美國雅培 (ABT) 2005 Q1 法說會逐字稿

Welcome to Abbott's first-quarter 2005 earnings conference call.

All participants will be able to listen only until the question and answer portion of this call. [OPERATOR INSTRUCTIONS] This call is being recorded by Abbott.

With the exception of any participants, questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott and cannot be recorded or rebroadcast without Abbott's expressed written permission.

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

Sir, you may begin.

Good morning and thank you for joining us.

Also on today's call with me will be Tom Freyman, our Executive Vice President, Finance and Chief Financial Officer.

Tom will review the first-quarter financial results and I am going to cover our Pharmaceutical Products Group and Medical Products Group.

Following our comments we will obviously take any questions you have.

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

We caution 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 2004 Securities and Exchange Commission form 10-K and are incorporated by reference.

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

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

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

In accordance with the SEC's regulation G and in line with Abbott's standard reporting practice, these non-GAAP financial measures are reconciled to the comparable GAAP financial measure in our earning news release and Q&A, which we issued this morning and is available on our web site at www.abbott.com.

With that I will now turn the call over to Tom.

Tom?

Thanks, John, and good morning, everyone.

For the first quarter we reported ongoing diluted earnings per share from continuing operations of $0.58, consistent with our previous guidance range of $0.57 to $0.59.

Sales increased 16% in the first quarter.

This was driven by strength across many of our businesses including our U.S.

Pharmaceuticals business which delivered nearly 20% growth, led by strength in a number of products, including HUMIRA, Kaletra, Ultane, Depakote, MOBIC, and our antibiotic franchise Biaxin and Omnicef, which was up more than 45%.

In addition our Medical Products Group also achieved double-digit sales growth including continued strong performance in Diabetes Care.

Foreign currency favorably impacted corporate wide sales by 2.6%.

Gross margin ratio in the first quarter was impacted by sales of low margin Mobic which grew 185%, exceeding expectations and the fact that sales of U.S.

Pediatric Nutritionals were below expectation.

Comparison of the gross margin ratio to the first quarter of 2004 was impacted by these items, expected decline in Synthroid sales, and the transition of Flomax from co-promotion to a distribution arrangement in August, 2004 as discussed on the fourth quarter conference call.

We continue to forecast a full-year gross margin ratio of approximately 54%, including the distorting effects of the lower margin BI products.

R&D investment increased almost 8%, consistent with our forecast of high single-digit growth for 2005.

R&D in the quarter supported key pipeline programs including a promising follow-on indications for HUMIRA and other late-stage clinical programs, pharmaceuticals, Diabetes Care and Vascular Devices, including our ZoMaxx drug-eluting stent program.

First-quarter SG&A increased nearly 12% driven by continued investment in new and ongoing promotional programs associated with many of our major global brands including HUMIRA.

TAPs overall sales met expectations with stronger-than-anticipated Prevacid sales offset by Lupron sells somewhat below forecast.

Our share of the TAP joint venture income was $83 million, in line with our expectations.

For the second quarter, we expect sequential growth and income from the TAP joint venture to approximately $100 million and forecast a range of 425 to $450 million for the full-year 2005, consistent with our previous guidance.

Tax rate for ongoing operations was 24%, also consistent with previous guidance.

Our reported results this quarter reflect previously forecasted onetime charges of $0.05 per share primarily related to the tax expense associated with our decision to repatriate approximately $600 million of foreign earnings in conjunction with the American Jobs Creation Act of 2004.

We continue to evaluate the opportunity to repatriate additional foreign earnings in the future.

Our ongoing earnings per share guidance range for the full-year 2005 remains unchanged at $2.47 to $2.53.

For the first time, we're providing earnings per share guidance for the second quarter of $0.56 to $0.58, excluding previously forecasted onetime charges as detailed in our earnings release.

We're forecasting double-digit sales growth in the second quarter with mid single-digit earnings per share growth, consistent with the forecast provided on the fourth quarter 2004 earnings conference call.

As previously indicated, guidance for 2005 does not include the effect of any potential future decision to repatriate additional foreign earnings or the effect of new accounting rules requiring the expensing of stock options.

Abbott plans to initiate the expensing of stock options effective July 1, 2005 in accordance with the requirements of FASB statement number 123.

We will provide the impact of this change in accounting treatment on earnings per share guidance under GAAP on our second quarter earnings conference call.

Overall, we are pleased with the continuing momentum generated by our broad-based businesses, as well as advances in our late-stage pipeline, which John will cover as part of his review of the business operating highlights.

John?

Thanks, Tom.

Our pharmaceutical products group obviously delivered another outstanding quarter.

Our U.S. pharma business delivered nearly 20% growth and has now achieved double-digit growth in 18 of the last 19 quarters.

In our immunology franchise, HUMIRA, global sales were more than 280 million.

We continue to forecast 2005 worldwide HUMIRA sales of more than 1.3 billion and we remain extremely confident that HUMIRA will become a legitimate multibillion dollar pharmaceutical product within the next several years.

HUMIRA is now approved in nearly 60 countries around the world with particularly strong performance in recently launched countries such as Canada and Australia.

In the U.S., we have recently initiated a new call-to-action patient promotional campaign, and we have sharpened our message to physicians, focusing on data supporting HUMIRA's earlier use in treating rheumatoid arthritis.

There's still a large number of untreated patients with early RA that represent a significant and largely untapped opportunity.

And we are poised to enter new indications with HUMIRA's clinical data which has been shown so far to be superior to other available treatments.

In fact, later this year we expect the approval and launch for both psoriatic arthritis and the early RA indications.

Psoriatic arthritis indication will allow our commercial team to expand its presence into the dermatology market segment.

This has been a rapidly growing segment for other anti T&S self-injectable therapies providing an opportunity to capitalize on HUMIRA's strong data in diseases that affect the skin, such as psoriatic arthritis and psoriasis.

And in early RA, our clinical data has shown that early aggressive intervention with HUMIRA plus methotrexate in patients with RA for less than three years, provides the most favorable outcomes when compared to conventional therapy.

In fact, our early RA study was the first study to meet ACR50 as a primary end point, providing additional information to physicians regarding HUMIRA's benefit when used before a patient's RA is categorized as moderate to severe.

So we anticipate a fourth quarter launch for both of these new indication.

Moving to antivirals, Kaletra worldwide sells grew 25%, on track for double-digit growth for the year, as Kaletra remains the number one protease inhibitor in the world.

We submitted our somple benal(ph) New Drug Application for a once daily formulation last year and we anticipate approval of that product this summer.

This option will enhance patient convenience.

We also plan to submit a supplemental New Drug Application to the FDA this summer for a reduced pill count formulation of Kaletra, which has added benefit of not needing to be refrigerated and this will, obviously, further improve Kaletra's convenience.

In our anti-infective franchise, as we expected, both Biaxin and Omnicef experienced strong growth in the quarter on the strength of the late flu season.

Omnicef, in particular, had another outstanding quarter up nearly 90%.

Biaxin sales were up 17%.

And consistent with our previous guidance, we are forecasting worldwide clarithromycin sales of approximately $1 billion in 2005 as well as strong double-digit growth for Omnicef.

We were pleased to announce at the end of March that the U.S.

Patent and Trademark office issued a new patent on Biaxin XL, our extended-release once daily version of Biaxin.

The new patent, which is supported by data from several Abbott clinical trials, covers the pharmacokinetic, or PK, profile by Biaxin XL to associate with the variety of clinical benefits including improved adverse event profile.

This new patent further strengthens the existing intellectual property estate surrounding Biaxin XL, which includes various formulation, manufacturing processes and crystal form patents.

These patents, including our new PK patent, expand until 2017.

We believe that if a generic XL clarithromycin is FDA approved as bioequivalent to XL, there is a substantial likelihood that the generic product would infringe on our patents.

We will continue to vigorously defend our new and existing intellectual property surrounding Biaxin.

Biaxin XL remains the preferred form of Biaxin that accounts now for nearly 70% of subscriptions in the U.S., according to the latest IMS monthly data.

Moving on to Synthroid, sales were 124 million in the quarter, consistent with our previous forecast.

After nearly 40 weeks of generic competition, Synthroid brand retention, which measures the percentage of pre-generic prescriptions retained by Synthroid, exceeds 65%.

This is well ahead of a typical generic incursion.

Despite the availability of generic therapies, patients and physicians continue to choose Synthroid.

As a reminder, we expect full-year sales of Synthroid this year that will exceed $400 million.

With regard to TriCor, sales this quarter were impacted by wholesale or buying patterns in the fourth quarter and the first quarter related to the launch of out new TriCor tablets.

The launch continues to exceed our expectations with nearly all TriCor patients now being prescribed the new tablet.

As a reminder, out new TriCor tablet brings additional benefits to patients including improved vial availability, offering the same effectiveness at a lower dose than the previous tablets.

And most important, TriCor can now be taken with or without food, increasing convenience for patients.

We continue to expand our market share with solid underlying script growth for new TriCor of more than 20%, on track for strong double-digit sales growth for the full- year.

In fact, based on the current trends, we now anticipate that TriCor full-year sales will approach $1 billion.

Longer term, we believe TriCor could have an unique role as a combination product and we have initiated several studies to evaluate this particular opportunity.

We expect to see results throughout the year from these trials.

In fact, just recently, a TriCor Zocor combination trial called Safari was published in the American Journal of Cardiology.

It demonstrated that TriCor plus Zocor compared to Zocor alone more than doubled the reduction in triglycerides, nearly doubled the increase in HDL or good cholesterol and improved the production of LDL or bad cholesterol.

This was, by the way, a Merck sponsored study.

In neural science Depakote had another strong quarter, with sales up double-digits, on track for modest growth this year.

We anticipate hearing back from the FDA regarding the approval of Depakote ER for bipolar disorder in the second half of this year.

In our anesthesia business, worldwide Ultane Sevorane sales were up mid-teens growth for the quarter, exceeding our expectations and aided, in part, by a favorable comparison to last year.

However, underlying demand for the product remains strong.

So overall our U.S.

Pharmaceutical Business performance remains right on track to achieve our forecasted double-digit growth for the full-year with continued double-digit growth projected again in the second quarter.

With respect to our Abbott International division.

International pharmaceuticals reported mid-teens growth this quarter, including the impact of exchange.

This was due to the continued successful global launch of HUMIRA and strong growth of Kaletra.

Revenues from Synagis also contributed to growth, up strong double-digits resulting from continued penetration and acceptance of the CHD indication.

As a reminder, we announced in February that we have expanded our agreement for ex-US distribution of Numax, MedImmune's second generation antiaris(ph) V antibody.

International Nutritionals also contributed mid-teens growth in the quarter due to continued growth of Pediatric Nutritionals including follow-on formulations.

We expect Abbott International to deliver mid to high single-digit growth in the second quarter and for the full-year.

Taking a look at TAP pharmaceutical products in the first quarter, sales met our expectations with stronger-than-anticipated Prevacid sales offsetting Lupron sales.

Prevacid's market share has stabilized and modestly improved in the recent weeks and growth of the branded PPA market is improving as well.

TAP continues to take steps to improve the performance of Prevacid including focusing on difficult to treat patients with new formulations including Prevacid Solutab and Prevacid IV.

And TAP continues to expect a modest overall decline in Prevacid sales for the full-year.

Lupron sales in the quarter, due to physician de-stocking associated with changes in Medicare reimbursement, were slightly down.

Based on these trend, TAP anticipates sales for Lupron will be flat to slightly down for the full-year, with expectations for improved sales growth in the second quarter, and second half of the year in particular.

And as Tom stated, our TAP joint venture income forecast for the full-year remains unchanged at 425 to 450 million.

For the second quarter, we expect sequential growth in income from TAP to about $100 million.

Now let's turn to our pipeline where I will briefly cover a few of the late-stage pipeline products that you have been hearing so much about, including upcoming data presentations and some other milestones.

Let me start with HUMIRA's follow-on indications, which are progressing as scheduled through the pipeline.

In addition to Psoriatic Arthritis and early RA, which I mentioned before, we expect to launch these by the end of the year.

HUMIRA is in development, as well, for psoriasis, Crohn's Disease, ankylosing Spondylitis and juvenile reumatoid Arthritis.

In psoriasis, at the American Academy of Dermatology meeting in February, we presented longer term phase II data that continues to demonstrate HUMIRA's significant benefit.

In fact, the phase II results have exceeded those of any currently approved psoriasis treatments.

As a reminder, we began enrolling patients in our phase III psoriasis trial at the end of last year.

We expect to file regulatory applications for HUMIRA for ankylosing spondylitis and RA in Japan and possibly juvenile RA by the end of this year.

We also look forward to presenting new, longer-term phase III data on Crohn's in the second half of this year.

On summary, on HUMIRA, the product has a total of six indications that we believe make this biologic a true pipeline in a product.

Regarding Xinlay, our NDA submission was accepted as filed by the FDA and is currently under active review.

As a standard practice with oncology drugs, we expect Xinlay to be discussed at a future oncology advisory meeting, or ODAC meeting.

We anticipate hearing from the FDA regarding our NDA submission in the fourth quarter of this year.

And we continue to forecast potential sales of greater than 500 million, and possibly more, if Xinlay is used in earlier stages of prostate cancer.

Simdax continues to progress through phase III development for acute heart failure and we are on track to submit a New Drug Application by the end of this year.

In the second half of this year we plan to share data from Revive II and possibly our survive trial.

As a reminder the revive 2 trial assesses how simdak improves patients' signs and symptoms while our survive trial is our mortality trial.

We continue to forecast the potential of simdak as a possible $1 billion opportunity, including the mortality indication.

Finally, we anticipate beginning phase III clinical trials for our pain management compound, Vicodin-CR, in the second half of this year.

And, of course, we also look forward to a midyear launch this year of Zemplar capsules, which as a reminder is our oral medication for early stage chronic kidney disease.

And I'd also remind you that TAP anticipates launching fabusastat(ph) for gout by the end of this year.

Each of these products anticipate -- we anticipate could provide a $500 million opportunity.

So in summary, our pipeline continues to deliver a strong flow of data throughout the year, and we look forward to several regulatory approvals or filings over the remainder of 2005.

Let me now turn to our Medical Products Group, which as Tom mentioned, delivered double-digit growth in the first quarter, driven by very strong performances in Abbott Diabetes Care and strong results in molecular, Point-of-Care and spine.

We also achieved several product milestones, development milestones, in the quarter which should enhance the group's overall performance going forward.

In Abbott Vascular, last Thursday, we are pleased to announce the approval from the FDA to begin enrolling patients in our U.S. drug-eluting stent clinical trial.

The approval allows us to begin enrolling the first 250 patients in ZoMaxx II in the U.S.

We expect to enroll the first patient within the first -- in the next 30 to 60 days, and as a reminder, ZoMaxx II will include a total of 1670 patients.

The trial's going to compare nine-month clinical outcomes in patients who are treated with ZoMaxx with those who receive the Taxus Express stent.

The primary end point is nine-month target vessel revascularization.

And we expect U.S. approval for ZoMaxx now in the second half half of 2007.

The ZoMaxx stent, as a reminder, features our Trimaxx stent, one of the new metal stents, that features a stainless steel and tantalum composite, as well as ABT578 and our PC coating, which features an unique top-coat process to slow the drug's dilution.

Enrolment in ZoMaxx I, our 400 patient ex-U.S. clinical trial, continues to proceed on track with now more than 150 patients enrolled.

In our endovascular business we received an approval letter in the quarter from the FDA for the exact carotid stent in Emboshield Embolic Protection System, subject to a standard pre-launch manufacturing inspection.

Both products are under FDA review for the treatment of carotid artery disease in patients at high risk for developing stroke.

We expect to launch both products in the U.S. this quarter and the second quarter.

Additionally we recently enrolled our first patient in Act I, the symptomatic trial -- asymptomatic trial.

This landmark trial will investigate carotid stenting in patients with carotid disease who have not displayed symptoms but are at risk.

An indication of this asymptomatic population would greatly expand the market three or four fold.

And just yesterday, we announced the submission to the FDA for approval of our StarClose clip-base closure device, which allows physicians to close the femur artery access site in about 10 to 15 seconds.

StarClose was launched outside the U.S. in 2004, and we anticipate a response from the FDA on that submission during the second half of this year.

In our worldwide diagnostic business, sales were up nearly 17%, including very strong growth from Abbott Diabetes Care, where U.S. unit market share is up about 2 points compared to the prior year.

We are using our International infrastructure to build the FreeStyle brand with the FreeStyle Flash Mini now available in most major markets.

The Precision optimum exceed glucose meter launch also continues to go very well and is now available in more than 40 countries and we'll launch an additional countries and in Latin America, Asia Pacific by the end of the second quarter.

During the first quarter, Abbott Diabetes Care launched its co-pilot data management system, which incorporates both Precision and FreeStyle products and allows for enhanced diabetes management.

The program can track more than a year's worth of patient data.

In addition to these 2005 product launches, our Navigator continuous blood glucose monitoring program remains on track in development with a projected launch in the first half of 2006.

So for second quarter, we expect another quarter of strong double-digit growth for Abbott Diabetes Care.

Finally, we are also pleased to announce today that United Healthcare recently selected Abbott's blood glucose monitoring products for preferred status on its formulary effective May 1, allowing more diabetics access to medicines and FreeStyle TheraSense products.

There are about 13 million covered lives on United Healthcare and 200,000 to 300,000 diabetic patients.

In our diagnostic big business, our core diagnostic business, which includes immunoassay, clinical chemistry and hematology, during the quarter we placed more than 330 ARCHITECT Systems worldwide with integrated CI-80 200s accounting for more than half of the placements.

Our Architour efforts that we have talked about in past have been very successful and continue to be.

In fact, two-thirds of U.S.

ARCHITECT modules were placed as a direct result of these unique cross-country mobile campaign which takes the CI-80 200 directly to the customer.

We are expanding our Architour campaign, adding two additional semi-trailers, one of which will demonstrate lab automation.

Abbott also launched a number of key assays this quarter, including myoglobin on ARCHITECT, which completes the acute cardiac panel, and a fully automated hepatitis C test in the U.S. for use on AxSym.

This quarter, we plan to submit a 510-K notification with the FDA for our much anticipated CELL-DYN Sapphire, an automated high volume hematology instrument, as well as introduce this instrument in several major markets, ex-U.S., including in Europe, Latin America and the Asia Pacific region.

We also announced an agreement to distribute two smaller volume hematology analyzers under the CELL-DYN Pearl brand name.

Finally ADD continues to execute on the strategy we have talked about before to improve the division's gross margin profile and international distribution as we build two new manufacturing facilities and expand two other facilities in Europe.

We expect to complete all sites in 2006.

And once completed, these plants will supply the majority of immunoassay products sold outside the U.S.

Quickly, in molecular diagnostics sales grew nearly 19% driven by PathVysion and UroVysion.

During the quarter the FDA approved UroVysion for use in diagnosing bladder cancer in certain patients.

Urovysion is the first gene-based test for both diagnosis and monitoring of blood cancer.

Looking to the second quarter, we expect molecular to deliver continued strong double-digit growth.

Turning to our Point-of-Care business, sales in the quarter grew 30%, driven by i-STAT's further penetration of the blood gas market.

The i-STAT system provides physicians with the information they need to make rapid diagnosis and treatment decisions.

Troponin-I, which was launched last year, allows physicians to diagnose myocardial infarction at the patient's bedside.

This quarter will launch the i-STAT CKMB assay, which also helps physicians determine if a patient has experienced a heart attack.

Later this year, we will launch our third cardiac assay, i-STAT BMP, for heart failure diagnosis.

Additionally we plan to launch the i-STAT Chem 8 panel later this year.

Targeted at the emergency room and physician office lab, the Chem 8 panel will measure 8 key anolites from a single cartridge.

In the second quarter, we expect Point-of-Care to continue its strong growth trend of strong double-digits.

For our reported worldwide diagnostic division we expect second quarter growth in the high single-digits.

Turning to our Ross Nutritional business, sales this quarter were up modestly due in part to a difficult comparison for Pediatric Nutritional sales, which had a very strong first quarter when sales were up in the high single-digits, and in addition, while although Similac maintained market share in the first quarter, there was a temporary reduction in retail channel inventory which also contributed to a decline in Pediatric sales.

Ross expects Pediatric Nutritional sales to return to more normalized growth in the coming quarters.

In Adult Nutritionals, incremental sales from EAS, which we acquired November of last year, included growth of more than 25%.

So for the full-year '05, factoring in recent performance of the pediatric business, Ross still expects to deliver high single-digit sales growth.

In Abbott Spine, which was formally known as Spinal Concepts, sales grew more than 50% in the quarter, driven by continued success of Pathfinder and incremental sales from the SpineX acquisition.

We anticipate similar sales growth in the second quarter.

So in summary, our medical products group remains focused on delivering consistent, reliable sales growth while steadily advancing some key major research and development programs in Abbott Diabetes Care, Abbott Vascular business, and our overall Global Diagnostic business where we expect to launch more than 100 new tests and assays this year, which follows the 80 that we launched last year.

With that, we will now open the call for questions.

And as a matter of professional courtesy as we always do, we'd ask that you limit your questions to one topic.

Thank you.

So we will open it up, operator

Thank you. [OPERATOR INSTRUCTIONS] Our first question comes from Rick Wise.

You may ask your question and please state your company name.

Rick Wise, Bear Stearns.

Good morning, everybody.

I guess I will focus on maybe TAP.

The -- it seems like you're -- you're feeling marginally better about TAP.

TAP seems to be turning around, if that's the right phrase.

A couple of questions related to it.

One, how sustainable do you think this is?

Number two, you seem to be articulating a -- given the 425, 450 estimate for the year for, I think, for net income, if I heard you correctly, a -- a sort of acceleration as we go through the year.

Can you help us understand that?

And is -- is fabusastat part of that turnaround and what's dialed in or not to those numbers?

Thank you.

Yes, Rick, this is Tom.

I will take that one.

Just to reiterate a couple of points.

When you look at the first quarter TAP was right on our expectations and, in fact, the revenue side was right on as well as the income side.

So it is steady as she goes there.

And, in fact, as John talked about and I alluded to, you are seeing some really good things happening with Prevacid in terms of market share.

And the market itself is actually starting to see some growth again and, as a lot of you know, some of the issues with TAP last year revolved around the fact that the market wasn't growing quite as robustly as it has been in prior years.

So, first quarter is right on track.

When you look at '05 going forward, we see -- we see sequential growth every quarter.

You should see income in the second quarter of around $100 million.

That would be our share, which would still be a decline from last year, but that, again, would be on expectations and, as you all know, TAP had some pretty tough quarters in the second half last year and you're going to see pretty substantial growth in the second half as a result.

So we are feeling about as good -- very good about TAP.

We haven't felt this good about it in quite a while and I think you are seeing some nice momentum there.

And we are pretty confident that this number, the 425 to 450, is very achievable.

Yes, Rick, I would ask on there, your question on fabusastat, I think that is good question.

Overall TAP's expectations are very modest.

That's the way they planned it for sales this year.

Their growth outlook for the product overall, as you know, is very good.

We expect, or I should say TAP expects sales to exceed $500 million peak.

And the reasons are pretty straightforward there.

This is -- this is, obviously, a very good drug based on the data that we have seen.

As you recall, the phase III data that we presented at ACR demonstrated that -- and that was the largest gout study, by the way, that was ever done, over 700 patients, that it was three times as effective as Allopurinol.

And this is a market, as we've talked about before, where there has been no promotion in 20 years and no innovation in something like 40.

So the results have been very good on the data side.

We think that TAP can come in there and, with the promotional efforts that they will put behind it, grow this product modestly this year.

But, very strongly in the outer years and so that is the way they plan for it this year.

Just to make sure I understand.

Can you quantify the incremental assumption for this year?

Is it like 25 million kind of range?

Is it that big or small or large?

We typically, at Abbott and TAP, plan pretty conservatively on these things.

So I would suggest its less than 25.

Okay.

And last, just -- Asoprisnil, I think, is the next drug in the TAP pipeline.

Any update there?

No, things continue to progress on that side.

They are moving along in phase III.

And right now the expectation is that there will be a filing by the end of this year or early in '06.

Thank you very much.

Okay.

Thank you.

Our next question comes from Mike Weinstein.

You may ask your question and please state your company name.

Thank you, it is J.P. Morgan.

John, I just want to make sure I heard you correctly on Simdax.

Did you think there was a chance we could actually see survived data by the end of this year?

It is a possibility.

We are looking at data later this year.

The most likely venue is probably going to be AHA.

There are a couple other specialty conferences where we could present data as well.

So it's possible.

The AHA we should have revived II.

But I thought survive was -- I thought the primary end point of survive was six-month all cause mortality.

So, that means you guys would say be near -- soon will be completing the enrollment?

Yes, we should be close and if not done by then.

I think there was some confusion on a note written recently that we might present some data at ACC.

Just to clarify that, the studies were not even unblinded at the time of ACC, just to make sure everyone is clear on that.

There was never any expectation that we were going to have data at ACC, just to clarify that point.

Not you.

There was another analyst.

Okay, thanks.

So, we have been fully enrolled on that survive trial now for maybe the last couple of months.

Just to clarify that.

Then if I could switch gears just quickly to Biaxin.

On -- on that sale, do you guys have thoughts on when we might have a hearing on the preliminary injunction motion?

Well, you know, that is certainly a possibility.

We have been asked about our legal strategy there and I'd say that we are going to vigorously defend our new and existing IP.

There are a lot of different possibilities.

A preliminary injunction is certainly an opportunity that would be available to a company.

So, that's an astute question.

But there is no -- nothing specific at this point that we are willing to discuss on that other than we remain very confident that the -- the PK patent and the existing patents that we have will be able to defend Xcel(ph).

If a generic were to attempt to launch at risk, we think they are betting their company and it would be a very high-stakes gamble.

We will see what happens there.

We will keep you posted as we can on different legal events, but right now we don't have any timing to give you.

The PK patent, which issued the 407 patent, looks like you submitted that -- submitted a motion late last week to include that in the -- in the suit against the three players coming with XCEL.

Do you expect to hear back on that motion later this week, do you know?

No, we have not yet, and I would say that in general because there are a couple of different players involved here.

We are in the process of asserting that new PK patent to the existing litigation where we have already sued these couple generics for infringement on the existing patents around XCEL -- that surround XCEL.

We are in the process now of asserting that new PK patent.

Our next question comes from Glenn Reicin.

You may ask your question and please state your company name.

Glenn Reicin, Morgan Stanley.

Topic is pipeline.

Can you give us your best estimate on approval timelines for Vicodin-CR?

And then I was a little bit surprised that you haven't started the phase III trials yet.

And then on ZoMaxx, can you give us your best guess when we are going to see an international launch?

Sure, let me start with the last one first.

ZoMaxx I, as I mention my comments, we are tracking right on plan in terms of enrolling patients in the ZoMaxx I ex-U.S. 400 patient trial.

We have over 150 patients now enrolled.

We should be fully enrolled by the end of the second quarter or shortly thereafter and so that would put us on track to be launched outside the U.S. in 2006.

And as I mentioned in my comments, ZoMaxx II, obviously, just getting going.

But clearly we are optimistic about the outlook there to get started and get the first patient enrolled here shortly.

And I would put us on a timeline to have that approved, hopefully, if things go well and launched in the U.S. by the end of '07.

Perhaps, early '08, but our expectation right now is by the end of 2007.

With regard so Vicodin-CR, we are looking at a filing timeline probably in the 2007 time frame, and that's really a function of design around the phase III clinical trial program which we have been working and in discussions with the FDA.

Just got some good, positive feedback from them about that trial design, and so we are going to beginning phase III trials in the second half of this year, as I mentioned before.

And that's obviously an interesting compound for the development of pain on a brand that is well known and trusted and has been around for decades.

And to be able to have a more convenient dosing form of a trusted brand like that should offer a nice opportunity that hasn't gotten a lot of visibility so far.

Sure.

Let me just push you on a couple of things.

When you are talking about ZoMaxx and an the end of '07 approval.

Are you assuming a fourth quarter '06 filing or a later filing than that?

You know what, Glenn, I am not going to be in a position right now to give you specifics on timing around filing, but obviously, our intent here is to enroll the 1670 patients in the U.S. trial of ZoMaxx II as expeditiously as possible, but at the same time, we don't want to sacrifice quality of data to do that.

So we are going to move at as quickly a pace as we can.

But at the same time not -- not -- not sacrificing any -- any data.

But I think it is premature to -- to give you specifics on filing.

I think you could probably back into your own filing estimate based on that.

Sure.

And we are talking about a late '06 U.S. launch or mid-'06 -- sorry, international launch?

Probably mid to second half '06, right now.

But we will see how it goes.

Okay.

Then just on Vicodin, how are these timelines different than what they were, maybe, nine-months ago?

They are a little past what we had thought, maybe, a year ago, but, again, it was a question of working on the design protocol with the FDA.

And so we haven't really updated our timing on this.

So maybe it is a little bit later than we thought, but we've got so many things coming through the pipeline, as you know, over next couple of years, there's certainly no rush to get more new products out and this allows us then to have a phased-in late-stage pipeline where we can get another product potentially on the market in the '08 time frame.

Right.

Thank you so much.

Okay, thanks

Thank you.

Our next question comes from Glenn Novarro.

You may ask your question and please state your company name.

Glenn Novarro with Bank of America.

Can you guys hear me okay?

We can hear you

Just a follow-up question on patents.

One, can you give us an update on the patent defense strategy on Sivo(ph)?

And then, also Biaxin outside the U.S.

You actually had a very strong quarter.

And I'm wondering if that was Japan or are you just doing better in European markets where the drug has gone generic?

And then are there any European markets this year and next year where we should worry about generic?

And then just lastly on Mobic.

I think exclusivity expires end of this month.

What's your update and timing of expected generics there.

Okay.

There is a lot there.

Let me start with the last one.

Mobic is not our product.

It is BI's product, as you know.

So, when there is a partner involved, we are respectful of commenting on their product.

So, they really would prefer that we not talk about market exclusivity, which is what the product has, and when there may or may not be an ANDA filed.

But I can tell you this, that we have agreed with them that we are both very confident there will not be, and I repeat not be a generic Mobic product on the market this year.

But that's our expectation there.

With regard to Civa Florine(ph), that's one where we have formulation patents on that product that go out to 2017 and 2018.

We will obviously vigorously defend our IP.

This is a very complex situation.

It's certainly not like your typical generic situation because it is an anesthetic product that is distributed in such a way that there are vaporizers, capital equipment at hospitals that are involved in this.

There's a unique formulation patent around this that protects the formulation and how it is stored and stabilized and delivered.

And also a container that is specially designed and formulated.

I don't know if you remember this, but some people don't recall back in the late '90s, we actually had a limited recall on Civa Florine because it degradated in the presence of what are called Louis Acids.

So we worked with the FDA to come up with a unique formulation in the actual formulation of the drug, which includes a certain amount of water, as well a container and how it is stored.

And that has all been done to ensure the stability and safety of the product.

So, any company that would try to come to market, I think would have a lot of challenges in terms of providing a stable product without violating our patents, and, also, the fact that worldwide we own about 150,000 vaporizers.

Those are our products.

We service and maintain those products in the hospitals and that's obviously part of the equation.

It is not an easy product to manufacture.

It is not like a generic pill, a community-based pharmaceutical.

There are complex manufacturing processes involved in how the drug is handled and stored.

It is a very aggressive chemical that can breakdown to hydrofluoric acid if not handled properly.

This is anything but your typical generic situation and we will defend our patents vigorously.

John, is there any specific court date that we should be focused on.

Some people know that we have had an ongoing trial with Baxter, our neighbor down the street.

And that trial is concluded.

We are waiting for the judge's verdict on that trial in the U.S.

I imagine that -- I am not a lawyer, but I imagine whoever loses that trial will appeal.

So there is probably not a near-term end to that decision and that trial.

The other complicating factor on this particular one for investors is that there is a alternative dispute resolution with Baxter that prohibits them from even attempting to enter the market till the end of this year, the second half of -- of December of this year.

Should they even win, they would be prohibited from entering the U.S. market until what is essentially early '06.

But we -- we expect to win that trial.

We are waiting for the judge's verdict.

And whichever party wins or loses I imagine there will be appeal process which could take some time as well.

That's really the only one that I am aware of right now.

And then just on Biaxin XL, International sales were strong, yet you are facing generics in various countries outside the U.S.

Can you give us some color behind what made the International sales strong?

Was it Japan, where I know you have patent protection for many more years?

And then how are the drugs doing -- how is Biaxin XL doing in countries where there's already generics there?

And then are there any countries going generic for Biaxin XL any time soon?

Okay, thanks for that question.

We have seen some select countries last year.

I think most people understand that, that there were some countries where we saw some generic competition.

The UK and Germany in particular.

That's been factored into our guidance.

The number that we gave, around $1 billion in worldwide sales, includes that impact from certain European countries.

In other major European countries like Italy and France, the composition of matter patent extends of 2008, 2010, something of that range.

And Italy and France in particular account for about 20% of our ex-U.S. sales.

And as you mentioned, Japan is also a large market that is about 25% of our ex-U.S. sales.

And generics there, as you probably know, are not a significant part of a Japanese market just because of the dynamics, physician usage, comfort level with -- with patients and so forth.

So -- and pricing that's set by the government that scales down over time, et cetera, et cetera.

That is a very unique situation.

I would say that there is no big country that I am aware of right now coming up outside the U.S.

You saw those two countries last year, that already happened.

And most other countries are modest sales where they are well less than 50 and in most countries less than 25.

Okay, great, thank you.

You are welcome

Our next question comes from Katherine Martinelli.

You may ask your question and please state your company name.

Thank you.

Merrill Lynch.

Wanted to ask a question about the gross margins in the quarter.

Specifically, if we are right just doing some back of the envelope analysis on the gross margins for the BI products, assuming they were somewhere in the mid teens in the quarter, down from about 25% or so year ago, as you are getting the full impact of some of those products that have gone from co-pro to distribution.

Is that ballpark, because it would suggest your Abbott margins, ex BI, were flattish to up modestly in the quarter?

Are we in the right range?

The BI margins in the quarter -- this is Tom -- compared to the prior year were down because of -- for those products in and of themselves were down because of the Flomax change.

And clearly our gross margin overall was impacted, as we talked about in the fourth quarter call and -- and during -- during my remarks today, just by the pure strength of Mobic in the quarter, that definitely skewed the margin.

The way I would look at margin in the -- in the first quarter is that putting aside the -- the surprising strength of Mobic and the incremental impact that had versus our planning assumptions and the -- the disappointing Ross sales which is a fairly decent margined product segment, we are basically right on line with our gross margin assumptions overall.

And we are projecting for the full-year '05 to be very much on the number we talked about on the fourth-quarter conference call of around 64%, including the BI impact.

And really not that much has changed relative to our assumptions.

And hopefully that answers your question, Katherine.

Okay.

And then if we just switch over to the diagnostics, in particular, the Diabetes Care.

It looks like TheraSense use or Diabetes Care excluding TheraSense, was up about 8%.

Is that a fair way to look at the business or are you defocusing on some of the other products and really focusing more on TheraSense, where we may be seeing better than expected growth than when we went into the deal?

I think you are seeing better than expected growth on both sides of that and that is the thing that is very encouraging about that business.

We's obviously seen synergies there between the TheraSense and MediSense line, which is one of the rationales for doing the deal.

In particular, MediSense has a strong global infrastructure.

TheraSense products, prior to the acquisition, were not promoted outside the U.S. and they really had no presence.

We have been able to leverage that presence outside the U.S. to -- to drag what is essentially a two-tiered strategy of premium products with TheraSense and more economically reasonable products with the MediSense line.

Kind of a gold-silver package, if you will.

So, Abbott Diabetes Care, as I mentioned, we've seen a two point share improvement year-over-year in a market where most of the major competitors have lost share or stayed flat.

And I think that's a -- a testament to the quality of their products, the speed, the size, the small sample size, they continue to innovate, and they are just doing a terrific job, not only on the top-line but the bottom-line, driving considerable margin improvement as we go forward beyond what we had expected in our deal model.

Okay, that's helpful.

Then just lastly, John, I think you mentioned 330 ARCHITECT System placements in the first quarter.

Can you give us a sense how that compared to the fourth quarter?

It is definitely up from the fourth quarter and I believe the fourth quarter was less than 200.

Great, thank you.

Okay.

Thanks

Thank you.

Our next question comes from Larry Keusch.

You may ask your question and please state your company name.

It is Goldman Sachs.

Good morning, everybody.

Good morning.

John, two questions for you.

Do you have any thoughts -- I think if I'm -- if our numbers are right, HUMIRA was actually sequentially down in the U.S. in the first quarter, kind of $6 million, something like that.

So just any -- any thoughts around what that might reflect.

And then secondly, I think you guys were -- were looking to start your clinical trial for the Wallace dynamic stabilization device in the first half of '05.

And just wanted to see if you had any updates on that.

Yes, I will start with the Wallace, the dynamic stabilization device that is part of the Abbott Spine.

We are still on track for that.

We will give you an update here shortly on that, but my expectation would be that we will begin enrolling patients in the second quarter in that trial.

So we will have something to announce on that shortly.

And as far as HUMIRA in the U.S. goes, it was -- you are right, it was sequentially a little bit slower than -- we had a really robust fourth quarter.

What I would tell you there is, obviously, we managed the product globally, as we have said.

And we are very pleased with the global sales number.

The fundamentals of that business remain very strong.

The outlook is very strong.

We are doing some things there to drive higher growth and penetration, particularly in the early RA segment which is, I think, the only thing where, frankly, we are a little disappointed, is the fact that our assumptions on penetration of early RA were probably a little bit ahead of where the market is actually come out in terms of ability to penetrate the early R.A. patient population.

But, again, with the data that we have shown and with the early RA indication coming in the second half of the year, that is still a huge untapped market opportunity for us.

And gives us a tremendous opportunity to continue to grow the product going forward.

There are some other promotional things that we are doing that I mentioned, call-to-action campaign.

You've probably seen the direct-to-consumer TV ads that are much more direct, about the seriousness of treating RA and to go on and get treated right away, appropriately.

I think the fundamentals of this market are still very, very good.

The growth is good.

The RA market growth is strong double-digits.

And we will see what happens going forward, but we are optimistic about the full-year and again we managed the product globally with over 60 countries now launched in.

I think we beat most people's international numbers if we're -- based on what we could tell.

And with these new indications coming and psoriatic arthritis and early RA in the back half of the year and the untapped potential in those markets as well as our psoriasis data, Crohn's's data and ankylosing Spondylitis.

As I mentioned in my remarks, this could clearly be a multibillion dollar product in the not too distant future.

Still very optimistic about the drug.

John, just given AmGen's kind of fourth-quarter prefilled syringe and once-a-week dosing, do you think you are seeing any increased competitiveness thrust from them?

Well, the -- the 50 milligram syringe from our competitor certainly had an impact on distorting the new RX share.

And you saw that happen in the fourth quarter.

And you are seeing us work through that as -- on an overall trend basis.

Week to week our share has been picking back up as we work through that -- that distorting impact on scripts going forward.

So, that -- that did have some impact on, particularly, the prescribing data that you probably look at as well as we look at.

And we've seen those improvements to the point where it is getting up -- back up to where it used to be and we expect growth from here.

Okay, great, thanks very much.

You are welcome

Thank you.

Our next question comes from Sara Michelmore.

You may ask your question and please state your company name.

Sure, it's Sara Michelmore, SG Cowen.

Just a question on the Diagnostics business, if I may.

John, what was the growth trend in the Diagnostics Group if you take out the diabetes and then the molecular and the Point-of-Care business?

A quick calculation from me it looks like it was flattish and maybe even down on the quarter.

So -- ?

No, we actually have up about low single-digits.

Okay.

With a base amino chemistry business.

And what is that growth -- ?

And that's in line with our expectations.

Pardon?

What is the difference in growth U.S. versus OUS. for that business.

U.S. we talked about the first quarter still being another quarter where we were going to see negative growth as expected.

Until we get more of these products launched into the marketplace, more assays, more tests and continue to drive that expansion, the comp cer(ph) are going to improve as we go throughout the year.

So the U.S. was down slightly.

Better performance obviously.

Ex-U.S., we're up in the mid single to high single-digit range.

Okay.

And then when you talk about these ARCHITECT System placements, what -- what -- where have the majority of those placements gone, U.S. or OUS?

It's -- it's split between both.

We are winning more than 50% of the ARCHITECT placement bake-offs, if you will, in the marketplace.

And so we've had very good growth, ex--U.S., which continues, and the U.S. has been picking up.

So net-net probably a little stronger ex--USA, but the U.S. is obviously doing much better and we expect that it will continue as we go throughout the year.

And then I guess my last question.

Any data we should be paying attention to at the AACR this week or ASCO -- upcoming ASCO meeting for any of the pipeline products you guys have in oncology?

Well, at ASCO we will probably have similar 10 milligram data that you may have seen at the ASCO Symposium recently, earlier in the quarter, where we showed just a slice of the 10 milligram data, which again demonstrated statistically significant delay in disease progression and some pretty profound impact on reduction in bone pain.

So our hope is that we will have something similar to present at the major ASCO meeting.

And that's Xinlay.

How about ABT510 or ABT751?

We may have some phase II data on those products.

We don't have anything to give you right now, but that's our hope.

Great, thanks, John.

You are welcome

Our next question comes from Matthew Dodds.

You may ask your question and please state your company name.

Thank you, it's Smith Barney.

A couple of questions on Xinlay, John.

First, for the filing in December, was that a phase III or is that a Meta-Analysis?

Can you just clarify that?

And then second, on the 244 trial, do you still expect it by year-end and is there any change in the event rate forecast for that trial?

Okay.

Yes, I think most people are aware that we filed with Meta-Analysis for Xinlay.

We did that in the fourth quarter of last year.

And in the first quarter of this year, the filing was accepted as filed.

We are hopeful that the product will go to an ODAC advisory committee meeting, as most oncology drugs that are on a track, a more positive track, generally do.

And that's our expectation.

So hopefully -- hopefully we will be in front of ODAC sometime this year.

It is unlikely that it will be at the May ODAC meeting, which is fine because that is coming up here very shortly.

But there is another one in September.

As far as 244 goes, it continues to progress on track.

We are continuing to enroll patients and we expect to have the required number of patient events by year-end.

All right, thank you, John.

Thank you.

Thank you.

Our next question comes from LeAnn Zoe.

You may ask your question and please state your company name.

Good morning.

This is Neil Sweig at Carrus.

Hi, Neil.

My questions relate to overseas HUMIRA.

Besides Japan, are there any major markets remaining for HUMIRA to enter, question one?

Question two, you are showing that you intend to file in the fourth quarter of this year in Japan for RA.

If you meet that schedule, is it conceivable that -- that the Japanese regulators would approve the RA claim in the second half of '06?

How have they been looking at these types of products?

So -- it kind of relates just to the overseas circumstances.

And then the third and last piece.

Which major markets were most recently entered overseas for HUMIRA?

Thank you so much.

Okay.

Thanks.

In terms of Japan, I think there is certainly a possibility that, based on our expected filing timeline, that we could have HUMIRA in Japan sometime in the second half of 2006.

And as I mentioned in my remarks, Canada was a market where we recently launched.

Australia, Italy, Belgium is another one, and those are all markets that -- that have done well.

So there are certainly some other countries that are coming up.

I just can't think of them off the top of my head.

But, there's plenty -- plenty of other countries we'll be launching HUMIRA in the next couple of years.

So I think that's -- Neil, if that satisfies you, I think we will wrap it up.

Okay.

Well, we appreciate you all attending the conference call today.

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The audio replay will be available until 5 p.m. on Tuesday, April 19th.

And thank you again for all for joining us.

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