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Executives

Charles E. Triano - Senior Vice President of Investor Relations

Ian C. Read - Chairman, Chief Executive Officer and Chairman of Executive Committee

Frank A. D'Amelio - Chief Financial Officer and Executive Vice President of Business Operations

Geno J. Germano - President of Pfizer Specialty Care & Oncology and General Manager of Pfizer Specialty Care & Oncology

Olivier Brandicourt - President of Pfizer Primary Care and General Manager of Pfizer Primary Care

Mikael Dolsten - President of Worldwide Research and Development

David S. Simmons - President of Emerging Markets & Established Products units and General Manager of Emerging Markets & Established Products units

Analysts

Catherine J. Arnold - Crédit Suisse AG, Research Division

Jami Rubin - Goldman Sachs Group Inc., Research Division

Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division

Christopher Schott - JP Morgan Chase & Co, Research Division

Marc Goodman - UBS Investment Bank, Research Division

Gregory B. Gilbert - BofA Merrill Lynch, Research Division

Mark J. Schoenebaum - ISI Group Inc., Research Division

Charles Anthony Butler - Barclays Capital, Research Division

John T. Boris - Citigroup Inc, Research Division

David Risinger - Morgan Stanley, Research Division

Steve Scala - Cowen and Company, LLC, Research Division

Seamus Fernandez - Leerink Swann LLC, Research Division

Pfizer (PFE) Q1 2012 Earnings Call May 1, 2012 10:00 AM ET

Operator

Good day, everyone, and welcome to Pfizer's First Quarter 2012 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations. Please go ahead, sir.

Charles E. Triano

Good morning, and thank you for joining us today to review Pfizer's first quarter 2012 performance. I'm joined today by our Chairman and CEO, Ian Read; Frank D'Amelio, our CFO; Olivier Brandicourt, President and General Manager of Primary Care; Mikael Dolsten, President of Worldwide R&D; Geno Germano, President and General Manager of Specialty Care and Oncology; Amy Schulman, General Counsel, and President and General Manager of Pfizer Nutrition; and David Simmons, President and General Manager of Emerging Markets and Established Products.

The slides that will be presented on this call can be viewed on our homepage, pfizer.com, by clicking on the link for Pfizer Quarterly Corporate Performance First Quarter 2012, which is located in the Investor Presentations section in the lower right-hand corner of this page.

Before we start, I would like to remind you that our discussions during this conference call will 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 Pfizer's 2011 annual report on Form 10-K and in our reports on Forms 10-Q and 8-K. Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Pfizer's current report on Form 8-K dated today, May 1, 2012.

With that, I'll now turn the call over to Ian Read. Ian?

Ian C. Read

Thank you, Chuck. During my remarks this morning, I will briefly discuss the quarter and how I see the company evolving over time, as we continue to stay focused on getting our innovative core more productive and sustainable and keeping our capital allocation priorities in line with the best interest of shareholders.

Regarding the quarter, we started the year on a solid footing. Some noteworthy highlights include good performance in Emerging Markets of 9% operational growth in revenues quarter-over-quarter. In particular, we had strong growth in 3 key markets: China, Mexico and Russia. While I'm pleased with this quarter's performance in Emerging Markets, as we have said before, we still expect there will be some volatility from quarter-to-quarter due to ongoing pricing and macroeconomic issues.

Several parts of our branded portfolio performed well. Globally, we grew revenues of Celebrex, Lyrica and Enbrel.

The work we did in planning for the Lipitor LOE has proved to be successful. Five months after LOE in the U.S., our market share is over 2.5x compared to other LOE analogs at the same point in time. Branded Lipitor sales in the U.S. for the quarter were $383 million.

The Animal Health and Nutritional business turned in another quarter of strong operational growth. Animal Health grew 6% and Nutrition grew 8% over the same quarter in 2011. As you know, last week, we announced an agreement to sell our Nutritional business to Nestlé. We are pleased with the interest there was in this business and believe that Nestlé, with its presence, resources and focus, is a very good strategic fit for the Nutrition business. We expect the divestiture of Nutritional will be complete by the first half of 2013, assuming the receipt of the required regulatory clearances and satisfaction of other closing conditions.

As we have said in the past, we will use the proceeds in a way that creates the best after-tax value for our shareholders. And we expect to allocate the after-tax proceeds to further share repurchases while also considering other value-creating opportunities, with the return on share repurchases remaining the case to beat and a high hurdle.

Our expense discipline and process improvement efforts continue to yield savings. Adjusted total costs were down 7% operationally from the first quarter of 2011. And we returned over $3.3 billion to shareholders through dividends and share repurchases in the first quarter.

Despite pricing pressures and global market uncertainty, the fundamentals of the business is strong, and our strategy is positioning us well for the future. With the pending sale of the Nutrition business and after the potential separation of Animal Health, which at this time, we expect would most likely be a public market transaction, our strategic imperatives remain the same. We are focused on building a sustainable research engine and allocating our capital in ways that create a competitive and flexible operating model that maximizes value for Pfizer and our shareholders.

I'm frequently asked: How do I see the company's strategy evolving? And what are the markers that will indicate if we're on track? As I've shared with you in prior calls, through our strategic imperatives, we are building 2 strong cores: an innovative core and a value core. I see each of these as having distinct cost structures and operating drivers, and our consumer business can support the evolution and growth of either these cores through its portfolio of strong brands.

A few words about the innovative core. It is intended to be a growth engine sustained by R&D investments that enable us to continue to build a robust late-stage, mid-stage and pre-proof-of-concept pipeline. A pipeline of highly differentiated products that are focused on areas of unmet medical need that payers are willing to pay for.

While we still have several products that will either lose exclusivity or will be approaching the end of their co-promotion periods over the next 2 to 3 years, I'm already seeing signs of positive momentum within the innovative core. Our late-stage pipeline has progressed well across multiple therapeutic areas as evidenced by the recent launches of Inlyta, Xalkori and Prevnar 13 for adults and the regulatory reviews that are underway for Eliquis, tofacitinib and bosutinib. Over the next few years, we expect that these assets will likely form the foundation upon which we build and grow. And by prioritizing our investments in advancing the most promising newest drug candidates, we now have a complement of early- to mid-stage compounds that we hope will achieve proof of concept over the next 2 years and that will form the necessary late-stage substrate of the future.

Turning to the value core. Its objective is to generate strong cash flow, albeit with less growth. It includes post-LOE products, certain products that are approaching LOE and other Established Products targeted to broad populations. The value core requires a strong presence in high-opportunity geographics, low-cost go-to-market and manufacturing capabilities, and a broad base of product offerings. These are all capabilities we are building for our Emerging Markets footprint and other business development activities such as the JVs and contract manufacturing agreements we have entered into.

To support and evolve each of these cores, we'll continue to work on our cost structure, inclusive of everything from research and development, manufacturing and go-to-market strategies, while allocating capital in ways that maximize value to shareholders.

To sum up, I believe we have the right strategy for Pfizer that will guide us over the next several years. It will take a few years to fully determine our success in building the innovative and value cores. That said, as they each develop over time, I see them generating consistent and steady growth in earnings per share.

Now I will turn it over to Frank for additional details on the quarter.

Frank A. D'Amelio

Thanks, Ian. Good day, everyone. As always, the charts I'm reviewing today are included in our webcast. Please note that starting in the second quarter of 2012, the Nutrition business will be presented as a discontinued operation in the consolidated statements of income for all periods presented on a retroactive basis. And as you know, discontinued operations are excluded from adjusted financial results. This means that for the full year 2012, the results of the Nutritional business will be excluded from adjusted results. Now let's move on to the numbers.

First quarter 2012 revenues of $15.4 billion decreased 7% year-over-year, reflecting an operational decline of approximately 6%, driven primarily by the loss of exclusivity of several key products in certain geographies, including primarily Lipitor in the U.S. Adjusted diluted EPS of $0.58 decreased approximately 3%, which primarily reflects the favorable impact of lower total adjusted costs resulting from cost reduction and productivity initiatives, to a lesser extent, the impact of foreign exchange, which was more than offset by the loss of exclusivity of certain products.

Foreign exchange negatively impacted first quarter revenues by less than 1% or $57 million and favorably impacted adjusted total cost by $163 million or 2%. As a result, foreign exchange favorably impacted first quarter adjusted diluted EPS by approximately $0.01.

We've included the next chart for the first time to better clarify the composition of biopharmaceutical revenues in Emerging Markets. In the first quarter of 2012, Emerging Market biopharmaceutical revenue increased 6% to approximately $2.3 billion, reflecting operational growth of 9% and the negative impact of foreign exchange of 3%. Volume growth of 13% in Emerging Markets was partially offset by price reductions of 4%, resulting in the 9% operational growth.

Of the first quarter Emerging Markets biopharmaceutical revenues, approximately 42% was generated by Established Products, 32% by specialty and Oncology products and 26% by Primary Care products. Established Product revenues generated by sales in Emerging Markets increased 9% operationally year-over-year. Specialty Care and Oncology revenues in Emerging Markets increased 12% operationally, and Primary Care revenues in Emerging Markets increased 7% operationally.

With respect to the BRIC-MT markets, first quarter biopharmaceutical revenues of almost $1.1 billion increased 10% operationally year-over-year, and of these revenues, approximately 44% was generated by Established Products, 29% by Specialty and Oncology products and 27% by Primary Care products. Revenues for Established Products sold in BRIC-MT markets increased 14% operationally year-over-year. Specialty Care and Oncology revenues in BRIC-MT markets grew 9% operationally, and Primary Care revenues in BRIC-MT markets grew 4% operationally.

We've also provided the next chart for the first time to better clarify the composition of biopharmaceutical revenues generated in the BRIC-MT markets. During the first quarter, volume growth of 15% in the BRIC-MT markets was partially offset by price reductions of 5%, resulting in operational growth of 10%. These markets contributed about 50% of the Emerging Market biopharmaceutical operational growth versus the first quarter of 2011.

We're updating our 2012 revenue guidance and certain elements of our 2012 adjusted financial guidance solely to reflect our agreement to sell the Nutritional business. Again, starting in the second quarter of 2012, the Nutrition business will be presented as a discontinued operation in the consolidated statements of income for all periods presented on a retroactive basis, which means that for full year 2012, results of the Nutrition business will be excluded from adjusted results.

Now most notably, we are decreasing revenue guidance to a range of $58 billion to $60 billion from the range of $60.5 billion to $62.5 billion, decreasing the adjusted cost of sales as a percentage of revenue guidance to a range of 19.5% to 20.5% from a previous range of 20.5% to 21.5%, decreasing the adjusted SI&A expense range to $16.3 billion to $17.3 billion, and decreasing our adjusted diluted EPS guidance to a range of $2.14 to $2.24 from a range of $2.20 to $2.30. In addition, we are decreasing our reported diluted EPS guidance to a range of $1.23 to $1.28 from a range of $1.37 to $1.52, primarily reflecting additional expenses related to certain legal matters and certain asset impairment charges.

Our first quarter results reflect our continued solid operational performance despite the negative impact of the loss of exclusivity of certain products in various geographies, mainly Lipitor in the U.S. Again, we are updating our 2012 revenue guidance and adjusted financial guidance solely to reflect our agreement to sell our Nutrition business to Nestlé. Following the completion of the transaction and after we receive the proceeds, which we believe will be in the first half of 2013, we expect to make additional repurchases of our common stock with the after-tax proceeds, with share repurchases continuing to remain the case to beat. We expect this to be accretive to our net results in 2013 and beyond.

We remain on track to announce the strategic alternative for Animal Health business in 2012 and continue to expect any separation of this business to occur between July of 2012 and July of 2013. As always, our decision will be based on the option that generates the greatest after-tax return for our shareholders.

We remain committed to delivering attractive shareholder returns in 2012 and beyond, with approximately $2.3 billion or 104.6 million shares repurchased to date in 2012. And we continue to expect to repurchase $5 billion of our common stock in 2012.

With that, I'll turn it back to Chuck.

Charles E. Triano

Thank you, Frank, and operator, please, if we could now poll for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Catherine Arnold from Crédit Suisse.

Catherine J. Arnold - Crédit Suisse AG, Research Division

I actually have 2 questions. I want to ask you about your comments on share repurchase. I know you guys always talk about share repurchase as the case to beat. And I think that we obviously have a lot of subjectivity in thinking about that in terms of what your stock price is now and where it will be and when that changes. But is it fair to think about it from an earnings yield perspective? When you think about consensus numbers divided by your share price, you're yielding 10%, and that seems like a pretty high number to beat. And actually, even $1 or $2 up from here, same deal. So is that a fair way of thinking about it? And then my more granular question is on tofa. Could you just comment on where the ORAL Start study is in regards to interim malice -- analysis reading out this year, if FDA has that in terms of its review? And the same thing with ORAL Scan.

Ian C. Read

Yes, I'll ask Frank to comment on the way you look at share repurchases, but I'd just like to once again emphasize that we remain committed to discipline in capital allocation. And we do see our shares as being a good investment and a high hurdle to beat. And we remain committed to looking for opportunities of sort of bolt-on acquisitions that would produce growth, but they always have to beat what we believe is the high hurdle of our share repurchase.

Frank A. D'Amelio

So, Catherine, I think the way I'd answer the question is, we don't look at any individual metric. We look at several metrics. At a macro level, we always start with at prevailing market conditions and therefore, prevailing market stock prices. Do we believe that buying back our shares represents an attractive investment opportunity and a prudent use of capital? The short answer is, we do. So we start there. Then we look at a few other metrics. One of which is the one you mentioned in terms of an EPS number on top of the stock price and the return you get. And then by the way, that's an after-tax return that needs to be trued up to a pretax number, which gets you to the high-hurdle comment that Ian made earlier on the phone call. So that is one of the other metrics that we do look at when we analyze the return on share buybacks.

Ian C. Read

And, Geno, if you want -- thank you. Would you answer the tofa question?

Geno J. Germano

Yes. Catherine, for the tofa trial, the ORAL Scan trial, the 1-year readout was included in the dossier that went to the FDA. So they have the data, the 1-year data. The 2-year data will read out a little bit later this year, and whether we submit that data to the FDA or not prior to an action will depend on ongoing discussions with the agency. In terms of the monotherapy trial, that also, the 1-year data will read out around middle of this year as well. And that has not obviously been submitted as part of the dossier since it hasn't read out yet. And so those data will be available as we progress through the rest of the year.

Operator

Your next question comes from Jami Rubin from Goldman Sachs.

Jami Rubin - Goldman Sachs Group Inc., Research Division

Just to follow-up on Catherine's questions. Ian, I don't mean to put words in your mouth, but do you see any other acquisition out there that is more attractive right now than buying back your stock? And then, Frank, maybe if you can talk about the proceeds from the Nutritional business, as I understand, are mostly outside the U.S. And what can you do to minimize the tax burden when you take that cash back from overseas to the U.S.? And then lastly, Geno, if you could just frame for us the issues going into the panel on Wednesday for tofacitinib. And just generally, how you're feeling about the potential outcome.

Ian C. Read

So I think we've said many times that we -- as we look at opportunities, especially in smaller bolt-on opportunities where we could acquire an asset that we could organically grow, we would be interested in that because we do want to look at growth assets. I certainly don't -- I look at them as bolt-on and I don't -- as I sit here today, don't see any of those type of activities. And certainly, I would say -- while never saying never, I certainly don't see any opportunity in larger-scale acquisitions that would be a prudent use of our capital. Frank, do you want to add to that?

Frank A. D'Amelio

Yes, so let me hit the question on the Nutri proceeds, Jami. Let me just start at the high level and then I'll drill down a little bit. So first, we're pleased with our recent announcement to sell the Nutri business to Nestlé. We look forward to working with Nestlé to get that transaction completed by the first half of 2013. In terms of the proceeds, in my mind, nothing's changed. We are all about working to continue to minimize -- to maximize the after-tax return to our shareholders. In terms of the use of the proceeds, nothing has changed. Share buybacks remain the case to beat. And then specifically now to your question, when we do receive those proceeds, initially, most of those proceeds will be domiciled outside the U.S. because our Nutri business was a non-U.S. business. And then in terms of what is our objective, our objective is to minimize the tax burden involved in those proceeds, as we maximize the share repurchases from those proceeds. And that's literally what we're working off all the way through as we go.

Ian C. Read

Geno?

Geno J. Germano

Okay. Jami, this is Geno. So let me make some comments about tofa. I think with regard to our expectations for the Advisory Committee and the issues, I mean, it's basically all about benefit-risk, and I think there will be a thorough discussion of both. And we feel that our data package is strong with regard to characterizing both the benefits and the risks associated with this medicine. On the efficacy side, we've done 5 large pivotal trials. We have a database of over 4,800 patients. We've shown consistent efficacy in signs and symptoms and function and remission. We have structured data in the ORAL Scan study. And importantly, we have strong patient reported outcomes data that showed patients actually function better and they feel better, actually, on this therapy. So on the benefits side, we think the benefits are really well characterized. On the risks side, this is a new mechanism of action, so there'll be lots of interest in understanding the profile thoroughly. The good news is that what we've seen in our clinical trials with regard to adverse events and safety issues are predictable based on the mechanism of action. You can almost anticipate what might be the case. What we've seen in the safety profile is that it is predictable. The safety events are familiar to rheumatologists. They're manageable in most cases. And we think that after a thorough and robust discussion, the Advisory Committee will have the data to conclude that the benefit-risk is positive at both the 5-milligram and 10-milligram dose, which is what we've concluded. We think the fact that this is the first oral DMARD in over 10 years and given the high unmet medical need for patients with RA, that the committee will be favorable and the discussions will be robust.

Operator

Your next question comes from Tim Anderson from Sanford Bernstein.

Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division

A couple of questions. The first question is a longer-term question on your restructuring. While selling off Nutritional and spinning out Animal Health may benefit shareholders, it's not apparent exactly how it really benefits the parent company, because these are growth to your assets that you're getting rid of. So it's clear how shareholders would benefit in the short term, but I'm hoping you can describe in what ways the parent company benefits over the longer run if growth in the pharma business ends up being lower as a result of the restructuring. And then the second question is, again, on tofacitinib, once FDA makes its final decision on the application, will you be disappointed if you don't get both doses of the drug approved and if you don't get a DMARD failure label versus only getting a third-line TNF-failure-only label?

Ian C. Read

Okay. So look, I'm not quite sure I totally agree with your hypothesis there with be the disposition or the monetization of Nutri and Animal Health. I think we are unlocking value for shareholders and hence, we are unlocking value for Pfizer. It's a good use of capital. It's an appropriate use of capital allocation. And in the end, the business rests on our ability to have an innovative core and a value core. That's where the vast majority of our business is. That's where our growth will come from. That's where our cash flow will come from. So unlocking the value of these 2 businesses, to me, seems to be in the shareholders' interest and in Pfizer's interest. With that, I'll pass it over to Geno.

Geno J. Germano

Okay. So with regard to potential outcomes, on the doses, we believe that we've demonstrated that both the 5-milligram and the 10-milligram dose independently have a positive benefit-risk and should be approved and should be made available to practicing physicians. We know that rheumatologists would like to have the ability to tailor therapy to meet the individual needs of their patients, and their preference would be to have both doses available. And so we will support the registration of both doses, and hopefully that will occur. If not, we really don't see it as a major deterrent to the use of the medicine or the potential for tofacitinib to help patients in need of a different -- alternative to what's available today. With regard to the positioning of post-DMARD or post-TNF, it's likely that the initial utilization of the medicine will be in a post-TNF patient population. That's where the greatest unmet need exists today. So it's almost regardless of what the labeling is. We think that the evolution of the use of the medicine will start in the post-TNF space. And as experience accumulates and as additional data are generated, we would see the labeling and the use of the medicine evolve to a pre-TNF and possibly even a pre-methotrexate position in the long run.

Operator

Your next question comes from Chris Schott from JPMorgan.

Christopher Schott - JP Morgan Chase & Co, Research Division

The first question is how you're thinking about the longer-term dividend here. You've commented a goal of getting back to an industry payout by the end of '13. But given the highly diversified business you're going to have, particularly post-Lipitor, why not think about even a higher payout over time? And I guess, how are you thinking over time about, again, a higher dividend versus share repo? And then my second question was on the bapineuzumab. What should we just be expecting here? Is it something that we're going to have to wait for a conference to get data? Or should we anticipate a press release from Pfizer when top line rate results are available?

Ian C. Read

Okay. So I think, Chris, we've been reasonably aggressive in increasing the dividend over the last 3 years. We're aware of how important it is in total shareholder return. We constantly monitor that. We've said up to this date that a 40% payout ratio would be appropriate, but we will look at that every year. And the tax -- right now, the tax is equivalent tax treatment between buyback and dividends, so there's no arbitrage there for shareholders. So we will look at it on a regular basis. We'll look at what the fiscal situation is, and I think we'll make the most prudent decisions for our shareholders. Frank, do you want to add anything to that?

Frank A. D'Amelio

I think I'll just add to it that the way we think about this, Chris, is the word I'll use is an "and," and not an "or." And what I mean by that is if you look at what we've been doing the last couple of years, we've been doing buybacks and a dividend. So last year, for example, we returned to shareholders over $15 billion: $9 billion in buybacks, over $6 billion in dividends. This year, with our goal of approximately $5 billion in buybacks, we'll return over $11 billion directly to our shareholders. So in the last 2 years, between what we've done and what we plan on doing, that will be over $26 billion in capital returned directly to our shareholders. So that's why I say an "and," not an "or." And over time, clearly, our objective is to generate steady, consistent earnings growth with our approximately 40% target in terms of payout. As earnings would grow, the dividend would continue to grow. So that's what we're all about doing.

Ian C. Read

Olivier, would you like to take the next question on bapi?

Olivier Brandicourt

Yes, Chris. So study 302, as you know, with ApoE4 carriers is now completed, and the database is being locked down. And the other study, the 301, for the ApoE4 noncarrier will be actually completed later during the summer. So currently, we plan to issue a press release to include the top line results of both studies, carriers and noncarriers, because as an alliance, we believe that we will best understood the results in the context of both populations. So we plan to issue the release as soon as possible after the availability of the top line results of the 301, and we anticipate that to be during the third quarter of this year. And after that, in line with the standard practices we have within the alliance, we intend to present the full results at a scientific or medical congress during the second half of the year.

Operator

Your next question comes from Marc Goodman from UBS.

Marc Goodman - UBS Investment Bank, Research Division

First, on crizotinib, can you give us an update, maybe how many patients are on therapy, and what's happening behind the scenes there? Second, any major inventory changes for the products, just from the end of the year to the end of the quarter? And then third, on tofa and the panel, the big concern is not what does the data look like and the adverse events. We've all seen the data. It's much more of a concern of how the FDA sometimes can recut data and look at things a little differently. And I was curious if you could give us any sense of if they've done any of that in your conversations with them so far, if it looks like the data is pretty straightforward as we've all seen it.

Ian C. Read

So could we -- Geno, could you answer the crizotinib and tofa question? And then we'll pass it over to Frank to do the inventories.

Geno J. Germano

So with crizotinib, the best way to characterize it is that -- continued progress. We have about 1,000 patients that have been prescribed Xalkori so far. Again, we're making really good progress. We're seeing a consistent accumulation of new patients. And as you know, the molecular testing is really the key. We've seen molecular testing increase from about 10% when we launched to about 45%. It's actually a little bit ahead of what our projections were. There are some issues with the length of time it takes for those tests to complete and information get back to physicians, so we continue to work with the oncology community and the hospitals to improve the efficiency of the testing process. But at this point, I'd say we're encouraged by what we see. And we think that with the duration of therapy starting to accumulate for new patients, we'll see the business continue to build. And with regard to tofa and the FDA's views, I mean as you say, they often run their own analyses and look at the data in various ways. And at the end of the week, they'll be making public their briefing documents for the Advisory Committee, and you'll see how they've looked at things. There's nothing that they've done that's been shocking or concerning to us. We've had some dialogue with them about a number of items, but I really can't think of anything to highlight at this point.

Ian C. Read

Frank?

Frank A. D'Amelio

And then on the inventory, Mark, I think the short answer would be, really no changes. If you look at the weeks on hand for Q1 of 2012, 2.7 weeks on hand. For Q1 of 2011, 2.7 weeks on hand. Then you asked me about the end of the year. The end of the year was 2.8 weeks on hand. So really, not any real change at all if you look over the various periods.

Operator

The next question comes from Greg Gilbert from Bank of America.

Gregory B. Gilbert - BofA Merrill Lynch, Research Division

I have 2 for Ian. First a strategic one. Despite some observers' predictions or suggestions that you spin or sell the generic division, I could see why you'd keep that business as different parts of pharma converge rather than diverge over time. But my question is, what can you do to enhance that business and treat it more as an offensive than defensive business? Or do you think you already have the right assets and culture in place there? And my second question, Ian, is that you sounded pretty excited at the Annual Shareholder Meeting last week about the CDK 4/6 inhibitor. So if you or one of your colleagues could comment on that with a little more color and some timelines, that would be great.

Ian C. Read

Well, look, I tried to be clear in the opening remarks about I do see the business, the totality of the business in 2 cores, one being an innovative core and the other being a value core, which is where your question is going to on the spin-off sale. I think they're both great businesses. I do think both of them have different drivers for their success. So I think, certainly, we want to move -- as we get through the Nutrition and Animal Health situation, we want to move to more distinct business cultures for those 2 businesses, so the managers have a clearer focus on what they're expected to do and how they're expected to do it and how we structure. And as we do that, I think it will allow us to do those businesses and then make the appropriate capital allocation decisions on those businesses. So that -- I hope that answers your question. And with that, I'll hand it over to Mikael to talk about CDK 4/6.

Mikael Dolsten

Thank you for the interest in our next wave of pipeline assets. And I think the CDK 4/6 drug, which we are in the lead in the industry, as we were with Xalkori, is another statement to our strength in designing highly targeted treatment for kinases in oncology. We have the CDK 4/6 tested in breast cancer -- ER-positive breast cancer, and we have been very encouraged of the data we have seen. And you will see in May in a breast cancer conference in Brussels, investigators sharing the data. We also see CDK 4/6 as an opportunity, as we have learned more about the molecular changes in tumors that may predict response, going into additional solid tumors, although we see breast cancer currently as the main near-term opportunity. And we all share Ian's enthusiasm about that drug and for an opportunity for patients suffering from breast cancer.

Ian C. Read

Greg, just to follow up a little on my comments. On the value core, you asked a question about acquisitions. We see acquisitions and joint ventures and agreements on supplies being vital to that business, and we're very focused on that. We had done a deal in Brazil to secure supply there, which we did last year. And we have just signed a joint venture -- or memorandum of understanding for a joint venture in China with Hisun, which will be important to us. We continue to look at ways of adding substrate through partnerships and supply agreements. And I think that's a typical example of activities that, that core business would be looking at, that's distinct from how our innovative core would be looking at what type of activities they do. We see the end in [ph] that, that Emerging Market business as being far more susceptible to local acquisitions and local deals. We don't -- I don't see it as being a global solution. These markets are very separate and very different, whereas perhaps in the innovative core, you'd look more for a global-type deal to meet those needs. So that's really how we're looking at that area. And in certain countries, we find the bar too high. Like if you look at India, it's a very expensive market right now, and we're unlikely to be interested in acquiring assets at that value. So I hope that gives you enough color.

Operator

Your next question comes from Mark Schoenebaum from ISI Group.

Mark J. Schoenebaum - ISI Group Inc., Research Division

Maybe a capital allocation question and a couple of general ones. On the capital allocation, if you guys know that you're going to get the proceeds from Nutritionals next year, has there been any thought, putting -- why not bring forward an increased authorization and perhaps accelerate some of the repurchases now? I mean, it looks like you guys could probably borrow for 1 or 2 years at very low rates. So just curious if you're thinking about that. Number two, on Emerging Markets, how, as analysts and investors, should we be thinking about pricing in the Emerging Markets over the long term? Should we be modeling 4% or 5% price erosion year-on-year kind of forever? Or should we be thinking about something different? And if you could give any color, specifically on what's happening in China, that would be very helpful because I know it's a big part of your business.

Ian C. Read

I'll ask Frank to answer the uses of cash, and then ask David to comment on the secular trend in the Emerging Markets, both on volume and pricing and wealth.

Frank A. D'Amelio

So on the share repurchases and accelerating the purchases by leveraging up, I'll give you a couple answers to this. I think first, as I mentioned before, without leveraging up, I think we've been very aggressive: $15 billion last year, as I mentioned before; $11 billion planned for this year. So quite frankly, I think we get the benefits of being aggressive in this area without leveraging up the balance sheet. And so from my perspective, we'll continue down that path. We said $5 billion or so this year. Approximately $5 billion, that's the path we're on. We talked about another $5 billion with the remaining $10-billion authorization. Remember, Animal Health and Nutri are separate and distinct from that $5 billion this year and that $5 billion in 2013 and beyond. Quite frankly, we think that is aggressive, and we're doing that without having to lever up the balance sheet.

Ian C. Read

Olivier -- I'm sorry, David?

David S. Simmons

Before tackling you specific pricing question, let me give you a frame on this, for Emerging Markets and the reason we're optimistic for potential growth in the future. There's 3 large trends going on in Emerging Markets: The population masses are expanding at a pretty significant rate. The per capita wealth is increasing at a pretty significant rate. And country-by-country, health care spending as a percentage of GDP is low when compared to OECD averages, much less what we would see in Western Europe or the U.S. So all these mean that there should be more healthcare spending going on. Now against that and specifically to your pricing question, there -- we do expect that there will be price pressure in the future on a continual basis. Now the issue with your question of how to model it, there's kind of a wild card in this, in that you don't have a steady rhythm of price erosion. You tend to have these step-function events where you can have a market turn into a pretty significant price decrease that could be in excess of 10%. But that's against a backdrop of other countries that aren't doing much price cutting at all. Last year, if you will remember, we had a price erosion of 5% against volume growth of 10%. So we netted out at 5% growth. That was a pretty large price erosion impact for us from a historic basis. We expect a little bit more moderate price erosion this year and moving forward, as we target high single-digit growth.

Operator

Your next question comes from Tony Butler from Barclays Capital.

Charles Anthony Butler - Barclays Capital, Research Division

Dr. Dolsten, you commented on the CDK 4/6, but I'd love for you to spend just a minute, if you could, on other assets that we should look forward to at ASCO, given you do have an analyst meeting there.

Ian C. Read

Mikael?

Mikael Dolsten

You referred particularly to the oncology area. So the next wave of oncology drugs, on the antibody-targeted conjugates, we are very encouraged by inotuzumab. We are in Phase III for lymphoma. And also, we'll share more data on leukemia -- on B-cell leukemia. We're making progress with dacomitinib for non-small cell lung cancer, a drug that have shown very encouraging data in Phase II versus Tarceva. In addition to CDK 4/6 that I commented on breast cancer, I could add there that CDK 4/6 has shown a very nice tolerability profile, which I think also is something that can open up a very large opportunity in women with estrogen-receptor breast cancer, adding on a combination on top of hormone blockade. Beyond that, we have 2 very interesting PI3K/mTOR drugs that we have in several Phase Ib studies and now entering Phase II studies for solid tumors. And we also have a small Hedgehog drug for particular hematological malignancies. So I think you can see that beyond the assets -- the 3 assets that we have been in registration alone, Xalkori, Inlyta and also bosutinib, there is now a next wave of oncology drugs, and you'll hear more of them as we share data at scientific conferences.

Operator

Your next question comes from John Boris from Citi.

John T. Boris - Citigroup Inc, Research Division

First question for Frank on optimization of the supply chain. Can you just remind us how many facilities you had when you merged with Wyeth, where you've taken that to, and how much more improvement there is on that side? And how that might shape gross margins going forward? Question on Eliquis. The second question has to do with Coumadin and the stickiness of Coumadin. If you take what you anticipate would be your mock label with some of the claims that you would have, how much less sticky do you think Coumadin becomes from the profile of Eliquis? And then third question, on your IV generics business, that on a global basis is about a $12-billion market, you have about a 7% share or close to $1 billion. A lot of companies have had manufacturing issues there. How is that business performing? And is that an important area for growth going forward?

Ian C. Read

So we'll ask Frank to give you a reply on the rationalization of the supply chain. Olivier will do Eliquis and then David can do the sterile injectable question.

Frank A. D'Amelio

So, John, on the supply chain question, when we announced our planned network strategy when we finished up with that after the King acquisition, we said we would cease operations in 10 manufacturing facilities over the next several years, with those facilities being in the U.K., Ireland and Puerto Rico. So from where we are, we have plans to reduce by another 10 facilities. That would be point one. In terms of what we're doing to manage the cost structure, I think the way I think about it from a supply chain perspective is, there's really 4 big buckets that we go after. The first one is, I'll call it the overall network, which is the plant network strategy that I just alluded to, in terms of the number of plants, where they are. That would be one. Second bucket would be optimizing each individual plant, do getting each individual plant to run as efficiently, as optimally as possible. And we use lean manufacturing processes, multiple continuous improvement projects to get after that. The third one is procurement. Procurement is a major element of manufacturing costs. So what we can do to continue to do better and better in the area of procurement. And then the last area would be what I call, center cost, kind of the center cost that's needed to manage all of the supply chains. So those are the 4 buckets that we aggressively manage to continue to drive costs and manage that cost in our margins as best as we can.

Ian C. Read

Olivier?

Olivier Brandicourt

John, about the stickiness, we are -- let me start by saying that we're planning for launching Eliquis during the summer, and we are fully prepared to do that. So first thing I believe is the fact that Eliquis is very strongly differentiated for warfarin. So that's number one. And you know why? Because it has demonstrated superior efficacy, superior bleeding outcomes and overall mortality advantage compared to warfarin. So that position us, we believe, very strongly against warfarin and position us also well to compete in the NOAC class. So we expect that to be very compelling for cardiologists and primary care physician. And then in the first 4 to 6 weeks after the approval, we will be focusing on establishing access and reimbursement, which is so critical. We believe there we have a very strong value proposition for payers. And we will also be preparing our sales force and medical teams in the field. We also, we believe, leveraging the very strong expertise of both companies. As you know, the bulk of prescription initially will be driven by cardiologists and mainly in hospital. About 50% of the initiations are made in hospital, and there, we will leverage BMS expertise and relationships with cardiologists before PCPs will take over. And then -- and there, as you know, we have considerable expertise and experience with PCP and integrated health system. So we think we're going to compete initially for new patient starts. That's how we are planning at the beginning of the launch. And patients who are not -- no longer well control on warfarin. And that over time, subgroups will actually be targeted and especially the one on aspirin or switches from patient who are well-controlled on warfarin. So just talking about the stickiness, if you look at data and market data, about 20% of newly diagnosed patients are placed on a new oral anticoagulant, or were in the past 3 months. And I think physicians are estimating to put 30% of their new patients under those medicines. So we are very optimistic for the beginning of the launch.

Frank A. D'Amelio

And then, John, I just want to -- even though you didn't ask me this, I thought I would just add one thing to my supply chain answer, which is we're acutely and very much focused on cost management. But please know, we are equally focused, just as acutely focused on quality and service performance. All 3 of those are equally important. They're critical, and we focus on all 3 in a critical way.

Ian C. Read

David?

David S. Simmons

Yes, John, related to your question on hospital-based sterile injectables, since 2008, we've been interested in this area and making efforts against our strategy in this area. The reason of interest is primarily because the competitive intensity is lower in this segment of the generics market. And that's driven by the precision and technical difficulty of manufacturing quality standards and holding those standards. If anything, in the last 3 years, that competitive intensity has even gotten less because we've had more and more competitors fail to rise to the level of scrutiny that the FDA is rightfully applying. Now our strategy against this area is to broaden the portfolio and introduce a few new technology platforms like refill syringes and bag technologies. The portfolio expansion that we're doing comes from 2 areas, one -- or 3 areas. One, we have a pretty significant basket of legacy products from Pfizer and its acquired companies, pharmacy in particular, Wyeth and Warner-Lambert. Adding to that, we are developing non-Pfizer legacy products in 2 manufacturing facilities that have specific technical capabilities. That's Kalamazoo, Michigan and Perth, Australia. Beyond that, we have a partnership with Strides in India, who is providing us with oncology and anti-infective products. In fact, we've been launching products. We have a large-format vancomycin entry that's taking significant share in the U.S. So everything you're seeing in the market is valid, and it's an area that Pfizer is poised to compete well and be a leader in due to our manufacturing quality standards.

Operator

Your next question comes from David Risinger from Morgan Stanley.

David Risinger - Morgan Stanley, Research Division

I have one question on tofa and then a few on bapineuzumab. So on tofa, you're expecting a favorable committee. Could you just talk a little bit about the REMS that you're proposing, including monthly blood testing requirements? And then changing gears to bapineuzumab. In the press release, it indicated data mid-year and you are expecting to issue a press release in the third quarter. My first question on bapi is, should we assume that the data will thus not be at the Alzheimer's conference in Vancouver in the third week of July? And then the second, with respect to the data, there's been some discussion by your partners about adding and prespecifying additional endpoints. But I'm hoping that Pfizer can clarify that since Pfizer owns half of bapineuzumab, so that we understand the analyses that you're going to be running when you look at the Phase III data. And then finally, your partners have also discussed a new Phase III trial that's being started. And once again there, I thought it would be best for Pfizer to discuss it since Pfizer owns half of the compound. Could you just walk us through this new subcutaneous trial in early-stage Alzheimer's patients? And with respect to that trial that you're running the new Phase III trial, some bulls would interpret that to mean that Pfizer has seen positive data. A bear would say, "What company starts Phase III months before Phase III is supposed to report out?" So if you could provide some color on the new Phase III trial, that would be helpful.

Ian C. Read

David, thank you for those questions. So we need to get at tofa first, I believe.

Geno J. Germano

Yes, that's an easy one. So, David, our expectation and our recommendation and the REMS for patient monitoring is that it's actually very consistent with monitoring that you would -- that's currently proposed and put in practice for patients that are on biologic DMARD, methotrexate combinations. So it will be very similar to what's in practice today.

Ian C. Read

And then, Olivier, I think the bapi was into 3 parts. One, do we expect to be at a conference in the third week of July? The -- some commentary on adding additional endpoints. And the third question was, why have we started a new Phase III trial?

Olivier Brandicourt

Right. So on to the first one, the answer is no. However, as I mentioned earlier during the call, we are planning to present the data at one other conference, but it's still not determined during the second half. And there are a couple which would be available during the second half of the year. So that's the first question. The second question, to be honest, I'm not entirely sure what are those additional endpoints you are referring to. The endpoints are very, very clear in all 3 programs, both in terms of efficacy and safety. So I'm not entirely sure what, again, you are referring to there. And I can get back to you on that one when it's clarified. And the third one, yes, we are discussing within the alliance is a possibility of subcu study in prodromal AD. However, the decision is not made. And as you rightfully suggested, the decision will be made on the basis of the strength of the data of the current Phase III program and the 2 first studies.

Operator

Your next question comes from Steve Scala from Cowen.

Steve Scala - Cowen and Company, LLC, Research Division

I have 3 questions. First, on Eliquis, do you believe 3% to 5% share of the oral anticoagulant market exiting 2012 is completely unattainable? Secondly, the decline in alliance revenue x U.S. is a bit puzzling because at least to my knowledge, Pfizer's Spiriva participation has ended in only a few small markets, with participation in larger markets ending in June. So what is the reason for the decline? And then thirdly, what was the rationale for exiting the Biocon deal for generic Lantus back in March?

Ian C. Read

So, Olivier, if you could deal with the expectations on exit market shares at the end of 2012. I don't believe we predict or give out projected market shares...

Charles E. Triano

No, we don't.

Ian C. Read

But you may make some qualitative comments about how we expect to go to market. And then the decline in Spiriva x U.S., I think that question was on that. And then Biocon, if David can talk to that.

Olivier Brandicourt

So on the first one, Steve, as Ian has mentioned, we are not giving out forecast, as you know. But we're planning again to be very successful and aggressive during the second half of this year, so that would probably be a good target. And again, we're going after cardiologists first who are responsible for a large piece of the prescriptions, a large volume of the prescriptions initially. And we have terrific access and relationship with cardiologists in hospitals, thanks to BMS. And again, the renewal of those prescription would be made through, obviously, a dialogue with our Primary Care sales force. So that's number one. Number two, Spiriva has a contract for Spiriva in the U.S. It's reaching year 10 only in 2014, by mid-2014. So that I think answers your question. And the third one, Ian?

Ian C. Read

The Biocon, regarding -- David?

David S. Simmons

Yes, related to Biocon, and in the framework of capital allocation, when we made the deal, we made a set of assumptions that primarily revolved around the U.S. market, which was the most attractive part of the estimates for that market opportunity. As we progressed the partnership, looking at the competitive landscape, looking at progress in understanding regulatory requirements on these types of products, we took an assessment that the amount of investment on a go-forward basis and the use of that investment versus other potential uses of that capital, that we made a decision to go with other uses of the capital rather than continue with the partnership.

Operator

Your final question comes from Seamus Fernandez from Leerink Swann.

Seamus Fernandez - Leerink Swann LLC, Research Division

Just quickly, maybe strategically you guys can help us think about -- and again, I guess it's more strategic pricing and marketing. As we think about access for tofacitinib, global pricing, should we be thinking about this as kind of a globally-priced product? Should we be thinking about it as having differentials in different markets? And do you see value in coming in with a reduced price potentially, to potentially gain market share despite, Geno, your comments that the use will probably be in the anti-TNF refractory space. And then similarly on Eliquis, even though you guys have demonstrated superiority over warfarin, how will price versus access in the context of, again, the uptake and really breaking through this barrier of inertia, how much does that weigh into your views versus marketing and the data itself?

Ian C. Read

These are very good questions and go centrally to competitive situations that we don't really want to get into discussions before launching, Seamus. I would say that we clearly need to position the price based on the value we see in the product and where it's positioned. And pricing is an important part of the launch platform. And we will do that with research, and we will do it carefully. I really don't want to say anymore around pricing until those final decisions are taken and until we understand where the label is and where the positioning is. And the same with Eliquis, I don't really want to get into pricing at this stage just before the launch. But thank you for the question.

Charles E. Triano

Thank you, Ian, and thank you, everybody, for joining us this morning.

Frank A. D'Amelio

Thanks for your time, everybody.

Operator

Ladies and gentlemen, this concludes the Pfizer's First Quarter 2012 Earnings Conference Call. Thank you for participating. You may now disconnect.

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