美國雅培 (ABT) 2011 Q4 法說會逐字稿

Good morning and thank you for standing by.

Welcome to Abbott's fourth-quarter and full-year 2011 earnings conference call.

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

(Operator Instructions).

This call is being recorded by Abbott.

With the exception of any participants questions asked during the question-and-answer session, the entire call including the question-and-answer session is material copyrighted by Abbott.

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

I would now like to introduce Mr.

John Thomas, Vice President Investor Relations and Public Affairs.

Thank you.

Good morning and thanks for joining us, everybody.

Also on today's call will be Miles White, our Chairman of the Board and Chief Executive Officer; Tom Freyman, Executive Vice President Finance and Chief Financial Officer; and Larry Peepo, Divisional Vice President of Investor Relations.

Miles will provide his opening remarks and Tom will review the details of our fourth-quarter results as well as our outlook for 2012.

I will then discuss the highlights of our major businesses.

Following our comments, Miles, Tom, Larry, and I will take your questions.

Some statements made today may be forward-looking including the planned separation of the research-based pharmaceutical company from the diversified medical products company and the expected financial results of the two companies after the separation.

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, 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 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 will turn the call over to Miles.

Miles?

Okay.

Thanks, John.

Good morning.

This morning I will review our 2011 performance as well as our outlook for 2012.

Tom and John will walk you through the details of our fourth-quarter and our full-year results as well as our 2012 outlook and then we'll take your questions.

As you can see from our earnings news release, Abbott reported another year of strong performance in 2011 despite what has been another challenging year for the healthcare industry and for the global economy.

We managed through these challenges as we have always done and delivered full year ongoing EPS growth of nearly 12%.

And as we announced this morning we expect to deliver another year of strong performance as we issued guidance of $4.95 a share to $5.05 a share for 2012.

I'll talk more about the year ahead in a moment.

In 2011, Abbott sales grew more than 10%, driven by double-digit growth in established pharmaceuticals, international and nutritionals, molecular and point-of-care diagnostics, international vascular, and global proprietary pharmaceuticals.

Humira had another outstanding year and with nearly $8 billion in sales, solidifying its global position as the anti-TNF market leader.

In addition, the full-year double-digit sales growth as forecasted, we improved the profitability of many of our operating businesses and in the fourth quarter we delivered an adjusted gross margin ratio of nearly 64%.

We also generated more than $9 billion of operating cash flow, which was another record year.

We returned $3 billion to shareholders in the form of dividends.

Our payout ratio was strong at more than 40%.

We've increased our dividend for 39 consecutive years, making Abbott one of only a handful of US companies to deliver with such consistency.

Our return of cash to shareholders through dividends together with Abbott's stock price appreciation generated a total shareholder return of nearly 22% in 2011 compared to 2% for the S&P 500 over the same period of time.

This level of performance led all large-cap medical device companies and was also near the top of large-cap pharmaceutical companies.

Abbott's performance in 2011 is our best annual return in five years and our second-best performance in 10 years.

Abbott's five-year total return of nearly 35% was more than double the S&P Healthcare Index.

Over the same time period, the S&P 500 Index declined 1%.

We continued to generate value for our shareholders and align Abbott's long-term strategic goals with shareholders' best interests.

We announced in October our intention to separate Abbott into two leading healthcare companies, one, in diversified medical products and the other in research-based pharmaceuticals.

Creating two independent companies provides two unique and compelling investment opportunities for shareholders as the investment identities and operating models of each business have evolved independently over the last several years.

Both enterprises will be well-positioned, large-cap investment opportunities in their respective peer groups.

They will also have broad product portfolios and global presence, strong balance sheets, significant and durable cash flows and are expected to have strong investment grade credit ratings.

As we've said, each will generate a dividend that when combined will equally add a dividend at the time of separation and as you can see from our earnings news release this morning, both businesses performed well again in 2011.

After we announced the separation in October, we immediately brought our transition organization together.

This is the same organization that executed the separation of our hospital products business and successfully integrated our key acquisitions including Knoll, Guidant and Solvay.

Right now we're working through the many details of separating the two organizations.

This has been simplified in large part by completing the separation of our established pharmaceuticals business at the beginning of last year.

But as you can imagine there is still a significant amount of work to do.

The transition team has developed and is implementing detailed plans to prepare for the separation.

Moving onto our 2011 results, I will start with the diversified medical products businesses, which is comprised of four similarly sized segments, established pharmaceuticals, nutritionals, diagnostics, and medical devices.

In our established pharmaceuticals division, which is our branded generics business, we delivered sales of $5.4 billion in 2011, an increase of nearly 20%.

We spent the better part of the last decade building EPD into the global organization it is today.

Most recently we completed the integration of Piramal Healthcare Solutions in 2011, which together with our existing business made Abbott the largest pharmaceutical company in India, one of several rapidly growing emerging markets.

The success of EPD is built on literally hundreds of different products sold around the globe.

Our global nutrition business delivered more than 8% growth for the full year 2011.

In the US we regained all of the share we had lost due to the late 2010 infant formula recall and reestablished our position as the infant formula market leader with Similac.

We also continued to drive double-digit growth of our toddler brand, PediaSure.

International sales increased 14% for the full year as we continue to drive growth in fast-growing emerging markets.

At $2.5 billion, our emerging markets nutritional sales comprised more than 40% of our total nutritional business and increased 17% for the full year.

As I discussed at our investor meeting in October, one of our key priorities in our nutrition business is to expand its operating margin.

Similar to the success that we've seen in diagnostics and diabetes care, we are implementing an improvement plan to drive our nutrition margin from the low teens in 2011 to our target of more than 20% by 2015.

We began to see progress from our efforts in the fourth quarter.

While quite detailed, this plan has four main drivers of improvement -- manufacturing, locations and processes; materials and packaging costs; distribution; and product and geographic mix.

Let me give you a few examples.

We are building plants in key emerging markets including China to be closer to the customer as well as reduce manufacturing and shipping costs.

We will be online with new facilities in 2013.

We are moving from a distributor model to a direct model in certain countries which we expect to generate significant savings and we are improving both our product and geographic mix and in some cases exiting product lines or markets to focus on more profitable opportunities.

These are just a few examples of many initiatives that are underway in the nutrition business.

We expect to see good progress in 2012 with much more significant improvement in operating margin in 2013 and beyond.

Moving on to Diagnostics, which had another impressive year in terms of both sales and margin.

Sales increased 9% with continued double-digit growth in both molecular and point-of-care.

We delivered strong growth in emerging markets such as China, where in core laboratory diagnostics for example, we continued to place new ARCHITECT systems.

In 2011 across Diagnostics, we launched a number of new devices and tests including our wireless i-STAT point-of-care device, a vitamin D assay on ARCHITECT, and a new molecular diagnostic that is used with a new lung cancer treatment.

We expect approximately 20 new product launches in 2012.

Diagnostics continued its successful multiyear operating margin improvement plan.

2011 was a record year for margin dollar contribution, up more than 35% resulting in an operating margin of more than 18%.

In 2012, we will continue to expand the margin profile of our core laboratory diagnostics business while we drive more significant contribution from our molecular and point-of-care businesses.

By 2015, Diagnostics should deliver more than $1 billion in margin annually reflecting an operating margin that we expect will be more than 20%.

Finally, our Medical Devices segment, which includes vascular, diabetes care, and vision care.

In diabetes care in 2011, we launched our new InsuLinx glucose monitor in Europe.

This technology is the foundation for our new product pipeline as we improve the testing experience for insulin-dependent patients.

Both the gross and operating margins in our diabetes business continue to improve.

In vision care, we launched five new products in 2011 including the European launch of our new TECNIS toric intraocular lens for cataract patients.

Our vision care pipeline is balanced across our LASIK, cataract, and eye-care solution business lines with numerous products launching over the next five years.

And in vascular, we launched several important new products in 2011 that solidified our position as the number vascular device company globally.

In the US, we launched our XIENCE nano small vessel drug-eluting stent and in November, launched XIENCE PRIME, our next-generation DES that is also for long lesions.

Both of these products have allowed Abbott to expand in the market segments where we weren't previously competing to and capture additional share.

In Europe, we received CE Mark for our bioresorbable vascular scaffold or VBS Absorb and we expect a full commercial launch by the end of this year.

We delivered high single-digit growth in our endovascular segment, which includes our carotid stents, vessel closure devices, and peripheral balloons and stents.

Our endovascular business is approaching $500 million in annual sales and we expect double-digit growth in 2012.

In 2011, we also saw continued gains from our new TREK balloon franchise delivering 20% growth for coronary balloons for the full year.

We also continue to perform well in emerging markets.

This geographic segment comprises nearly 20% of total vascular sales and increased 25% for the full year.

In addition to our endovascular business, we expect numerous new product launches to drive growth over the next several years.

This includes Absorb, as I mentioned, our US launch of MitraClip for mitral regurgitation.

Our recently announced new drug-eluting stent system, XIENCE Xpedition, which we anticipate launching in Europe in the second half of this year, as well as numerous coronary and endovascular products are pipeline.

In our proprietary pharmaceutical business, we delivered another year of industry-leading performance.

Humira, our biologic for the treatment of autoimmune diseases, continued to exceed our expectations, delivering strong growth again in 2011.

With its broad range of indications, strong global market position, and well-established safety and efficacy profile, it will continue to be a strong and sustainable growth product going forward.

Beyond Humira, we delivered strong growth with many of our durable specialty focused products.

This included double-digit growth for the full year 2011 in the US for Lupron, Synthroid, Creon, Androgel.

In our pharmaceutical pipeline, we advanced two products into Phase III development and now have more than 20 compounds or new indications in Phase II or Phase III.

I would like to focus on just a couple in particular.

As we discussed in October, we made significant progress on our pipeline over the past several years, augmenting it with promising late stage assets and successfully advancing internal programs.

One of these internal programs is HCV where our data to date has shown that we are in the running to have a leadership position in this category by effectively curing HCV with a short course of therapy without interferon.

We will present additional HCV data this spring and more importantly, initial results from our Phase IIb program in the fall.

Another late stage compound I would highlight is perhaps bardoxolone, which is in Phase III for chronic kidney disease.

Bardoxolone has the potential to prevent and possibly reverse the progression of CKD.

To date, no treatment has been shown to reverse disease progression.

Bardoxolone could change the treatment landscape as well as have a significant economic benefit for the healthcare system.

We are developing this compound with our partner, Reata, and recently expanded that agreement to jointly develop and commercialize their entire portfolio of next-generation anti-inflammatory treatments across a number of diseases including RA, MS, and COPD.

So in summary as we look back on 2011, it was really another outstanding year for Abbott.

We delivered ongoing EPS growth of nearly 12% and generated a total shareholder return of nearly 22%.

As we look forward to 2012, we expect to deliver another year of strong earnings growth while investing appropriately to ensure successful futures for our two leading healthcare companies post separation.

Each has its own unique and compelling investment identity and both are well positioned in their respective markets.

We expect Abbott to be one of the fastest growing large-cap diversified medical products companies with a durable mix of products and a strong emerging markets presence.

The new research-based pharmaceutical company will be a leader in its industry with a strong and sustainable portfolio of biologics and specialty medicines and a promising pipeline.

We believe both of these companies will be attractive opportunities for investors.

With that, I will turn it over to Tom and John for a more detailed overview of the fourth quarter and our outlook for 2012.

Tom?

Thanks, Miles.

We are very pleased with how we ended 2011 as we had a strong fourth quarter delivering double-digit ongoing earnings per share growth.

And we had strong overall performance in 2011 with ongoing EPS above the original guidance range we provided at the beginning of the year.

For the fourth quarter, we reported ongoing diluted earnings per share of $1.45, an increase of 11.5% over the prior year.

For the full year 2011, ongoing EPS was up 11.8%.

Sales growth in the quarter was 4.1% including a favorable 0.2% impact from exchange rates.

With the significant movements in number of currencies during the quarter, impact from exchanges was almost 1% less favorable than we had forecasted on the third-quarter call.

We continue to see the benefit of our strategies to expand in the emerging markets with total emerging market sales across the Company of $2.5 billion representing nearly 25% of total sales with particularly strong growth in Nutritionals, Vascular and Diagnostics in the quarter.

The adjusted gross margin ratio was 63.8%, up 320 basis points from the prior year.

While changes in exchange rates contributed roughly half of the improvement over 2010, we did see significantly better operating performance across most of our businesses, including Vascular, Pharmaceuticals, Nutritionals, Diabetes Care, and Diagnostics.

Overall as we look at 2011, we delivered strong ongoing EPS growth despite a number of factors that impacted our industry.

We continued to expand our presence across emerging markets, advanced our late stage pipeline, and made great strides to improve the overall efficiency of the Company while continuing to invest in the business to drive future growth.

And we generated a record operating cash flow of more than $9 billion in 2011.

Most importantly, we announced our plan to separate into two leading healthcare companies, each with a unique investment identity.

Looking ahead to 2012, as Miles mentioned, the separation is on track for completion by the end of the year.

So the guidance we have provided today reflects a full-year outlook for the Company in total.

Today we issued full-year ongoing earnings per share guidance of $4.95 and $5.05 reflecting another year of strong performance.

Regarding sales growth for 2012 with the recent movements in various exchange rates, we'd expect there to be a sales headwind this year.

Current rates would result in a negative impact of exchange on sales of approximately 2.5% in 2012.

Our operational sales growth in 2012 is expected to be in the mid-single digits.

However, if current rates were to hold, the negative impact from exchange would result in reported sales growth in the low single digits this year.

Our sales forecast reflects an expectation for somewhat slower growth in our proprietary pharmaceutical business, offset by stronger growth in the remainder of the medical device and nutritional businesses.

Our outlook for proprietary pharmaceuticals reflects ongoing trends in our US lipid franchise including a continued decline in Niaspan and an expectation for generic competition for TriCor in the second half of the year.

Also for 2012, we are forecasting continued improvement in our adjusted full-year gross margin ratio, which is expected to approach 62% for the full year.

This reflects efficiency initiatives, favorable mix, and current exchange rates, partially offset by the decline in US lipid sales.

We are forecasting continuing strong investments to drive long-term growth in 2012 and after the separation for both companies with R&D of 9.5% to 10% of sales and SG&A somewhat under 28% of sales.

Overall, we expect to expand our operating margin ratio by around 100 basis points in 2012.

We are forecasting net interest expense of around $450 million in 2012.

We saw great progress in improving liquidity through the buildup of cash and by paying down short-term debt in 2011.

But since both short-term investments and long-term debt are at such low interest rates, there is little expected change to net interest expense in 2012 from the amount seen in 2011.

Regarding the tax rate in 2012, we expect a rate of 14.5% to 15%.

We are forecasting quarterly ongoing EPS growth in each of the quarters that's consistent with the growth implied by our full-year EPS guidance range.

Our operational sales growth in the first quarter is expected to be in the mid-single digits.

However at current exchange rates, we would see a roughly 2% negative impact from exchange in the first quarter, which would result in reported sales growth in the low single digits.

We are forecasting an adjusted gross margin ratio approaching 61% in the first quarter, up over the first quarter of 2011.

Finally in 2012, we are planning to resume share repurchases.

So in summary, we exceeded our key financial goals in 2011 including strong EPS growth and cash flow generation while continuing to take strategic actions to shape Abbott for the long-term.

Our outlook for 2012 again reflects strong performance as we execute the steps necessary to separate Abbott into two leading healthcare companies by the end of this year.

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

John?

Thanks, Tom.

This morning I will review the fourth-quarter performance for 2011 and the 2012 outlook for our major business categories.

I will also provide a brief overview of our pipeline and the major milestones we expect this year.

I will describe our fourth-quarter and full-year 2011 results on a reported basis -- that is including the impact of foreign exchange.

For our 2012 division outlook, when I get there, and given recent FX trends I will provide both operational and reported expectations.

So let me start with our proprietary pharmaceuticals business where worldwide reported sales in the fourth quarter increased nearly 7%.

For the full year 2011, worldwide reported sales in pharmaceuticals increased 11%.

Global demand for Humira continues to outpace the market with reported sales up nearly 16% in the fourth quarter.

Performance was driven by strong US sales growth consistent with underlying trends in the quarter.

We continue to see steady market growth globally including strong performance for Humira in the gastroenterology and dermatology segments.

International Humira growth in the quarter was impacted by our previous change to calendar year reporting for our international operations.

Therefore adjusting for results on a calendar year basis, Humira international sales would have increased approximately 15% in the fourth quarter on a reported basis.

Full year 2011 reported sales for Humira increased 21% globally, ahead of our original outlook at this time last year, which was low teens growth.

As we look ahead to 2012, we expect low double-digit reported sales growth for Humira worldwide, which includes the negative expected impact of foreign exchange.

Global reported sales of Creon in the quarter were approximately $175 million, up approximately 13%.

Full year 2011 global reported sales were approximately $630 million and that was up 45%.

Creon maintains market leadership in the pancreatic enzyme market and over the past year we have captured the vast majority of new prescription starts in this category.

US sales of Lupron in the quarter were up 7%.

Full-year global Lupron sales were $810 million and that was ahead of our expectations.

Our recently approved six-month formulation of Lupron Depot continues to perform well, driving share gains and further expanding our category leadership.

And US sales of Synthroid were approximately $135 million in the quarter.

Full-year sales were approximately $520 million and that was up more than 15%.

For 2012, we expect US Synthroid sales of more than $500 million.

Moving on to Androgel, where US sales in the fourth quarter were approximately $260 million, up nearly 20%.

Full-year 2011 sales were approximately $875 million, an increase of nearly 35%.

Androgel holds a number one share position in the testosterone replacement market, where growth is being driven by increasing diagnosis and treatment of low testosterone.

Our new low-volume formulation is the fastest-growing therapy in the market and has quickly gained market share.

So for 2012, we expect continued double-digit growth for Androgel.

Moving on to our more mature lipid franchise, where sales of Niaspan were $258 million in the quarter, down 10%, with prescription growth slowing following the discontinuation of the AIM-HIGH trial in May as we have previously discussed.

Global TRILIPIX/TriCor reported sales in the quarter were down approximately 4%, reflecting ongoing impact from the ACCORD study and continued softness in the overall cholesterol market.

In terms of our 2012 outlook for our proprietary pharmaceutical business, we contemplated the current dynamics of the total cholesterol market, prescription trends for our range of lipid products including TriCor, TRILIPIX, and Niaspan and the entry of generic TriCor in the second half of the year.

As a result, we expect low single-digit reported sales growth for the global proprietary pharmaceuticals business including roughly flat performance in the US and low single-digit reported growth in international business.

On an operational or performance basis excluding the impact of the foreign exchange, we expect international proprietary pharmaceutical sales growth of mid to high single digits.

Moving on to our established pharmaceuticals division, or EPD, which includes international sales of our branded generics portfolio, fourth-quarter reported global sales were nearly $1.4 billion.

Excluding the impact of timing related to a significant tender for vaccine sales that occurred in the third quarter of 2011 rather than the fourth quarter, sales in our established pharmaceutical business increased approximately 3% in the fourth quarter.

In 2011, we received approximately 250 product approvals across numerous countries.

And over the next several years we expect more than 1000 product launches in EPD, including registrations across multiple geographies to help drive continued durable performance in this business.

So for 2012, we expect mid single-digit operational sales growth in our established pharmaceuticals division, including continued double-digit growth in key emerging markets with strong bottom-line growth.

However, since this business consists entirely of international sales, we'd expect reported sales growth to be roughly flat including a mid single-digit negative sales impact from foreign exchange.

Turning to our worldwide nutritionals business, where global reported sales increased approximately 8.5% in the fourth quarter, driven by mid single-digit sales growth in the US and double-digit growth internationally.

Full-year 2011 global sales were more than $6 billion in this division, an increase of more than 8%.

Over the course of the past year, we have advanced several strategic objectives in our Nutritionals business.

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

In addition to regaining significant US infant formula market share in 2011, as Miles mentioned, we drove double-digit growth in PediaSure, our toddler brand, and Ensure, our top-selling adult nutritional product.

Internationally in our nutritional business we successfully completed approximately 50 new product launches in key countries around the world.

And also as Miles mentioned, we continued to deliver strong double-digit growth for our nutrition business in emerging markets as well as drive meaningful operating margin expansion.

As we look ahead to the full year 2012 in our global nutritionals business, we're forecasting high single-digit reported sales growth including mid single-digit growth in our US business and low double-digit reported growth for our international business, which includes an estimated negative impact from foreign exchange of approximately 1%.

In our global diabetes care business, worldwide reported sales increased 4% in the quarter.

US sales were up more than 7% as we continue to grow our retail prescription share through expanded consumer outreach and patient education.

In 2011, we launched our new FreeStyle InsuLinx blood glucose monitor in Canada as well as several European countries and expect to launch it in additional markets this year.

In addition in 2011, we significantly improved the profitability of our diabetes business, increasing operating margin by more than 300 basis points as a result of favorable product mix and operating cost reductions.

And we expect continued margin improvement throughout 2012.

So as we look ahead to 2012 in our global diabetes business, we expect flat to low single-digit reported revenue growth including an estimated impact from foreign exchange of approximately 2.5%.

In our core Laboratory Diagnostics business, which includes immunoassay, blood screening, and hematology, global reported sales in the quarter increased nearly 6% with US sales up 10% driven by continued strong growth of our ARCHITECT and PRISM systems.

Full-year sales were nearly $3.4 billion and we continue to deliver strong margin improvement.

In our point-of-care business, reported global sales in the fourth quarter increased nearly 8%.

Full-year global sales were up more than 10% in 2011 driven by strong growth of our bedside cardiac tests and continued expansion in emerging markets such as China.

And in molecular diagnostics, reported global sales increased more than 10% in the fourth quarter driven by double-digit sales growth in both the US and international markets.

Full-year global sales were up nearly 15% in 2011 including more than 20% reported international sales growth.

We have seen uptake of our ALK companion diagnostic to a new non-cell small -- small cell lung cancer medicine and we continue to place new systems and expand the menu of tests offered on the PLEX-ID system.

So as we look ahead for the full year 2012, we expect our worldwide diagnostics business and that includes our core laboratory, point-of-care, and molecular businesses, to generate mid single-digit reported sales growth including an estimated negative impact of foreign exchange of approximately 2.5%.

Moving onto our vision care business, where worldwide reported sales in the fourth quarter increased approximately 2% and more than 4% for the full year of 2011.

Internationally we have seen good uptake of our new TECNIS toric IOL in Europe and strong double-digit growth in emerging markets such as China and India.

For 2012, we expect low to mid single-digit reported sales growth in our vision care business including an estimated negative impact from foreign exchange of approximately 2%.

Finally in our Vascular business, worldwide sales in the fourth quarter were $826 million.

Sales are roughly flat on a reported basis; however, excluding non-commercial revenues, sales increased mid single digits for the fourth quarter.

As a reminder, the third-party distributor of PROMUS is now transitioning away from this product as we approach the end of our distribution agreement with them this year.

International vascular sales, which now comprised more than half of our total Vascular business, increased 7% in the quarter.

And emerging markets, which comprise nearly 20% of this business, increased more than 14% in the quarter.

In our coronary stent business, the US launches last year of XIENCE nano in May followed by XIENCE PRIME in November contributed to DES franchise revenues of approximately $480 million in the fourth quarter.

XIENCE sales increased nearly 10% globally, offset by a double-digit decline in PROMUS revenues as expected.

With the recent US launches of nano and PRIME and continued strong performance in Japan, China, and other key international markets, XIENCE has solidified its position as the number one drug-eluting stent family globally.

XIENCE PRIME is the only everolimus drug-eluting stent available in long lengths in the US, which is helping us to continue to gain share at a higher price point.

Our endovascular, other coronary and structural heart businesses comprised 40% of Vascular sales and they increased mid single digits in the fourth quarter, led by continued strong growth of MitraClip, which posted sales in the fourth quarter of more than $25 million.

Also, was driven by growth in coronary balloons with the launch of TREK as well as growth in endovascular, driven by our [newer] model line of peripheral balloons and our renal stent, Herculink Elite.

So as we look ahead to 2012 for Abbott Vascular, we expect roughly flat global reported sales growth including our assumptions for PROMUS and nearly 2% of negative foreign exchange, offset by continued strong performance from our underlying businesses.

The PROMUS transition will be nearly completed by the end of 2012 positioning 2013 for a stronger reported growth rate.

And now turning to our pipeline, since Miles spent time this morning discussing a number of compounds and technologies in our portfolio, let me spend a few moments outlining some of the milestones we expect that will occur this year in 2012.

We have taken significant strategic actions to strengthen and advance our pipeline and we expect a good deal of activity throughout this year including new regulatory filings and product approvals, clinical trial advancement, and data presentations.

Starting with Diagnostics, we expect regulatory filings and approvals for a number of new assays for our ARCHITECT platform.

We also expect the worldwide launch of a web-based informatics platform called OneLab designed to connect all of the labs information into one easy to use system.

OneLab was released in Europe and Australia this month and is expected to launch in the US and Canada later this year.

In Molecular Diagnostics, we expect CE Mark for a number of infectious disease tests for our M2000 system.

In addition, we will launch our ALK companion diagnostic in more than 50 additional countries following US approval last year.

In our Nutrition business, we expect nearly 70 innovations globally in our adult and pediatric business lines in 2012.

In our Vascular business, the productivity of our pipeline is resulting in multiple new coronary and endovascular product launches across every major geography this year.

Some of these include our continued rollout of XIENCE PRIME including geographic expansion into Japan and China in the first half of 2012; the launch of XIENCE Xpedition in Europe, which offers a new catheter for enhanced deliverability as well as a broader sized matrix; two stents for iliac indications in the US, Absolute Pro and Omnilink Elite; and a full commercial launch by the end of this year in Europe and a number of other countries around the world of Absorb, our bioabsorbable vascular scaffold.

We are finalizing the ABSORB US trial design and expect to begin enrollment in the first half of this year with our Japan registration trial beginning in the second half of this year.

We also continue our ongoing dialogue with the FDA on the US review of MitraClip.

In AMO, we expect European launches for a number of products and we plan to submit our US PMA for the TECNIS toric intraocular lens.

And then finally in proprietary pharmaceuticals, 2012 promises to be a pretty significant year for our HCV program with the results from our initial interferon free trials presented at a spring conference and preliminary data from several Phase IIb studies in the fall.

We have a high level of confidence that our HCV compounds in development can dramatically change the treatment landscape.

We plan to present additional data analysis from our Phase IIb study of bardoxolone this year as well for the treatment of chronic kidney disease.

The Phase III program is enrolling very well and we continue to expect results from that trial later next year.

Also in development for CKD is atrasentan.

We expect to complete our ongoing Phase IIb study in diabetic patients this year and plan to initiate the Phase III program next year in 2013.

We expect to present Phase II data from ABT 126, our NNR in development for Alzheimer's and other conditions this year as well, likely at a medical meeting this summer.

We are working with regulatory authorities to finalize the Phase III study design of elagolix for endometriosis and expect to initiate the global trial in the coming months.

We plan to present Phase III pivotal data for Duodopa, an intestinal gel for advanced Parkinson's disease at an upcoming medical meeting.

We expect to submit our US regulatory application for Duodopa later this year as well.

Finally certainly the most important milestone for 2012 will be the separation into two companies.

As Miles mentioned, we expect significant activity leading up to the separation as we disclose additional detail and meet with existing and potential new investors throughout the coming year.

So in summary in 2011, Abbott demonstrated strength with sales and earnings growth and reported financial results generating total shareholder return as Miles mentioned of approximately 22%.

We delivered gross margin expansion and significant profitability improvements in many of our major business segments as well as another record year of cash flow and dividends.

As we move into 2012, we look forward to delivering another year of strong growth as we prepare to separate into two leading healthcare companies with unique investment identities.

With that now, we will take questions from the analysts.

(Operator Instructions).

Rick Wise, Leerink Swann.

Good morning, Miles.

Good morning, everybody.

Let me start with gross margin outstanding.

I guess I would ask Tom what took so long to get here?

It's such a major leap forward.

Can you talk about a couple of points?

Are the efficiency initiatives completed?

What more is there to be done?

How sustainable is this?

Maybe just help us understand a little better why maybe the sequential dip in the first quarter and why it ramps through 2012?

Thanks.

Sure, we've been talking for a long time about a number of -- really the focus of the entire Company and every single business on improving gross margin.

And as we have always talked about over the last couple of years, our progress, our underlying progress has really been masked by some of the pricing pressures in pharma through healthcare reforms and austerity in Europe as well as an occasional generic issue.

What has really been going on in the business has really been quite good and I think this quarter as we moved into the fourth, you are really starting to see the benefits of that play through and we do expect this to continue into next year.

For 2011, we finished with an ongoing gross margin a little under 61% and as I indicated in my remarks, we should be approaching 62% next year and that's despite the effect of TriCor and the slowdown in Niaspan.

So as we talked about when you -- we talk about the operating margins in the business and when you see those operating margins in the 10-K when we file it in a few weeks, you're going to see that most of the businesses are making very nice progress and we expect it to continue longer term.

So we do expect this improvement of at least a point next year overall despite the headwinds and we expect continuing improvement beyond 2012 because every division is focused on it, every plan and including for example, the program Miles went through in nutrition has pretty detailed plans on how to get there and we are very focused on executing it.

Thanks, second question.

Let me turn to the stent business if I could.

You can -- sort of half related to the margin question, as promised volume declines, can you talk a little bit about how you keep margins whole?

Is it all through the uptick of the new products in XIENCE PRIME?

Maybe any just broader perspective about your view of the market outlook for 2012 and growth and pricing pressures and how you -- what you have dialed into your numbers.

Thanks so much.

Overall, obviously we are offsetting the PROMIS effect with product mix improvements and really business mix improvements.

And so just like the other headwinds, when you net it all out, we are showing an overall improvement.

In terms of the overall environment, clearly in particular the pharma business went through the austerity period in Europe and the US healthcare reform but we have seen a bit of a more stable outlook for 2012.

Certainly we have factored in some degree of adjustments in our forecast.

But I think 2010 and 2011 were a bit of a step function and we expect that aspect of pricing, etc.

to be a little more normal in 2012.

So Rick, we would expect as you know, price declines have moderated, so from year-over-year high single digit declines, which we saw last year, it's more in the mid single-digit range, which is encouraging.

And in addition to what Tom said, we would obviously expect to pick up a lot of that business with XIENCE PRIME, which we continue to sell and market in the US and outside the US and now that we have nano and PRIME, we have the full complement of ranges and sizes and lengths that not always available with some of the other competitors and that's one of the reasons why we have done so well internationally.

We keep talking about the fact that this business has grown to more than 50% internationally, where double-digit growth is the norm in a lot of these key emerging markets for us as well as some other more developed Western Europe countries as well where we continue to take share with PRIME.

So I think those things plus the MitraClip ex-US run rate is now at roughly $100 million on an annual basis and that's helping as well.

Rick, I'd say one last thing.

Clearly as PROMUS pulls out of the market and really we're going to have two independent products as opposed to the same product, that is going to bring a better dynamic to the PES market for us.

I appreciate that, thanks.

Mike Weinstein, JPMC.

Miles, let me ask you I guess the tough question first.

Going back a year ago on the fourth quarter of '10 call, someone had asked you about 2012, which was setting up to be a difficult year, and whether you thought sustaining 10% EPS growth was still achievable.

You had commented at that time that that was still your goal.

And then someone asked you at the October analyst meeting on the spin announcement whether the double-digit EPS goal was still an appropriate target, and your answer at that point in time was yes, you thought that was still an appropriate goal.

But then today's guidance is 6% to 8% EPS growth for 2012, so can you comment on that?

Has anything in your view changed that makes 6% to 8% the appropriate target for this year versus the 10% plus before?

Yes, I think that's a pretty simple answer.

I think everybody is aware the single biggest thing that has changed is exchange.

There's been a pretty big shift in currency in the last three to four months here.

And that's the single biggest part of any change in our expectations going forward, really.

The other thing I would note too, Mike, as you know, is our guidance of $4.95 to $5.05 brackets with the First Call consensus is right now, which is $5.02.

Understood.

So, Tom, maybe you just want to add to that.

So, Tom, you think that the FX impact right now on the bottom line for 2012 would be a negative two to four points?

Yes, we've factored these rates in and clearly that had an impact on the progression of our forecast as we worked through the fourth quarter and worked on our plan.

And these rates have definitely affected us and that's in our numbers for 2012.

Okay.

Any additional sensitivity you can give us on that, Tom, just so we can think about it going forward?

Obviously, if the dollar weakens or strengthens from here, we can think about the potential impact on the Company's bottom line.

I think historically people have viewed Abbott as being relatively insulated absent some of the currencies where you can't hedge, like Latin America.

Yes, well, as we -- the closer we get to a year, the more -- the less exposed we are to currency and that has to do with the way exchange rates get into inventories and some of our other natural positions.

So the further out you are, the harder it is to forecast.

The closer you get into a year, it gets a little less -- a little more predictable.

And I feel like we are in pretty good shape here and certainly it's manageable.

Even if rates do go up or down, I think we can manage 2012 within this guidance range.

Okay, two other maybe quick follow-ups.

One, could just talk about Humira in the quarter?

I'm focused really on the US, which was obviously very, very strong.

I just would like to get your sense of if there's anything in there that aided the quarter because it's obviously well above recent trends.

And then second, the FX impact on gross margin is a bit tough to tease out.

Obviously it helped a little bit this quarter.

In that 2012 guidance for gross margin improvement, how much is FX a factor on that line?

Thanks.

On Humira, nothing unusual in the US.

The script rates are strong and when you look at the overall dynamics on the product growth, it's very much in line with expectations there.

For 2012, I would say a modest part of the margin improvement is exchanged and there's a lot of -- the majority of it is operating performance.

The cost reduction programs that we've talked about efficiencies, product mix, and the like.

Mike, the only thing I would add to there on the Humira is what we said in the past and what we talked about in October at the meeting and Rick talked about is the differentiation of Humira in terms of breadth of indications, depth of clinical data, our differentiating efficacy and safety profile, our strong managed care position.

Derm share has been picking up nicely, as has gastro share.

Those have all combined to make this what we think is a durable growth vehicle going forward.

I think some of the expectations and uncertainty around some of the other products in the market have dissipated as more data has come out on things like orals and so forth.

And so we have seen competition in the past every year since we have had this product.

There have been multiple products that have been in the market.

Humira continues to shine in terms of its overall profile.

And so we don't expect anything to change that overall trajectory of strong double-digit growth here particularly for this year.

That's helpful.

Thanks, John.

Mike, this is Miles again.

I can't help but chuckle here because I recall in October, you advocating to me that we should take a more cautious view of earnings growth in 2012 and I'm wondering if you had some prescient view of exchange?

And if you had, I wish you had said so.

No, if that's the case, I wouldn't be on this call.

I would be doing something else.

Actually the conservatism is for me, as you know, is top and bottom line, just setting a bar that's reasonable and achievable.

I would also say, too, Mike, you know this.

The other companies are also discussing the impact of foreign exchange and I think when all the companies report at the end of the day, like is usually the case in a week or two, our growth on a relative basis will be strong and in the upper half of the group.

You know, I think I would add to that, I'm pretty happy with what I see in the operating performance of the Company right now on so many dimensions.

I am happy with the commercial performance of a lot of our businesses.

They are still places we can make improvements, no question.

But I think in general, I am very pleased with what I call the operating execution and I am pleased to see even earlier than I might have expected some of the impact on gross margin because I do expect even greater improvement because I think there's a couple of target-rich opportunities for us in the businesses to improve our margins.

So that's a good thing.

While we have got a lot of these product launches or registrations under way with both EPD and frankly even our nutrition business internationally, we had 52 new products launched in the nutrition business last year, which is very important to filling out the product lines and the strategies in the countries and so on.

We've got a lot of really good things going on.

Now we know that we will experience the beginning of our lipid franchise going generic this year.

Humira's growth and momentum will I think nicely offset that to a large degree.

There's actually a lot of good fundamental things going on here that I think position us well actually in both companies.

So exchange is a little harder to predict and it goes better than we think we'll be happy.

If it doesn't, we will do everything we can to adjust to it but I think with all the moving parts in the businesses right now, I think this is the prudent place to be.

That's the one thing we can't control very well.

David Lewis, Morgan Stanley.

Good morning.

Miles, I wanted to come back to hep C, where you made some interesting comments.

One of the interesting things when you started talking more about your hep C program earlier this year was the diversity of that program and I guess as you look out at the next three to five years in terms of the multitude of players that are getting more active in this market, are you comfortable with your organic program or internal program on hep C as you see the market developing over the next three to five years?

I think so.

I think that there's been an awful lot of attention paid to everybody in the category and I think we surprised some people when we exposed our program in more detail in October.

We have obviously seen a -- so we say a changing competitive response out there.

I think we've got a really promising program here and we like what we are holding.

So I think as you've seen from let's say some of the reaction out there, it's a highly valued segment and I observe that and I think, man, if that's how people think of it, the value of our pipeline must be astronomical.

We have all the types of assets we need.

I'm very pleased with what we've got and the potential for it as it particularly impacts patients and the disease.

So I am very hopeful and very optimistic about the program and very excited about it from a pharma business.

Yes, as a reminder, Dave, we talked about this in October but we did show some of that first 12-week course of therapy.

It's a smaller subset of patients but it did demonstrate that 90% cure rate and most importantly without interferon.

We think that's critical obviously to these new therapies and where we are going and the promise of our program.

And as I mentioned in my remarks, we are going to present some of the initial Phase IIb full data set later this fall and also in the spring.

Okay, very helpful.

Thanks, John.

And maybe one more strategic for Miles and maybe one for Tom.

Miles, I know it's early but you did mention a restatement of your prior marks which is that you are committed to a total dividend for both assets.

That's equivalent to the prior dividend.

I guess is it still too early to suggest that is it a reasonable assumption to assume that of the two assets we see generally speaking a higher relative dividend on the pharma asset and generally speaking perhaps more debt on the pharmaceutical asset relative to the diversified asset?

It's too early for me to comment on any of that.

I think when we are ready later in the year to put out the split of the economics of the companies and all those sorts of things, we will address it then.

But yes, it's too premature.

Okay, and then, Tom, just --

The main thing is, look, our investors have come to rely on and expect a certain cash return and we are well aware that the profiles of the two businesses which frankly owes to the different investment identity of the two businesses would suggest they would not be necessarily identical on a lot of dimensions.

So I understand the nature of the question.

I think we will deal with it when the time comes.

But look, they are two different investment identities.

We understand the question and we will have an answer for you later in the year.

But in the meantime, our investors in addition to the growth profile we provide do expect a certain cash return that is a combination of dividend and/or share repurchase from time to time.

And what we do know is that because investors will initially hold both shares, it's important for us to make sure there's no diminution of that cash return to investors.

How we split it remains to be seen.

Okay.

Very helpful, Miles.

Just real quickly, Tom, you've talked a lot about nutritionals and the opportunity for margin expansion, which seems very clear and Miles also reiterated.

But from a topline growth perspective, are you comfortable with where the current growth profile of the nutritional business and the current market share for nutritionals sort of post the recall?

Are we sort of back to where you want to be or is there still significant room for upside in either growth reacceleration or share?

Thank you.

David, you've got two different markets.

There's the US market and then there is the international market and of course I guess there is two different markets internationally, one in Europe and one the rest of the world.

The year -- the US market for nutritionals is not particularly a growth market as a market but our team has done really well there.

We have regained all the share that was impacted by the recall and they have done a nice job in the US of gaining share relative to competition over the last several years.

So -- but the US market for infant nutrition is a declining market, slightly declining at least for the last couple years it has been and we have gained share against that headwind and grown.

So do I expect to see the same kind of performance out of our business?

I will tell you that is certainly what we press for.

It is a well performing business.

I like the plans, I like the team, I like the product portfolio.

I think it's a well executing team.

So I expect to continue to see good performance out of the US.

The growth profile overseas I think should improve and I think it's already a strong growth profile but there's a tailwind of market growth there too particularly in emerging markets.

I think in addition to margin expansion, there's a growth expansion expectation that I expect to see here over time as we fill out the product offerings and the product lines in given geographies.

So I think this business has an awful lot of opportunity for us going forward here.

Thank you very much.

Rajeev Jashnani, UBS.

Good morning.

Thanks for taking the question.

Just on the gross margin guidance, I guess given the pending split perhaps you could tell us a little bit about more where the margin expansion is coming from, whether it's the pharma side or the diversified side first?

Thank you.

I would say the pharma is relatively stable.

You have Humira continuing to grow, which is a solid product, and we do have kind of a slowdown in the lipids, are fairly neutral on pharma and better progress in the diversified businesses.

Okay and secondly -- I apologize in advance.

This might be a tough question but, Miles, I was wondering if you could comment on what you intend to do with your shares in the pharma company close to split.

Would you intend to hold them or would there be potential conflicts of interest there or other reasons that might prevent you from doing so?

No conflicts of interest.

I intend to hold them.

I am confident for both companies.

Great, thanks.

Barbara Ryan, Deutsche Bank.

Thanks, I tried to take myself out of the queue because most of my questions were answered, but --

You are stuck now, so --

I know, so maybe as you talk about -- and I can understand the huge undertaking of splitting the two businesses, but can you give us some sense of timing beyond later this year?

Just in terms of seeing numbers for the different businesses and how would you envision that coming out?

Would it come out with a quarterly earnings release?

Any more color on that would be really helpful.

Sure, I think the next big data point will be the submission of the Form 10, which we expect by the later part of the first half.

As you know, that's where we basically carve out the proprietary pharma business historically in a way that -- as if it had been an independent company during that period.

That's a pretty extensive process to go through that.

We have to obviously -- we're just finishing the closing of the books for 2011.

We've now completed that and now we're in the process of going through a carve out an audit procedure to come up with that Form 10 information.

So that would be the first data point.

In the meantime, we'll be refining our outlook for the remainder of 2012 and going into 2013 for the two businesses and we will be able to talk more prospectively about them and you can expect increasing investor relations activity in the second half of the year in a timeframe consistent with completing the separation by the end of the year.

So Miles and Rick and the various management teams will be out interacting and talking about the future outlook for these companies in that timeframe.

Barbara, the only I could add there -- is on the Form 10, I would just caution everybody but that is going to be a historical document and as we work to separate the businesses and the products and so forth, you'll have to be a little careful at the time of that document that you don't extrapolate that forward too much and draw too many conclusions separately.

When we do the roadshows for these businesses, we will talk about how it looks and things like that.

So just be a little careful with that information, we can help you at the time of it.

It serves a purpose but it shouldn't be misconstrued in the wrong way about forward-looking projections.

Okay, I guess part of that is the capital structure that each company would have going forward versus the past.

To John's point, the historical capital structure of the two businesses in the Form 10 will be quite different than what the capital structure of these companies will be in the future.

That's just one example of the types of things we're going to have to help investors through.

Okay, thanks very much.

Thanks for asking the question.

Tony Butler, Barclays Capital.

Good morning.

Thanks very much.

Miles, I wanted to ask one question to you and then one for Tom if I may.

You have given some lofty guidance or some thoughts around the molecular diagnostics business in the future and if you take away 2012, can you help us understand how that business is going to grow?

Is it organic or will it be external adds to that business?

And moreover, if it's true that Roche happens to consolidate some sort of sequencing business, do they get an edge in the molecular side or is that really irrelevant to your vision of molecular diagnostics in the future?

The second question again for Tom is, I think you made a comment about resuming share repurchases in '12.

What is the existing authorization?

Thanks very much.

I'll take the second question first.

We have about $3.4 billion remaining under the authorization so we are in good shape to execute what would be appropriate during 2012.

Thank you, Tom.

As far as the molecular business, Tony, as you know, that has been a great business for us.

We are definitely an emerging leader in that business.

It is about $450 million in sales in 2011, growing to what we expect will be more than $1 billion by roughly 2015.

So we have factored in all the different situations there and products and so forth that you're talking about.

So we expect continued strong double-digit growth here in 2012 as well as over the LRP for that business.

Sarah Michelmore, Brean Murray.

Thanks for taking my question.

Just to follow up on the EPD business.

I'm just wondering I guess that mid single-digit growth trajectory you are expecting for '12 struck me as maybe a little bit on the low side, And I was just wondering if you could help us kind of compare and contrast to kind of what the underlying growth was in 2011?

Is that a similar rate of growth or an uptick?

And then, Miles, you talked a lot about all these filings and that that should improve the growth prospects going forward.

Is that something that we could see kind of come to bear in the second half of this year?

Is that more of a 2013 or even a 2014 type of event?

Thanks.

Yes, I think you got two things happening here.

In the mix of the EPD business or established pharmaceuticals, there's a chunk that is generics in Western Europe and that business has been under the kind of pressure, austerity pressure we've seen in Europe.

So the kind of growth that we've seen in pure emerging markets has been pretty significant double-digit.

That's with only a modest number of these registrations done.

So you've got two things happening here.

Over the course of 2012, there will be in addition to the couple hundred that were filed in the second half of 2011, a lot of filings in a lot of these countries that are in our targeted geographies around the world particularly in emerging markets.

And as you would imagine, it will take some time to establish those.

So I think you'll see some of that late in the year but I think probably you'll really see the impact of it moving into '13 and beyond.

So while we will be watching for do we get the filings done and do we get them done on time and do we get them done in the mass that we intend to in the various countries and so forth, the real financial impact of that will be as they take hold and grow beyond that, which is probably more likely to be visible to you in a '13 timeframe.

And at the same time, we are going to have to -- by growing those markets dilute -- we will call it the austere impact of that chunk of business in Western Europe.

I will just add, I think if you were to look at normalized growth rates in 2011 versus 2012, you would see roughly mid-single digits in both and one thing to keep in mind is this organization has been in place a little more than a year.

They are just in the very early innings of execution and driving additional growth out of the portfolio, and as Miles said, adding more and more products to the portfolio.

So you're going to see decent growth this year with very strong emerging markets, and accelerating we believe as we going to 2013 and beyond.

And as we said back in October, we think that overall probably mid to upper type growth is what you should see in this established business over the longer term.

Okay, that's really helpful.

And then, Tom, you did say that the Company would again be in the market doing share buybacks and I get that there's a lot of management resources being spent on the spin right now.

But I was hoping just you could -- you or Miles could comment on kind of your thoughts on M&A.

I look at that diversified medical products business in particular and think there's a lot of tuck-in or other type of asset acquisitions that you could do that could further enhance what you have there.

So just curious if M&A is off the table for 2012 or if you are still out there kind of actively looking at things?

Thanks.

I'll take that, Sarah.

I don't think I'd say it's off the table per se but I would say this.

Philosophically, I am not looking for -- we are not looking for big significant things.

I point out to you, we did the Reata transaction or deal after our announcement of split.

I think we are always vigilant looking, analyzing, etc.

in all of our businesses.

We will always be focused on pipeline enhancements for pharma because I think you practically always have to be.

I don't think there's a particularly robust opportunity set out there today.

I think it's pretty limited and I think valuations are let's call it stratospheric and difficult to justify at this point.

So I think it's very easy to be selective right now on the pharma side.

But I know that Rick and his team and our organization are constantly looking for additional enhancements to our pharma portfolio.

On the device side, I think you characterized it well.

You might call it tuck-in or you may call it geographically opportunistic.

There's a few very targeted things that we are interested in.

I would call them focused and smaller.

As a matter of generality, I'm not looking for big deals and I think to be realistic, and I agree with our investors on this point, I think our investors would say look, unless you've got some really great -- boy you can hardly stand it opportunity, husband your cash.

There's better things to do with your cash and our investors in these kind of economic times value cash return or holding and accumulating some cash.

And we are.

So I'm not looking for places to go spend it necessarily unless something is really compelling and I would say right now my push in the organization is a much greater focus on organic performance and organic execution.

We were very busy in M&A activities for the past several years.

As Tom was answering about established pharmaceuticals a few moments ago, they've gone through a pretty significant integration of our legacy Abbott business, Solvay, Piramal, our arrangement with Zydus in India, and in the process of integrating that into a single division, they also separated it from the proprietary pharma business.

So that was a pretty big effort in the organization.

It's important in all of these businesses to make sure that they are operating at their best organically and particularly in R&D.

I think philosophically every now and then, it's good to pause, soak it up, and make sure that everything organically is working well, whether it's your R&D system, your innovation, your gross margin performance, etc., and we're very focused on that.

I think when that's all in good shape and you are well integrated or separated, as the case may be, the foundation for your M&A activity is stronger.

And so right now I'd say our focus is very much internal, very much operational, but if the right circumstances come along for whether it's tuck-in or nice adjunctive add, we will respond to it.

But I think in that long rambling answer, you can kind of hear that we are being very selective.

Great.

Thanks for the color, Miles.

Thanks.

I think we have time for one more question please.

Larry Biegelsen, Wells Fargo.

Thanks for fitting me in here.

Just two here.

First, I was encouraged to see that you guys settled the Androgel patent cases with TEVA and Perrigo.

Should we assume that the terms are similar to the Watson timeline --- I think 2015 or so?

Yes, Larry, we did have settlements with both of those parties but the terms of those are confidential.

So no update on kind of when we should assume kind of a generic launch to ---

No, in October we talked about 2015 and we feel good about 2015.

Great, and lastly, on emerging markets, the $2.5 billion for the quarter, what was the year-over-year constant currency growth rate?

The last time you gave that number for emerging markets you had $2.6 billion I think in the second quarter of '11.

The growth rate would be helpful.

Thanks.

There definitely was currency affecting all sales in the quarter but on a constant currency basis, for the diversified company, if it was up in excess of 10%, so double digit growth there.

And again, we define emerging markets pretty broadly.

And in the proprietary business, there were some tender ins and outs between the third and fourth quarter so it was a little less robust in the proprietary business in the quarter.

Thanks, guys.

Thank you and that concludes our conference call today.

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