美國雅培 (ABT) 2004 Q1 法說會逐字稿

Good morning and welcome to the Abbott Laboratories' conference call. (OPERATOR INSTRUCTIONS).

Today's call is being recorded by Abbott.

With the exception of any participants, questions answered in the Q&A session, the entire call including the Q&A session is material copyrighted by Abbott.

It cannot be recorded or rebroadcast without Abbott's expressed written permission. (OPERATOR INSTRUCTIONS).

I would now like to introduce Mr. John Thomas, Divisional Vice President Investor Relations.

Sir, you may begin.

Good morning and thanks for joining us.

Also on today's call will be Tom Freyman, our Executive Vice President of Finance and Chief Financial Officer, and Cathy Babington, Vice President Investor Relations and Public Affairs.

Tom is going to review the first quarter financial results.

Cathy will discuss performance of our Pharmaceutical Products Group, and I will cover the Medical Products Group.

Following our comments we will take any questions as always that you have.

Some statements made today will be forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995.

Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.

Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Exhibit 99.1 of our Securities and Exchange Commission 2003 Form 10-K and are incorporated by reference.

Forward-looking statements should also be evaluated together with the disclosure regarding Hospira contained in the risk factors section of Hospira's Security and Exchange Commission Form 10.

Abbott and Hospira undertake no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments.

In today's call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance.

These include such things as earnings per share, gross margin and SG&A, each excluding onetime charges.

In accordance with the SEC's regulation G, and in line with Abbott's standard reporting practices, non-GAAP financial measures are reconciled to the comparable GAAP financial measures in our earnings release and Q&A issued this morning and available on our website.

With that I will turn the call over to Tom.

Good morning everyone.

As John just mentioned unless otherwise indicated in my remarks on the first quarter results, I will be addressing ongoing financial performance.

As he said, our earnings release do reconcile these ongoing results to GAAP results.

Regarding first quarter EPS, we reported a strong quarter with diluted earnings per share of 57 cents at the high end of our previous guidance range of 55 to 57 cents.

Sales increased nearly 14 percent in the first quarter.

This was driven by strength across many of our businesses including more than 9 percent growth in our Medical Products Group, with 11 percent growth in Ross, its best performance in five years.

We also saw continued double-digit growth in U.S.

Pharmaceuticals led by many of our key marketed products including Depakote, Synthroid, TriCor, Omnicef and Ultane.

Worldwide Humira sales in the quarter were nearly $150 million, including the better-than-expected performance in international markets.

Exchange favorably impacted sales by 4.9 percent.

The gross margin ratio increased this quarter to 52.5 percent compared to 52.0 percent last year.

This improvement was due to better sales mix, reflecting a higher relative contribution from our global pharmaceutical business.

R&D investment increased almost 6 percent consistent with our forecast.

R&D in the quarter supported key pipeline programs including the promising follow-on indication for Humira, other late stage clinical programs in pharmaceuticals, and programs in vascular devices and molecular diagnostics.

First quarter SG&A was up significantly, increasing more than 20 percent driven by continued investment in the global launch of Humira, promotional spending on other marketed pharmaceutical products, as well as higher spending supporting U.S. nutritionals.

Our share of the TAP joint venture income was $102 million.

The previously forecasted decline from last year was due to lower sales in both Prevacid and Lupron.

Sales performance of these products for the quarter was roughly in line with past forecasts.

As we indicated on our year end earnings call, the quarterly income contributions from TAP are expected to improve sequentially throughout 2004.

Our expectation remains for the full year 2004 income contributions from TAP in the range of 2003, with these improving results providing a solid base as we move into 2005.

As I mentioned, total corporate sales were favorably impacted by 4.9 percent due to exchange rates, which was above our plan expectations.

At current rates favorability versus 2003 would be approximately 2 to 3 percent in the second quarter and the impact would be roughly neutral by the fourth quarter.

Tax rate for ongoing operations was 24.5 percent consistent with previous guidance.

Also consistent with our forecast, our results this quarter reflect onetime charges of 5 cents per share related to the acquisition of i-STAT and the spinoff of Hospira.

Our ongoing earnings per share guidance for the full year 2004 remains unchanged at $2.40 to $2.48.

For the first time we are providing earnings per share guidance for the second quarter of 57 to 59 cents.

Guidance for both the quarter and the full year excludes previously forecasted onetime charges as detailed in our earnings release.

Our 2004 guidance continues to assume a full year of net income from the business components that will be separated into the new hospital products company, Hospira.

As previously projected, the full year 2004 ongoing earnings per share contribution to Abbott from these business components is estimated to be approximately 16 to 17.5 cents, as these businesses are currently structured within Abbott.

Abbott will adjust its 2004 consolidated earnings guidance when the dividend distribution is announced to reflect the shift of a portion of future earnings to the new company.

The spinoff of Hospira is on track for completion in the second quarter.

The future Hospira management team will be providing further details on its performance outlook prior to the spinoff date.

Cathy and John will now cover the business operating highlights.

Cathy?

I will start with domestic pharmaceuticals.

Our U.S.

Pharmaceuticals business delivered another outstanding quarter with sales up 24 percent as a result of strong double-digit sales growth across most of our major brands.

This business has now delivered double-digit growth fourteen of the past fifteen quarters.

So I will walk you through each of the major franchises.

First I will do immunology.

The worldwide launch of Humira is exceeding our expectations with global sales totaling nearly $150 million in the first quarter.

The international launch is proceeding very well as we have transitioned more than 90 percent of eligible early access program participants to paying patients.

Humira recently received approval in several additional countries bringing the total number of approved countries to 41.

In only seven months after having received EU approval Humira has now been launched in virtually all Western European countries.

The European market continues to offer tremendous growth potential as acceptance of biologic by rheumatologists and funding by healthcare authorities is increasing.

In addition there has been limited penetration of other biologics in Europe thus far.

In the U.S. we're pleased with our progress and estimate that we have captured nearly 27 percent of the new prescription self injectable markets share for rheumatoid arthritis.

So for 2004 we remain on track to achieve our full year sales guidance of greater than $700 million worldwide.

And based on the strong global demand for Humira, we're pleased to share for the first time our global Humira sales forecast for 2005 of more than $1.2 billion.

Moving to our HIV franchise, Kaletra remains the number one protease inhibitor in the world with sales growth of more than 25 percent in the quarter.

We continue to anticipate double-digit global sales growth for Kaletra for the full year 2004.

In February we shared data at the retrovirus meeting that showed a once daily dose of Kaletra had comparable viral suppression when compared to a twice-daily dose in patients new to treatment.

We continue to explore options in HIV therapy that offer dosing flexibility and brings convenience to patients.

In the anti-infective area global sales for clarithromycin were flat for the quarter, and in the U.S.

Viacin sales were impacted by a strong fourth quarter in '03 due to a particularly strong but early flu season.

Omnicef again grew 40 percent in the quarter, on track for strong double-digit growth for the year.

It remains the fastest-growing branded oral antibiotic.

New treatment guidelines were published by the Sinus and Allergy Health partnership that identified Omnicef as one of the primary treatment options for acute bacterial sinusitis.

In addition, the American Academy of Pediatrics and the American Academy of Family Physicians also recently released new joint guidelines for the diagnosis and treatment of acute otitis media, or ear infections.

And Omnicef is one of only a few brands of antibiotics that these organizations have endorsed.

In the neuroscience franchise we prevailed in the Depakote patent infringement trial against TorPharm as we had expected.

The judge's ruling stated that TorPharm's generic products infringes on Abbott's Depakote patent.

As a reminder, the composition of matter patents in Depakote extend until 2008, and the formulation patent covering Depakote ER extends until 2018.

As expected, Depakote sales were priced strong this quarter, up more than 20 percent following a slight decline in the fourth quarter '03 at a favorable year-over-year comparison.

Next I will move to cardiology and neurology.

TriCor continues to expand its market share, and growth of both new and total scrips continue to outpace the cholesterol market.

Sales grew nearly 40 percent this quarter, on track for double-digit growth for the full year.

Global sales of Tarka grew nearly 40 percent.

And as a reminder, Tarka combines the benefit of a calcium channel blocker and an anase inhibitor into a convenient once daily treatment for hypertension.

Mobic, Micardis and Flomax were also up strong double-digits.

Metabolic diseases, Synthroid had a very strong quarter with sales of $165 million resulting in growth of more than 50 percent.

Sales were positively impacted by a favorable comparison to the prior year when wholesalers were adjusting inventory levels following the 2002 approval of Synthroid's new drug application.

Synthroid market share is now 60 percent.

As a reminder, the U.S. pharmaceutical business now includes the anesthesia agent, Ultane, and the vitamin D therapy, Zemplar, which were both up double-digits.

So for the overall U.S. pharmaceutical business we are extremely pleased with its performance and continue to forecast double-digit growth for the full year with low double-digit growth anticipated for the second quarter.

With respect to pharmaceutical sales within our Abbott International Division, in addition to the successful global launch of Humira, International Pharmaceuticals performed very well with growth of 20 percent, including the impact of foreign exchange.

Kaletra experienced strong double-digit growth outside the U.S., and international sales of Synagis grew more than 50 percent including the benefit of change.

Market penetration in both Japan and Europe, as well as the benefit of its new indication in Europe for CHD led to the strong growth for Synagis.

So for international pharma we remain on track to deliver high single digit growth for the full year and the second quarter.

Now I will turn to TAP Pharmaceuticals.

As TAP anticipated, and consistent with its full year plans, sales were down this quarter.

As expected, Lupron sales declined as a result of adjustments made in Lupron's price due to the entry of a new competitive product last year, which was initially priced lower than Lupron.

TAP has seen its urology market share steadily improve since the competitive entry and anticipates improving growth for Lupron in the second half of the year.

Prevacid remains the PPI market leader with market share of nearly 30 percent.

In line with TAP's expectations the entire branded PPI market was impacted by a reduction in overall scrips for promoted PPIs compared to the prior year first quarter, which did not include the impact of Prilosec OTC.

However, year-to-date total scrips for the PPI market are ahead of expectations as the market now appears to have stabilized.

In addition TAP continues to defend and build its share within the branded PPI market, and in early March launched its new direct to consumer campaign featuring former NFL quarterback, John Elway.

Prevacid's pediatric indication, as well as the new Prevacid Napropack, an Enced combination pack, continues to add to Prevacid's growth.

Prevacid is the only PPI approved for combination treatment with Enced for patients taking Enced and at risk for ulcers.

TAP continues to forecast modest sales growth for Prevacid in 2004 with higher sales growth expected in the second half.

Overall TAP expects sales and income growth to improve in the second half of '04 and into '05, as Tom had indicated in his remarks.

I just want to spend a minute on the pharmaceutical pipeline.

We have new and promising data in many of our therapeutic areas that we look forward to presenting at medical meetings throughout the year.

Regarding Humira, we are on track with clinical trials for all of our follow-on indications in Crohn's disease, juvenile rheumatoid arthritis, psoriasis, psoriatic arthritis and ankylosing spondylitis.

We recently shared phase II psoriasis data demonstrating that patients with moderate to severe psoriasis receiving Humira every other week achieved statistically significant results after just 12 weeks.

More than 50 percent of the patients achieved at least a 75 percent or greater improvement in their psoriasis area and severity index, or POSSI score, with some patients achieving this level of improvement as early as four weeks.

As a point of comparison, Embrol Phase III 12 week data showed just 34 percent of patients demonstrating a 75 percent POSSI score improvement when dosed at Embrol's RA 25 mg twice weekly dose, and only 49 percent when dosed with double 50 milligrams twice weekly.

Humira results were also significantly better than the results of other available treatments.

Our data also showed that Humira was very well tolerated.

We also plan to share Crohn's data for both Humira and ABT 874, our anti-IL-12 compound in phase II at a gastroenterology medical meeting in May, as well as additional medical meetings throughout the year.

Data on the other follow-on indications is also expected throughout 2004.

At the American Society of Clinical Oncology meeting this June, we will be presenting data on all three of our oncology compounds in later stage development, Atrasentan, ABT 510 and ABT 751.

As a reminder, ABT 510 is our anti-angiogenesis compound in phase II where we're looking at it as a treatment for sarcoma and lymphoma.

And ABT 751, also in phase II, is a once daily oral chemotherapy we're studying for several types of cancer.

We will be presenting phase I data on both of these compounds at ASCO.

Oral Zemplar remains on track for submission in the coming months and we expect to present data on this promising compound later this year.

The oral formulation will expand the benefits of vitamin D therapy to predialysis patients both with stage three and four chronic kidney disease.

Our pain management compounds and the late stage TAP compounds, Vivostat and Abbott Prism for fibroid endometriosis also remain on track in clinical developments, with Vivostat expected to file later this year.

So as you can see we have a full pipeline of late stage products ready to launch in the coming years.

So with that I will turn the call over to John for a review of our Medical Products Group.

Thanks, Cathy.

I will review medical products which collectively in the quarter delivered growth of more than 9 percent continuing the momentum that we saw from the fourth quarter.

And as Tom noted, the spinoff of our core Hospital Products business is on track for the second quarter.

Hospira management is going to be providing additional guidance and outlining company strategy during an upcoming roadshow.

So in lieu of that pending spinoff, I'm going to comment only on the Hospital Products businesses that are going to remain with Abbott's Medical Products Group, including Abbott Vascular Devices and Spinal Concepts.

In our Vascular Devices business sales grew more than 20 percent which includes the incremental sales impact of JOMED products.

In the vessel closure area next month at PCR we will launch the StarClose (ph), our new vessel closer device in Europe.

StarClose is a clip-based device that insures a secure reliable close while significantly easing device deployment and reducing the time to close to less than 30 seconds.

Physician feedback regarding both the ease of use and time to close aspects of the device has been overwhelmingly positive.

In our endovascular business we completed a 12 month follow-up in February on our security trial.

We remain on track to file a PMA in the second quarter for the Emboshield (ph) capture device, an exact stent for approval with a high-risk carotid indication.

In our coronary business we're on track to initiate human clinical trials this summer with our new proprietary tri-metal stent called Trimax, using our anti-proliferative drug, ABT 578 and PC coating.

Trimax was designed to offer excellent deliverability, trackability and conformability with vessel coverage that provides optimal drug delivery.

As we near initiation of human clinical trials we will certainly provide additional detail on our regulatory pathway and clinical trial design and some of the unique product attributes of our drug coated stent program using Trimax.

Spinal Concepts were not part of Abbott until June of '03 for comparison purpose grew more than 60 percent for the quarter on a relatively small base, of course.

Domestic sales of PathFinder, the recently launched minimally invasive pedicle screw system drove the sales increase performance in the quarter.

Turning to our nutritional business, our U.S.

Nutritional business, or known as Ross, delivered its best performance in five years with nearly 11 percent growth.

Pediatric nutritionals, adult nutritionals and pediatric pharmaceuticals all performed well.

Ross delivered strong growth despite the comparison impact of last year's divestiture of consumer products.

The infant nutritional business increased more than 8 percent in the quarter, continuing to benefit from the increased penetration of Similac Advance.

The Advance formulations are being promoted for their proven benefit in the development of infant immune systems in addition to the cognitive and visual benefits provided by the addition of DHA and ARA.

In Pediatric Pharmaceuticals revenues from our U.S.

Synagis business continued its strong double-digit growth.

As a reminder, in the U.S. we copromote Synagis with MedImmune and book the copromotion fees as sales.

The strong growth in our adult nutritional business was driven in part by the incremental sales of ZonePerfect and more than 40 percent growth in Glucerna.

So for the second quarter we expect momentum to continue in our U.S. nutritional Ross business with high single digit growth.

Turning now to our worldwide diagnostic business where we reported sales growth of 5 percent, which included solid growth in MediSense and hematology.

Sales in our U.S. immunoassay business declined as previously forecasted, however, the business is stabilizing and we expect performance to improve throughout 2004 and certainly into 2005.

In the quarter the Diagnostic Division received FDA clearance for 13 new immunoassays from the FDA.

So altogether 17 assays were launched in the quarter, including long-awaited Acton (ph) hepatitis and cancer markers.

Acton BNP, which was approved by the FDA in February, was launched globally and customer uptake has been strong in both the U.S. and Europe.

In fact our internal estimates suggest than in the first 30 days of launch of BNP we have achieved nearly 10 percent market share.

The clear benefits of the Abbott assay is the ability to differentially diagnose New York Heart Association Class One patients from non-heart failure patients due to the sensitivity of our assay.

The assay has 14 day onboard stability, which is appropriate for the hospital market that we're targeting.

However, while BNP is certainly an important addition to the Acton menu, keep in mind it is a modest contributor to overall Abbott sales.

And just yesterday, as you might have seen, the U.S.

Department of Agriculture approved our rapid Enfer BSE test used to screen cattle for mad cow disease.

This highly sensitive and reliable test provides results within 3.5 hours, is easy to use and addresses the workflow needs of USDA approved screening laboratories.

Turning now to our molecular business, we had strong growth of more than 30 percent in molecular sales, if you exclude the previously announced withdrawal of LCx products.

And going into the second quarter we expect sales growth in Molecular to exceed 30 percent as we capitalize on new opportunities and lap the impact of the LCx withdrawal.

As you may have noticed in our earnings release we have renamed our MediSense Blood Glucose Monitoring business earlier this week following the closure of the TheraSense deal.

And moving forward we're going to be referring to this business as Abbott Diabetes Care.

The TheraSense acquisition does strengthen our presence in blood glucose monitoring, as you know, providing advanced technology, strong IP for future products, and critical mass in global R&D and SG&A.

TheraSense also allows us to gain a greater position in the premium area of the blood glucose monitoring market where TheraSense has its greatest strength.

In the second quarter we plan to launch the Deltec CozMore, an all in one smart pump integrating the Deltec insulin pump and the TheraSense FreeStyle blood glucose monitor to provide a single user interface to both monitor glucose levels and to manage insulin requirements.

And in January the PMA was filed for the TheraSense FreeStyle Navigator Continuous Glucose Monitor and given expedited review status by the FDA.

As a reminder, the FreeStyle Navigator is designed to replace traditional blood glucose testing with a sensor inserted under the skin that continuously measures glucose levels in interstitial fluid.

So with the completed acquisition and the launch of new TheraSense and MediSense products we expect our blood glucose monitoring business to reach $1 billion in sales by 2006.

Turning to our point-of-care business this quarter, as you know, we closed the i-STAT acquisition, which solidified our position in a point-of-care segments, which continues to grow in excess of 15 percent.

And so looking to the second quarter, our Total Diagnostic Division is expected to deliver high single digit growth, including more than 40 percent growth in our blood glucose monitoring business, which now of course now includes TheraSense.

Overall the Medical Products Group turned in another strong quarter as we continue to execute on our strategy to focus on high-growth, highly innovative businesses with billion dollar potential.

And finally to sum up the quarter overall for Abbott, we're extremely encouraged by the performance of our broad base of businesses.

We delivered strong topline growth, supported by nearly 25 percent growth in U.S. Pharmaceuticals.

Humira contributed 150 million in global sales.

And we expect sales of more than $1.2 billion in 2005.

Ross also had a very strong quarter with its best performance in five years.

And our Diagnostic Division is off to a good start with a number of product launches, including 17 new assays.

In addition of course we completed the i-STAT and TheraSense acquisitions.

And as we said, we remain on track to spin off Hospira and to focus our attention on those higher growth, higher margin businesses that have supplemented the Abbott portfolio over the last several years.

With that we will now open the call up to your questions.

(OPERATOR INSTRUCTIONS).

Rick Wise.

It is Rick Wise, Bear Stearns.

Great to see you beat the first (technical difficulty) guidance this quarter.

But I guess my first question is given the excellent first-quarter performance and what seems like a robust outlook for the year, why have you kept the guidance range so wide and so conservative?

And maybe, Tom, you could remind us -- I know there are a number of issues in your mind when you gave the guidance range.

Can you go through those issues again and tell us your thoughts about where they might stand or the resolution that would maybe bias you more towards the upper end as we proceed through the year?

Sure, Rick, obviously in the first quarter we're off to a good start.

I think, as John and Cathy indicated, we see a lot of nice momentum in a lot of the businesses.

We just really think that with only one quarter under our belt that it is premature to adjust the range.

And frankly the rationale that we had back in January when we set the range is still intact.

And the main swing factor there was what the FDA is going to do with the Citizens' petition on Synthroid, and none of that has changed.

So that is why even though we feel good with this nice quarter under our belt that we just decided to keep the range where it is.

And just to follow up on that.

Have you had any additional dialogue with the FDA on the Citizens' petition, or when do you?

And maybe a larger related question.

Some of the pharma product that did so well this quarter quarter were part of your BI relationship.

Obviously some changes are coming there in terms of how the products move from copromotion to distribution.

Can you talk about what fills the gap and whether we should be concerned as we look out over the next 12 to 18 months about that?

Yes.

First of all to your first question, we have no news from the FDA, so there is just nothing to report there.

As we have said, there is going to a change in some of these products over the next three years from more of a copromotion arrangement to more of a distribution arrangement, which will leave revenues intact, but will impact the amount of margin we earn on these deals.

As we have indicated many times and as you have seen in our gross margins, these products are far less profitable than the average pharmaceutical product.

And we continue to believe as we look forward that the impact of the change in profit-sharing, if you will, in these contracts is something we can manage through as we move into 2005 and beyond.

So nothing really new to report there either, Rick.

Dan Lemaitre.

It is Merrill Lynch.

Good morning everybody.

Maybe just a little help on the diagnostic side.

I guess, John, in listening to some of your comments about POC growing 15 percent, molecular growing 30 percent, when you strip out some of it -- and hematology doing well -- it would appear that your immunoassay business in the U.S. in particular could be down 20 or 30 percent.

Maybe my numbers are wrong, but you only have $191 million of domestic business left after the MediSense business domestically, and if the other businesses are growing that strong.

So the first question is, is your immunoassay business dropping more than 20 percent year over year?

And just how quickly do you think you might be able to turn that around with some of the new products you have just launched?

The U.S. immunoassay business has declined as we expected.

And we talked about that before.

That was our previous forecast for the full year that because of the rate of erosion that we saw the last year we had our toughest year-over-year comp in the first quarter.

And obviously it gets better as we move into the second quarter, then particularly in the third and fourth quarter, and then going into 2005.

So in the base immunoassay business there was a double-digit decline.

We did expect that.

And as you noted, that we have a number of products that are launching in the first quarter and throughout the rest of the year, 17 new assays launched in the first quarter, BNP.

We have got a number of different things coming, including Prism later this summer.

So that is the way we planned it.

We expected that we would have to endure a tough comp in the first quarter because of the high marketshare that we had a year ago, and then the erosion that we saw throughout the year.

So it is going to take a couple of quarters to turn this into the right positive territory.

That is the way we planned it.

It is no different than our original forecast.

And as we have said, it is going to take time to ramp up this year.

And then the full impact of all those initiatives and the new product launches will really be felt next year.

One follow-up on that.

I was intrigued with your comments about your ability to differentiate with BNP.

And I understand it is a niche in the overall scheme of things, but it probably is a pretty good door opener for you -- for your sales folks.

You said specifically that you could uniquely differentiate between cross line (ph) patients who may not be in heart failure, but I thought all of the BNP levels were pretty proportional to increasing New York Heart Association Classes.

And I am just confused as to why your test would be differentiated on that basis?

My understanding of it is, and I don't profess to be an expert here, Dan, but my understanding is that medium concentrations of BNP using other assays are somewhat lower than what we have on Acton.

And this means that Acton will better differentiate patients with New York Heart Association Class One patients from those without.

Glenn Reicin.

Glenn Reicin, Morgan Stanley.

A couple of questions.

Can you give us any granularity on how many patients you think in the U.S. and international right now -- internationally are on Humira?

You know what, I'm not prepared to give you a number right now.

We know that we ended the year with more than 50,000 patients.

And we have had, for example outside the U.S., some early access programs where we have had about 11,000 patients on.

And we have converted over 90 percent of those patients now to paying customers as we get approval, launch and reimbursement in all the countries that we mentioned.

And we have about 25 countries now that we have launched in.

So things are going well.

I'm not prepared to give you a patient number per se, but obviously it is increasing steadily.

And we feel very good about the global numbers.

How about sequential growth?

Are you willing to give us that?

What do you mean?

Sequentially what patient numbers are up from the fourth quarter?

I can't give you something specifically.

I know they are obviously up significantly, but I don't have that in front of me, sorry.

I can probably get that for you later.

And then we have had an ongoing dialogue about Ross in the last couple of years and about consumer marketing and your experience in consumer marketing.

You seem pretty upbeat about Ross.

Maybe you can give us a little bit of granularity there?

And obviously this also coincides with new management in place at that division.

So maybe you want to give us just a little bit of insight as to what is truly happening?

Okay, why don't I start and maybe Tom can comment on the new senior management there, which is Gary McCullough who is doing a great job, and brings a lot of retail and consumer experience.

But I think we're seeing the impact of some of the initiatives that we started last year.

Obviously in the pediatric side the further penetration and conversion to Similac Advance has been going very well.

And as you know, and I think we mentioned on the call last time, we picked up the California WIC bid, which is a huge piece of business not only in WIC, but more importantly the follow through on the retail -- more profitable retail side of that market.

So it drives further marketshare penetration for us in that profitable segment.

They have been doing a number of consumer initiatives, and those are ramping up even further as we get into the first quarter of this year under the new senior management team.

ZonePerfect obviously was a very nice addition to the adult nutritional segment which rounded out their portfolio and gave them a nice, very fast growing opportunity in the healthy living segment.

So now we have the full spectrum from babies to healthy living to mature adults covered in that division.

Glucerna, as we mentioned for diabetics, especially formulated for people with diabetes, is doing very well and growth there was 30 or 40 percent.

They have a number of other specialty nutritional products that they will be launching over the course of the next couple of years.

And I think Gary and Tom could probably comment more on this than I could.

But he really is focusing on building the brands that we have already established there.

As you know, we have very good brand equity in Ensure and Similac Advance and the like.

And the focus is really going to be back on those core businesses and how to grow those.

So let me ask you in a different way.

If I took out the WIC contract, can you give us an idea of what Pediatric would have grown at?

And the same thing on the adult business if you took out ZonePerfect, what would be around the underlying growth rate for that business?

Let me address the latter.

ZonePerfect added about 20 million in sales this quarter.

On the WIC contract I don't have that specifically in front of me.

I can see if I can get that for you.

It was probably, you know for the full year it is going to be, I don't know, maybe a 20 to $30 million impact for the full year '04.

Thank you very much.

Did you want to comment more on --?

I will just add on Gary -- you know, Gary came to us late last year.

And he has been there just a few months.

But he is a really seasoned consumer executive with over 20 years experience with major consumer companies.

And he is just brought a tremendous amount of energy and expertise.

And you can already anecdotally see the positive impact he is going to have, but obviously it is still a little bit early.

Glenn Novarro.

Glenn Novarro with Banc of America Securities.

Two questions on Humira.

First, if you look at the sequential growth from 4Q to 1Q, it slowed a little bit from what we saw in 2003.

So maybe you can comment on that and what gets the sequential growth going for the rest of this year?

And I'm referring specifically to the U.S. sales on Humira.

And then the psoriasis timeline, maybe you can give us when you expect to start your phase III trials and when you expect this to come onto the U.S. market?

With regard to psoriasis, we are obviously very, very excited about the phase II psoriasis data that we presented in February at the dermatology meeting.

So we are in late phase II development there.

And you can expect that we will be moving into phase III very shortly.

We have talked about that being a filing sometime basically in the '05, '06 timeframe.

But as you know, we probably are working here hard to accelerate development of some of the key indications and psoriasis would certainly be one of those.

With regard to the U.S. market we feel very good about where our share is.

We have -- if you look at the RA factored self injectable marketshare, which is how we view it, taking out of the equation any psoriasis impact that you would see from one of our competitors.

We grew that share about 2.5 points or so recently to around 27 percent of the total RA self injectable market.

So we are seeing nice steady growth there.

We do expect a higher sequential growth improvement in the U.S. going from the first quarter to the second quarter.

And we're on track for our full year plan.

But I think you need to look at this product globally, which is how we are managing it and how we view it and track it.

And globally we are obviously doing very well.

And we wouldn't have felt good about it if we hadn't issued the number for next year, the greater than 1.2 billion in '05, if we didn't feel good about where the product is growing and so forth.

So there are some other initiatives that, in the U.S. in particular, will be hitting the marketplace in the first half of this year.

Patient education and physician education programs on treating early RA and the like with a consumer campaign that will also have an impact.

But we're right on track.

We feel very good with where we are.

And we obviously are very pleased with the progress of the drug, particularly internationally.

Could you also just as one follow-up, because I know there has been concern that some patients are moving from once every other week to once a week.

Can you give us an update on what percentage of Humira patients start on once every other week and are staying there?

Sure, I would be glad to address that because I think there has been some misinformation recently out in the marketplace about that.

The vast majority of patients are on the recommended labeled dosage, recommended every other week 40 mg, which is the standard of care there.

And it is a significant advantage versus the competition because basically you're talking about an injection once every two weeks or 2 shots a month versus 8 for the competition.

But our data, and we just had a longitudinal study done recently of approximately 12,000 patient cohorts that showed that we are about 8 percent or so on weekly dosing those patients that could benefit from weekly dosing.

And interestingly that same data analysis showed that our competitors had a higher rate of greater frequency of dosing than their recommended dosing, more like 9 or 10 percent.

Alright great, congratulations on a very fine quarter, guys.

Neil Sweig.

Neil Sweig, Fulcrum Partners.

In reference to the 15 percent decline in TAP sales and each of the products, Prevacid and Lupron, fell by that amount.

It would seem that to meet the modest sales growth for the whole year then TAP sales would have to grow somewhere in the mid teens assuming less of a decline than 15 percent in the second quarter.

That is that question.

And then quickly the follow-up question relates to Humira.

Besides Japan, what other major markets are you awaiting approval for Humira?

And when might those markets give approval, and the timetable for Japan as well?

Thank you so much.

Sure Neil.

Your analysis on TAP, and particularly Prevacid and the growth expectations for the second half of the year I say are pretty accurate.

We do expect that type of growth going into the third and fourth quarter.

That is the way that they planned it after we lap the impact to the PPI branded market of the entry of OTC Prilosec was which the summer of last year, July or August, I believe.

So that is accurate.

That is the way they planned it.

And the TAP has been very good at forecasting how their sales and profits are going to play out quarter by quarter, as you know.

So no problem there in our minds.

The only Western European countries that have not launched yet include -- for Humira, I'm talking about now, -- includes Italy and Belgium.

And those will happen in the coming months.

I would say that we recently launched the product in the Netherlands one month ahead of our schedule and that is performing exceptionally well, although it is obviously early in the launch.

And did you have a third question?

No, that is it and congratulations.

Oh, and Japan?

Oh, Japan.

Japan is – we are looking at – it is a couple of years out.

I don’t have it in front of me exactly, but I know it is at least several years out.

We will get that for you later.

Mike Weinstein.

I think we've got probably three questions here, just following up from the ones the others asked.

First is on the U.S. pharma business, it appeared as if some of the product lines did pretty much better than the prescription trends.

Let me just comment on a couple of them.

One, you mentioned Synthroid, which was up 53 percent in the quarter.

And I think January and February total RX's were up about 10 percent.

You said that last year there was a destocking effect that made this year look like an easy comparison.

But I think last year we went back and looked, I think it was up about 3.5 percent.

I don't think as we look at the transcript we have seen a reference to it.

So if you could just add a little bit more on that one.

And then if we looked across the (indiscernible) at TriCor, which had total RXs up 17 percent, was up 41 percent in terms of sales reported.

Mobic up 18 percent; it was reported up to 63 percent.

Depakote total RX's were flat and you guys reported 23 percent.

And so could you just comment on how much of an inventory benefit there was in the quarter for U.S. pharma?

I will take that.

There really were three significant comparison issues in the year.

You mentioned Synthroid.

Last year in the first quarter we had about 108 million in sales.

If you look at where we ended up the year at 564, clearly that was a very low quarter.

And if you look at the run rate on this one -- if you looked at normal growth in Synthroid, I think you would still see that as being very, very reasonable.

So I think the sales level this quarter was very normal there.

Depakote, we were down like 16 percent last year.

So clearly, and again if you annualize out the sales for this quarter, you're going to see it very close to a full year number.

The other one was Flomax, as you mentioned, which slightly ahead.

Inventory levels at the end of last year were a little bit low at the wholesalers.

This is my understanding on that one.

But still not very far off the full year trend rate.

So it is a big quarter of comparisons.

Those are really the ones that are -- clearly help the quarter.

As you look at the second quarter, certainly we are not expecting this level -- this level of double-digit growth we saw in pharma in the first quarter, we're still expecting double-digit growth.

And I think that the sales for these products on an annualized basis are pretty normalized.

So you're characterizing it as being easy comps versus (indiscernible) inventories and things that were happening in this quarter and saying it was more of a year ago?

Right.

So Synthroid, which RX's grow 10 percent, we're not going to see another 53 percent quarter.

Flomax, we are not going to see another 50 percent plus quarter?

Is that fair?

I think the way to look at these products, as we have looked at them relative to the full year plan is the sales for the quarter were pretty darn close to an annualized rate, with certainly some growth going forward in the products kind of on a quarterly basis.

And then Rick asked the question -- I guess he commented on the Boehringer Ingelheim agreement.

And you guys have I guess commented that there are some changes upcoming in the agreement.

But you have never really gotten specific as to what those changes are and when those changes occur and exactly how they occur.

And I was wondering if maybe this was a time to do that to try and flesh out and maybe clear up some confusion on the Street as to what plays out in this agreement?

As we had indicated, the change in the profit split changes, some of it starts later this year and over the 2004, 2007 timeframe.

And we're just not going to going to specifics of that, Mike.

Maybe I could just try and push a little bit.

Do you maintain distribution rates for all three products through 2007?

Yes.

That is how the deal is structured, Mike.

We book sales all the way through the end of 2007.

At various times those products change from active copromotion to just the distribution agreement.

But again the margin on these products is very low relative to the rest of the pharma division.

And it is a very manageable situation that we feel that with everything else happening, with Humira growing strongly, and the other product that are coming to market, and some of the relaunches that we're having, if you will, and some of the commercial products that are on market now like Tarka and Omnicef and some other things that we expect to do very well well in the coming years, that it can more than offset that impact.

That was very helpful, John.

Just to clarify, right now as the agreement stands and assuming there's no changes to this agreement, you do maintain those distribution rights?

Does Boehringer have the option still at this point maybe to pull back those rights?

Is that in there?

Is that potential -- could they pull back rights to Flomax any time over the next couple of years?

No.

Okay.

And then just the last question unrelated to this is, you did give Humira guidance for 2005 for the first time.

And I just was hoping maybe you could just spend a minute explaining the Company's guidance policy?

You're getting guidance for Humira, but you're not getting guidance for the overall Company or for any of the product lines.

And I was wondering since you are giving guidance for one product do you want to give guidance for the whole Company for any other products?

Thanks.

As Miles indicated on the fourth quarter call we give earnings guidance one year at a time.

And just like any -- when we have had an R&D meeting where we have talked about products in the pipeline or we have a significant product that is ramping up, we think from time to time it is useful to give you an idea what our thinking is on that.

But that is what we do on products in the pipeline, and that is what we have done in this product.

We just think it is appropriate to give you an idea of how we see that product playing out.

Larry Keusch.

Goldman Sachs.

Good morning.

John or anybody, could you just give us some sense of what you might be anticipating coming out of the FDA panel meeting next week for Synthroid?

Is that going to just be a general discussion and there is no vote taken at the end of that?

Let me clarify, Larry, we have no indication that that has anything to do with Synthroid.

That is a regular scheduled meeting.

And if it was Synthroid related, I'm sure we would have been notified about it, and would have let you guys know.

But what we're trying to do through the citizens' petition, as you know -- what we have requested that the FDA to do is have an expert advisory panel or group meeting to discuss specifically the bioequivalency standards related to orowevathyroxin (ph) sodium products, which the Endocrine Society support our position on in thinking that those standards are not where they need to be to protect the patients.

We're talking about two different things.

There is no indication that panel has anything to do with Synthroid.

Okay, great.

That is helpful.

We will take one more question.

Robert Goldman.

It is Bob Goldman at Buckingham Research.

A couple of things on Zemplar.

Can you just remind us again what percent of the Zemplar patient populations are not Medicare patients?

And also, you mentioned that we would see data for the oral version of Zemplar for predialysis later this year, but I just wanted to make sure that the filing was still scheduled for this summer?

And finally now that Synsipar is approved and out in the market by Amgen, outside of the obvious of one being a tablet and the other IV, I was hoping you might be able from your perspective to contrast the two and tell us the benefits of Zemplar relative to Synsipar.

Sure, I would be glad to.

First to clarify Medicare reimbursement end-stage renal disease is all Medicare related.

Okay?

So that is fully reimbursed.

And as far as Zemplar and any impact from a competitive product that might be out there now, as you probably know the IV form of Zemplar, which is what we've had on the market for some time, is the cornerstone of therapy for these patients.

So this competitive product that has launched on the market is not a direct competitor.

It will have no impact on our base Zemplar IV business.

It has a side effect profile that is not attractive, as you probably know, because of hypocalcemia in more than 50 percent of patients, and a number of patients I believe, around 30 percent in their trials, suffered from nausea and vomiting.

This is going to be adjunctive therapy.

The FDA also has required them to warn that this should not be used in predialysis patients.

And as you know, that is the market that we will be going after with our oral Zemplar form, which is on target to file this summer, and will provide some significant benefits for patients with chronic kidney disease who are predialysis patients.

And it opens up a significant market opportunity for us and our ability and opportunity to serve a patient population that could be upwards of 10 times as large as the current chronic kidney disease patient that we serve now, which is about 140,000 patients that are on -- that suffer from chronic kidney disease and are eligible for treatment of Zemplar for secondary hyperparathyroidism.

Does that help?

Yes, thank you John.

Okay, that ends our call.

And as you know a replay will be available after 12:00 Central time on our web site at www.abbottinvestor -- all one word -- .com.

And after 12:00 Central via telephone at 402-220-4617.

Confirmation code is 2733803.

The audio replay will be available until 5 PM on Thursday, April 15th.

And we thank you all for joining us.

Have a good day.

Thank you.

This concludes the Abbott Laboratories first quarter earnings call.

Thank you for your participation.

At this time you may disconnect your lines.