美國雅培 (ABT) 2014 Q1 法說會逐字稿

Good morning and thank you for standing by.

Welcome to Abbott's first-quarter 2014 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 written, express permission.

I would now like to introduce Mr. Brian Yoor, Vice President, Investor Relations.

Thank you, Elan.

Good morning and thank you for joining us.

Joining me today on the call will be Miles White, Chairman of the Board and Chief Executive Officer; and Tom Freyman, Executive Vice President, Finance, and Chief Financial Officer.

Miles will provide opening remarks, and Tom and I will discuss our performance in more detail.

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

Some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2014.

Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.

Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1a, Risk Factors to our annual report on Securities and Exchange Commission Form 10-K for year ended December 31, 2013.

Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

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 measures in our earnings news release and regulatory filings from today, which will be available on our website at Abbott.com.

Our commentary on sales growth refers to operational sales growth, which excludes the impact of foreign exchange, unless otherwise noted.

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

Okay, thank you, Brian.

Good morning.

This morning we reported first-quarter ongoing earnings per share of $0.41 above our guidance range.

Operating margin exceeded our target, and sales increased modestly in the quarter, in line with our expectations, as Tom will discuss in more detail in a moment.

We're confirming our full-year 2014 ongoing earnings-per-share guidance, which is for double-digit growth at the midpoint of the range.

Going forward, we continue to expect accelerating sales growth as the year progresses and double-digit ongoing earnings-per-share growth starting in the second quarter.

We're recovering share in our international and nutrition business.

We're continuing to drive above-market sales growth in core laboratory diagnostics.

We're launching new products to capture share in our medical devises business, and we're on track to expand full-year operating margin.

I'll summarize first-quarter performance before turning the call over to Tom and Brian for more detailed commentary.

Diagnostic sales increased 5% in the quarter, driven by continued momentum in core laboratory diagnostics in both developed and emerging markets.

In molecular diagnostics, sales increased strong double digits in our core infectious disease testing segment, where our best-in-class assays provide the opportunity for significant share expansion.

In our diagnostics pipeline, we're investing in the development of multiple new instrument platforms that will launch over the next several years.

Our medical devices includes vascular, diabetes, and vision care businesses.

In our vascular business, international sales representing 65% of our global business, increased nearly 4% in the quarter.

Growth has been driven by a number of new products, including our new peripheral stent, Supera, and our structural heart device, MitraClip.

And in our drug-eluting stent product portfolio, we're driving increased penetration of our bioresorbable vascular scaffold, Absorb.

In the international markets where Absorb is approved and actively promoted, it's now approaching 20% of our drug-eluting portfolio revenue.

We're making significant progress to bring it to three major markets where it's not yet available, the US, Japan and China, which represent more than 50% of the world's coronary stent market.

We've recently completed patient enrollment in the Absorb randomized clinical trials required for approval in these geographies.

Vascular sales in the US were lower in the first quarter due to trialing of a competitive drug-eluting stent.

We anticipate better US performance in the coming quarters as we recapture drug-eluting stent share, focusing on the superior profile of XIENCE Xpedition and accelerate growth of our broad vascular portfolio, including MitraClip, and now, Supera.

Supera received US FDA approval last month and expands our endovascular portfolio with the best-in-class stent technology.

It treats blockages of the superficial femoral artery, or SFA, one of the largest and fastest-growing segments in the peripheral stent market.

In diabetes care, sales were in-line with our expectations.

In the US, as we've discussed, the market has been impacted by the implementation of the CMS competitive bidding program.

Our management team has navigated this environment well versus the competition, remaining focused on gaining share in the more attractive market segments.

Outside of the US, emerging market growth was strong in the quarter, and we're making progress towards CE Mark in the second half of this year for our next-generation sensing technology.

And in vision care, sales increased 10% in the quarter, driven by above-market growth of our cataract lens business.

We expect double-digit sales growth for the full year, with continued positive momentum from new products, including our TECHNIS Toric intraocular lens in the US, our TECHNIS OptiBlue lens in Japan, and our new Catalys laser cataract system, and several additional product launches throughout this year.

In established pharmaceuticals, total operational sales performance was roughly in line with our expectation.

In our key emerging markets for EPD, strong growth in Brazil and India was offset by a temporary decline related to an expected plant shutdown for capacity expansion purposes to meet increasing demand.

At the same time, EPD leadership is making progress on initiatives to accelerate growth by further aligning its commercial strategy with the opportunities these emerging markets represent.

We continue to expect better momentum in EPD in the second half of this year, with improved market growth in India and the benefit of additional plant capacity to meet sales demand for key products.

And over the next several years, we anticipate continued improvement in EPD's growth rate, as sales and emerging markets become a larger component of this business.

In nutrition, as I mentioned, we're recapturing share in our international pediatric nutrition business following a supplier recall initiated last August.

As I discussed on our fourth-quarter earnings call, we are executing on a recovery plan and regularly monitoring our progress.

We remain on track to return to pre-call levels in the third quarter.

In the second half of this year, we're well positioned in nutrition for double-digit sales growth and operating margin expansion as we begin to anniversary the supplier recall.

We opened three new manufacturing facilities to support strong global demand for both adult and pediatric nutrition.

We continue to execute on our margin expansion initiatives and launch a number of new products into the new market segments across several key geographies.

In the coming months, we'll launch a new adult nutrition brand in Japan, our largest adult market outside of the US.

And over the course of the year, we're launching several new pediatric nutrition products in fast-growing market segments in China and other emerging geographies.

This includes a new win from formula product Eleva, we launched in China just last week.

These innovations bring advanced nutrition to meet the needs of our customers, drive share expansion, and grow the market.

So in summary, our first-quarter ongoing earnings per share results were better than our expectations.

We continue to expect accelerating sales growth as we progress through the year, particularly in the second half, and we're on track to achieve another year of double-digit earnings per share growth.

I'll now turn the call over to Tom and Brian.

Tom?

Thank you, Miles.

Today we reported ongoing diluted earnings per share for the first quarter of $0.41, above our guidance range.

As we forecasted in January, first-quarter sales increased modestly on an operational basis.

Exchange had an unfavorable impact of 3% on sales in the quarter, also consistent with our previous estimate.

As a result, reported sales declined 2.5% in the quarter.

It's important to keep our first-quarter sales growth in perspective.

As we indicated in January, we expected modest growth before exchange, as we recover from the 2013 supplier recall in nutrition and work through certain sales comparisons.

We're right on track; with the sales progression we expected in January, with sales growth before exchange essentially on our planned forecast.

And exchange was close to the forecast we provided as well, in what should be the most challenging quarter of the year for currency.

So as sales are progressing as we planned, our full-year forecast for sales growth remains unchanged.

The first-quarter adjusted gross margin ratio was 54% of sales, also in line with our guidance.

Our overall spending levels in the first quarter were below forecasts we provided in January.

Ongoing R&D came in about $20 million below our expectation, which was simply a result of timing.

We expect to fully fund our R&D initiatives over the remainder of the year.

Ongoing SG&A spending was around $80 million lower than we planned.

Approximately 50% of this was timing, which we expect to balance out over the last three quarters.

The remainder reflects our continuing focus on managing down G&A costs and is available to either reinvest in the business or carry through to earnings for the year.

So as we factor first-quarter ongoing EPS of $0.41 into our thinking on the full year, around 50% of the over-delivery compared to our guidance is attributable to the timing of spending, which we expect to balance out over the remaining three quarters.

Regarding our full-year 2014 outlook for the P&L, we continue to forecast operational sales growth in the mid-single digits.

Based on current exchange rates, we expect exchange to have a negative impact of somewhat more than 1% on our full-year reported sales, with the most significant impact in the first half of the year.

This would result in reported sales growth in the low- to mid-single digits for the full-year 2014, consistent with our forecast in January.

Operational sales growth is expected to be driven by continued strong growth in diagnostics and vision care, and sales growth acceleration in nutrition and established pharmaceuticals.

We continue to forecast an adjusted gross margin ratio of approximately 55% of sales for the full year, which reflects a negative impact of around 50 basis points from foreign exchange.

We also continue to forecast ongoing R&D somewhat above 6% percent of sales, ongoing SG&A expense of approximately 30% of sales, and an expansion of our full-year adjusted operating margin by approximately 60 basis points in 2014.

Turning to the outlook for the second quarter, we're forecasting ongoing earnings per share of $0.50 to $0.52, reflecting double-digit growth at the midpoint of the range.

We forecast operational sales growth in the low to mid single digits in the second quarter.

At current exchange rates, we would expect a negative impact from exchange of approximately 1.5%, resulting in reported sales in the low single digits.

We forecast an adjusted gross margin ratio of around 54.5% of sales, ongoing SG&A expense of approximately 30.5% of sales, and ongoing R&D expense somewhat above 6% of sales for the second quarter.

We project [specified] items of $0.29 in the second quarter, reflecting the same items as we identified for the full year in our earnings release.

As previously indicated, we expect the pace of both sales and ongoing EPS growth to accelerate throughout the year, as product launches and key initiatives ramp, and as comparisons become more favorable.

For the second half of 2014, we continue to forecast operational sales growth in the mid- to upper single digits and steady operating margin expansion supported by our continuing efforts to manage G&A expenses.

So in summary, sales in the first quarter were in line with our expectations.

We exceeded our ongoing EPS guidance, and we're confirming our full-year, ongoing EPS guidance range of $2.16 to $2.26.

As we start the year, we're well positioned to deliver another year of double-digit earnings growth in 2014.

With that, I'll turn it over to Brian to review the business, operating highlights, and outlook.

Brian?

Thank you, Tom.

This morning I'll review our first-quarter 2014 performance and second-quarter sales outlook by business.

As I mentioned earlier, my comments will focus on operational sales growth.

Overall, our first-quarter sales increased modestly and sales in emerging markets grew mid-single digits, both in line with our expectations, as we worked through a couple of year-over-year comparison items: one in international nutrition and one in our established pharmaceuticals division.

We estimate that these items impacted Abbott's year-over-year emerging market sales growth by approximately 4.5 percentage points in the quarter.

I'll now discuss each of our businesses.

In our diagnostics business, sales increased 5% in the first quarter, slightly ahead of our expectations.

Core laboratory diagnostic sales increased more than 5% in the first quarter, and this business continues to deliver above-market performance in both developed and emerging markets.

US sales increased 11%, primarily due to several large health-system customers selecting Abbott's integrated and flexible solutions to manage their testing volumes and increase operational efficiencies.

International sales grew 4% in the quarter, driven by continued growth in emerging markets.

We continue to broaden and differentiate our ARCHITECT assay menu and launched a new diabetes test in the US in April.

To address the growing prevalence of diabetes in the United States, our new test provides fast, accurate results to help laboratories manage the anticipated increase in demand for testing.

This test aids physicians with diagnosing and monitoring diabetes, as well as identifying people at risk for developing diabetes.

In molecular diagnostics, worldwide sales increased 5.6% in the first quarter, with international sales up 12.6%, led by continued strong growth in infectious disease testing and double-digit growth in emerging markets.

In the US, growth of infectious disease testing, which is our largest segment where we have best-in-class assays, was offset by the expected timing of the conclusion of a distribution agreement for a respiratory test.

In point-of-care diagnostics, worldwide sales increased nearly 3%, with international sales growing double digits, as this business has increased its focus on expanding in select European and emerging markets.

In the first quarter, the US business experienced somewhat slower -- somewhat longer purchasing cycles and reduced utilization rates in the hospitals.

We started to see stabilization of US order patterns in March and April and continued to focus on building momentum in international markets.

For the second quarter, in our global diagnostics business, we are forecasting mid to high single digit operational sales growth.

In medical devices, sales in our vascular business increased 1% in the quarter.

International vascular sales increased nearly 4%, driven by continued momentum of our drug-eluting stent product portfolio, including Absorb, and double-digit sales growth of MitraClip, as well as our endovascular products.

We expect a number of new product launches to drive improved performance over the next several quarters.

As Miles mentioned, in March we received US FDA approval for our Supera peripheral stent, which treats blockages in the superficial femoral artery, or SFA.

¶ The global SFA market is growing at a mid to high single-digit pace.

With the approval of Supera, Abbott now has one of the most comprehensive and competitive portfolios in the peripheral market.

We're also making good progress to bring Absorb to the United States, China, and Japan over the next few years.

Absorb clinical data, demonstrating positive long-term outcomes was presented at the American College of Cardiology medical meeting.

We expect to present one-year clinical results in the second half of this year from Absorb 2, which is the first randomized trial to compare Absorb to standard of care.

As we look ahead to the second-quarter 2014, we expect sales in our global vascular business to increase in the low single digits on an operational basis.

In diabetes care, global sales in the first quarter decreased 9.5%, in line with our expectations.

International sales, which represent approximately 65% of total diabetes care sales, grew for the sixth consecutive quarter, increasing 4%, lead by double-digit growth in emerging markets.

As Miles mentioned, we are also moving our new investigational next-generation sensing technology through development, and expect to receive European CE Mark in the second half of this year.

In the US, as anticipated, sales were impacted by the carryover effect from implementation of the CMS competitive bidding program for Medicare patients in July of last year.

For the second quarter, in our global diabetes business, we continue to forecast a low double-digit decline on an operational basis.

In vision care, we achieved 10% sales growth in the first quarter, above our expectations, with double-digit growth in both emerging and developed markets.

Sales of our cataract products increased double digits and represent more than 65% of our vision care business, where we are capturing market share with multiple new products.

As we've discussed in the past, we continue to make good progress with the launch of several new cataract lenses in both the United States and Japan.

In addition, our new Catalys laser cataract system has received very good feedback from our customers, as it continues to penetrate high-volume cataract centers.

We expect continued double-digit performance in our vision care business throughout this year as we introduce more new products.

This includes first-quarter launches in Japan of Tecnis Toric lenses for patients with astigmatism, and Tecnis OptiBlue pre-loaded lens, which improves the ease of use for the cataract surgeon and enhances predictability of the procedure.

For the second quarter of 2014, we expect our global vision care business to continue to grow double digits on an operational basis.

In our established pharmaceuticals business, or EPD, sales in the quarter decreased modestly.

Sales in our developed and other market segment decreased 1.5% in the quarter.

Developed markets perform largely in line with our expectations, partially offset by better-than-expected performance in a number of emerging markets that are included in this business segment.

Sales in our key emerging market segment were relatively flat in the quarter.

As we expected, year-over-year sales comparisons in this business were affected by the timing of supply of key products in our women's health portfolio, primarily due to an expected plant shutdown for capacity expansion purposes.

As Miles mentioned, we expect sales growth in key emerging markets to accelerate over the course of the year.

For the second quarter of 2014, we are forecasting sales in our established pharmaceuticals business to grow in the low single digits on an operational basis.

And lastly, our nutrition business, where global sales decreased 1.7% in the first quarter, in line with our previously provided guidance.

As expected, international pediatric sales were impacted by the unfavorable year-over-year comparisons created by the previously reported 2013 supplier recall.

The impact of this event is estimated to have reduced international pediatric operational sales by approximately $75 million, or 12 percentage points in the quarter.

We are recovering share in the affected markets and expect to launch a number of new products in China and other emerging markets to help drive sales growth.

Late last year, we launched our Similac simple pack into the online channel in China, and just this month, we launched a new product, Eleva, that will further enhance our competitiveness in the premium segments of the Chinese infant formula market.

International adult sales increased nearly 12.5 percentage points in the quarter, driven by strong growth of our Ensure brand, along with execution of several market development initiatives.

We continue to shape and grow priority international markets and expect to launch several new products this year, including the launch of a new adult brand, [Anavo], in Japan, our largest adult nutrition market outside of the US.

Anavo is a next-generation, follow-on product for our market-leading Ensure brand.

In the United States, the severe winter weather did have some impact on Ensure, Pediasure, and performance nutrition brands in the retail segment.

As a market leader, we partnered with retailers late in the quarter to launch demand-creation programs to boost consumer demand and are seeing positive early results.

In our infant nutrition business, we recently launched Similac with OptiGRO, which contains Abbott's exclusive blend of DHA, lutein, and Vitamin E, to support brain, eye, and immune system development.

Lastly, on a global basis, we continue to expand our manufacturing presence in nutrition to be closer to our customers, and at the same time, further expand operating margin.

We expect to open three new manufacturing facilities in the second quarter this year in China, India, and the United States, to support strong global demand for our products.

And we remain on track to achieve an operating margin ratio of more than 20% of sales in our nutrition business by 2015.

For the second quarter, we are forecasting mid single-digit sales growth on an operational basis for our global nutrition business.

So in summary, in the first quarter, sales were in line with our expectations and we delivered ongoing earnings per share of $0.41, ahead of our guidance.

Moving forward, we remain on track to deliver continued margin expansion and expect sales growth acceleration in our nutrition, established pharmaceuticals, and vascular businesses.

We are well positioned to deliver another year of double-digit earnings growth.

We will now open the call for questions.

Thank you.

(Operator Instructions)

Our first question today is from David Roman from Goldman Sachs.

Thank you and good morning, everyone.

First, I had one strategic question and then a follow-up on the financial side.

Maybe Miles, you could talk a little bit more about your evolving views around capital allocation.

As I think about how the Abbott story has gone over the last year, post the spin, I think we've seen an evolution in the growth rate as it relates to the top line.

And correspondingly, a change in the way you've thought about capital deployment, with a big dividend increase last October is followed by a fairly big buyback announcement at the beginning of this year.

But maybe you help frame for us how you're thinking about using cash from here, in the context of how you're seeing growth play out.

Because even with the buyback in dividend, you still sit on a pretty healthy net cash balance, that if you believe any of the analyst forecasts out there, should grow pretty meaningfully the next several years.

Yes, you noticed that did you?

Thank you, David.

Let me take you back a little bit to the time of the split.

When we split, we split with AbbVie the balance sheet, the debt, et cetera.

We did all that proportional with cash flow at the time, and we set our dividend rate on each side proportionately, as well.

And so, AbbVie ended up with a very healthy dividend, somewhat disproportionate to what Abbott had paid prior to that, and Abbott's dividend, as a percent of EPS, was lower.

And we started out that way primarily -- and the combined dividend, as you'll recall, was higher than Abbott in the past.

And we started out the year, I'd say, waiting to see how the split was going to progress, cash flows, et cetera, and debating the appropriate cash return, et cetera, because Abbott, as you know, has had a long history of healthy dividend, dividend growth, et cetera.

And so in the fall, made the decision to increase the dividend back to a percent of EPS; it was around 40%, I think, at the time.

And that's the dividend that is being paid now.

So we made that adjustment, because I think that the identity of this investment, this stock, has always been both growth and cash return, and its been a very stable, reliable performer that way, because of the combination of the growth and the cash return.

As far as share repurchases have gone, we've been steady share repurchasers year to year.

There have been some times when we've taken it lower; other types we've taken it higher and so forth.

Because there's a limit to how much cash you want to accumulate, because cash generally isn't earning much on your balance sheet these days.

So we look at where our own deployment of that cash will go.

And if it starts to accumulate at some level beyond the Company's good use of it, then we think about a combination of either dividend or share repurchase.

And that's always our thought around that.

We keep our debt in a proper balance, we believe.

As you note, our cash flow is strong, and in no way have we changed strategy.

I think there's plenty of ammo on the balance sheet, should we see opportunities in acquisitions or licensing or whatever deals may be out there that can enhance or add to our business.

I don't feel constrained at all by the balance sheet, so I think investors expect us to steward the assets well.

And if there are, say, excess cash or excess assets that we don't foresee an immediate use for, that we can invest at a better rate, I think a return to investors is always a first priority.

So we have a steady policy around dividend.

We have a steady policy around share repurchase.

We've had a significant share repurchase earlier in the year this year.

And I still feel like I've got plenty of cash for M&A activity and not much constraint on borrowing capacity, should something significantly larger come along, et cetera.

So I would tell you that there's really been no change in philosophy.

I do believe in a strong cash return to investors, and we will keep looking at our dividend and our share buyback that way, and I continue to look at M&A activity.

You there?

Continued balance use of cash, but no necessary urgency to up big M&A, as we've seen elsewhere in healthcare over the past couple months?

Well, I never feel pushed for M&A because of accumulation of cash.

I would say M&A is driven much more strategically by opportunity that fits our business.

And I think in the last couple of calls with investors, I've commented that I haven't seen a lot on the radar screen.

And I'd say during the split, there's only so much integration or disintegration activity that an organization can absorb or sustain.

So during the time of the split, some of the M&A or deal activity we did was rather modest, or smaller deals that were particularly focused on our medical device business.

And while a fair amount of the disintegration activity is ongoing in a lot of our back-office areas with AbbVie, it's also coming to a conclusion here in the coming years.

So without forecasting anything specific, we've always been opportunistic about a lot of different opportunities we've been interested in, in different geographies and tracking those.

And it's possible that that could find its way back to the radar screen here.

That's helpful.

A quick financial follow-up for Tom: on the P&L, understandingly, the gross margin has -- there are a lot of moving parts in there, FX, you've got the plant shutdown.

You did mention in your prepared remarks there are tight G&A control and focused on that line item.

Could you give us some sense as to where we are in the self-help type of cost cutting that you can do to help improve the margin profile here?

Certainly, we factored some of that into our original plan.

We worked hard last year to identify areas of efficiency, and I'd say we made some initial steps when we put the plan together.

And as you know, in the second half of the year in our forecast, the SG&A ratios get better, and that's due in part to some of those initiatives starting to benefit the P&L.

But I think we've created a culture here and people understand what we're trying to do in terms of focusing on this G&A area.

I think a little bit of what we saw in the first quarter is that playing out and people are really working hard at it.

I'd say perhaps we're a little bit ahead of what we would have thought when we put the plan together, so we're building on that, and it's something that we're going to continue to build on during the year and certainly as we roll into 2015.

Thank you very much.

Thank you.

Our next question is from David Lewis from Morgan Stanley.

Good morning.

A quick one here for Miles and one for Tom.

Miles, I think for most investors, they viewed this first quarter as certainly the most challenging quarter of the year, and yet margin earnings were certainly better than expected.

So I wonder from here, could you help us understand the margin story and momentum from here?

And then related, your confidence in nutritional margins is clear, but should we be thinking about opportunities at Abbott on a segment basis, on a corporate-cost basis, or both?

Okay.

Yes, let me back up to the bigger context of the year and the quarter.

As you know, because of some things that happened in the second half of last year, we've got an optical challenge here.

It's more optical than operational really, because the nutrition recall we had in the second half of the year was significant.

Exchange went disproportionately against us in the second half of the year compared to the first half of the year.

There's a bunch of comparative things I can tell you, but at the end of the day, it makes for a tale of two halves.

And when you're lapping the impact of those, it makes this first half look depressed and the second half look like a huge ramp.

And the truth is neither is true, and it's really a comparison issue in a lot of cases here.

I'd love to tell you, gee, but for these things, the growth rate this quarter would look like X. But the fact is that's the truth, and so, the first half of the year looks one way; the second half looks another.

Now recall, I'd say first of all, I'd remind you when we gave our guidance, we gave double-digit guidance, which we've done every year for the last seven years I think.

And we come into the year knowing the first half doesn't do that, but the second half then looks like this big ramp.

And the optics of that have some people saying, can you really get there?

And I think, well yes, it's really more comparison than anything else.

And the underlying fundamentals of everything I'm looking at look solid to me; I don't see any trends or anything that are concerning me yet.

Now that said, I'm not a forecaster of exchange.

And last year exchange went the wrong way in the second half, and I'm not sure I could have forecasted it to the degree that it happened, but -- and I certainly couldn't have forecasted the recall.

But in any case, one of the challenges is that quarter-to-quarter look, because you've got to constantly remind investors about the elements that are affecting the oddness of this comparison.

And I'd say the first half is trending better than I expected.

We do have a number of costs and expense initiatives, and I would say they're focused, partly because of the separation with AbbVie, and partly focused on greater efficiency and the shaping of our business.

And they happen to be in a lot of the same areas, so the -- as you work through the separation of back-office things and so forth, with AbbVie, it's the opportunity to get things resized, reshaped, located in the right places and so on.

That's all going pretty well, and there's a lot of initiatives that way inside the Company that are coming along, so as Tom, I think, pointed out, the beat here, the $0.06 beat is partly timing, because -- and I'm happy about that, because otherwise, that optical comparison of the first half and second half does look pretty dramatic, and there is a timing issue in this.

Part of it's in R&D; part is in SG&A, et cetera, but at least the optics look a little better.

And part of it's not timing; part of it is real.

And I know at some point, somebody's going to ask me here, why didn't you raise guidance?

And I'll wait until you get to that, and I'm sure Mike is going to ask me that here pretty soon, but I'll explain it when I get there.

But the point is, there's a lot of opportunity here in real cost.

We're seeing a lot of improvement in our gross margins, first of all, above the discretionary spending line.

But as I think most of you realize, whether it's been price pressure in Europe or exchange itself, that all that benefit of the gross margin improvements has largely offset what otherwise would have been deteriorating margin, because of exchange or pricing et cetera, and we haven't deteriorated.

In fact, we've improved gross margin anyway.

Then on top of it -- and then I think there's still quite a bit of opportunity there for us, and we are well planned and going after it.

On the other hand then, in expense, there's good spending and there's spending that you'd rather not spend too much on.

And in a lot of our G&A categories, I think there's opportunity for us to spend less and be more efficient.

And that's real [money] too.

And some of that will improve margins at the bottom line, and some of it will allow us to spend more either in SG&A or R&D, but the fact is our SG&A spending, I think, is pretty healthy as it is.

We're up 31%, 32%, something like -- we're at 31% or 32% as a percent of the P&L, and that's a pretty healthy spend.

Now could you spend more?

I've never asked a general manager yet, that if they needed money would they take it to spend more.

And of course, they would all take it and spend more, but I think we've got healthy spending.

I think the P&L is healthy.

I think that the balance is right.

We've got opportunity to improve spending and improve gross margin.

And as we work through the things we're doing to improve our top-line growth and our share gain and our expansion in the number of markets, I think it's good for our investors that they can count on a certain amount of margin expansion and profit growth while we wait for the top line and the economies and other things to improve.

So I hope that answers your question.

Okay, thank you, Miles.

And I think one additional question for Tom.

I think I may have missed it in the commentary, Tom, but historically, when you do do a buyback, your buybacks are heavier in the first half than the second half.

Can you talk about the pace of the buyback in the first half of the year, how active you were in the first quarter?

And should we expect that historical Abbott practice of buybacks to occur here again in '14?

Thank you.

Yes, well as you saw in the release, our average shares were about $19 million below the prior year, which was about 1% below.

We were pretty aggressive in the first quarter on the share buyback, and I think, David, your comment is pretty accurate.

We're pretty much through the vast majority of what we're going to do in that area.

We liked the price of the stock, and we felt it was a good time to execute.

¶ So we're down about 1% on average in the quarter, but as you know, that improves after the first quarter, because we bought throughout that period.

And the second and third and forth quarters will benefit even more from the share buyback.

So you're right, the vast majority of it was done in the quarter.

Great, thank you very much.

Thank you.

Our next question is from Mike Weinstein from JPMorgan.

Thank you for taking the questions, and Miles, I'm not going to ask why you didn't raise guidance.

So I'm sorry, I'll save that for someone else.

Let me focus on the international nutritional business, because if my math is right, if you back out the $75 million from Fonterra and you back out FX, you still get a business that's only up by 4.5%, which is well below what [the other] was growing prior to Fonterra.

So can you spend a minute on that?

So, again, backing out FX, and backing out the $75 million from Fonterra, and international pediatric nutritionals is 4.5% there.

Yes, I'm going to let Brian answer that.

He's dying to answer that for you.

Go ahead.

Thank you, Miles.

So Mike, yes, same math.

You get about 4%.

I think you need to go back to Q1 and look at what we had said in Q1 last year in our pediatric international nutrition business.

I think we grew somewhere around 21%, and historically, we've been saying more think of this business sustainably performing in the mid-teens.

So we're up against a comparison last year.

We're just worldwide.

We launched a lot across our tolerance portfolio, and adjusting for that, it puts you more back up into the double digits.

So as we move forward, we're in a good position.

We continue to recover in China, so we're seeing the recovery there.

You see where we just launched a new product, if you will, that will help us to further compete as we segment the premium market over there.

There's opportunities for there for us with our new product that I mentioned with Eleva.

And even more opportunity to come here as we open our plant in the second quarter, which will also provide further capabilities there, as well, and will also bolster our return back to our historical growth rates there.

But basically, when you look at the first quarter, you do have a comparable that you're facing in Q1 where we were launching a lot of tolerance across the portfolio.

Mike, I would add to that, and I hate answering questions this way.

This is not a business that's always smooth quarter to quarter, even though you'd think it should be.

And so sometimes the comparison are choppy, and in the past, when we had the pharma business with us, so much attention was paid to pharma and Humira and other things that people didn't really notice the choppiness of the nutrition business.

And factors like what Brian just highlighted have made a difference from time to time.

I'd say that a couple of things are clear.

The economy has definitely pressured the business some, particularly in the US, and I think in emerging markets as well.

I think we see that slower underlying market rate like everybody else does, and yet, that emerging market rate is still much higher than developed markets.

But we've seen that pressure.

And I note that a lot of companies have pointed at the harsh winter in the US and so forth; I don't know whether winter affected us or not.

I suppose it stands to reason that it could have, in the US.

And internationally, the single biggest thing, as you know, that has affected us has been this recall and lapping it, because it affected more than one country.

But that said, if you ask me, am I satisfied with the growth rates in some of these countries anyway, the answer would clearly be no.

Do I think there's more potential to do better there?

I do, and I think we're making the right investments and the right changes and so forth to address that.

A lot of our attention is currently being paid to the countries that were impacted by the recall, and I'd say the teams are doing a really great job in terms of the recovery, given the dynamics of the infant formula market.

We've still got tremendous opportunity there, and we're investing to secure that opportunity.

We've got tremendous opportunity in adult nutrition in some markets where we are not present, and China looms as a big opportunity that way.

So I'm not discouraged, I think, at all.

I'm never very satisfied, but I'm not discouraged.

I think that sometimes this business looks like 20% in the quarter, and sometimes it looks like 10% or 12% or 8% or 9% or whatever, and it does roll in humps.

But underlying I think is still a very robust and strong market, all of us would benefit from a little tailwind of economy, but you never take that for granted.

Okay, let me ask a couple quick follow-ups.

So one, I wanted to ask on the adult nutritionals business in the US.

Perrigo announced in the quarter that they were going to enter that market with a store-brand Ensure.

And you dominate that market with Ensure, I think you have about 70% share.

Can you talk about how you view the competitive landscape and the degree to which we should be watching how this plays out with Perrigo being a real competitor potentially coming in?

And then lastly, Tom, can you spend another minute on the timing issue of expenses?

The fact that it was so different than your guidance in January caught us all off guard.

So what surprised you that the expenses didn't occur this quarter, that they slipped into later parts of the year?

Thank you.

Well let me comment on the [addition] first.

First of all, I'd say Perrigo is a fine competitor, and I admire a lot of the accomplishments Perrigo has had in the markets that they serve.

That said, we've had private-label competition for Ensure for some time.

Wal-Mart, which is one of our biggest distribution outlets, has its own private label that competes with Ensure.

So that's not new for us, and we've already had that competition in these categories for years.

So whether a new entrant in the category makes a difference or not is to be seen.

It's not a new thing.

Our share position with Ensure hasn't been impacted significantly by the existence of the private-label competition that's already there, and I think it's in the mass outlets that you would expect would have the greatest impact.

So I would never like to predict how a fine competitor is going to do, but I think we're in a very strong position with our brand and our product and the way our customers view it.

And now I'll let Tom address your expense question.

Yes, Mike, it runs really interesting in the quarter, usually the challenge is getting sales forecasts accurate.

And as I indicated in my remarks, we were incredibly accurate on our sales forecasts and right on track.

And usually in the spending areas when you look across our businesses and across the functional areas, everyone forecasts the rate of spending.

And usually when you look at the actuals, there are a few puts and takes, and you're usually pretty close to your forecast, which is very unusual this quarter that virtually every unit was underspending in the same direction.

And when we worked with them and talked with them about their plans and initiatives and the importance of that spending relative to achieving commercial objectives in the businesses and in terms of some of the project work and some of the other areas, it was still very critical that we continue to invest in those programs, despite the fact that we didn't forecast the spending as accurately as we should.

So I think to your question, historically, we've been very good at forecasting this.

It was just a very unusual quarter and everything just moved the same direction and really this is spending we should be doing.

We've got lots of good opportunities, and I'm just talking about the timing piece of this for my remarks.

We've got tons of opportunities in the new product areas, and it's things that we should be investing in the business and will be investing over the next three quarters.

Mike, I'd say for my part, I was also caught a little off guard by being ahead so far in the quarter, and we have looked at how much of it is real timing and how much of it is real.

And I think the fact of the matter is we went into the year with a double-digit target and our original guidance was double digits.

We did not constrain SG&A or R&D spending in the setting of those targets relative to the goals we have, the new product launches, the expansion opportunities, and so forth.

And frankly, I'm favorably pleased.

I'm pleased that we are ahead on a number of the things that we've wanted to do.

I think, even though you didn't ask me, I want to see another quarter played to see what those underlying trends are.

I still think it's early in the year to be making adjustments to expectations, but frankly it's possible.

And I think at the end of the second quarter, we'll have a pretty good feel for how things are trending for the year and into the second half.

I don't really have any desire to constrain spending, but I don't have any desire to constrain what the bottom line does either.

Even though we forecasted a range that gave us 10% growth at the midpoint of the range, that's actually low for us in terms of double-digit growth over the last seven years.

We've been higher than that in our overall growth in the last seven years every year, so I think there's a pretty good chance some of this is sustainable.

I think we'll see another quarter played, and if we get a little boost from gradually improving economy and so forth, I feel pretty good about the second half.

I feel pretty good about the profile of the businesses.

I feel good about our spending capacity.

I would like to spend more, but I know that's always a tradeoff with investors [who] like to participate too.

So I think that's possible in both directions, and I'm pleased that we can balance this timing a bit, but I'm also pleased that I think we're ahead.

I'd just like to see how ahead we are on what sustainable basis and make sure that we are robustly funding everything we want to do.

Thank you.

Our next question is from Jeff Holford from Jefferies.

Hi, thank you for taking my questions.

So on the non-cost phasing part of the EPS beat, so can you just give us a bit more color on which division that $40 million of the non-phased part of the SG&A was, which division that was primarily being focused on?

And then, you keep reiterating the original midterm guidance in 2015 for nutrition of more than 20%, but that could lead investors to generally think that once you get above 20% of that division, that's your ceiling on margins.

When do you think you'll be able to update the market on what more of a real long-run rate of margin performance could be in that business?

Thank you.

Well I never give forecasts out through the following year, and I don't constrain margin.

Actually, I'll tell you, interestingly, it's a rare debate that you think you've got too much margin, or too much margin growth.

I think it's a fair call.

Our diagnostics business, for example, as you're probably aware, has enjoyed great improvement in gross margin over the last several years.

And that drops through to the bottom line and operating margin and so forth.

And there's a point where you'd say, okay, it's making enough money.

Let's make sure we're spending enough in SG&A and R&D, which we are.

And they're in a fairly heavy investment phase in R&D, because they've got multiple systems in development, all of which remain on track in timing and so forth.

And I think it's somewhat unprecedented that way.

But at some point you say look, we can make something too profitable.

I haven't had that problem, although, as we've noted in the improvements in diagnostics over time, they're getting up there to first -- best-in-class profitability in that business, and I think nutrition has a way to go.

There's still an opportunity there.

It doesn't constrain the spending, there's no limit.

We are not operating against some limit, nor would I forecast one for you, because I don't have one.

So I'd say we're always relentlessly pushing forward in the improvement of the profiles of the business.

We want to be efficient users of assets and expenses.

And while there's opportunity for margin expansion, there's also no substitute for top-line growth.

And you've got to invest to get that top-line growth, so we have to find that balance.

Tom, there was a question there about the mix in the divisions.

Yes, Jeff, it's the same as the answer I provided to Mike.

It was pretty much across-the-board, relatively small amounts across the various divisions, but when you added it all up, it just turned out to be a fair amount of timing in the quarter, so no one division really stands out.

I also had a quick follow-up on EPD if I can.

Could we expect some restock in that business in Q2 with the planned manufacturing coming back on board again?

Probably.

Go ahead.

Thank you Miles.

Yes, I think, Jeff, to think about over the Q2, Q3 time frame, as you know, the way this works is you had inventory with the distributors.

Those distributors would be working off inventory to meet the end consumers demand.

And likewise, then we would be coming back and working with our distributors to restore them to their ongoing, normal inventory levels here in established pharma.

Okay, thank you.

Thank you.

Our next question is from Josh Jennings from Cowen.

Thank you for taking the questions.

First, just to follow-up on the EPD business, understanding that the re-acceleration in the back half is going to be pushed by continued mix shift towards emerging markets, can you talk and give us an update about some of those new SKUs or new products that you're getting registrations in, and new countries that you're entering into and where we are in terms of those metrics?

Josh, I'll kick this off and then let Tom or Miles add more color.

Really, this business is more going to be about our portfolios that we're building, not really one SKU matters.

But I would say the team is making progress as it evaluates where it wants to be strong, for example, in women's health or in gastroenterology, in spaces like this, where they have a very rigorous approach to go look and where there might be gaps in the portfolio that they could easily augment or going through L& A. So there's a lot of activity going on there.

I would expect as part of the acceleration in the second half, we will continue to see strong growth in India.

We mentioned Brazil earlier.

India has returned to a more healthy market growth versus what the market saw last year.

Recall last year we saw this market slow as it implemented what we called this drug-pricing control order, which caused a little bit of channel disruption, if you will.

We're coming out of that.

We're seeing the market return to nice growth rates, our growth rates as well.

So that sets us up, as well, for some acceleration as we move through the second half in one of our largest -- our largest country, if you will, in the established pharmaceutical business.

Josh, I would add to that, on the emerging market side, in particular, in this business, there are 14 countries or so that we put extra emphasis on and focus on.

And each has a plan that's very detailed about the build out of its key therapeutic categories in that country or that market and the depth or breadth of product line within each therapeutic category.

And there is a plan there that's a combination of two things in each country.

First, is our internal registrations from our own creation or pipeline or existing products.

And second is an L&A budget for filling gaps or opportunities that they see in their country.

It's the one place where we decentralized a bit of the L&A activity into the hands of the president of that business and his staff, so that they can more rapidly go after these smaller product or product-line opportunities that can enhance our position in a lot of these markets.

I can't give you a lot of detail or background about how that's going, because frankly it's dozens and dozens of products and opportunities and countries and so forth.

But it's pretty comprehensive, pretty detailed, and its tracked closely by them.

And it's getting a lot of attention and you build it out a little bit over time.

This is not a business of blockbusters, although ironically, the product for which we shutdown the plant for expansion here in the first quarter, it's a significant product for EPD, a very significant product, which is why we needed the plant expansion.

And I figure if we're going to have a plant expansion or suppress a quarter this is the one to do it when we knew it was going to be a tough comparison so it's good to get that out of the way.

We've got some products like that that are fairly big sellers, but generally this is a base-hit business, a lot of base hits.

So every one of these countries has got a plan around a whole portfolio of base hits to enhance this business, and we're going at it a lot more methodically than we did at first.

Thank you, and then one follow-up on the devices unit, specifically in diabetes with the headwinds you're facing here and in the US market.

You had commented on next-generation, sensing technology platform, but what other strategic initiatives can you put into play to help with the risk of the competitive bidding?

Could it continue and pricing could continue to be a headwind in the out years?

What other strategic initiatives can you manufacture to support the diabetes unit?

Thanks a lot.

Well I'll tell you, this is one unit I'm actually very excited about.

I'm excited about the innovation coming here.

I think that our team there did a wonderful job segmenting this market in a way that minimized the damage we took from competitive bidding.

We took a hit just like everybody else did, but I think to a lesser degree.

Because I think we focused on segments that frankly were more profitable and less vulnerable in a way than what the overall target of competitive bidding was.

Now that said I think we played great defense in what is a more challenged market right now, but going forward, the innovation that's coming here which will launch in Europe late this Summer is pretty significant and I think a pretty unique product that I expect will be very well received by diabetic patients and it hasn't had a lot of visibility yet.

It will in the coming months.

We keep referring to it as Next Generation but frankly it's quite a creative product and I think that it's going to have a lot of impact on the business.

I've got great hopes for this and I think the diabetic community in particular, both physicians and patients are going to think it's a terrific product.

So I've got great expectations for that.

And I think that as that mode of testing progresses over time, this is going to be a fairly good business, pretty good business for us.

Thank you.

Our next question is from Larry Biegelsen from Wells Fargo.

Good morning.

Thank you for taking the question.

Let me start off with M&A.

Miles, you made some tantalizing comments earlier, I think in response to David Roman's question.

Could you talk a little bit about whether your focus is on technology versus geographic expansion, large versus small deals?

And then I had a follow-up.

Thank you.

Larry, I'm afraid all I can tell you is yes.

The answer to that is yes.

It's geographic.

I don't know where you define big.

Can you hear me?

Almost all of this, some people would consider small and we might consider big.

In the context of this Company, I would say some of this is fairly significant to us, and what we're looking at is nicely enhancing to our businesses and our positions.

Nothing is ever done until it's done, so I think it's dangerous to forecast anything in particular, but I at least like what's on the menu and I like what I see here in a few places.

And it's across a couple of our sectors.

If you're looking for deals today, I think it's a difficult deal market, because in some cases, valuations are very high or there's not great quality in the assets in some cases.

I think we've said this every year for the last 15.

I think the deal market gets a little tougher every year, and yet, we're looking in the places that can really enhance our positions, our businesses, and so forth.

We've always had a pretty difficult or tough hurdle for the quality of deals.

We've had a fairly good track record that way, and I like what's on the menu right now.

We'll just have to see how it plays out.

What I'm cautious about, it's hard to forecast until something is done, but if I tell you there's nothing on my menu, then there's nothing on my menu.

And now I can't tell you that; I can't tell you there's nothing on my menu.

So I don't want to surprise you by telling you there's nothing on the menu and next week I suddenly had a great idea or a great possibility.

And it's not going to be next week, but I see a couple things coming here that would be nice additions to the business.

That's about all I can tell you.

That's very helpful, and then as my follow-up: the nutritional mid single-digit growth in the Second quarter is a pretty big improvement from what we saw this quarter, of, I think, down 1.7%.

So can you give us a little more color where if you expect those improvements to come from and what -- because that's a big part of what will drive acceleration from this quarter in the overall business?

Lastly the overall Abbott emerging growth rate this quarter, you've given us that in the past.

Can you give that to us this quarter?

Thank you.

Let me start with the first one, then I'll come back to nutrition.

With respect to the emerging markets overall, if you take the couple (inaudible) adjustments that we talk about in my script that refers to the plant capacity expansion, [affecting] our established pharmaceuticals, as well as where we're at with respect to our recovery, it puts you closer in the 8% to 9% operational growth worldwide in the emerging market growth.

So still very solid growth, Larry.

Coming back to nutrition, I'll go back to my first comment that, remember, Q1 first of all, we did have a lot of launches in Q1 of '13 that made for a little bit more difficult comparison, as I was talking to Mike there.

But secondly, our recovery is going well in China and Vietnam, and so as we move through time and we look at our ramp there of where we're gaining share back in the markets, we would expect that impact to moderate as we move into quarter two.

That will have a significant impact on our step up.

The other thing I'd add is as we saw overall in the United States, we saw a retail environment that was quite slow.

I think not only did the companies who serve the retailers feel it, but the retailers themselves felt it.

We've been out there, and it's a great opportunity for us as the category leader, as the market leader, as Miles mentioned, particularly in adult and even in brands like Pediasure, to work with our retailers to generate demand for the consumers through some retail activation programs.

And those are generating some nice early results there in March and early into April.

We'll continue to watch that, but we definitely would expect a step up in the United States.

I'll also comment too in the United States that this was the last quarter of our getting through the transition where we were exiting the non-core, what I'd call device or tubes and sets business in the United States so that also will drive some step ups sequentially as we look at the US results.

So the combination of those two things, Larry, the recovery; the US; and continued underlying strong demand in our nutrition business worldwide, both pediatric and adult, will cause us to move up the chain there as we expect.

Thank you for taking the questions.

So Elan, we have time for one -- we're going to do one more question here.

Thank you.

Our final question today is from Glenn Novarro from RBC Capital Markets.

Hi, good morning.

Thank you for taking my question.

Miles, my first question is for you, Miles.

The back-end acceleration, a lot of it is going to be driven by nutritionals and a lot it going to be driven by the recovery in China.

And one of the pushbacks I get and one of the concerns I've been hearing is the China economy slowing.

And I know, Miles, you're in China several times a year.

So I'm wondering if you could just take a moment and talk about what you're seeing in the China nutritionals market and how Abbott is positioned there so some of that concern can be [comped].

And I had a follow-up on the US infant business.

I suppose it's fair to say in a general sense, the economy or the market in China has slowed some, but there's slowed and then there's slowed.

And China is not a slow market.

China is not like Europe or the US or Japan or developed markets.

It's by comparison, a robustly growing market.

The fact it's not growing double digits may disappoint some people, but I think the high single-digit growth rates in the Chinese economy are pretty attractive.

And our business opportunity on top of that is pretty attractive.

And I suppose it depends on which competitor you ask, and how damaged we were by the recall or the dynamics that changed in the market or whatever.

I see a market that's worthy of a significant investment and great opportunity, and we are gaining our share back, growth rate is good, very good.

I think if I expand that to the second half of the year, the reality here of our business is we just had the quarter that we didn't want to have, but had to have as a transition in the year, because the optics and the comparison and so forth.

Next quarter gets better, and it's still part of that first half, but I'd say the second quarter is a transitional quarter for us, and second half of the year is pretty robust.

There's nothing heroic that has to take place for that second half of our year to be robust.

We're well ahead on our own margin initiatives.

Haven't seen any significant speed bumps around the sales growth rates or the fundamentals of the markets.

We just had the quarter we forecasted, and we're ahead.

In my mind, we're well ahead of where we wanted to be and we're well ahead going into Q2, and I think we're going to be well ahead going into Q3 and Q4.

When we set our guidance at the beginning of the year, that dramatic difference between the first half of the year and the second half of the year had a number of people cautious about the second half of the year, just like you just said.

And I thought, if we raise guidance here in the first quarter and raise the second half of the year even more, nobody's going to particularly think that that is that credible because they're already cautious.

Well I'm not cautious.

I know what we're going to do.

I'm pretty confident, other than things I can't predict and nobody can, I'm pretty confident about our performance, and I think we'll wait and see how the second quarter goes, but I think the second quarter is a transitional one to a robust second half that then takes us strongly into '15.

And I think the underlying fundamentals of our primary geographies around the world are improving.

People may be looking at China and say it's declined.

I think that already happened.

And at this point, particularly given the business we're in, we're not in mining.

We are not in other things where you can say, wow, it really slowed.

We're in a segment that frankly, isn't slowing, and it's just as robust as it's been.

And I think it's a terrific opportunity for us, which is why we're going to put a fair amount of investment there, not only in China, but in a number of markets around the world.

And the birth rates should increase next year and the years after; is that correct?

Well I don't know.

I suppose so.

I'm not counting on birth rates.

I don't even get that micro economic about it.

We're looking at, frankly, I'm not even counting on just the tailwind of market growth.

I want share gain, and I'm targeting share gain from competitors and share presence in that market and in a lot of these markets.

We're measuring ourselves on share, and that translates, as you might guess, into fairly healthy growth.

But you can fool yourself with healthy growth when it's the market.

I want share gain.

And so that on top of whatever the market may give us in terms of birth rate and so forth, I think we've got a very long-term market in China that's a very healthy, robust market.

And I think we had an unfortunate setback last year that was nobody's intention to have happen.

It certainly wasn't our partners' intention to have it happen, but it did.

And we've had great cooperation from Fontera in resolving what happened there, and they remain an incredibly important partner to us and a valuable partner to us.

And I'd say, look, the two of us as companies have some great plans and thoughts for China and other markets.

It's an important one for us, and we remain very committed to it, because I think that all the growth that we forecasted in the past is there.

One of the things I always caution investors about, we get so obsessed about a quarter in the United States, because that's how we are.

We're a quarterly driven, CNBC-driven economy.

And our investments in progress in some of these markets, you can't measure in quarters.

I know we need the feedback every quarter, but -- to know that everything is okay and everything is on track, and so forth.

And I would tell you everything is okay and everything is on track.

I expect speed bumps out of the emerging markets.

I don't expect not to have them.

I mean, who could forecast that you'd have issues with Russia and the Ukraine and so forth?

And who could forecast that you'd have devaluations in given countries?

You can't forecast some of that stuff.

There's always going to be that, but the long-term fundamentals of investing in a lot of these countries and their healthcare systems and their need for the products that we make are strong, and that's where we're going.

It may be bumpy from quarter to quarter.

It's particularly bumpy this time in the first and second quarters, because of this recall we had last year, which was significant, and the adjustment in exchange in the second half.

But the long-term fundamentals of these markets are very strong, and we've been careful to select geographies where we know those fundamentals remain sustainable, and frankly, I'm pretty upbeat about the rest of this year, even the second quarter.

I think there's great opportunity here, and I see nothing but upward ramp, probably with some speed bumps, to be unpredictable, but nevertheless, pretty strong year ahead of us.

And I'm glad we've got a head start on it, and we're well ahead in this quarter.

I'm not ready to change our guidance, because I want to see another quarter played.

Because it's a transitional quarter for us, but second-quarter call should be an interesting call.

That's helpful.

Could I just ask also in the US infant business, that business came in softer, and I think Brian on the call mentioned a little bit of weather, but is there anything else going on underlying in the US infant business?

Share is very stable; our share is strong, very stable.

I have a hard time blaming weather on this one, because babies got to eat.

I just cannot come up with a weather reason for that.

I think the US market has always been pressured, the pediatric market.

We haven't lost share, so I have to say it's probably economy phenomenon to some degree.

We are not losing share to private label or anything else.

We are not losing share.

So I don't know if there's much more fundamental I can say about it, other than I think the underlying fundamentals are good, and it was a lesser quarter than we might have liked.

But I don't think it [pressages] some long-term direction.

Glenn I'd just clarify in Brian's remarks, he was referring more to the adult segment.

Which as you know, to Miles' point, infant is less discretionary and adult segment is a little more discretionary.

And while overall, there was a modest impact on the Company in the quarter, that's the one area where we saw a little bit.

Yes, I think it's a fair comment.

The adult is more discretionary, but look, the bottom line is the quarter was forecasted to be a very low-growth quarter.

Well, we met expectations.

It was a low-growth quarter on the top line.

It didn't miss our expectations.

It is what we expected.

Its ins and outs are a little different, but you could sit here and say there's a whole list of things, comparisons and other things that make it a low growth quarter.

Alright, some of that is pretty significant and true, but at the end of the day it was a low-growth quarter.

I don't expect that to be some sustainable growth rate.

I think this gets constantly better over time, and I'm glad to be ahead.

Okay, great.

Thank you for the color.

Thank you, Larry.

Thank you Elan and thank you all -- Glenn, excuse me.

Thank you, Elan.

Thank you for all your questions.

That concludes Abbott's conference call.

A replay of this call will be available after 11 am central time today on Abbott's investor relations website at www.abbottinvestor.com and after 11 am central time via telephone at 203-369-0489, passcode 4223.

The audio replay will be available until 4 pm central time on Wednesday, April 30.

Thank you for joining us today.

Thank you, and this does conclude today's conference.

You may disconnect at this time.