美國雅培 (ABT) 2006 Q4 法說會逐字稿

Good morning, and thank you are for standing by.

Welcome to Abbott's fourth quarter 2006 earnings conference call.

All participants will be able to listen only until the question-and-answer portion of this call.

During the question-and-answer session, you will be able to ask your question by pressing the star one keys on your touchtone phone.

Should you become disconnected throughout this conference call, please dial 1-312-470-7334 and reference the Abbott call.

This call is being recorded by Abbott, with the exception of any participants' question-and-answer session is material copyrighted by Abbott.

It cannot be recorded or rebroadcast without Abbott's expressed written permission.

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

Good morning, and thanks for joining us.

Also on today's call, will be Miles White, Chairman of the Board and Chief Executive Officer;

Tom Freyman, our Executive Vice President Finance and Chief Financial Officer; and Rick Gonzalez, President and Chief Operating Officer.

Miles will make some opening remarks and Tom will review the fourth quarter and year-end financial results and provide more financial detail regarding our outlook for 2007.

Rick will discuss the business operating highlights.

Following our comments we'll take any questions you may have.

Some statements made today may be forward-looking for 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 item 1A, Risk Factors in exhibit 99.1 to our annual report on the Securities and Exchange Commission Form 10K for the year ended December 31, 2005 and in item 1A Risk Factors to our quarterly report on Securities and Exchange Commission Form 10Q for the quarter ended March 31, 2006 and are incorporated by reference.

We undertake no obligation to release publicly any revisions of 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 Abbott's ongoing business performance.

These non-GAAP financial measures are reconciled with the comparable GAAP financial measure in our earnings news release and regulatory filings from today which will be available on our web site at www.abbott.com.

And with that I'll turn the call over to Miles.

Miles?

Okay.

Thanks, John.

Good morning to all of you.

This morning we announced 2006 results for earnings per share sales growth and cash flow that were ahead of our previous expectations.

We reported fourth quarter earnings per share excluding specified items at $0.75 at the high end of our guidance range of $0.73 to $0.75.

Our sales growth was 14.5% adjusted for the Boehringer Ingelheim deal and we reported record operating cash flow of approximately $5.3 billion for full year 2006.

In addition, today, we announced our guidance for 2007 that includes double digit growth in both sales and earnings per share excluding specified items.

The guidance looks to me to be in line perhaps just a [titch] ahead of where the consensus expectations are based on the latest first call mean that I've seen.

EPS growth in 2007 will accelerate as we progress through the year, particularly the second half of the year, and Tom will explain that in a little bit, as the vascular business ramps up in profitability and we begin to realize the synergies from the Kos acquisition.

I'm going to walk you through the progression of the quarters in a moment, which may look somewhat different than previous years given the significant and positive changes that we've made to our business over the last year.

And a break from our past practice, Tom will give you or guidance in each quarter to help explain how that's going to look.

Rick will cover the business performance highlights for 2006 and the outlook for these businesses in 2007.

I'm going to keep my remarks brief since we just spoke with you last week.

Let me start with my perspective on 2006.

Without question, it was a highly productive and successful year for Abbott.

In fact it was one of the most satisfying years for me personally since I became CEO eight years ago.

We accomplished all of our major strategic, operational and financial goals positioning Abbott for greater success in the coming years.

Our stepped up strategic activity this past year was firm and immediate yet it was grounded in our long-term strategic direction and our fundamental Company values.

These strategic actions have enriched Abbott's mix of cash flows, strengthened the diversity of our earnings growth drivers and boosted our corporate cash position, adding short and long-term firepower to our financial strength.

Our work is never finished as I indicated last week, but I'm particularly pleased with the significant progress we made in 2006 and early here in 2007.

Abbott today looks very different than it did a decade ago and yet in many ways it's very similar.

Today our investment identity remains that of a broad-based consistent performer with the earnings power and financial strength to deliver double digit EPS growth while also returning cash to shareholders in the form of steady dividend increases and share buybacks.

In 2006, we declared our 332nd consecutive quarterly dividend giving our shareholders more than 30 years of consecutive dividend increases.

And late last year,we announced a new $2.5 billion share repurchase program.

Collectively, the transformational changes that we've made over the course of the last seven to eight years have significantly strengthened Abbott's core investment identity as a balanced, broad-based healthcare company built for sustainable double digit EPS performance.

As I mentioned last week, that core investment identity hasn't changed.

What we have done is reshape and reposition Abbott for higher growth, higher margins and potentially higher shareholder returns.

We've amassed greater depth within each of the major businesses that form our diverse framework, medical products, pharmaceuticals and nutritionals.

We've also uniquely positioned Abbott within the universe of blue chip healthcare investments with two of the most powerful growth drivers in the industry fueling the performances of two of our separate diversified businesses.

I'm talking of course about the enormous potential for HUMIRA, our flagship biologic treatment for auto-immune diseases, as well as XIENCE V, our next generation drug eluding stent system that launched in Europe last October.

We remain right on track with our development timelines for both of these blockbuster programs and we expect each to contribute significantly to our sales and earnings growth over Abbott's five-year long range financial plan.

Both HUMIRA and XIENCE are products we aggressively targeted through strategic actions.

HUMIRA, through our Knoll acquisition in 2001 and XIENCE through last year's acquisition of Guidant's vascular business.

That agreement not only brought us XIENCE, it allowed Abbott vascular to leapfrog into the number three position in the nearly $10 billion global vascular care market with the potential to become number one in drug eluding stents.

Should that happen, and at this point we see no reason why it shouldn't, XIENCE will become Abbott's largest medical device in our nearly 120 year history.

Likewise, HUMIRA has already achieved premier status as Abbott's best selling global brand ever with full year 2006 sales surpassing $2 billion.

Our development strategy and commercial execution on HUMIRA has been nothing short of outstanding and there's more to come.

I'm confident that HUMIRA will remain a strong performer as we advance major new disease treatments for patients through our late stage development pipeline.

To support the strong global demand for HUMIRA, three years ago, we made a strategic decision to begin investing in a new 310,000 square foot biotechnology center in Puerto Rico where Abbott has almost 40 years of successful manufacturing experience.

I'm pleased to say that this new state-of-the-art biotechnology facility will be operational soon, dramatically expanding the manufacturing capacity that we currently have available in our Worcester plant.

We further strengthened our global pharmaceuticals business in 2006 with the December acquisition of Kos Pharmaceuticals.

Kos significantly expands our on market presence in the $20 billion cholesterol.market and strengthens our late-stage and mid-stage pipeline.

We also took strategic actions last year that were far less visible than Kos and Guidant Vascular but equally important to our long-term growth and investment identity.

For example, we strengthened our global nutritionals business with the creation of Abbott Nutritional International.

ANI, as we call it, is a new business carved out of our legacy Abbott International operating division, which once served as the international marketing arm for our pharmaceuticals, nutritionals and former hospital products businesses prior to the spin-off of Hospira in 2004.

Today, the ANI management team is focused exclusively on maximizing the potential of international nutritionals, particularly the fastest growing global market such as China, Southeast Asia and Latin America.

Sales growth in these regions top 25% combined in the quarter.

To support this rapid growth, we began construction of a new manufacturing facility in Singapore that will begin production in 2009.

This new plant will help meet the growing consumer demand in these emerging Asian markets for both adult and infant nutritional products.

Today, Abbott is without question a stronger company than it was several years ago.

We've taken deliberate actions to build and shape Abbott for higher growth, accelerating cash flow generation and consistent earnings performance.

Our body of work to date has produced a richer mix of businesses that compete in attractive global markets where medical innovation wins and where market leadership ensures a commensurate level of financial return.

Going forward, we will continue to align the significant financial, operational and scientific resources of Abbott behind the most promising technologies in the most promising healthcare businesses and in the most promising growth markets around the world.

That's what our investors expect from us and that's what we intend to deliver.

The market rewarded Abbott's shareholders last year for the accomplishments of our employees and results they produced.

We appreciate the support as well as your continued confidence in our long-term strategic direction and we share your optimism for Abbott's future.

With that, I'll turn the call over to Tom to review our 2006 financial results and our outlook for 2007.

Thanks, Miles.

As Miles indicated, for the fourth quarter we reported diluted earnings per share excluding specified items of $0.75, the high end of our previous guidance range of $0.73 to $0.75.

Sales this quarter increased 14.5%, when adjusted for the B.I. agreement and including a favorable 1.5% effective exchange rate.

Results were broad based with each of our major businesses, pharmaceutical, medical devices and nutritionals contributing strong growth.

Accounting for the B.I. effect, reported sales were $6.2 billion, up 2.8%.

The adjusted gross margin ratio on the quarter was 59.3%, up nearly 500 basis points from the prior year and up sequentially from the third quarter as forecasted.

The year-over-year margin expansion reflects the positive effect of the amended B.I. agreement.

We continue to invest in the business as well as R&D and SG&A showed strong increases in the quarter and for the full year.

As a remainder, the reported levels in each category included the impact of the Guidant's acquisition and stock compensation expense.

Income from the TAP joint venture this quarter of $119 million was in line with our expectations.

Our ongoing effective tax rate in the quarter was 22.8%, which was favorably impacted by the recently renewed U.S.R.D. tax credit.

Excluding the tax credit, the rate was 23.8%, consistent with our guidance last quarter.

Now let's turn to the outlook for 2007.

As you know, today is the first time we're providing guidance for the year.

As Miles indicated, we're providing guidance for 2007 earnings per share excluding specified items of $2,77 to $2.83, midpoint of which is somewhat above the current first call means.

Forecast of specified items are detailed in our release.

As we indicated last week that the divestiture of the Core Laboratory Diagnostics Business was neutral to our 2007 earnings per share before specified items, our EPS guidance includes the net effects of the transaction.

By net effect, I'm referring to the combination of income from the operations of the Core Laboratory Diagnostics Business while we own it plus the income effect of the redeployment of proceeds from the sale for the balance of the year.

Now that the agreement has been signed, accounting rules require us to report results of the operations of this business in the discontinued operations line of the P&L for all of 2007 even if the transaction is it not yet closed.

Therefore, the P&L line item guidance for 2007 I'm going to provide today will be based on continuing operations, that is with the divested business out of the line items in both 2006 and 2007.

Though, for the full year 2007, we're forecasting strong sales growth of 13% to 15% including the impact of the Kos acquisition.

Expect a full year gross margin ratio in the low 60s, reflecting approximately 300 basis points of improvement from the divestiture and continued progress in expanding gross margin from mix and cost reduction.

We're forecasting continuing investment in programs to drive future growth with R&D as a percentage of sales expected to be roughly 10%.

Regarding SG&A, which is a percentage of sales with Kos 29% last year when adjusted for the divestiture, we're forecasting a modest reduction from this level for the full year 2007.

Though you'll see some leverage in the SG&A line for the full year, particularly in the second half when the Kos synergies are realized.

In the first quarter, SG&A as a percent of sales is expected to be somewhat above the full year 2007 average.

Regarding other aspects of our 2007 outlook, we're forecasting income from the TAP joint venture of $425 to $450 million.

Since the full year level of net interest expense is dependent upon the timing of close and the ultimate use of proceeds from the divestiture, we'll provide our full year outlook after the deal closes for this line item.

I can say at this point that we're forecasting net interest expense in the first quarter of around $125 million.

As we discussed last year, we're projecting a sustainable reduction in the full year effective tax rate for 2007 based on changes in the mix of income across the various tax jurisdictions.

Tax rate for 2007 is expected to be around 22.5%.

Finally, as Miles mentioned, there were several transformational events and product developments that occurred last year that have fundamentally change our business for the better beginning in 2007 including Guidant, Kos and the Diagnostic's divestiture.

Since the business looks very different than a year ago, I'd like to take a moment to provide the outlook for sales, gross margin ratio and earnings per share for each of the four quarters.

This is more detail than we typically provide at this stage of the year but we hope this will help investors more effectively model our business this year when EPS growth accelerates as we progress through the year.

From a sales perspective, we expect strong and fairly consistent growth each quarter in line with our full year growth expectation.

Regarding EPS, the Guidant Vascular and Kos Pharmaceuticals acquisitions are expected to contribute positively to earnings in the second half of the year based on product momentum and the timing of cost synergies.

On the other hand, in 2006, we're in the last stages of significant commercial activity for two U.S. products, Biaxin XL and and our core promotion of Synagis.

As a result, there will be a significant reduction in the contribution from these products starting in 2007.

This creates an unusual earnings comparison to the prior year particularly in the first quarter where sales of these products were historically strong.

So, also for the first time, we're providing guidance for first quarter earnings per share excluding specified items of $0.51 to $0.53.

Includes an estimated gross margin ratio of a little more than 60%, which includes the benefit from the divestiture.

We expect the gross margin ratio to steadily improve throughout the year into the low 60s.

For the remainder of the year, we expect EPS growth over 2006, excluding specified items, to accelerate as we begin to realize the cost synergies from the Kos acquisition and profitability accelerates in our vascular, including the impact of XIENCE.

We're forecasting earnings per share, excluding specified items, of $0.67 to $0.69 in the second quarter, $0.64 to $0.66 in the third quarter and $0.94 to $0.96 in the fourth quarter.

As I mentioned earlier this translates into our full year guidance of $2.77 to $2.83 per share. the mid-point of this range represents growth of approximately 11% over the full year 2006 base of $2.53 which was $0.06 above the mid-point of the 2006 guidance range we provided following the Guidant Vascular acquisition last April.

To summarize our EPS guidance, our mix of businesses have changed for the better.

We've more than replaced products such as Synegis and Biaxin XL in the U.S. with products, businesses and cost structures that will benefit us well beyond 2007, including XIANCE, Kos and a lower tax rate.

With that, let's turn to the business operating highlights.

Rick?

Thank you, Tom.

Good morning, everyone.

I couldn't agree more with Miles and Tom. 2006 was a truly transformational year for Abbott.

We strengthened the depth of each of our major businesses and delivered on our key performance and strategic business goals.

We further shaped Abbott's business portfolio by acquiring Guidant and Kos last year.

We successfully integrated Guidant and we're on schedule integrating Kos.

We launched XIENCE V internationally, arguably the best drug eluding stent on the market today.

We drove strong performance with our flagship biologic, HUMIRA, receiving approval for its third disease indication and filing for its fourth.

We continue to grow Kaletra market share launching the more convenient Kaletra tablets outside the U.S.

We surpassed $1 billion in TriCor sales for the first time while expanding our on-market cardio-vascular presence and pipeline with Kos and AstraZeneca.

We launched the FreeStyle Freedom blood glucose meter which offers the fastest test time on the market today and we continue to advance several new technologies and treatment through our research and development pipeline.

We accomplished a lot and we saw the results in our 2006 performance.

This morning, I'll review our major business segments, medical products, nutritionals and pharmaceuticals.

Let me start with our medical products business.

In diabetes care, global sales increased 6.5% worldwide for the year reflecting more modest growth in the overall blood glucose monitoring market.

Our Freestyle and Precision products continue to gain share globally.

In our diabetes pipeline, our Navigator continuous glucose monitoring system remains under active regulatory review.

We hope to receive FDA approval in the coming months.

Beyond the Navigator system, we're developing a fully integrated blood glucose monitoring system that combines a meter, test strips and lancing capabilities into one device enabling simple point and click testing.

In addition to these innovations, we continue to refresh and update our Freestyle and Precision meter platforms and look forward to a number of new product launches this year.

For 2007, we anticipate a return to double digit growth for Abbott diabetes care.

In our molecular diagnostics business, sales growth was nearly 30% for the quarter and the year, growing three times as fast as the total molecular market.

This quarter, we anticipate U.S. regulatory approval for the m2000 system with HIV viral load.

This year we also anticipate receiving approval in Europe for our real-time PCR hepatitis B assay, expanding the m2000 systems' growing menu of tests which currently includes assays for HIV, hepatitis C, chlamydia and gonorrhea.

This will now provide laboratories in Europe with a complete menu of infectious disease assays.

For 2007, we anticipate molecular sales to again increase strong double digits.

Abbott molecular is now approaching $200 million in sales and continuing to grow at a double digit pace.

It will become a more significant contributor to our sales and earnings growth over Abbott's long-range plan.

Abbott Spine also had a good quarter with sales growth of more than 20%.

We continue to study dynamic stabilization and motion preserving technologies with a number of pipeline programs in development, including the Wallis system.

Finally, in our emerging vascular business.

We ended of the year with more than $1 billion in sales including the partial year contribution from Guidant.

The integration of our vascular business is now essentially complete.

Vascular care is a $9 billion market opportunity across coronary, endo-vascular and vessel closure, where we already hold strong positions of either number one or number two in several of these segments.

Our long-term goal is overall leadership in this market and we're on our way to reaching that goal with the international launch of XIENCE.

We also have a broad portfolio of vascular products including our market leading VISION metallic stent, two carotid stent platforms and a leading vessel closure product in StarClose.

Let me start with our coronary business where we launched XIENCE in Europe and Asia beginning in mid-October of last year.

Physician feedback has been outstanding across the board.

Interventional cardiologists continue to be impressed with the deliverability of the XIANCE platform.

Data from our XUS Spirit 2 trial has been very well received where XIENCE demonstrates its superiority to Boston Scientific [INAUDIBLE].

As a result, the international launch of XIENCE continues to proceed well and remains on plan.

We're capturing a majority of new accounts as they become available through the hospital tendering process.

In markets where we initially launched XIENCE last October, we've gained about 5 percentage points of market share per month.

In several countries we've already captured share in excess of 20%.

We're right on tack to exit 2007 with overall market share expectations for XIENCE alone in the mid to high 20s as we communicated and expected.

We're also in the unique position to participate in both drug eluding and bare middle stent segments.

Our bare middle stent share, which is led by VISION, holds more than 50% market share globally and more than 60% in the United States.

Beginning in the first quarter, we will break out more components of our vascular business.

In the meantime, to give you a sense of the early progress of the XIENCE international launch, I can tell you that our total drug eluding stent franchise sales, which include XIENCE as well as other DES product revenues, were between $35 and $40 million in the fourth quarter.

Remember, this fourth quarter number only includes six weeks of XIENCE sales as our international business reports on a one-month lag.

So the launch in October through the end of last week our DES franchise sales are approaching $60 million, of which more than half is XIENCE.

We continue to view the drug eluding stent market as a substantial and significant growth opportunity, particularly over the next several years as we launch XIENCE in the U.S. and Japan.

We plan to present results from our more than thousand patient U.S. pivotal trial, Spirit 3, in the first half of this year.

And we remain on track to submit XIENCE for U.S. approval in the first half of 2007.

In our vascular pipeline, we're bringing forward next generation DES technologies focused on improving deliverability, particularly in longer lesions, and patients with bifurcation disease.

We also see additional data from our bioabsorbable drug eluding stent in development in the first half of this year.

In our endo-vascular business, we're the only company with two carotid stents on the market providing a choice to physicians based on their needs.

We continue to enroll patients in our long-term carotid clinical trials to obtain ad expanded indication for our carotid platforms.

In vessel closure in 2006, StarClose achieved double digit growth globally and our total vessel closure market share is 30%.

Next quarter we will launch a new version of StarClose called StarClose SE, featuring design enhancements intended to make it even easier to use.

Looking ahead to 2007, we expect continued strong momentum in our total vascular business with growth of more than 60%.

Moving to our nutritional business where global sales exceeded $1 billion in the quarter, international sales increased 20% with continued strong growth in Latin America and Asia.

Ross U.S. nutritional sales were up 3% in the quarter driven by Similac and PediaSure brands including the recent launch of NutriPals bars and shakes.

We also saw solid growth for our Ensure in the E.A.S. consumer brands this quarter.

Looking ahead to 2007, we anticipate another strong year of double digit growth internationally.

In the U.S., however, reported raw sales will be impacted by the previously announced change in our co-promotion of Synagis.

As a result, U.S. nutritional sales will be down approximately 10% for the full year.

This includes a decline in sales in the first quarter of about 25% because the seasonality of Synagis sales.

Now let me turn to our global pharmaceutical business which had an excellent year.

Our U.S. pharmaceutical business performed very well with sales growth of about 10% adjusted for BI.

HUMIRA surpassed our internal expectations exceeding $2 billion in sales globally just four years after its approval.

We also took a number of strategic steps including Kos, AstraZeneca and Enanta to expand our early, mid and late stage pipeline and to increase our R&D spending capacity.

Let me start with our immunology business and HUMIRA.

Rheumatoid arthritis which encompasses 85% of HUMIRA sales, self injectable market share remains strong.

And the approval of an expanded indication in psoriatic arthritis has helped us grow our presence in dermatology.

In 2006, we launched our third indication, Alkylosing Spondilitis, which is arthritis of the spine.

Fourth quarter worldwide HUMIRA sales were $620 million, up 40%.

With multiple indications in one product, we are well positioned to continue to gain share in this large and fast-growing biologic market for years to come.

Our next two largest indications after R.A., Crohn's and psoriasis, are each expected to surpass $500 million in peak sales.

With Crohn's launching in the coming months and psoriasis launching next year.

Our Crohn's indication has been granted six-month priority review by the FDA bades on HUMIRA's potential to effectively treat patients who have not succeeded on currently approved therapies.

We anticipate a response from the FDA in the first quarter, followed by European approval alter this year.

In psoriasis, we've already presented best in class data from one of our phase three trials.

We look forward to presenting the results from our U.S. phase three pivotal trial at the upcoming American Academy of Dermatology meeting in early February.

We're on track to submit our psoriasis indication in the coming months.

As the collection of data expands across these numerous disease states it is becoming clear that HUMIRA is a best in class anti-TNF therapy with multi-billion dollar potential. 2007, we forecast worldwide HUMIRA sales of more than $2.7 billion.

Let me now turn to our cardio-vascular franchise where TriCor prescriptions continue to outpace the market growth rate.

Full year sales exceed $1 billion, up 13%.

Fourth quarter sales of $326 million were up more than 20% sequentially from the third quarter.

Year-over-year fourth quarter sales growth was impacted by a difficult comparison to the prior year when sales were up 37%.

For 2007, we anticipate double digit growth again for TriCor.

But TriCor is only one piece of our expanding cardio-vascular portfolio.

We took a number of strategic actions last year to increase our commercial presence and late stage pipeline in the rapidly growing lipid management market.

At $20 billion, it is the largest U.S. pharmaceutical market.

Through our collaboration with AstraZeneca, we are developing the first ever statin fibrate fixed dose combination product which will target all three blood lipids, LDL, HDL and triglycerides.

This product will combine into a single pill either TriCor or our proprietary next generation, fenofibrate ABT-335 with AstraZeneca's Crestor.

We're also developing ABT-335 as a stand alone therapy and plan to submit it for FDA approval at the end of this year.

With our acquisition of Kos, we've added Niaspan to our on-market portfolio, the most effective therapy available for raising HDL with the longest record of success.

Niaspan fits very well into our product mix given the current market trends for its HDL raising therapies.

In total, Kos' product product portfolio will nearly double our dislipidemia franchise in 2007.

Kos also strengthens our pharmaceutical pipeline with late stage programs that include a next generation formulation of Niaspan as well as Simcor, a product that combines Niaspan with generic Zocor.

We look forward to launching our next generation Niaspan and filing Simcor for regulatory approval in the first half of this year.

With TriCor, Niaspan, Simcor and access to Crestor, Abbott is uniquely positioned with the only Company with assets that target all three lipid parameters.

Now let's turn to Kaletra, which maintained its market leadership position as the number one protease inhibitor in the world.

Worldwide sales last year exceed $1 billion, representing double digit growth.

With the introduction of the more convenient Kaletra tablets in Europe, we've seen as much as a two share point gain in several European countries.

Our efforts focus on differentiating Kaletra by its sustained viral suppression profile as well as its convenience and tolerability.

In 2007, we expect mid to high single digit growth for Kaletra worldwide.

Depakote sales were up double digit for the year and we expect growth in 2007 in the low to mid single digits.

Synthroid exceeded our expectations once again this year, with U.S. sales of $470 million.

Synthroid remains the number one prescribed treatment for patients with thyroid with disease three years after generic entrance.

We expect U.S, Synthroid sales in 2007 to again exceed $400 million.

Regarding Biaxin XL, we saw an at-risk generic launch at the end of last year in the U.S., which resulted in the decline in fourth quarter sales of about 40%.

We also expect very modest levels of Biaxin XL sales in the U.S. going forward.

Though for 2007 in our U.S. pharmaceutical business, we expect full-year sales growth of about 20% and international sales growth in the mid to high single digits.

In the TAP joint venture, Prevacid sales increased 12% in the quarter as Prevacid share has stabilized.

This was partially offset by the decline in Lupron sales.

In TAPs pipeline, TAK 390MR, TAP's next generation PBI, is advancing through phase three development.

TAP plans to complete enrollment in its phase three trial in the first half of this year, on track for an early 2008 FDA submission.

Now let's turn to the Abbott pharmaceutical pipeline.

As we've already discussed, we advanced a number of HUMIRA indications in 2006.

We also significantly enhanced our cardio-vascular pipeline with Kos and AstraZeneca.

Beyond lipid management, Kos also added several late stage pipeline opportunities.

In 2006, we also made progress on several of our internal opportunities in the mid to late stage developments area such as ABT-874 in control released Vicodin and we advanced many of our early stage programs.

In fact, this year, we expect to more than triple the number of compounds entering phase one and phase two compared to 2006.

I've been especially impressed with our scientific platforms in oncology and neuro-science, where Abbott scientists are researching several truly cutting edge therapies.

Granted these compounds are still pretty on in clinic -- pretty early on in clinical development but they could change the way we treat cancer and the way we treat neurological diseases, Alzheimer's.

In oncology this includes our research of DCL-2 inhibitors which has been published in the journal Nature.

It's long been a goal of oncology research to program cancer cells to die, stopping the progression of the disease.

Our pre-clinical research has shown that these agents not only enhance the effects of chemotherapy and radiation, they also kill certain types of tumors such as lymphoma and small cell lung cancer.

In earlier development, in addition to our BCL inhibitor work, we have a Park inhibitor in development which prevents DNA repair in cancer tumors and stops the progression of the disease.

The National Cancer Institute has identified our molecules one that they're particularly excited about.

We're planning several phase one studies this year to research it further.

Our Pharma bench scientists continue to work closely with our molecular diagnostic R&D team to apply biomarkers across all oncology compounds to better target our pharmaceutical therapies.

I'll briefly touch on a few more of these exciting early stage compounds but let me first start with immunology.

ABT-874 is our anti-IL12 biologic in phase two for the treatment of various auto immune diseases.

As you know, you've already seen promising results in Crohn's disease demonstrating very strong efficacy.

In M.S., which is a particularly difficult disease to treat, we've unblinded our phase two study for approximately 200 patients.

The study did beat its primary end point and demonstrated an excellent safety profile.

However, it did not achieve our internal target criteria for advancement, which is a profile that is significantly advanced over what's available for patients today.

We're also evaluating ABT-874 for the treatment of psoriasis and we've unblinded this phase two trial as well.

Although we plan to present the full results this summer, I'm pleased to announce today that the phase two results were outstanding.

We met the primary end point and we demonstrated efficacy levels that exceed any phase two data we're aware of for any other agent.

We will move ABT-874 into phase three development for psoriasis this year.

In neuroscience and pain, controlled release Vicodin in currently in phase three development and we remain on track to submit for regulatory approval later their year.

Controlled released Vicodin is a more convenient form of the trusted brand Vicodin and has a longer duration of pain relief for the management of moderate to moderately severe pain.

Vicodin is the number one prescribed pain product in the U.S. and the market for pain medications is the second largest at more the $12 billion.

Our controlled release form of Vicodin has both a fast-onset of action and sustained relief, thus reducing the dosing schedule from four to six times a day down to only twice a day.

We've also made progress in Abbott's early stage development pipeline with compounds for schizophrenia , ADHD and pain.

This includes ABT-089, a nicotine receptor antagonist for ADHD.

These compounds play a role in regulating pain, move, memory and other neurological functions.

And in our antiviral research we recently announced an alliance with Enanta Pharmaceuticals for the development and commercialization of protease inhibitors for hepatitis-C.

Given the sizable market potential, if successful, this could result in a very meaningful longer term opportunity.

This builds on the foundation in HIV where Abbott scientists discovered and developed protease inhibitors including Kaletra.

In summary, we couldn't have been more pleased with what we've accomplished in 2006 and in 2007, we see continued progress from our two major growth drivers, HUMIRA and XIENCE.

With the Crohn's launch in the coming months, we're on track to exceed $2.7 billion in HUMIRA sales this year.

And we're ramping with the launch of XIENCE in Europe as we prepare and simultaneously for U.S. approval.

All told, we anticipate significant product activity throughout the year with two important data presentations, at least three product approvals and likely five FDA submissions.

We're looking forward to another productive and highly successful year.

With that let me turn the call back over to John.

John?

Thank you Rick.

And we'll now open the call for questions.

As a matter of professional courtesy, as we do each time, we ask that you try to limit your questions to one topic.

Thank you.

(OPERATOR INSTRUCTIONS) Our first question today is from Mike Weinstein from JP Morgan.

Thank you for taking the question and nice quarter their morning.

Thank you.

A few questions just to clarify relative to the guidance.

First off, can you just comment on what you're assuming for Omnicef?

I'm not sure if you comment on that and I missed it.

And them second, on TAP, it looks like you are being a little more conservative on TAP profitability this year than we are.

Excuse me, a little bit worse than we had.

Could you just comment on that?

Thanks.

Mike, it's Rick.

I'll take the Omnicef question.

I think maybe as a little bit of background on Omnicef just to frame for everyone where we are.

I think most people know that we have a composition or compound patent that extends until mid-2007.

We also have formulation patents that cover the crystalline form of this product through 2011.

Our obvious position is we're going to defend that IP aggressively as we defended in the past other generic entrants in different areas.

But for financial planning purposes as we've said in the past, we continue to plan these generic opportunities in realistic way, and we've done so accordingly with Omnicef.

I'm not going to discuss a lot of the specifics around the legal strategy but I think you'll see this progress similar to you've seen with other generics.

The only thing I'd tell you is if for any reason we're unsuccessful with our legal strategy, we have put in place a contingency plan that would cover Omnicef if it were to go generic.

And then, Rick, why don't you handle TAP as long as you've -- he's asking about that as well.

Okay.

Tom, I think is actually going to handle that.

I just think, as you look at TAP, clearly we have some more mature products in that business as we plan for '07.

We've looked at very realistically and we also have continuing R&D activity involved there so there will be some R&D spending during the year which Rick detailed in his remarks.

When you add it all up, that results in a slight reduction in profitability in 2007.

Obviously, that team is going to work to do better than that.

But that's really the way we look at it now, Mike.

Mike, I would add to that, this is Miles.

We plan TAP carefully because we don't manage it.

And so we want to be careful that it doesn't represent an unmanageable downside or risk to us, so I'd say in general we try to be careful about how we plan it.

So I wouldn't be surprised if it looks conservative.

I don't know that it will do better than it's planned to do.

But we certainly want to be prepared in the event it doesn't.

Okay.

Not that it really matters much to the overall picture.

Coming out of the quarter, HUMIRA came in above where the Street was at and certainly above where we were at, and your commentary on XIENCE is certainly encouraging.

Could you just on both of those talk a little bit about strategies because you're going through a period where HUMIRA you're expanding your labeling through a series of steps here over the last year plus and then you're going to get Crohn's in a few months.

Could you talk a little bit more about your sales and marketing strategy how you're building out your HUMIRA base sales force for dedicated to HUMIRA?

And then on XIENCE, could you just talk, maybe you can just give us a little bit more in terms of countries that you have targeted and what's still in front of you in terms of countries you really need to get into?

Thanks.

Okay.

Thanks, Mike.

This is Rick again.

If you look at HUMIRA, it continues to perform just extremely well.

The market is industry attractive.

The market continues to grow just under 20%.

We continue to capture in excess of a third of all of the new RX's.

The product grew last year 46% versus the prior year.

We currently have three approved indications, RA, PSA and AS globally.

And really I think as you look going forward, we continue to capture share in the RA market.

That's obviously the biggest piece of the market.

But there are two very significant launches that we're going to do over the course of the next 12 to 14 months.

Crohn's first, which we expect to happen in the in next month or so, the big market worldwide is in excess of $1.3 billion.

This is a product HUMIRA that has excellent efficacy, in fact probably best this class sustainability with no fade and the ability to significantly reduce steroid use.

I think around 20% of the patients ended up being steroid free.

And so we think we will have a very big opportunity as it relates to Crohn's and we're excited about that.

Psoriasis, same thing.

Large market opportunity.

Just absolutely stunning efficacy.

It's the first biologic to really show superiority over Methtrexate.

Very good POS-E 75 scores around 80%.

And so we think HUMIRA's going to do very, very well in the psoriasis market.

Then the third area is we expect to get approval in Japan late 2007.

And so as you look at those opportunities, I can tell you, HUMIRA's a big product and it's going to get a lot bigger as time goes on.

As far as the sales force is concerned, we're obviously aligning the sales force around the channels where these particular products fit.

It's more of a focused kind of specialty sales force but we'll have a room sales, we have a rheumatology sales force, we have Durham sales force right now and we'll have a GI one that focuses on Crohn's.

And so we believe we're very well positioned to be able to compete in each one of those markets.

As far as XIENCE is concerned, as my comments indicated, we're very pleased with how XIENCE is going.

Interestingly enough, four weeks into the launch in mid-December, myself and John Capek flew over to Europe to review the launch just to make sure things were going well.

I've been around a long time.

I've seen a lot of product launches.

I've never been brought all of the GMs together from around the world and met with them, and I've never seen a situation where the GMs were tough to come up with even a single objection around the product.

Perception of this stent in the marketplace is absolutely spectacular.

You know, physicians love the deliverability of it.

In fact, interestingly enough, a lot of them comment that it's more deliverable than Vision.

We think that may be partially due to the polymer that's on it .

It actually slides through the vessel a little more easily.

But they're very excited about the deliverability.

Obviously excited about the data itself, and so, this is a product that we have a tremendous amount of confidence in going forward.

As I indicated in my formal remarks, we've gained in excess of 20% share already in several countries.

Two good examples would be Spain and Switzerland.

We're continuing to gain share at a very good rate in other markets.

The one thing to keep in mind, though, in Europe, Europe is a tender market and you do have to wait for access to those tenders, and so it will take roughly a calendar year.

So fourth quarter of this year, to get through all of the tenders when we have full access to the entire market.

And I'll give you a good example.

I can't give you the account name, but we've closed what I think is the largest cath lab in Europe, if it's not the largest it's certainly one of the top two or three, on an exclusive for XIENCE.

But they can't start until March.

So that account is closed right now but they'll start up and actually start ordering product and we'll put the consignment in in the later part of February.

So we have a number of accounts that look like that but I'm very impressed with the product.

It clearly is a winner.

There's no question about it.

Okay.

Next question, operator?

Thank you.

Our next question is from Glenn Reicin from Morgan Stanley.

Good morning, folks.

Hi.

I just need a little bit of clarification about what happens in the first quarter here so I just need some confirmation, Tom, on the way these things work here.

If you look at the other nutritionals line in 2006 in the first quarter it was like 250 million, 240 million --

Right.

And I think what you're saying is that run rate, because Synergis goes away, is maybe 10 or 15 million?

Very, very modest, right.

Is that 10 or 15 million the right number?

That's in the right area, that's correct, Glenn.

Okay.

So that whole business goes 400 and some odd million to like a $50 million run rate?

It wasn't that high.

No, it was --

Excess of 350.

Over 350.

It wasn't as high as that number, Glenn.

Okay.

I mean the combined businesses including the small pharmaceutical business you have in there.

Yes.

Okay.

Then you have obviously the Biaxin hit.

And then diagnostics you have a business with $300 million operating income run rate in 2007, that basically goes away with no corresponding reinvestment of the proceeds?

Yes.

On diagnostics, I think you're a little high on the run rate there at least in terms of '06.

I think it's closer to 250.

That's what we talked about on the call the other day.

Right.

Certainly as with any business, the earnings are somewhat different across the quarters. but we will have that portion of the earnings for that business in the first quarter in the discontinued ops line in the first quarter.

And we'll break that out in the first quarter call.

Okay.

I assume it's those three issues there impacting the numbers more than the investment and guidance in Kos?

Kos is one where clearly in the first quarter we do not have synergies yet.

We do have the data on the book.

So Kos is hurting us in the first quarter.

We're actually overcoming that really when you put the other items aside.

And Kos is the one that really kicks into the profitable contribution later in the year when the synergies kick in.

So Kos is actually negative in the first quarter.

Okay.

Just one product question.

If we look at the LifeScan numbers yesterday and we look at your numbers, it looks like the diabetes monitoring business a little bit punk right now.

What is happening in the marketplace and why are you so confident that you're going to get 10% growth out of that business in '07?

Yes, Glenn, this is Rick.

The first thing when you look at the LifeScan numbers, you have to be careful that you back out the impact of the Animas and look at the base numbers.

But I'd say there were a couple of things that happened to the market this year that were somewhat unique.

One is, we saw it particularly in the U.S., retailers becoming a lot better at managing inventories at the retail level than we've seen in the past.

So we did see some inventory reductions in the marketplace that seem to have stabilized as we moved through the end of the year.

So that's an impact that was unique to '06 and shouldn't repeat in '07.

We have seen some price in certain markets around the world and that, too, is moderating.

So I think the market growth this year was lower than we've seen in quite some time, and we expect some rebound although we're not forecasting that the rebound will be as significant as we've seen in the past, high single to low double digit kind of market growth rates.

I think more like mid single digit kind of market growth rates is what we're anticipating going forward.

And so ultimately it now boils down to a share gain.

If you look at last year we captured about one share point.

The year before we captured about two share points.

We became number two in the U.S. now, and so we continue to make good progress.

What we're most excited about is, I'm not going to give you a lot of color on this for competitive reasons, but we're going to launch a new meter device, discreet meter device, into the marketplace in the second half of '07.

And we believe that product will allow us to pick up a couple of market share points.

So that's the key driver, and we're very confident in what that product looks like.

Does that answer your question, Glenn?

Yes.

Thank you very much.

Okay, thank you.

Thank you.

Our next question is from Glenn Novarro from Banc of America.

Hi, good morning, guys.

Hi, Glenn.

Two questions on XIENCE.

One, XIENCE in France you're supposed to get reimbursement there this summer yet Medtronic has won an injunction.

So, obviously you appeal.

Does the appeals process, will that be done prior so that you're not joined so maybe you could talk a little bit about what's next and what the strategy is in France?

And then secondly in the U.S., at a Medtronic meeting last week, they hinted that the FDA is getting a little tougher on safety and that they're likely going to require several thousand patients at least out to two years to verify the safety of the stent.

One, are you hearing that?

And secondly, let's say we get to an FDA panel later this year.

How many patients will you have out to one if not two years to satisfy the FDA?

Thanks.

Okay, Glenn, this is Rick.

Let me start with France.

Again, obviously I need to be careful about how I characterize our legal strategy here but I think I can give you a little color and talk to you about our confidence.

This is a space that's obviously very litigious.

Has been, always will be probably going forward.

One of the things that's so important as we were building this franchise and as we acquired Guidant was to try to assemble a very significant IP portfolio which I believe we have.

You look at the Guidant IP portfolio, it's a very large, has some landmark IP like Lao (ph), like Piak (ph) and many other pieces.

And in addition to that, we have covenant not to sue from Boston Scientific who also has a very broad IP portfolio.

I don't think there's a single company that's better positioned from an IP standpoint in this space than Abbott.

And obviously as we've said in the past, we'll use that IP to our advantage and we'll use it both offensively and defensively.

Specifically on the Avisio ruling in France with Medtronic, clearly, we believe the Avisio patents are invalid and we plan on litigating to get to that outcome.

The French courts tend to defer to the PTO office on invalidity arguments and that's exactly what happened here.

This decision is all just part of the process.

I can tell that you we're very confident in our freedom to operate on XIENCE.

I'm not going to discuss specifically our legal and other strategies but you'll see them play out over the course of the next several months and I think it'll become clear to you.

What I will tell you is we do plan on launching in France as soon as we have reimbursement.

Then just in terms of the FDA process and perhaps coming -- the number of patients that you feel will be satisfactory for approval?

I guess it doesn't surprise me that Medtronic is taking the position that they're taking around long-term safety data, particularly based on the outcome of their trial.

You ultimately have to look at every FDA submission based on the data you've given to the FDA, their comfort with you meeting your end point and the kind of results that you get.

There's no -- I don't think there's any single criteria that gets applied to every single company.

I can tell you we've been in dialogue with the FDA all along this process.

The FDA has been very consistent about what data it would take to gain approval, Spirit First, Spirit 2, Spirit 3 results.

And I think if they look at the way we think they're going to look that will be satisfactory to the FDA.

We did start Spirit 4 to be able to provide additional data in the event that in the latter stages of approval, the FDA wanted to look at that.

That's a two to one randomization against taxes.

I can tell you it's enrolling very rapidly.

It's at 40 sites around the U.S.

If you actually look at where we'll be in sort of the October time frame from a data standpoint, we'll have a little over 4,000 patients that have been implanted in our trials.

A little more than half of those will be XIENCE patients.

And so obviously we'll be able to provide that data to the FDA at that point.

We're confident.

We've had a lot of dialog.

We're confident that that will be sufficient.

And the 2,000 patients on XIENCE, what -- how many of those will be out beyond one year and out to two years?

More than half of them will be out beyond one year.

Just one last one.

As the bare metal stent leader, where do you think penetration is right now in the U.S. between E.A.S. and bare metal stents?

That's actually a great question.

We're obviously monitoring it carefully.

And our bare metal stent sales have grown pretty significantly over the last couple of quarters.

The latest data I just looked at it the other day shows that we're at about 72%, 73% penetration.

And it looks like it's stabilized there.

It's basically held at that level for about the last three weeks so we think we probably hit that area and now it'll start to rebound.

It's actually one of the things I think that excites us about our strategy going forward, we're obviously the leader in bare metal stents in the U.S. and we're obviously taking advantage of the opportunities there.

But I think what's more significant to us is as you bring new technologies like XIENCE to the marketplace, I think we have an opportunity to start as we gain more data, more experience, start to increase that penetration again in DES and so we can ultimately enter the DES market in the United States with a market that's again growing from a penetration standpoint but yet still taking the advantage of the opportunity that exists today.

Obviously we don't have any share in the U.S. now so it's all upside to us.

I think we're very well position to participate in this and I think based on everything we've been able to gather, the penetration rate will probably stay at this level and not trend down further.

Okay.

Great.

Thanks, Rick.

Thank you.

Thank you.

Our next question is from Rick Wise from Bear Stearns.

Good morning, everybody.

Good morning.

Just a quick follow-up on that question, Rick.

Bare metal stent invasion has not been as dramatic in recent years for obvious reasons.

Does Abbott plan to make this a long term strength and focus on innovation in that area as a way of driving sustainable ownership of that space?

Clearly, the bare metal stent versions of all of our drug eluding stents and future iterations of drug eluding stents will be available as part of our portfolio.

And so as an example, we're working on our next generation product beyond XIENCE that has a stent, a different stent design.

It's more deliverable, particularly in longer lesions.

And that will be available as a bare metal stent version as well.

So I think you'll continue to see innovation on both sides but they're somewhat linked with each other because that'll be the base platform that we use on next generation drug eluding stents as well.

Couple of quick ones.

Can you update us on the timing or expected approval for the next gen version of Niaspan?

And maybe Tom could highlight in a little more detail some of the cost reduction initiatives associated with Kos and what you're looking for this year in a little more detail?

Okay.

On Niaspan caplets, we're in labeling discussions right now with FDA.

And so, as you know, once you get the labeling discussions typically approval is shortly there after.

So we're anticipating approval shortly thereafter.

Our plan would be to launch late in first quarter or early in second quarter that product.

That's really the status of it.

On Kos, obviously there's a significant amount of synergies that are built into the Kos model.

And we're well into the integration process right now.

In fact commercial integration is commencing and we plan on being fully synergized between the Abbott commercial organization and the Kos commercial organization in the March time frame.

And we've identified all of the synergies and we've started the process to be able to create those synergies as we go forward.

As Tom mentioned, as you go through the next three or four quarters, we ultimately get to 100% of the synergies by the fourth quarter.

And that's our new running rate.

And so that creates a fair amount of the leverage that we're seeing on the Kos transaction from a profitability standpoint.

Is there a number associated with that?

Rick, as you know, Kos is running about 50% SG&A.

We run about 25% SG&A in our pharma business and I think there's even a little more opportunity there because obviously we have infrastructure already established to support the business within our pharma business.

At this point that's probably the best yardstick I could give you in terms of estimating a number.

Okay.

And just one last quick one from Miles.

Be able to fall this year.

As far as the number of questions or what?

Exactly.

But we got you on the call and I want to grab you a second.

That -- in your words, you reshaped Abbot for quote, higher growth, higher margins, higher returns and are using words like broad based steady performer.

Is your thinking about Abbott now -- give give me your time frame over the next three to five years, next five year, what are your goals when you're talk internally to your folks for sales?

EPS or returns?

How are you managing the business now?

Thanks.

Well, I'll tell you, as I commented last week, Rick, there's a fundamental investment identity to any company.

In our case it's growth, and growth in our industry tends to mean double digits.

You can look at what kind of double digits, low double digits, higher double digits, high teens, whatever it may be.

But in our particular industry, growth has always meant double digits.

And while we admittedly all face a more challenging regulatory, commercial, budget environment, whatever you want to call it, the reality is, governments around the world, patients, insurers, everybody' s having greater difficulty affording healthcare, and so that creates a more constraining or tougher environment.

And it means that those who are going to succeed have to outinnovate and outperform and outexecute their competition.

I think if you say we're going to be a double digit grower, then it puts the onus on us both internally in terms of our organic growth and our innovation and our R&D investments and so forth to focus on new products that will continue to fuel that growth, but that's not alone going to do it I don't think for any large cap company.

We all need to be looking strategically at what we can enhance our business with and so consequently what we can do either with product acquisitions, technology acquisitions or even company acquisitions in some case will supplement that.

So going forward, the hurdle we set and the expectation we set with our entire management team and our businesses is that nothing less than that is acceptable to us.

We understand the environment.

We don't sit around and complain about it.

It is reality and we navigate it.

And we're not going to alter our ambitions for our investors because I think that's what our investor expects as a return when they buy our stock or invest in our Company.

Consequently, over time, we will manage the business that way.

We will continue to shape it for the kinds of products, kind of businesses that will deliverer that kind of double digit growth sustainably.

Investors pay you for sustainable growth.

That's what drives the value of the stock.

It's never good to be priced in the rear view mirror.

It's much better to be priced on your prospects going forward.

And for your prospects going forward to mean something, you've got to have healthy pipelines, healthy strategies and you've got to be able to deliver double digit growth.

I hope that kind of summarizes the expectations that I set for our businesses for our employees, for our management team, for our Company.

I'm not afraid at all to have investors aware of that.

Frankly, they ought to be.

That's what we're trying to do.

I would say this, everything doesn't always go right.

Everything's not perfect.

There will always be speed bumps.

There may be significant speed bumps from time to time.

I can tell you it feels like a lot more than a speed bump when a product goes generic.

But we know it's coming, et cetera.

So we continually look to enhance or build our portfolio with more and more of the things that meet the criteria I described so that there's, frankly, a greater opportunity to be well above our goals or safety net to protect our goals.

Over time, we're going to keep looking for the things that we add to the portfolio that will continue to ensure the sustainability of that double digit growth.

Thanks, Miles.

Thank you.

Take next question?

Thank you.

Our next question is from Larry Biegelsen from Prudential.

Hi.

Good morning, everyone.

Hi, Larry.

Couple of questions on Kos.

Could you please tell us what the Niaspan full year 2006 sales were?

And that was one product I didn't here you mention growth expectation for 2007.

Okay.

Is there another question, Larry, beyond that?

Also, if you could talk a little about international opportunities for Kos as well.

Okay.

Well, Larry, we didn't break out the fourth quarter Niaspan because we didn't obviously have the business the full year.

What I can tell you is that for '07, I'm not sure if we gave that to you before specifically, but we expect 600 million or so or in excess of 600 million for the full year 2007.

Yes, Larry from the deal model, I'm trying to think back, I think the product was about $500 million in the prior year.

So one of the things we've obviously anticipated here is that we will significantly accelerate the growth of this business going forward.

We have a lot of experience in this segment and we think this is a great asset, particularly from a script standpoint.

We believe we can significantly accelerate the growth of it.

We are exploring internationally opportunities here.

I thinks it's one of the advantages we bring.

And it's an area that Kos didn't spend as much time on, didn't have the infrastructure to be able to deal with that.

And so it is one of the opportunities that will be built into our strategy going forward.

Secondly, different topic.

Was there any stocking in the quarter for any U.S. products?

Fourth quarter?

Yes.

No.

Inventory levels are fine.

Effect is, we commented, some of them were destocking.

And if I could sneak one last brief one in.

Spirit 3, ACC or PCR, can you say at this time?

As you probably know, we're in the process now of going through the data, and reviewing it.

In order that -- our goal is to try to hit ACC.

I will tell you it's fairly tight because for the late-breaking sessions you have to get your information in a couple of weeks ahead of time.

I think right now the latest timeline I've looked at, I think we'll make it, but it'll be fairly tight.

In the event we don't make ACC then we'll present it at PCR.

The other thank that we'll be presenting at ACC, just for your knowledge, is we have gone back and adjudicated -- readjudicated Spirit 2 against the Arc definition and we will be presenting that data at ACC as well.

Thank you.

Okay, thank you.

Thank you.

Our next question is from Sarah Michelmore from Cowen and Company.

Hi, good morning.

Thanks for taking my question.

In terms of the guidance, you guys have been consistent in terms of quoting ranges the last couple of year and I'm just wondering this year, I know there are a lot of moving parts but are there any sort of identifiable items there that would cause you guys to come in at the bottom of the range versus the top of the range and if you could just comment in terms of I guess it would be the timing of some of those Kos synergies perhaps maybe the timing of the diagnostics divestiture but just wondering if you could identify any major swing factors there?

You know, obviously, the ranges contemplate that nothing's perfect in forecasting and the future's never predictable but I think the point of the range is that there's upside as well as downside depending on the turn of events.

Really, our best judgment is somewhere around the middle of that range is where we'll end up.

And we think with the diversity of the business and all of the pluses and minuses that we'll be able to manage pretty tight towards the middle.

Sar ra I think the way to think about this is in any given quarter, sometimes, you know there's a little bit of noise around a range or around a midpoint of a range just because of the timing of shipments or other things.

I don't think there's anything particularly stunning about the ranges.

The bigger issue here and the one that's it's very important for analysts and investors to understand is that this year's pattern of quarter to quarter is going to be different than past years.

What happens with companies obviously they get into a sort of a rhythm of how those quarters ebb and flow.

Particularly if there's some seasonal products in the business and we've had that.

This year's pattern is going to be different because of the things we explained earlier so that the bigger issue here isn't what happens inside a two or three cent range in any given quarter, it's more about the differences across the quarters and making sure our investors understand the pattern that they're going to see.

Okay.

That's helpful.

Let me add on the Kos transaction.

I would tell you first of all, Adam's got a good track record of doing integrations.

And I'll tell you as we went through this particular one and reviewed the synergies, they are all things that I think we have a very high level of confidence.

Examples of things, the difference between our LTI program and the Kos DLI program.

That is a synergy.

I can tell you it's 100% deliverable as we're going with our LTI program.

There's functional head count that's duplicated between Abbott and Kos.

Those are synergies that are built in.

There's royalties that go away over time.

And so I'd say as I look at the synergies, they have a very high probability of being executed against.

Very low risk.

Okay.

That's extremely helpful.

As a follow-up for you, Rick, I don't think you gave an update on the Navigator continuous glucose sensor.

Just wondering what the status of that product was and if there was any upgrade on other febuxostat from TAP or [INAUDIBLE]?

I think the phase three results from the nonmetastatic trial were due out at some point here in the near future.

Just wondered if you had any updates on those products.

Thanks.

Sure.

Let me start with Navigator.

As I mentioned in my comments, we're still under active regulatory review.

One of the things that did happen with Navigator is as the on-market products experienced some issues in the marketplace, the FDA did come back to us and asked some additional questions around those types of things.

And so we've responded to all of those questions right at the end of November or early December.

We believe the FDA has everything that is necessary in order to approve the product now.

It will require that we get an inspection of both our manufacturing facility in California as well as one of our vendors, the vendor that makes the inserter has to be inspected.

And so those have not been scheduled yet but we anticipate they will be scheduled soon.

Shortly after that is when we anticipate we should be able to get approval.

So we're assuming approval over the next couple of months.

Okay.

On febuxostat, I think just maybe as background for everyone, I think everyone's aware TAP did receive a second approvable letter from the FDA.

They've been meeting with the FDA on what the next steps are for that product.

We do believe that it is likely now to entail an additional clinical trial using both 40 and 80 milligrams, the lower dose, and TAP's preparing accordingly to be able to execute that trial.

So that's the status of febuxostat.

Any questions on that one?

No.

Okay.

On zenlay (ph) we have had an opportunity to evaluate all the data.

We've looked at it.

We will be presenting that data at an ASCO convention I think it's in February.

You know, I think what we've said in the past as it relates to zenlay is that our expectations are very, very modest and we wouldn't expect anyone to have zenlay in their models.

But I don't want to talk specifically about the data until it's presented.

Yes, I think everyone's taken out of their models, Sarah, and that's fine with us.

I'd keep your expectations low.

Okay.

I appreciate it.

It's very helpful.

Thank you.

Thank you.

Thank you, our next question is from Katherine Owen from Merrill Lynch.

Thank you.

Good morning.

Can you hear me okay?

Yes.

I just wanted to ask a question, and I know you just gave '07 guidance.

If you like ahead to 2008, there's a huge range of consensus EPS estimates about $0.75 and assuming that's primarily a function of expectations or forecasts regarding the timing and magnitude of earnings contribution tied to the U.S. drug eluding stent launch.

Any comments you can give, even if it's kind of conceptually, about the willingness in kind of quote unquote unusual year you have a major product launch like that to see some of tit excessively, if you will, flow through to the bottom line where you could have a much greater than normal earnings growth as it implied by the high end of the estimates or are some of those numbers may be underestimating the reinvestment opportunities and you'd look for more of that consistent growth miles that you talked about?

Well, well done question, Katherine.

You know, everyone always tries to get me to give guidance a year in advance.

Well you've got to remember who my old boss was.

I do.

I'm not going to give you guidance a year in advance but I will tell you this.

We've set a target of double digit.

We expect double digit.

Our target remains unchanged.

The degree to which we perform against that target or outperform against that target at this point isn't even clear to us.

Our crystal ball isn't any better than a lot of other people's until we get closer to that.

We've obviously got a rich pipeline of opportunities here.

I think XIENCE and other things are going to be great products for us.

I think it's premature to estimate.

I know that there are investors who say well gee, Miles, will you -- if you do earn more than you project, do we get to have some of that or are you going to reinvest it all?

And I've always said it kind of depends on whether I've got places to reinvest it for you that I think are worthwhile.

This is one year investors did a couple of pennies better than our projections here at Abbott.

I don't want to get into the game where I'm just sort of feeding an extra penny every now and then for the headlines and so forth.

We try to be responsible about the real investment balance in the business and the return to investors.

Obviously, if we exceed our expectations and do well, would we pass that on to investors as upsides to the earnings projections?

Of course we would.

But I think it's premature to project what it ill be.

Okay.

Fair enough.

And then just a second question.

With the New York Times article of this morning talking about a lot of dogs and more significantly insurers balking at the significant cost of some of the biologic treatments for psoriasis and recognizing how strong the data looks relative to prior therapies with HUMIRA.

Just wondering because some of the points that were brought up is the fact that derms can treat a lot more acne or botox patients than they can a psoriasis patient and they don't have to deal with any of the reimbursement issue.

Against that, do you think those comments are fair?

Does it create more work as you launch for psoriasis and therefore we should assume it's a more measured uptake to get to that peak year sales number that you pegged I think was at 500 million?

Thanks.

Right.

This is Rick.

I think I'd cover it in two areas.

First of all, I glanced at he article early this morning so I can't say I read it in depth.

But I looked at he numbers that they presented from the cost of therapy.

And I think you have to recognize that some of those upper end numbers are due to some extent to the current therapy's fade effect where you have to keep dosing up.

So you literally have patients that ultimately can end up with a lot more need for drug over time.

Our product doesn't fade at all.

And so I think we'll come in in the lower end of that range from a treatment standpoint.

And as far as reimbursement is concerned, you know, again it's a self injectable product.

We don't see that as a big disadvantage in derms.

We're in derms now with PSA and we seem to get good acceptance.

And so I think we're pretty comfortable.

There'll be a ramp, clearly, as you go out and you penetrate the market and you educate patients in particular on the options that are available.

But when you look at the efficacy of this product it's pretty impressive.

And for those patients, I think you'll end up creating demand going back into the derms office.

Great.

Thanks so much.

Yes, and the last thing I'd add there before we close out is that at least from what we can tell on first call there's only about half of the cell side analysts that cover us that have 2008 earnings guidance posted at this time.

That concludes today's conference call.

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