IMS Health Q1 2006 Earnings Conference Call Transcript (RX)

IMS Health (RX)
Q1 2006 Earnings Conference Call
April 19, 2006, 5:00 PM (Eastern)

Executives

Darcie Peck, Vice President of Investor Relations
Dave Carlucci, Chairman and Chief Executive Officer
Nancy Cooper, Chief Financial Officer
Gilles Pagot, Executive Vice President and President of or Global Business Management
Bruce Boggs, President of IMS Americas

Analysts

Eric Coldwell, Robert W. Baird & Co. Inc.
Robert Willoughby, Banc of America Securities
Steve Unger, Bear Stearns
Larry Marsh, Lehman Brothers
John Kreger, William Blair
Duane Pfennigworth, Raymond James
Christopher McFadden, Goldman Sachs

Presentation:

Darcie Peck, Vice President of Investor Relations

Thank you, Tim and good afternoon everyone. Welcome to our 1st Quarter 2006 Earnings Conference Call. With me today are Dave Carlucci, our Chairman and Chief Executive Officer, Nancy Cooper, our Chief Financial Officer, Gilles Pagot, our Executive Vice President and President of our Global Business Management, and Bruce Boggs, President of IMS Americas.

Dave and Nancy will discuss highlights from our 1st Quarter 2006 results, and then we’ll discuss our guidance for the 2nd Quarter and Full-Year. We posted slides with the highlights of our 1st Quarter performance on our website, and I encourage you to view these slides as Nancy and Dave go through their prepared remarks this afternoon. A question and answer session will follow their prepared remarks.

Now the standard procedure. Let me read our safe harbor provision. Certain statements we make today are forward-looking within the meanings of the U. S .Federal Securities Laws. These statements include certain projections regarding the trends in our business, future events and future financial performance. We’d like to caution you that these statements are just predictions and the actual events or results may differ. They can be affected by inaccurate assumptions or by known or unknown risks or uncertainties consequently no forward-looking statement can be guaranteed.

We call your attention to our 1st Quarter 2006 Earnings Release which we issued earlier today, and our 2005 Annual Report on Form 10K which set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements. All forward-looking statements represent our views only as in the date they are made and the company undertakes no obligation to correct or update any forward-looking statements whether as a result that new information, future events, or otherwise.

The financials we’ll talk about today are on an adjusted basis. Adjusted results are those used by management for the purpose of global business decision making including developing budgets and managing expenditures. Adjusted results exclude certain US GAAP measure to the extent that management believes exclusion will facilitate comparisons across periods and more clearly indicate trends.

Although IMS discloses adjusted results in order to give the full picture to its investors of its business as seen by management, these adjusted results are not prepared specifically for investors and are not a replacement for the more comprehensive information for investors including in IMS’ US GAAP results. Adjusted results should be read in light of the detail reconciliation to results on an SEC reported basis in our Press Release, and I encourage investors to review the notes in our Press Release further describing adjusted results.

As it relates to our comments on guidance today in accordance with (inaudible), it’s important that you understand the basis of our guidance to you. Going forward as is the past our guidance excludes certain items such as the one Nancy will describe in our 1st Quarter results because we feel it is a more reliable way to give you guidance on our core operational performance. Now with that, let me turn the call over to Dave Carlucci.

Dave Carlucci, Chairman and Chief Executive Officer

Thank you, Darcie. Good afternoon everyone and thank you for joining us. By every measure we had a great start to 2006. We continue to build our strong momentum from last year and turned in an excellent operational performance in the 1st Quarter. As you’ll recall, we told you at the Investor Day that we committed to driving operating income growth and we delivered. In fact, we achieved double-digit balance growth for the first time in five years. And we are on track to continue this positive performance.

Our business has never been stronger and our performance this Quarter gives us real confidence that we’ll achieve our financial objectives for the year. Revenue for the 1st Quarter was $446 million dollars, up 13% on a constant dollar basis. Excluding the expensing of stock options, operating income also grew 13% constant dollar inline with revenue growth. In operating margin was strong and stable at 24%. An adjusted earnings per diluted share was $0.34 up 17% year-over-year and a $0.01 better than the high end of our guidance. All of our business lines performed very well in the Quarter achieving or exceeding the guidance ranges we gave you in February.

Sales force effectiveness, our largest business segment, grew 11% on a constant dollar basis. We saw outstanding demand for our data in non-retail channels such as long term care. A continued update in our BDD offerings in Japan. We saw more clients using our weekly services and growth in our consulting offerings that support increasing need by our clients for improved productivity also saw great gains.

Our portfolio optimization segment was up 7% constant dollar in the Quarter. This is higher than our historical growth rates and we are especially pleased with the uptake in offerings as our clients address generics and other markets challenges. Launch brand and other grew 26% on a constant dollar basis. This represents our largest opportunity segment sized at more than $2 billion dollars. We are capitalizing on this opportunity in a number of ways. For example, the opportunity pipeline is impressive for our first 3 Promo 360 offerings which we launched globally in the Quarter.

This powerful portfolio of global offerings provides pharmaceutical marketing teams with a comprehensive consistent and tailored approach to promotion management. In just one of the Promo 360 winds we had in the Quarter we helped a large global pharmaceutical company determine its total promotional budget for a new product launch across 22 countries. Along with sizing their promotional span, we recommended how that budget should be allocated by country. Our ability to deliver a comprehensive multi-country view is a significant competitive differentiator for IMS, and we are pursuing similar client engagements with our other clients around the world.

Now turning to consulting and services, we saw 31% constant dollar growth which was in line with our expectations. Our consulting engagements are helping drive additional demand for information and analytics solutions. In fact, our information and analytics business in the 1st Quarter grew 10% constant dollar. The strongest growth we’ve seen in this part of our business for more than 4-years. These results underscore the strength of our global business model. Clients continue to value our ability to help them improve the effectiveness and efficiency of their operations.

The findings from our latest annual client’s survey validate that value. A record number of clients from around the world recently responded to our survey – with client loyalty scores improving in all regions. We are especially pleased that scores improved for two of the most critical drivers of client loyalty: ease of doing business and overall value. We think our focus on clients is clearly working.

Now let me turn to the regions which are off to a great start. In Europe, revenue grew at 8% constant dollar. And while our strength in ten consecutive Quarters of double-digit revenue growth ended this Quarter, Europe has a solid backlog of business as well as a strong opportunity pipeline. We had exceptional strength in several of the mid-sized markets and our new health economics and outcomes research capabilities are in high demand as health care payers look to economic modeling to provide the value of pharmaceutical products. We are especially excited about our 1st Quarter operating income growth in Europe which was up an impressive 22% constant dollar. This is due to a number of operational in our business and operating margin improved in the region.

In Asia Pacific we delivered another impressive Quarter growing 17% constant dollar. China, Korea, and India continue to be bright spots providing strong growth opportunities for our clients and for us. In fact, these countries are delivering growth rates above 15% with operating income growing faster than revenue. Across Asia we are seeing a strong pipeline of consulting engagements from large US and European based pharmaceutical clients who are working with us to evaluate and develop their growth strategies for this vital market.

And in Japan, we are performing well with double-digit constant dollar revenue growth and operating profit growth in line with our expectations. With the launch of our new SFE offerings, our clients are benefiting from our ability to transfer successful sales and marketing strategies and solutions from other regions around the globe. In fact, we are providing these clients, some for the first time, with a way to measure and reward their sales reps on the basis of market changes in their territories. This is just another example of where we are leveraging our global capabilities and expertise for our clients.

Turning now the Americas – we had an outstanding Quarter with 16% constant dollar revenue growth and 16% growth in operating income. Once again, these results were driven by exceptionally strong balanced double-digit gains in the US; and what is most remarkable, is that these results included in an aggressive set of acquisitions in 2005 and even with that organic growth in the Americas was 9%. This is a testament to the ongoing investments we made in areas of vital interest to our clients, such as long term care, specialty markets, and anonymized patient level data. Clearly a lot of things are going right in the Americas.

In the Managed Care arena a primary focus of our US pharmaceutical clients, we’ve brought a number of new capabilities to market. This is particularly important as clients respond to the impact of Medicare Part-D. with nearly 100% coverage of Medicare Part-D formulary information, we are able to give our clients a comprehensive understanding of how their brands are doing and what’s driving product and plan performance.

This Quarter we helped a major US pharmaceutical re-engineer its compensation plan based on changes made its sales model due to the impact of Medicare Part-D. And, by using our unique insights into the long term care channel in the US, we helped this client evaluate new opportunities in new territories. With anonymized patient level data, we are delivery more granular insights to clients. ATLD is a unique combination of IMS’ longitudinal prescription information and the patient level insights to ride for integrated claims data. It helps our clients understand more about how care is given, how medications are applied, and what kind of health outcomes they achieve.

So all-in-all, a very strong start to 2006 in the Americas and across the board. Clearly our clients have a compelling need for what we offer. We are leveraging our global footprint in new ways and with the underlying strength of our business, we remain confident in our ability to stabilize our margins and grow operating income as we continue to innovate across all our business lines. So now I’ll turn it over to Nancy Cooper who’ll take you through the details of our 1st Quarter Financial results.

Nancy Cooper, Chief Financial Officer

Thanks, Dave and good afternoon everyone. We started the year with a strong 1st Quarter. Revenue was $446 million up 13% on a constant dollar basis, and 9% as reported. Constant dollar revenue growth this Quarter was higher than reported as the dollar strength in year-to-year about 10% (inaudible) our five major currencies.

Dave took you through the performance of our business lines, all of which are performing very well and right in line with the guidance ranges we gave you in January. Given the complexity of FAS 123R, I will begin by taking you through our financial results before stock based compensation expense so that you will get a meaningful year-to-year comparison. Then I will walk you through the impacts of expensing in the Quarter.

First we had excellent growth in operating income. Operating income grew 13% on a constant dollar basis and 10% as reported. Our operating margins were 24% up 2/10 of a point year-to-year. There are a number of factors that are contributing to a more stable operating margin in 2006 and we walk through several of these in our Investor Day meeting in February, and have posted these on our website so you would have a reference point.

This Quarter, several of these contributed to our margin stabilization and the major factors were that operating income in Japan grew for the first time since 2002, data cost growth was in line with revenue growth even with the addition of new data (inaudible). We continue to realize the efficiencies from our production and development operations. Many of these come from Europe and contributed to the strong European operating income growth that Dave just mentioned. And although our acquisitions in total continue to impact operating margins in the Quarter, we were able to deliver balance growth overall given the mix of factors I just went through.

So we had strong performance across the board on both the top line and the operating income line in the Quarter. (inaudible) interest expenses in the Quarter were $7 million dollars reflecting the increase in our debt level to support the 1st Quarter 29 million shares repurchase. And other income and expense net in the Quarter was a positive $3 million dollars. This includes a modest impact from a foreign exchange hedge gain and the remainder is the proceeds from our plan sale of our investment in All Script. That income for the Quarter was up 6%, which is less than the operating income growth and reflects the increase in the interest expense from our higher debt levels. And adjusted EPS in the Quarter was $0.34¢ up 17% year-to-year.

In the 1st Quarter we bought back 29 million shares of stock. We bought 4 million of those in January through open market share repurchases and the remaining 25 million through the accelerated share repurchase program that we announced on January 31. The bank that is executing this for us is about half way through executing this transaction. We ended the Quarter with approximately 212 average diluted shares.

Now let me walk you through the impact of FAS 123R on our financial results. As you can see from our Press Release, we have an additional table that reflects our results with and without this impact. We have also included a slide in our presentation materials today entitled Q1 2006 Adjusted Income Statement, which I will detail to help understand the impact of expensing options.

We turn to that, we recognize $9.6 million in cost and expense for FAS 123R and that’s a split between $1.4 million in operating costs and $8.2 million in SG&A.
And this matches how the employees with option grants are distributed through our business. Including the impact of FAS 123R, operating income was $97million dollars. FAS 123R had a 2 point impact on operating margin in the Quarter. Now we decided not to restate 2005 for options expense; however, if you normalize 2005 expense and take into consideration our lower share count, the impact of FAS 123R is about the same year-to-year or $0.13¢ on the Full-Year.

Operating income margin with options expense 21.7% versus 23.8% without options expense in line with the 2 point impact we are expecting for the Full-Year. Net income after equity expense was $65 million dollars which reflects $6.8 million of after tax expense associated with equity based compensation expense. Adjusted EPS including FAS 123R expense was $0.31¢ in the 1st Quarter. So we have a $0.03¢ from equity based compensation in the Quarter.

Now turning over to cash flow – preliminary free cash flow was very strong this Quarter at $17.4 million dollars which is up $31.5 million dollars from the negative $14.1 million dollars in the 1st Quarter of 2005. And our excellent accounts receivable management in the Quarter help up strive these strong cash flow results. In fact, DFO was 63-days in the Quarter which is 5-days better than the 1st Quarter of last year.

Turning to the balance sheet – cash and equivalents totaled $146 million at the end of the 1st Quarter which is a decrease of $217 million compared with December 31 due to the share repurchases. Debt as of March 31 totaled $1.1 billion. An increase of approximately $501 million compared with December 31 also due to share repurchases. And we spent $11 million dollars on one acquisition in the 1st Quarter.

Turning to our SEC results for the Full-Year – SEC-EPS for the 1st Quarter was $0.56¢, which is $0.25¢ better than our adjusted results with options expense; and this primarily due to a large favorable item – the favorable settlement with the IRS of our ILA partnership and the timing of reporting a favorable IMS corporate tax audit settlement for the years 2000-2003.

Table one in our Press Release, our SEC table, reflects the inclusion of a few gains and charges which we have excluded from adjusted results. Let me walk you through those four items. First, the largest, is a $29.5 million tax benefit resulting from the favorable settlement with the IRS of the ILA partnership for the years 1998-2005. This is net of tax expense accrued related to certain remaining disputes with D&B. This is a major step forward for IMS in bringing the D&B legacy tax measures to closure. Second, a tax benefit deferral of $2.3 million in the 1st Quarter of 2006. The SEC tax provision in the 1st Quarter reflects the impact of favorable US tax audit adjustments for the resolution of tax years 2000-2003 that were fully recognized in the 1st Quarter for SEC purposes, but while we recorded radically through the year on an adjusted basis. Third, a pre-tax loss from investment for the 1st Quarter of 2006 was $.6 million; primarily related to the enterprise portfolio. And finally, a pre-tax foreign currency hedge gain deferral of $2.1 million in the 1st Quarter of 2006.

From a balance sheet perspective, we have come along way at IMS. We are very pleased that we now essentially have the legacy liability issues behind us. As you know, the IRI matter was settled earlier this year. So, five years ago we had about 7-pages of liability disclosure in our 10Q, and after the 1st Quarter of this year, that disclosure will be down to about a page. In terms of our financial results, we had a great Quarter and I have never been confident in our teams’ ability to deliver and execute in a balanced way. Though we’ve always had a clear focus on delivering operating income, we made a conscious decision to make foundational investments in our business during the last 3-years and I’m delighted that we are increasingly seeing the results of those investments.

Now let me turn to guidance for the Full-Year and the 2nd Quarter. With a strong start to the year we are recommitting our guidance for the Full-Year which is constant dollar revenue growth of 11-13%, constant dollar operating income growth of 9-13%, adjusted EPS of $1.45-1.51, and free cash flow of $265-300 million dollars. These are all before equity based compensation expense which we expect to have a $0.13¢ impact on Full-Year EPS.

For the 2nd Quarter guidance we expect constant dollar revenue growth of 11-13% and adjusted EPS of $.036-0.39¢, and this again is before the FAS 123R expense. In the 2nd Quarter, we expect a $0.04¢ impact due to FAS 123R as this is Quarter which will be $0.01¢ more than the other Quarters and still add up to the $0.13¢ for the year. The 2nd Quarter adjusted EPS guidance with options expense is $0.32-.035¢.

Now let me turn this call back to Dave.

Dave Carlucci, Chairman and Chief Executive Officer

Thanks Nancy. Our 1st Quarter results speak for themselves and we cannot be more pleased. Our performance is accelerating and strong across the board. And our results continue to show that we are a different company than we were just a few years ago. We’ve added significant depth to our information assets, we’ve broadened our capabilities, we’ve enhanced our skills, and we’ve become even better at understanding the marketplace.

As you saw from our Annual Review of global pharmaceutical market performance, growth rates in the industry have slowed from historical levels. However, this remains a healthy, vibrant marketplace with 7% growth last year and 5-8% compounded annual growth forecast through 2009. Growth will continued to be driven by many factors from the emergents of new market and aging populations to innovative new medicines and rising demand for higher quality of life. All these trends will not only continue but they will intensify. One way we are sharing our market insights with more senior level audiences is through a publication called IMS Intelligence 360; which many of you have received. This is the 2nd Annual edition of I360 and it provides our perspective on the key dynamics in changes facing today’s pharmaceutical marketplace.

All challenges that we’re helping our clients address through our unique combination of information, analytics, and consulting. We’ve covered a lot of ground today and I think you can see that our business is strong. We’ve picked the right areas to invest in and remain very confident in our ability to deliver balanced growth. Thanks for your time this afternoon and now we’d be happy to take your questions.

Operator, ladies and gentlemen if you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a 3-toned prompt to acknowledge your request. Your line will then be briefly accessed to obtain information. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. If you are using a speaker phone, please lift your handset before entering your request -- one moment please for the first question.

Operator

Our first question comes from the line of Eric Coldwell, Robert W. Baird & Co. Inc.

Eric Coldwell

Hi, good afternoon and thanks very much. Three quick questions, I’ll fire them at you and then jump off. First, I was hoping we could get a little bit of color on the launch brand and other business, obviously very strong year-to-year, down it looks a little bit seasonally, I’m just hopeful we can get some color on how you see the revenue progression in LBO through the rest of this year, number one.

Number two, SFE, obviously your mainstay largest business had a fantastic Quarter, a little bit of upside here, I am curious if you could give us just directionally a sense on how much of that upside came from Japan as opposed to just overall market strengths if Japan was in fact the big factor in the upside performance there.

And then finally, Dave, great demand across all regions. You’ve brought a lot of new data online, I’m curious whether IMS as a company is starting to see some pricing opportunities in it’s portfolio and whether pricing is becoming a factor in terms of your strong revenue growth. Thanks very much.

Dave Carlucci, Chairman and Chief Executive Officer

Thank you, Eric. The color on launch brand and other, we continue to see significant growth in all pieces of it. We saw a very nice uptake in managed care and I mentioned that in the Americas results. We really saw that investment and the intensity around that topic as a significant contributor. The other portions in there are consumer health, which continue to do well, and the other pieces of launch and brand characterize by promotion as well as health economics and outcomes research. So, if you look at it across the board, they were all positive contributors. And we’ve also told you that they’ll be fluctuation Quarter-to-Quarter so if you look at launch and brand, although it is our largest opportunity, it is the one we entered most recently and really is the smallest in growing of our major segments.

From and SFE perspective, Japan contributed pretty much like the track they were on since we introduced the product. There was nothing unique about the performance although they continue their track of double-digit revenue growth. We continue to see demand, not only for our SFE data assets, but we had really good growth in the US and we are seeing it combined in a lot of ways. Particularly in the example I gave on how to deploy sales forces and what the changing dynamics are as the channels change that are more important to pharmaceuticals.

Your last question centered around our pricing?

Eric Coldwell

Yes, that is correct. I am just curious whether, when you look at your forward budgets now whether pricing is actually becoming a favorably influence on total growth.

Dave Carlucci, Chairman and Chief Executive Officer

Well, I would say consistently we have continued to try to add value to our existing offerings and we have not seen price lift on our historical core products. What we are seeing is, clients willing to pay a premium for things that they need in the specialty area in long term care and in other assets that we’ve acquired most recently. I’d like to say in my mind it is a very good price value equation, because where we are making the investment, we are getting a very good return on it and we are also trying to improve everyday the quality of our existing offerings.

Eric Coldwell

That’s great. Congratulations on the nice Quarter.

Dave Carlucci, Chairman and Chief Executive Officer

Thanks, Eric.

Operator

Our next question comes from the line of Robert Willoughby, Banc of America Securities

Robert Willoughby

Thanks, it’s John Wood. Dave, I heard you give an organic growth number for North America; did you give it for the company?

Dave Carlucci, Chairman and Chief Executive Officer

I gave it for the Americas, but Nancy can tell you what we saw acquisitions contribute to.

Nancy Cooper, Chief Financial Officer

Yes, as we said we had 13% constant dollar in the Quarter, 4 points of that were acquisition. That leaves 9 points constant dollar growth which is the highest organic rate we’ve had in a long time.

John Wood

Is it safe to assume that you won’t be repurchasing shares in the open market until the ASR transaction is complete?

Nancy Cooper, Chief Financial Officer

Well, as I said we’ve completed about half that transaction, so that’s a reasonable assumption.

Operator

Our next question comes from the line of Steve Unger, Bear Stearns

Steve Unger

Hi, good evening guys. First question, the Promo 360 launched this Quarter; that was launched globally correct?

Dave Carlucci, Chairman and Chief Executive Officer

Yes, but primarily aimed at about 8-countries from a complete set of promotional activity around it and focus. But, yes, the capability is available to be delivered globally.

Steve Unger

How should we look at that in terms of how it is sold in the drug industry and are your customers and the relative contract value?

Dave Carlucci, Chairman and Chief Executive Officer

I wouldn’t look at it from a contract value point of view, because as we mentioned before there are seven different components that are a combination of data assets and consulting and services capabilities. Much of it is centered around methodologies and approaches and some of it is fed by a combination of syndicated data and primary research data. It really is a broad set of capabilities and we haven’t packaged it from a pricing point of view as we would a syndicated product. So, it varies by scope of the activity, the example I used of going across 23-countries and trying to find the mix and the how, was a very good engagement and it involved a fair amount of consulting and implementation capability.

Steve Unger

And that is an incremental revenue stream then for your?

Dave Carlucci, Chairman and Chief Executive Officer

Yes.

Steve Unger

Great and then moving to Europe, you mentioned that Europe did not have a 10% top line growth in the Quarter. Can I come to the conclusion that exponent as a product is starting to slow down a bit and does the company have any plans to expand exponent into other European countries?

Dave Carlucci, Chairman and Chief Executive Officer

No, I would not come to that conclusion at all. I think we had a streak of 10-Quarters of double-digit growth. We also had a much more aggressive acquisition activity in Europe in 2003 and 2004. As you know, the bulk of our significant acquisitions in 2005 were in the US, so I would not conclude that at all. I would just say that after that streak, 8% growth is very good based on the market in Europe. We are seeing our Eastern Europe operation and our mid-markets doing extremely well. We have excellent operating income growth at 22% improvement, so I like the balance; I like the backlog and pipe line going forward. We have no concerns whatsoever on European growth and we would not say that that relates in any way to exponent being tapped out or the need to expand it in any way.
Steve Unger

And then just lastly, on Japan – have you started to build consulting teams in Japan and if not when can we expect that to begin?

Dave Carlucci, Chairman and Chief Executive Officer

Yes, in fact the very good news on the uptake of that business beginning in 2005 was the fact that we had added consulting and services to the mix which didn’t exist before the data interruption. That is how we got confidence that we would return to double-digit growth and we’d also start to see operating income improvement in 2006 and both has happened. I like to think of it as adding new capabilities, certainly but also helping the implementation of our new offerings on the information analytic side.

Steve Unger

Fantastic, great job guys – thank you very much.

Operator

Our next question comes from the line of Larry Marsh, Lehman Brothers

Larry Marsh

Thanks and good afternoon Dave and Nancy. Just wanted to touch base around your consulting business; as you broke it out and said that you generated about $69 million in revenues in the 4th Quarter, and that also showed some seasonality. I know your 4th Quarter was extremely strong. The question is, how much of that 20+%, excuse me 30% constant dollar growth is coming from acquisitions within consulting. And, could you talk about the kinds of RFP’s you are a responding to in that business in your marketplace and who you might be taking share from?

Nancy Cooper, Chief Financial Officer

Larry, why don’t I first answer the growth – and it’s continued to be, I think we said a couple of times last year, 2/3 of the growth was from acquisitions. That’s about the same amount in the 1st Quarter; it’s kind of the same trend. In terms of the things that we are getting into, it really is a number of things and what we are very encouraged about in the 1st Quarter, is you are seeing our consulting start to pull data; which is that 10% constant dollar growth you are seeing on INA, in terms of specific examples.

Dave Carlucci, Chairman and Chief Executive Officer

Yes, I would say, I have got Bruce and Gilles here and they can add some comment, Larry. What we are seeing is the size of some of the engagements increasing because of the scope across multiple geography. Several multi-country engagements, several engagements around, we had a major engagement that we are in the first phase of and about to head to the second phase in the oncology area with a client across multiple countries. What we are seeing in the willingness on pharmaceuticals and the need, frankly, to look at the scope of these engagements on a broader base then just trying to solve a point problem in a specific country. And I think it’s positioned us very, very well. (inaudible) being the competition and as Nancy said, we had always seen data as a factor in this, but I think as we see consulting get more to scale, we are seeing a broader pull on the INA assets. It really becomes a major differentiation point for our consulting teams, so we are trying to position rather uniquely not as a head-to-head pure consulting approach, but really a combination view with a deep set of analytics, some very strong statistical analysis skills, and a good portfolio of thought leaders.

Larry Marsh

Nancy, you are saying about 10% constant dollar, organic growth in consulting is how we should think of that and that should be pretty consistent for the Full-Year.

Nancy Cooper, Chief Financial Officer

No, I was actually, Larry, referring to the past. It’s what you have seen in the past couple of Quarters and this Quarter is a repeat of what we’ve seen. And we still expect the Full-Year to have, we think 30% growth is a very good growth for our business especially when you consider the points that Dave said in terms of pulling data.

Larry Marsh

Elaborate a little bit if you could about the INA business, I think Dave in your prepared comments you said that’s the best growth you’ve seen here in four years, I believe it was. Where does that show up in how you report and how big a business is that?

Dave Carlucci, Chairman and Chief Executive Officer

Well, as you know we’ve ended 2005 our INA business was 84% of our business. The key drivers really are the weekly data assets we are providing to clients, the long term care data, including a view around oncology and other key therapy classes, our specialty retail data, which is tied to the therapy class focus, and our anonymized patient level data. In addition to that, I think we had outlined for you, we have something called health care relational steers that is a piece of work we did with Axiom to identify the connection in the chain between physicians and hospitals and clinics. We are seeing a very, very good uptake in all of those investments and that’s why we are particularly heartened by the US performance, because it is not only a combination of acquisitions we did in the second half of 2005, but it’s the cumulative effect of the decisions and investments that have been made over the last few years in key data areas.

Larry Marsh

Two other question – Nancy, you said $11 million for one small acquisition in the Quarter, could you talk about what that was specifically and whether we should still think about roughly $100 million in monies dedicated to acquisitions in 2006?

Nancy Cooper, Chief Financial Officer

Sure, Larry. It is one acquisition, it was in Sweden and it really got us really great new sales assets for our INA business. In terms of the Full-Year, we still are guiding to this $100 million level of acquisitions, we just haven’t done it yet.

Larry Marsh

And finally, maybe a big picture, Dave maybe it was you – in your intelligence 360 publication, I guess (inaudible) of change you identified was a real rationalization of sales forces that you had said 13% reduction in visits in 2005 in the US which was the first time in 7 or 8 years you’ve seen that. You talk a little bit about that retail model, how do you sell that concept to your customers and you remind us as to how you deal with or impacted at all with any change and so forth in your business?

Gilles Pagot, Executive Vice President and President of or Global Business Management

Yes, I think first of all, customers have to (inaudible) because they don’t have the same product portfolio. The big busters are replaced by more specialty products from that. What we do basically, we help them to realign their organization and we maximize granularity. In order to be able for them to target at their product in a much better way; that’s what is very important now.

I think everybody has realized now that everybody has a much bigger portfolio and it’s a very different portfolio, so you cannot have the same (inaudible), more reps is not the answer. Its different reps, more specialized sales force, they (inaudible) after that. We have major transformations coming up. You have just seen the beginning of the major new era on that.

Dave Carlucci, Chairman and Chief Executive Officer

Larry, I would just add that every client is different in terms of their portfolio and their approach and so it does take a unique combination of responding to the evidence based data by looking at their unique situation. And as we look at the focus particular therapy classes, we are finding now they want more by indication. So, it continues to get more and more granular as well look at how do you get more specific and more targeted to the right audiences. It really is playing very, very well to our assets and our capabilities.

Operator

Our next question comes from the line of John Kreger, William Blair

John Kreger

Thanks. Dave, could you give us a little bit more color on Japan and where you think you are in the recovery in that region. If you look back, let’s say I think it was 2002 before you had the pull, the weekly product and compare it to today, how many clients would you say you had verses then or in terms of perhaps the revenue per client? Can you give us a sense about where we are in that recovery process?

Dave Carlucci, Chairman and Chief Executive Officer

Yes, I think we said we see this come back over a two to three year period and I’d say that’s where we are. The different nature of it is, we have added consulting and services assets which didn’t exist before this. We are adding more offerings, but if you look purely at the recovery of the weekly product and the issues associated with that, we had a tremendously good implementation of DDD from a client placement point of view. Now the improvement going forward will be to do more therapy areas within those existing placements. So, we don’t see as rapid an uptake in the sale of DDD to new clients, we see the expansion across the broader set of therapy classes going forward.

And, they are right on track where we hoped they’d be. We also think that in light of the fact that Japan’s market grew about 6.8% from a pharmaceutical point of view in 2005, well above anything in the last several years. Japan continues to be a good place for us to invest.

John Kreger

Great, thanks -- and can you expand a bit on the uptake in your managed care and patient level data products. Where are you seeing the uptake there, are those from your traditional pharmaceutical clients or are you getting more traction with perhaps managed care clients?

Dave Carlucci, Chairman and Chief Executive Officer
Yes, I’ve got Bruce Boggs here with me who is the President of the Americas. I’ll ask him to comment on that.

Bruce Boggs, President of IMS Americas

I think that the managed care area is probably the hottest in the US with the Medicare Modernization Act and every pharmaceutical manufacturer trying to understand what the impact will be of the many, many new channels that are being introduced with that program. There’s tremendous interest in how effective they’ve been with their contracting for managed care, it’s a huge opportunity for us.

Where we are right now with it, is candidly there hasn’t been enough volume yet to really tell which of these plans are going to be the big winners and which ones are going to be the big losers, but as time passes and more volume passes through those plans, there will be tremendous interest in what is driving success and failure. I think that is going to be a huge opportunity in helping the industry sort that our by brand.

John Kreger

And should we think about that as more consulting orienting, kind of one time engagements or more ongoing subscription data type sales?

Bruce Boggs, President of IMS Americas

I would say it would be largely consulting led, but typically those kinds of efforts lead to significant long engagements.

Operator

Our next question comes from the line of Duane Pfennigworth, Raymond James

Duane Pfennigworth

Thanks for taking the question. With regard to your opportunity to sell across regions with big pharmaceuticals, I wonder does this create sort of a framework or master services agreement with your customers. And if so, what percent of your larger customers have such an agreement?

Dave Carlucci, Chairman and Chief Executive Officer

When you say master services agreement, we have always traditionally had large contracts with our clients for syndicated offerings of ours. And as you know, we enter the year with about 60% of our business under contract. Are you referring to master agreements for consulting and services?
Duane Pfennigworth

No, I do not totally understand the sales process. Do you sell to different organizations within the same pharmaceutical company verses one agreement across all the regions you might sell into?

Dave Carlucci, Chairman and Chief Executive Officer

Yes, we generally are seeing a propensity to do more Pan-European agreements across the Americas and Asia agreements and we are also, as I have said in the past, seen a desire to consolidate to a fewer number of vendors who can provide a broader array of capability. That trend continues and I think continues to play to our advantage. We see that as something that is a positive for us and I think as our clients see more and more capabilities that we can drive in a consistent fashion in terms of the way we implement geographically, like the Promo 360, we’ll start to see more of that.

Duane Pfennigworth

Great, could you quantify across your base, how many you have multi-region agreements with?

Dave Carlucci, Chairman and Chief Executive Officer

I don’t have that statistic. It does vary in some places; it’s a subset of the offerings they buy from us in any given country. And as you well know since our data assets differ some degree country by country based on availability of assets – that also adds variability to it, so I don’t have specific number for you, how many global Pan-European or Pan-Americas agreements we have.

Duane Pfennigworth

Ok, fair enough, and then I guess consulting was actually another good point. With regard to consulting, how many of those or to what extent are you seeing master services agreements or multi-engagements beyond more of a transactional or single study sell?

Dave Carlucci, Chairman and Chief Executive Officer

Yes, in general these agreements have phases. We will sign a multi-phased agreement, but we don’t have any master agreements that say we will do “x