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Abbott Laboratories (NYSE:ABT)

Acquisition Announcement Call

January 12, 2008 9:00 am ET

Executives

John Thomas – Vice President Investor Relations

Thomas C. Freyman – Chief Financial Officer & Executive Vice President Finance

John M. Capek, Ph.D. – Executive Vice President Medical Devices

Analysts

David Lewis – Morgan Stanley

Bruce Nudell – UBS

Frederick Wise – Leerink Swann LLC

Michael Weinstein – J. P. Morgan

Larry Biegelsen – Wachovia Capital Markets, LLC

Sara Michelmore – Cowen & Company

Bob Hopkins – Banc of America Securities

Operator

Welcome to Abbott’s conference call to discuss the acquisition of Advanced Medical Optics. All participants will be in a listen only mode until the question and answer portion of this call. (Operator Instructions) With the exception of any participants questions asked during the question and answer session, the entire call including the question and answer session is materially copyrighted by Abbott. I cannot be recorded or rebroadcast without Abbott’s express written permission.

I would now like to introduce Mr. John Thomas, Vice President Investor Relations.

John Thomas

Thank you for joining us for this special conference call to discuss Abbott’s acquisition of Advanced Medical Optics which we announced this morning. Also on today’s call will be Tom Freyman, our Executive Vice President Finance and Chief Financial Officer and John Capek, our Executive Vice President Medical Devices.

Before we begin today’s call, let me remind you that some statements made today may be forward-looking. 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 the forward-looking statements. Factors that may affect Abbott’s operations are discussed in item 1A risk factors to our 2007 Form 10K, our Form 10Q for the quarter ended June 30, 2008 as well as our Form 10Q for the quarter ended September 30, 2008.

We undertake no obligation to release publically any revisions to forward-looking statements as a result of subsequent events or developments. In today’s conference call as in the past, non-GAAP financial measures will be used to help investors understand Abbott’s ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measure in our news release and regulatory filings from today which will be available on our website at www.Abbott.com.

On today’s call Tom will provide a brief overview of the transaction including its strategic context and financial highlight. John Capek will provide a brief operational overview of AMO’s business. We’ve also posted a few slides as additional background on the basics of AMO for reference only. They’re on our investor website at www.AbbottInvestor.com.

Following Tom and John’s remarks, we’ll take any questions you may have about today’s transaction specifically. As you may have seen, Abbott also announced today its ongoing earnings per share outlook for 2009 of $3.65 to $3.70 and confirmed its previously issued ongoing earnings per share guidance range for 2008 of $3.31 to $3.33. The midpoint of our 2009 guidance range reflects double digit growth over the midpoint of our 2008 guidance range.

We’ll provide further details regarding our 2009 guidance on our January 21st fourth quarter and full year 2008 earnings call. As we do every year, Miles White our Chairman and Chief Executive Officer will join Tom and me to review our 2008 results and our outlook for this year. With that, I will now turn the call over to Tom.

Thomas C. Freyman

Let me start by telling you how pleased we are today to announce our acquisition of Advanced Medical Optics, a global leader in the large and growing eye care market. This acquisition strengthens our current medical devices business further diversifying Abbott for the long term. AMO represents a unique opportunity for Abbott to establish a leading position in ophthalmology, a $22 billion market with sustainable long term growth potential.

This market is supported by strong demographic trends including a large and growing population age 60 and older and the global expansion of eye care procedures. As we outlined in our news release this morning, we’re purchasing AMO for $2.8 billion. The estimated value of the transaction is based on the purchase of AMO’s outstanding shares for $22 per share in cash plus estimated net debt at the time of closing.

This price represents a multiple of around 2.5 time sales which is comparable to similar medical device transactions. We expect this transaction to be neutral to ongoing earnings per share in 2009 and accretive beginning in 2010. We anticipate closing this transaction by the end of the first quarter of 2009 and have included its impact in our 2009 guidance we issued this morning.

As John indicated we intend to provide more detailed P&L guidance regarding 2009 on our fourth quarter call on January 21st. For those of you that are not familiar with AMO, it’s a leading developer, manufacturer and marketer of eye care surgical technologies and devices as well as eye care solutions. AMO is headquartered in Santa Ana, California with sales in 60 countries.

Approximately 60% of AMO sales occur outside of the United States. As a global leader in ophthalmology, AMO participates in three segments: cataract surgery; refractive surgery or Lasik laser vision correction; and lens care products such as contact lens solutions. AMO holds the number one position in Lasik, the number two position in the cataract surgery market and the number three position in lens care solutions.

AMO has over $1.1 billion in annualized revenue and produces good cash flow. Given we anticipate closing the transaction by the end of the first quarter, approximately three quarters of these annualized sales will be incremental to Abbott in 2009. AMO has a broad geographic presence, robust product offering and market leading positions providing for the long term profitable growth of the business.

Upon the transactions close, AMO will become part of Abbott’s medical devices business. Jim Mazzo, AMO’s Chairman and CEO will remain with Abbott as President of AMO. John Capek, our Executive Vice President of Medical Devices will now take a few moments to walk you through AMO’s business segments in a bit more detail.

John M. Capek, Ph.D.

Let me also say how pleased we are to make this announcement today. AMO will strengthen our medical device platform adding a profitable business that over the long term we expect to grow in the high single digits. Equally important, we look forward to adding a talented and experienced team of AMO employees to our organization.

As Tom indicated the broad vision care market has strong underlying fundamentals driven primarily by favorable demographic trends including a steadily growing elderly population and increased global demand for advanced vision care procedures and products. There are more than 700 million people globally over 60 years old and this number is expected to reach one billion by 2020.

Cataracts are the leading cause of vision loss for this segment of the population. 60% of people over the age of 60 get cataracts and cataract surgery is one of the most common surgical procedures performed in the world. In addition, we’re also seeing strong international growth in the laser vision correction market. This being driven by the availability of and advances in refractive surgery technologies fueling demand for advanced eye care procedures and products over the next few years.

Let me begin with a brief overview of the cataract surgery segment where AMO holds the number two position with more than 20% worldwide share. This segment accounts for about half of AMO’s total revenues. The cataract surgery segment is geographically diverse with more than 70% of revenues coming from outside the United States. Product uptake is driven by physician preference with the largest source of revenue in the cataract segment coming from intraocular lenses or IOLs.

An IOL is an artificial lens that replaces the natural lens during a cataract procedure and restores a patient’s clear vision. Two types of IOLs are used in cataract surgery today: monofocal and multifocal. AMO has the industry’s broadest product lines in both categories. Last year AMO launched a new monofocal IOL in the United States and Europe called TECNIS 1-piece which is expected to drive share gains in the near term.

AMO also anticipates US FDA approval early this year for the TECNIS multifocal IOL. The TECNIS multifocal IOL has done very well in the international markets and we would expect similar acceptance here in the United States. In addition to IOLs, AMO has a solid product line in two other key components of the cataract market: [viscoelastics] which lubricate and protect the eye during the procedure; and phaco-emulsification systems which remove the patient’s natural lens.

AMO has the second largest install based of phaco-emulsification systems. AMO also has several cataract technologies in its pipeline including an accommodating IOL in early stage development. Unlike conventional IOLs, accommodating IOL more closely mimic the way the natural lens moves allowing the patient a more continuous range of vision. AMO’s technology advancement in cataract surgery create the opportunity for significant market share improvements. This plus favorable underlying market trends gives us confidence that the cataract surgery segment will be a steady stable grower over the long term.

Next, I’ll move to the second largest segment of AMO’s business which is Lasik or laser vision correct. This segment represents approximately one third of AMO revenues. AMO is the global Lasik leader with US market share exceeding 60% which is three times the share of the closest competitor. AMO has the most comprehensive and advanced product line of diagnostic instrumentation and lasers and the largest installed base of Lasik systems.

Revenues in this segment include sales of Lasik equipment as well as revenue related to payment on individual procedures. There are two types of Lasik procedures: standard; and custom. Custom Lasik delivers improved outcomes over standard procedures through the use of sophisticated diagnostic equipment that creates an ablation pattern that is unique to each patient, thus maximizing the patient’s quality of vision. Custom Lasik is the largest and fastest growing segment of this market and AMO is the clear leader.

The laser vision correction market is correlated with consumer confidence and while we’ve planned conservatively regarding our assumptions for this business in the near term, as the worldwide Lasik leader with the largest installed base of systems, AMO is uniquely positioned to capture the benefits of an economic recovery.

I’ll now move on to AMO’s third segment eye care which includes contact lens solutions and other eye care products. This business represents roughly 20% of AMO revenues. Multipurpose solutions for cleaning and disinfecting contact lenses are the key products within this segment. AMO’s major brand of multipurpose solution is sold under the brand name Complete. AMO most recently expanded its consumer franchise by entering the $500 million dry eye market with Blink Tears brand. AMO continues to gain share with both of these well known brands.

In summary, the acquisition of AMO strengthens and expands Abbott’s medical device business adding a market leading and sustainable new growth platform with more than $1 billion in annualized sales. AMO’s business is not only geographically diverse but diverse in and of itself participating in three segments of the large and growing vision care market. We expect AMO to be a steady high single digit grower on the top line and a profitable contributor over the long range plan.

We also expect that Abbott’s global presence and distribution capabilities will further improve upon AMO’s international growth opportunities especially in emerging markets. As Tom mentioned, this transaction is expected to be neutral to our ongoing 2009 earnings per share guidance and accretive beginning in 2010.

With that, I’ll turn the call back over to John Thomas for the Q&A portion.

John Thomas

Operator we’ll now open up the call for any questions that might be out there.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from David Lewis – Morgan Stanley.

David Lewis – Morgan Stanley

John or Tom I was wondering if you could talk a little bit about integration here? It seems as this is going to be classified under the medical device division, that being said, would it make more sense to take lens care and throw it with more your consumer lines? You talk about the ability to grow globally here, maybe talk about specifically how these assets, given that you have not historically been in these businesses, how you can grow these internationally and globally post acquisition, post integration?

John M. Capek, Ph.D.

Let me address that. While there are some parts of this business which have nutrition like distribution and models associated with it, we do see that there are benefits of having these three businesses being integrated as part of our ophthalmology strategy. As such, I think the combination of these, cataract surgery, the Lasik refractive and eye care businesses deserve to be together as part of medical devices.

David Lewis – Morgan Stanley

Just in terms of other areas of the business, in terms of specific integration plans to grow this franchise globally?

John M. Capek, Ph.D.

Well essentially, the business here stands on its own. There will be some opportunities for us to have leverage within the administrative areas but essentially this business is a complete business and will run as such. You asked earlier about opportunities for growth internationally, I think you may be familiar with AMO’s growth to this point. There has been substantial growth in the emerging markets China, India and other markets including Japan in which these markets now represent over 25% of global revenues.

We do see an opportunity where our infrastructure and distribution in those countries can actually enhance that growth going forward.

David Lewis – Morgan Stanley

Just secondarily Tom, just given the economic pressures in the refractive business, how did you get comfortable with the premium in this business and the visibility in that segment?

Thomas C. Freyman

Well, when we look at the value of this company and when we look at the cash flow and expected growth rates, we were very, very comfortable that this is a fair price for the equity of this deal. If you look at it in terms of multiples of sales, EBIT, other types of metrics you typically look at. The price of this acquisition is very much in line with precedent transactions.

We do think that the economic situation has been more than factored in to the current price of the stocks and clearly there’s an opportunity here as the market recovers to essentially have a call option on the economy. There’s going to be very nice leverage in this business when the Lasik area gets moving again and a result we’re very, very comfortable with the acquisition price for this deal.

David Lewis – Morgan Stanley

Just one more question and I’ll jump back in queue, should we assume that the driving force behind this transaction was medical device diversification or Abbott’s desire to be in the ophthalmology segment over the next five to 10 years.

Thomas C. Freyman

I think this deal is very, very consistent with the strategy we’ve articulated over the last few years of really participating in diversified healthcare businesses, in high growth markets, which this is, where you can differentiate through innovation. Clearly, there’s a tremendous amount of innovation in this area. This is consistent with things we’ve done in other areas such as diabetes care where we’ve taken a position and built the business over time.

What’s really great about this particular acquisition is that in all of these segments, the company already has very good share positions: number one in Lasik; number two in cataract; and number three in solutions. It’s a great place to start and we can build from here.

Operator

Our next question comes from Bruce Nudell – UBS.

Bruce Nudell – UBS

I’m not very familiar with eye, could you give us an overview of kind of by division the intrinsic growth rate so that you see top line, the current operating margins and where the operating margins may go over time?

John M. Capek, Ph.D.

Inherently, if you look at the business I think we’ve characterized it in really three major components: Lasik refractive business; the cataract surgery; and eye care or lens care. If I focus first on lens care we would see that business on the top line growing in the mid single digits. We look at the fundamentals of cataract surgery, as I mentioned before with over 700 million patients over 60 the number growing out to over a billion by 2020 and the globalization of the treatment of patients with cataracts, we would see that business growing in the high single digits to perhaps low teens.

Lasik and refractive is a business which has historically grown in the mid teens to double digit consistent growth. Obviously, with the economic impact we’ve seen the last year and over the last year that business is down sequentially but one where we believe on the recovery that business will be able to grow in the teens going forward once recovery happens.

Bruce Nudell – UBS

But just on the operating margin side for these businesses, where do you see that today and where might it be going?

Thomas C. Freyman

Well, if you look at analyst estimates right now just on how the business is operating, the operating margins are in the low to mid teens. They’ve been better than that in the past obviously and we would expect again, as growth continues, as the expense base gets leveraged and as the economy recovers and the fall through from the growth is very strong we would expect those operating margins to expand well up in to the upper teens and beyond hopefully over time.

John M. Capek, Ph.D.

Again, that’s based on street estimates only; just to be clear.

Operator

Our next question comes from Frederick Wise – Leerink Swann LLC.

Frederick Wise – Leerink Swann LLC

A couple of questions, first John or Tom, Lasik I would guess is still declining maybe even more sharply in the second half of ’09. Can you give us a little bit of perspective on your assumptions there? Do you feel like you’ve dialed in a worse case? Maybe John, what are your thoughts about where it bottoms and maybe talk to us about what kind of recovery you are thinking we might see and when? Just any kind of color there.

John M. Capek, Ph.D.

First, in the area of Lasik and as I said before, we’ve got a sector if you will of AMO’s business which accounts for approximately 30% of revenues and even within Lasik a substantial portion is outside the US so we’re really talking about a business that is globally diverse. You are exactly correct, over the last nine months of 2008, that market has been down approximately 35%. We’ve modeled here very conservatively as we go forward in to 2009 and 2010 and really have taken a position where the economy and the drive back in to procedures in Lasik really don’t come back to a historical level beyond 2010.

I think we’ve modeled conservatively in that regard. It is one as Tom mentioned, where given the installed base of Lasik equipment which is out not only here in the United States but in the global marketplace. We really would see a very strong recovery of the financial performance of this business as the economy does recover.

Frederick Wise – Leerink Swann LLC

Tom, you indicated that you don’t expect the deal to be dilutive in 2009 and accretive in 2010, should we assume that ex charges though the second/third quarter might be dilutive and then you get it to neutral or accretive by the fourth quarter? Just hard to believe you start off from day one non-dilutive.

Thomas C. Freyman

This deal is not going to impact the gating of our quarters in 2009. We’ll talk more about that on the call next week Rick. Again, we should be closing later in the first quarter here. Clearly in the first quarter there will be modest impact and really as we look at the spread of the earnings of this company over the year, there’s no significant impact on our gating.

Frederick Wise – Leerink Swann LLC

So we shouldn’t worry about the second quarter being suddenly negatively affected, as you see it now?

Thomas C. Freyman

This transaction will not impact the timing of Abbott’s earnings during the year.

Frederick Wise – Leerink Swann LLC

Lastly, if I could Tom, your guidance of $3.65 to $3.70, knowing you I’ve got to believe it’s realistic might be the word and rational, should we also view it as possible conservatively realistic? Especially when I think about how you set us up for the 2008 year, based on what you know?

Thomas C. Freyman

We’ll, we’re trying to limit this call to the transaction, the AMO transaction. We will be going, as we indicated a couple of times, more in to the guidance on the call next week. Again, this is guidance that we think is appropriate at this point in time and we’ll talk about it more next week.

John M. Capek, Ph.D.

You’re right Rick that we do tend to plan pretty conservatively as you might have noted in 2008 where we ended up last year significantly outperforming. So, we’ll see.

Thomas C. Freyman

One thing I will add though is it is clear on announcing this transaction and the fact that it is non-dilutive in ’09 and accretive beginning in 2010, that is underscored by the guidance we provided today which I think is very much in line with what people had been expecting for us. So, it’s clear that this transaction fits very nicely in to our earnings expectations for the year.

John M. Capek, Ph.D.

And as we said Rick the midpoint of that new range off the midpoint of the expectations for 2008 represents more than 10% growth. We think that’s pretty good in this environment.

Frederick Wise – Leerink Swann LLC

Just a last quick one to follow up on David’s earlier question about strategy, should we think that given the values that are out there in the world, given Abbott’s ability to make these acquisitions, that we might see more similar size deals this year or i.e. larger deals, or are you done now?

Thomas C. Freyman

I think we’re very focused on this transaction Rick and let’s just leave it at that for now.

Operator

Our next question comes from Michael Weinstein – J. P. Morgan.

Michael Weinstein – J. P. Morgan

If you survey investors you’re probably going to get a fair amount of raise eyebrows this morning on the transaction but I think most people if you talked to them prior to today would have viewed AMO as a bit of a distressed asset. They’ve obviously been through a tough period here the last couple of years with the Lasik business taking the hit on the economy and certainly the other half of the business struggling through the recall they had on the solution side, trying to compete with a dominate player in [inaudible] in cataract.

Tell us a little bit about how you got comfortable with the quality of the overall asset that you’re buying? John, you talked about high single digit top line growth for this business, this hasn’t been a stable company, this hasn’t been a company – you talked about a couple of references to street estimates, it hasn’t historically done a very good job of forecasting this company and neither had management. So, how do you get comfortable with the quality of the business, the stability of the outlook for what’s been a very volatile company over the last few years?

John M. Capek, Ph.D.

Let me comment first. On the fundamentals obviously of this market are attractive and as we’ve had a chance through diligence to look in to not only the short term but the longer term product pipeline, we do see that this business not only can continue to participate at the share position that it has but has an opportunity for further share gains.

Clearly, in Lasik and refractive there’s a lot of effect on the company’s performance which is driven by the economy given their substantive market share position. But, within cataract surgery with only 20% market share and the opportunity of some of the advancing intraocular and the lenses which sit in their product portfolio, and further advances in their phaco-emulsification equipment, we do see that that share position has an opportunity to grow over time in a market which is substantially growing by the underlying fundamentals of an aging population and globalization of eye care.

In the solutions business, clearly the recall that they had in ’07 has had some impact on their overall presence but that share continues to grow and continues to rebound and in this particular marketplace, given its size and give the relatively low share position that AMO currently holds, there’s a lot of upside opportunity and a lot of leverage which comes to this business as that brand continues to get rebuilt.

I would say our interest in this business is not only the diversification it provides for Abbott but if you look within AMO’s business in and of itself, it’s a diverse business. Over the last several months and quarters they’ve had some issues that have gone the wrong way for them in several of their businesses but we do see very strong fundamentals. In the due diligence process we’ve been able to go through we’ve been impressed with their product development pipeline and we do believe this business through its diversity will continue to grow in a stable fashion going forward.

Thomas C. Freyman

We’ve been studying this deal for quite some time and as John indicated really are attracted to the market dynamics here and have felt for some time that it is very, very consistent with the rest of our strategy, again in the types of market that require innovation to grow. This is something we’ve been looking at for some time.

Michael Weinstein – J. P. Morgan

John, can you just comment on the management team that will be running the business as it becomes part of Abbott?

John M. Capek, Ph.D.

I think as Tom mentioned in the call, Jim will stay with the organization and head it up as president for AMO. As we’ve had a chance to interact with the management team there from R&D to manufacturing in to their quality and regulatory areas, we’ve been impressed with the management team and that team will carry this business going forward. There’s a lot of opportunities for us to work a process in a consistent manner that we have done with the other divisions that are part of medical devices, vascular and diabetes care.

We do think this management team can deliver. We’ve got some opportunity as we mentioned to help facilitate the growth in the emerging markets by our presence there and some subsequent investments that we’ll make to further accelerate growth in some of those areas. We expect the management team to be with us through this and we’ve been impressed with what we’ve seen through diligence.

Michael Weinstein – J. P. Morgan

Tom, without having gone through AMO’s debt structure, obviously they were saddled with a lot of debt from the acquisitions spree that they had gone on over the last several years. Is part of the financial analyst that we’ll do on this deal that you’re able to bring down obviously their cost to borrow substantially and be able to pay off some of that debt?

Thomas C. Freyman

Yes. A good part of the consideration that we’re providing in this deal is to take on the debt that they have and certainly with the financial backing of the company that will no longer be of concern to the business and we will be able to start paying down the debt that they had not only from their own cash flow but from Abbott’s capacity.

Operator

Our next question is from Larry Biegelsen – Wachovia Capital Markets, LLC.

Larry Biegelsen – Wachovia Capital Markets, LLC

A couple of quick ones, did EYE run a full auction process here? And, is there a termination fee or how much is the termination fee? And, why a tender offer?

Thomas C. Freyman

We are the only ones that they negotiated with and there is a breakup fee.

Larry Biegelsen – Wachovia Capital Markets, LLC

Could you tell us what that is Tom?

Thomas C. Freyman

That will come out in the merger documents over the next few days.

Larry Biegelsen – Wachovia Capital Markets, LLC

Neutral to ’09 on a cash or GAAP basis?

Thomas C. Freyman

It’s on an ongoing earnings basis. There will be obviously some deal fees and some integration costs associated with the deal which we will specify after our valuation is completed. We’ll probably specify that on the first quarter call.

Larry Biegelsen – Wachovia Capital Markets, LLC

Your assumptions for EPS accretion in 2010, are your assumptions for EYE’s top and bottom line different – how different are they from consensus in 2009 and 2010? Can you talk about that?

Thomas C. Freyman

You know we’re quite aware of what the street has and we are not making any heroic assumptions and so as John indicated we’ve taken pretty conservative assumptions in terms of economic recovery. As it works out and when you factor in our financing costs versus theirs, when you factor in all of the aspects of bringing the business in to Abbott, it’s expected to be neutral in ’09 and accretive in 2010.

Larry Biegelsen – Wachovia Capital Markets, LLC

Lastly, your interest level in adding pharmaceuticals to EYE’s business, Tom I know you said earlier you’re focused on this acquisition but people will immediately start to speculate when you’ll add ophthalmic drugs to their portfolio?

Thomas C. Freyman

As we’ve indicated a couple of times obviously one of the greatest things about this acquisition for us is an opportunity to get in to this very good field with a business with leading positions in these markets. So, it does stand on its own as John indicated and we really don’t need to do more to make this successful, we just need to continue to execute and benefit from the demographics and ultimately the economic recovery.

Obviously, with Abbott having great pharmaceutical expertise that does provide some strategic options over time but none of that would be necessary to us being successful with our financial projections or our strategic objectives in this business.

Operator

Our next question is from Sara Michelmore – Cowen & Company.

Sara Michelmore – Cowen & Company

I guess just one quick follow up, Tom you talked a little bit about the financing costs being different but just directionally this company is going through restructuring currently. What should we think about in terms of Abbott coming in and changing either some of the financial structures or resource allocation, investment focuses of the company, what kind of are the key directional changes should we think about in terms of costs going forward?

Thomas C. Freyman

This is not a synergy play, we’re going to be retaining the management as we indicated in the organization and obviously since we’re new to this field that is going to be critical to the success. We would expect some efficiencies from non-recurring or overlapping corporate expenses, efficiencies in areas such as distribution which John talked about and certainly being integrated in to a larger company hopefully we can bring other economies in to the equation.

But, even without significant efficiencies in those areas, the lack of dilution of this deal is clear. The ability for it to be accretive is clear and hopefully, we’ll do even better than that just by bringing a little more resource to the company, taking the debt burden away from it obviously and letting the management focus on operating the business as opposed to some of these other items.

Sara Michelmore – Cowen & Company

John Capek mentioned international and expansion, I mean how much of an incremental investment is that up for you and over what time period should we think about you growing out that business?

John M. Capek, Ph.D.

In the international markets where clearly their business has been continuing to grow through even some of the economic pressures that exist, really it’s not going to move the needle if you will for a significant infrastructure expenses for us to leverage our existing operations and help predominately in some areas of distribution where we think we can enhance the cost efficiencies of moving in to some of these emerging markets.

I do want to take a step back and Tom addressed this already but, let me add my comments, AMO has announced a restructuring initiative through the course of this year as part of their normal business operations. We’ve had a chance to review those and in essence those are moving the business to be the right size given the overall performance. I would say as we look in to R&D we do see some opportunities for potentially accelerating some of their key projects going forward, all of which would be managed within the financial structure that Tom alluded to and provide here for our ’09 guidance.

Sara Michelmore – Cowen & Company

That was my third question, John in terms of the R&D pipeline what are the key areas of focus? I know you referenced some of the new IOL products but what should we be thinking about in terms of to your time frame and maybe a longer term time frame in terms of where you spend that R&D dollar?

John M. Capek, Ph.D.

I’ll make some broad comments, it’s really not appropriate for us to get in to the details of their pipeline. We’ll be able to do that after we close the transaction in more detail. But, clearly we have been impressed not only in their individual portfolios that exist in each of the three businesses but, how balanced it is across the businesses.

There’s opportunities for share gain in intraocular lenses, really bringing TECNIS multifocal here in the US is very near term but the work that is ongoing in the area of accommodating IOLs which is really one of the growth opportunities and significant enhancements of the technology going forward and we’ve been pleased to see the breadth of their internal programs. Eye care there’s opportunities for bringing forward new solutions ‘010 and beyond and really just hold off on providing more details than that until we actually get towards closing that transaction.

Operator

Our final question is from Bob Hopkins – Banc of America Securities.

Bob Hopkins – Banc of America Securities

I’m just wondering because I think you said earlier that this was not a competitive situation so if it wasn’t a competitive situation I’m just wondering how you got to such a large premium above where the current stock price was trading?

Thomas C. Freyman

Bob, these are unusual times and we know what the value of this company is. We have very good returns as a result of this transaction and their company despite what the market is reflecting right now, they know the value of their company as well. This is the appropriate price, this is a fair price and we’re going to get a good return on this transaction. When you look at it in terms of multiples, very, very consistent with other transactions and that’s really what both companies need to be looking at.

Bob Hopkins – Banc of America Securities

But am I right in what I heard earlier that this was not a competitive situation, is that what you had suggested earlier?

John Thomas

Let me just make a couple of summary comments here before we finish the call. We’re obviously very pleased with today’s announcement, both announcements. The planned acquisition of AMO further diversifies Abbott’s long term growth, strengthens our current medical device business by adding a market leading sustainable growth platform with more than a billion in annual sales, gives us a leadership position in this fast growing and long term growth market in eye care.

It’s a broad, large market upwards of $22 billion across the overall market. This transaction is not dilutive, in fact it’s accretive in 2010 so it will be a good long term sales and growth expansion story for us and as we announced separately we’re pleased to provide today with more details to come next week, our 2009 earnings guidance of $3.65 to $3.70 which at the midpoint represents double digit growth over the expectations that the street has for 2008.

I would also remind you that we will be presenting tomorrow at J. P. Morgan at 10 o’clock Central. Tom Freyman will do a presentation of the entire company including a review of this acquisition announcement. John Capek will join us. Then next week, January 21st we will have Miles White join us for our usual fourth quarter 2008 yearend earnings call where we will talk about all these things in the broader strategic context and growth outlook for the company.

With that we thank you for joining us and please call us if you have any questions.

Operator

This concludes today’s conference. You may disconnect at this time.

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Source: Abbott Laboratories Acquisition of Advanced Medical Optics Announcement Call Transcript
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