輝瑞 (PFE) 2005 Q4 法說會逐字稿

Dr. McKinnell, you may begin.

Hello, everyone, I am Hank McKinnell, Chairman and CEO, and welcome to Pfizer's fourth quarter 2005 conference call and webcast.

I am in New York this afternoon with several of my colleagues you will hear from later.

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

I will make a few brief comments and then we will get right to your questions.

I do realize that several of you were not happy with our last conference call.

We will try to do better today and on February 10.

I'm pleased that our fourth quarter and full year results exceeded our earlier expectations of $1.92 to $1.94.

There were two drivers of this better than expected performance.

Human Health revenues were stronger than previously forecast, reflecting the early market success of Lyrica, better than anticipated performance in key markets such as Japan and Germany, better than planned performance in some key products such as Zyrtec and Norvasc, and an unanticipated two-week delay in the introduction of an azithromycin generic in the United States.

Our results in the fourth quarter should be viewed in the context that there were four fewer business days in the quarter compared to the fourth quarter of 2004.

That adds 6% to all growth rates.

Our operating flexibility, notably our ability to reduce our expense base, also contributed to the better performance in the quarter.

Particularly, we exceeded our 2005 cost saving targets from our Adapting to Scale initiative.

We had originally targeted $400 million in 2005 savings.

Our October guidance assumes $600 million of savings, and we achieved $800 million, significantly more than our earlier estimates.

All of this is certainly good news.

But we want to make clear that the factors that drove Pfizer's performance in 2005 may differ materially in 2006.

On February 10 in New York we will provide a full update on our strategies and on the potential growth of our marketed medicines and new medicines in the pipeline.

One point I want to emphasize today is that we are listening to you and to all of our shareholders.

We have heard your questions about Pfizer's performance and prospects, and we also understand the focus on the leader of an important industry in these turbulent times.

In summary we completed 2005 with positive news on many fronts, including double-digit, full year worldwide growth of Lipitor, a very successful Lyrica launch in the U.S. following successful lunches elsewhere.

We received priority review for Sutent and Champix in the U.S.

We won favorable decisions in key Lipitor and now Norvasc patent cases.

Our AAA credit rating was reaffirmed by Standard & Poor's and Moody's.

And based on our strong operating cash flow, we increased the dividend 26% for the first quarter of 2006.

While 2005 was a challenging year due to expected patent expirations and unexpected unfavorable COX-2 news, we enter 2006 with renewed determination to do what we have always done best, bringing valuable important medicines to those who need them for the benefits of our patients and our shareholders.

Before we get to your questions, David Shedlarz needs to remind you of our cautionary disclosure language concerning this afternoon's conference call.

I will also ask Peter Brandt to discuss prescription growth, inventories and revenues since this question has already been raised.

First, David.

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 2004 annual report on Form 8-K and in our reports on Form 10-Q and 8-K.

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

You can find a reconciliation of those measures to the most rightly comparable GAAP financial measures in our current report on Form 8-K dated January 19th, 2006.

This report is available on our website at www.pfizer.com in the For Investors, SEC Filing by Pfizer Section.

And now let me pass this to Peter.

The two questions that Hank referred to that have come up and have come up in previous conference calls as well have to do with our inventory levels in the distribution channels, and how does one do the walk-through from prescriptions to revenue growth.

Starting with the inventories, globally we believe that the level of inventories of our products in the distribution channels at the end of 2005 is very consistent with the inventory levels at the end of 2004.

In addition, also quite consistent with inventory levels at the end of the third quarter of 2005.

In total, very little change in our inventory levels.

More specifically, in the U.S. our month on hand at the wholesale level is approximately 0.7 by our calculations, very much in keeping with the range that we always try to work with our partners in distribution channel of between 0.6 and 0.8.

And again for the U.S. specifically that 0.7 months on hand is again consistent with levels that we had at the end of the third quarter of this year as well as comparable time period at the end of the fourth quarter last year.

When we look across our products, the entire portfolio within the U.S., there is very little variation product by product with that 0.7 months as well.

The second question that comes up is how do we walk from the total prescription growth rate to the revenue growth rate?

The product that obviously is the most important one and comes up quite on is Lipitor.

Let's take a look at the performance of Lipitor.

As you know and you saw in the release on a worldwide basis Lipitor grew 12% or $1.3 billion worth of growth.

And in the U.S. specifically it is over $800 million worth of growth and the same 12% growth rate, while total prescriptions grew 6%.

How do we go from the 6% total prescription growth rate to the full year 12% revenue growth rate?

Total prescriptions up 6.

Then when we also look at the number of units per prescription over the full year that grew 2% as well relative to last year.

Then you also have mix, which is a combination of unit movement to higher dosage forms, and then the price impact of, if you will, of those higher dosage forms.

That added 5% to the growth rate of Lipitor in the U.S.

To be more specific about that, that means we have seen a movement from the usage of the 10 milligram to more usage of the 20, 40, and 80 milligrams of Lipitor.

Another component to this, one of the final pieces, is when you look at price.

Now price is obviously a combination what we do on a list price basis that then bleeds through to the retail chains, as well as what we do in terms of rebating, both in terms of Medicaid as well as to managed care.

On a full year basis price impact was approximately 2% for Lipitor.

So underlying demand as well as mix changes as well as price changes, you've got 6% for total prescription growth, 2% for unit growth per RX, mix 5%, price 2% would indicate that Lipitor revenues could have grown approximately 15% in the U.S.

And compares we think within the quarters of the ability to be able to forecast this and the data that we get to the 12% revenue growth that we actually demonstrated for Lipitor.

Thank you, David, thank you, Peter.

And now we turn to your questions.

(OPERATOR INSTRUCTIONS).

Michael Castner with Bernstein.

So don't get caught off guard next year with six extra, or the six deficient calendar days in Q4, how does that translate to the year-over-year comparisons for the quarter?

And then also with the benefit as opposed to what you had reported in October, one of the things that it seems to me that cost must have come in much lower than you had been anticipating in October.

So was there a point at which you tried to put on the breaks and spend significantly less, or did you just not have a great sense of where your costs were trending as of mid-October when you lowered your guidance?

Two questions.

On the question of days, it is hard to have a different number of days in 2006 and 2005.

What happened is a shift from days from the first quarter 2005 to 2006.

I don't know how that compares next year.

David, do you -- Peter?

Yes.

Next year is pretty comparable quarter by quarter to 2005.

We should not see the same anomalies that we saw in Q1 and Q4.

That is good news.

On expense estimates, we did have a significant overshoot or overachievement in our Adapting to Scale cost reductions.

That is certainly good news.

The original target was 400 million.

When we put out our estimates in October we saw we were going to do better.

Within our estimate was an expectation of 600 million in savings, and we achieved 800.

That is a good part of the difference here.

Plus there were other operating expense controls.

We are, as you know, a very little well-run Company and as we see a shortfall at the top line, we do start pulling back on expenses.

That did happen all year.

And we saw a little more of it than we expected in the fourth quarter.

So basically good news, and a significant contributor to the overachievement this year.

Tim Anderson with Prudential Securities.

Just on one line item of guidance that you had in October was R&D of, I think unless I am wrong, 7.6 billion in '05.

But in three month time you came in a full 200 million less than that.

And I am just wondering was that part of AtS program?

And then the second question, and maybe you talked about this at your February meeting, but on the [IVIS] trial results for torcetrapib, not the INT results but just the IVIS results, you said recently late '06 is when we would see what those findings are.

But if I look at enrollment as having finished I think in mid '04, and this being an 18 month study says your results could be out basically almost now or early '06.

I'm just looking for guidance on where I may be wrong here.

Let me ask John LaMattina, who heads our research efforts around the world to answer both questions.

And maybe Joe Feczko can help out on the IVIS timing.

On the R&D costs a couple of things.

As we expected, the Adapting to Scale initiative had contributed to cost savings.

But let me also caution you that around the cost savings, even though we spent last interestingly enough we have been able -- we spent more in 2005 on our portfolio of compounds than we had budgeted for.

We were able to shift a lot of the costs from our non portfolio items to portfolio items.

While we spent less, we were able to do more, which Hank was very pleased about.

On the IVIS studies you have to remember enrollment is complete but people enrolled at different times.

It is an 18 month study.

But then once they have been on treatment for 18 months then they have to come back in.

We have to repeat the procedures and then we have to analyze all the data.

Again, Hank asks a lot of us when we are going to get these results, and we explained this to him as well, that yes, the enrollment is complete at a certain date, and 18 months later is another certain date, but then we have to get analyzed in the results and that will take a few months as well.

Again, we're projecting the end of 2006.

You really have to focus on last patient, last visit which is a rolling number, given away the patients are enrolled.

Carl Seiden with UBS.

Obviously versus expectations it was a very good quarter, but I'm just thinking about where we were three months ago; it probably would have been received even better.

Since you beat your annual estimate before you lowered it a quarter ago, my question is really, Hank, fundamentally has anything changed relative to your ability to predict financial performance going forward?

I understand the list of things that you have talked about that are better like Zithromax, Lyrica, Japan and Germany.

But for a Company of Pfizer's size, one would expect a similar list of things sometimes up, sometimes down every quarter.

Are we simply in a new place relative to either Pfizer's cost structure or external things that really limit your ability to predict financial performance?

That is a good question.

I think the answer is in a word, no.

But clearly there is more volatility in parts of our business.

And I remember at the October meeting somebody asking if there was any reason we were expecting a delay in azithromycin generics.

And I looked at Jeff and his answer and my answer was no.

It turned out we got a two-week delay, which for a product the size of Zithromax is quite material.

We also overachieved our AtS goal.

That is something you hope for, but you don't build into a forecast.

And we did get some pleasant surprise in the fourth quarter on a couple of products, Zyrtec and Norvasc, and a couple of countries did better than we expected.

I don't think it is necessarily our ability to forecast.

Good things happened in the fourth quarter and that is a positive.

[David Chan] with [Genison].

Hank, I guess I'm wondering if you could comment -- the weekly prescriptions are obviously a little under unreliable, but there was a noticeable drop in the market share of Lipitor.

And people are somehow tying it in their minds I guess maybe with some of the formulary changes at Express Scripts or others.

And do you think in fact that is what is going on, or is there still a kind of salesforce dislocation, or do think just this is a weekly fluke and that the shares will go back to more normal numbers in the coming weeks?

I watch those numbers very closely.

At 7:30 Monday morning I am looking at my computer screen.

And the salesforce is actually well ahead of where it was before the reorganization.

In spite of the loss of productivity during the period of the reorganization in the third quarter, it has now snapped back.

People are in the field.

They are enthusiastic, focused on the right issues.

I think the salesforce at this point is a plus for us.

It certainly was not in the third quarter.

In the fourth quarter it turned positive.

It certainly is very positive right now.

The problem is for the last three -- last four weeks, every week has been its own story.

Christmas fell in a different week last year than this year.

New Year's fell in a different week last year than this year.

I thought last week, the one ending January 6, would have been a clean week.

It wasn't because New Year's ended up on a different day.

I'm hoping the next week will be a clean week.

I think we have had some difficult signal -- difficult to read signals for the last four weeks, which has been kind of frustrating I must admit.

Let me ask Pat Kelly to comment on the market share and specifically the managed care formulary status.

I think the story to report on that for Lipitor is quite positive, both on the remaining true fact of Lipitor's formulary acceptance in managed care and in commercial plans is in a preferred brand status, or otherwise known as Tier 2, more than any other branded statin.

And that great performance is actually amplified with the institution and implementation of the Medicare drug benefit wherein Lipitor's formulary status goes up, because we have successfully negotiated with all the prescription drug plans under Medicare to insure a preferred brand status for Lipitor at a greater level than any other statin now on the market.

We continue to believe that the prescriptions will continue to rebound and rise in concert with those new opportunities.

And the detailing numbers in key position offices are up quite strongly from the third quarter.

If I could just follow-up briefly, I think a few weeks back at the Morgan Stanley Unplugged Hank, you said Lipitor will be up this year.

And I just wanted to -- that was in dollars or would that also be for total prescriptions?

We'll give you more detail than you might want at our February 10 analyst meeting.

You can never give us too much detail.

I'm looking forward to it.

That is a very important question.

We will discuss that in great detail on February 10.

David Moscowitz with Friedman Billings Ramsey.

I appreciate the question.

In terms of some of the formularies that have discontinued the coverage of Pfizer products, Express Scripts and Florida Medicaid, and potentially with lower volumes, could you speak to any rebate reversals that might have been included in the quarter?

And also, in respect to the statement of factors being materially different in 2006 versus 2005, are we really talking about different factors or different mix of drivers, or is this a cautionary comment that you're making to us?

Let me take the second one of those.

It is definitely a cautionary comment, and what I am saying is wait for February 10.

I guess I will say my answer to that question will be delivered in great detail and comprehensiveness on February 10.

There actually are no -- what did you call it, rebate adjustments?

Rebates may be lower, but it is not really an adjustment of anything.

Peter, would you like to address that?

Sure.

Let me give you the Lipitor numbers for the fourth quarter that are analogous to the ones that I gave on the full year when we began the call, because I think it does highlight exactly the point that you're making.

Because we did pay in essence a lower percentage of rebates on Lipitor in the fourth quarter for some of the reasons that you're alluding to.

When you look at total prescription growth for Lipitor in the U.S. in the fourth quarter, it was 2%.

And again we gain another percent because of the units per Rx growing, and then another 2% because of that mix issue that I referred to before, usage of 10 milligram moving to usage of 20, 40 or 80.

Then for the first time in a long time we get a positive -- a much more substantial positive price benefit of 7 or 8% in the quarter for Lipitor, which is not a result of increasing our price, it is just the opposite.

It is a result of paying fewer rebates, or lessening our rebates, if you will.

And then the other -- so if you look at all those factors combined, you get underlying growth of Lipitor of 12 to 13% in the U.S. in the quarter.

And then you have to back off that 6% due to the days issue, the number of days that Hank and David alluded to before.

And that gets you pretty close to the underlying revenue number that we reported of 2.5% growth for Lipitor.

Tony Butler with Lehman Brothers.

When you consider the acceleration on Adapting to Scale, Hank, is this principally a U.S. initiation that has allowed the 800 million versus the original 400 million?

And will that geography continue to be the driver?

It is worldwide.

In fact, this is a global effort with no country, no group excluded.

The pace is quite different from organization to organization.

For example, our Animal Health Division is all done.

They have achieved the numbers, and it is back to business as usual, which is a commendable place to be.

Manufacturing, on the other hand, is probably going to be the slowest, not because they are the slowest but because it just takes time to close plants and shift production to other sites.

And you need regulatory authorization to do that in most cases.

Probably we will see manufacturing lagging in this entire effort.

It is good everywhere, but we are seeing more rapid adoption in some places than others.

The U.S. international split is not one we look at very closely.

My guess is it is pretty comparable.

People are nodding, so I guess that is right.

Jamie Rubin with Morgan Stanley.

Just to follow-up to Tony's question.

You did 800 million this year, which was double what you expected.

I'm just wondering if that is a result of -- it sounds to me like it is a result of achieving those synergies faster than you expected, not finding an additional 400 million in synergies.

I am just wondering how that plays out over the course of the next three years.

Does that mean that if you had originally assumed or targeted 1.5 billion or so of synergies next year that number is now significantly lower because you found the synergies, or achieved those synergies this year?

My second question relates to Lipitor overseas.

If you could break down the components of sales growth, how Lipitor is doing in some of the overseas markets, namely Germany.

On the first question, I guess I should first thank you for hosting the conference in New York last week.

I enjoyed it.

On the cost savings issue, I have always said be careful what you ask for because you're going to get a lot of it.

And I guess that is true here as well.

We did double our estimate for this year.

I don't think that will result in a higher overall goal.

We're still looking for $4 billion over the three years.

And that of course adds to 6 billion we have already taken out of our cost base through the two major acquisitions.

There is still the opportunity for operating cost rationalization.

And I don't doubt that outside the Adapting to Scale program certain businesses will be adapting their own scale to the level of their revenues and the growth of their revenues.

But we're still looking over this three-year period to a cumulative, annual cost reduction of $4 billion.

On your second question, let me ask Ian Read, who is in charge of our European and other markets to answer that question.

On Lipitor and full year you're looking at -- you can (technical difficulty) area of 6% Lipitor growth.

If you strip out Germany, it is 13%, so Germany had a substantial impact on the growth.

Germany itself was negative 54.

We have now seen that stabilize with Germany at about a 15% value share in IMS, and we expect it to remain there until we turn around the situation and get back to reimbursement in Germany.

We have a robust plan for that, and there are changes in the law which give us optimism we can turn that around in '06.

Now in the other countries you're looking at France, plus 13% growth, you're looking Canada, plus 12, UK, Ireland's plus 26.

Overall it is a very robust growth outside of Germany.

And most of these countries we already face generics in the statins.

That is one of the reasons we are pretty comfortable with the difficulty of therapeutic substitution.

Germany is very interesting.

The 1.1 million Germans on Lipitor, which is called Sortis in Germany, 25% chose to pay the part charge and stay on Sortis or Lipitor. 25% ended up on no therapy.

Patients at risk of heart disease went from effective control of lipids on Lipitor to no treatment. 50% switched to less than than optimal treatment.

So sure it saved money in the short term, but as you all know, I think it is a lot better to prevent those heart attacks and strokes rather than wait and have to treat -- pay for the treatment of the heart attacks and strokes.

Peter Brandt, you wanted to add to this?

Just one comment to fill in one more blank on your question about international performance of Lipitor.

As you know from the documents we sent out, total Lipitor growth was 13% internationally.

If you adjust for Germany, the points that Ian was making, that growth goes up by approximately 5 percentage points.

David Reisinger with Merrill Lynch.

I had a couple of questions.

First, for Hank, could you give us an update on Florida Healthy State?

That was a program that you had discussed historically.

Second, for David Shedlarz, if you could discuss the heightened degree of variability in the quarterly financials.

And then third, with respect to Germany and Lipitor a year ago when there was the price cut in Germany, I think it was communicated at the time that there was going to be a second price cut in January of '06.

And I'm just wondering if that happened, and if that is going to have any incremental effect or not?

Let me ask Peter Brandt to discuss the Florida program since he was there.

We are in our fifth year of operation with the Florida Healthy State Program.

And because of at least a year plus lag in getting all the claims data, we should be having year three results, including financial claims data, hopefully by the end of January.

It perhaps could be sometime in the early part of February.

A preliminary look at year three and program to date through three years looks very similar to the first two years.

In other words, we are exceeding our guaranteed cost savings by a wide margin; at least 50% over the guarantee.

And we what we are seeing in all three years of the program to date are a continuation of extremely high engagement rates of this Medicaid population.

And then in that population very strong evidence of sustained behavior modification, which in turn is leading to a continual growth in the improvement of clinical status.

The results that we were able to demonstrate after year one got better because people are in the program longer in year two.

And they look -- we believe they will look even better by the time we get to year three.

That has resulted in a continuation of a decline from the projected cost of the state of Florida to treat these individuals.

At this point we've got over 150,000 Floridians that are part of the program, well over 20,000 of them being very high-risk individuals at their disease states, and the results continue to look very good.

Was that renewed at the end of last year?

Was it renewed at the end of last year?

What is the status of the program?

It was indeed renewed at the end of last year.

What we have is a contract with the state of Florida.

I believe it is either through June or September of this year.

And then the state of Florida is going to at our -- we have been working with them over the last three or four years.

There are parts of the program that the state of Florida will be taking over themselves.

And then they will be turning that over to kind of an RFP process to any vendor who wants to fill that need with that.

And at that time Pfizer and Pfizer Health Solutions will determine if we want to continue our involvement with the state of Florida.

But one of the things we have been working very hard on is getting Florida to the point where they can have this be a sustainable program with the help of some others, perhaps, but after five years we wanted to get them a little bit on their own legs.

The very important message from this program, of course, is that you achieve better health outcomes and significantly lower costs by managing care, putting the patient at the center, rather than managing cost, which points the payer at the center.

David, do you just want to add any more to variability?

Yes.

I think in large part the issue of variability is a function of a lot of good news.

So when you take a look at the fact that the Company is going through a major restructuring effort and has been able to accelerate it quite significantly.

That subjects that benefit to the Company to a certain degree of ranges and variability.

We have an opportunity we will talk about on February 10 in terms of a large number of new products, and they are going to define the new Pfizer.

And obviously, their availability, their penetration into global marketplace, which will define the future of Pfizer, offers the natural degree of variability associated with any new product.

And then increasing access to what we do in terms of our pharmaceutical medicines through things like Medicare Part D will drive a certain degree of variability as well.

The variability is being driven in many, many respects by favorable things that the Company looks forward to and obviously has to navigate well.

And on the Florida Healthy State Program -- Karen reminds me that we're replicating the fundamental message here that access to medicines and access to care reduces costs and improves outcome -- is we're replicating this study in the Medicare population as one of only eight pilots authorized by HHS.

In partnership with Humana we are managing a large number, or will be -- I guess we are already.

We are.

We launched January.

Already managing a large number of Medicare population in Western Florida in partnership with Humana, an effort we call Green Ribbon Health.

And that is one we will be highlighting on February 10.

Further price reductions in Germany, Ian.

Yes, we expect the price reductions if not January 1, then April.

It is unclear at this moment the extent of the reductions as the rules are being changed.

I expect it will be above 10%.

We expect minimal impact on our Lipitor franchise.

Presently it has 15% value share.

Most of the patients are either paying the copay or they are in private plans that cover the price of Lipitor.

So we expect minimal impact on (technical difficulty).

This is another interesting example of a failed policy.

In an effort to control costs the German government continues to use government price controls to push down price.

The result is every year cost goes up.

What we are advocating and demonstrating in many places around the world is that by managing care, by putting the patient at the center, you achieve your objectives of better outcomes and lower cost much more effectively than through government price controls.

Chris Shibutani with JP Morgan.

On the Adapting to Scale and the cost saving initiatives, Hank, you had characterized the relative progress at different parts of your business, Animal Health versus manufacturing.

The R&D spending level was lower than we had expected.

You commented a little bit about that.

But could you tell us where you are on the case or timing of the Adapting to Scale initiatives there?

And then could you also clarify a little bit more what you meant by having a net increase in spending on portfolio products?

I think I get that, but if there something more clarifying that would be helpful.

Let me ask John Lamattina to answer that.

Specific to the second part of your question, we were able to invest more money this past year in programs like [Myravirox] and some of our oncology programs in 2005 that we originally hadn't budgeted as much for doing different indications and the like.

And we were able to do that despite the fact that we had some financial constraints, because we took money out of other parts of the Corporation.

The other thing to keep in mind in the reduced to spend in the fourth quarter, which I think is what seems to be highlighted with most people is that we include in our R&D spend there is royalty or milestone payments.

And there were some that were delayed from December of this month to January of 2006.

The overall reduction you see is also partly due to that as well.

I almost hate to raise it, but of course we did have fewer days in the quarter, and that means fewer days to spend money, so that affects revenue but it also affects expenses.

One of the things that I would like to reinforce that John is highlighting for R&D but it is implicit throughout the Company.

This almost singular focus on the $4 billion is missing a lot of the benefit associated with what we're doing in restructuring and refocusing the Company.

There's a lot that is going on in terms of allocating expenses from lower value added activity to higher value activity.

And at same time there's a lot that is going on in terms of streamlining anywhere from decision-making to basic governance in the Company.

And that fluidly and reorganization is also critically important to Pfizer, including the reallocation of funds to things that drive the future of the Company, in particular research and promotional support.

[Lloyd Hicman] with Earnest Investment.

This is [Lloyd Zackman] at Bernstein.

Given that Lipitor's mix impact was about 5%, which was a good part of the overall revenue increase for the year, I was wondering if you could tell us if there are any other of your major drugs that have a large mix component there, and also what this might mean to revenues overall?

No, there is really no other product that has this level of impact.

Remember the mix change within Lipitor is physicians better controlling cholesterol, lowering cardiovascular risk by upping the dose of Lipitor.

That is increasingly documented in our clinical studies.

And treating to new targets there has been a wealth of clinical data showing the benefit of increasing the dose of Lipitor, further reducing LDL either to guidelines or below guidelines.

And that is obviously happening.

And we're encouraging that because it is in the interest of patients, and we also think the interest of payers.

Robert Hazlett with SunTrust Robinson Humphrey.

Regarding Lyrica -- a couple of product questions I guess -- Lyrica, a solid launch is underway there.

We have seen a fairly significant amount of journal advertising focused on the pain indication.

Can you give us breakdown of its use epilepsy versus pain if you can?

Secondly, Celebrex, we haven't seen really any major signs of life in terms of script growth.

Do you still believe in the re-invigoration of its franchise?

And if you do, when should we begin to see that reflected in scripts?

And just lastly, the anti-CTLA4 program, when might we expect data from the Phase III studies?

Let me address the last one.

We will address the CTLA4 on February 10.

And Pat Kelly on the other questions.

Starting with Celebrex, which was your last of the product questions, I would point you to the December monthly IMS prescription report, which will indicate that Celebrex reached a 52-week high in market share of 10.9%, which makes it the highest share that Celebrex achieved all year.

And it begins to more closely approximate the share that it was generating prior to all of the COX-2 challenges that have occurred.

We believe the rebound on Celebrex has begun.

And we believe it will continue as more and more doctors begin to appreciate that there is a strong clinical benefit to the COX-2 medications in arthritis pain and inflammation.

And that the safety record of Celebrex in particular continues to be validated with everything from Lancet to British Medical Journal to other upcoming publications, which show that is the most extensively studied insaid ever.

And it is demonstrating no greater cardiovascular risk than any other insaid.

That point is beginning to sink in to physicians, and I think will only accelerate the rebound.

On Lyrica it is important to note that the epilepsy market and the neuropathic pain market are quite different in size.

The epilepsy market, while very important from a medical need point of view, is quite small because there are not that many epileptic patients.

However, there are an extraordinary number of patients with neuropathic pain, and many of which are not satisfied with the pain relief they are currently receiving.

And thus have been responsible for a lot of the rapid uptake in Lyrica, because of the strong clinical benefit the product provides.

Again it is an unfair comparison to ask which is contributing more.

Pain will always contribute more because it is a much larger market.

I think we have time for two more questions.

James Kelly with Goldman Sachs.

I have a couple of questions about the gross margins, if I may, for David.

In the third quarter report I believe that the commentary was that could be a decrease in throughput, especially given the day count, and a higher fixed cost [berg], and that is going to have an impact on gross margins going in the fourth quarter.

Gross margins were down sequentially, but not really the lowest point that you've seen this year.

So could you comment really on the throughput difference that you saw, the impact of AtS, whether it was just on the variable costs or some of the fixed costs, if you have been able to achieve any of those, and also on the impact of the change in the Lipitor rebate environment?

And if I could just throw one on there with the [treebeat] environment.

If you are going to have preferred brand status in Medicare in 2006, is that something we're going to see reversed in 2006?

The 2006 question we will take on February 10.

Let me ask our CFO, Alan Levin, to discuss David's favorite subject, gross margins.

The big difference on the fourth quarter versus the third quarter and cost of sales is really foreign exchange.

We saw an appreciation of foreign currencies relative to the dollar at the sales line earlier in the year, and that is built into our inventories which are capitalized.

And then brought into P&L (technical difficulty).

So there is really a lag effect on that.

And that was much more a fourth quarter phenomenon than anything else and accounts for some of the improvement that you see in gross margins going forward.

We do continue our planned rationalization strategy, and so the capacity in the system is coming down as we close or downsize our [plant] network.

And we will be in a position to discuss our forward-looking plans on that at our February 10 analyst meeting.

Let me ask Peter Brandt to address the fourth quarter Lipitor rebate question again.

As we mentioned before, the rebates for Lipitor in and of itself in that quarter were lower than what they had been in the fourth quarter of the previous year.

I think that honestly it is too early to -- there are so many factors that go into these.

You're dealing with over 100 different contracts, well over 100 different contracts, that to be able to say we have a trendable event or not off of that.

And I think you're asking one very important component of it, what in essence the rebate structure going to be looking like for the 99 some odd plans that we will be contracting with on the Medicare side of the equation.

We are still grappling with -- because not all the contracts are signed yet -- the marriage of all the current contracts, the move of the dual eligibles into Medicare from Medicaid, what impact that would have on an ultimate rebate structure, as as some of the accounts that we have been doing -- we have been negotiating with or battling with in terms of the appropriateness of some of their requests, and what ultimate impact that will have on rebates for 2006.

That is something we hope, as Hank said, to have a better handle on by the time we meet in February.

One thing that is clear, and Peter mentioned 99 contracts -- or 100 contracts this year, 99 next year, it is quite clear that the rebates to the one will go to zero.

That is helpful to us.

The last question please.

John Boris with Bear Stearns.

Just on Lipitor.

It has been a long time since the National Cholesterol Education Program revised the treatment guidelines.

Can you just talk about how the T&T results and how potentially numerical results might influence a revision in the treatment guidelines downward?

And how that helps you competitively against generic Zocor?

A second question on Zithromax.

Has a pediatric suspension been launched on Zithromax?

And then third a philosophical question for you, Hank.

When you do your scenario analysis on a growth rate for the industry I think consistently you have said that the number constantly comes out to be about 8%.

With the Medicare prescription drug benefit on the horizon does that change your opinion at all about that industry growth rate going forward?

Let me take the last one first.

My number is still 8%, interestingly enough.

It is a different 8% than we had before quite clearly.

But the size of this market says good things happen, bad things happen.

There is a regression to the mean.

The Medicare prescription drug benefit is certainly a positive for the industry, for patients and for the federal government, the payer.

On the other hand, there are more and more branded products going off patent.

There is going to be a point here at which that reverses as industry R&D productivity picks up, which I think it will.

Certainly ours has already.

And I expect this from others in the industry as well.

But first let me have Joe Feczko discuss the guidelines on cholesterol.

There is no doubt that not only T&T, IDEAL but every study we have done with Lipitor has shown that as we drive the LDL lower we have an improvement in endpoints.

And this is whether it is against placebo, against low-dose, or against some of the statins.

We anticipate that this is being -- we believe this is probably being picked up by the practicing physician and by the people who look at the guidelines too.

And this may be reflected on some of the comments we said earlier about the change in the mix, so that we are seeing more higher dose Lipitor being used.

And I'm sure that is a reflection of the data that is becoming available.

But there is no doubt that we are seeing whenever we do this that there is a continued improvement in outcome as we drive LDL lower.

And that is much more readily achieved with Lipitor.

And competitively, how does that help you with generics in the statin?

Every eminent study that we have done looks for an endpoint of getting down to 60 or 80.

And our endpoint study from T&T and IDEAL have driven the LDL down to that 60 to 80 range, and we have been able to do that.

And that is beyond the guidelines that we currently have, which is 100.

We have been able to do that much more consistently.

And it is certainly far below what generic simvastatin can get to.

Yes, you can't get there with generic simvastatin is the point.

And we see significant benefit getting that -- to that low level, which helps patients and it helps payers.

I think we've got a good story here.

Finally, on Zithromax generics, it is true we don't have competition on all dosage forms.

Peter, could you briefly discuss where we do and don't have generic competition?

We do not have competition on generic azithromycin for the oral suspension or the intravenous formulations.

We maintain the only presence in the market for those.

Where on the oral solid form, the capsules and the tablets, are generically competitive.

Just remind me the mix, is it 65, 35?

Yes.

That would be a good estimate. 65% [noral solid], 35% [alpha].

Thank you all.

That concludes today's conference call.

We appreciate your time, your support, and I hope to see you all on February 10.

Thank you.

Ladies and gentlemen, this concludes today's Pfizer fourth quarter 2005 earnings conference call.

You may now disconnect.