Our development and commercial infrastructure provides us the flexibility to pursue both early- and late-stage inlicensing opportunities. During 2007, we intend to focus more of our efforts on identifying and acquiring assets that can further leverage our infrastructure.

LUNESTA® Brand Eszopiclone
We continue to expand our clinical research on the use of LUNESTA for the treatment of insomnia with co-existing conditions. In late 2006, we provided the first overview of clinical results from a study of LUNESTA in the treatment of insomnia in patients with co-existing generalized anxiety disorder, at the American College of Neuropsychopharmacology annual meeting. This study adds to the wealth of clinical data for LUNESTA that we have already produced, including the previous year’s completion of significant, large-scale studies of the product in the treatment of insomnia in patients with co-existing depression, pain associated with rheumatoid arthritis and perimenopause. This extensive Phase IIIB/IV database supports LUNESTA’s value in the treatment of insomnia and its associated symptoms when it co-exists with other common disorders. As part of our marketing strategy for 2007, we have begun the rollout of a new physician education campaign containing some of these data, which we believe will further distinguish LUNESTA as a unique treatment available for the millions of people in the U.S. who have insomnia.

In 2006, we made significant progress in our goal to extend the LUNESTA franchise outside the U.S. In Japan, we are currently completing a Phase I study.We plan to include data from our U.S. studies of LUNESTA in a submission to the Japanese regulatory authorities. This bridging approach has been accepted by the Japanese regulatory authorities, allowing us to proceed directly into a truncated Phase III program. This strategy has the potential to significantly decrease the anticipated time and resources needed to complete the clinical program and submit the Japanese New Drug Application.

In the European Union (E.U.), we have met with several of the national regulatory authorities and believe that

we are in a position to use the data from our U.S. trials of LUNESTA, including those from our Phase IIIB/IV program, as part of our marketing application. At this time, we are targeting submission of the E.U. marketing application for the second half of 2007.

XOPENEX® Brand Levalbuterol Franchise
XOPENEX Inhalation Solution, our short-acting bronchodilator, continued its track record of annual growth in revenue, contributing $555 million to overall product sales, an increase of more than 29 percent over 2005. Growth was driven principally in the non-retail sector, with sales to hospitals and channels reimbursed by Medicare providing the biggest gains. Future growth of XOPENEX Inhalation Solution will be contingent on a variety of factors, including appropriate coverage and reimbursement under the Medicare Part B prescription drug benefit.

We were encouraged by the government’s action in late 2006 to initiate a National Coverage Analysis (NCA) of our product in the treatment of patients with chronic obstructive pulmonary disease (COPD).While the resolution of this NCA is not expected until the latter part of 2007, we remain optimistic that reimbursement policy will continue to support access to XOPENEX Inhalation Solution for the thousands of Medicare beneficiaries who rely on XOPENEX as part of their treatment regimen.

We launched XOPENEX HFA, our hydrofluoroalkane (HFA) metered-dose inhaler (MDI), at the end of 2005, and it showed steady revenue growth in 2006. Complementing our XOPENEX Inhalation Solution product, XOPENEX HFA had revenues of $41 million for 2006, bringing total XOPENEX franchise revenues to $596 million for the year.

A transition is underway in the short-acting beta2-agonist MDI market in which XOPENEX HFA competes. A phase-out of chlorofluorocarbon-containing (CFCcontaining) albuterol MDIs is occurring, providing us an opportunity to offer XOPENEX HFA as a CFC-free alternative to these older medications. In the coming