美國雅培 (ABT) 2016 Q1 法說會逐字稿

Good morning and thank you for standing by.

Welcome to the Abbott's first-quarter 2016 earnings conference call.

(Operator Instructions)

This call is being recorded by Abbott with the exception of any participant's question 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. Scott Leinenweber, Vice President, of Investor Relations.

Good morning and thank you for joining us.

With me today are Miles White, Chairman of the Board and Chief Executive Officer; Tom Freyman, Executive Vice President, Finance and Administration; and Brian Yoor, Senior Vice President, Finance and Chief Financial Officer.

Miles will provide opening remarks and Brian will discuss our performance in more detail.

Following their comments, Miles, Tom, Brian 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 2016.

Abbott cautions that these forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those indicated in our 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, 2015.

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.

Please note that first-quarter financial results and guidance provided on the call today for sales, EPS and line items of the P&L will be for continuing operations only.

On today's 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 filing 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, Scott.

Good morning.

Today we reported ongoing earnings per share of $0.41 exceeding our previous guidance range.

Sales increased 5% in the quarter led by strong performance in Diagnostics and Established Pharmaceuticals.

As you know we've been taking important strategic steps to expand our footprint in the world's fastest-growing geographies and have been investing in R&D that has resulted in numerous new product launches across our businesses.

These actions and investments are driving our strong first-quarter performance which I'll briefly review by business.

I will start with Diagnostics where we achieved sales growth of 7% in the quarter, driven by continued above market performance in core laboratory and point of care diagnostics.

We continue to capture share and win new accounts with our customer focused solutions which we further enhanced with an unprecedented series of new instrument launches over the next few years.

We continue to make great progress on our next-generation diagnostic systems and point of care immunoassay testing, clinical chemistry, hematology and blood screen.

These new systems are being designed with the customer in mind, incorporating the features they deem most important including increased automation, higher throughput and an enhanced user interface.

We will provide more details on our launch plans of the systems in the coming quarters.

In Nutrition, both pediatric and adult nutrition grew roughly 4.5% in the quarter.

Above market performance and US pediatric nutrition was led by strong performance of recently launched non-GMO products for infants and toddlers.

Internationally pediatric nutrition growth was led by continued share expansion of Eleva in the premium segment of the Chinese market as well as continued strong growth in Russia and across several countries in Latin America.

In adult nutrition where Abbott is the global leader, sales growth was led by Ensure in the retail and institutional segments of the US market as well as double-digit growth in several Latin American countries as we continued to expand the adult nutrition category globally.

In Medical Devices sales growth was led by 5.5% growth in medical optics where we continue to capture share and drive growth in our portfolio of recently launched premium cataract lens products.

Earlier this month we opened a new manufacturing facility in Malaysia that is capable of producing over 4 million lenses a year to meet the growing demand for our products.

In diabetes care international sales growth of 11% was driven by continued consumer uptake of FreeStyle Libre in Europe.

During the quarter FreeStyle Libre received European approval for use in children and teens who can now manage their diabetes without the need for routine finger sticks.

We expect growth in our diabetes business to accelerate in the coming quarters as we meet increasing demand for Libre from consumers and healthcare professionals and we also look forward to bringing Libre to new markets including the US.

In vascular, modest growth in the quarter was led by double-digit growth of MitraClip, our market-leading device for the minimally invasive treatment of mitral regurgitation and strong performance in our endovascular business driven by vessel closure products and Supera, our unique peripheral stent for the treatment of blockages in the superficial femoral artery.

And in established pharmaceuticals, or EPD, sales growth of 11% was led by continued double-digit growth in India which comprises more than 20% of EPD sales including strong growth in the therapeutic areas of women's health, gastroenterology and cardio-metabolics.

We also achieved above-market growth in China and several countries in Latin America as we continue to expand our presence and portfolios in these important geographies.

Finally, given our performance in the first quarter, coupled with an improving exchange outlook, we are raising our full-year adjusted EPS guidance range to $2.14 to $2.24.

So in summary, we're off to a good start this year with each of our four businesses having met or exceeded growth expectations for the quarter and with good progress on our new product initiatives.

So I will now turn the call over to Brian to discuss our results and outlook for the year in more detail.

Brian?

Okay, thanks, Miles.

First I'll provide further details on the first-quarter results.

Sales for the quarter increased 5.1% on an operational basis.

Exchange had an unfavorable impact of 5.3% on sales, resulting in relatively flat reported sales in the quarter.

Regarding other aspects of the P&L in the quarter, the adjusted gross margin ratio was 56.8% of sales, adjusted R&D investment was nearly 7% of sales and adjusted SG&A expense was nearly 34% of sales.

Turning to the details of our full-year 2016 outlook we continue to forecast operational sales growth in the mid single digits.

Based on current exchange rates we now expect exchange to have a negative impact of around 2% on our full-year reported sales.

This would result in reported sales growth in the low single digits for the full-year 2016.

We forecast an adjusted gross margin ratio of around 57% of sales for the full year which includes underlying gross margin improvement initiatives across our business.

We forecast adjusted R&D investment of around 6.5% of sales and adjusted SG&A expense of around 30.5% of sales for the full year.

This would result in full-year adjusted earnings per share guidance of $2.14 to $2.24 from continuing operations.

For the second quarter, today we are issuing ongoing earnings per share guidance of $0.52 to $0.54, reflecting double-digit underlying growth offset by the impact of foreign exchange on our operating results.

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

At current exchange rates we'd expect a negative impact from exchange of around 3%, resulting in reported sales in the low single digits.

I'll now provide a quick overview of our second-quarter operational sales growth outlook by business.

In Diagnostics, we forecast mid-single-digit sales growth.

In Nutrition we forecast sales to increase mid to high single digits.

In Vascular we forecast relatively flat sales growth.

In Diabetes Care we forecast mid-single-digit sales growth.

In Medical Optics we forecast mid-single-digit sales growth and lastly in Established Pharmaceuticals we forecast mid-single-digit sales growth in the second quarter.

Turning back to the other aspects of the P&L, for the second quarter we forecast an adjusted gross margin ratio of somewhat above 57%, adjusted R&D investment somewhat above 6.5% of sales and adjusted SG&A expense of around 31.5% of sales.

Finally, for the second quarter we project specified items of $0.14.

And now with that we will open the call for questions.

(Operator Instructions) Kristen Stewart, Deutsche Bank.

Hi everybody, it's Brittany Henderson in for Kristen Stewart.

I just wanted to start on a high-level basis.

The Medical Devices business continues to be somewhat of a drag on the overall business.

So we just wanted to get your thoughts on just the outlook for Abbott pharmaceuticals with Medical Devices and how that kind of fits along with the other segments of the business, how it fits in with Nutrition and Diagnostics and the Established Pharma business?

Yes, this is Brian.

I will start off and open it up to miles.

I think you've got to look within Medical Devices and there are a lot of bright spots here in terms of what's growing.

If you look at MitraClip we had 40% growth in the quarter.

And that's a space we're early to and it could be a large market here.

If you look at our Supera product, again a newly added product in the not-too-distant past, it's grown double digits for the quarter.

And coupled with that our vessel closure business has led to real strong growth in the endovascular.

Clearly as you see on the stent side it is a flattish market but even then we're excited about our portfolio we have.

It provides a great contribution to our business.

And if you look at where we're at now we've stabilized our share of where we're at and we're excited about bringing Absorb into the portfolio ultimately and to further compete in this aspect of the business.

Miles, I don't know if you'd add anything to that.

The only thing I would add is that we've got Absorb coming in the US and Europe.

We've got a number of things happening here from a new product standpoint expansion of the business that I think are all good for the business going forward here.

So I think it's all good.

Okay, thank you for taking the question.

David Lewis, Morgan Stanley.

Good morning.

Miles, I wanted to start off with Alere and just sort of reflecting on investor commentary here in the first quarter.

I think when we talk to investors I think they understand the ability to take out margins with Alere potentially and given the success of the Diagnostic management team in Abbott they seem to have a high degree of confidence in your ability to do that.

Where they seem to be getting hung up is the growth opportunity for Alere.

They see Abbott as a large-cap growth Company and they are buying a business that has below Abbott growth rates.

How would you comment on sort of how you see Alere from a top-line growth perspective over time both market and the particular Company?

I look more at the Diagnostics business broadly in all phases, all segments and I look at it globally and I look at it by testing categories, not just point of care or core lab or blood screening or molecular testing and so forth.

I think our Diagnostics business has shown that there's good growth to be had and good growth if you're innovative and your systems and your products are responsive to customer needs.

I think all the segments of Diagnostics provide a growth opportunity.

And I think that our own business in particular has shown that not only is there growth opportunity everywhere it competes but it can manage margin, it can manage cost, it can manage product innovation, it can do all that.

So I would comment on the overall Diagnostics growth opportunity as demonstrated by Abbott's Diagnostics business and not specific to any one company.

Okay, and then, Brian, just a clarification.

I'm trying to kind of reconcile organic growth in the quarter, so we're basically taking 5% operational plus like 2 points of Venezuela and getting something around 7%.

Is that kind of in the ballpark?

It's in the ballpark.

You're right there.

You may have noted a lot of these businesses globally in different geographic segments were growing 10%, 11% on the top line in the quarter.

So it was a pretty strong quarter across the board there, David.

Yes, agreed.

Thanks so much for the clarification.

Mike Weinstein, JPMorgan.

Thanks.

Miles, just to clarify, on Alere are you reaffirming your commitment to the transaction?

I'm going to be careful how I answer any questions about Alere, Mike, because as you know they've had delays filing their 10-K.

We don't know when they will file their proxy.

We don't know when they are going to have a shareholder vote.

So right now I'd say it's not appropriate for me to comment on Alere.

Okay, and let me ask, I've gotten a bunch of questions already this morning just on the guidance raise relative to the FX delta from the 4Q call to today.

Depending on people's math, anybody who has gotten anywhere from $0.06 to $0.12 of basically earnings delta from the impact of FX from when currency was on the fourth-quarter call to where it is today, but you only raised guidance by $0.04 including the beat today.

So could you just walk through your math, Brian, on FX and the headwind for 2016 today versus what it was three months ago?

Before I turn that over to Brian, Mike, let me tell you a couple of things as background.

First of all, you know that the exchange impact for us lags on the bottom line relative to the top line because it's got a pass-through inventory, etc.

So we do have that lag.

And that's always a little difficult for us to precisely call.

And we get very close but it's always a little difficult to precisely call depending on the currency of the world and depending on inventories and so forth in sales and sales mix in that given geography.

And as you know because we've got such a broad market basket of currencies, that's a little more difficult to call precisely and it does lag as you've already acknowledged.

So while I'd say, look, I like what I'm starting to see as the easing in exchange but given the last few years I'm a superstitious person and I think the minute I think this is starting to go well for some reason we're going to get smacked down with some change in the market.

For the last two years in the third and fourth quarter we've seen some events, some economic event of some kind alter the world's view of economies and then a change in exchange and more recently last fall it was $30 oil.

So if there's some caution in the raise, and I'd say if things don't -- if we get no curveballs you're probably right.

You call it the curveball discount there.

I'm just waiting to see another quarter, and right now I'd say all indicators are looking favorable for improvement as the year goes on.

I actually want to see some of that improvement sustain, meaning economic conditions and exchange.

Plus I'm mindful of the fact that we made adjustments to our estimates here in the fourth-quarter call three months ago that clearly some of that has changed with exchange but it can change in as little as a quarter.

So with the current circumstances of the world and what everybody is talking about in terms of real negative interest rates and so forth that actually favors weakness of the dollar for us right now.

And I hope that continues for some time here but I just want to see some of it before I go further.

Brian, did you want to add to that?

Brian, do you want to weigh-in on that?

No, I think it's perfectly articulated.

Q1 and Q2 as we talked before, Mike, is largely locked into the dynamics Miles discussed on the timing of flow-through.

So really this is a second-half phenomenon.

Mike, if you look at it this way, the sales strength on the top line is frankly my leading indicator here of we're above all of your estimates.

Frankly, we're above our own for the first quarter.

That's a good thing going into the year and it's across all businesses and most geographies.

So that to me is a pretty strong indicator and if exchange does improve arithmetically as you describe of course that only gets better, too.

So whether we forecast it now or actually experience it later we'll see.

Okay, one follow-up, Miles, and I will jump.

Can you talk about pricing across you are Nutritionals business?

And I'm asking because in the 10-K usually you guys disclose the contribution of price to each of your different businesses.

And in Nutritionals if we went back a couple of years price is a pretty significant contributor and I think back in 2012 it was a 4.5% contributor to the top-line growth of the business.

In 2013 it was 3.2%, in 2014 it was basically 1% and last year it was zero.

So the contribution from price has obviously eroded over time.

And we hear the Mead Johnson calls, we hear the Danone calls talking about pricing pressure in China and other markets.

So can you just talk about that business in that end market?

And obviously we're talking about a bunch of different end markets, but can you talk about those end markets and what's happening with price and your view on them?

Yes, I think it's different by geography.

First of all, I think all your facts and all the stuff you just quoted, absolutely right.

Actually there's a couple of things there.

One, you know that in the last call it two years certain countries, China, Saudi Arabia, Vietnam, have taken unilateral government actions to pound down price of the multinationals in particular in those countries in reaction to price increases taken by multinational competitors in those countries over the prior few years.

And you know our ability to be commercially successful around the world depends on healthy, happy markets and happy governments in some cases.

So I'd say to the extent that influences the degree to which companies are able to take price I think that has some influence.

I also think that there's the overall balance of consumer demand, consumer absorption, etc.

And what I've been pushing with our team is let's compete on product and volume and share gain.

The prices in the market for now they are healthy and to be truly competitively healthy I think we have to be able to win share, win the shelf space, win the consumer, win the physician, win the recommendation, etc.

That's where we put a lot of our emphasis.

So to the extent we have not put further emphasis on price in the last couple of years it's primarily to sharpen our own competitiveness and compete I'd say at a pretty effective level on all other dimensions.

I think from a business fundamentals standpoint that's important.

I want real growth, not just masked growth because we took price, but I think at the same time the opportunity for us here is pretty good.

These are healthy products.

This is a robust segment of business in all these countries.

Profit is not challenged.

And I think we're just drawing, call it, a little different balance in terms of how we want to be competitive versus relying on price alone or too significantly in the mix.

So I'd say have the dynamics intimidated price?

I'd say dynamics have pushed price to a more appropriately balanced level.

And in our case I want the emphasis on real share gain and product growth and market segment growth.

And to the extent that at some point there is opportunity for price we certainly know that.

But I think price is easy and sometimes too easy.

Thank you, Miles.

I appreciate it.

Bob Hopkins, Bank of America.

Hi, thanks and good morning.

Thanks for taking the call.

So two questions.

First one I wanted to ask on just capital allocation, Miles, is M&A still a top priority for you from a capital allocation perspective?

And then within the different divisions is it safe to say that Vascular remains a very high priority given the growth rate relative to your other divisions?

Yes to both.

No change.

Same top priority, same focus.

The only thing I'm cautious about, Bob, that I'd say is different, while I think there are opportunities as I've said before in the pharmaceutical arena, and remember we're only in the branded generic pharmaceutical business in emerging markets, we're not in the US or Europe in pharmaceuticals, but in those markets I have noted from time to time a lot of opportunities to add to our platform.

We have in that business really strong positions in the markets we've focused on and great depth and breadth and I think we've chosen our countries well.

I think we've chosen our breadth and depth well.

So we've got an EPD that now post-shaping of the Europe business and so forth is a pretty good gem.

And there are other properties out there that would expand that footprint and add to it.

However, in the last couple of years in particular, currency or exchange in those markets has been pretty heavy headwind.

And the expectations of value by potential properties or assets in those markets has been 25 to 30 times EBITDA which to be honest is way out there according to any kind of historic norms.

So if you have to go pay that kind of a multiple and then translate back to dollars with a strong currency headwind you really can earn the return for your shareholders against that headwind that you need to if you're going to pay that kind of the multiple.

So we have sidelined that to a degree.

I think we can be selective about given markets.

But we've sidelined that while we put our emphasis and focus on other areas of Abbott's business in terms of what we're looking at or what we're interested in.

It doesn't mean that we don't think there's wonderful properties in the pharma business.

But we're much more selective about geography, what we think we can see as currency headwind, growth of market, etc., going forward here because I think we want to be prudent that we earn the return.

To a high degree we're always talking about the underlying growth of the business.

Investors have got to be able to spend the underlying growth and we've got to be able to bring that underlying growth to the real bottom line.

So while we do navigate a market basket of currencies in a volatile world economically and we're diverse across all countries and we're in emerging markets for their growth, I think we have to be prudent about when we invest and how we invest in those markets that we can bring back the return that it costs us to invest in those markets.

So we've kind of put that one I'd say partly on the back burner but it depends on the country.

And then as you say it's a high priority for us and we continue to look at opportunities in devices and in diagnostics and those remain of interest to us.

But I know that's a long-winded answer but that's really how we're thinking about it.

No, that's helpful.

And in the second thing I wanted to ask you, Miles, is that can you give us a sense of what emerging market revenue growth was in the quarter?

And then more importantly, can you just comment broadly on what you're seeing in terms of emerging market economies and the health of the consumer in emerging market relative to what you saw exiting 2015?

Are things improving, stable, how would you characterize it?

I'd characterize it first of all as high single digit overall and which I think is good.

I think it kind of depends.

The world wrings its hands about slowing growth rates in China and China was 6.5% and I think if any other country in the world was growing 6.5% we'd all be doing cartwheels and investing heavily.

We wring our hands when a country as large as China slows to 6.5%.

Even if China were at 5% I'd think it was pretty attractive.

So I'd say I think the growth rates relatively speaking are strong.

I think you have to take into account here that historically if one area of the world was struggling other areas of the world were pretty strong.

That's actually not the case right now.

Everything has slowed some and for all the reasons we know.

I think there's a lot of uncertainties around the world right now.

And I could run through them, but we'd just be in a bad mood afterwards.

And I think everybody is kind of waiting to see how some things turn out.

And whether exchange stays on a certain track, whether some countries kind of recovery, I think people are waiting to see what happens with oil and they are going to wait a while to see that.

They are going to see what happens with interest rates.

There's a lot of handwringing as I said over negative interest rates.

So there's going to be a lot of things that kind of hang on the world.

You say, well, how does that directly affect your business?

Well, in healthcare a lot of healthcare is funded by governments and they are the insurer of their populations and so forth and the health of their economies.

And as you know almost half our business is consumer direct in a fashion or consumer pay.

So the health of those economies matters.

I still believe and continue to believe China, India, Russia, these are all strong markets notwithstanding the currency speed bumps that we've had here in the last couple of years.

But these are strong markets, I think there is solid growth there.

Countries like Venezuela, Brazil and some others are obviously of great concern for their own economic circumstances and volatility.

I think Venezuela as we've talked about plenty here has been a real outlier that way.

But I think the emerging markets represent real strong growth.

I don't see that slowing.

I think the kind of growth rate we see there drives pretty healthy expansion and investment by companies like us and Europeans and others as well.

I think all those markets represent terrific growth, better than developed markets.

But I also think if you're innovative and you have new products and you have products that bring value to the healthcare system I think the US and Europe are also worthy markets for us and remain a focus.

These are some of our most important markets.

So because we're geographically diverse and we are a multinational I think they are all pretty healthy.

And I think that's reflected right now in our top line, which is pretty strong relative to all the concerns that get expressed about the world's economies and economic growth.

One of the best things about healthcare is even in poor economic times people need healthcare at one level or another.

So I'm pretty bullish about the opportunities for us.

I think we've all adjusted industry-wide or even investor-wide to lower growth rates.

And today we talk about 5% like it's a pretty high growth rate, and I have to say it feels pretty good and 11% feels really good on the top line and those kinds of things.

And I can remember when that didn't feel so good because we were used to much higher growth rates.

But, frankly, in this global economy right now, those are pretty healthy returns and we're conscious of the returns.

So I'm still pretty positive about all this.

Great, thanks for the color.

David Roman, Goldman Sachs.

Thank you, good morning everybody.

I wanted to start on the operating margin side of the business.

And this goes back a little bit to the disclosures that you provided in the 10-K and also some of the longer-term margin targets you've put out by segment.

If I look at where you're sitting right now in your Nutrition and your Diagnostics businesses both of those look to be pretty close to best-in-class margins.

Can you maybe talk about the areas for operating margin improvement, how much of that on a go-forward basis comes from the individual segments versus how much would come from the G&A side or sort of internal restructuring efforts?

Yes, David, this is Brian.

So as you know we've been growing 100, 200 operating basis points per year on an underlying basis and we continue to see that performance in 2016.

Clearly, as you said, we've made great progress in Nutrition as well as Diagnostics as where they stand today but that's not to say that there isn't additional opportunity.

It may not come through at the same pace that you are accustomed to seeing it but there still is we believe remaining opportunity in these businesses to continuously improve our margins.

Over the longer term we have some businesses like Established Pharma.

Clearly there's opportunity there in the coming years, so we see that, that that could be a driver as part of contribution.

And don't forget, too, we are still working through the phases of what we're doing from a G&A, taking out the unproductive spend around the world when it comes to how we operate and support our businesses what's the right shape and what's the right size.

So I think taking all these things into consideration, David, we're still targeting around the same range that you've been seeing on an underlying basis.

Now FX as you know is muting that this year but the underlying is still there.

Okay, that's helpful.

And then maybe back on the earnings guidance increase, understandably you might not want to get ahead of yourself with respect to currency at this point, but can you maybe just talk about the charge related to Venezuela?

It looks like you're taking up the GAAP adjustments from $0.55 to $0.78 this quarter.

How much of that is Venezuela and how much of that is cash and are you moving anything from ongoing to one time?

Now, David, this is just the adjustment we're making in Venezuela similar you've seen to other countries to take the net monetary write-down at the end of the quarter and it's somewhere north of $0.30 and we're done.

Ongoing earnings, no impact.

We will do business forward at the rate of the new floating rate which is around 2.60 but any activity if it's minimal really won't surface at those rates.

Okay, and then just lastly on the top line, you are talking about mid-single-digit organic growth of the entire year but I do think you started at a higher rate than where you had initially contemplated.

So given things like FreeStyle Libre and the new platform launches in Diagnostics, is there the potential to see an acceleration from the 5% that you generated this quarter and what you're sort of guiding to in Q2?

Well, the question is how much of that have we already got baked into our estimates for the year and how much of it will exceed that.

And let's put it this way, the fact that we're above all of your estimates in the quarter and all businesses performed at or better than expected I think that's a good sign.

I'm just going to wait to see a little more sign.

Okay, understood.

Larry Biegelsen, Wells Fargo.

Hey guys, thanks for taking the question.

Just one question on EPD and one question on capital allocation and M&A.

First up, the last couple of quarters for EPD have been quite strong, about 11% constant currency growth, but you're guiding to mid-single-digit growth for EPD in Q2 if I heard correctly.

So just any color on why that business would slow down.

And as I said I have one follow-up.

I think keep in mind we talked about this earlier what our growth would be but for this business has that one country we don't talk about.

But if you look at India it's growing double digits, Larry, so it's doing well.

Latin America and CFR, the performance is going well.

The integration has gone extremely well.

And I'll say Russia, and Miles mentioned that as a strong country, we're doing very well on our performance here in Established Pharma and our achievement, what we expect from the Veropharm acquisition that was made.

But EPD is not a straight line, Larry, as you know there's a lot of markets.

And so from time to time there can be simply just some timing of tenders.

So there may be a little timing.

I don't -- I think we are getting ahead of ourselves here.

I think that's the best answer because we have comparisons from quarter to quarter that depend on what happened last year in what country and the countries don't tend to be the same.

You know, this is -- because of the diversity of countries and currencies in this business, it doesn't tend to be that nice, reliable ruler business where you can lay a ruler down on the line of growth.

It's just bumpy.

Overall it's all up and it's all good.

We like that, but any given quarter can have a curve ball in it or a comparison to last year.

So I'd say the underlying fundamentals are all strong here.

And we do have -- we're going to have to lap Venezuela because that was a pretty significant piece for EPD given CFR there and so forth.

I'm trying to think where else.

Currency I guess is an issue in a number of countries, particularly Russia, and I'm just cycling through all the ups and downs.

There are quarter-to-quarter variances depending on, gee, the tender didn't happen in March, it happened in April, that kind of thing.

So I think underlying this is pretty solid strong growth.

Fair enough.

Then Miles, you said in the past that you're not constrained on doing more deals even after the Alere acquisition.

So how should we think about Abbott's ability to do another medium-sized transaction while the Alere deal is pending and there is some uncertainty?

And second, is a sweet spot for Abbott still that $5 billion to $7 billion range that you've talked about in the past?

Thanks for taking the questions.

Yes, again I don't feel unreasonably constrained at all.

I think that we're always conscious of capital allocation, we're always conscious of return, we're always conscious of where our debt is and what our debt rating is and so forth.

We want to be all in the right balance here, but for the things that I think would be on my radar screen I think we're in good shape here.

Thanks for taking the questions.

Operator, we'll take one more question.

Jayson Bedford, Raymond James.

Good morning.

Thanks for taking the question.

Just to follow up on the EPD, the 11% growth certainly exceeded our number and your expectation I think going into the quarter.

What was different from your thoughts heading into the quarter?

Was it a function of tenders?

And then secondly, there were some headlines earlier in the quarter or I guess in February around increased regulation of combo drugs in India.

And I'm just wondering does that have any impact on your business?

Well on the last part it hasn't yet but it could.

And we're prepared for that if it does.

So that remains.

It's still working its way through the Indian courts.

But maybe Scott has got more detail on that right now than I do but it hasn't yet.

Yes, and I would also add just on the quarter there is some timing, to Mile's point there is always some tender timing in various countries.

If you take the first quarter and the second quarter you're looking at a first half of the year that will be a high single-digit operational growth for EPD.

And that's strong growth.

Okay.

If I could just add a second one in there, just on Nutrition, certainly the US Nutrition business is seeing some pretty good signs of momentum here both in adult and pediatric.

I realize you are anniversarying some tougher comps, but are you seeing some real momentum or at least some sustainable share gains here?

It's kind of too early to tell.

I think you kind of hope so but to call it sustainable I'd like to see some more data and I'd like to see a little more time.

Because generally speaking in the Nutrition business in the United States share might blip up and down a little bit but over time remains relatively static.

It's pretty difficult to move share sustainably and meaningfully over time in the US.

And your ability to grow the adult Nutrition business is to grow the market for the most part.

And as you know we are the leader in that market.

And pediatric, share may move a couple of points here and there but it always seems to snap back to wherever its median point was.

So we're always pushing on share gain and about the time you think you've gotten somewhere with it something happens, competitive response or whatever, it moves back the other way.

So I think to call current momentum sustainable I think I'd say let me see another quarter.

All right, thank you.

Thank you, operator, and thank you for all your questions and that concludes Abbott's conference call.

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