輝瑞 (PFE) 2005 Q1 法說會逐字稿

Dr. McKinnell, you may begin.

Hello everyone and welcome to Pfizer's first-quarter 2005 conference call and webcast.

I'm Hank McKinnell, Chairman and CEO of the Company.

I'm in New York this afternoon with my colleagues from Pfizer, some of whom you will be hearing from shortly, others you will hear from in response to your questions.

As always, thank you for your time, your interest and your support.

Once again, Pfizer delivered steady performance in the first quarter.

I say Pfizer, but Pfizer today is really two companies, the product of two underlying forces.

One Pfizer markets the broadest array of in-line and new products in the industry.

Excluding the U.S. revenues of Neurontin, Diflucan and Accupril, products that faced generic competition beginning in 2005, and excluding Celebrex and Bextra, which faced unique challenges, Pfizer revenues for the first quarter of 2005 grew 19%.

Our Consumer Health Care business grew 17% and our Animal Health business grew 16% in the quarter.

The other Pfizer is the business going through the natural process of addressing the loss of exclusivity of a number of products, a situation that we had long planned for by advancing a number of internally developed in-licensed and co-promoted product candidates and maximizing revenues from our wide array of in-line products.

As a leader of the worldwide pharmaceutical industry, we have important competitive advantages that serve us well and distinguish us from others.

The unparalleled breadth and depth of our product portfolio and pipeline, plus our proven skills at leveraging the opportunities this provides, will serve us well.

Scale also enhances our status of partner of choice with other companies who have promising product candidates and technology, as well as giving us influence as a global purchaser of goods and services.

Our strategic and operating flexibility allows us to marshal and focus resources when and where they are needed, to change with a changing environment and to recognize and seize opportunities and our will to succeed in the important work of improving human health remains as strong as ever.

Now I will ask David Shedlarz, Vice Chairman, to provide comments on the quarter and the outlook for 2005, followed by Karen Katen, Vice Chairman and President, Pfizer Human Health.

David?

Thank you, Hank, and good afternoon everyone.

As Frank indicated, Pfizer performed well in the first quarter and the Company's long-term prospects remain strong.

Pfizer revenues for the first quarter of 2005 grew 5% to $13.1 billion, compared to the first quarter of 2004, reflecting strong performances by Lipitor, Zithromax and other major product lines.

Revenue growth was also due to three additional days in our fiscal calendar in the quarter compared to the prior year, as well as the weakening of the U.S. dollar relative to a number of foreign currencies offset in part by sales declines for Celebrex and Bextra and recent generic competition in the U.S. against Neurontin, Diflucan and Accupril.

Cost of sales as a percent of revenues in the first quarter of 2005 was adversely impacted by changes in production volume as well as geographic, segment and product mix, largely reflecting the loss of exclusivity of certain major products in the U.S. and lower year-over-year sales of COX-2 products compared to the first quarter of 2004.

Cost of sales as a percent of revenues will remain under pressure in 2005.

R&D spending increased 7% in the quarter due to the advancement of a number of our pipeline products.

Full-year R&D spending is expected to be approximately $8 billion.

Finally, the effective tax rate on the adjusted income increased to 23%, reflecting changes in geographic and product mix.

We expect 2005 to be a transition year for Pfizer due to a number of factors.

Results in 2005 are being and will continue to be impacted by loss of U.S. exclusivity of major products Diflucan, Neurontin and Accupril during 2004 and Zithromax in 2005.

Revenues have also been and will continue to be impacted by publicity and regulatory actions regarding COX-2 selective inhibitors.

Full-year revenues will be substantially unchanged as growth from other product lines is offset by these factors.

The suspension of sales up Bextra in the U.S., EU and other markets in early April is expected to reduce our previously announced targeted full year 2005 adjusted and reported diluted earnings-per-share by approximately $0.05.

Bextra asset write-offs are expected to reduce our previously announced targeted full-year 2005 reported diluted earnings-per-share by an additional $0.10.

However, 2005 results are no longer expected to be impacted by the adoption of new accounting regulations relating to the expensing of stock options due to a change in the implementation date of the new regulations announced by the SEC last week.

These regulations have been expected to result in an after-tax expense reducing 2005 adjusted and reported diluted earnings-per-share by $0.03.

Pfizer expects to implement SFAS 123-R regarding expensing of stock options as of January 1, 2006.

Given these and other factors, we expect 2005 adjusted diluted earnings per share of $1.98 and reported diluted earnings per share of approximately $1.04.

Throughout 2005 and beyond, we will sustain both the capability and will to make those investments necessary to support long-term growth.

Pfizer's financial strength remains unprecedented and will be enhanced by the cash repatriation of $28.3 billion in foreign earnings during this year.

With the current quarterly dividend of $0.19 per share, which is 12% higher than last year, we're continuing the Company's commitment to strong growth in dividends both today and in the future.

We will accelerate and complete our current share purchase program in the second quarter by purchasing approximately $2.4 billion of the Company's stock in this quarter alone.

Early in the second half of this year, we will consider additional opportunities to purchase the Company's stock.

A number of factors are expected to drive a return to double-digit adjusted earnings growth in 2006.

We're undertaking a new broad-based multiyear productivity initiative to increase efficiency and effectiveness of all operations companywide.

Annual savings are projected to total $4 billion by 2008.

Improved revenue performance is also anticipated in 2006 as many of our existing products continue to grow.

We experience renewed growth of Celebrex and the contribution of new products increases.

Revenue growth, enhanced by continuing productivity initiatives, is expected to drive a strong 2007, but we anticipate accelerating double-digit adjusted earnings growth.

As usual, I need to remind you that this afternoon's discussions include 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 2004 annual report on Form 10-K and in our periodic reports on Form 10-Q and Form 8-K.

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 April 19, 2005.

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

Now I would like to turn things over to Karen Katen.

Thank you, David.

Hello, everyone.

As you have heard, 2005 will be a transition year for Pfizer, but as you will see we have the ability to manage our business through difficult times as we always do by treating disease with aggression, patience with compassion and shareholders investment with discipline.

The Human Health organization's underlying strength was evident during the first quarter of this year through its solid performance despite patent expirations and COX-2 regulatory situations.

The strength of our medicines are sustained through a body of robust clinical data made stronger through investments in new clinical trials and leveraged through skillful execution and continuous improvement.

First quarter numbers show what a solid portfolio with balance, depth and breadth can do to offset unfortunate market events.

Human Health revenues grew 4% in the first quarter, led by strong performance from a host of established products, such as Lipitor ahead 23%, Aromasin ahead 134%, Camptosar ahead 132%, Vetrol (ph), Vetrol LA ahead 22%, Xalatan/Xalacom ahead 19%, Zithromax ahead 71%, Zoloft ahead 4%, Zyrtec ahead 14% and Zyvox plus 47%.

New introductions made strong contributions as well.

Geodon was ahead 56%, Relpax up 77%, Vfend plus 38% and Caduet ahead 10%.

This solid in-line portfolio performance was more than positioned to mitigate the first quarter sales decline for Celebrex and Bextra and for Neurontin, Diflucan and Accupril because of generic entries.

We continued to strengthen our portfolio during the first quarter with new medicine.

In the United States, we successfully introduced Macugen, a major new medicine, and we filed for Exubera, an important new diabetes treatment option.

Vfend was approved in Japan, the world's second-largest antifungal market.

Strategically impressive is our recent progress in our already promising pipeline.

It now stands 78 product enhancement projects and 149 new molecular entities.

Human Health took an important step toward becoming more efficient during the first quarter as well as part of an ongoing organizational change throughout the Company toward more end-to-end process clarity, faster decision-making, quicker market response and more efficient and aligned operations.

The evolution of our HH organization will go a long way toward helping Pfizer reach our enterprise-wide target of $4 billion in annualized cost savings by the year 2008.

We've also made recent progress in piloting new business solutions through some of the most urgent problem of health care systems in the U.S. and around the world.

I will provide more details on some of these items in a minute, but first let me talk about specific first quarter product performance, starting with the COX-2's.

As you are all abundantly aware, the FDA decided to require warnings on all NSAIDs, both prescription and over-the-counter, including our COX-2 Celebrex.

We will work with the FDA to add the expanded risk information they require for the Celebrex label.

As you know, we have accumulated extensive Celebrex clinical data over the past 10 years and we're committed to conducting even more long-term clinical studies to better evaluate -- further evaluate the benefits and risks of Celebrex.

We will do this because there are patients for whom nothing but Celebrex works and we want to continue making this important option available to them.

We will also work closely with the FDA to develop a guide to help patients and their health care professionals make the best decisions for treating their arthritis pain.

Regarding Bextra, the FDA has asked us to suspend sales in the United States.

While we respectfully disagree with the agency's position regarding the overall benefit risk profile of Bextra, we have complied.

We also suspended Bextra sales in non-U.S. markets at the request of local regulators.

We will continue to stay in close contact with regulatory agencies around the world to take appropriate measures as required.

Aside from the COX-2 situation and the patent expirations we face, our portfolio is balanced and is strong and as its performance during the first quarter demonstrates, our core Human Health business remains fundamentally sound.

Lipitor, for instance -- after seven years on the market, Lipitor still shows double-digit growth off the largest base of any pharmaceutical medicine ever.

It had first quarter revenue of $3.075 billion, ahead 23%, and showed strong growth in share and prescription volume around the world.

The expanding wall of Lipitor clinical evidence underscores the efficacy and safety of this remarkable medicine.

The most recent results from the Treating to New Targets, or TNT study, found that intensive therapy with Lipitor 80 milligrams can reduce cholesterol and cardiovascular events significantly with a comparable safety profile to low-dose Lipitor therapy.

Norvasc first quarter revenue reached $1.175 billion, ahead 3% despite loss of exclusivity in several European markets.

Its performance in the U.S. is strong with 11% growth in the first quarter and new prescription growth outpacing the overall cardiovascular market.

This is bolstered by the recent ASCOT clinical trial, which demonstrated a 25% reduction in cardiovascular mortality with Norvasc therapy.

Zithromax sales were $797 million in the first quarter, ahead 71%.

We filed a single-dose Zmax formulation with the FDA, which offers a one time, one dose antibiotic course of therapy that will improve compliance by allowing directly observed therapy in the presence of a health care provider.

Viagra contributed $438 million in first-quarter revenue, up 5%.

It still leads the market despite competition and does sell because of its unique functional and emotional benefits.

New clinical data and reinvigorated sales and marketing efforts should continue to fuel Viagra performance.

Now let me quickly highlight the contributions of a few recently launched medicines that should continue to grow by the way based on new clinical data and better market acceptance.

First, Lyrica, now launched in the UK, Germany and Mexico, is showing strong first-year market performance and rapid uptake with 8.1% revenue share of the total antiepileptic market in Germany and 5.3% share in the UK after just five months on these markets.

It should launch later in 2005 in the United States for diabetic peripheral neuropathy and posttraumatic (ph) neuralgia, pending the completion of a scheduling designation.

Vfend revenue reached $88 million, up 38% and a new candidemia indication approval in December 2004 will help United States patients at risk for both mold and yeast infections.

Also just a few days ago, Vfend received approval for a broad first-line antifungal indication in Japan, which is the world's second-largest antifungal market.

Geodon continues to outperform the market and was up 56% in the first quarter with revenue of $138 million.

The recently launched bipolar mania indication expands the potential Geodon patient pool and the market is welcoming the very distinct benefits of this agent over older products.

Pfizer, along with other manufacturers of atypical antipsychotics, recently received a request from the FDA to add a Black Box warning to the Geodon label regarding an increased mortality risk in patients with dementia-related psychosis.

The proposed new labeling is based on a meta analysis from 17 placebo-controlled clinical trials of other atypical antipsychotic agents in patients with dementia.

Geodon was not in that meta analysis.

Now turning to the pipeline, we have a range of late-stage candidates sourced through internal R&D and external activities alike with significant promise to replenish and grow our future portfolio.

Many of these candidates target disease areas with significant unmet medical needs.

Our research engine is reliably generating new energy, advancing 10 new candidates into preclinical development during just the first quarter of this year.

Just as impressive is the fact that our licensing and technology alliance teams are completing deals at a pace of one every two weeks.

Our advanced development pipeline includes key compounds, such as Sutent for cancer, Branicline (ph) for smoking cessation;

Maraviroc UK-427857, it's a CCR 5 antagonist for HIV (indiscernible);

Asenapine for psychosis;

Torcetrapib/atorvastatin for athro (ph) and Daxas for respiratory disease.

Pfizer Global Research and Development invests more than $20 million every working day on finding new medicines, which makes it one of the world's largest research institutions.

It's an obvious strength we intend to keep building through productivity enhancements to better leverage the strategic advantages afforded by our vast scale.

That optimization process also includes ongoing rationalization in our global manufacturing plant network to reduce the number of our manufacturing operations and distribution facilities so that we can optimally meet our current and future product supply needs.

New medicines also have to be delivered more effectively of course, so realigning our U.S. field force already long recognizes the industry's best in quality and productivity to serve a changing promotional environment.

And to put this all in the largest possible content and help, as you've heard us say many times before, Human Health has both a duty and a business opportunity to meet critical health needs beyond innovative pharmaceuticals.

In the broadest sense, our goal has been to advance the cause of better health, which is a cause that we share with many other stakeholders.

We believe this can best be accomplished by shifting the health care debate to the value of health and the cost of disease and away from the price of medicine.

We also believe these efforts will ultimately secure a leadership position for us in health as well as protect the future of innovative medicines.

We have made recent progress here too by piloting new business approaches that represent solutions to some of the most urgent problems facing health-care systems in the United States and around the world.

We're convinced these solutions will serve as templates for relief of serious health issues and cost pressures for patient populations and payers for the future.

We're also trying to move health care systems to the next generation.

We're piloting new levels of care based on the premise that better health at lower cost is not only possible, but it is achievable.

One of our most exciting initiatives in this area is the Green Ribbon Health Program in partnership with Humana.

This three-year program will provide care management services to approximately 20,000 Medicare patients in Florida who have congestive heart failure, diabetes or both conditions, all part of the center for Medicare and Medicaid services and CMS efforts to find the best ways to manage the care of chronically ill, high-risk Medicare beneficiaries.

We are convinced that in the end, meeting the needs and patients and establishing the value of health cannot help but serve the best interest of the public, of our communities, of our business and ultimately, of all our stakeholders, a virtuous value equation of meeting needs with solutions that will inevitably accrue benefits to our shareholders.

Thank you very much, and with that, I would like to turn is back to Hank.

Thank you, Karen.

Today, we face a paradox.

On the one hand, the opportunities for bringing innovative lifesaving medicines to patients have never been greater.

On the other hand, the challenges for companies like Pfizer have also never been greater.

But at Pfizer, we've faced important challenges before and we have always addressed them with energy and resolve and emerged a stronger company.

Pfizer has a dynamic organizational of dedicated colleagues to navigate the challenges that lie ahead, and I appreciate all their efforts.

I'm confident that Pfizer's people, equipped with our innovative products and unsurpassed capabilities, will once again propel our company to long-term success.

And now, your questions please.

(Operator Instructions).

David Risinger, Merrill Lynch.

Thank you very much.

My question is related to the torcetrapib.

You have shared with us the timing for torcetrapib imaging studies to be completed in late 2006.

And in case the FDA chooses to require outcome studies or maybe just one outcome study to approve the product, can you provide the timing for outcomes data?

Thank you.

Number one, it's not clear that morbidity-mortality data will be required and the morbidity-mortality studies are underway.

But let me ask Joe Feczko or John LaMattina to add to that.

I think that, you would add, we said the imaging studies will come down at the end of next year, so it's the end '06.

Add about another two years or so for morbidity-mortality studies to start getting their first results there, so that would be late '08, early '09.

Thank you.

Timothy Anderson, Prudential Equity Group.

Thank you.

A question on gross margins and actually just going back to the analyst meeting you had recently in which David I believe said that 2005 would be the nadir.

Can you confirm that that is indeed the case?

And if I could also just get your comments on prescription trends for generic Mevacor, which basically suggest managed care successfully pushing one of the most inferior products here in the statin categories solely based on cost, makes me wonder what's going to happen once Zocor and Prevacol are available in the next year or so, generically.

Well, one of the real strengths of Lipitor is its ability to get patients to go where other products can't do that.

That's the real power of the Treat to New Targets study, which shows what we've known for a long time, which is lower is better.

And in fact, that study shows that lipid levels of 80 or maybe even lower continue to provide benefit, and you just can't get there with the older agents.

So that does make Lipitor quite unique.

I don't think we're going to see a long-term threat from the sort of therapeutic substitution that you're talking about.

Time will tell, but it is in the interest certainly of the patient, but we also believe the managed care organizations themselves or Medicare to actually provide high-quality care, which both improves outcomes and lower cost.

Karen referred to the Green Ribbon experiment we're running in Florida, one of nine under CNS, and the whole point of that is by putting the patient at the center, not the payer at the center, you both improve outcomes and achieve lower costs.

So this is going to be a battle.

It has been a battle for a long time, but there is a reason that getting to target predicts as both health outcomes and cost benefits.

David, on gross margin?

As we highlighted, gross margin in 2005 will be under pressure.

A number of factors, including change in production volume, geographic segment and product mix reflecting a host of factors.

But there's hope and that hope relates to the ongoing productivity initiatives that the Company is embarking upon and the opportunity to continue to rationalize the manufacturing facilities on an ongoing basis, as well as the increased volume coming from the introduction and establishment of new products.

Mario Corso, Summer Street Research.

Thanks for taking my question.

In terms of the COX-2 inhibitors, could you elaborate a little bit more on your expectations in terms of, number one, timing when Celebrex labeling might be worked out?

In terms of Bextra, what there really is to discuss with the FDA?

And in terms of potential usage, would you anticipate Celebrex declining more from current levels and then rebounding with some post-Bextra use?

Thank you very much.

Let me ask Susan Silverman (ph), who has been leading this effort on our behalf of a very large team, as you might imagine, that has been living these sorts of issues for the last four months I guess it is now, or longer.

Thank you, Hank.

I think in terms of our expectations on timing, we have had discussions with the FDA last week as everyone knows around the Bextra suspension, but we were not given any concrete expectations on timing for the Celebrex label, nor for the new warnings that will be added to the NSAIDs, as Karen mentioned, both OTC and Rx.

In terms of the question around Bextra, I think our expectations are to work with the FDA and other regulators around the world to perhaps find a way to manage the risk that has been identified and continue to make Bextra available to patients.

It's not something that is easy for us to put timing on, but we have committed to go back to the FDA in the near future to discuss those plans.

In terms of rebound for Celebrex or whether Celebrex has actually reached its low point, I think it's awfully early for us to tell.

It's less than 10 days since the Bextra suspension in the U.S. and also in Europe.

So I would hesitate to give you a prognosis on where Celebrex might turn.

I think we have plans in place to continue to grow Celebrex over the current period and I think we will start to see that once we get some of the final regulatory (indiscernible) in place.

(indiscernible), do you want to add to that?

I would just add that, as the most recent weekly prescriptions would indicate that for three weeks in a row, Celebrex has led the market in market share gain for new prescriptions.

So one might argue, although it's early still as Susan said, that we are started on the way up.

The fundamental issue here frankly is all of these agents will have the same warnings.

We have done so much clinical work though that we have a wealth of positive information on both the benefit and the safety side that we think it's our responsibility to fully inform physicians as to the benefits and risks of Celebrex and then to allow physicians with patients to decide what treatment option is best for that particular patient.

And we do believe in that world that Celebrex will prove to be a very important treatment option for millions of patients, here in the United States and abroad.

John LaMattina, you want to add?

I just wanted to point out to callers that there was an important paper presented yesterday in Anaheim at the American Association for Cancer Research based on some work being done in Norway.

Some physicians wanted to see whether Ensense (ph) could prevent oral cancers because various data suggested this might be the case.

And they went into a Norwegian cancer registry which had a database of in excess of 100,000 patients.

And there, they looked at people who had a high risk of developing oral cancer.

And in fact, what they found at looking over a 20-year period, that in fact people on Ensense did have a drop in the oral cancer that they were getting, but they didn't have a higher survival rate.

And that's because those people also had a twofold increase in cardiovascular events.

So a lot of what has been missed from the advisory committee, although the FDA certainly hasn't missed this with the labeling changes that they are proposing, are that Celebrex and Ensense are not all that different in terms of cardiovascular risk elevation over placebo.

And I think you will see more and more of these kind of studies coming forward in the future.

And there will also be studies that nobody should pay attention to.

The media continues to be the media.

The latest news, in quotation marks, is the New Zealand study which showed no difference in risk between Celebrex and Vioxx.

Of course, it was an extremely small study that did not have the power to distinguish any difference and that's what is in the news.

What's not in the news is the five published studies of a million or more patients that have been done that showed a clear differentiation in risk between Celebrex and Vioxx.

So I think we really need to get this out of the media into the label and in front of doctors so that doctors and patients can decide what medicine is best for them.

Enough on that, we'll take the next question.

Mara Goldstein, CIBC World Markets.

Thank you very much.

I am hoping that you might just be able to give us a just little bit more granularity on the gross margin in terms of the impact of let's say currency versus volume and that 22% rise in the cost of goods sold in this quarter, just so that we can maybe more appropriately think about the next few quarters.

And then secondarily in the press release, you talk about refiling the Lyrica NDA for epilepsy.

Does that now have a new PDUFA date, or is this an extension of the original PDUFA date on that filing?

Let me ask Joe Feczko to deal with the second issue while David is figuring out how to say no.

Alright, you can't (indiscernible) for trying.

As far as the epilepsy, it's a refiling of some additional data, but it's not going to reset a full -- a new PDUFA date.

They're going to look at it in a more expeditious matter.

But we're still working through the timelines on that with the data.

David, how do you say no?

Well, Mara, I love you, but we're not going to provide that detail, other than to say they're all -- the factors I cited -- they're all material contributors to the growth and the cost of goods.

Thank you.

Jami Rubin, Morgan Stanley.

Thank you.

Hank, I'm going to ask this sort of a little bit differently.

But on April 5, you projected that the COX drugs would accelerate in 2006.

And on April 6, the FDA announced the withdrawal of Bextra.

And today, you're saying that revenue guidance for the year essentially unchanged, similar to what was said on April 5th and if revenue guidance expected to accelerate in '06 and '07, so again, no change, even given the surprise announcement by the FDA.

So again, if you could talk about what drives your enthusiasm with this new change.

And do the expectations this year assume that patients will switch from Bextra to Celebrex?

And just to follow up on that question, the cost of drugs will be required to have a Black Box warning.

I was just wondering what sort of restrictions would be in place on DTC.

And lastly, I was wondering if there are any plans to pull the submission of Parecoxib from the FDA?

Thanks.

Well, a series of questions, Jami, but pretty clearly, the answer to your first question is that we have far more data on both benefit and risk with Celebrex than we do with Bextra.

And we were counting on Bextra to be the engine of that growth going forward, not Bextra, which was a fairly small contributor.

I forgot the other question.

One was pulling Parecoxib.

No, we have no intention of pulling Parecoxib, but I didn't know how close you followed the advisory committee meeting, but the one anesthesiologist on that committee was in fact a very bullish on this compound, feeling that it offered a major advantage.

A, it's a compound used in the hospital setting, it is not an opioid, it is unique in that regard and I think fills a major medical need.

So, no, not only do we have no intention of pulling it, but the compound is doing okay in Europe as well.

And on direct to consumer advertising, Pat?

Direct to consumer advertising is allowed under current FDA regulation for products that have Black Boxes, but the Black Box has to be made quite apparent in that advertising.

So we are still obviously awaiting what that Black Box looks like in the final label from Celebrex.

And at that point, we will decide if and when we decide to continue direct to consumer advertising.

On the other question relative to switching, that is already going on.

There is Bextra switching into Celebrex that is occurring in the market, there's also switching from NSAIDs to Celebrex going on in the market again, which is a good thing, and all of that still awaits a label at which point we can begin to communicate with doctors about what appropriate options might exist.

Thank you.

Carl Seiden, UBS.

Thank you very much.

A question on international Lipitor results, if I could.

I think your reported sales growth for the quarter was 26%, which was above the full year 24% rate of all the last year.

And our understanding is that in the first quarter, Germany might have been down by as much a 70 or 80%.

So I'm wondering if you could give us just a little bit of a more granular sense for what's going on there.

Is there really that much acceleration going on someplace else, or is this a little bit of a blip in the usual noise?

Do we think that's reflective of actual underlying demand in Europe for Lipitor?

Thanks.

Most of these sales are in Europe.

Asia contributes some, but Europe is the big part of it.

So let me ask Ian Read, who's the President of that area, to comment.

Well, you have an exchange effect on the (indiscernible) 8%.

So if you take that off, it limits it somewhat.

If you look at Europe in the first quarter, Germany was down 55%.

Putting that to one side, we can see an IMS (ph) data -- France accelerating 15%, the UK 20%, Canada 21% and so on.

So we have very strong growth to end markets (indiscernible).

Okay.

David Moskowitz, Friedman Billings Ramsey.

Yes, thank you very much.

A couple of questions.

The CCR 5 antagonist Maraviroc, that has entered Phase III.

Can you give us a sense of timing for those Phase III trials and potentially when could we see a filing on that product?

And also, with respect to the Medicare prescription drug benefit, can you talk about the impact to Pfizer on the top and bottom lines?

Thanks.

On Maraviroc, we never comment on NDA filings so we will not change that policy today.

Having said that, it's a compound with a very high priority.

Studies are going very well, recruitments are ahead of schedule and we're very optimistic that all studies will complete expeditiously.

And our belief on Medicare has always been, it should be a net neutral, that the loss in price because of more effective private sector managed care discounting, which will be significant, will be offset by improved compliance in a very important patient population.

The media does tend to underestimate the price effect here.

I think they are also ignoring the very low compliance of many seniors and how their health would benefit significantly by better compliance with important medicine like Lipitor and Norvasc and many others.

The one wild-card in all this, and I think it's an important one, is what's called the Welcome to Medicare Physical.

Because of this modernization of Medicare, anybody turning 65 will receive a physical and risk assessment.

That could have a very positive short-term benefit for Pfizer and others.

But of course, if significant risk factors are picked up and treated, that should result in a, certainly a benefit to individuals, but also a net long-term reduction to total cost to the payer, which in this case is the federal government.

So our belief has always been neutral top and bottom line but I do believe this prescription -- this initial medical assessment could be something that's more important for patients, for the payers and the industry than any of us really realize yet.

Thank you.

Bert Hazlett, SunTrust.

Thanks.

I won't ask you about the filing timing for Sutent then, but I will ask you -- you've had some additional competition from -- apparently from folks in the renal cell area.

When should we see the renal cell data for Sutent?

And on Lasofoxifene -- have we seen cardiovascular benefits for that drug?

And can you describe those, if we have?

Thank you.

On Sutent, I would say that -- and there will be a number of papers on this in May I believe at the ASCO meeting, so you can look and see some pretty hard data there.

Everything that we've seen to date in comparison of Sutent to other compounds show Sutent to be very superior on the front and renal cell carcinoma.

And also as we talked at the analyst presentation a couple of weeks ago, very strong in terms of Aglevec (ph) resistant (indiscernible) cases.

I won't comment on filing, but I will say this.

We recognize the medical importance of this compound and we are working extremely, extremely hard to get this one filed as soon as possible.

And so, plus the results are so profound.

So those first two indications, they're moving very quickly on that.

On Lasofoxifene, we haven't really been profiling cardiovascular effects, per se.

We've really been looking at the bone effects there.

I don't know if you want to add anything (inaudible).

The current studies weren't designed to really (multiple speakers) at least the current studies that were in the file, there's larger ongoing studies that may or may not show some.

I would just add with Sutent, we're seeing enormous excitement in oncology circles, which is a good leading indicator of the importance of this revolutionary new medicine.

Thank you.

Richard Evans, Sanford Bernstein.

Thank you for taking this question.

I just wanted to get some more color on Green Ribbon and programs like that.

Are you sort of forward into the supply channel program something that you roll out defensively when you're under cost pressure at the state level or at the managed care level, or is this something that you plan to roll out more proactively?

And if it's proactive, can you give us a sense of the scale?

And then finally, could you let us know whether or not you intend to take risk on drug cost, total medical cost or medical outcomes?

Well, Richard, I don't normally do this, but let me respond to what may have been your comment of a few weeks ago that us attempting to diversify into health care delivery would be an enormous mistake.

I agree with that, it would be an enormous mistake and we're therefore not going to do that.

What we are doing however is partnering, usually with our customers.

The Florida Medicaid program, which also involved a number of teaching hospitals.

This case, it's partnering with Humana, and it really is to underscore what I think is the game-changing development here, which is shifting from a focus on the cost of disease and therefore the high cost of treatment to the benefits of health, the long-term benefits of health and the value of the medicines that we produce.

Now we're not going to become a provider, but we are going to partner with providers to demonstrate those benefits because trying to compete on the sale of pharmaceuticals in a world which is dominated by rationing and price controls is not a very good place to be.

On the other hand, if you're partnered with your customer producing better health outcomes and lower cost, I think that's a winning formula for Pfizer and for those in the industry who are able to follow us into this new world.

It will require some creative partnerships.

We're good at that, as you know.

But to your or whoever it was concerned, that this represented dangerous diversification, that is not our intention at all.

And Karen or Pat, would you like to comment further.

No, I think that's all.

Just a specific follow-up -- any intention to assume financial risk as part of these programs?

Well, we did in the Florida program, for example.

To get that jump-started, we needed to underwrite the cost savings.

We actually blew those numbers away quite significantly.

And Peter Brandt, you're on the call.

Maybe you could add some comments there.

Sure.

Very much to your point, Hank, as we all know, the way that health care is delivered right now is in an episodic or a silent fashion, as opposed to patient centric.

And unfortunately, it's also accounted for and therefore funded in those same silos.

So to get our point across, that if you take a more patient-centric view, we needed to go at risk in one or two examples to get that example out in the late public.

We are willing to do that.

And the Florida Medicaid program that Hank is talking about, our total guarantee over the 2.25 years of that first part of the program, $37 million, and that included the cost of the program as well as medical cost savings.

And the breakout on that, we guarantee that we would put in at least $19 million in terms of the cost of the program to build the infrastructure for all of the care managers involving those teaching hospitals Hank referred and another $18 million in medical cost savings.

And the total actual medical cost savings as verified by an external third party was $42 million.

And again, with that 19 million that we put into the investment, that was a total of 61 million in medical cost savings and avoided costs for the State of Florida versus a guarantee of 37.

So I think numerically, the deal worked very well for the State of Florida.

I think more importantly, we had targeted 50,000 individuals in the program, we exceeded 150,000.

And on any of the markers, whether they were behavioral change or more importantly overall health status improvement, things looked really good for the patients that were involved and that did have the anticipated cost savings associated with it.

And Richard, to your or others concerns that we may be taking on excessive risk here, we are in a changing environment here.

But I don't really believe in a Big Bang theory of new strategy, new business model, whatever that means.

I believe in aggressive experimentation.

So we're doing a lot, a lot you haven't heard about yet.

But new experiments, small scale, small risk, but then if things are working, such as the Florida Healthy State Initiative, we then replicate that very rapidly, both in the United States and around the world.

So our approach here is experimentation, taking some risk where we think it's prudent and necessary to get the program started, which was Florida Healthy State, and then if it works, we'll do more of it.

But none of this is intended to lead to some sort of bizarre diversification into being a health care provider.

It's really intended to do what we do best, which important new medicines to both improve health outcomes and we believe lower total cost.

I appreciate the color.

Steve Stella (ph), SG Cowen.

Thank you.

I'm wondering how the number of Lipitor details changed in Q1.

On the Q4 call, I think it was said that 25% of all details in 2004 were on the COXIBs, and that was more than twice the number that were put to Lipitor during the same time period.

I'm wondering how much of that has shifted to Lipitor and perhaps that has accounted for Lipitor's very impressive performance in the first quarter.

Boy, that's a hard one?

Pat?

Pat Kelly, who heads our U.S. business.

So the Lipitor performance in the first quarter is the result of the underlying benefit of the product as underscored by the tremendous clinical data that has been coming out over the last year supporting its early benefit in reducing cardiovascular risk.

And then on a more technical detailing aspect, we have different parts of our deal force detailing the COX-2's than those that detail Lipitor.

So the net effect between those two was not anything.

Thank you.

And as you might imagine, there was a lot of hand-holding going on during that first quarter around an evolving COX-2 situation.

Chris Shibutani, J.P. Morgan.

Thank you very much.

We've had some episodes where the Lipitor patent has come under scrutiny in different countries either expectedly or unexpected outcomes.

Could you outline if in the coming months, there are particular countries in which we might expect adjudication, particularly in European countries, in the coming months?

Jeffrey Kindler, our General Counsel.

I believe the only case that is currently set for a trial in Europe is in England in July.

There are challenges to the patent in other countries in Europe, but I believe that's the first one up at that, and that's set for trial in July.

Other than that, I don't believe any trial settings have been made.

And as I'm sure you are aware, the generic industry, or at least a few companies in the generic industry, has a very clear, articulated strategy of challenging every patent by every research-based company in every country.

Some are quite proud of the fact they employ more lawyers than they do scientists.

I would only add, this is a strategy not without risk.

And maybe, Jeff, you could comment a little bit on some of our actions that are about to unfold here.

Well, as you may be aware, we a couple of weeks ago obtained a preliminary injunction in U.S.

District Court halting sales of a generic product -- a generic Accupril product.

The court ordered Teva and Ranbaxy to immediately stop marketing the product, which Teva had launched last December under its own label, but with an agreement for indemnification by Ranbaxy.

The court held that we were likely to prevail in our infringement suit and ordered the injunction to prevent any further sales.

We intend to proceed aggressively with that case.

There has been no trial setting yet, but at trial, we intend to seek recovery for lost profits and sales that we incurred as a result of them having an infringing product on the market.

We believe that is going to result in very substantial damages on our behalf and we intend to seek that form out.

So that's an example of our efforts to go after the generic companies that are infringing our products, and that was a case where they launched notwithstanding the fact that their product clearly infringed our patents and the court so held in what is actually a very unusual ruling by taking them off the market.

And as I said, we had very, very substantial damages in the way of lost profits that we intend to recover from Ranbaxy.

And we're not going to give you the amount of those damages until we make the claim at trial.

But just remember that Jeff has said very substantial (multiple speakers) now.

Catherine Arnold, CSFB.

Thanks very much.

Could you speak to how the inventory levels have changed in the quarter in regards to product like Lipitor and Zithromax, and how that may have also impacted the sales performance in the quarter for these and squaring that with the audits where you have a product like Lipitor that increased 22% in the U.S., the audit suggesting 9% volume growth and the 5% pricing growth?

And then on manufacturing, could you comment on how significant the transitional costs were associated with potentially shutting down facilities and getting products validated and consolidated in other sites?

Okay.

David, first on manufacturing transitional costs.

To date, they haven't been significant, but on the other hand, we haven't put a number out there for these costs as well.

I'll ask Peter Brandt, Head of Finance for our Worldwide Pharmaceutical Business, to comment on inventory.

I guess we get this question every call because others don't manage inventories as well as we have for decades now.

And none of you yet have the data.

You don't yet have the wholesaler inventory data.

We have it.

And it's always the same answer.

There are changes from time to time in individual products.

We manage this very carefully.

First quarter end '05 was 3.9 weeks, the same period last year was 3.8 weeks and what I'm particularly pleased by in this performance is that the COX-2 inventories are fine.

And you might imagine that with the initial demand being strongly up on the Vioxx recall and then down and then Bextra withdrawn, to have managed through all of that, it ended up with normal Celebrex inventories at the end of it is really quite an accomplishment.

But let me ask Peter Brandt to again answer this question.

Okay, thanks Hank.

A couple of brings on the inventory.

I think as you well know and that you're picking Lipitor, and that's a very good example, there are a couple products that always seem as if they're off one way or the other, that the revenue is either higher or lower than the scrip growth in the U.S. would tend to indicate.

In total, as Hank said, our months on hand or weeks on hand -- I'm sorry -- is 3.9 in '05 versus 3.8 in '04.

So while Lipitor may look a little above, others are compensating on the downside.

So I don't think anything in total is anything about dislocation.

To answer your Lipitor question specifically, there are a couple of pieces to it, one of which is kind of buried or hidden at this point.

You're exactly right when you look at total Rx's, up about 9%.

Our number on the price increases is closer to 4% for Lipitor instead of the 5 that you quoted a moment ago.

But in addition to that, there were three more shipping days that are not reflected in the scrips, but are reflected in the absolute sales in the first quarter in the U.S.

That would be 62 days versus 59, so that adds another 5%.

So if you're looking at that 5% plus the 4% for the price increases plus the 9% for the total Rx growth, you're very close to that 22% revenue growth in the U.S. for Lipitor.

And now for our final question.

Jim Kelly (ph), Goldman, Sachs.

Thank you very much.

Hank, when you talk about the notion of the two Pfizers, when we look forward to 2006, once again there are a lot of products that are going to be facing patent expiree (ph).

And I'm just interested, as we think about it in terms of revenue growth versus cost-cutting, which piece is most important and what stage of plant closings, as far as that goes with gross margin, what stage should we be in at that point if we're looking in the three-year plan?

Is it really a third, is it very tail-loaded (ph) can it be front-end loaded?

Well overall, the primary driver in '06 will be the cost reductions, but revenue growth will be a major contributor.

In '07, it reverses.

The major contributor is revenue growth assisted significantly by cost improvement.

On the plant closing question, David, do you have anything to add to that?

No.

Those tend to be the sale of the activity.

What you will see more likely up front is some of our purchasing initiatives and some of our initiatives in terms of G&A activity.

Plant closings by nature take more time, if nothing other than the regulatory component of (indiscernible).

Thank you, Jim, thank you all.

With that, we end our conference call.

Thank you for being with us.