美國雅培 (ABT) 2009 Q4 法說會逐字稿

Good morning, and thank you for standing by.

Welcome to Abbott's fourth quarter 2009 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 is material copyrighted by Abbott.

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

I would like to introduce Mr.

John Thomas, Vice President, Investor Relations.

Thanks Alain, good morning, everyone, and thanks for joining us.

Also on today's call will be Miles White, Chairman of the Board, and Chief Executive Officer and Tom Freyman, Executive Vice President Finance and Chief Financial Officer.

Miles will provide his opening remarks and Tom will review the details of our fourth quarter results and outlook for 2010.

I'll then discuss the highlights of our major businesses.

Following our comments, as we always do, we'll take your questions.

Some statements made today may be forward-looking.

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.

Factors that may affect Abbott's operations are discussed in item 1-A risk factors to Abbott's Form 10-K for the year ended December 31, 2008, 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 we do always, non-GAAP financial measures will be used to help investors and analysts 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 website at Abbott.com.

With that, I will now turn the call over to Miles.

Miles?

Okay, thanks, John, and good morning.

I'll review our 2009 performance as well as our outlook for 2010 across our diverse mix of health care businesses, Tom and John will then walk you through the details of our fourth quarter and full-year results as well as our 2010 outlook, and then we'll take your questions as always.

As you can see from our earnings news release, Abbott reported another year of industry-leading results in 2009.

When the industry is finished reporting, our 12% ongoing EPS growth rate should again lead all US pharmaceutical companies.

Abbott's sales performance in 2009 included double-digit operational sales growth in our international pharmaceuticals, global nutritionals and global vascular businesses as we ended the year with total Abbott worldwide sales of nearly $31 billion.

As we did in 2008, we raised our earnings guidance in 2009 as we progressed throughout the quarters and gained additional clarity and greater momentum in our businesses.

We delivered industry-leading performance in the face of some difficult headwinds, challenges that faced every multi-national company and each of our healthcare peers as well.

The two that stand out, of course, is the global recession and early on, the impact of currency headwinds.

In addition, Abbott faced one of its toughest internal challenges ever, the expected loss of nearly $1 billion in sales of Depakote to generic competition.

As evidenced by our results today, we managed through these external and infernal challenges and still exceeded our goals for the full year.

In many ways, 2009 was a year in which Abbott's investment identify was further solidified as that of a durable sustainable growth company, one that investors can depend on year in and year out despite external uncertainties or the Company's specific challenges.

Our management team approaches every year with that financial brand identity clearly in mind.

We take that commitment seriously, and 2009 was no exception.

At this same time last year, we committed to delivering top tier double-digit EPS performance, and we were one of only a few healthcare companies to commit to that level of performance and to ultimately deliver on it.

And that's what our shareholders expect from Abbott, and it's what we intent to achieve again in 2010.

As we announced this morning, our ongoing earnings per share guidance range for 2010 of $4.20 to $4.25 reflects accelerating double-digit EPS growth.

The midpoint of this range reflects EPS growth of approximately 13.5%.

I'll talk more about 2010 in a moment.

2009 demonstrated the balance within our diverse mix of businesses and the strength of our financial position.

We generated record operating cash flow of more than $7 billion, returned approximately $2.5 billion in cash to shareholders in the form of dividends, reflecting an 11% increase, and we repurchased more than $800 million of Abbott stock.

2009 also represented our 37th consecutive year of dividend increases, making Abbott one of only a handful of US companies that has increased its dividend this consistently over so many years.

Our return of cash to shareholders through dividends together with Abbott's stock price appreciation generated for our investors a total shareholder return of 20% over the last three years, compared to a decline of 16% for the S&P 500 over the same period.

That level of performance led all US large cap companies in the pharmaceutical industry, while our five year total shareholder return of 32% was among the top two companies and a full 30 percentage points higher than the S&P 500's total return of 2.1%.

To help maintain this performance, last year we look long-term strategic actions to augment and reshape our business portfolio.

We added new growth platforms and new late-stage pipeline technologies, and we did it without passing on EPS dilution to our shareholders.

These non-diluted strategic actions have enriched our mix of diverse businesses for the near and long term.

So here is a reminder of what we accomplished in 2009.

In medical products, Evalve brought a new category of growth to our vascular business with a leadership position in structural heart repair.

It is one of the fastest growing sectors in cardiology.

Ibis expanded our portfolio of technologies and molecular diagnostics.

Advanced medical optics provided entry into the attractive vision care market, adding a leading, diverse and sustainable new long-term growth platform.

We augmented this business later in the year with Visiogen, adding a new late stage pipeline technology with an accommodating lens.

And in our global pharmaceuticals business, we took a range of significant strategic actions from the expansion of our early-stage pipeline with the addition of a novel biologic for the treatment of chronic pain to the acquisition of Solvay Pharmaceuticals.

Solvay brings Abbott a pharmaceutical portfolio of more than $3 billion worth of successful, consistently performing global products, a number of which have reported sales of $100 million or more.

Approximately three-quarters of these sales are in international markets, predominantly from stable, branded generic products.

The acquisition bolsters our presence in key emerging markets where we will leverage our distribution channels to accelerate growth, taking both Abbott and Solvay products into new and faster-growing geographies.

As we noted at the time of the agreement with Solvay, we expect to more than double Abbott's overall presence in emerging markets by 2013 from nearly $3 billion in 2009 to more than $6 billion.

Solvay also enables us to step up our R&D investment, giving us approximately $500 million of incremental R&D investment capacity.

We'll use this extra funding power to drive future pharmaceutical growth.

Finally, the Solvay acquisition was highly attractive to a financial standpoint.

In addition to adding more than $600 million in operating cash flow by 2012, Solvay has a very attractive ongoing EPS accretion profile.

This accretion is assumed in our 2010 guidance range.

We still anticipate this accretion will ramp to more than $0.20 by 2012 and then increase further in subsequent years.

Each one of the actions we took in 2009 was strategically attractive, strengthening our technology base, our geographic mix and our overall financial position.

In addition to these actions, Abbott continues to maintain commercial leadership positions in a wide range of attractive growth markets.

So let me discuss a few of these.

Humira, our biologic for the treatment of autoimmune diseases, delivered growth of more than 20% for the full year 2009, and we're well positioned for continued double-digit growth over the long term, including another strong year in 2010.

We anticipate that Humira will eventually become the number one anti-TNF worldwide, surpassing Enbrel's global market share.

Humira's safety and efficacy profile compares favorably to any competitive product on the market or in development to date, and there continues to be plenty of room for further penetration in all market segments.

This is particularly true internationally where a significant number of patients retain untreated.

In cholesterol, Niaspan remains the number one therapy for raising HDL, or good cholesterol.

The ARBITER 6 - HALTS data has helped Abbott's Niaspan prescription share reach an all-time high, and our TRICOR, TRILIPIX franchise includes the best therapies for reducing triglycerides as TRILIPIX continues to gain market share.

Our nutrition business is one of the strongest globally, and we're the market share leader for the majority of the categories in which we compete.

This includes infant formula where we've made significant strides versus the competition in the US.

Outside of the US we're the fastest growing international nutritional Company, and we expect to maintain our pace of double-digit growth over our long range plan as we further penetrate emerging markets such as China, Brazil and India.

In vascular, we're the market leader in drug-eluting stents where the XIENCE platform is clearly number one in both the US and Europe, and we expect to launch XIENCE in Japan in February after receiving final regulatory approval earlier this month.

Japan is the second largest DES market in the world, representing a $500 million to $600 million market opportunity.

The success in XIENCE has also contributed significantly to this division's operating profits which more than doubled from 2008.

We expect continued steady margin improvement in our vascular business again in 2010, as well as over our long-range plan.

And in diagnostics, our core laboratory business remains the global leader as we significantly improved operating margins and returns in 2009.

The team in this division has outperformed our expectations, executing on our previous plan to expand margins and increase cash flow.

We continue to grow our point of care and molecular businesses at a double-digit pace as well.

We're using our financial strength to continue to invest in our research and development across our pharmaceutical and medical device platforms and pipelines where we have a balance of near-term, lower-risk opportunities as well as earlier stage biologics, small molecules and medical devices that have real potential to change how diseases are treated.

Let me highlight a few of particular interest.

First and nearest term is CERTRIAD, which is our fixed dose combination product that combines Astra Zeneca's Crestor with Abbott's TRILIPIX.

It provides comprehensive lipid management, targeting all three lipids in a single pill.

Given the size of the market and the strong attributes of this product, we have high expectations for CERTRIAD long term.

US approval is expected in the first half of this year.

In the earlier stages of our pharma pipeline, the PanGenetics biologic that we acquired last year is a potential game changer in its ability to treat pain.

It's also complementary to our in-house neuroscience portfolio where we have recently moved two compounds into Phase 2 for Alzheimer's disease.

And we have proprietory research technology that could lead to combination biologic therapies, with potential application in a number of therapeutic areas including immunology and oncology.

In our oncology pipeline, our compounds continue to move through development with two compounds in advanced clinical trials and several more in earlier stages.

In HCV, we have a multi-pronged approach to our research-based -- based on our foundational work in the development of protease inhibitors, as well as an internal program focused on additional viral targets.

We currently have three compounds in human studies, and we'll see data on each of them this year.

We expect data from about a dozen different pipeline programs throughout 2010, including data from several programs within our medical device portfolio.

In our medical technology pipeline, vascular continues to be a source of opportunity with 10 coronary technologies launching over the next five years.

Of course, our recent XIENCE approval in Japan will allow us to compete in a large $500 million to $600 million market that's primed for our everolimus-based DES product.

We'll also be launching several new DES products in the US in the coming years, including XIENCE Nano in 2011 and XIENCE Prime in 2012.

We also have our bio absorbable drug-eluting stent which is slated to launch in Europe during 2013.

And finally, we have two new late-stage medical device technologies that we added next year.

Synchrony is a new accommodating intraocular lens or IOL technology that allows the eye to move and focus like a natural lens.

We anticipate approval in 2011.

And the Evalve MitraClip technology will be the first of its kind in the United States to treat mitral valve disease where there's a significant patient population that has only one treatment option, and that's open heart surgery.

And we also anticipate approval of MitraClip in 2011.

Innovations such as these will help us remain a leading healthcare Company in the years to come with new medicines and devices that can make a real difference for people with cancer, chronic pain, hepatitis C, alzheimer's disease and heart failure, life-threatening diseases where successful treatment options can have a major impact on the quality of life.

As we look back on 2009 at the significant impact we absorbed from Depakote, the difficult currency fluctuations early in the year and one of the worst global recessions ever, we still managed to meet our major strategic and financial commitments while investing in new opportunities that will help us achieve our targets in the coming years.

As we enter 2010, we have good visibility on Abbott's future, we're pleased with our momentum and the fundamental performance of our businesses.

We have well-defined leadership positions across multiple growth areas with significant growth to come.

We're also confident about our financial position with record operating cash flow and a well diversified base of reliable earnings growth drivers.

As a result, we anticipate another year of top tier double-digit EPS growth in 2010.

We remain confident about our long-term strategic direction, and we're optimistic about Abbott's future.

With that, I'll turn it over to Tom and John for a more detailed look at our fourth quarter as well as our outlook for 2010.

Tom?

Thanks, Miles.

As you can see from our earnings news release, we had a strong fourth quarter, delivering double-digit sales and earnings growth, and we're very pleased with our overall performance in 2009 as we delivered results ahead of original expectations for the year.

Our fundamentals are strong and our major businesses are healthy.

During 2009, as Miles indicated, we accomplished a number of strategic objectives that help position Abbott for sustainable double-digit EPS growth.

For the fourth quarter, we recorded ongoing diluted earnings per share of $1.18, an increase of 11.3% over the prior year and at the high end of our previous guidance range.

Sales growth in the quarter was 10.6%, including a favorable 2.4% impact from exchange rates.

The adjusted gross margin ratio was 58.3%, reflecting improved operating performance of the diagnostic nutritional businesses, offset by expected lower Depakote sales due to generic competition as well as the negative impact of foreign exchange on the ratio.

We also had strong investment spending in the quarter, with SG&A expense up nearly 7%, higher than originally planned as we took advantage of opportunities to accelerate programs that we expect will drive growth in 2010 and beyond.

R&D investment reflects continued progress in our broad-based pipeline, including programs in biologics and vascular, as well as promising Phase 1 and Phase 2 clinical programs in HPV, oncology and neuroscience.

The full-year 2009 ongoing tax rate of 16.8% reflects continuing favorable trends.

We expect these trends to continue in to 2010, as I'll discuss in a moment.

The fourth quarter tax rate was 14.5%, reflecting the mix of income by tax and jurisdiction.

We took advantage of the tax rate in the quarter to increase our investment spending in SG&A above our original forecast as I indicated.

Overall, as we look at the full year 2009, it was a very successful year.

We exceeded our original EPS targets, delivering 12% EPS growth despite the loss of nearly $1 billion dollars in sales from generic Depakote.

We also showed improvement in the operating and net margin ratio, while continuing to invest in the business to drive future growth.

As Miles indicated, today we're issuing 2010 ongoing earnings per share guidance of $4.20 to $4.25, reflecting another year of strong double-digit growth.

This guidance includes the impact of Solvay Pharmaceuticals acquisition, which is expected to close by the end of February.

Regarding sales in 2010, we expect strong double-digit growth, including nearly $3 billion in sales from the Solvay Pharmaceuticals acquisition.

In our sales outlook for 2010, we have also reflected the negative impact to our business in Venezuela from the devaluation of the bolivar that occurred earlier this month.

We had sales of more than $350 million in Venezuela in 2009.

In addition, we have also included realistic expectations for sibutramine, known by the brand Reductil and Meridia based upon ongoing regulatory reviews of the product, including the European recommendation last week to suspend the product in the EU-member countries, following the review initiated in November last year.

Sibutramine sales were more than $300 million globally in 2009 with somewhat less than half in the EU.

Our 2010 sales forecast reflects an estimated favorable impact from foreign exchange of 1% to 2% based on current exchange rates, including the impact of the devaluation of the Venezuelan bolivar.

Also for 2010, we're forecasting an improvement in the full-year gross margin ratio over 2009 with the ratio of around 59.5%.

This increase reflects the favorable impacts of improved product mix and efficiency initiatives, as well as the addition of Solvay Pharmaceuticals.

Also in 2010, we're forecasting continued investment in research and development programs to drive future growth with R&D of approximately 9.5% of sales.

This includes the incremental R&D capacity from Solvay.

In 2010, we'll be adding Solvay, which had a higher SG&A sales ratio than Abbott to the expense base.

This will increase SG&A as a percent of sales in 2010 to more than 27%.

As we said when we announced the Solvay acquisition, our 2010 estimate of accretion assumes no significant efficiencies in SG&A, but we would expect to see efficiencies in 2011 and beyond.

Regarding other aspects of our 2010 outlook, we're modeling less than $100 million of other income for the full year 2010 related to the ongoing payments from our previous joint venture.

This reflects in part the latest performance expectations for the Takeda products that are associated with these royalty payments.

In addition, we expect no milestone payments related to Takeda pipeline products in 2010.

As a reminder, in addition to the royalties and milestones on Takeda products, we also received the Lupron franchise, which continues its steady performance as part of the equal split of the joint venture.

We expect net interest expense in in 2010 of approximately $450 million.

For 2010, we're forecasting a full-year tax rate of between 16% and 16.5%.

This rate is based on growth of key products, and the related mix of income across various tax jurisdictions.

Now let's turn to our quarterly outlook.

For the first time, we're providing first quarter ongoing earnings per share guidance of $0.79 to $0.81, including a partial quarter of impact from the Solvay acquisition.

The midpoint of this EPS range represents growth over the prior year of approximately 10%.

Expected EPS growth in the first quarter is negatively impacted by the comparison of the prior year when other income was $156 million, reflecting royalties and milestone payments related to our previous joint venture.

Recall that our international business reports on a one-month lag so the first quarter 2010 will only include a very small portion of Solvay's international results.

Looking forward to the remaining quarters of 2010, EPS growth is expected to be in the low teens in each of the remaining three quarters.

We're forecasting strong double-digit sales growth in the first quarter, including Solvay.

We expect a favorable impact from exchange on sales of approximately 3% to 3.5%, and an ongoing gross margin ratio approaching 57% in the quarter.

So in summary, our global diversified business strategy is continuing to deliver sustainable results.

In 2009, we met or exceeded our goals and continued to shape Abbott for the long term.

Our diversified mix -- business mix, the market-leading products within our core franchises and the strategic actions we have taken all provide a strong foundation from which we expect to continue to grow.

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

John?

Thanks, Tom.

This morning I'll review the quarterly performance of our major business segments, pharmaceuticals, nutritionals and medical products, including diabetes care, diagnostics and Abbott vascular.

So let me start with our global pharmaceutical businesses where worldwide sales in the fourth quarter, excluding the impact of Depakote, increased approximately 9%.

Fourth quarter reported sales increased 5.2%.

For the full year, excluding the impact of Depakote, operational sales increased approximately 9%.

In immunology, global Humira sales in the fourth quarter increased 23% to more than $1.6 billion.

Performance was driven by strong international sales growth of 48%.

For the full year, global reported Humira sales increased 21.4% to more than $5.4 billion, excluding our previous guidance for Humira of 18% to 20% reported sales.

In line with our expectations, US Humira sales growth in the quarter was impacted by the comparison to the fourth quarter of 2008 when sales growth exceeded 40%.

Underlying demand for Humira continues to outpace the market with particularly strong growth in dermatology and gastroenterology segments.

During 2009, Humira continued to gain total prescription share in the US anti-TNF market.

And we're building a strong share position across all indications.

Internationally strong double-digit growth continues in the major European countries.

We continue to enhance our number one share position in western Europe and Canada, and we are well positioned to expand our number one position in to new regions in 2010.

Today, more than 425,000 patients worldwide are being treated with Humira.

The growing awareness of Humira amongst physicians and patients and the expanding body of best in class clinical data and further market penetration across indications will continue to drive demand in the years to come.

Recently, Humira was the first biologic approved for the treatment of psoriasis and psoriatic arthritis in Japan.

As you may recall, Humira received approval for rheumatoid arthritis indication in Japan in 2008.

Additionally, we have completed regulatory submissions in Japan for both Crohn's disease and ankylosing spondylitis, and review is currently underway.

We also anticipate approval for RA, our first indication in China during the first half of 2010, and we are continuing to launch the psoriasis and Crohn's disease indications in new countries around the world.

Humira continues to represent a strong and steady growth driver, and we remain confident in our outlook for continued double-digit sales growth.

So for the full year of 2010, we anticipate reported global Humira sales growth of approximately 20%.

Moving on to our lipid franchise where Niaspan sales in the quarter were $254 million, up nearly 15%.

Significantly outpacing the total cholesterol market, which as you know, is growing in the mid-single digits.

Full year Niaspan sales were more than $850,000.

We expect double-digit growth for Niaspan to continue in 2010.

As Miles mentioned, the release of the ARBITER 6 - HALTS study data at AHA November has had a favorable impact on Niaspan prescribing trends.

The data add to a consistent body of evidence supporting the role of Niaspan in reversing plaque buildup in the arteries and also underscore the importance of looking beyond LDL to address other lipid targets such as HDL.

Also during the quarter, we filed an application with the FDA for two new dosage strengths of SIMCOR that include 40 milligrams of simvastatin.

When approved, the new dosage strengths will provide additional flexibility for physicians, as approximately 50% of simvastatin prescriptions are written with 40-milligram dose.

We anticipate approval for these new dosage strengths during the first half of 2010.

TRICOR, TRILIPIX franchise sales in the quarter were $419 million.

Sales growth this quarter was impacted by the comparison to the prior year when sales increased around 16%, and that included nearly $40 million related to the initial TRILIPIX launch.

In addition, growth in the quarter reflects the temporary reduction in net price associated with broader managed care access and expanded patient's assistance programs that were initiated in the third quarter of 2009 as we previously discussed.

Total prescriptions for the TRICOR, TRILIPIX franchise continue to grow in the high single-digits, exceeding the growth rate of the overall cholesterol market.

So in 2010, we expect low double-digit growth for the total TRICOR, TRILIPIX franchise.

Also as Miles mentioned, we continue to be on track for the first half 2010 approval and launch for CERTRIAD.

The regulatory filing for the product is supported by data from multiple studies of TRILIPIX in combination with the most commonly prescribed dosages of Crestor in large controlled clinical trials.

Given the size of the market, as well as the impressive clinical data and product profile, both companies, us and AZ, believe CERTRIAD represents a significant long-term opportunity.

For 2010, we expect continued strong double-digit reported growth for our total lipid franchise.

So as we look ahead to 2010 in our overall global pharmaceutical business, including the addition of nearly $3 billion in sales from the Solvay acquisition, we expect strong double-digit growth.

This includes more than 15% growth in the US for the full year 2010, and more than 25% growth internationally for the full year.

Turning now to our global nutritionals business, reported sales in the quarter increased almost 9%.

US sales in the quarter increased nearly 7%, where we have gained strong market share in the retail sector, driven by the launch of numerous new formulations and line extensions as we've discussed in the past.

In our infant formula business specifically, our innovative products continue to resonate in the hospital and retail settings, helping us to maintain a strong share lead over our nearest competitor.

Many of our other US products, including GLUCERNA for diabetes and our EAS performance nutrition brand also reported double-digit growth in the quarter.

International nutritional sales reported in the quarter were 11% versus the prior-year-reported period when sales increased nearly 20%.

We saw double-digit growth across geographies, including Latin America, Japan and the Pacific Asian markets, as well as broad based growth across both pediatric and adult product categories.

This was the result of launching next-generation products across many of our brands, which we're continuing to roll out in 2010.

So as we look ahead to 2010 in our global nutritionals business, we expect continued double-digit reported sales growth with mid-single-digit growth in our US nutritionals business for the full year and mid-teens reported growth internationally for the full year.

Turning to our medical products businesses.

Let me start with our worldwide diagnostics business, where reported global sales in the quarter increased nearly 9%.

In our core laboratory diagnostic segment, which as you know includes amino assay -- amino chemistry, excuse me, and hematology, reported sales increased about 6.5%.

We continue to reduce overall cost, improve efficiencies and expand operating margin in this business.

During the quarter, we achieved an important milestone as we placed our 10,000th Architect system globally.

The Architect family on analyzers offers immunoassay, clinical chemistry and integrated modules with sizes to fit the needs of any clinical lab.

It's unique ability to process samples has changed the way customers process critical test results and how patients receive care.

Abbott launched a new Architect test for ovarian cancer in Europe and submitted a new HIV combo assay for Architect to the FDA.

In the fourth quarter, we also strengthened Abbott's competitive position in the global diagnostic market with the acquisition of STARLIMS, a leading provider of laboratory information management systems.

STARLIMS will enable Abbott to provide advanced web based software applications to help laboratories efficiently store, retrieve and analyze data.

We plan to complete this acquisition here in the first quarter.

In both our point-of-care and molecular diagnostics businesses reported global sales in the fourth quarter grew again double digits.

In molecular, reported sales were up more than 30%, driven by our M2000 platform performance.

This quarter we launched a real time assay for colorectal cancer on the M2000 in Europe.

This DNA-based test provides a less invasive option to colonoscopies and is the first cancer test available on the M2000.

In our point-of-care business, reported sales were up more than 10%, driven by continued success of our camay test and cardiac menu.

So as we look ahead to 2010, in our worldwide diagnostic business, we expect mid-to high single-digit reported sales growth.

This includes mid-single-digit reported sales growth in our core laboratory business, where we expect -- we expect continued profitability and cash flow improvement.

We're forecasting double-digit reported growth in both molecular diagnostics as well as point-of-care.

So let me turn quickly now to our other medical products businesses.

In our diabetes business worldwide reported sales in the fourth quarter declined modestly.

While the market has been negatively impacted by the economy, we continue to focus on growing our retail prescription share through expanded consumer outreach and patient education.

Similar to what we have done in our core laboratory diagnostics business, we're focused on improving the profitability of diabetes care as we look through 2010 and beyond.

So as we look ahead to 2010, our global diabetes business, we expect mid-single-digit reported growth.

Let me move on to vision care and AMO, where sales were $317 million in the quarter.

AMO results in the quarter included December international sales, reflecting a transition to calendar-year reporting for AMO's international business.

There was no significant profit contribution associated with these sales, given that it also included operating costs in December.

Therefore, the bottom line impact was negligible.

In addition, we closed our acquisition of Visiogen in the quarter, bringing us the late-stage pipeline technology Synchrony .

Synchrony is an accommodating IOL, which is designed to mimic the eye's ability to change focus, delivering improved vision at all distances and potentially eliminating the need for glasses and contacts.

Synchrony is on the market in Europe, and we anticipate US approval, as Miles said, in 2011, based on the likely timing of panel review in the second half of this year.

We expect sales of more than $1 billion for AMO in 2010.

Turning now to our vascular business where worldwide sales in the fourth quarter were $723 million, and that was up approximately 9%.

Global DES franchise sales in the fourth quarter were more than $370 million.

DES franchise sales include XIENCE, XIENCE Prime, as well as our other third party DES product revenues and were up double-digits sequentially, as well as year-over-year.

Sales performance was driven by the continued success of our drug-eluting stent XIENCE, as well as the international launch of our next generation product, XIENCE Prime, which as Miles mentioned, is launching in the US in 2012.

Two important clinical trials SPIRIT IV and COMPARE were presented at TCT at the end of September, as you know.

And earlier this month, COMPARE results were published in the medical journal, The Lancet.

In this 1,800 patient investigator-led study, XIENCE demonstrated statistically superior outcomes in key safety and efficacy measures compared to TAXUS Liberte.

In the coming months, we anticipate SPIRIT IV will be published in a top tier medical journal as well.

The publications of these two studies, COMPARE and the other publication will further increase awareness of these trials among our customers and physicians.

Since TCT and the disclosure of these data, we have seen positive market share moves for XIENCE and the XIENCE platform in the US, and we expect that to continue over the course of this year.

From the third quarter of 2009 to the fourth quarter, end of the year 2009, we saw approximately 3 to 4 points of market share move to the XIENCE platform share, which includes PROMUS with roughly equal gains from both products.

In Europe, with this data and the launch of the next-generation DES XIENCE Prime, we're seeing positive market share trends as well.

In the US DS market, PCI volume is up low single digits year-over-year, and DES penetration is approximately 77%.

That's up about 4 points versus last year.

As Miles mentioned, we received approval for XIENCE in Japan, and we expect to launch in the first week of February, immediately following final reimbursement authorization.

In addition to our leading stent portfolio, we have expanded our business to include structural heart repair for the acquisition of Evalve, a leader in mitral valve repair.

Evalve's MitraClip device's minimally invasive option for treating mitral regurgitation, which is approximately four times more prevalent then aortic disease and is currently treated through open heart surgery.

The MitraClip is on the market in US -- in Europe -- excuse me, and is anticipated to be approved in the US in 2011.

We're on track to submit MitraClip to FDA this quarter, and also expect to see the US pivotal trial results of EVEREST II at the upcoming ACC meeting this March.

So as we look ahead in 2010 and our vascular -- global vascular business, we expect double-digit reported sales growth as well as continued strong improvement in the operating margin.

Moving on to our broad-based pipeline overall, we took a range of strategic actions as Miles and Tom mentioned in 2009 to bolster our early and late-stage pipeline as well as continued -- as well as continue to see progress with many of our internal programs.

In 2010, we expect to see continued advancement of our pipeline, including the anticipated approval for a number of new products or indications and data for more than a dozen pipeline programs.

In our pharmaceutical pipeline, we have a number of unique compounds in early- to mid-stage development for oncology, immunology, HCV, neuroscience and pain management.

Our oncology program is comprised of breakthrough research, focused on unique, less toxic treatments.

Our compounds and development employ unique mechanisms to inhibit tumor growth and improve the response to common cancer therapies.

Abbott continues to progress, ABT-869, our multi-targeted kinase inhibitor, which is already generating compelling data in liver, lung, and kidney cancer.

We recently initiated a Phase III trial of 869 in hepatocellular carcinoma, and additional Phase II studies in other cancer types are ongoing.

ABT-263, our BCO-2 family inhibitor is currently in Phase II for chronic lymphoid leukemia and ABT-888, our PARP inhibitor is currently being evaluated in a number of cancer types, including metastatic melanoma.

Abbott is also validating a number of additional promising mechanisms in our preclinical pipeline.

In immunology, we're leveraging our experience with the development of Humira to identify new mechanisms with the potential to treat an array of immune mediated diseases.

Our pipeline includes early stage work on oral DMARD therapies, as well as a number of biologic candidates, including ABT-874, our IL-1223 for psoriasis currently in Phase III.

And our proprietary DVD-ig technology represents a promising approach that could lead to combination biologic therapies with potential application in a number of therapeutic areas, including immunology and cancer.

In HCV, we currently have three compounds in human studies spanning multiple mechanisms of action with the ultimate goal of developing a best in class combination treatment.

We have ongoing work in three different target classes, each of which is shown to be effective in humans.

We're well positioned to explore combinations of new therapies and strategy with the potential to markedly transform current treatment practices by shortening therapy duration, improving tolerability and increasing cure rates.

In neuroscience, we're developing compounds to address Alzheimer's disease, schizophrenia, pain and other neurological conditions.

We recently advanced two compounds from our NNR and H3 platforms into Phase 2 development for Alzheimer's, as Miles mentioned.

And in our vascular pipeline, as we've discussed recently, we're working on more than 10 coronary technologies over the next five years, making it the most robust pipeline in the industry.

These include news devices such as XIENCE nail, small vessel DES, XIENCE Prime in the US in 2012 and ultra thin metallic DES next generation balloons, as well as our bioabsorbable drug eluting stent where we're several years ahead of any competitor in the DES space.

We recently presented three-year data from our bioabsorbable clinical trial which showed impressive efficacy and safety results, consistent with our two-year data, and we have initiated a trial called ABSORB Extend, which will enroll up to a 1,000 patients with more complex disease.

Outside of DES, we're continuing to update our product portfolio.

We recently received CE Mark for MULTI-LINK 8, our next generation bare metal stent, which serves as a stent platform for XIENCE Prime.

We anticipate launching MULTI-LINK 8 in the US later this year.

We're also reshaping our balloon offerings with the goal to recapture the number one share position.

In 2009, we launched our VOYAGER NC balloon, and we've gained about 6 share points of the total US balloon market.

We plan to launch our next generation frontline balloon later this year with the expectation for continued market share gains.

So in summary, we're pleased with our overall performance in 2009.

We've got momentum as we enter 2010 and prepare to close our Solvay Pharmaceuticals acquisition.

With that, Alain will now open the call

Thank you.

(Operator Instructions).

Our first question today is from Mike Weinstein from JPMC.

Thank you, good morning, guys.

Good morning.

Let me ask just first, the two big swings on the income statement in 2010, per your guidance, are -- the big drop-off that you are assuming in your payments from Takeda, which is fairly meaningful to the bottom line, and then that is offset more so by the tax rate.

Could you just spend a minute on the two, and is there a linkage between the two, is there a tie there because the payments are coming down from Takeda that that brings your tax rate down as well?

Is that contributing?

No, there's no direct linkage, Mike.

This is Tom.

What is happening with the tax payments is the development of the products, which as you know would have been part of the joint venture, and we would have been participating even more in if the joint venture had continued.

The progress of those pipeline products just has not been what was expected a couple of years ago, and as a result, the amount of other income associated with the splitup of the joint venture is going down.

I think one way of looking at that is certainly, over the next three or four years, we all knew this was going to decline, and we have now taken this out of the mix, and it's something that people can pretty much -- given the modest level we're running at here, take out of their radar screens as something to be concerned about in the future.

So that's the situation there.

Totally dependent of that, we continue to see, given the growth of key products, just continuing positive trends in the tax rate.

You saw that as we left 2009, and we pretty much just carried forward the trends we saw as the year progressed in to 2010 with a very slight improvement from those levels.

So two independent things, but I think you are right.

They tend to offset each other from a modeling perspective.

It really means that the fundamentals of the business and the growth that we're projecting for 2010 are sound.

Let me ask you a few others and take them in the order, I guess they would be number one, as you have gotten further in to your Solvay planning, have your thoughts around accretion from that transaction changed at all, plus or minus?

Two, you talked about Humira, but could you talk a little bit about your thoughts about US versus OUS performance in 2010, and then I'll let others jump in.

Thanks.

I'll take the Solvay question.

We still have not closed.

Although that is fairly eminent, we expect that by the end of February.

I think it's too early to say, given that we haven't totally rolled up our sleeves and worked with the management of Solvay to work on improving profitability.

Certainly, as I indicated in my remarks, we do expect some efficiencies in SG&A, it is going to take a while for those to kick in, and really will be more of a 2011 opportunity.

And I just think it's too early to say whether there's any additional potential in 2010, but certainly, we have high expectations for this deal, both commercially and from an efficiency point of view as we progress over the next couple of years.

Okay.

Mike, yes, on Humira, we're obviously very pleased with the outlook for the product for 2010 with global reported sales growth of approximately 20%.

So we're doing very well internationally where penetration rates are low and lower than the US, and we continue to expand, our outlook there is robust for 2010, as I talked about in my remarks.

In the US, remember we had this odd ball situation from last year that is affecting, you know, kind of the overall performance as reported -- on a reported basis, but the growth of the product underlying growth is still strong.

The script trends are in the double digits.

You know, we continue to see steady improvement there.

We expect, as Miles said, to become the number one anti-TNF eventually.

That might not happen this year, but maybe shortly thereafter.

Some of the market, obviously, is screwed by Enbrel and their decline.

So we continue to see good progress there.

Our data, as you know, is best in class, and so the new entrants to the market, some of the anti-TNF, and then the other IL-1223 have had limited impact in line with our modest expectations, and we expect that will be the case as we go in to 2010 here as well, and we have obviously accounted for those in our approximately 20% guidance for growth for this year, so.

Overall, we feel good about where we're at.

And Miles, do you want to add anything to that, or?.

The only thing I would say, Mike, is if you recall the uneven quarter-to-quarter look of Humira last year from the fourth quarter of '08 to the first quarter of '09, sort of presents an uneven comparison for this year as well, so that looked a little bumpy.But the underlying fundamentals of it are what's more important, and I understand that's what you are asking about here.

I think the bottom line is I -- clearly, a lot of factors in the market affected NITNF last year biologics of all kinds and Humira, but underlying that, I think we can do better, and I think we can do better in our own marketing performance of the product in the US, and frankly, I expect to see us to do better with it this year anyway.

So adding on to what John said, I think there is a number of factors affecting it, but part of it is what I think we can do.

And we continue to grow faster than the market, which I guess is the bottom line.

Thanks, Miles, I'll let some others jump in.

Thank you, our next question is from Jami Rubin from Goldman Sachs.

Thank you very much.

Just a couple of questions.

On the topic of US Humira sales this quarter, Tom, if my memory serves me right, I think you had called out about $100 million in stocking fourth quarter '09 so -- or rather fourth quarter '08.

If I adjust for that stocking, is a it correct to assume that US Humira sales would have been up about 19% this quarter?

And on that topic of inventory levels, you also had $40 million of Trilipix a year ago.

So as you head into 2010, what sort of color can you provide around inventory levels going forward?

Because that obviously was a factor in your 2009 numbers.

And just last question, the guidance for the first quarter, $0.79 to $0.81, which is below the consensus forecast, I would have thought that easy Humira comparison should have been a pretty significant tailwind going into the first quarter.

What are some of the factors that we should be thinking about in adjusting our models?

Thanks.

I'll go through those questions.

I think I'll start with Trilipix .

Clearly, what happened in 2008 as we launched the product in the fourth quarter, so certainly there was some launch quantities going out the door for Trilipix , and that really is what made the comp difficult between the fourth quarter of '09, and the fourth quarter of '08, so that was really very much a product launch phenomenon and very normal type of thing.

Humira stocking, there is probably a little confusion about this.

Certainly in the first quarter of '09, we saw roughly $100 million of destocking that really affected that quarter.

I would say that was even more than the advanced buying or the additional buying the wholesalers did given the strong demand we had in the fourth quarter of '08.

It was even more than we saw in that period of time.

So I think I would put the fourth quarter '08 number more in the $60 to $70 million range.

And certainly, I think that 19% you quoted is a little high, but certainly as John indicated, if you look at the fundamentals of this business, it's moving in a script basis in the low double digits, and probably a little bit more than that overall.

So hopefully that gives you the math and the gating between the two quarters.

And I -- again, as I mentioned in my remarks, I think the big thing in the fourth -- in the first quarter of 2010 that is a comp issue is we had some pretty significant milestone payments under the Takeda arrangement in 2009, and as I indicated in my remarks, we are not expecting any milestone payments in 2010, and that really is the big comp issue, I think.

And when I say that, we're still talking roughly 10% growth in the first quarter.

So it's slightly less than the later quarters, mainly because of that comp issue.

So I still think the growth in the first quarter is very solid, and there is really nothing else notable to factor

Yes, the other thing, Jami, I would mention, this is John, is be a little careful with that -- those estimates in the first quarter.

There was a few people in there at 20%, 30% growth rates, which obviously skewed the number, so it's not quite a trued up number.

Yes, usually as you know, as we go in to the new year, the quarterly estimates, which -- this is the first time we've provided any quarterly forecast, they are not very well refined, and they really are somewhat dependant on us giving guidance.

So I think John makes a good point.

Thanks.

Thank you.

Thank you our next question is from Glenn Novarro from RBC Capital Markets.

Hey, thanks guys.

Hello.

Two questions.

One, Tom, you gave a lot of guidance in the middle of the income statement for 2010.

Gross margins going higher, SG&A ratio going higher.

A lot of this is being skewed by the Solvay deal.

And today a lot of us will be published our 2011 forecasts as well.

So can you help us, how do we think about what kind of a sustainable gross margin is going forward, what a sustainable SG&A ratio should be going forward, so that we can kind of get our 2011 models at least close to how you are thinking about 2011.

That's my first question.

Okay.

Talking about 2011 is a challenge today, but as we look forward at gross margin, the mix of our business continues to improve, and I would characterize our gross margin as steadily improving over the next few years, similar to the improvements you are seeing in 2010 here.

SG&A , certainly there is a step-up this year as we add the Solvay business, which has had a higher SG&A ratio, as I indicated in my remarks.

But as we are looking at efficiencies in 2011, I am hopeful that we can bring that ratio down and start seeing the type of leverage again as you have seen in 2009.

I would say one more thing about 2009, going -- and really, it affects 2010 a little bit ,as well.

Exchange, as you know, as it positively impacts our top line, it does put a little pressure on the margin ratio, given the mix of our business, and that has had a little bit of impact on the margin ratio in 2009 and even 2010.

Hopefully that will normalize out, and really, the fundamentals of the business will come through a little

Okay, and how should we think about that R&D ratio too, longer term?

As we indicated in our remarks, we're -- that's going up quite a bit in 2010 to around 9.5%.

And certainly, we are committed to maintaining at least that ratio going forward.

Miles may want to chime in here.

But we're very committed to very sustainable R&D spending over the long term.

Yes, the thing I would add to that Glenn, is we -- as we continue to build our pipelines, and the company continues to perform well, I think the thing that I look at long term is obviously wanting to put more and more -- I don't know that I will ever want to stop that, put more and more in the engine room for sustaining the company long term.

So, I have a personal intent and goal here, which, of course, 80,000 other people now share, to increase the spending in R&D, and again, increase that profile, so we'll be increasing that profile and that spending in '010, and my goal would be to continue to increase and improve that profile over time.

Actually, SG&A kind of depends.

It depends on the -- I think we're in a good balance in our sales and marketing costs.

There's a lot of opportunities to spend on, I think, for market growth where we can measure the return we're going to get.

So I think that kind of depends on where we see the opportunities.

But I like to have the power to do that, and right now, the earnings power of the company and the cash flows of the company are such that we can.

We're going to turn out pretty healthy double-digit growth this coming year and be able to improve our spending in both R&D and SG&A, and that's a pretty strong position to be in.

Just one quick follow up.

The shares outstanding ticked a little bit higher than we thought in the quarter.

What is a good shares outstanding for 2010?

For us, we do plan share repurchase in 2010.

The shares outstanding for diluted purposes tend to go up and down with the stock price just a little bit, and that's just the way this formula works.

So I think something roughly in the current level is a reasonable expectation for next year as the share repurchases at least offsets any dilutive effect of options, et cetera.

Okay.

Great.

Thank you.

Thanks.

Thank you.

Our next question is from David Lewis from Morgan Stanley.

Good morning.

Good morning.

Tom just on -- coming back to tax rate here for a second, I would assume Solvay would have increased the tax rate year-over-year.

So can you talk about the specific dynamics on the core business that are resulting in sort of that net lower tax rate for 2010?

It's very straight forward, and you know what products are rapidly growing for us that tend to benefit -- we have benefits from certain tax jurisdictions, so it's pretty much the mix of the business that is driving it and the continued success of our key products.

Great, so more of the same?

Yes.

Okay.

And then last quarter and this quarter, you talked significantly about specific, or John did, the pipeline.

Are you in any better position here with Solvay coming up, closing here in a month, to talk about where this relative level of R&D investment is going to go?

Maybe help us sort of priority rank of all of the things that John talked about on the pipeline, where we can see the greatest investment for the business here over the next couple of years.

Well, again, our plan is to -- once we close the Solvay to do a more thorough review -- a very, very thorough review of the pipeline and continue to invest in programs that have good opportunity, and to the extent we have better opportunities either in house where we're getting more and more products out of our development pipeline -- or our discovery pipeline, or even external opportunities similar to the Pangenetics deal we did or other things we continue to look at it.

It's really going to be a process we'll work through, really, throughout the year, and that's the way we're going to approach it.

David, are you asking specificly about a particular business, or the company as a whole?

You've just done a nice job laying out the pipeline more definitively now than you had in prior quarters.

I'm just wondering, given the increased investment, if you could help frame up for investors where we can expect more significant investment versus sort of less significant investment given you throughout kind of a myriad of programs.

I would say by sheer balance of size in the business, obviously pharma is going to be a place that gets a disproportionate amount of R&D investment in absolute terms, because it's just a much bigger business.

But I would tell you also, we remain pretty bullish on our pharma business and the categories -- therapeutic categories that we are in, and so consequently I would say, over time here, that will get a fair amount of incremental investment, at least I would like it to.

And one of the most attractive things about the Solvay acquisition was the ability to redeploy some of that spending to things we want to spend on either new products coming out of discovery into our clinic or frankly, things we want to accelerate.

So I like having the spending power and flexibility to do that.

At the same time, we're putting some attention behind the expansion of products in a emerging markets That's kind of a -- it's a newer area for us, it hasn't gotten a lot of attention.

It will going forward.

You heard from Tom that there's a significant number of opportunities emerging in our device businesses, and while I think there's a lot of opportunities there, and we can put a fair amount of investment behind them, pharma tends to be a fairly big consumer of spending as a generality, as I said, we have done really well with pharma in the last 10 years, and we continue to, and we like our position and remain bullish on the specific opportunities there, so I would look for that kind of proportion in balance.

Okay, just one last question, and I'll jump back in queue.

But John, you talked about -- it's very clear that Trilipix , TriCor back on track with pretty good growth rates for 2010.

Is there a conversion percentage that the company is striving here by the end

Obviously we want to keep moving it up steadily, which is what we have been seeing in the marketplace.

And as we talked about in the past, that level of Trilipix continues to increase at a nice steady pace, so no specific targets I can give you other than steady improvement.

Okay.

Thank you very much.

Thank you.

Thank you.

Our next question is from Sara Michelmore from Cohen.

Great, thanks.

Miles, while we have you, I would be interested in your thoughts in terms of long-term picture here, and where your growth drivers are coming from.

Today, if I look at the portfolio, a lot of the key growth drivers, or a number of them anyway, come from products that you have acquired externally, and it sounds like the company is maybe shifting more towards internal innovations.

And I'm wondering if you can comment on that.

And then also, now that you have got -- or are close to closing the Solvay deal, is that -- should we think about that being kind of the acquisition that you are focused on for 2010?

Does it preclude you from doing other things, et cetera?

Thank you.

I tell you, the notion of where your products come from kind of ebbs and flows.

As you point out, a number of the products that are growth drivers today were the results of acquisitions.

Of course, they were in development at the time of acquisition, and in a lot of cases, while you forecast success for those products, we've been pretty fortunate that a number of those products have been extra successful in a lot of ways, and I think we've done a great job with the development of those products and the -- taking them to market, which I credit my management team with.

So we have been beneficiaries of that.

The development of a pharmaceutical pipeline, or frankly today, even a very innovative device pipeline takes a lot longer than it used to, or at least on the device side.

And your organic pipeline takes years to evolve and development.

I'm very pleased by what I see comes out of discovery now into Phase 1 and Phase 2.

But I'm also mindful that investors are a little more impatient than waiting 10 years to see a product develop.

So you have got to try to stage your pipelines and your products in a steadier fashion for the investment community and so consequently, you supplement what you do with licensing and/or acquisitions.

Having said that, I don't think anything company -- at least this company should not rely on just licensing and acquisitions.

You have got to have a pretty good organic engine room that can innovate, discover, develop, design, et cetera, new products.

I'm pleased by what I see there, but I put an awful lot of emphasis on that internally, because I don't want to be reliant on external sources of new products.

So it ebbs and flows, Sara.

We look pretty comprehensively at both.

We have got a pretty good idea of what is coming out of our own innovation, but at the same time, I don't think we can ever feel satisfied that there is enough, and so consequently, we push ourselves to look not only internally, but outside until there's a balance.

Now with regard to the future, I think that there is things I see in pharma that clearly will be growth drivers.

We're paying at attention to the long term there, the five to 10 year out period because not all products are sustainable.

There's things that go generic, et cetera, and we're mindful of that.

We're mindful of the timing, and this year we weathered the largest product that has ever gone generic in our history, that was Depakote, and I would suggest in some ways nobody even noticed because we had so much growth out of other new products that we managed to maintain double digit growth in a tough economy with the biggest generic -- or product going generic we have ever had.

We have to plan that way for the long-term future, and so we do, and I think we balance the investment and external opportunities with the internal very well, but I wouldn't skew too far in any one direction.

Remind me again the second part of your question?

Yes, just on M&A.

Do you feel like your plate is full, at least in the near term for large deals with Solvay?

And how should we think about your appetite for M&A going forward?

Thanks.

Well, we did a lot in 2009, as you know.

We had six significant additions to the company, some more significant in than others in terms of pure size.

We're obviously focused on the integration preparation for Solvay when it closes.

I will tell you that we have had so much experience with the rapid integration of a mid-sized company like that, that I think we're well prepared and well organized for that.

AMO is fully integrated.

We're sort of done with that and up and running and fine, and the smaller things that we added to the company, whether Evalve, Visiogen, et cetera, they are all, I think, well integrated.

So Solvay is getting the preparation right now.

I don't in any way think that that consumes our activity so much that we're unprepared for anything else.

I wouldn't tell you that we're so busy and at capacity that we can't do anything else.

That said, we'll being rather opportunistic and selective as we look at what kinds of things we continue to be interested in.

I think it's an opportune time, last year and going forward for a while in the external world.

I think there are opportunities there.

We are -- we're keeping our eyes open for things that would be additions to or expansions of our existing franchises or businesses around the world.

We're mindful of further geographic footprint.

I have mentioned before that the emerging markets are clearly a priority for us, and our footprint there important to us in a number of our businesses.

So I wouldn't rule out any kind of licensing activity.

I'm always looking for things to enhance our pipelines, and I think that's a constant effort, and I don't feel constrained from an inactivity standpoint or capacity standpoint at this point, and I think from a financing standpoint, which is prudent.

We try to keep things in balance because we know it's important for us to maintain a certain flexibility and maintain a certain financial profile for our investors.

So, kind of a long-winded answering of saying no, I don't feel overly constrained.

That's helpful Miles, thank you.

Thanks.

Thank your you our next question is from Rick Wise from Leerink Swann.

Good morning.

Hi, Rick.

How are you doing?

Let me start off with the EPS guidance one more time.

If you look at the low end of the 420, 425, if Solvay is going to add roughly $0.10 this year, it would seem, clearly, you are more caution on -- maybe let's call it the core -- the '09 core added.

Is that all Takeda and the Meridia impact?

Is that the major delta in the context of -- I know you are always desirous of being conservative to start the year.

Certainly you are right, it's the beginning of the year, but I wouldn't characterize it that way, Rick at all.

Let's look at the basics here.

If we didn't have the $0.10 for Solvay, we would be growing, again, double digits, even excluding the Solvay addition over the 2009 numbers.

So, again, very, very strong earnings growth regardless.

Certainly, we've had a couple of headwinds that I mentioned earlier in the year, but we factored those in to our guidance, and we're still delivering guidance that is very consistent with what we have been saying for a long period of time, and very specifically what we talked about in the third quarter call despite these events.

So I think that shows just how strong the underlying business is, our ability to withstand things that happen, and I think our growth forecast at this point are very solid, even before the addition of Solvay.

Okay.

Stelara, -- or I'm sorry, let's try this differently.

ABTA -74, could you update us a little bit?

I don't think I heard you mention it, but -- and any early signs from the competitive anti-L-12 that you launched -- that have been launched about how this type of drug is being received in the market and maybe just thoughts about timing of -- to data and launch?

Thanks.

Yes, hi, Rick.

Yes, I did mention in my prepared remarks that 874 continues to progress in Phase 3 development, so the timing there is the same as what we've talked about before.

Our target is to continue to continue look to file that product in the first half of this year.

It -- of course, is always, within any of these products, you have to meet with regulatory authorities and go over your pre-NDA submissions and so forth.

So nothing really new there.

I would tell you that the other IL-1223 product that you mentioned, which did come to market, has had about the impact we expected, which is modest.

And that's explainable, particularly given that it is psoriasis product and derms, as we've talked about before, tend to be more conservative in their treatment.

And probably we'll wait to see more data and get more comfortable with these new mechanisms of action and their safety profiles as we go through time.

That contrasts, obviously, with the anti-TNS and Humira in particular, which has not only strong robust efficacy data on the psoriasis side, but also many, many years of safety that also go with it.

So I think there's more of a comfort there.

So as I mentioned in my remarks about the 20% global reported growth for Humira this year, that does factor in these new mechanisms of action which tend to be used more for failures to be begin with, and that's the expectation we'd have going forward.

And last -- Miles, if I could follow up on the earlier question asked a little differently.

Maybe just update us on your latest thoughts about cash use, or how your priorities or your thoughts are changing as you look out at this year and next?

And maybe broadly, would you rather, if you could acquire, would you -- at the right price -- would you rather be doing it on the pharma side or the rest of the franchise?

And maybe any thoughts on where we stand with healthcare reform as well?

Thanks so much.

Okay.

Well that should take the next hour.

I would tell you this.

On the cash use -- first of all, we have got a very strong cash flow, and we have maintained steady dividend growth to the delight of many investors now for 37 years, as we pointed out.

And double digit dividend growth.

So I think that's a healthy thing, I think for investors, in particular the kind of investor that we often appeal to.

Secondly, we repurchased shares.

So our cash return to investors is very strong.

I think we're prudent investors of capital.

Our cash flow is strong enough that we can do all of that, and still have the flexibility to -- whether it's in licensing or certain selective acquisitions and so forth, we can do that.

We try to maintain a particular balance with all of that.

To add on to Tom's point earlier about our forecast coming in to the year, I think we have given investors a very strong forecast.

This is an accelerating double-digit earnings forecast, on top of a double-digit performance in the prior year that many companies did not deliver and owing to clearly economic factors and specifics to their companies and so forth.

So I think what we're seeing here is a very steady, strong and even accelerating financial and economic performance, and the underlying balance sheet and cash flows contribute to that.

My desire is to keep all of that in balance.

We try not to extent to any particular extreme.

And then with regard to M&A activity, we try to just keep it balanced, and -- so that we can respond to opportunities.

I wouldn't say our priorities have changed.

I wouldn't say we're shifting in any particular direction other than that we have done.

If you look at last year, we were able to do all of the things that we did and pass through no dilution.

I know our investors, particularly in this environment, are concerned about that.

They want steady reliable, "you told me you were going to do this, please do it", kind of forecasting, and that's what we have given them.

We said we are going to do X.

We went out and did our strategic investments, and we didn't alter X.

We didn't disrupt our investors with changes in our earnings or earnings forecast or our long-term earnings or earnings forecast or return forecast going forward.

We haven't altered our dividend profile or our cash profile or return to investors profile, and I think you do that if you maintain a certain balance, and you have to maintain a little bit of contingency planning in there.

You can call it conservatism.

You can call it whatever, but we always enter a year understanding that we're going to need some sort of contingency planning for the unknown.

Whether it's a Venezuelan devaluation or suspension or a product or --these things happen, and yet we have not passed those through to the investor, we have managed them.

And that's what we're suppose too do.

We're supposed to manage them so we can remain a reliable, steady, predictable investment for our investors.

And I would add to the top of that, if you go back and look over the last four or five years, I would say pretty consistently, or at least probably 70% to 75% of the time, we have beat our forecast in the quarter.

And I would say that ought to give an investor confidence.

I remember, Rick, you used to ask me, if we had a stronger performance, would we reinvest it or give some back to the investor, and I used to tell you we would do both.

And that's exactly what we have done.

We have done both.

We have passed some of that back to the investor, and we've also invested either through M&A or the investment in our profile.

So I think we have been a really good story for investors and a good balance.

We have done what we said we were going to do and more.

And we're forecasting to continue to do it.

Are you there, Rick?

Definitely.

I didn't want to stop you, Miles.

John was giving me the hook that I was doing a filibuster, you know.

Anything else, Rick?

Thank you very much.

Okay, thanks.

Thank you.

Our next question is from Bruce Nudell from UBS.

Good morning, I have a very tactical question, and then I have a more strategic question.

Looking at (inaudible) 70 million stocking in 4Q '08, around 7% Price out of the 10% list is what we were guessing.

That would imply, perhaps, a little bit of destocking this quarter.

Are we just over optimistic on the price component?

Could you just give us a little modeling guidance there?

Yes, you are very high estimating that.

As you know, there may be a wholesale adjustment, but when you net it down through rebates, et cetera, you get to a pretty low single-digit type number, so I think you are very much over estimating that, and I think that's the situation.

That would explain it.

Thank you.

And then on the strategic level, the dynamics in the drug-eluting stent market in aggregate are bad.

Pricing is more than offsetting any volume growth.

In terms of an investment opportunity, do you see that market turning around, and can you contrast that with the structural heart disease opportunities that you could address through your vascular business?

Either the mitral one or perhaps an aortic one down the road?

Thanks a lot.

I can give you an overall sense of the market.

I think a lot of markets took a lot of pressure in the last year or two, largely because of the economy, and to a degree some consumer discretion.

And then on top of that, some pretty intense price competition.

If I look at the DES market in particular, I would say this.

The market has tougher conditions, but we couldn't be in a better position in that market, both in terms of XIENCE, and the XIENCE Promus platform.

We go head on against our competitor Boston Scientific, against our own product, and that's an interesting dynamic in the market, but frankly, that's benefiting the product.

And if you are going to be in any kind of a market at all, whether it's under pressure or not to have the superior product, superior medically, technically and from a scientific standpoint, et cetera, that's a pretty strong position to be in.

I don't think the need for these products is going to go away.

I don't think the concern about the cost of healthcare is going to go away.

But in a market where there is pressure on cost, et cetera, there is always going to be opportunity for superior products that make a real difference, and that's what XIENCE Promus and frankly, that's what the pipeline is like coming out of our vascular business.

So I would say we remain pretty optimistic about the opportunities in that segment.

I think if you have just got a me-too product or an inferior product, you are going to struggle in these markets, and we see that in a couple of our businesses, not this one.

We see that in some other companies and their products.

So I think we're in a pretty strong position.

We are in a position where we can afford to be pretty, I guess strong in terms of our investment and our expansion.

The way you look at a market like this is you want to take as much share as you can with your product while you've got a strong position, and that's what we're doing.

And we see that happening and we've got geographic expansion on top of that, and then a pipeline of improved products coming behind it where we are way ahead of our competition, like bioabsorbable stents, et cetera.

We are just way ahead of everybody else in terms of the things that are coming.

So I think that remains a pretty attractive market.

Remind me again the second --

He asked about Evalve.

More broadly.

Evalve is probably the first of many things that you could do in that space over time.

I tell you, Bruce, right now we're very excited about the mitral space, that's, as I mentioned, a space that's about four times the size of aortic.

It's about a $3 billion market opportunity.

We're there first.

We have got a considerable lead.

It's a pretty exciting technology, as you know, and the alternative is opening up your chest with open-heart surgery, so obviously a critical patient need.

We will be presenting data at ACC.

In fact, as we were talking we just found out that our late breaker, Everitt II, it has been accepted as a late breaker presentation at ACC.

So that, I think, is the focus area for now.

There's no other plans to expand beyond that in any significant way at this time.

But that's what we can tell you so far.

Thanks so much.

Okay.

Operator, we'll take one more question.

Thank you.

Our final question is from Derek Sung from Sanford Bernstein.

Hi.

Good morning.

Miles, just staying at the high level first.

Humira has just been driving tremendous growth, obviously, as we all know, for the company over the last few years and will probably continue to do so, certainly this year and maybe next year.

But inevitably, that growth is going to slow, and you are going to be facing potential generic competition in 2014 and maybe the oral (inaudible) are going to become competition before that.

How comfortable do you feel on -- in terms of the positioning of the company as it stands today, that you'll be able to fill that gap when that inevadible slow down happens?

And how do you get investors comfortable with your ability to do so?

Well, a couple of things.

Am I comfortable?

I'm comfortable that we will address that dynamic when the time comes properly, because we are working on it now, and we have been..

I would tell you, if an investor is looking for a single product that replaces the slowing down of a Humira, it's probably not a single product.

I don't think you can count on a single bullet that is going to miraculously somehow replace a product like Humira.

Humira's patents last until 2018 outside of the US, early 2017 in the US.

And we look at that, and we say, okay, we're going to need -- it's going to be a different dynamic, I think, with a biologic than your typical oral med in the US.

I think what we are going to see is a decline that would be more gradual than a typical small molecule.

But even then, I think we have to prepare for a number of other growth drivers across the board that would replace the growth being driven by Humira, and we are.

We are not counting on any one thing and we're not counting on only a couple of things, so we are addressing a lot of growth drivers from a lot of sources.

Some of that is pharma.

Actually, some of it is geographic, some of it is devices.

We're well aware of what the profile could look like out there.

I don't think it's a statin-type profile when the time comes, but nevertheless, we're planning and preparing and making our strategic moves with the notion that it will be a combination of factors.

Now as how do I get investors confident about that.

There are a lot of investors that aren't confident until they can see something in the rear view mirror behind them.

But I would say this: a lot of times investors gain their confidence by the track record and the performance of the company.

And if you look at what we have done over the last six or sech years and how we navigated Depakote going generic, Biaxin and clarithromycin going generic, et cetera, as I said earlier, you didn't even notice that Depakote went generic because there were other growth drivers in the pipeline, and they arrived and launched and drove growth at exactly the offsetting time of Depakote, and I will tell you that is not an accident.

That had been planned.

That had been managed.

It had been prepared for years earlier, and the same is happening here with the anticipation that some day Humira will not be the growth driver that it is today.

All I could tell you is to the extent that there's not crystal clear, crystal ball visibility to what those drivers may be when the time comes, I think the investor has to take some confident that the management and the strategies of the company historically have repeatedly done that.

If you go back to what this company looked like in, say, 10 or 11 years ago, we were about $12 billion in sales.

We spun off Hospira and about $4 billion to $5 billion worth of pharmaceutical products went generic in the interim.

That leaves us, as a company, with about a $5 billion base back then, and this year we project to do $36 billion, $37 billion in sales.

That wasn't an accident, that was managed.

And I would say to investors that we're obviously a much broader-based company today.

We've got more growth drivers today.

It didn't happen to us like an act of God.

We'd planned ahead for the things that would go generic and that we would have to replace.

We invested in our pipeline accordingly and the things that we brought to the company, and we will do the same going forward in that five to 10 year period when Humira will slow and other things will obviously go generic.

A company like ours has to keep replacing itself with new technologies, new products, new growth drivers, and we are.

We are not sitting back just watching Humira and enjoying the growth.

In fact, that's part of what we do today, and that's part of where investors focus today.

Because you look for an answer every 90 days.

We're spending a fair amount of our time on our investments and our pipelines and on research and development, and we're planning and plots years six through 10 out there in the LRP.

I think that right now, absent detailed visibility and forecasting of elements of our pipeline, of new products coming, that's probably the best we can ask of investors is keep believing in us because of what we've already done and delivered on a fairly consistent basis, and better than most over the last 10 years.

Okay.

Thank you.

On -- a follow-up to the Humira pricing question.

So you have been taking maybe 5% to 6% price increases annually, and I understand that that's wholesale price and with rebates and such, it might not flow through.

But my question is how sustainable is that moving forward?

How much of that is built into your guidance for 2010, given the cost contain environment?

Do we continue to assume that that continues on for the next few years?

Certainly, we're pretty realistic about the markets, and it's clear that in all of our healthcare businesses across the board, we generally don't count on price.

We recognize that it's competitive markets, and we have to be efficient, and that's fundamentally the way we put our long-range forecast together.

So fundamentally, we can't count on it going forward.

And we have not built expectations of it into our forecast going forward.

Okay.

And one real quick one, your guidance for TriCor and Trilipix 2010, does that -- what does that assume about the results from the Accord trial?

Positive impact, negative impact, neutral impact?

And when might we expect to see those results?

I was waiting an hour and a half before I got that question.

So for the uninformed, the Accord trial is a, as we talked about in the past is an NIH study, and it was designed back in the late '90s, started enrolling patients shortly thereafter.

Not our study.

I think the key things to remember with that are its a baseline patient population that has near normal trych levels.

So clearly not our target patient population, which tends to be patients who have trych levels that are quite a bit more elevated than that, 200 to 300 in most cases.

The other thing is that most of those patients that were in that trial were already at goal and taking a statin as well.

So there's a number of confounding factors there.

I think the expectation is that most people understand that now, that that's not something that would typically be set up, at least from our viewpoint to try to demonstrate the efficacy of a product that's been well demonstrated through other studies and so forth.

So, the only thing I would tell you on that is we don't control the study.

We don't be know when it is coming.

ACC would seem like a likely venue, but it's completely in the control of NIH.

And the other thing I would say is as with any clinical trial result, I think it's important to look at the full context of the data, look at the full body of the data, the sum total.

That can be primary end points, that can be secondary end points, safety, efficacy.

So we'll see, but we're obviously aware that, we factored it in.

We don't expect any significant impact from it, I guess is the bottom line, and if you remember the field study, which got a lot of attention at the time, we actually grew our script share quite nicely from that base.

So that's the story.

Thank you very much

Okay.

You're welcome.

That concludes our conference call today -- excuse me -- today.

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Thank you all for joining us.

Thank you, and this concludes today's conference.

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