1 human testing and 12 Phase 1 clinical development candidates advanced into Phase 2 proof-of-concept trials.

Reducing attrition has been a key focus on our R&D productivity improvement effort. For several years, we have been revising the quality hurdles for candidates entering development and throughout the development process. As the quality of candidates has improved, the development attrition rate has begun to fall. At our current internal discovery output of chemical entities and at the attrition rates we are seeing for these high quality candidates, we believe we will improve our overall success rates to 1 in 11 versus the historical industry rate of 1 in 20 to 25. This would allow us to double our productivity without doubling our R&D investment. Given the multi-year nature of pharmaceutical R&D, it will take some time before the full impact of these changes is realized.

While a significant portion of R&D is done internally, we do enter into agreements with other companies to co-develop promising compounds. These co-development and alliance agreements allow us to capitalize on these compounds to expand our pipeline of potential future products. We have more than 1,000 alliances across the entire spectrum of the discovery, development and commercialization process. Our R&D covers a wide spectrum of therapeutic areas as discussed in the “Product Developments” section of this Financial Review. Due to our strength in marketing and our global reach, we are able to attract other organizations that may have promising compounds and can benefit from our strength and skills. Over the past two years, we have invested $4.4 billion in acquisitions for these purposes. For example, in 2005, the acquisition of Vicuron builds on Pfizer’s extensive experience in anti-infectives and demonstrates our commitment to strengthen and broaden our pharmaceutical business through strategic product acquisitions. By acquiring Vicuron, Pfizer looks forward to bringing to patients around the world two important new medicines that at the date of the acquisition were under review by the FDA. In February 2006, Eraxis was approved by the FDA.

Our Expectations for 2006

While our revenue and income will likely continue to be tempered in the near term due to patent expirations and other factors, we will continue to make the investments necessary to sustain long-term growth. We remain confident that Pfizer has the organizational strength and resilience, as well as the financial depth and flexibility, to succeed in the long term. However, no assurance can be given that the industry-wide factors described above or other significant factors will not have a material adverse effect on our business and financial results.

Given these and other factors, at current exchange rates and reflecting management’s current assessment, for 2006 we expect Adjusted income of approximately $15 billion, Adjusted diluted EPS of approximately $2.00, reported Net income of approximately $11.4 to $11.7 billion, reported diluted EPS of approximately $1.52 to $1.56 and over $16 billion in cash flow from operations, all of which do not reflect the purchase accounting impacts of a pending