Good day, everyone, and welcome to Pfizer's third quarter 2016 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.

Thank you operator. Good morning, and thanks for joining us today to review Pfizer's third quarter 2016 performance. As usual, I'm joined today by our Chairman and CEO Ian Read; Frank D'Amelio, our CFO; Mikael Dolsten, President of Worldwide Research and Development; Albert Bourla, Group President of Pfizer Innovative Health; John Young, Group President of Pfizer Essential Health; and Doug Lankler, our General Counsel. Slides that will be presented on the call can be viewed at our home page, Pfizer.com, by clicking on the link for Pfizer Quarterly Corporate Performance – Third Quarter 2016, and this is located in the For Investors section in the lower right-hand corner of the page. Before we start, I'd like to remind you that our discussion during the call will include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Additional information regarding these factors is discussed under the disclosure notice section in the earnings press release we issued this morning, as well as in Pfizer's 2015 Annual Report on Form 10-K, notably including part 1, item 1A, Risk Factors. And this is filed with the Securities and Exchange Commission and available at their website, as well as the Pfizer website. Forward-looking statements during this conference call speak only as of the original date of this call, and we undertake no obligation to update or revise any of these statements. Discussions during the call will also include certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. Reconciliation of these 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, November 1, 2016. You may also obtain a copy of the Form 8-K at our website, Pfizer.com/investors. Also, any non-GAAP measures presented are not and should not be viewed as substitutes for financial measures required by U.S. GAAP. They have no standardized meaning prescribed by U.S. GAAP and may not be comparable to the calculations of similar measures at other companies. We will now make prepared remarks, and then we will move to a question and answer session. With that, I'll now turn the call over to Ian Read. Ian?

Thank you, Chuck, and thank you for joining our call this morning. During my remarks this morning, I will briefly recap the highlights from the quarter and provide some comments on the strength and depth of our pipeline. Starting with the quarter, we reported another quarter of solid operational revenue growth, marking our eighth consecutive quarter of operational growth. Excluding the impact of foreign exchange and legacy Hospira operations, Pfizer's standalone revenues grew by 3% operationally. Looking at each of our businesses, Pfizer's Innovative Health achieved another quarter of strong revenue growth due to the performance of key brands, including Eliquis globally; Xeljanz, Lyrica, Chantix and Ibrance primarily in the U.S. We continue to be very pleased with the performance of Ibrance. Since our U.S. launch in February 2015, it remains the market leader for the treatment of first-line HR+, HER2- metastatic breast cancer. As expected, we are starting to see a tempering in new market share growth. However, our total scripts continue to grow, and we are focused on reaching additional metastatic patients currently receiving chemotherapy or hormone replacement therapy – sorry, hormone therapy alone. We also anticipate publication of our phase 3 PALOMA-2 study will occur by year-end and expect that the ability of our dedicated breast cancer field force to then detail on the strength of this data, which should allow us to achieve greater penetration into the right adopting physicians, many of whom are potentially high prescribers for Ibrance. A key milestone to grow the Ibrance franchise will be secure approval in the EU, where we have filed and received a positive opinion from the CHMP in September. We expect a decision from the commission later this year. Also of note, both Eliquis and Xeljanz continue to generate attractive growth on a quarter-over-quarter basis, and Chantix…

Thanks, Ian. Good day, everyone. As always, the charts I'm reviewing today are included in our webcast. As a reminder, because we completed the acquisition of Hospira on September 3, 2015, Pfizer's financial results for the third quarter and the first nine months of 2016 include Hospira global operations, while the comparable prior-year periods include only one month of legacy Hospira U.S. and do not include financial results from legacy Hospira international operations. In addition, Pfizer completed the acquisition of Anacor Pharmaceuticals on June 24, 2016. Consequently, our financial results for the third quarter and the first nine months of 2016 include three months of legacy Anacor operations, which were immaterial. Finally, Pfizer completed its acquisition of Medivation on September 28, 2016, so financial results for the third quarter and first nine months of 2016 reflect three business days of legacy Medivation operations, which were also immaterial. Now moving on to the financials. Third quarter revenues were approximately $13 billion and reflect year-over-year operational growth of $1.2 billion or 10%, which was partially offset by the unfavorable impact of foreign exchange of $224 million or 2%. Legacy Hospira operations contributed $1.1 billion to Pfizer's third quarter revenues and our Essential Health business. If you exclude foreign exchange and the contribution from legacy Hospira operations, Pfizer's standalone revenues grew operationally by $381 million or 3%. Innovative Health operational revenue growth was 10%, driven by the strong performance of Ibrance in the U.S.; Eliquis globally; and Xeljanz, Lyrica, and Chantix, all primarily in the U.S., which were partially offset by the loss of Rebif alliance revenue versus the year-ago quarter due to the expiration at year-end 2015 of the agreement to co-promote Rebif in the U.S., lower Enbrel revenues in most developed U.S. markets due to biosimilar competition, and expected lower revenues…

Thank you, Frank and Ian. And at this point, operator, can we please poll for questions?

Your first question comes from Gregg Gilbert from Deutsche Bank.

Yes, I'd start perhaps for John – a two-parter for John. First on biosimilar Remicade, how would you set expectations on the launch in light of rebates and aggressive contracting by J&J? And any legal risk that you see that remains for Pfizer? And separately, on the SIP business, which was very strong in the quarter, were there any temporary factors there that helped that? And then for Ian, following your decision to, for now, not split the company up, can you speak to your comments in the release that you will now move forward with focus on strategic priorities to grow and increase operational efficiency to be more competitive? And sort of what that means? Thanks.

Okay. Thanks for the question, Gregg. So let me take the launch of Inflectra, first of all. We obviously are very excited, very positive, about the opportunities that we have, and that's based on the positive uptake that we've seen in the markets where we've already launched Inflectra. In fact, where biosimilars have launched, we've already seen around about a 26% volume share of branded Remicade switch to biosimilars of infliximab, and so we believe that actually the marketplace on a global basis is really beginning to become more comfortable with the introduction of biosimilars. And so in the United States we obviously are very positive about the opportunities that that represents, and we look forward, as we've already announced, to introducing INFLECTRA towards the end of this year. In relation to sterile injectables, obviously as you know we're very focused on the combination of the legacy Hospira sterile injectable portfolio along with the branded legacy Pfizer portfolio. The strong performance that we've seen in the sterile injectable business this quarter really is a reflection of the combination of the strengths of both of those portfolios together, both the legacy branded Pfizer portfolio, as well as the legacy generic Hospira sterile injectable portfolio. And I think we're seeing at a customer level that the combination of that much broader offerings to customers really provides us with the breadth of portfolio that our customers value and provides us with a strong operational offering to customers right across the world. So we're very positive about that opportunity and how the business is performing. Thanks for the question, Gregg.

Thank you, Gregg. To your second question, my comment there really reflects that through this process we've now established two very strong teams in both businesses. We've established metrics and comparatives, and these teams are focused on producing strategies that indicate or ensure they're competitive within their comparison group and focused on generating the returns that shareholders require. Thank you.

Thanks, Ian. Next question, please, operator.

Your next question comes from David Maris from Wells Fargo.

Good morning, Ian. Perhaps you could talk a little bit about pricing in the U.S., specifically on Proposition 61? Most recent polling seems to show that if it were held today, it would pass. The industry's fighting it. Can you describe what you think the impact would be on innovation and pricing? What the difference between what – state agency pay versus the VA pay for Pfizer drugs? And then, separately, we've spoken a little bit about this, but some have pointed to the supply chain, specifically PBMs, as being part of the problem in lack of transparency. Do you agree? And do you think if the U.S. is willing to discuss price controls it should be willing to discuss PBM rebate controls? Thank you.

So let me take that. This is going to take a little bit longer given the extent of your questions on this. Let's just deal in general with the pricing situation, and then we'll come back to the -

The PBMs.

– the Prop 61. So look, obviously drug pricing affordability is an issue that is concerning to us and has clearly been amplified in this election cycle. There is considerable uncertainty and turmoil about both candidates' positions on these issues, and it's difficult to decipher between campaign rhetoric and legitimate policy views. It's been disappointing that this debate on pricing has completely neglected the other side of the ledger; that is the benefits and value added by the pharmaceutical industry. So while we understand the healthcare costs have been increasing for many patients, we disagree with the prevailing notion among some politicians that pharmaceuticals are the reason for these rising costs. And we believe that post the election cycle, good public policy will prevail. So currently in the U.S., just to use a comparator, we spend 17% of our GDP on healthcare, yet we only spend 2% on drugs. About 12% of GDP was spent on inpatient and outpatient services. When we compare that to the OECD countries who spend approximately 9% of GDP on healthcare, they spend 1.5% of GDP on drugs and only 5.5% of GDP on medical services. Over a half a point of GDP extra on drugs between OECD and the United States, you get a vibrant, research-based industry that is producing roughly $1.3 trillion of value to GDP. I think policymakers are well aware of the importance of maintaining an innovative pharmaceutical business. Further, if you look at cost increases in the U.S. from 2004 to 2014, hospital service costs have increased 75%, while prescription drug costs have increased 35%. While faster than the CPI, they are lagging the overall medical costs of around 40% growth. I think what's exacerbated the cost problem for patients is their insurance plans on average cover a much lower…

Thank you. Next question, please.

Your next question comes from Geoff Meacham from Barclays.

Morning, guys. Thanks for taking my question. Just had a couple. On the bococizumab discontinuation, obviously this could have been a large commercial investment, which now you'll save. Ian, can you put this in the context of Pfizer's strategy in primary care? And what influence, if any, would this have on your appetite for bolt-on type of deals? And then, on the pipeline for Xtandi, now that you guys have TERRAIN formally in the label, how much of a tipping point do you think this could be for urologist adoption? I'm just thinking about the bigger M0 population as you move upstream? Thanks, guys.

Thanks, Geoff. Look, on the bococizumab, I don't initially have – it doesn't have that dramatic implications. Its contribution to our EPS was modeled by most analysts as being moderate in the outer years. So, per se, it's not an issue that creates a sudden need to change strategies. It certainly does indicate that we need to continue to make our decisions on portfolio based on what we believe will generate return, and we need to look at the substrate we had in cardiovascular to review – to see how we strengthen our cardiovascular presence with more substrate. I'll pass it over to -

Xtandi.

– Albert to do the Xtandi. Thank you.

Yes, thank you, Geoff, for the question. And for Xtandi going forward, we believe there will be continued momentum in the oncology segment. But importantly, as you asked, we believe there is a large untapped opportunity within the urology segment, which we believe will be capitalized by the TERRAIN label update. Just some facts: In Q3, 26% of Xtandi units were prescribed by urologists, up from 20% historically. Right now, we have approximately 2,000 urologists prescribing the program. And recent market research suggests that 80% of urologists are highly compelled to prescribe Xtandi after seeing the TERRAIN data. So I think TERRAIN data publication and the inclusion in the label will be an important catalyst for Xtandi.

Thanks, Albert. Next question, please, operator.

Your next question comes from Jami Rubin from Goldman Sachs.

Thank you. I have a couple questions. First, Ian, just on your decision to discontinue your PCSK9, it sounds to me like the only thing that has really changed is the emerging profile of your specific drug. The evolving landscape hasn't evolved yet, because we don't yet have clinical outcomes trials, for which we are waiting. I'm just wondering if you saw something with your outcomes trials that you can share with us, and any additional details on LGL lowering and events? And then my second question is back to the pricing question. Clearly, Pfizer, along with many of your peers, have taken multiple price increases during the year; Pfizer is no exception. How do you see your ability to take price going forward? How should we think about contribution from price going forward? And also, if you could just break out what was price versus volume this quarter? Thanks very much.

Okay. On the LDL, on the bococizumab, we're making decision based on the profile of our drug, not on the profiles of other drugs. And, on our profile, what we saw was that earlier on we did see we had (39:39) but we had data earlier on at 12 weeks and 24 weeks, and we saw no substantial impact on LDL lowering. In fact we continue to see a robust LDL lowering. It was only recently that we got the data on the majority of our LDL trials out at 52 weeks, and out at 52 weeks, we saw a substantial population reduction in LDL lowering, and we correlated that with neutralizing antibodies. And then we had the injection-site reaction on some of our trials. So when you look at the total profile of our drug, we don't believe that it can be commercially successful or in the benefit of patients for us to continue to bring that to market. And then on the -

Pricing.

On the pricing issue, we've always priced responsibly. We've priced to the marketplace the value of our product, and on the affordability issue, we've always made provisions for patients who have no insurance or poor insurance to get our product for free or nearly free. So I don't believe that there's any reason for Pfizer to change its approach to the pricing of our products as we sit here today. Thank you.

Thank you, Ian. Great, next question, please, operator.

Your next question comes from Steve Scala from Cowen.

Thank you; I have three. On Prevnar 13 year to date, the franchise is down modestly, in part due to the Q3 government purchases. To hit the full-year guidance of comparable to slightly down, it implies Q4 will also be slightly down. Is that how to look at it? That does seem better than the cautionary commentary that the company provided, particularly that in August. Secondly, now that Pfizer's had a chance to see Novartis's CDK 4/6 inhibitor data, how would you compare and contrast the profile to that of palbo? And then lastly, the CTLA-4 from OncoImmune is described in the press release as potentially differentiated. I'm wondering if you could elaborate on its potential differentiation. Thank you very much.

Thank you, Steve. I'll ask Albert to answer the Prevnar question, and then Mikael will hand the evolving profile of competitive products and our evolving profile, and also the CTLA-4 question. Thank you.

All right. Thank you, Ian. Look, the statement is exactly the same as we did it last time. We already expect the total for the year of Prevnar franchise revenues to be slightly down compared to 2015. As we said, we were down 2% operationally; that was driven primarily by the adult indication, which as expected was down approximately 26% in the U.S. Notably, the quarter sequentially grew 37% versus second quarter, because we're entering a high flu season. And in the international markets – ending the year in aggregate, excuse me – in the third quarter we were up 21%, but this was driven by the volatility we see in this case, as CDC orders were much higher in this quarter.

Yes, we are very excited and appreciative on the Ibrance profile. It's been taken up extremely well by patients and physicians. It's viewed as an effective, really well-tolerated therapy, and has had a profile for bones and metastatic breast cancer patients that has been great. And we see the profile being very suitable for also early breast cancer and many other indications. Now, we tend to not comment on other products, and as you know, it's difficult to compare across trials, but in contrast to other products, we have not seen issues with elevated liver tests, no issues with cardiovascular or Q2C (44:00), nor issues with GI. Our products has been really well-behaving, and we think its profile works across the breast cancer segment as well as in many other indications.

Thank you, Mikael. The next question please, operator.

CTLA-4 question, Mikael?

On the CTLA-4 -

Differentiation.

Yeah, so when it comes to CTLA-4, our view – referring to -?

I think it's referring to potential licensing opportunity that we have.

Ah, okay. Well, thank you for that. As you know, the CTLA-4 agents are quite powerful but have been limited by quite some systemic adverse events, and we do look at having the most comprehensive I-O combination portfolio in the industry. And, as you know, we're quite excited by some of our existing assets, like 4-1BB, as a great partner to PD-1/L1 or OX40, either one. All of these are advancing in our portfolio. We do obviously assess the CTLA-4 class, but the type of drugs we're looking at would be CTLA-4 variants that would have some best-in-class properties that would retain efficacy but attenuate the adverse event profile seen. Those are the ones we're looking at, evaluating, and that would fit with our view of immuno-oncology product to be efficacious but need to demonstrate they're well-tolerated.

Thank you, Mikael.

Okay. Thank you, Mikael.

Next question, please, operator.

Your next question comes from Jeff Holford from Jefferies.

Hi. Thanks very much for taking my questions. First of all, on Enbrel, I wonder if you could just give us a bit more color on the market dynamics there for pricing and script switching in markets where you have biosimilars. Second, on Ibrance, I guess the prescription data is beginning to suggest that in the United States at least you may have reached a duration of therapy out there in the market. I wonder if you could maybe give us a bit more color of what duration of therapy looks like in first-, second-, and third-line patients. And then, just in general, sounds like you remain pretty committed on cardiovascular as a therapeutic area. Just how and when will we see you build that out further in terms of developing pipeline assets there? Thank you.

Thank you. I'm going to just take the cardiovascular one first. As we sit here today, we have good assets in cardiovascular. We think it's an important area, and we'll continue to look for ways of strengthening our position there to ensure that we can be players in cardiovascular. Of course, like all of our therapeutic areas, we review these on an annual basis and make decisions on where we want to go and how much we want to invest. And none of this will be an exception this year, when we'll once again look at our long-term strategies in all of our therapy areas. I'm going to ask Albert to answer the Enbrel and Ibrance question. But I'd just like to point out with Ibrance in the marketplace, we're very pleased with the reaction from patients and physicians for the treatment of Ibrance and its relatively benign side effect profile. Go ahead.

Thank you, Ian, and thank you, Jeff, for the question. The third quarter revenues for Enbrel were down 12%, and this decline reflects the negative impact from biosimilars in Europe that will launch later in Q1. We have been preparing for biosimilar competition for quite some time, and we plan to continue to differentiate Enbrel by generating new data, by enhancing the patient experience, and of course by leveraging our expertise in inflammation. For the remainder of the year, we expect to continue modest uptake of etanercept biosimilars, but due to their limited long-term safety and efficacy data, we anticipate their use will be primarily in new patients as physicians look to gain experience with these programs. On your question on price, so far of the limited pricing we have seen to date for Benepali, the discount levels are in line with our expectations, and we expect Enbrel's pricing to be competitive. In Norway or Denmark, where Benepali won national tenders, let me say Norwegians publish the outcome of their tender, and the Benepali won the tender with a 47% discount, while Enbrel have provided a 41% discount, but it is important to note that the tender process in Norway is not indicative by any means of the pricing practices and trends typically seen in other markets across Europe. Now let me speak about Ibrance. Ibrance had a terrific launch and has quickly become the standard of care. Since launch has been prescribed by more than 8,500 physicians, reaching more than 40,000 patients. This rapid uptake is a testament to its efficacy and its outstanding safety and tolerability profile. Very low rate of Grade 3 or 4 GI side effects, such as fatigue or diarrhea. Now, as expected given this performance, we are starting to see some tempering of growth.…

Thank you, Albert.

Thanks, Albert. Next question, please.

Your next question comes from John Scotti from Evercore ISI.

Hi. Thanks for taking my questions. Maybe initially for Ian, so I wanted to ask a corporate strategy question. Just – I wanted to get your sense on appetite potentially for other actions, from a corporate strategy perspective in addition to M&A, given that you decided not to split, et cetera. So things like spinouts of business units such as consumer, shock-and-awe buyback, and then of course also any color on the M&A environment right now. Are you still in the market for a transformative deal? And what are your therapeutic categories of interest? And then finally on I-O, I wanted to ask what your thoughts are on the probability of success of your study in the first-line PD-L1 positive setting for avelumab reading out next year. Do you have the ability to change the PD-1 cutoff? And then based on your current thoughts on how the market will play out, do you intend to move I-OI-O combos or chemo combos into phase 3? And when should we expect those registrational trials to start? Thank you.

Thank you, John. So on the corporate strategy issue around the use of our cash flows, we've always had a combination of use of cash flows between buybacks, dividends, investment in our portfolio, and that has – also business development. And that combination is what we continue to try to maximize. So I would say today on the business development part of it, our appetite for continued acquisitions or investments in business development remains firm, that if it can improve the return to shareholders, we would act on it. And I don't believe that we're limited in the size of the deal we could do. That being said, clearly if you do it in therapeutic areas you're already well-established, you tend to get more value, because you get the value of the synergies in that area. So you tend to be looking to do deals in the areas where you're already strong. Secondly, I do think that the whole industry is on pause right now in major business development while we wait to see the consequences abroad – primarily I would suggest tax policy – on the results of the elections. Thank you. I'll pass it over to Albert to do the other questions. Mikael, sorry. I apologize. Mikael.

Thank you, Ian. So I think the way we approach clinical trials is always to be agile and adapt to new information. And clearly we have taken notice about the impact of high PD-L1 for response in first-line lung cancer, and we are reviewing how to best execute the design of our trial. And you can be certain that we will incorporate the most appropriate design to maximize likelihood of success. And certainly we are encouraged that our drug and the class will do well in PD-L1 high lung cancers. Now, when it comes to opportunity to advance the class further, I really appreciated your question because I think in 2017 and 2018 you will see Pfizer propel as among the leaders when it comes to combination therapies. We aspire to have up to six triple therapies in the clinic by 2018 and up to four of them in the clinic by the end of this year. And that will include triple I-O agents such as 4-1BB, avelumab and OX-40. And it will include doublets and triplets with chemo and I-O agents. It will include also combinations with other emerging drugs in our pipeline, whether targeted drugs as well as combination drugs such as antibody drug conjugate, small molecules like IDO, and I think what you will see is across many solid tumors, some of the larger tumor cases – lung, ovarian, and gastric, as well as in blood cancers – a large set of trials that will be doublets and triplets and will address the need to further augment the promising results of immune-oncology, as well as deal with the colder tumors that are lower in PD-L1.

Thank you, Mikael. I would like to add to that the commercial importances that we have all of those agents in-house and will enable a more efficient and focused relationship with the payers.

Thank you, Mikael and Ian. Next question, please.

Your next question comes from John Boris from SunTrust.

Thanks for taking the questions. First question for you, Ian. It's been bantered about that there could be a repatriation bill. If there was one, what would the dynamics of that repatriation bill need to look like for you to consider repatriating some of the $80 billion that you have trapped offshore that you might potentially like to bring back to the States to put to use? Second question on pricing. I don't think – you answered Jami's question on price-volume and the contribution there, but just delving on pricing a little further, certainly McKesson and Cardinal have indicated that they expect significantly less price increases next year. Is your innovation product group and your established health group anticipating a similar level of increases to what they took in 2016, or less of increases, as been evidenced by what McKesson and Cardinal have said? And then lastly on Xeljanz, just any update on the European review on Xeljanz and the timing for potentially supplementing that with ulcerative colitis and the psoriasis data? Thanks.

Thank you, John. So, Albert, could you deal with the Xeljanz question first, please?

Yes, of course. Let me say first of all that Xeljanz completed robust growth, and this growth is primarily due to increasing confidence as a monotherapy agent and inclusion of Xeljanz in the ACR guidelines, introductions of Xeljanz XR, and growing brand awareness among patients. Now, to your question. We are expanding Xeljanz both geographically and therapeutically. And geographically we are moving it to Europe. As you're aware, in March the EMA accepted our application for the treatment of moderate to severe active RA. The application provides additional information to the original submission. It includes data from the oral development program, which consisted of six completed phase 3 clinical trials, plus two open-label long-term extension studies, one of which is still ongoing. While we cannot speculate what will be European authority's decision, we are very confident on the strength of the data, and discussions are going very, very well. On the UC and psoriatic arthritis, we are continuing the development of those two indications. They represent high unmet medical need; as a result, high potential, commercial potential. And we plan to file in 2017, as Ian said.

Thank you, Albert. Frank, do you have the numbers on pricing?

Sure. So, as you mentioned before, Ian, we have been, we are, we expect to continue to be responsible players when it comes to pricing. In terms of the absolute numbers, if you look historically, on a total company basis enterprise-wide, our pricing impact in any given year is plus or minus a range of low single digits. And that's what we're seeing again this year on the plus side, a low single-digit increase. And that's what we've seen historically; that's what we're seeing again this year. And obviously for 2017 – John asked about 2017. When we provide our 2017 guidance in January, we'll also talk about any major assumptions relative to pricing.

Yeah, and, John, as I said before on pricing, we're going to continue to use the philosophy we've always used, which is to look at the value of our products, look at it in context of the marketplace, handle affordability outside of insurance by our programs that allow people without insurance or poor insurance to get it for free from Pfizer. And so I don't expect, at this moment in time, that there's going to be any dramatic change in Pfizer's policies there. Now, on repatriation, I would hope that Congress, with the administration, will reform the international tax code as soon as possible next year. I think it is entirely uncompetitive and negative for businesses and jobs in the United States. So I would hope they would reform it in terms of not only repatriation, but going to a territorial system or another type of system that permanently puts us on a level playing field with foreign companies. And I can't really speculate on how they're going to do it or the exact mechanisms, but we would evaluate the law they pass, and we'd make the appropriate decisions when we see what they're proposing. Thank you, John.

Thanks, Ian. Next question, please, operator.

Your next question comes from Richard Purkiss from Piper Jaffray.

Oh, hi. Thanks. Two quick questions if that's okay. Could Frank just run through if there are any specific FX moves that are driving the higher COGS in the third quarter? And then just a question on biosimilars for John. Do you think the branded injectable industry is as complacent now as the branded pill industry was in the first half of the last decade? Thanks.

So I'll answer the FX question first, which is there's really two things driving the impact on, I'll call it gross margin. I was going to use cost of sales, it's easier to do FX. One is FX negatively impacted revenues by $224 million or 2%. It also negatively impacted COGS by $189 million. Now, typically FX, it operates like an ocean tide. Everything rises, everything falls in the same direction, but we had an atypical move this quarter. We actually had it last quarter too, very unusual, where revenues were down, COGS were up. So if you look at our cost of sales as a percentage of revenue this quarter, 22.7%. If you remove the impact of foreign exchange, that 22.7% becomes 20.9%. So FX had a material negative impact overall on cost of sales. By the way, this kind of atypical relationship between revenues and cost of sales, we don't expect it to continue in 2017. We do expect it to continue next quarter, and it's really being driven primarily by Japan, and within Japan obviously the yen, based on just what's gone on there relative to the currency fluctuations of the yen and the amount of in-market inventory that we have there. But net-net, 22.7% becomes 20.9% for the quarter.

So, Richard, thanks for the question. I certainly wouldn't characterize the industry or specific companies as complacent, but I think we would always say obviously the lifeblood of any company is its ability to innovate. But where there are important treatments that are coming towards the end of their period of patent protection, we as you obviously know, are very positive about the opportunities that biosimilars represent to be able to bring treatment options to patients that actually can add real value to the healthcare system. And so we are very focused on what we can do to bring that value to healthcare systems and patients and physicians in the U.S. and around the world.

Yeah, and I don't accept the comparison to small molecules to sterile injectables. Sterile injectables is an incredibly complex process, needs high capital, needs constant focus on quality. The FDA is very active in ensuring that they meet those qualities, so I really don't think that the risk and the return on capital in sterile injectables can be compared to the small-molecule business.

Thank you, Ian. Next question, please, operator.

Your next question is from Chris Schott from JPMorgan.

Great. Thanks very much. Just two questions here. The first, coming back to Ibrance, is there any numbers you can put around how large the opportunity is for this next cohort of physicians that you're planning on targeting post the PALOMA-2 publication? I guess just what percent of the market does that represent, or percent of physicians does that represent? And the second was, just staying on Ibrance as well, when we think about the EU opportunity for the drug, how should we think about both the launch and size of that opportunity relative to what we've seen in the U.S.? I guess how would you compare and contrast the uptake we've seen here versus what you hope to see as we roll out in Europe?

Albert?

Yes. I will try to give you my personal observations. We do have very high penetration among target physicians in the U.S. So many of them, in the range of 80% are prescribing, but the issue is that the vast majority of them are prescribing one to three prescriptions so far. So they are just testing the waters of the program, and this is where the opportunity is coming, and this is why we have developed a specialty force, and this is why I think that the publication of PALOMA-2 data will capitalize this. In terms of the EU markets, look, I cannot obviously give you a forward-looking statement on our progress, but we aim for leadership with Ibrance there, and we think that we have very robust plans which have built our sales forces. We are expecting the approval now. We have one of the most comprehensive compassionate-use products that Pfizer's ever launched. We have more than 1,000 patients on Ibrance, and we are looking to the future with a lot of optimism.

So I'd just add to that, your question on the EU and the U.S., and the only sort of thing I could say to you is if you look at our experience with Sutent or perhaps the industry's experience, you normally see that the European markets, once you have the investment, can be as robust as the U.S. market in specialty high-value drugs.

Thanks, Ian. Next question, please, operator.

Your next question comes from Seamus Fernandez from Leerink.

Oh, thanks very much for the question. So just a couple here. First off, can you guys talk a little bit about the scale in the consumer business as it sits today and your interest in expanding and building out those assets, as well as the argument for its fit inside the Innovative business rather than the GEP business. The second question is, just excluding product-specific issues, if you were looking at the PCSK9 market and the class with fresh eyes today, given your comments about the market itself, would you still view this as an attractive area for new investment for Pfizer? And then the last question is, as we look at and consider the market opportunity and your considerations in I-O, I would argue that it implies either a unique ability to displace existing players or a larger market opportunity. Can you give us your thoughts on which of the two you see for Pfizer going forward? Thanks.

So on the I-O, they're both opportunities. You're going expand by the combination therapies. Tumors that today we called cold, they don't react, they don't benefit from PD-L1 therapy, and you will also see a replacement ability because we expect to have our efficacy with these combinations and triplets. So I think on the I-O we'll get both of those if we're successful. On the PCSK9 question, if you ask me would I today begin a new PCSK9 program, the answer is no, we're too far behind. And on the consumer business, look, it's a valuable business. It's growing well. We're investing. We've made acquisitions. But like all our businesses, we all look at them and we subject them to tests of are they worth more inside or outside of Pfizer? And we'll continue to run those tests. Thank you.

Thanks, Ian. Next question, please.

Your next question comes from Marc Goodman from UBS.

Yes. Just on Ibrance, can you give us the penetration rates for first, second, and third line so we can figure out where we are and how much is more to go? And then, second question, remind us what the next milestone is for the Medivation PARP. And, third, can you give us an update on China and how that's doing in the quarter and year-to-date, what the trends are there? Thanks.

Okay. For Ibrance, the market share, the latest that I saw – actually I saw them today in my office – we have approached 50% in first line and 50% in second line of markets there.

Okay. Thank you. Medivation, PARP?

Yeah, thank you for asking about the PARP inhibitor. I think it's really a growing drug class, which was fueled by very promising ovarian data that was presented at ESMO, and within that class we are very excited about talazoparib because of its very strong potency and also that it has a potentially unique differentiation with what is called PARP trapping. When it comes to the near-term opportunities, we have a phase 3 trial called EMBRACA, which is in BRCA-mutated breast cancer that was a readout due next year, possibly middle of the year, and we look forward very much to see that data set, as we think that the talazoparib and the PARP class, for these type of sensitized tumors with DNA-repair deficiency, can perform very well and supplement other therapies. I wanted to just to punctuate that the existence of this BRCA and other DNA repairs deficiency now goes into a number of cancers and opportunities likely much larger than earlier anticipated. It's not just breast, ovarian, but also increasingly seen in prostate and lung. And these tumors often carry a high mutational burden, which allow us uniquely to combine talazoparib with immuno-oncology products, and of course that can include doublets like avelumab and potentially even triplets. So I think you should really keep an eye on what we may be able to do with our really comprehensive portfolio to move this asset standalone and in combination.

Thanks.

China. There's more – the numbers on China. For the quarter, operational revenue growth, 16%, year-to-date operational revenue growth, 10%, and we remain bullish on China. Increasing population, increasing personal wealth, increased government commitment to healthcare spending. Strong GDP, although moderated somewhat. But net-net, doing very well there, and we remain bullish.

Thank you.

Next question, please, operator.

Your next question comes from Andrew Baum from Citi.

A couple of questions, please. First, going back to the PBMs, which are clearly striving to deliver value for their shareholders. CVS pulled Xtandi and Tasigna, two oral cancer drugs, from their 2017 formulary. Given and following your acquisition of Medivation, plus your existing compounds, the contribution from all cancer drugs in your portfolio is going to be highly significant as we go out five years. Within those categories, there's going to be three CDK 6's, probably five ALKs. Xtandi, as we mentioned, is already gone. I guess what I'm driving at is what you see the risk that PBMs will alight upon oral cancer drugs and therefore the volatilities, given your exposure in that area. And then, second, on ribociclib, the hepatotoxicity that's been reported with ribociclib. Mikael, you mentioned that yours is behaving very well. There's been case reports of hepatic failure with palbo. What are you seeing more broadly in the real-world practice? Do you think what you're seeing or what Novartis are seeing with ribociclib is due to CDK 6 activity or simply off-target activity of their particular molecule, or are you seeing anything to suggest that may be a mechanism and may in fact impact your molecule as well? Many thanks.

Andrew, on the PBM question, Xtandi was being managed by Medivation, and we probably have more extensive and deeper relationships with the payers than Medivation. So that's one. Two, while I think that PBMs will take a hard look at what we they can achieve, you have to realize that there's a huge emotional content around oncology, and a huge impact on lives saved, value of life, months added. And even in countries like the UK, you've seen them have to react to outrage from the population over lack of access. So I think you'll see a good balance in our society between access and pricing and the efficacy of the drugs. So with that, I think we've tried the Ibrance question and Medivation, and we go to Mikael.

Yeah, we're always careful to comment on other company's drugs, but I hear you saying that ribociclib has had reports on cases with liver and also with cardiovascular. And, as you heard from Albert and myself, Ibrance has performed extremely well. It has a very nice tolerability, appreciated by patients and physicians, and we haven't seen these type of issues with our drug. So I'll likely conclude it doesn't seem to be related to CDK 4 and 6, but I'm careful to comment on other companies' drugs.

Thanks, Mikael. Next question, please, operator.

Your next question comes from Tim Anderson from Bernstein.

Thank you. A few questions. On Xeljanz, can you talk about the U.S. reimbursement outlook heading into 2017? It's a crowded category, lots of moving parts in that marketplace. Second question on PBM, kind of going back to the very first question you got but asked differently, do you think that there's going to be a material change in the relationship between pharma companies and PBMs going forward over, let's say, the next three years? Whether it's a good relationship or not, do you foresee that there's actually going to be material change? And then just a last quick question on CTLA-4 again. And I know it's preclinical, but did you did call out differentiation. You're not in humans yet. I'm wondering what gives you the basis to think that that might actually have a differentiated clinical profile?

Okay. Xeljanz. Albert.

Yes. The current growth of Xeljanz – which is very impressive, 86% – is driven primarily by the increasing confidence of Xeljanz as monotherapy, inclusion in the ACL guidelines, the recent introduction of Xeljanz XR, and growing brand adherence among patients. All of these reasons, plus our extensive relations with payers, are driving to us having increasing access. And right now we think that the access is going to be much higher in 2017 than it is in 2016.

On PBMs, I mean, we work with PBMs. They have played up to date a role in improving access and reducing cost to patients. I think the issue of the size of the rebates and the net pricing and the general focus on getting pricing transparency could have a marked change, but it would require legislative change. I don't think accident ledgers have changed. I think the market will be stable around the PBMs. It just depends what happens when the new administration and Congress is in and how much they want to get rid of this issue of having high gross prices and low net prices, which I think today we would say is a disservice to patients, especially those that are not insured or poorly insured. Mikael?

Yeah, no, I really appreciate, Tim, your interest in how we try to build an industry-leading combination portfolio. And, as you know already now, we have up to 10 different immuno-oncology product. And as I stated, we will have six triplets by 2018, multiple doublets in 2017, and four triplets. Among the many opportunities, given that we think there are ample potential to expand I-O beyond what we see with single therapies, we do evaluate – and the CTLA-4 monoclonal antibodies that you came back to. And I tried to stay at the high level, because I don't want to in detail reveal what type of approaches we are considering. But basically we think there are opportunities to potentially see a second generation also in CTLA-2 that will deliver the benefit that you see in the tumor or possibly have a better safety profile, and we do look at CTLA-4's that could have this differentiated profile. As you have noted our agreement with OncoImmune as one example, and there may be several opportunities to tailor a next generation of CTLA-4 antibodies to potentially have such a differentiated profile, so that's why we are eager to further add this to our nice collection of I-O agents. But I have to obviously be careful in not revealing what we think are the unique opportunities that we are assessing. As our portfolio matures, we'll talk more about that.

Thank you. David.

Next question, please.

Your next question comes from David Risinger from Morgan Stanley.

Yes. Thanks very much. I have two questions. First, with respect to biosimilar Remicade, do you believe that the NOR-SWITCH trial will be relevant at all to U.S. payers or the U.S. medical community? And then second, for Frank, could you just comment on the operational efficiency opportunities that you foresee in the future for Pfizer? Thank you.

Okay. John.

Okay, so thanks for the question, David. So obviously we think the increased data on the biosimilars and the utilization in appropriate patient populations is going to be helpful to make sure that patients, that physicians, that payers can gain confidence in how to use them appropriately. NOR-SWITCH is a significant additional add to the data that we have for Inflectra. As you know, it was a randomized double-blind parallel group study with almost 500 patients, and importantly it was funded by the Norwegian government. And the study found no significant difference in disease worsening between patients who underwent a single switch to Inflectra CT-P13 versus those who remained on Remicade. It also found that the incidence of anti-drug antibodies and the frequency of reported adverse events between Remicade and Inflectra CT-P13 were similar. And so we think that the impact of that data is that it certainly will be helpful and informative in helping to make sure that physicians, patients, and indeed payers can make an informed choice about the role that biosimilars and Inflectra specifically can play in that patient population.

Thank you. Frank?

On operational efficiency, Dave, I think – two comments on this. One, obviously with the two separate businesses we have running within the company, separately we should see separate accountability, really managing their businesses in a very detailed way. We see that as a potential for operational efficiency. And then, just as a company, we're always looking at every dollar, every dollar of capital that we deploy, always with the intent of how do we maximize, how do we optimize the capital that we've spent. So, given that, that's what we meant when we talked about operational efficiency.

Thanks, Frank. And, operator, if we could please take our last question.

Your final question comes from Vamil Divan from Credit Suisse. Vamil K. Divan - Credit Suisse Securities (USA) LLC (Broker) Great. Thanks so much for getting me in. So just two questions following up on topics that came up before. So, one, on your decision to not split, I'm just wondering if you could give any sort of sense around timing for when you may reassess that decision? Is there an ongoing review, or should we not assume anything is going to be looked at again for the next several months or several quarters? And then, second one, on the consumer side, which I know came up a couple times, you mentioned that it's been growing, but looking back at the numbers really it doesn't look like it's grown that much since 2013. So I'm just curious, internally, are there opportunities such as Rx-to-OTC switches or other things that could drive the growth beyond what we've seen over the last two, three years here? Thanks.

Yeah, well, I see growth in consumer. Clearly, it's not a market that grows that much, but I'll ask Albert to talk to that.

This quarter it grew 2%, but the year-to-date growth is 5%, which is beating the market growth, and we expect to stay there.

So it's a very valuable asset inside our company, and as I said, we look at all of our businesses to continuing tests that they're generating the right return to shareholders. Look, on the split issue, I think we've made a decision. It was a major undertaking to look at it. I don't expect us to revisit that on a quarterly basis, as you suggested. I think it will be reviewed in the context of strategic decisions on a longer timeframe than that.

Great. Thank you, and thanks, everybody, for your time this morning.

Ladies and gentlemen, this concludes Pfizer's third quarter 2016 earnings conference call. You may now disconnect.