美國雅培 (ABT) 2014 Q4 法說會逐字稿

Good morning and thank you for standing by.

Welcome to Abbott's fourth-quarter 2014 earnings conference 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. Brian Yoor, Vice President Investor Relations.

Good morning.

Thank you for joining us.

With me today are 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.

Before we get started, 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 the 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, as except required by law.

Note that financial results from the developed markets branded generics pharmaceuticals and animal health businesses are reported as discontinued operations due to the pending sale of these businesses.

As a result, the line items of our consolidated statement of earnings are reported as continuing operations, or excluding the results of these two businesses.

To help facilitate year-over-year comparisons we filed an 8-K on Tuesday of this week that provides historical results from Abbott's continuing operations for the first three quarters of 2014.

In addition, our 2015 guidance provided today for sales, P&L line items, and earnings per share is for continuing operations only.

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, thanks, Brian.

Good morning.

Today I will discuss our results for the fourth quarter of 2014 but in particular our outlook for 2015.

We made good progress against our objectives last year, and we see good positive underlying momentum in our businesses going into 2015.

However, as you know, recent macroeconomic events have dominated the discussion on Company outlooks for 2015, in particular the significant strengthening of the dollar against almost every currency during the fourth quarter of 2014 and into 2015, as well as the impact of the decline of the price of oil on the global economic outlook.

These factors will affect the 2015 forecast for most multinational companies including Abbott.

But, while many are focused on the negative aspects of these events, I'd note that they will impact countries and companies in different ways.

Abbott will clearly face some head winds where emerging market currencies have devalued.

However, underlying fundamental growth remains strong.

In fact, countries such as India and China where Abbott has a strong presence will benefit economically from the lower price of oil.

And while the weakening of the euro impacts our European-based revenue, the fluctuations of this particular currency will not impact our bottom line as a result of our European cost base.

This should provide some durability to our results.

So, while I will discuss currency in more detail when I review our 2015 outlook, the bulk of my remarks here will address what we control -- our commercial and operational execution, our new product introductions, and our efforts to reduce costs and expand margins.

For the full year 2014, we delivered operational sales growth of 5.5% including acquisitions.

Sales growth rates improved sequentially each quarter last year, as we expected, and sales in emerging markets increased nearly 13%.

We expanded both growth and operating margin and achieved adjusted earnings per share of $2.28, including results related to the established pharmaceutical developed markets business.

This exceeded our guidance range and represents year-over-year adjusted EPS growth of more than 13%.

During the year, we continued to build Abbott's investment identity as a durable and reliable growth company.

Following a number of actions we took last year, we're broader and deeper in emerging markets.

And we are more consumer-facing.

In short, we are more present where the growth in healthcare is taking place now and will be over the long term.

In established pharmaceuticals we further positioned the division for faster growth.

We added CFR Pharmaceuticals which provides the scale, manufacturing, R&D, and product portfolio to establish Abbott as a top 10 pharma company in Latin America.

We acquired Veropharm, positioning Abbott as a top five branded generics company in Russia.

Both CFR and Veropharm provide Abbott with in-country manufacturing to bring us closer to our customers, as well as better match our costs with our sales and currency in those regions.

And we're on track to close on the sale of the EPD developed markets business in the first quarter, a business that performed above expectations in 2014 and is well positioned to move forward with Mylan.

Last year in our nutrition business we increased our local presence by investing in our global infrastructure.

We opened three new manufacturing plants in China, India, and the US.

And we partnered with the world's largest dairy cooperative, Fonterra, to invest locally in China's milk supply.

These investments are a reflection of the strong underlying demand for our high-quality adult and pediatric products.

In medical devices, we positioned our portfolio for stronger growth over the long term.

We entered the $3 billion fast-growing electrophysiology market through the acquisition of Topera.

In vascular we achieved improved reimbursement and coverage for MitraClip in the US, which should further expand adoption.

And we presented the first of multiple randomized clinical trials underway for ABSORB.

In medical optics we broke ground on a new facility in Malaysia to expand manufacturing capacity for our cataract lenses, driven by strong global demand for cataract surgery.

In diabetes care we established a new market with our Flash glucose monitoring device, FreeStyle Libre, launched directly to consumers in Europe last fall.

It eliminates the need for routine finger sticks and provides glucose data in a simple format that allows people with diabetes to achieve better health outcomes.

In diagnostics we delivered another year of mid to high single-digit growth, well balanced across both the developed world and emerging markets.

In Europe we introduced our IRIDICA testing system, what we believe will be a breakthrough in infectious disease testing.

We are entering 2015 with good momentum.

The fundamentals of our business are strong and the underlying trends across our markets remain positive.

The innovations we are launching are driving share gains and we are investing in our businesses to drive above market growth over the long term.

We expect to step up in our 2015 sales growth rate the high single-digit operational growth, including acquisitions, with emerging markets expected to contribute another year of double-digit performance.

From a currency perspective, we expect around a 6% negative impact to sales from foreign exchange.

This is roughly double the impact we had expected just three months ago, and is in line with what a number of other companies and analysts have forecasted as part of their outlooks for 2015.

Currency is a head wind that's impacting all multinationals.

And our assumption for this impact has been incorporated into our 2015 adjusted earnings per share guidance from continued operations of $2.10 to $2.20 a share, reflecting top-tier growth at the midpoint of the range.

Strong business performance and growth in operating margin expansion has and will continue to help offset even these more pronounced currency impacts in 2015.

At the same time we need to continue to invest in our businesses to drive sustainable long-term growth.

In 2015 I'm optimistic about our prospects.

In nutrition our R&D organization has been the most productive it's ever been, launching multiple products over the last several years.

In 2014 in China this included two new infant formula products, Eleva and Similac QINTI in new market segments.

We expect continued momentum in 2015 including our new Ensure product in China, which is the first product introduced in the newly established adult nutrition category in this country.

We are also building our brand in India.

Local R&D, manufacturing and supply chain are fully established.

We recently rolled out our first line of Similac products produced in our new state-of-the-art facility.

Margin improvement remains a key priority for our nutrition business, and we expanded its operating margin by several hundred basis points each of the last two years.

Our original target was to reach 20% of sales by 2015 and we exceeded that goal in 2014.

Going forward we expect further margin expansion in this business.

In established pharmaceuticals we are continuing to improve our commercial execution by strengthening our capabilities in key geographies and channels, expanding our product portfolios through innovation that's both fast and locally driven.

And driving awareness of our Abbott brand with consumers who are taking an ever greater role in making decisions about their healthcare.

We are also strengthening our local scale and infrastructure through the integration of CFR Pharmaceuticals and Veropharm.

Both of these acquisitions enhance our local market insights, know-how and our commercial capabilities, as well as help build out our portfolios in our core therapeutic areas.

Finally, as I mentioned, we anticipate closing on the sale of our developed markets business to Mylan in the first quarter.

We will receive 110 million shares of Mylan stock, which provides us with significant optionality given our strong balance sheet and ability to redeploy the net proceeds from the ultimate sale of Mylan shares.

In medical devices we are investing in a number of new products across diabetes care, vascular and medical optics.

In medical optics in our cataract business a steady stream of new products over the last two years has resulted in several points of share gain.

In 2015 we expect continued strong growth of our cataract business, driven by more than 20 new product launches across multiple geographies, as well as continued expansion of our laser cataract system CATALYS.

In vascular we are continuing to drive updates of our new products MitraClip, Supera and ABSORB, as well as our newest drug-eluting stent XIENCE Alpine launched in the US and recently approved in Japan.

In diabetes care we'll expand FreeStyle Libre into multiple new markets over time, targeting the more than $8 billion global blood glucose monitoring market.

Strong patient awareness has exceeded our initial expectations based on our direct-to-patient sales model.

We are already executing on a capacity expansion and we're working to secure broader reimbursement for Libre.

Finally, diagnostics, which remains one of our most durable and reliable growth businesses, consistently delivering mid to high single-digit operational sales growth the past four years.

We'll continue to execute on our commercial strategy in core laboratory diagnostics in both developed and developing markets.

We are also investing simultaneously in the development of next-generation system platforms in blood screening, immunoassay, clinical chemistry, hematology, molecular diagnostics and point of care.

Margin improvement in diagnostics once again exceeded our expectations, increasing nearly 100 basis points versus 2013.

Our gross margin improvement initiatives are continuing to yield results, and we expect continued steady margin expansion in this business.

So, to summarize, as we enter 2015 we expect a step up in full-year 2015 operational sales growth, into the high single digits, with double-digit growth in emerging markets.

And we expect continued gross and operating margin expansion as we execute on our division improvement programs and back office support initiatives.

While we anticipate currency to be a more significant head wind this year than in 2014, the long-term fundamentals of our business are healthy and we remain committed to increasing returns to shareholders.

In addition to our dividend and share repurchase activity, our strong balance sheet and additional flexibility from the Mylan transaction provide us with a significant opportunity to invest in strategic growth opportunities to continue to shape Abbott for long-term durable growth.

I will now turn the call over to Tom and Brian to discuss 2014 results in more detail and the 2015 outlook.

Tom.

Thanks, Miles.

Before I review our financial performance and outlook I would like to remind you that my remarks today regarding 2014 earnings per share will include the contributions from the developed markets branded generics business that we agreed to sell to Mylan and the animal health business that we agreed to sell to Zoetis.

Both of these transactions are expected to close in the first quarter of 2015.

This basis of comparison is consistent with the adjusted EPS guidance we provided in October.

However, my comments for sales and other P&L line items this quarter and for our 2015 forecast will be for continuing operations only -- that is, excluding the businesses being sold.

Today we reported fourth-quarter earnings per share, excluding specified items, of $0.71, above our previous guidance range due to the full-year effect of the US tax legislation enacted in December, including the R&D tax credit for 2014.

Adjusted EPS from continuing operations increased 29% in the fourth quarter.

We saw strong operational sales growth and increasing sales momentum in the fourth quarter.

Sales from continuing operations increased 10.2% on an operational basis in the quarter, which includes the impact from the recent CFR Pharmaceuticals and Veropharm acquisitions.

Operational sales excluding these acquisitions increased 6.5% in the quarter.

Reported sales increased 5.6% in the quarter, including an impact of 4.6% from foreign exchange.

The negative impact of foreign exchange on sales was almost twice as high as the estimate we provided in October, reflecting strengthening in the US dollar versus almost every currency during the quarter.

Operational sales growth was driven by strong performance in nutrition, diagnostics and established pharmaceuticals.

Total Company sales in emerging markets increased strong double digits on an operational basis in the quarter.

Fourth-quarter adjusted gross margin ratio was 56.9% of sales, ahead of our previous guidance, reflecting underlying gross margin improvements across the businesses, as well as the impact of the weaker euro on our manufacturing cost base.

Adjusted SG&A expense was 29.5% of sales and adjusted R&D investment was 6.4% of sales.

The fourth-quarter adjusted tax rate was below our previous forecast due entirely to the inclusion of the full-year impact of US tax legislation enacted in December that I mentioned earlier.

Overall, as we look at 2014, we delivered strong EPS growth, above our initial guidance range, and up more than 13% versus the prior year.

Adjusted EPS from continuing operations grew 21%.

We continued to make significant progress on our margin improvement initiatives, expanding our full-year adjusted operating margin from continuing operations by 200 basis points.

And, importantly, we exit the year with strong underlying momentum as we head into 2015.

As I turn to our outlook for 2015, I'd note that, as detailed in our earnings release, in 2014 we achieved adjusted EPS from continuing operations of $1.98.

This is the new baseline against which we will be measuring EPS growth in 2015.

As Miles indicated the recent strengthening of the US dollar is negatively impacting our 2015 growth, as it is for most multinational companies.

Based on current exchange rates, the impact of foreign exchange on our sales will be even more pronounced in 2015 than it was last year, with a negative impact on 2015 sales growth of around 6% compared to 2.5% for the full year 2014.

Although the impact to currency will be significant in 2015 it's important to note that, as I mentioned earlier, we exited last year with strong underlying performance momentum.

Our top-line operational growth accelerated significantly in the second half of the year, as expected, and we continue to make substantial progress in our margin expansion initiatives.

Importantly, the underlying trends across key geographies and healthcare segments in which we compete remain positive and attractive over the long term, driven by improving access to healthcare and demographic trends that are aligned to our businesses.

So, despite recent currency dynamics, we are well positioned to deliver strong EPS growth in 2015.

Turning to the specifics of our outlook for the full-year 2015, today we issued guidance for adjusted earnings per share from continuing operations of $2.10 to $2.20, which reflects growth around 8.5% over 2014.

At current exchange rates currency would negatively impact 2015 EPS growth reflected in this guidance by around 10%.

We forecast operational sales growth from continuing operations in the high single digits for the full year 2015.

As noted, at current exchange rates we'd expect a negative impact of around 6% on our full-year reported sales, which would result in reported sales growth in the low single digits for the full year 2015.

Brian will provide more detail on the 2015 outlook by business in a few minutes.

We forecast an adjusted gross margin ratio somewhat above 57% of sales for the full year 2015, reflecting more than 150 basis points of expansion, driven by gross margin improvement initiatives across our businesses.

I'd note that at current exchange rates the impact of foreign exchange on our gross margin ratio is expected to be relatively neutral in 2015 as the impact of exchange on sales will be largely offset by the benefit we'll realize from the weaker euro on our European-based manufacturing costs.

We forecast adjusted R&D investment as a percent of sales consistent with 2014 level, at around 6.5% of sales.

And we forecast adjusted SG&A expense around 31% of sales for the full year as we invest some of the savings from our efficiency programs and move products across our businesses to drive top-line growth.

Overall we expect to expand our full-year adjusted operating margin by over 100 basis points in 2015, reflecting another year of significant margin expansion.

We forecast interest expense of around $150 million, up over 2014 due to a planned refinancing of a portion of our short-term debt, an expectation of higher US short-term interest rates impacting short-term debt in the second half of the year, and somewhat lower interest income as a result of the funding of 2014 acquisitions.

We forecast an adjusted tax rate of 19% for the full year 2015, which is in line with the normalized 2014 rate excluding the effect of the US tax legislation enacted in December.

Our forecast does not assume reenactment of the US R&D tax credit in 2015.

Finally, I would like to review our outlook for the first quarter of 2015.

For the first quarter, we forecast adjusted earnings per share from continuing operations of $0.41 to $0.43, which reflects growth of over 23% at the midpoint of the range over adjusted EPS from continuing operations in the first quarter of 2014, up $0.34.

This strong growth, even in light of currency headwinds, is driven by strong underlying performance, as well as favorable year-over-year comparisons due to certain items that reduced sales and earnings in first quarter of last year, including the carryover effects of the 2013 supplier recall nutrition, the timing of a plant shut down in EPD to expand capacity, and reimbursement changes affecting our US diabetes business.

For the second, third, and fourth quarters, while we forecast strong underlying adjusted EPS growth, this performance will be partially offset by the significant impact of foreign exchange on EPS growth in each quarter of the year.

This would result in adjusted EPS growth in the mid or mid-to-upper single digits, depending on the quarter, over the last three quarters of 2015 as we work through the exchange head wins that began in late 2014.

Returning to our first-quarter forecast we project operational sales growth in the high single digits.

And at current exchange rates we'd expect a negative impact from exchange approaching 7%, resulting in reported sales growth in the low single digits.

We forecast an adjusted gross margin ratio somewhat above 57% of sales, and adjusted SG&A expense somewhat above 34% of sales, consistent with the relatively higher ratio we typically experience in the first quarter, and reflecting investment in growth initiatives.

We forecast adjusted R&D investment of around 6.5% of sales, net interest expense of around $30 million, and around $20 million of income in the exchange gains and nonoperating income lines of the P&L.

In summary, we delivered another year of strong adjusted EPS growth in 2014, exceeding our initial guidance range, and exited the year with strong momentum, including sequential improvements in operational sales growth each quarter of the year and significant operating margin expansion.

This strong underlying performance and momentum positions us well to deliver durable growth in 2015 despite a challenging currency environment.

Our 2015 outlook reflects top-tier ongoing EPS growth, driven by high single-digit operational sales growth and continued operating margin expansion.

With that I will turn it over to Brian to review the business operating highlights and outlooks.

All right.

Thank you Tom.

This morning I will review our fourth-quarter 2014 performance and 2015 sales outlook by business.

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

I will start with our nutrition business where global sales increased 9% in the fourth quarter.

In our international pediatric nutrition business, sales increased 14%.

We continue to capture market share with new infant formula products, including Similac QINTI and Eleva, which we launched in China during 2014 to further enhance competitive position in our relevant market segments.

International adult nutrition sales increased 13% in the quarter, representing the fifth consecutive quarter of double-digit sales growth in this business, as we continue to expand the adult nutrition category internationally.

Earlier this month we launched our Ensure brand in China.

Although we expect modest sales initially, the adult nutrition market in China represents a significant long-term growth opportunity for Abbott.

The aging population is expected to grow to four times the size of the US baby boomer population.

In the United States, pediatric nutrition sales were relatively flat in the quarter and in line with our expectations as share gains in the non-WIC segment of the infant formula market were offset by lower sales in the WIC segment.

Adult nutrition sales in the US were impacted by volume and price dynamics in the institutional segment and by softness in our performance nutrition business.

For the full year 2015, we will continue to focus on capturing market share with recently launched infant nutrition products and expanding the adult nutrition category internationally, including developing and shaping the adult nutrition market in China.

We are forecasting high single-digit growth on an operational basis in our global nutrition business, with double-digit operational sales growth in international nutrition.

For the first quarter, we expect the global nutrition business to deliver mid to high single-digit sales growth on an operational basis.

In our diagnostics business, sales increased 8.6% in the fourth quarter, with sales in emerging markets growing double digits.

Core laboratory diagnostic sales also increased 8.6% with high single digit growth in both the US and internationally, as we continue to build momentum with our commercial model.

We are also expanding our testing menu in order to provide greater value to clinical laboratories and ultimately patients.

In the fourth quarter we received US FDA clearance for the first fully automated galectin 3 test for use with our ARCHITECT platform.

This test assists doctors in assessing the prognoses of people diagnosed with chronic heart failure.

Additionally, a study on our high-sensitive component test previously launched on ARCHITECT generated new data that was recently published in the British Medical Journal.

The study found that Abbott's tests can precisely measure very low levels of toponin, which may help doctors accurately diagnose twice as many heart attacks in women compared to standard toponin tests.

In molecular diagnostics sales increased 4.4% in the quarter.

Our infectious disease business, which is our core focus, and represents more than half of our molecular diagnostics sales, increased double digits in the quarter.

This growth was partially offset by a decline in the oncology and genetics businesses in the US resulting from pricing and market channel dynamics.

As Miles mentioned, in December we received European approval for IRIDICA infectious disease testing platform.

IRIDICA is a first of its kind platform that more rapidly diagnoses serious infections such sepsis and pneumonia in critically ill patients, and has the potential to lower associated healthcare costs by up to 30%.

In point-of-care diagnostics, worldwide sales increased 14% as this business continues to build and expand its presence in targeted developed and emerging markets.

The point-of-care business had a considerably strong fourth quarter in the US, due in part to customers ordering Abbott's i-STAT analyzers as part of their Ebola preparedness activities.

In addition, a major hospital network in the US standardized its point of care testing around Abbott's market-leading i-STAT platform, which also contributed to strong growth in the fourth quarter.

We expect another year of durable performance in our diagnostics business in 2015 as we continue to execute on our commercial model and core laboratory diagnostics, drive uptake of our new IRIDICA infectious disease platform in molecular diagnostics in Europe, and increase market penetration with our point-of-care platform.

At the same time we continue development of our next-generation platforms across all three businesses.

These systems are being designed to positively impact patient care, improve service to customers, enhance laboratory productivity, and reduce costs.

For the full year 2015, we expect our global diagnostics business to generate operational growth that is similar to our performance in 2014.

For the first quarter in global diagnostics we are forecasting low to mid single-digit operational sales growth.

In medical devices, we completed the acquisition of Topera in the fourth quarter.

Topera provides Abbott with a foundational entry in the $3 billion fast-growing electrophysiology market.

Its breakthrough technology can transform how physicians treat people with complex heart rhythm disorders.

Our vascular business increased 1.7% in the quarter, representing a sequential improvement versus third quarter of 2014 and somewhat above our previous guidance.

In our structural heart business we continue to see strong double-digit sales growth on MitraClip, our breakthrough technology for the treatment of mitral regurgitation.

Our endovascular business also generated double-digit growth in the quarter, driven by our Supera peripheral stent for the superficial femoral artery, or SFA.

In November, we presented long-term Supera data that demonstrate a very strong freedom from target lesion revascularization rate of 94% at three years.

In the third quarter we launched our new drug-eluting stent system, XIENCE Alpine, in the US.

XIENCE Alpine is the only drug-eluting stent with an indication to treat chronic total occlusions.

We've recently received XIENCE Alpine regulatory approval in Japan, and expect to launch it in the next few months following reimbursement approval.

We are also making regulatory progress with our bioresorbable vascular scaffold ABSORB, which we expect to submit for approval in the US, China, and Japan by the end of this year.

These three geographies represent more than 50% of the world's coronary stent market.

For the full year and first quarter 2015, we expect sales in our global vascular business to increase modestly on an operational basis.

In diabetes care, global sales in the fourth quarter were down mid single digits, in line with our expectations as the rate of decline in the US is moderating, following the US reimbursement changes that were enacted in the middle of 2013.

Outside of the United States, we launched our revolutionary new glucose-sensing technology, FreeStyle Libre, direct to consumers.

With the launch of FreeStyle Libre, we expect our global diabetes business to return to low single-digit growth on an operational basis in 2015.

For the first quarter we are also forecasting low single-digit operational sales growth in our diabetes care business.

In medical optics, sales increased 3.6% in the fourth quarter and 8.5% for the full year.

Sales of our cataract products, which represent approximately 70% of our medical optics business, increased high single digits globally in the quarter.

This growth was partially offset by market declines in the refractive and corneal segments of the medical optics business.

In 2015 we look forward to multiple new product launches across a number of key geographies, as well as continued penetration of our CATALYS laser cataract system.

The first of these new products, our TECNIS Multifocal Low Add premium intraocular lens, which provides more range of vision options to patients and surgeons, will soon launch in the US.

For the full year 2015, we expect our global medical optics business to grow mid to high single digits on an operational basis, with low to mid single-digit growth in the first quarter.

And, lastly, our established pharmaceuticals business, or EPD, where sales from continuing operations, excluding the developed market branded generics pharmaceuticals business, increased strong double digits in the quarter.

As Miles mentioned, we completed the acquisitions of CFR and Veropharm last year, but at the same time generated strong underlying performance from our EPD emerging market business.

Excluding the sales contributions from acquisitions, organic sales increased nearly 9.5% in the quarter.

This performance was driven by double-digit sales growth across several emerging geographies, including India, Russia, and China.

For the full year 2015, we expect continued strong double-digit growth in EPD on an operational basis, including the impact of acquisitions, as this business continues to expand product portfolios in key therapeutic areas, implements new branding initiatives across the portfolio, and increases its focus on marketing to the pharmacy channel.

Excluding the contributions from our accusations made in 2014, we expect high single-digit operational sales growth in EPD for the full year 2015.

For the first quarter, we are also forecasting strong double-digit growth in EPD on an operational basis, including the impact of acquisitions.

In summary, we achieved our expectations in 2014.

Sales growth improved sequentially every quarter this year.

We exceeded our earnings per share expectations.

We expanded our adjusted operating margin by 200 basis points.

And we completed several actions to continue to position Abbott for durable growth.

As we look ahead to 2015 we are well-positioned to deliver a sequential improvement in operational sales growth and another year of top-tier earnings per share growth.

We will now open the call for questions.

Thank you.

(Operator Instructions)

Our first question this morning is from Mike Weinstein from JPMorgan.

Good morning and thanks for taking the questions, guys.

Let me touch maybe on two topics.

The first, Tom, could you talk a little bit more about FX, the impact on 2015?

And how should we think about your ability to manage through additional dollar strengthening going forward?

I pretty much covered that in my remarks.

We talked about 6% based on current rates on the top line and there is about a 10% head wind on our earnings growth year over year.

Historically, as those of you that follow us know, within any one year, we have done a pretty good job of managing through what I call normal fluctuations in currency.

And, really, it has not affected our performance against our expectations.

And going forward from this point, assuming the major moves have happened, we would expect something similar in 2015.

I think what everyone is seeing in this season is that there are limits if there are major major moves.

But I would say anything within the normal levels of fluctuations, we'd continue do what we have done in the past.

Mike, I would add to that, we may have an unusual mix of currencies relative to a lot of multinationals.

For us, for example the euro is not an impact because we just happen to have enough cost, manufacturing, and other things in Europe that it pretty much self hedges.

As we look forward at the year one of the more uncertain currencies might be the euro and that won't affect us.

We are pretty protected on that.

In a rather back-handed bit of good fortune, I don't really expect the ruble to impact us very much because it already did.

And it already impacted us pretty significantly in 2014.

So, when we look forward at the particular currencies that are most likely to be volatile or might have risk -- and I have no corner on a crystal ball here to know what's going to happen, certainly no one would have projected any of the things that happened this last year -- I think that where we are likely or possibly going to see volatility in FX, we're in a pretty good position.

So, we don't anticipate it impacting us like it could some.

And we have already had the impact in 2014 in others and absorbed that.

We always go into the year with a little bit of cushioning contingency just in case.

So, I think we are probably in as good a place as we have ever been in spite of how heavy the headwind is of FX in general for all countries.

Miles, let me ask the strategic questions.

You exit 2014 with the underlying business in really good shape.

Obviously not all pieces are doing as well as you would like but in aggregate it looks very strong, obviously a lot stronger than it did, say, 12, 18 months ago.

What are the strategic priorities, particularly in the context of your balance sheet and what your balance sheet could look like, should you monetize your Mylan stake over the next several months?

I assumed that question would come up at some point.

My first priority is to get the deal closed.

You may know that their shareholder book concludes today.

We've had some really good news here in the last week in terms of EU approval for the deal and so forth.

So, I expect to get that closed pretty quickly here.

I don't want to forecast where or what we might be looking at or considering.

I do want to add to the business.

I do want to add to the Company in places where we either want to expand our footprint or can certainly expand the strength of our footprint, without telegraphing where that might be.

As you know I don't always telegraph those things ahead of time, and yet we have been pretty consistent at the kinds of things we're interested in.

I think we've got a lot of capacity.

And presuming that everything concludes properly here with our Mylan transaction, we've got a lot of flexibility and a lot of capacity.

I think I want to make good strategic deals that are prudent.

I think that's a little more difficult these days.

It's not difficult to be prudent.

It's difficult to find a lot of good opportunities that fit.

A lot of price tags out there have very ambitious expectations.

I don't think it's as rich or robust an M&A environment as we have seen in other years.

But having said that, I still see plenty of opportunities for us to expand and add to the business.

It's just a question of right timing, right receptivity on the other side, right values and finding some overlap.

I think the good news is, I think you only want to really add to a sound foundation.

Sometimes if you do M&A to patch something that's not working in the core of the company, it doesn't always work that well.

We have had a lot of disintegration to get through here, separating from AbbVie.

That's pretty much concluded, getting close.

We've got the same thing where we are working through on the EPD developed market business.

You want your organization ready for the integration of whatever you may do, however big or small it may be.

And I think we are in a good place where the underlying performance of all the businesses is really good.

You are right there are places I would rather see better commercial performance but overall it's very stable.

Internal organization has the other hats and distractions pretty much concluded.

So, we couldn't be more ready and positioned better with a good strong balance sheet.

Having said that, I know it doesn't give you any sort of indication of where, what, when, et cetera, but we're obviously observing, looking, hunting.

Miles, a comment about targets.

Ideally, with the cash you are going to have outside the US in your balance sheet, an ideal target would be outside the US.

Are there no shortage of targets for you outside the US?

Do you see opportunities there?

I see a lot of targets outside the US.

A lot of them have very high valuation expectations that I think are a little unrealistic, in some cases.

But in the grand scheme of things I think that's just negotiation.

I think external, ex to the US, is, in a fashion, not quite target-rich but there is a lot that can be done to expand our business and our presence in a number of key countries.

I don't rule out the US.

I think that there is still opportunity in the US.

It's just a lot more selective.

Obviously, financially speaking, it's a lot easier to deploy cash that's outside the US, which there is going to be a lot of.

And that's a lot easier under today's tax regime.

It's probably a more attractive environment and a lot of our monitoring and hunting, if you will, is outside the US.

The good news is we have been in these countries outside the US a long time and we know them reasonably well.

In a lot of cases the kinds of businesses that we are interested in outside the US are family-owned or family-sponsored.

It's a little different environment than the US or European markets.

But we're comfortable there, we're comfortable navigating there, we have had a fair amount of experience there.

And that's a plus for us.

I think in the last couple of years we've been able to accomplish some pretty unique and unusual acquisitions.

I think Veropharm was pretty unusual, particularly given that we were well into it when the Ukraine issue happened and made it more difficult.

And I would say I would pat the CFO on the back here for having the presence of mind to do this deal in rubles, so we were not exposed to exchange on that particular deal.

I think it's a fabulous deal for us long term in Russia, and that's an important market for us.

We anticipated -- we didn't wish for the devaluation of the ruble but we were prepared for it.

So, I think there is a number of places where there is opportunities for us outside the US that aren't necessarily that visible to US investors or US analysts.

I know you know that.

There is a lot out there that enhances what we are trying to do with the business and where we believe the growth opportunities are and where we can lever the already existing infrastructure we have.

Perfect.

Thank you, Miles.

I'll let some others jump in.

Thank you.

Our next question is from Kristen Stewart from Deutsche Bank.

Hi.

Thanks for taking the question.

I was wondering if we could just focus on the margins and the underlying performance.

What stands out the most to me is just the guidance in terms of the EPS being up 8.5% at the midpoint despite a 10% FX head wind.

Can you maybe just walk through the confidence in the underlying margin expansion, and then also just touch on the fourth-quarter gross margin because that came in much better than we were anticipating.

I will make a couple comments about it, Kristen, and then I will hand it to Tom for a little more color here.

First of all, we had a head start here because with the separation of AbbVie, as we have said in past calls, we took a very comprehensive look at our G&A costs and our underlying costs in manufacturing and other things across the Company.

And we have had initiatives in all of our divisions pointed at that for some time.

We've had some very good success with improvement of costs and improvement of expenses in the Company in a variety of ways.

And I highlighted nutrition and diagnostics as two that stand out where we've had tremendous improvement in underlying cost structure.

The unfortunate thing is that, given the exchange rates that multinationals have experienced around the world and so forth, some of that has been chewed up or at least that improvement in our cost and expense structure has protected us from erosion from exchange.

And it continues to.

Ideally we want to keep improving those costs over time which we believe we can.

But the single biggest cost we have had has been exchange.

I think you can see that in the top line.

The good news is, in a lot of cases we have our cost structure and our expense structure distributed among the countries where we have the highest sales and profits.

And, so, it does offset to some degree the impact of exchange on the sales line.

And what you will see is, when it hurts the sales line, it improves the gross margin.

It's just offsetting.

So, part of the improvement that you see in our gross margin is being in the right places when exchange hits us so we can mitigate the impact on our profits.

And we got a big head start on that two years ago when we split so we've been well prepared to absorb what was happening.

It would have been our intent to have much higher earnings but, in fact, it has absorbed the impact and kept us at, I'd say, a performance level that's really good.

But we could have hoped for more had it not been for that.

Tom, you want to give some more color on that?

I would just add a couple things.

Recall that when we announced the EPD developed markets transaction, we said that the underlying growth rate of Abbott was about 2% better on a continuing operations basis than it was before.

So, certainly that's giving a little more oomph to our growth than what you might have expected.

I think the other thing, and it's really all about the manufacturing margin, their gross margin that Miles alluded to, the last two years we have had relatively flat gross margin.

And what we have been saying is that's been in spite of the really strong cost improvement programs Miles talked about because currency was hurting our gross margin.

But that was because the euro was strong and that was keeping our costs for that particular large manufacturing cost base up pretty high.

But now the euro is moving with the other currencies, and the real benefit of the real actions in our manufacturing plants and our operations people are really starting to show through the gross margin now that the euro is matching where the other currencies are going direction-wise.

So, I think those are a couple differences that really are the basis for our relatively stronger EPS growth rate in 2015 than what you might be seeing from other companies.

Make no mistake.

If it weren't all of us facing some of this currency head wind earnings would be even stronger.

Just in light of all the portfolio moves how do you look at longer-term growth?

Do you feel very well positioned in the mid to high single digit and it certainly sounds like double-digit EPS growth forecast?

It's always our intent to be in that range or better.

I'd say, yes, I feel pretty good about that.

I say this with caution because I would not have predicted the things that happened in the latter half of the year in 2014.

And I don't think there is many people that would have predicted what happened in 2014 toward the end of the year, either in what happened with the price of oil, what happened with interest rates, what happened with exchange rates, et cetera.

That said, all things being equal, yes, I expect that we can maintain healthy high single-digit sales growth rates and double-digit bottom-line growth rates.

That's our intent.

That's our goal.

We think that's the identity and expectation of the Company.

Every year, at every LRP, every long-range plan is built around the expectation of maintenance of that.

And we've always got a long-term view of where we believe those growth and share opportunities are.

And I say so far so good, and I don't see any reason to expect less.

Just to clarify, you said high single-digit sales or mid to high?

Mid to high.

To be clear I am always pushing for more.

In reality today, mid's pretty good.

I can remember when mid was a disaster and today mid looks pretty good.

I guess if the market, the world, all of us are down long enough, anything looks good.

But I think we target that range.

If we steadily are in that mid to high range we are going to be targeting high.

And if we are steadily in the high range we're going to be targeting double.

It's going to be always wanting to do a little better than or maybe a lot better than what the market gives you.

Perfect.

Thanks very much.

Our next question is from David Roman from Goldman Sachs.

Thank you.

Good morning everybody.

I wanted to start on the US as obviously markets outside the United States were very strong for you in the quarter.

But maybe you could just talk a little bit broadly about your US franchises, particularly in the context of what looks to have been a better operating environment domestically, whether it's what we are seeing out of the hospitals or some of the other volume-related companies.

How do you think about the evolution of your US franchise in 2015 and beyond?

I'd say that I think the US -- first of all, it's a very important market to us.

It's a big market to us.

It's our largest market.

Three of our major businesses are large and important here.

And one, the established pharmaceutical business, is not here at all in the US.

I'd say it's interesting to me.

Most shareholders and analysts that I listen to today or hear from will tell me the US is better.

I think better relative to what?

I don't think that the healthcare environment for healthcare products companies in the US is that much better, to be honest.

I don't think it's a robust market.

I think it's a reaction to the kind of sudden volatility that a lot of companies have experienced outside the US.

And we tend to like predictability in this country, and we tend to like our predictability in quarterly doses.

But I look at the markets long term and I think the US is a healthy market.

It's important for products.

But I don't consider it in our businesses a particularly robust growth market.

And that means that as we look at the US our expectations are to be in good single-digit range and remain profitable and healthy here.

But the real growth, even in this volatile market worldwide, is outside the US for, I think, healthcare products, for pharmaceuticals, for devices.

For the products that we are in, I think the growth rates are much better outside the US.

We just have to navigate the volatility of what that means.

In that case there is probably 15 countries around the world, maybe 20, depending on what company you are, that are important at varying degrees as growth opportunities, market development opportunities, et cetera.

And as those economies are developing or recovering, as the case may be, I think the underlying fundamentals of growth in those markets exceed the US.

That doesn't mean the US is bad.

I think the US is better than it's been but it hasn't been particularly good.

So, better is easy, it's a low hurdle.

While we say the US is more solid today, I think the US today isn't necessarily a better growth market.

It's just a lot more stable and predictable than a lot of markets around the world.

Do you guys want to add to that?

I'd just say, even as we look at 2015, putting currency aside again, we are looking at growth rates 2X, 3X, 4X what the US is.

And it underscores Miles' point that that's where the growth is.

But we do see improvements in some of our US businesses in 2015.

Diagnostics is continuing to be a pretty good performer there, relative to the lower growth market.

And ADC is now moving better into better territory.

We do have some new product activity in vascular, which can help you outgrow a slow growth market.

And things like MitraClip and Supera and XIENCE Alpine are going to help us do a little bit better in that business in 2015.

But the relative growth rates, I'd just echo what Miles says, there is no comparison.

And that's why we have pursued and invested more in these higher-growth markets.

I'd tell you, one last comment, in the US -- and it's, frankly, good for any company around the world in any country -- but here in the US you are not going to get a lot of tail-winded growth.

So you better be prepared to innovate and slug it out for share.

You got to look at it that way, that you've got to win.

You got to beat a competitor.

You just can't take a tail wind.

We've got to keep improving our products, we got to keep putting out better products and gain our share that way.

The thing I am heartened by is that when I look across all of our businesses and divisions and their R&D pipelines and the products they're bringing, whether they're incremental innovation or maybe substantial innovation like Libre in our diabetics care business, they're really good products and they really will make a difference and they really will drive share gain and growth.

That, actually, I look forward to as a real positive here over the next, call it, two to five years as we keep bringing out more and more new products.

It keeps us and makes us more competitive in markets like the US.

Frankly, the reverse side of that is in markets where you got a great tail wind of growth, you tend not to be as sharp in terms of competitiveness because you are getting that tail wind of growth.

I think it's actually healthy for us to be both ways and we'll get the benefit of our new products and innovations in all markets.

Okay, that's a helpful perspective.

Maybe just a follow-up on some of the questions around M&A and strategic vision here.

I think, though, the language that you have used in the past couple calls is looking to Reshape Abbott in 2014 was obviously a busy year in that regard.

Can you maybe give us some more perspective on Reshape Abbott into what?

What is the long-term vision here given all the moving parts?

Are we looking at this as a four-legged stool for a sustainable period of time?

Is the mix of business one that makes sense?

Ultimately when you are done with that reshaping, what do you want Abbott to look like?

I like the foundation we've got.

I like the four legs that we have, if we want to describe them as four legs.

We talk off and on from time to time about whether something is truly a fifth leg or whether it relates to our current structure.

For example, a lot of people wouldn't necessarily see the branded generic pharmaceutical business an efficient business as related.

But truthfully, overseas they go through all the same channels.

They go through the same wholesalers, they go through the same retail outlets, they go through the same pharmacies, and so forth.

And they're very consumer-facing in the markets and targets we have focused on.

So, there is a lot of, I'll call it, brand synergy and customer synergy and consumer synergy among them.

So those are pluses for us.

Other than in our nutrition business, and in a way our branded generic business, we are not fully in the OTC business.

But I will just use it as a wild example because I think if someone brings me an opportunity here that says -- look it's got this, this, and this and, oh, by the way, it's got OTC, would you reject it with the OTC?

I wouldn't in some countries.

Does that mean I'm looking for that to try to complete with, say a P&G, in the US?

No, I'm not.

But if in a country like India where the overlap of OTX, OTC, branded, generic, pharma and nutrition is such that that was an expansion opportunity, it would strategically fit really well with our infrastructure in India.

So, I'd say it depends.

I think we're much stronger when we can add to businesses we already know and already understand the operating models of, and know how we can leverage both the business, the brands, infrastructure, et cetera, much like we are with CFR in Latin America.

But I want to be cautious not to rule out opportunities that I think are long-term expansions for us.

I look at medical optics.

When we made that acquisition a number of years ago there was criticism that -- gee, that's far afield for you.

It isn't.

It's now a nice strong growth driver for us.

Would I add to it?

I would, if I see the right opportunities and the right circumstances.

I think the related businesses here, they all have a couple of things in common.

They are all in growing markets, they're all innovation driven, they're all durable.

They're durable in terms of their growth rates.

I compare that to the pharma business that we used to be in.

Pharma, it's a fabulous business if you get all the way to the finish line and launch a product.

It's a risky business because the science is so risky with pharmaceuticals.

So it's a different business model.

Without the pharmaceutical business, that particular pharmaceutical business, which has been tremendously successful separate from Abbott, we are more of a durable growth company.

A lot of people would interpret durable a number of different ways.

I think it's at least mid to high single-digit growth.

I think it's not particularly volatile in terms of patent expirations and so forth, although it might benefit from IP like our device businesses do, and so on.

But it's on got a certain stability to it while it's also growth and innovation driven.

I think that the long-term identity of Abbott has been to be growth, to be relatively reliable, to be real growth, and to return cash, et cetera, to shareholders as it grows.

And that's been the identity of the Company for a long time.

I think the mix of countries and products that we're in delivers that identity without a lot of harsh volatility.

An example would be the environment we're in right now.

If we can weather 2014 and 2015 with what's happening in the world economies and in the world's markets and so forth, and deliver the results we're delivering, I think we are absolutely living up to the identity of a very reliable, durable, profitable growth company.

That's what this mix of business is and mix of geographies does.

I think it's a bit unique that way.

But I think that's the intent of what we are trying to do.

Whether there is room for a fifth or sixth leg in there, I think it depends.

And I think we take our opportunities as they come.

We know what we are good at.

We know what we are not good at or don't know about.

If we are looking at some acquisition or business to add to the Company, my first question is can we add to it, can we do better because it's in our hands.

I think that's a critical threshold for us to hold ourselves to as we invest shareholder money.

Thank you.

I appreciate all the perspective and congrats on a good quarter and first start to 2015.

Thank you.

Our next question is from David Lewis from Morgan Stanley.

Good morning.

I just want to come back to guidance for a quick second.

I think the numbers were largely in line with many expectations.

But the revenue outlook has been, I think, more bullish this morning.

And I think the stock is reacting to that.

Either for Miles or Tom or Brian, thinking about this year, if you can get acceleration, you have more difficult comps versus 2014 as the business improved in the back half of 2014.

We talked a lot about emerging market currency but there may be emerging market weakness investors are concerned about.

So, the first question is just what provides the confidence that you can get that incremental acceleration and be very confident in that revenue number?

Is it products, is it specific segments?

And where does that momentum reside that even in the face of EM and the face of strengthening comps you feel pretty confident that you can deliver this top-line number.

And then I have a quick follow up.

I think all three of us are dying to pounce on that one.

Let me give a couple of comments and then I'll had it back to Brian and Tom to add.

There's a number of moving parts here.

The first thing I'd say is we look at the underlying growth of the businesses.

Some of them are very strong, stronger than you might see.

Some countries have stabilized and turned more positive -- India, as an example -- than it has last year.

So there is some underlying strength here that comes from a variety of sources, number one.

And there are still some I would like to see do better.

Number two, there is the lapping of various events or unevenness in the quarterly reporting.

For example, you will recall last year in the first half of the year we were lapping a recall from the prior year, which suppressed the first and second quarters of 2014, which enhances the comparison for 2015.

So we've got some of that up and down in here, as well.

We have the launch of some new products.

We have two acquisitions in here that weren't there before that particularly affect the last half of the year, CFR and Veropharm.

There will be two subtractions from the Company which will also affect that quarter to quarter comparison.

The established pharma-developed market business will be out of the mix.

When you change the mix of the pieces and the growth rates of the various pieces, when it all comes together it actually looks like what we forecasted and makes sense.

It's just that there is a lot of moving parts and I think it probably is not that easy for investors to tease those apart, put them back together, and see what it boils down to.

But this is what it boils down to and I am very confident in it.

David, this is Brian.

I'd say, too, like foreign exchange, I think what's going on in the world impacts companies differently in different ways.

You take, for example, what's going on with respect to the price of oil.

There are actually countries who benefit from this.

And see that pass all the way down through their GDP and ultimately to the consumer.

As Miles talked about, being a more consumer-facing company, clearly this is playing out very nicely in the countries, for example, of China and India, who are net importers of oil.

We are seeing very strong performance by our nutrition business, particularly with the launch of the products like Similac QINTI that I referenced, as well as Eleva.

Recall, we just turned on promotion there towards the end of 2014.

And I'd add that in China, as well, we have not only recovered to baseline, we have gone beyond share.

So, all signs pointing positive there.

David, let me add one more thing to it.

Clearly under the circumstances of the last four weeks, when so many companies have identified the currency risk that everybody is feeling, and the currency hit that everybody is feeling, and the oil shock that many are feeling, and the impact of that on tertiary markets and so forth, a lot of people are necessarily having to report that it's going to impact their business.

And we've all got different businesses.

In that environment, I'd have to say it's tempting to reset the bar lower.

We looked at that and said no, we are not going to reset our bar lower.

And it's not because it's hard for us to stretch to do it.

It's, if you want to be a transparently reliable growth company, as we are, and we're already dealing with always educating our investors about the variety of emerging markets we're in and so forth, I think it's important for us to be true to what we think we are going do.

And this is what we think we are going do.

There was temptation to buy a little conservatism here and estimate lower and beat.

We may beat anyway.

But I didn't want to take that opportunity to set lower.

So, I am confident in these numbers.

I am confident in the earnings projection.

I think our mix is different than others'.

I think, as I pointed out earlier, we are just not vulnerable to the euro and a lot of companies are.

So, they've got to forecast that.

I don't have the same issue.

So, our earnings turn out where they are.

Okay.

Just one quick question.

I am loathe to ask another balance sheet M&A question but I am just going to ask it and hate myself the rest of the week.

Miles, one of the hallmarks of how you approached M&A was to basically fix exposure.

You have obviously had this nutritional asset, which is great exposure.

You've increased your exposure to the part of the pharmaceutical business that you want and decreased your exposure to the part you didn't want.

I wonder if you can talk about the consumer more broadly.

Is getting access or getting exposure to the consumer, or steam, or something we could expect out of the Company in coming quarters and years?

Yes, but for a reason different than just exposure to the consumer.

I'd say we've intentionally wanted to change the mix of the Company to a source of sales and profit, et cetera, that wasn't necessarily as reliant on government reimbursement.

We wanted a greater mix of patient pay or consumer pay.

I'd rather ride with the consumer markets than ride with the volatility of, say, a Europe where it's heavily reimbursement-driven.

And given the economic issues that most European countries in the EU faces, you are at the whim of the next stroke of the pen to cut prices.

So, we wanted a different mix.

We wanted a different geographic mix.

We wanted a different balance in how much we are reliant on payers, how much we are reliant on governments, and how much we're reliant on the consumer or the patient themselves.

That drove some of the choice around geography and/or business areas that we believe make up a durable growth company.

We also find that the predictable growth and profitability of countries or businesses that are more patient-pay is, frankly, more reliable than those that, at least for us, are susceptible to reimbursement cuts, et cetera.

It doesn't mean we don't want to be in countries that are reimbursement-driven.

We do.

It's a matter of balance, it's a matter of mix, it's a matter of trying to have it all but not too much.

Thank you.

Our final question today is from Larry Biegelsen from Wells Fargo.

Good morning.

Thanks for fitting me in.

Just a couple quick clarification questions for Tom, and then one product-related question from Miles.

On EPS, I just wanted to confirm, the FX hit, the 10 percentage point hit.

So, at the midpoint constant currency would be about 235, Tom?

Yes, 10% is around 20 pennies.

So that's about right, Larry.

And then the contribution from acquisitions implied in the high single-digit constant currency growth for 2015, we have about 4%.

Closer to 3.5%, Larry.

3.5%.

Okay.

And that includes, that's net of divestitures, Tom?

Divestitures are already out of the numbers because of our continuing operation, so that should be comparable between the years.

Got it.

Then just lastly for me, Miles, on Libre, if you could talk about your excitement for that product, how big you think it can be, and your long-term strategy in atrial fibrillation, a new market for you.

I am sure people would be interested to hear your long-term strategy there.

Thanks.

First of all in Libre, I am excited about the product.

I think it's a great innovation, a great product.

I think we've had really good customer response.

And our challenge right now is capacity expansion.

I'd say that's a limiting factor for us.

Quicker, faster, sooner than we expected.

So, the organization's got the blow torch going to expand capacity because I think that product, particularly as word of mouth spreads amongst patients, is going to be very strong.

I am frustrated with the pace of regulatory approve in the US.

But nevertheless, right now we need the capacity anyway.

So, it's open to a really good reception in Europe and I expect it's going to be a real positive product for us and for patients in that sector.

On the electrophysiology front, I don't want to create high expectations there because everybody is going to tell me we are entering land of the giants and so forth.

I think it's a great segment.

I think there is a lot of opportunity for advancement of technology there to make a real and improved impact on the treatment of the patient.

People see it as a $3 billion market today.

I think it's going to be a bigger market, a much bigger market over time.

And I think there is a lot of room for technology innovation there.

We have invested in not only Topera but a number of other companies from an equity standpoint to bring them along.

And we have a long-term view of how we want to play in that market, which I don't want to detail here.

We're going to take a run at it and see what can be accomplished there.

Thanks for taking the questions, guys.

Thank you, operator.

And thank you all for 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 abbottinvestor.com, and after 11 AM Central time via telephone at 203-369-0289, pass code 5311.

The audio replay will be available until 4 PM Thursday February 12.

Thank you for joining us today.

Thank you.

This does conclude today's conference.

You may disconnect at this time.