the multiple and diverse components of our late-stage pipeline including the injectable COX-2 sective inhibitor, Dynastat for pain and inflammation, Lasofoxifene for osteoporosis, [ INAUDIBLE ] for insomnia under co-development with Neurocrine, Macugen, for acute macular degeneration under development with Eyetech. [ INAUDIBLE], an NNRTI for HIV/AIDS.

The combination of Zithromax and Chloroquinefor malaria, Asenapine for schizophrenia and and bipolar disorder under co-development with Organon.

Edotecarin for colorectal cancer and SU-11248 for gastrointestinal stromal cell tumors and other cancers.

The depth and breadth of this pipeline is unmatched in the industry and will enable us to fulfill our challenging goal of 20 NDAs in the five year period ending in 2006.

Thanks.

Thank you, John.

I guess research is back.

We are continuing our long-standing commitment to all stakeholders to deliver outstanding business results while expanding access to innovative medicines and demonstrating good corporate citizenship.

We also recognize the critical role we play as the world's largest company committed to healthcare.

A role now recognized by the inclusion of Pfizer in the Dow Jones Industrial Average.

We are very proud of this milestone and the contributions being made by our 122,000 colleagues around the world. 2004 will be an exciting year for Pfizer, as we continue to advance our mission of becoming the world's most valued company to patients, customers, colleagues, investors, business partners and the communities where we live and work.

And now, your questions please.

If would you like to ask a question, please press star and then one on your phone.

Our first question comes from David Risinger.

Sir, please state your company name.

Yes, Merrill Lynch.

My question is related to additional clarity on Torcetrapib.

You had mentioned in your press release that 12,000 patients are enrolled in clinical trials and separately, you have plans for enrolling 13,000 in morbidity and mortality trials.

If you could please help us understand how many trials are on in the first bucket of 12,000 patients, and is it right to assume that you plan on filing Torcetrapib on a subsegment of the 12,000 patients and, in addition should we expect clarity on filing timing at your analyst day later this year?

Thank you.

Thank you, David.

Well, we just kicked off those studies recently so we certainly don't have 12,000 patients already enrolled.

Being enrolled might have been better grammar.

And we file when we're ready to file.

We cannot announce those until we file them.

But Joe, do you have some comments on the trial design?

Yeah.

The bulk of the filing package will -- I think we stated this before, it is a series of -- it's in a flux of try trials.

One bucket is a series of trials looking at imaging that is a key end point.

We are looking at regression and change in size of atheromas in the coronary arteries and in the carotid artery.

And we're using ultrasound technology, as well as traditional ultrasounds on necrotic.

And those are large, fairly large studies looking at changes over a two year period.

In addition we're doing some traditional comparative studies against other lipid lowering agents just looking at changes in lipid corrections LDL, HDL and a variety of subtractions.

That's the bulk of the phrase three program and then the morbidity trial is separate from that and it will be ongoing at the time of filing.

Thank you.

Timothy Anderson, you may ask your question.

Thank you.

Excuse me.

A couple of questions.

The first is: When looking at sequential total company revenues, I'm just trying to figure out how first quarter total revenues could be about $1.7 billion below where they were the first quarter of last year.

I guess if you correct for discontinued operations it's closer to $1.5 billion.

It doesn't look like it's the trend that's been seen in the past either with Pfizer or Pharmacia at quarters.

And I'm wondering why the big Delta going from last quarter to this quarter sequentially.

And then on gross margins obviously a nice figure in the quarter and the highest in the industry.

But I'm wondering how much more margin improvement is possible and what is the realistic theoretic upper limit on gross margins for the company?

Well, fourth quarter to first quarter revenue changes do reflect discontinued operations.

More importantly, though the fourth quarter is always bigger than the first quarter.

That's not surprising in our business.

We're very pleased with the revenue growth in the first quarter.

You can see that going down the individual products.

And except for Zithromax which reflects a stronger flu season last year and, of course Viagra which I'm sure somebody is going to ask about here.

And David on gross margins.

The gross margins of the company in the first quarter are reflecting a number of factors.

Especially relative to the prior year.

They reflect the mix of Pharmacia and Pfizer products in the first quarter of last year we only had Legacy Pfizer products.

It also reflects the fact that the foreign exchange, while it's climbed to the top line is not kind with regard to expenditures.

And lastly, last year we were recording the benefits of our commercialization of Bextra and Celebrex with Alliance revenue without the cost of goods and this year we are recording both the revenues and cost of goods.

Now having said that, the fact that Pharmacia had a lot higher relative cost of good and it points to an opportunity that we fully expect to take advantage of in terms of rationalizing the manufacturing operations and, in fact, part of the $4 billion synergy that we're looking forward to.

Hence little longer lead time attended to and that's tied in the regulatory underpinning some of our manufacturing rationalizations.

Just to underscore that, this time last year, just after closing, we had, I think 93 manufacturing plants around the world.

We're down to about 86 now.

And that number goes down every couple of months.

Next question, please.

James Kelly, you may ask your question.

Please state your company name.

Goldman Sachs.

Good afternoon.

I'm asking about the difference between the adjusted earnings and the GAAP earnings.

And David, I just want to make sure I understand for the gain on sales of discontinued items, and the gain on sales, if you are selling product lines, will these items both be excluded from the adjusted number?

My first pass on the first quarter of '03 in the adjustment said that a small item came back into the adjusted number and I just wanted to be clear.

Thank you.

Well, Jim, thanks for the question.

The biggest exclusion, of course was something like $2.5 billion in gains on sales of two of the consumer products businesses.

But, David, is there anything else?

Yeah, the $2.2 billion associated with the divestiture last year in the first quarter of our Adams business, and our Schick shaving business is the primary contributing factor.

Now having said that, the $2.13 does not include any impact of divestitures because we don't have any plan at this point in time that we can put a number around.

So to kind of clear up the $2.13, it doesn't reflect any benefit or detriment from the sale of businesses because none have been contemplated and estimated at this point.

Thank you.

Ken Kuljo, you may ask your question.

Please state your company name.

Yes, Credit Suisse First Boston.

Thanks.

Question on Caduet.

I wonder if you could comment on the relative positioning of this drug.

Obviously, it's somewhat designed to cannibalize Norvasc ahead of the patent expiration.

Could you give a better feel for the number of patients who have who are on Lipitor and Norvasc and what type of metrics are you use internally to get to essentially gauge the success of the Caduet launch, relative to Lipitor as well as relative to the established Norvasc franchise.

That would be very helpful.

Thanks.

Thank you, Ken.

Karen, you can start?

I will take a stab at it and then my colleagues can fill in the blanks.

We're obviously very excited about Caduet.

We won't talk about the product positioning at this point and time.

But we are launching it at the end of this month with the feel force in the U.S. and so far, will only metric we have is the degree of stocking and the interest in the stocking, which has been considerable.

Though that, in fact, substantially more than our usual launch average.

So that there seems to be a general excitement and interest in the product in the -- at least in the pharmacy community.

And I will ask for Carolina and Greg Duncan to comment on their worldwide and U.S. experience.

Which is -- which is non-existent yet.

Lipitor is to cannibalize Norvasc.

It is to treat two risk factors hypertensions and lipids which are very rarely treated to go.

Physicians will start treating hypertension and then much later on, and sometimes not at all, we'll deal with lipids and we have seen in the ascot study that actually patient hypertension should be treated aggressively during the disorder.

So the key rationale behind Caduet is to give physicians the opportunity and the tool to treat both conditions together.

The overall patients taking both Lipitor and Norvasc is not very high.

It's something like 4 or 5% of the patients.

So that's clearly not the main driver for us.

It's really making sure that patients are controlled for both conditions which are 90% of those patients are actually treated.

Thank you.

Greg?

To put that in further prospective, the [ INAUDIBLE ] patient group of [ INAUDIBLE ] hypertension dyslipidemia is 21% larger than the overall hypertension patient base at large and as Rick Kelly mentioned less than 10% of those patients are actually at goal and Caduet has demonstrated it can get six out of ten patients to goal.

And importantly right now there's only 3% of that total pool of 21 million patients who are on Lipitor and Norvasc at the same time.

So effectively, roughly speaking 97% of those patients are a terrific opportunity for an upgrade.

That's why cannibalization would not make sense.

Okay.

Thank you.

Carl Seiden you may ask your question.

State your company name.

Thanks very much.

I'm with J.P. Morgan.

A couple of questions on Pregabalin.

Although we understand that the FDA filing was simultaneous for the various indications, I'm assuming it will be separate parts of the FDA.

Are you expecting a simultaneous approval process or do the indications now go on their separate paths?

And separately, could you tell us therapeutically, how you would characterize the advantages of Pregabalin, versus Neurontin specifically in treating neuropathic pain.

And last, in the Q&A section of your release today you talked about the objective of moving Neurontins use for neuropathic pain up to the 800 milligram per day dose.

Can you put some numbers on how successful that has been?

What percent was at that dose before it started?

And where you are now and where you think you can go?

Thanks.

On the regulatory pathway, it is one NDA and you are correct, there are different parts of the FDA doing simultaneous reviews, but it does come back together then into a final approvable process for the NDA.

Joe, on differences between Pregabalin and Neurontin, these are, of course, different chemical entities.

There are a number of significant differences from dosing to [ INAUDIBLE ], is there anything that stands out?

The Pregabalin, of course, Lyrica has -- what's been very interesting is consistently in our studies is the consistency of response that we have seen.

It is a lower pill burden.

It is a lower dosage to use and the efficacy that we have seen -- these are difficult trials especially neuropathic pain because any syndrome, often sees a placebo.

What we have seen pretty consistently with a wide range of studies with Pregabalin that are GAD, neuropathic pain, and of course, epilepsy is a consistency of response that was a little bit harder to see ---- at times.

And, again, the efficacy has been extremely good.

And more potent in terms of milligram dosages.

Lower pill burden and lower dosages.

Neurontin dose , Caroline.

I think the numbers going up and I don't quote numbers in the various countries but it is really difficult the effective of dose even though it's creeping up, it is far from what it should be.

It is estimated that probably fewer than 50% of patients have the effective dose of 1800 milligrams at present. [ INAUDIBLE ].

Thank you.

Jami Rubin you may ask your question.

Please state your company name.

Thank you, Morgan Stanley.

So I will get to ask the question on Viagra, Hank.

Obviously, new competition has created pressure on market share but we've also noted that Viagra's new RXs have declined at an accelerated base over the last quarter.

So, if you could talk about -- we obviously know what's happening there in terms of new competition but we don't seem to be seeing market expansion and growth of this category the way that I think some of us would have expected.

If you could talk about that.

And secondly, to put it bluntly it seems like Inspra is a big flop.

Can you talk about why sales were zero this quarter and what we can expect going forward.

Thanks.

Viagra is a bit of a three-part story.

First, is the international markets where competition has been on the market for about a year.

It seems to have stabilized the two competitive products are not gaining share.

They seem to have plateaued.

Many places we are seeing a shift back to Viagra.

So the international market doesn't look like much of a near-therm threat to our business.

U.S. results at least on the revenue side are magnified in way that many of you might not have thought of.

When a product goes to growing to even a modest decline, the days of inventory get magnified pretty quickly.

Because we control wholesale inventories to a .5, to .75 month level, that magnified the effect on revenues much more dramatically than scripts.

So if you look at the U.S. numbers, revenues are down about 25%, I think scripts are down about 6%.

So Viagra is actually doing not as well as we had hoped, obviously, we have a number of competitive responses underway already.

But Viagra is the one product that is is a disappointment to us and we are going to do things differently.

So let's stay on Viagra for a minute and then we'll come to Inspra.

Karen?

I'd just like to add that at the other variable that's maybe not being looked at as closely like inventory is the vouchers that both Levitra and Cialis are using to encourage the use of their products.

They counted scripts even though they are samples.

So that distorts the script count for both of those compounds.

And so that's -- that really is an additional factor.

The other issue is that we are launching a value card for Viagra and I will ask Greg to talk about it a little bit more to encourage -- to keep the loyal individuals on the medicine, and encourage the continued compliance and the use of the medicine as we go forward.

Greg?

Sure I would be happy to put it in domestic context.

It's important to note that still even with the new competition, two out of three new patients are prescribed Viagra and importantly the patient that's have stayed loyal to Viagra tend to be the heavier users, which is a much more valuable patient to us from a franchise perspective.

Those who have actually moved to both Levitra and Cialis are occasional or infrequency users.

And the Viagra loyalty program is actually targeted directly at those avid or heavy users such that those who get six prescriptions actually get the seventh prescription free.

That's turned out to be a terrific benefit to our loyal customers and we are seeing patients in the marketplace now switch back from Levitra and Cialis to Viagra.

In the most recent prescription data that Viagra's share went up modestly, while the shares of Levitra and Cialis went back a little bit

I think your point about the market expansion is a very good one, Jami.

We're disappointed that the market did not expand.

We assumed and hoped that the market would expand and carry all boats with it.

It hasn't happened as much as we expected.

So we have to -- and they are targeting, directly targeting Viagra, so we have to slog it out in the market and see what happens as time goes on and that's been very -- that's been very reasonable if you look at the European experience and the Asia experience.

So we expect that we'll see these recreational users who like to try new products in this category come back to the Viagra because of this performance.

What is reassuring is no product has been demonstrated to be better tolerated or more effective and we are now turning to the hard job of regaining shares.

So I think you'll see things look quite different in the future.

Karen or Caroline on Inspra?

Greg?

I think the -- with Inspra, I think there's some conFusion about the -- about what the drug is indicated for.

It is indicated to prevent CHF in patients who have had an MI and have other issues.

What this drug is not indicated and has never been targeted to the bulk of the CHF patients.

To give you a frame of reference, CHF has 5 million patients hypertension or lipids is 50 or 55 million.

So it is much less.

But if you are looking at the indication, it is for patients who have had a recent MI.

So the pool of patient, which is eligible at any one time is fairly limited.

So you would expect a drug with that indication aimed at those particular patients to grow very gradually, as the patient accrues, as the drug is being used in hospital and the drug is accepted by formulary and discharged protocol.

So it's a fairly long process to make it an established course of therapy within the hospital and releasing the patients.

But there is not a huge pool of CHF patients to be add.

It is indicated forever patients who have had a recent MI.

I think the other point is that the excitement about the science has confused some people because people are very excited about the science and having a medicine that works in this patient pool, because obviously, it is not been well treated but it is still a limited population.

It is more or less a niche market I guess you would call it.

The awareness and trial by cardiologist who are driving this in the institutions and driving formulary acceptance is quite substantial. 25% of the cardiologist in the U.S. have reported using Inspra.

At least in some of their patients but it is a limited number of patients.

So -- and formulary will stem from that.

Okay.

The next question.

Ken Araki, you may ask your question.

Please state your company name.

Nomura Securities.

In terms of the last three years the reclassification issue and the EPS adjustment issue.

First of all, could you please describe 2003 impact, and also when you guided 2004 EPS guidance regionally, you didn't mention these types of classifications.

Today the permission of 2004 EPS guidance imply you are underlying performance original than expectation excluding this reclassification issue.

Thank you.

I think you are mixing apples and oranges here.

David, can you help out?

Yes, the strong performance expected for the full year in terms of adjusted earnings per share is $2.13 remains unchanged.

What has transpired here is the need to properly account for our plans to divest certain businesses during the course of 2004.

And as a result, the change in accounting treatment to accommodate that.

The other factor is a more conservative approach that we have adopted in 2004 in terms of including the expenses that we currently have under contract, for co-promotion in 2004 and obviously we there to go back and restate on the same basis for 2003.

But most importantly, the adjusted earnings expectations for the company have not changed.

They continue to point to strong growth and strong performance.

Thank you.

Thank you.

Mr. David Moskowitz, you may ask your question and please state your company name.

Yes, thank you.

Friedman, Billings, Ramsey.

Good afternoon.

Lipitor you reported up 14% year-over-year growth in the U.S.

We have -- we're tracking volume growth at about 4% in the U.S.

Pricing, I think you guys have stated is up about 3 to 4%.

So the other 6%, we're assuming is from buy-in on the proven study, as well as dose escalation.

Could you talk about that incremental 6% in term of those two factors and in terms of your inventory, are you letting more inventory into the channel because of the proven study?

The answer is no, but Peter Brandt our Head of Finance for Pharmaceuticals do you want to try that one?

Sure I think if you look at some of the numbers of Lipitor performance for the first quarter are up 6.5 or 7%.

So that gives you a little bit of a gap because I think you cited the number of 4%.

To Hank's point exactly it is not anything with letting more into the channel.

Our inventory practices tight with the wholesalers in terms of allowing for only underlying demand that's pulled through not pushed in.

I think what you are looking at in our product that that has continued to reach the benefits of the clinical work that's done over the period of years and the whole body of work that adds up to an impressive portfolio.

The delta that you are referring to is within the normal ranges of what you expect when you compare revenue and inventory changes in scripts performance.

What people may not understand is we make the shipping decisions at the end of a quarter, based on two months of data.

We don't actually get the third month until two weeks into the fourth period of the year, for example.

So you will see some minor fluctuations quarter to quarter and inventory levels but over time, it averages out to our targets and over all products it averages out to no significant difference.

Now it may not be true of all companies but we see -- we tend not to see, except for these minor changes, quarter to quarter anything of significance in our inventory numbers.

You make a good point on prove it study.

We did see a bump up in scripts immediately following that publication and the "Wall Street Journal" highlighting of it.

Next question, please.

George Grofik , you may ask your question.

Please state your company name.

Smith Barney.

Thanks for taking my question.

Can you just give us a status update on the Neurontin litigation.

And secondly, recognizing that year-over-year comparisons are distorted by the acquisition, could you give a sense of what pricing contributed to sales growth in the quarter?

Thanks.

Yes, Jeff Kindler, our General Council.

Yes there's nothing really knew to report on the Neurontin litigation.

The subject motions remain pending.

The deadline for discovery concerning Apatex is September 1, 2004.

So the discovery is ongoing through the summer on that particular defendant and the summary judgment motions are pending with the court.

We have no knowledge of when the court might rule on them and no trial that has been set.

Now, pricing is pretty close to a net zero in line with our longstanding, decade-long policy of being moderate in price increases and pricing new products at a discount to major competition.

Next question.

Scott Henry, you may ask your question.

Please state your company name.

It's Oppenheimer.

Just a couple of modeling question, particularly given the Pharmacia acquisition.

When I look at the gross margin for Q1 '04, do you believe that's indicative of the full year '04 gross margin?

And as well, if you could give any color on the other income line, obviously the amortization and net interest is pretty easy to figure out but more in terms of the other line and particularly any co-promotion charges through '04.

We need to get the roles straight here.

We don't forecast margins for the year.

That's your job.

David, on other income.

Yeah, there's a breakdown of other income, which is included in the Q&A section and by far the biggest factor is is the amortization of intangibles associated with the Pharmacia acquisition.

Thank you.

Thank you.

Steve Scala, you may ask your question.

Please state your company name.

SG Cowen.

Thank you.

Several questions on Spiriva.

First, the product is off to a terrific start in foreign markets.

Can you sell us about the usage in those markets?

Is it being used as a single agent or combined with others and is it being driven by new patients or switches from other therapies?

Secondly, was Spiriva a meaningful contributor to Alliance revenue in Q1.

And then thirdly it appears one Glaxo's routes roots of attacks could be the potential urinary obstruction given [ INAUDIBLE ] colon mechanism.

I think there was four cases of obstruction in clinical trials requiring catheterization.

How do you defend against that particular attack?

Well you're right, the start has been terrific in the international markets reflecting very strong clinical data for the product it.

It clearly is becoming the gold standard in COPD.

Caroline do you want to sart with the international results?

I think the answer of where they go is the answer of all of the above.

I mean, this drug is used by itself, but it is also used in combination other agents, just becoming the norm to treat COPD patients.

And the amount of operating from the former form of the drug depends very much on the countries and how big it was.

But regardless of how much -- what's the mix of agent in the various countries the drug is being used widely and it is seen as the gold standard agent.

And we have never broken down Alliance revenue in total.

It's about $144 million.

Part of that is clearly Spiriva and this vicious Glaxo/Spiriva attack, Joe?

Well, they are antagonists.

I guess it was given orally or with high blood levels.

We're not aware of any significant problem.

We're not aware of a problem really being reported to us and we have to remember, it is inhaled and it works predominantly locally. [ INAUDIBLE ].

You avoid systemic toxicity and have local effects.

I'm not aware of -- they may be saying it but I'm not aware of this being a problem out in the clinic, in the medical situation.

Thank you, David.

Tony Butler you may ask your question.

Please state your company name.

Lehman Brothers.

Thank you very much.

Hank, perhaps a little more of a boring question on June the 1st a number of discount cards will become available to Medicare recipients.

I'm curious of your view how it will affect the industry.

Moreover, how will it affect Pfizer's own card?

Would you argue that it is in direct competition?

Will Pfizer make some adjustments to its card on a forward-looking basis?

Thanks.

Good question, Tony.

I think -- there's pleasant news coming on the discount cards.

There's almost 30 of them.

I think the discounts will be far more nationwide.

The discounts will be far more significant than anybody is expecting.

So into these modest expectations there will be a very significant discount benefit here for all seniors, and particularly for low income seniors who benefit from a $600 credit against these cards.

Our own card will be integrated into a larger offering called the you share card and that will be available next month and Peter Brandt you might want to talk a little bit about the specifics of that.

Yes, there are at least 30 national offerings out there.

We anticipate there will be over 100 offerings in total when you include some of the regional or local plans that will be offering discount cards as well.

And, again, to echo the points that Hank made, I think the ability to generate meaningful discounts is going to be profound in this.

I think the card that we have, which Hank said will be the you share, it won't be the Pfizer offerings but one if not a couple of other pharmaceutical companies giving the same type of benefit, if you will, as opposed to top-line discounts that we have seen in the sharecard.

We have been offering a 30-day supply of any of our products for $15 as a flat fee as owed to any type of a percentage off a much higher number.

I think the ability to get these into eligible individuals' hands is going to be the true test of these cards.

And I think every company that's behind one is gearing up to rather large effort to do just that.

And, of course we start with more than 500,000 elderly and disabled already enrolled in our card.

So I think the power of those cards is going to be a pleasant surprise.

There's also, as you may know, a massive Medicare prescription drug benefit educational campaign underway, which I think is going to -- we know from our own research once seniors understand the benefit, they like it a lot better.

So I think you are going to see some good news on the pharmaceutical pricing side pretty quickly.

Thank you.

Jim Baker, you may ask your question.

Please state your company name.

Neuberger Berman.

I wanted to ask you about cash flow expected for this year.

Last year you spent a little over $3 billion for pension contribution and restructuring and outlays for Pharmacia.

And I think I recall that at your June meeting last year, you thought cash from operations could be something approaching $18 billion in 2004 with capex maybe in the $2.5 billion range.

Could you comment on that?

And in particular, what sort of pension contribution and restructuring outlays you expect this year.

Good question, Jim.

One of our real strengths.

David?

Yes.

At first just dropping back to 2003, and putting that in some context, we were expecting about $13 billion in cash flow from ongoing operations.

And we achieved slightly in excess of that.

So it was an excellent year both in terms of the income statement, and also the cash flow from ongoing operations.

And as we now look to 2004, while we haven't put an official number out there, we're still looking in the range that we formerly highlights in terms of cash flow expectations and as it relates to additional contributions to the pension plan, we don't expect any significant additional contribution during the course of the year.

And restructuring outlays?

The restructuring outlays in total, still on the term of the overall program expected to be about $5.5 million but about $2.25 million this year.

Okay.

And just one other thing, do you have figures for what your sales for the COX-2 franchise would have been in the first quarter of '03 because I don't think Pharmacia ever actually reported last year and that might just be useful thing to know.

Of course it was only Celebrex last year in the first quarter.

We have not done the pro forma for the first quarter of last year.

We don't report anything other than what we actually operate.

Okay.

If I could just refer to one thing you did report, though, last year, you did publish a number in the -- the 10-Q last year which basically indicated that pro forma sales for the first quarter of '03, for the combined companies would have been $11,632 billion and you can deduce that by subtracting the second quarter from the six months.

Now, I don't think that's comparable to what you would say this year because I guess there have been certain -- you know, things that you have classified as discontinued and possibly some small divestitures over the course of last year.

Could you give us some feeling of how that $11.6 billion might be revised to really make it comparable to $12.5 billion you reported today.

Again, we steer clear of reporting out unless absolutely required.

And the pro forma you are talking about si pro forma required for SEC filing purposes but they are not numbers that we derived.

They are numbers that Pharmacia derived and we are obviously not going to speak to those and obviously it's not appropriate for to us adjust them either.

We didn't operate the business, it's hard for to us comment on it.

I know you will not be reporting similar pro forma numbers this year in the queue or maybe you will?

That's correct.

We won't -- whenever we can avoid presenting pro formas especially for something we have not operated.

Thank you, gentlemen.

Okay we have time for one more question.

Mara Goldstein, you may ask your question.

Please state your company name.

It's Mara Goldstein with CIBC World Markets.

Just a follow-up on Viagra if I may.

It seems that the answer to Jami's question are not representative of market dynamics or somewhat due to inventory adjustments.

Should we infer that reported sales in the second quarter are likely to be closer to prescription trends or is it your expectation that this process will take a bit longer to work its way through the P&L?

It may take a little longer.

Our policy is always trying to target normal inventory levels at quarter end.

It is going to depend in part on what happens to prescriptions during the quarter.

If they are continuing to go down, which is not my expectation, that then magnifies the inventory effect.

If they start going up again, this ratchet starts going the other way.

So it depends on what happens during the quarter.

Okay.

Thank you.

Thank you, Mara.

With that question we conclude today's conference call.

We appreciate your time and support of Pfizer.

Thank you.