美國雅培 (ABT) 2010 Q3 法說會逐字稿

Good morning, and thank you for standing by.

Welcome to Abbott's third quarter 2010 earnings conference call.

(Operator Instructions).

I would now like to introduce Mr.

John Thomas, Vice President, Investor Relations and Public Affairs.

Good morning, and thanks for joining us.

Also on today's call will be Tom Freyman, Executive Vice President, Finance, and Chief Financial Officer, as well as Larry Peepo, Divisional Vice President of Investor Relations.

Tom will review the details of our financial results for the quarter, as well as our outlook for the year.

Larry and I will then discuss the highlights of our major businesses.

Following our comments, Tom, Larry and I will 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 1A risk factors to our annual report on Securities and Exchange Commission Form 10-K for the year ended December 31, 2009, and in item 1A risk factors to our quarterly report on Securities and Exchange Commission Form 10-Q for the quarter ended March 31, 2010, and are incorporated by reference.

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

In today's conference call, as in the past, non-GAAP financial measures will be used to help our 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 website at Abbott.com.

So with that, I'll now turn the call over to Tom.

Thanks, John.

Today, we're pleased to report strong third quarter results, with ongoing earnings per share up more than 14%, at the high end of our outlook for the quarter.

We delivered these results, while taking action to enhance our long-term growth, particularly in emerging markets and with our pharmaceutical pipeline.

This includes the closing of the Piramal Healthcare Solutions acquisition, establishing Abbott as the market share leader in the fast-growing Indian pharmaceutical market.

We also completed the integration planning for the Solvay acquisition, and are on track to achieve a significant accretion profile we've outlined for that transaction.

We continued our efforts to enhance our pharmaceutical pipeline with the addition of another attractive late stage asset, bardoxolone, for the treatment of chronic kidney disease.

This follows the addition of several novel compounds that we added earlier this year for MS, oncology, and women's health.

The strategic actions we've taken position us well in high growth markets, as well as promising new therapeutic areas.

In the quarter, we delivered double-digit sales growth, and we reported ongoing EPS of $1.05, up 14.1% from 2009, and at the high end of our previous guidance range.

Sales growth in the quarter was 11.8%, including an unfavorable 1% impact from foreign exchange rate.

Sales included the contribution from the Solvay acquisition, adding roughly $900 million in sales for the quarter.

Piramal acquisition closed at the end of the third quarter, and while we recorded the purchase on the balance sheet, there were no sales from Piramal reflected in our third quarter results.

Sales growth was negatively impacted by higher rebates required under US healthcare reform, an approximate $100 million impact on a nutritional product recall, and sales returns associated with the withdrawal of sibutramine.

Despite these head winds, we delivered strong overall sales and EPS growth, as well as gross margin expansion.

Excluding the impact of the recall, that was communicated in September, sales growth would have exceeded 13%, in line with our guidance for the quarter of low teens sales growth.

The adjusted gross margin ratio for the quarter was 61.6%, more than 100 basis points ahead of our forecast, and significantly up from 2009, driven by strong performance across several businesses, including vascular, pharmaceuticals, diabetes care and diagnostic, as well as a favorable impact from foreign exchange rates.

This gross margin improvement occurred despite the high follow-through impact of the recall.

We also had strong double-digit growth in investment spending in the quarter, including the contributions from the Solvay acquisition.

Ongoing, R&D investments was 10.6% of sales, reflecting continued progress in our broad-based pipeline.

This includes programs in biologics and vascular, as well as promising clinical programs in HCV, oncology, and neuroscience.

Turning to our outlook for the full-year 2010, we're raising the lower end of our previous guidance range by $0.03.

As a result, our full-year 2010 guidance range is now $4.16 to $4.18 which excludes specified items.

The midpoint of this guidance range reflects growth of more than 12% over 2009.

We continue to expect strong double-digit sales growth, including the incremental sales from the Solvay Pharmaceuticals acquisition.

For the full-year, we're forecasting foreign exchange rates to have a favorable impact on sales growth of approximately 1%.

This reflects the year-to-date impact, and our fourth quarter forecast of a negative impact from exchange on sales of around 1%.

We expect a significant improvement in the full-year adjusted gross margin ratio over last year, with the 2010 ratio at around 60%.

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

Also for the full-year, we're forecasting continued investment in research and development programs to drive future growth, with R&D of approximately 9.5% to 10% of sales.

As you know, we added Solvay to the expense base this year, which has a higher SG&A to sales ratio than Abbott.

This is expected to result in SG&A as a percentage of sales for the full-year of more than 27%.

During the quarter, we completed the integration planning for the Solvay acquisition, and announced the one-time costs of the associated restructuring and integration, in line with our expectations.

For the first time, we're providing a fourth quarter ongoing earnings per share guidance of $1.29 to $1.31.

We're forecasting low to mid-teens sales growth in the fourth quarter, including a 1% negative impact from foreign exchange previously mentioned.

We expect that adjusted gross margin ratio approaching 61%, R&D, as a percentage of sales around 9.5%, and SG&A, as a percentage of sales somewhat above 26%.

In summary, we had strong performance in the third quarter that exceeded our previous targets, and confirmed our outlook for 2010, while raising the lower end of our full-year ongoing EPS guidance range.

We also advanced our broad-based strategy through the addition of new growth drivers, and through geographic expansion to capture new opportunities in the years ahead.

With that, I'll turn it over to Larry and John for the business operating highlights, beginning with Larry in pharmaceuticals.

Thanks, Tom.

In our global pharmaceuticals business, worldwide reported sales increased nearly 22%, driven by strong growth of nearly 30% in our international pharmaceuticals business, and 13.5% in our US business.

Sales included the contribution from the Solvay acquisition, which closed in February.

In our proprietary pharmaceuticals business, in immunology, global HUMIRA operational sales increased more than 16%.

Performance was driven by strong international operational sales growth of more than 23%, including a modest impact from austerity measures in some European countries.

HUMIRA sales in the US grew more than 8%, including the impact of healthcare reform, in line with underlying trends for the product.

Demand for HUMIRA continues to outpace the global market, and new competitive entrants continue to track in line with our modest expectations for these products.

Internationally, strong double digit market growth continues in the major European countries, where HUMIRA holds the number one share position.

We anticipate that HUMIRA will eventually become the number one anti-TNF worldwide, surpassing the current global market share leader.

We continue to launch HUMIRA indications into new countries around the world.

Earlier this year, HUMIRA was the first biologic approved for the treatment of psoriasis and psoriatic arthritis in Japan.

And we're on track for approval of our ankylosing spondylitis and Crohn's disease indications in Japan by year-end.

Additionally, we launched our first indication in China during the quarter.

HUMIRA clinical data continues to compare favorably versus existing agents or potential new competitors.

In fact, at the upcoming American College of Rheumatology meeting, we'll present data across the rheumatology indications, including data demonstrating radiographic inhibition with HUMIRA up to eight years in RA, and 5 years in early RA.

HUMIRA is the only biologic to demonstrate radiographic inhibition for this length of time.

Based on outstanding clinical data across our full range of indications, and more than 13 years of clinical experience, we continue to be well positioned for success in this efficacy-driven market.

We continue to expect global reported sales growth approaching 20% for HUMIRA in 2010.

Moving on to our lipid franchise, where global TRILIPIX/TriCor sales increased more than 22%, including the international contribution from Solvay.

In the US, sales increased more than 3%.

Regarding the US approval process for Certriad, the fixed dose combination of Crestor and TRILIPIX, we continue our work to address the FDA's questions on the submission, and expect to meet with the agency within the next few months.

Sales of Niaspan, our HDL raising therapy were up nearly 5% in the quarter, outpacing the growth of the overall lipid market.

There are currently more than one million patients on Niaspan.

And during the quarter, Niaspan's share of the total lipid market reached an all-time high.

Continued momentum from the Arbiter - HALTS data, as well as an ongoing consumer awareness campaign, are driving positive trends for Niaspan.

During the quarter, we received FDA approval for two new dosage strengths of Simcor that include 40 milligrams of simvastatin.

These new dosage strengths provide additional flexibility for physicians, as almost half of simvastatin prescriptions are written for the 40 milligram dose.

US sales of two key products from Solvay, Androgel and Creon, were approximately $190 million and $80 million, respectively in the quarter.

Androgel holds the number one share position in the testosterone replacement market, an attractive category that continues to grow double digits, due to the growing diagnosis and treatment of low testosterone.

Creon also maintains a leadership position in the pancreatic enzyme market, and prescription volume reached an all-time high during the quarter.

As we look ahead to the fourth quarter, we expect double-digit reported sales growth, in both our US and international pharmaceuticals businesses, including Solvay.

Moving on to our pharmaceutical pipelines, where we have continued to augment our late stage portfolio with promising new assets, we have a number of unique compounds in development for oncology, immunology, HCV, neuroscience and pain management, and other areas of high unmet needs.

As Tom mentioned during the quarter, we entered into a collaboration agreement with Reata Pharmaceuticals to develop and commercialize bardoxolone, a promising late stage compound for the treatment of chronic kidney disease.

The agreement gives Abbott exclusive rights to develop bardoxolone outside the United States, excluding certain Asian markets.

Bardoxolone is an oral, first-in-class compound that works by increasing filtration in the kidneys.

Early clinical studies suggest bardoxolone could be a significant improvement to the current standard of care, and possibly prevent patients from progressing to the later stages of the disease and dialysis.

A Phase IIb study was recently completed and late-breaking data from this study will likely be presented at the upcoming American Society of Nephrology meeting in November.

Discussions with regulatory authorities are underway regarding Phase III study design.

We also recently entered into a collaboration with Neurocrine, to develop Elagolix, a first-in-class oral compound for endometriosis-related pain and uterine fibroids.

A Phase II study was recently completed in endometriosis, and we are working with regulatory agencies to determine next steps for development, including the Phase III clinical program.

In immunology, we're leveraging our experience with HUMIRA to identify new mechanisms with the potential to treat an array of autoimmune diseases.

Our pipeline includes early stage work in oral DMARD therapies, as well as a number of biologic candidates.

This includes ABT-874, our anti-IL 12/23 for psoriasis, which we recently submitted for regulatory review in the US, and Europe.

Earlier this month, we presented data from the four pivotal trials, which showed patients treated with ABT-874 achieved superior skin clearance rates than those treated with Enbral, methotrexate, or placebo.

In oncology, we're working to advance a number of novel compounds, targeting more than 15 different cancers and tumor types.

ABT-888, our PARP-inhibitor, is currently being evaluated in combination with chemotherapy in a number of cancer types, and we plan to initiate a Phase III study of ABT-888 in breast cancer early next year.

ABT-869, our multi-targeted kinase inhibitor has already generated early data in liver, lung, and kidney cancer.

It's currently in Phase III for liver cancer, and in Phase II for additional cancer types.

ABT-263, our Bcl-2 family inhibitor is in Phase II for CLL and other cancers, and in Phase I for a number of solid tumors.

Additionally, our acquisition of Facet Biotech included several oncology collaborations, including elotuzumab, which is currently in Phase II for multiple myeloma.

We are also evaluating a number of promising mechanisms in our preclinical oncology pipeline, including work on an early stage cMET antibody, and an EGFR inhibitor that is on track to begin Phase I by the end of the year.

In HCV, our goal is to transform current treatment practices by shortening the duration of therapy, improving tolerability, and increasing cure rates.

We recently advanced a new mechanism of action, NS5A into the clinic.

And we'll be presenting late-breaking, Phase II data on ABT-450, our protease inhibitor at the upcoming meeting of the American Association for the Study of Liver Disease.

In neuroscience, we're developing compounds to address conditions such as Alzheimer's disease, schizophrenia, pain, and MS.

We currently have three compounds in Phase II development for Alzheimers, two of which are also being evaluated in schizophrenia.

And a Phase III study of Daclizumab, a next generation biologic being evaluated in MS, is currently under way.

So with that, I'll turn it over to John for a review of our medical devices, diagnostics, and global nutritional businesses.

Thanks, Larry.

Our vascular business in the quarter delivered strong performance once again.

Worldwide reported sales increased more than 18%.

International vascular sales growth of nearly 40% in the quarter was driven by the continued success of XIENCE, as well as our next-generation XIENCE PRIME.

Global DES franchise sales this quarter were in excess of $450 million, and that's up more than 37% year-over-year.

XIENCE remains the market share leader in Europe, and other international markets.

Since the XIENCE PRIME launch in Europe, we've seen mid to high single-digit share point gains for the XIENCE franchise.

Based on the results presented yesterday by other DES manufacturers, we estimate our revenue share in Europe has grown by 2 share points sequentially over the last quarter, and 7 share points since the third quarter of 2009.

XIENCE also continues to maintain its leadership position in Japan, with total XIENCE platform share exceeding 70%.

The reset trial enrollment completed in July, and we continue to maintain our leading share for XIENCE.

Japan, as you know, is the second largest DES market, with market sales of $500 million to $600 million annually.

And in the US, the total XIENCE platform, which of course includes PROMUS, maintained market leadership with approximately 60% share this quarter.

Strong top line growth in our expanding worldwide DES market share have led to continued improvements in the operating margin for our vascular business.

Abbott vascular continues to experience growth in DES market share in key markets around the world.

In fact, Abbott's worldwide DES share has increased 2 points sequentially from the second quarter, and 13 points versus the same quarter last year, driven by the launch of XIENCE in Japan and China, as well as continued share growth in Europe, Australia, as well as the United States.

In the US, PCI volume was largely flat versus the prior year.

DES penetration, we estimate was approximately 79% this quarter, which signals unit growth in the DES category.

At the recent TCT meeting, we announced compelling long-term data from our SPIRIT III, as well as SPIRIT IV trials, which add to the strong body of clinical evidence for XIENCE.

These SPIRIT data, as well as two-year results from the investigator-initiated COMPARE trial, showed XIENCE significantly outperformed Boston Scientific's Taxus Express and Liberte drug-eluting stents, respectively on both efficacy and safety end points.

Two-year data for SPIRIT IV demonstrate that Abbott Science continues to outperform the leading product.

In the trial's composite end point, XIENCE demonstrated a 30% risk reduction in target lesion failure compared to Taxus.

In addition, XIENCE had an impressive low rate of stent thrombosis at two years.

In SPIRIT IV, XIENCE also showed low event rates in complex patients, those with diabetes, small vessels, multi-vessel disease, and long lesions.

SPIRIT III showed continued benefit with XIENCE compared to TAXUS Express out to four years.

And finally, data from the 1800-patient COMPARE trial demonstrated statistically significant, better outcomes for XIENCE in key safety and efficacy measures, compared to TAXUS Liberte, Boston's newer stent.

Patients receiving XIENCE had a 77% lower rate of stent thrombosis than TAXUS at two years.

So as we look ahead to the fourth quarter, in our global vascular business, we expect mid-teens reported sales growth, supported by one of the broadest platforms and portfolios in the business.

Turning to our global diabetes business, worldwide reported sales this quarter were flat.

US revenue was up nearly 8%, as we launched our next-generation FreeStyle and FreeStyle Lite test strips.

These strips feature a new easier to use design for faster blood application that reduces the number of error messages and wasted strips.

In the fourth quarter, for our global diabetes business, we expect low single-digit reported revenue growth.

Moving on to vision care in AMO, where worldwide sales -- reported sales were $250 million, US sales were up more than 8%, as we continue to gain momentum with our TECNIS Multifocal 1-Piece IOL.

Cataract surgery is the most common surgical procedure in the world, and AMO holds the number two position in this segment.

We're expanding our premium cataract product portfolio in Europe following the CE Mark of our TECNIS Toric IOL, which is designed to correct astigmatism in our first entry into this segment.

During the quarter, we introduced our newest contact lens solution, complete RevitaLens Ocutec in the US.

This new product delivers high quality disinfection and comfort, with the convenience of a one-bottle multipurpose solution.

So in the fourth quarter looking ahead, we expect low single-digit reported sales growth for AMO.

In worldwide diagnostics, reported global sales were up modestly this quarter, with US diagnostic sales up more than 8%.

In core labratory diagnostics, which includes immunochemistry and hematology, reported global sales were flat operationally, and up nearly 3% in the US.

Sales in China were up double digits, as we continue to strengthen our presence in this important growing market.

The diagnostic division continues to make progress in it's ongoing effort to increase profitability and cash flow, as we have discussed in the past.

Also in the quarter, PRISM sales increased double digits, with it's HIV assay driving growth in the US.

ARCHITECT sales also grew double digits, driven by the success of our new c4000 chemistry analyzer for mid-size labs.

In our molecular business, sales were up 16%, driven by our m2000 platform and it's expanding test menu.

We recently received FDA approval for the Abbott real-time HBV assay for measuring the amount of hepatitis B virus in a patient's blood.

The assay runs on our m2000 system, and is intended to help manage care for patients with chronic HBV infection, undergoing antiviral therapy.

In our Point of Care business, sales were also up double digits, driven by the continued success of our [CHEM8] test and cardiac menu.

So as we look ahead to the fourth quarter in our worldwide diagnostic business, we expect low single-digit reported sales growth.

Turning to our worldwide nutritional business, sales decreased 1.5%, including a favorable 0.8% impact from exchange.

International nutritional sales growth versus the prior year was adversely impacted by new product launches that occurred in the year-ago quarter in many international markets.

We expect a return to stronger reported growth in the fourth quarter, with high single-digit growth in our international nutrition business.

In the United States, Abbott nutrition continues to maintain its strong market position, in both adult and infant formula nutritionals.

As expected, growth in the US during the quarter was negatively impacted by approximately $100 million due to the product recall we previously announced on September 22.

Excluding the recall, US nutritional sales would have grown high single digits.

Since the recall announcement, we've been working to ensure that our customers have continued access to Similac, including liquid formula and other powder products manufactured at other facilities in the US.

We appreciate the patience and loyalty of our customers during this period.

I can tell you today that the one affected powder manufacturing line in the one facility has resumed operations, and we've restarted the process of reshipping Similac Advance in our popular simple-pack container.

Over the coming months, our target is to have our retail powder supply back to near normal levels.

Worldwide sales for adult nutritionals in the quarter, including Ensure and Glucerna grew 8%.

In the US, we recently introduced two new nutrition shakes, Ensure Muscle Health and Ensure Clinical Strength, that feature a proprietary ingredient called Revigor, as well as protein to help rebuild muscle mass lost naturally with age.

The launch is off to a good start, with strong double-digit sales growth for Ensure this quarter.

Also in early August, we launched PediaSure SideKicks, new shakes designed for kids who are on track with growth, but can use extra nutritionals to fill nutritional gaps.

So as we look ahead to the fourth quarter in our US nutritional business, we're forecasting a high single-digit decline, up in the low single digits, excluding the recall as a result of the impact from the product recall on fourth quarter sales.

And we expect high single-digit reported sales growth in our international nutrition business.

With that, let me turn to our medical products pipeline.

In our vascular pipeline, we expect to bring more than ten coronary technologies to market over the next five years, making our pipeline one of the industry's most robust.

These include new devices such as XIENCE Nano small vessel DES, and XIENCE PRIME in the US, an ultra thin DES, next generation balloons, MitraClip, as well as our bioreabsorbable vascular scaffold, or BVS technology.

MitraClip, our minimally invasive device for the treatment of select patients with mitral regurgitation, has been submitted for regulatory review and remains under review.

We continue to work toward an advisory panel for MitraClip in the first half of 2011, subject to further discussions with the agency.

As a reminder, mitral regurgitation is the most common valve disease in the world.

Currently, MR is treated with medication or open heart surgery.

At TCT, we shared additional MitraClip data from our US pivotal trial that continued to demonstrate the safety and sustained meaningful clinical benefits of therapy.

The US pivotal trial results, which were presented at ACC in March, demonstrated that MitraClip met both it's primary safety and efficacy end points, suggesting that MitraClip may be an important treatment option for select patients with MR.

Also at TCT, we shared positive nine-months results from our first 45 patients enrolled in the second stage of ABSORB, our BVS clinical trial.

At nine months, Abbott's BVS ABSORB demonstrated strong results that remained consistent with the six-month data from the same 45-patient group.

BVS resorbs away after treatment, leaving behind a vessel that can move similar to an untreated vessel.

Abbott is the only Company with long-term data on a BVS.

Additionally, in our vascular pipeline, we remain on track with 2011 US approval of XIENCE Nano, and a 2012 US approval of XIENCE PRIME.

As a reminder, our US clinical trial for XIENCE PRIME is evaluating a range of stent sizes, including small vessels and long lengths.

We're continuing to expand our position in the coronary market, which excluding DES, is a $2 billion global category.

Abbott holds the leadership position in guide wires and bare metal stents, and our goal is to recapture the market leading position in balloon angioplasty, which accounts for nearly half of this $2 billion market.

We've already had success with our next-generation balloon TREK, which has gained several share points in Europe.

In the US, the TREK family will be launched in a range of sizes, and sometime in the first part of next year.

TREK is also the delivery platform for Abbott's future generations of stent technology.

In addition, we recently filed for our expanded indication for our Acculink carotid stent system to treat patients with carotid artery disease, who are at standard risk for surgery.

Our submission to the FDA included the results of a pre-agreed upon analysis of the CREST trial.

In our broad vision care pipeline, we expect approximately 20 new products and technology advancements over the next five years.

This includes the launch of our recently approved complete RevitaLens contact lens solution.

In our market leading Lasix business, we're expanding our proprietary laser platform into new applications, including cataract surgery, and we're developing new diagnostic instruments and treatments to improve visual outcomes.

In our cataract business, we continue to expand our premium and standard IOLs.

Synchrony, our next-generation IOL remains under FDA review.

Synchrony is available in Europe and continues to perform well there.

So in summary, for the third quarter of 2010, Abbott delivered strong double-digit performance with ongoing EPS growth of more than 14%, at the high end of our previous range.

We invested in the long-term growth of the business, with strong investment spending, particularly in R&D.

We reported an adjusted gross margin ratio of 61.6%, despite certain head winds.

We confirmed our ongoing EPS growth outlook for the year, raising the lower end of our previous guidance range.

We completed the Piramal Healthcare Solutions acquisition, and finalized our innovation plans for Solvay.

We added another attractive late stage asset to our pharmaceutical pipeline, which represents one of five late stage compounds we've added this year alone.

And as I mentioned, we released key long-term data that further supports our market-leading DES product, which performed well in the quarter, including XIENCE PRIME in Europe, and XIENCE in Japan.

Our performance and the strategic actions we've taken continue to position Abbott well, with durable growth drivers, as well as opportunities in high growth emerging markets, and attractive new therapeutic areas.

So with that, we'll turn the call over to Alana for Q&A.

Tom, Larry and I will handle those together.

(Operator Instructions).

Your first question today is from Mike Weinstein from JPMorgan.

Mike, your line is open.

Please check your mute feature.

Mike, are you there?

Mike, we're not able to hear you.

Hello, Mike?

Please either lift the handset, our check your mute feature, sir.

Do you want to call back in?

I apologize.

We'll move on to the next question.

Our next question today is from David Lewis from Morgan Stanley.

Well, good morning.

Hi, David.

Tom, just real quick question here, starting with gross margins.

The ast three quarters, sequential outlook obviously has improved every quarter, fairly dramatically.

I actually think it's the strongest that we've seen from the Company sequentially in several years.

So I know it's early to talk about 2010 outlook.

Can you talk about the underlying drivers of gross margin, and perhaps the sustainability of these trends heading into 2011?

Yes, again, we're very encouraged with the progress we've made.

We've been working a number of years across all the businesses, whether it's through cost reduction, mix improvements, et cetera.

And throughout the year, we've pretty much gotten above that 60% level, and we've been able to sustain and grow that.

And we have a very, very strong quarter, as you mentioned, David, at 61.6% this quarter.

That was a bit ahead of our expectations.

And really it's been driven by the improvements across all the businesses, in particular, vascular, diagnostics, diabetes care.

And we saw some improvement in pharma, this quarter as well.

There is some quarter-to-quarter noise from exchange that helped us a little bit this quarter.

And in fact, we're expecting a little bit lower gross margin in the fourth quarter, because we're expecting a bit less exchange favorability.

But I think the key message here is, we seem to be firmly above the 60%, and fundamentally improving it across the businesses, And we expect that to continue into 2011.

It is a little early to give precise guidance on how far that might go next year, but I certainly believe that the trends are positive.

Okay, very helpful.

And then maybe just talking a little about O-US HUMIRA trends, Tom, in the particular quarter, and perhaps the outlook, can you talk about maybe opportunities in other emerging markets for penetration of HUMIRA, what you think about the existing state of penetration for HUMIRA, and perhaps competitive dynamics that you're seeing outside of the United States?

Thank you.

Well, we continue to have opportunities to grow in a number of markets.

I think Larry mentioned that Japan, we've got opportunities with more indications there.

China, I mentioned.

Other emerging markets, it's somewhat dependent on their economic prosperity, for a product like anti-TNF.

But there is longer term prospects in emerging markets for a product like HUMIRA.

Okay, David?

Thank you.

Our next question, we'll re-take from Mike Weinstein from JPMorgan.

Hi.

Can you hear me this time?

Yes, I can you hear me now.

I was talking.

I don't know what was going on.

We were just hearing a lot of clicking.

There you go, okay.

Well, couple questions to start with.

And if we look at the P&L this quarter, and your guidance changes for the balance of the year, gross margin obviously came in very strong.

And you are guiding to better gross margin than your guidance previously.

You actually -- is going to be raising at the margin, your R&D guidance for the year.

Now part of that is going to be in part, the Solvay.

I was hoping you could try and tease out for us the --what's happening in gross margins, because obviously some impact from FX, but on the flip side, you've got the negative impact from Similac.

So help us get a better insight into the strength we saw this quarter, and why that continues?

Mike, while you were off, the second questioner had basically the same question.

Okay.

But I'll just add a couple things to what I've said there, and you do raise a good point.

On the FX, I'll just say again, we did get a bit of a lift beyond our expectations in the quarter, that just has to do with the timing of sales versus costs and the like.

And we do expect to trend down again a little bit in the fourth quarter and we would expect gross margin to be somewhat below what we had this quarter and my remarks, I think I said approaching 61%, but you do raise the point that the recall impact on the book on nutritional business, which was around $100 million is pretty much all fall-through.

and that's probably half a point detriment to the margin in the quarter.

So I think if you cut through that, and even considering some of the favorable trends for foreign exchange, it's still a very, very strong performance.

Let me just ask a couple pipeline items here.

So with Certriad, the dialogue with the FDA seems to be relatively slow.

Should we be taking that out of our model at this point, or are you still optimistic?

Well, I don't know if I would take it out of your models, but certainly that process continues.

And as I said, we do expect to meet with the agency here in the next few months.

So, it's always difficult to predict those with any specificity, but we are moving forward with the discussion with the agency.

I'll add that, obviously, given the timing, and the fact that if it were approved at any time even in the earlier part of the year, in a launch here you're not going to see much profit impact initially from that product.

I think when you're modeling 2011, it's not going to be a driver either way, depending on how the process plays out here.

Okay, and then last one, MitraClip and Synchrony, any visibility on FDA panel?

Well, MitraClip, as I mentioned in my remarks, Mike, we expect the panel in first half of 2011.

Of course, that's up to the agency.

Synchrony, we're hoping for a panel in 2011, but I don't have anything specifically to give you today.

We keep working with the agency, and discussing with the agency next steps on that as well.

Thank you.

Thanks.

Thank you.

Our next question is from Rick Weiss from Leerink Swann.

Good morning, everybody.

Can you hear me?

Hi, Rick.

Good.

A couple things.

First, Tom, I was just re-reading the second quarter transcript, and you promised then, and I'm going to hold you to it, more color on the integration and synergies of Solvay, and now Piramal.

Maybe talk a little bit about, if you could, how you are going to, hope to leverage some of the SG&A, higher SG&A -- just in general, what can we expect?

Thanks.

The main thing I was alluding to there, was the announcement we made in September of the fact, that we completed our integration planning, that we were going to incur some costs associated with that, both for restructuring and integration.

And the conclusion of that planning makes me very confident in our ability to deliver, at least the accretion we have in the original forecast, which as you recall was at least $0.20 by 2012.

What we're doing, when we combine the -- our former international business, our international pharma business with the Solvay international pharma business, we're finding a lot of commercial synergies in the sales organization.

We're finding back office efficiencies in the various companies.

And we're able to drive some pretty nice benefits, starting in 2011 because of some discussion that has continued with various organizations, the timing will be not immediate.

It will be starting in 2011, and continue to accelerate into 2012.

But that was really what I was alluding to,RIck, the fact that we would be including it.

And I think there's quite a bit of detail in the filing we made, regarding the integration planning for Solvay.

Sounds good.

There's been some attention paid in recent months to an oral drug for arthritis.

I saw some data from Pfizer, AstraZeneca has a Phase III compound.

Any perspective on the risks for HUMIRA, and how you all might approach that opportunity?

Sure.

Well, I would say that the clinical development program for those agents are still kind of a long ways off, and are ongoing.

In this environment, new mechanisms of action certainly have a pretty high threshold, in terms of safety and tolerability.

Again, we will start to see a little bit of the Phase III, but it is fairly small data sets here this fall.

But, small molecules typically have, a little bit more off target toxicity.

We've seen some side effect profiles, cholesterol issues, risks like that, that could certainly slow down the progress of those in development.

So we'll have to see how they play out.

Certainly if you look at TNF, it's been around a long time.

There's a lot known about the product, 13 years of experience, as I mentioned.

That's a lot of data, and, again, getting back to this current environment, I think there's going to be a fairly high threshold for these products.

So I'll have to see how the safety plays out in the upcoming data.

But I think at least based on what we know that we'll see here yet this year.

It's a pretty limited data set, and certainly not enough to draw a conclusion on the long-term safety profile of these products.

Okay, and just a last broad one for Tom.

Obviously, there's a lot of concern about procedure slowdowns, increased pricing pressure.

Maybe just, Tom, your higher level thoughts about those two points.

Do you feel like, are you seeing just in a broader sense, particularly on the device side, stable or improving, as you got to September, October, do you feel like price pressures are increasing?

Are you more concerned about that issue today?

Just, again, any perspective will be welcome.

Thanks.

Well, I'll start with the price.

In the US, our situation was pretty well defined with healthcare reform.

And we've been very explicit about the impact in 2010, and we continue to experience that.

And we had talked about an incremental impact in 2011, and that seems to be pretty well, pretty well defined.

Outside the US, I would say it's similar.

There are a tremendous number of actions by European government health plans, particularly in the pharma area, over the last six months.

Those have largely been completed.

And as I've talked to our people, we feel like that function is pretty much played out.

We think that -- we don't expect anything similar next year, and we pretty much got the situation redefined at this level.

So I think it's pretty well known on the pricing front.

In terms of procedures and volumes, particularly in the US, as you know, we tend not to be as susceptible to activities in the hospitals, or elective procedures.

Probably the one exception in our business is the LASIK business, which continues to be pretty flat, But obviously in the vascular business, it's generally those are acute situations that are going to be driven by the health condition, not some fundamental trend in procedures that are more elective.

So we still have had very little impact in our devices businesses.

And I think it's just the nature of the mix of businesses we have, and where we compete.

Appreciate that, Tom.

Okay, thanks.

Our next question is from Glenn Novarro from RBC Capital.

Good morning.

Hi, Glen.

Good morning.

One for John, and one for Tom.

For John, vascular had another good quarter, and topped our expectations.

Your guide for 4Q is also above our expectations.

But yesterday on the Boston Scientific call, they said they expected their business in Japan to get stronger now that the reset trial has concluded.

So can we maybe talk to us about some of the inputs that lead you to believe vascular can grow mid-teens, particularly in light of Japan, the reset trial now being concluded.

And then second, just for Tom, can you quantify what the impact of Similac and Meridia were on the bottom line for 3Q, and what the impact will be for 4Q?

Thanks.

Yes, Glen, we do expect to continue to have strong performance in Japan, where as you know, we've gained a lot of share.

And that's due to the performance of the product, the overall platform, and how well we've done in terms of data and relationships.

And so we don't expect that the reset trial is going to have a significant impact on that.

We expect to maintain our share position, not only in Japan, but obviously with XIENCE PRIME in Europe, and continue the growth that we've seen recently.

So I guess, we would disagree with that assertion.

By answering your questions on Similac and Meridia, again, when we announced the Similac recall, we estimated about $100 million in sales returns.

That's pretty much where it came in, net impact of around $100 million.

That virtually all falls, right through to the bottom line, Glen.

So you could say probably $0.04 to $0.05 in the quarter impact of the Similac recall.

Meridia, quite a bit less.

We again, had to book a reserve for sales returns.

That's probably closer to a $0.01.

So I think you raise a point, that if you look at our ongoing performance at $1.05, our 14% growth at that level.

And then take these things we overcame in the ongoing performance into account, we had a very, very strong quarter for income growth, putting these things aside.

Obviously for Similac and Meridia, we did have some one-time costs which are detailed at our earnings release.

Is there any residual impact in the fourth quarter?

Yes -- Right now, when I look at your guidance, essentially you're reaffirming 4Q.

Right.

And I'm just wondering if you would have raised guidance further, if it were not for Meridia and Similac.

Well, and I say on Meridia.

It's very, very small now.

We had very minimal sales, and with the intangible no longer being amortized, that is basically neutralized out of Meridia.

As you know on Meridia and Reductil, because of the European action earlier in the year, we had a smaller expectation for that product on a quarterly basis during the year.

So Meridia is pretty much a resolved matter, and minimal impact.

With Similac, we clearly are in rebuilding mode, both from a market share point of view, and just replenishing the pipeline.

As John talked about, we're very pleased that the plant is back online, and we're shipping the simple pack product back into the market.

I think we've done a very good job in bringing other presentations of Similac and putting them on the shelf.

And our customer response has been very good to that, and they have shifted to some of the other types of products.

But that said, we are going to have a sales impact in the fourth quarter, quite a bit less than the $100 million pure fall-through we had in the third quarter.

And obviously, we would have had better performance in the fourth quarter if that wouldn't have happened.

But we're mainly focused on rebuilding customer relationships, and reestablishing that product firmly in the market, as we move into 2011.

Okay, thanks, Tom.

Thank you.

Our next question is from Jami Rubin from Goldman Sachs.

Thank you.

Couple questions, Tom, for you.

Obviously gross margin has improved nicely this quarter.

And it seems that that's sort of a level, at which we can expect Abbott to continue to generate gross margins.

But on research and development expenses, that, too, ticked up pretty significantly from the previous quarters.

Is the 10.6% ratio to sales, is that the new normal now, with the full integration of Solvay research expenses, as well as the development of some of the recent products that you have recently licensed in?

So that's the first question.

Second question relates to healthcare reform.

If you could just quantify for us the level of healthcare, or the cost of healthcare reform to the quarter, as well as European healthcare reform?

And how that relates to -- I think you had said earlier this year, you expected a $230 million hit from US healthcare reform.

If you can remind us where your thinking is on that?

As well as are the numbers so far tracking in line with your expectations?

Thanks.

Right.

Well, on R&D, to me, even more encouraging than the ratio impact, is just the, kind of the sequential increase in R&D in the quarter compared to the second quarter, we were up around $60 million, up strong double digits compared to the -- I'm sorry, upper single digits, compared to the second quarter.

So the sequential spending is even more encouraging.

And we expect that to continue into the fourth quarter, with another nice sequential increase in raw R&D spending.

The quarter, at 10.6% was aided by the fact that -- just generally our third quarter sales level is a little bit lower than the average for the other quarters.

So there was a bit of lift there.

As I indicated in my remarks for the fourth quarter, we're going to be closer to that 9.5% range in the fourth quarter, and for the full-year, between 9.5% and 10%.

And I think that is more the range you should model, as you look at future years for us.

But we are stepping up R&D significantly.

If you look at the raw dollar increases, I think it's very encouraging that we're committing more and more to the future of the Company.

For healthcare reform, everything is pretty much tracking in line with our original expectations.

As you indicated, Jamie, for the full-year, we expect about a $230 million impact.

And if you spread that out over the quarters, there's a little bit more in the first part of the year, but it's a pretty steady amount through the year, and it's playing out the way we expected.

For Europe, the way I've talked about that is we typically see very low single-digit pricing impact on our ex US pharma business.

We saw roughly double that this year, with the various austerity measures in Europe.

But still, when you add it all up, we are still at a low single digit pricing impact year-over-year in 2010.

And that pretty much could be factored in on a pro rata basis over the quarter as well.

So we have overcome those.

The gross margin improved despite these types of things, but it's pretty much playing out the way we forecasted earlier in the year, and the way we saw it on the second quarter call.

Thank you.

Thank you.

Thanks.

Thank you.

Our next question is from Derrick Sung from Sanford Bernstein.

Hi, good morning.

Thanks for taking my questions.

Good morning.

Just first, a quick follow-up on your European comments.

How, how do you foresee the European austerity measures and pricing pressures playing out into 2011?

I understand that things are coming, are playing out sort of to your expectations now.

Does it get worse in 2011, or do we still kind of sit at this low single-digit pricing pressure level?

Well, the key things for 2011, and I talked about this previously as well, and on other calls.

The austerity measures pretty much went in mid, mid to late in the year.

And we will have a lapping effect in 2011, which will be -- which will be meaningful as well.

But again, any -- our view is based upon, how aggressive these actions were, and just our read of what's happening in the market, is incremental measures really are -- we really don't see much happening in that regard, at least at this point, as we look at 2011.

So the main effect next year will be lapping what we saw, and then hopefully we're more in a steady state, more, very low single-digit type impact as we go forward.

Okay, thank you.

I wanted to ask you about your expectations for TriCor generic entry next year.

I recall that the agreement that you set up with Teva had language around possible generic entry as early as March next year, but there might be some condition in which that might be delayed.

So was wondering what your expectations are at this point for that generic entry?

And also the conversion of TriCor to TRILIPIX, how that is going, and how that might impact -- your -- your impact when that happens?

Yes, we're fairly confident based upon the conditions in that agreement, that license, that we won't see generic impact in 2011 in TriCor.

And it would go much more likely to the outer edge of that license agreement, which is mid-2012.

For TRILIPIX, we continue to see steady conversion.

We're in the low 30s, as the market evaluates the pros and cons of the two products.

And we just expect that to continue to improve, and there's quite a ways until the outer edge of the TriCor license agreement, when we would expect generic competition for that product.

Okay, great.

And just lastly, I know you are going to start breaking out your established products division growth rates next year, and performance next year.

Can you give us any insight into how your emerging markets pharma results came in this quarter?

We're just -- you're right.

We're going to have the separate provision reported next year, and we'll be very discreet about that, and try to provide a lot more color on it.

We're still in the process of starting out exactly how those two divisions are going to set up, and exactly which products end up where.

I would say, though, that in general, across the business -- particularly in pharma, vascular and diagnostics I would say, the emerging markets growth continues to be very good.

We're doing extremely well in China, across the businesses.

And we're very excited obviously with India .

In the fourth quarter, it will be our first addition of revenue from the Piramal acquisition.

And we've got some nice initiatives going on across the other businesses as well.

We'll be more precise in the future, but in general, I think our emerging markets performance was pretty good in

Okay.

Thanks a lot, Tom.

Thanks, Derrick.

Thank you.

And our next question is from Bruce Nudell from UBS.

Thanks for taking my question.

Good morning, Bruce.

Good morning.

Just a follow-up on Derrick's question.

I think it would be -- if you could provide any color -- when you take the established products division, and look out medium term,could you just speak generally to the kind of growth rates you expect?

Because a lot of the stuff, I guess, that is synonymous with that division is buried in Other, but has done quite well historically.

Could you kind of give us a frame, the sorts of growth rates you might expect from the division, and the margin structure?

And I have one follow-up.

Yes, well, as we've modeled this out over the next five years, and as we're kind of compiling, and really constructing that division in the latter part of this year, what we see is the ability to drive some of these branded generics, more established products, very hard in the emerging markets, and to really leverage in particularly the Solvay infrastructure that we inherited, where they are very strong in markets, in east Europe and Russia, and also the Abbott infrastructure, where we're very strong in Latin America.

And so, you know, we'll take advantage of the infrastructure and move additional products from each side to the other side, as well as to bring (inaudible) products into the market.

And then on top of that, to drive Indian growth through the Piramal acquisition.

When we model all of that, weighed against slower growth in the European markets for some of these products, I think mid to upper single growth is very achievable on a sustainable basis.

And again, the way we've defined this business is more of a durable one, not subject to cliffs and big movements.

And hopefully we can do better than that with additional investment in SG&A and driving additional products, but that's certainly a good baseline to start with.

Thanks, and then I had another question.

And it's something, I don't have an answer to at all, is in one way, biodegradable stents could be very disruptive, as a more natural product, as it were.

On the other hand, the latest generation of drug-eluting stents does a great job of lowering late stage thrombosis, which was the original kind of target for biodegradable stents.

What do you need to show clinically, to kind of make it either disruptive on the share level or on the ASP level, so that the docs will use it and/or payers will pay a premium?

Well, as we talked about, we've had some very good early data.

I think we just need to have longer-term data with larger patient sets, which we're making some very good progress on.

I think the phrase would be, stay tuned on that front, as we progress throughout the year and go into early 2011.

I think we'll have some updates for you on that front that will be more encouraging.

But we really just need to move into that later stage of clinical trial work, where we get a large patient sampling, and show the kind of benefits similar to what we showed with XIENCE.

I guess just one more follow-up on the established products division.

Should we be thinking about that division margin structure as kind of -- I know there are puts and takes, ASPs versus selling costs, would similar to the current pharma division?

No, I mean, the gross margin in this business are good.

They are certainly above our corporate average.

There is -- this is more of a primary care business.

There's a little heavier SG&A investment for the business.

On the other hand, there's a relatively lower R&D percentage.

I think when you add that all together, you're going to end up with Op margins somewhat less than the proprietary business, but still very healthy and a very nice contributor as that business grows.

Thank you so much.

Thanks, Bruce.

Thank you.

Our next question is from Sara Michelmore from Cowen.

Great.

Thanks for fitting me in.

I guess, the question on the diabetes business.

I know you guys have been working on taking some costs out of that business, given what's going on in the marketplace.

You called out, Tom, in terms of a gross margin contribution.

Could you just talk about where you are with that process, and what's left to do?

You are talking about gross margin in diabetes?

In diabetes, yes.

Yes.

Well, we did -- we had some planned efficiency initiatives we've implemented over the last couple years.

It's pretty much at the tail end, where we're making a few more product transfers into our more efficient facilities.

But we, we do expect to continue reengineering of the manufacturing processes there.

And I would say we've had a step function in diabetes care, through several points over the last couple years.

They have done a great job.

And I would say going forward, it's more in that steady type improvement scenario.

Okay, and then we talked a lot about the medical optic pipeline, but just taking a general that just taking a step back, could you just give us an update in terms of where that business line is relative to your expectations?

And,what is it going to take to really get that to be a notable growth contributor?

Is it really the pipeline, or is there a potential that that LASIK business would bounce back at some point?

Thanks.

Yes, I guess to answer your question, just take a half a step back, and just look at how we're doing this year.

And I think there are a lot of good things going on within that business.

They are being masked by a couple items.

The LASIK market driven by consumer confidence continues to be very, very flat, and that was going to be a nice lever for improving margins, and obviously growth, whenever that inflection point hits.

We still haven't seen that.

And we're probably going to assume going into 2011, that it takes a while for that to happen again.

The other thing that's happened, in Japan, particularly in the LASIK business and also across -- we've had some competitive challenges there.

There is really one geography where we've been challenged.

If you adjust for that item, those items, and in Japan, we're taking a number of actions to kind of right the ship there.

If you take those into account, and look at what's going on underlying, the business performance is good.

And you're correct that the key to future growth beyond LASIK is going to be a number of these pipeline products hitting.

John talked about 20 products over the next five years.

We do have a new lens solution that's just hitting in the market, both in Europe and in the US.

As well as programs like Synchrony, and enhance, other enhanced cataract products, et cetera.

So it's been -- we've had our disappointments this year in that business, but I think there are a lot of good things happening.

And hopefully, we'll see that start ticking up, to be a positive contributor of growth over the next year or two.

And then just one last one on Similac, if I could.

I mean, how are you guys looking at the momentum of that product line, if that's the right word?

Is it possible that it could get worse before it gets better.

Or do you feel fairly good that you have visibility, at least in terms of your ability to at least retain the share that you have?

Thanks.

Yes, it's still pretty early in the process.

We're doing a lot of monitoring of consumer sentiment, et cetera.

It has definitely stabilized.

We think we had an initial effect, but it's definitely stabilizing, and we've taken a number of initiatives to restore confidence with our customers, and to start building that positive momentum.

But it's just too early to see that inflection point at this point in time.

And Sara, our number one goal from the start after the recall was to maintain broad availability for products, which we did.

We were never out of powder.

We were just out of that particular container, the simple pack container.

So we've done a number of things in our liquid business to increase production and stimulate demand there.

And also to make other sizes available.

In all those things, customers can order online at the Abbott store product as well, and they have taken advantage of that.

I think the business has done a really good job of aggressively taking actions to ensure that customers remain loyal.

And we've gotten good feedback from our customers and how we responded after the recall.

So a number of actions there, that are taking place, maintaining the product availability.

And as I mentioned in my remarks, getting that one line, and that one manufacturing facility back up and running and now shipping products to the market here, a few days ago will make a big difference.

And we'll obviously target some of the major retail stores first with those simple pack Similac containers.

All right, great.

Thanks so much.

Thank you.

Thank you.

Our next question is from Bob Hopkins from Banc of America.

Hi, good morning.

Can you hear me okay?

Yes, we can.

Hi, Bob.

Okay, great.

So I just wanted to follow-up on Bruce's question on (inaudible) resorbable stent can absorb.

I think you guys have said in the past, that you might help to launch a product in Europe by 2013.

And I was just wondering if you could give us an update on timing for the potential O-US launch, as well as any initial thoughts on how long US process might take?

We're not officially updating our guidance on that today, other than confirming the 2013.

But I think it's fair to say that as we work through the regulatory and strategic approach, commercial approach, there's certainly some opportunity to potentially move that date up.

So as I said to Bruce, stay tuned and we will update you as we can, and what's appropriate as we get into the next quarter or two.

Great, and then the follow-up on that also is, I'm just wondering, your level of confidence, that the product you have today, that has been in clinicals, is sort of the final version that you need?

Because as I talk to physicians, it seems the number one concern, as much as long-term data, is really the sort of acute results, in terms of elastic recoil, and is the product going to be strong enough to present that, or to prevent that.

So I'm curious if your level of confidence, that product that is in clinicals now is sort of the final design, and you are very comfortable in what you are seeing, and don't need to make any major incremental tweaks?

Yes, we did make some improvements, as you probably know, from cohort A to cohort B, to make some device enhancements for improved deliverability and vessel support.

But more specifically, as you've seen with the early data in the smaller data sets, the MACE results are very good, low thrombosis rate, low rate of MACE.

So all of the clinical data points that we would care about, and people would pay attention to, look as strong as our XIENCE platform.

And we'll have to see how we do, and continue to progress in some of these larger trials.

But as I said, I think we're making pretty good progress here, and stay tuned on updates for that.

Okay, great.

Thanks very much.

Thanks, Bob.

Thank you.

Our next question is from Larry Biegelsen from Wells Fargo.

Good morning.

The Solvay number that you gave, could you give us the US/O-US breakdown?

I'm sorry, I missed that for the quarter.

We didn't have it specifically in the remarks, but kind of a 70/30 mix isn't a bad ball park estimate for that, 70 being ex US, 30 being US.

And I think most of us tried to calculate an organic growth rate for the quarter.

Could you help us out a little bit with that?

I get to about 1.3% with the recall, 2.5% without the recall.

Am I in the right ball park?

That's a little bit low.

I guess what I would say, when you look at our organic growth rate year-over-year, you do have to take into account some of the things we've faced as a Company.

I think a lot of them are transitional or one-time in nature.

I mean going back to the beginning of the year, as you may recall, we had a significant Venezuelan business that was impacted by the 50% evaluation.

We've obviously had the significant pricing pressures in Europe.

We've had the US healthcare reform impact, and we've had the Similac recall, as well as some products in the pharma business, such as Depakote, that continue to decline.

So a lot of those are transitional items.

And while I think the number is a little better than what you've quoted, I think it has to be put in the context of a lot of these transitional issues, that really we dealt with this year very well, and delivered a very strong performance overall, despite these factors.

That's helpful.

And one last one, Zemplar has been I think, a strong product for you guys, and if I'm not mistaken, $500 million, $600 million annual product.

What are your expectations going forward with the new dialysis bundling rule that goes into effect, I think in 2011?

Thanks.

We do think there is going to be an impact on Zemplar from a different approach to used by the providers, in terms of negotiating with suppliers.

And SO we are expecting that there likely will be a reduction in Zemplar sales in 2011, and we're going to be factoring that into our planning forecast.

Thank you very much.

Thank you.

Thank you.

Our next question is from Matthew Dodds from CitiGroup.

Hello?

Yes, hi.

Good morning, Matt.

Hi, Matt.

Couple questions.

First, on the vascular business, outside of all the stents, you continue to do really well, even better this quarter than last quarter, and I would call it the other.

I'm wondering how much of that MitraClip doing well O-US versus pull-through you're getting with XIENCE in Japan and XIENCE PRIME in Europe.

Well, MitraClip continues to do well in Europe, but it's a pretty small piece.

You're talking about an annualized product sales that are less than $50 million.

So it's probably 10 or less in the quarter, but certainly good performance on a relative scale for that product.

Japan is clearly helping us, but also Europe XIENCE PRIME continues to do extremely well in Europe.

And our other product portfolio, we've made a number of improvements, as you know to the balloons and delivery catheters and so forth.

So there are enhancements across the product portfolio and some pull-through effect, that you get when you're performing as well as we are with the DES platform.

And then one other question, when you look at your other sales category, I know it has diabetes and AMO in there.

When you take those out, it's down a lot this year.

It's down, I think like 35% year-over-year.

Animal health might be in there, amongst some other things.

Is there anything though, that has gone away in that division that's making these comps so tough?

It definitely is one of the drags on the organic growth.

Yes, these comps are always impacted by volatility, particularly in this pharmaceuticals business, where things go up and down and timing of shipments are often impacted.

So I wouldn't, I wouldn't read too much into the year-over-year change in that category.

Okay.

All right, thanks, Tom.

Thanks, John.

Thank you.

Operator, I think we have time for one more question.

And our final question today is from Tony Butler from Barclays Capital.

Good morning.

Thanks for squeezing me in.

Question around the diagnostics business.

And while I recognize it's being run for profitability, it is curious that as you look back for five quarters, for example, if you look at the operational growth ex-US, it shows slight gains, still above 3%, and yet we're kind of flat, to slightly down this quarter.

You commented about China.

And you also comment about it was a contributor to overall gross margins, but I'm just curious what this actually says about the amino acid business, principally in Europe, and whether or not that should be a sustainable run rate?

Thanks.

All right, well, international diagnostic sales, as we talked about, were down modestly.

And there was some impact from the European economic climate overall, and the austerity programs that are going on there.

So that did affect performance.

But we had strong performance in the US as a result of things like the PRISM HIV assay, and the overall mix of the new mid-size ARCHITECT system.

So, when we look at that, we expect that improvement in the fourth quarter, as I mentioned, we'll see an uptick in the fourth quarter.

And as we continue to place the CI -- the 4000 systems throughout the world.

Tony, I would add one more thing, as you know, part of this entire profit improvement strategy, is being more selective in accounts we will participate in.

And a little slowdown is not unexpected, as we try to upgrade the mix of the customers in the portfolio.

Thanks, a lot.

Thanks, Tony.

Thank you.

And that concludes our conference call for today.

A replay of the call will be available after 11 AM Central Time on our Investor Relations website at Abbottinvestor.com, and after 11 AM Central via telephone at 203-369-3307, confirmation code 7494902.

The audio replay will be available until 4 PM on Wednesday, November 3rd.

Thank you all for joining us, and please call us if you have any follow-up questions.

Thank you, and this concludes today's conference.

You may disconnect at this time.