clinical trials, implementing an extended transition program for those patients unable to

transition to other medications within the three-month period, and exploring asset disposal or redeployment opportunities, as appropriate, among other activities.

As part of this exit plan, in 2007, we paid $135 million to one of our partners in satisfaction of all remaining obligations under existing agreements relating to Exubera and a next generation insulin (NGI) under development. In addition, in the event that a new partner is selected, we have agreed to transfer our remaining rights and all economic benefits for Exubera and NGI. This transfer of our interests would include the transfer of the Exubera New Drug Application and Investigational New Drug Applications and all non-U.S. regulatory filings and applications, continuation of ongoing Exubera clinical trials and certain supply chain transition activities.

Total pre-tax charges for 2007 were $2.8 billion, virtually all of which were recorded in the third quarter. The financial statement line items in which the various charges are recorded and related activity are as follows:

The asset write-offs (intangibles, inventory and fixed assets) represent non-cash charges. The other exit costs, primarily severance, contract and other termination costs, as well as other liabilities, are associated with marketing and research programs, and manufacturing operations related to Exubera. These exit costs resulted in cash expenditures in 2007 (such as the $135 million settlement referred to above) and will result in additional cash expenditures in 2008. We expect that substantially all of the cash spending will be completed within the next year. During the exit of this product, certain additional cash costs will be incurred and reported in future periods, such as maintenance-level operating costs. However, those future costs are not expected to be significant. We expect that substantially all exit activities will be completed within the next year.

• Income from continuing operations before cumulative effect of a change in accounting principles was $8.2 billion compared to $11.0 billion in 2006. The decrease was primarily due to event-driven expenses, such as:

 higherassetimpairmentcharges.In2007,weexpensed$2.8 billion, pre-tax, related to our decision to exit Exubera, compared to $320 million, pre-tax, in 2006, related to the impairment of our Depo-Provera intangible asset; and

 higher restructuring charges and acquisition-related costs associated with our expanded cost-reduction initiatives,

partially offset by:

 lowerAcquisition-relatedin-processresearchanddevelopment charges (IPR&D). In 2007, we incurred IPR&D expenses of $283 million, pre-tax, primarily related to our acquisitions of BioRexis Pharmaceutical Corp. (BioRexis) and Embrex, Inc. (Embrex), compared with IPR&D of $835 million, pre-tax, in 2006, primarily related to our acquisitions of PowderMed Ltd. (PowderMed), and Rinat Neuroscience Corp. (Rinat);

 higher interest income compared to 2006, due primarily to higher net financial assets during 2007 compared to 2006, reflecting proceeds of $16.6 billion from the sale of our Consumer