Abbott Laboratories Q1 2009 Earnings Call Transcript

| About: Abbott Laboratories (ABT)

Abbott Laboratories (NYSE:ABT)

Q1 2009 Earnings Call

April 15, 2009 9:00 am ET


John Thomas -Vice President of Investor Relations

Miles D. White - Chairman and Chief Executive Officer

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


Rick Wise - Leerink Swann Llc

Mike Weinstein - J.P. Morgan

Bruce Nudell - UBS

David Lewis - Morgan Stanley

Glenn Novarro - RBC Capital Markets

Sara Michelmore - Cowen and Company

Catherine Arnold - Credit Suisse

Larry Biegelsen - Wachovia Capital Markets, Llc


Good morning ladies and gentlemen, I would like to welcome everyone to Abbott’s First Quarter 2009 Earnings 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 Abbot’s express written permission.

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

John Thomas

Good morning and thanks for joining us. Also on today’s call will be Miles White, Chairman of the Board and Chief Executive Officer and Tom Freyman, Executive Vice President of Finance and Chief Financial Officer.

Miles will provide his opening remarks and Tom will review the details of our financial results for the quarter and the outlook for the year. I will then discuss the highlights of our major businesses. Following our comments we will take any questions you have.

Some statements made on this call may be forward-looking. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Factors that may affect Abbott’s operations are discussed in item 1-A, risk factors to our annual report on the Securities and Exchange Commission form 10-K for the year ended December 31. 2008 and are incorporated by reference.

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

In addition, we will include operational sales results information today which are given on a constant currency basis that is excluding foreign exchange.

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

Miles White

Thanks John and good morning everyone. As you can see from our earnings news release this morning Abbott’s first quarter results demonstrate that there is tremendous value in a well balanced, highly diverse portfolio of businesses that is capable of top-tier earnings performance in even the most difficult market conditions.

Despite a clearly weak US economy, Abbott’s fundamentals are strong and so is our commitment to delivering double-digit earnings per share growth, while returning cash to shareholders through city dividend increases and ongoing share repurchase.

This quarter our collective businesses delivered mid-teens earnings per share growth. We also saw strong double-digit operational sales growth in global nutritionals, international pharmaceuticals, and global vascular, which continues to benefit from the steady performance of XIENCE V® our best in class and drug-eluting stent.

In the first quarter we also delivered significant operating margin expansion in our vascular diagnostic segments: as a result, we exceeded the midpoint of our EPS guidance range this quarter by $0.03. We also confirmed our 2009 EPS guidance range of $3.65 to $3.70 reflecting double-digit earnings per share growth this year.

There were three particular things in the quarter, one of which was one-time in nature, which impacted our top-line results this quarter, but did not impact our ability to deliver EPS in excess of our forecast. I will briefly touch on these before Tom and John provide their normal reviews.

The first was the impact of foreign exchange rates on our reported sales growth this quarter. We had originally expected that first quarter currency rates would have a negative impact on reported sales and so our first quarter would be the most difficult quarter of the year in terms of year-over-year comparisons. As it turned out currency trends were somewhat more unfavorable than our estimates, particularly the non-euro currencies in regions such as Latin America, Eastern Europe, and Asia. However, we are significantly insulated on our bottom lines in currency fluctuations due to our substantial International operations, as well as our overall mix of product sales which act as a natural hedge. So, we didn’t see any significant impact to earnings in the quarter, just the top line.

The second item impacting sales this quarter was the overall weak US economy and the impact that has had on managed care practices and patient behavior. For example, recent market data indicates that a higher percentage of patients in the US are not refilling their prescriptions. What is more, a the beginning of each year we typically see adjustments to insurance plans in terms of changes or increase to co-pays, deductibles and out of pocket costs, as well as prior authorization requirements. We expect some of that each year and we plan for it. This year the magnitude of these care changes was greater than in previous years. Together with a weak US economy and changing consumer behavior, this impacted the growth trajectories in certain business segments more than we would have otherwise anticipated.

The third, but related item, impacting sales this quarter was the effect of US wholesalers reducing purchases as they too adjusted to the weakening economy and slower than expected market demand in some segments. We had not anticipated the full magnitude of this effect in our original planning for the quarter, including HUMIRA®, which I will discuss in a moment.

Given these unique dynamics our US pharmaceuticals team has adjusted its commercial approach on a number of levels, refining our marketing mix to more directly address this changing patient behavior.

We are now focusing additional attention on programs that we know will directly benefit eligible patients, those who need assistance in this economy affording their co-pays and out of pocket costs. We have done that by expanding our existing patient assistance programs. At the same time we are seeing a continued shift toward the use of specialty pharmacies for products such as HUMIRA®.

Specialty pharmacies are patient focused services within large pharmacy benefit managers. These services actively engage patients on many levels and help to increase patient adherence to therapies, so that is a good thing for patients, and it is a good thing for our business longer term.

Specialty pharmacies also tightly manage their inventories and tend to operate using more of a just in time model. As a results of these changing dynamics, our US pharmaceuticals was below our expectations for the quarter, including HUMIRA®, as Tom will discuss in a moment. However, we think customers across our pharmaceutical distribution channel are now better aligned with current demand trajectories making this more of a one-time transitional quarter.

As we look ahead, underlying patient demand in the US for our key growth drivers remain strong, including trends for HUMIRA® which continues to grow significantly faster than the anti T&F market. In fact, this morning we noted that the latest March monthly prescription data indicates that HUMIRA® total prescription growth has accelerated to 24% from February’s 19% with an improvement in new prescriptions as well.

Outside the US HUMIRA® operational sales grew nearly 50% this quarter reflecting continued strong double-digit demand internationally. Globally, HUMIRA® ranks as the fastest growing pharmaceutical product among the industries top 15 global products, just ahead of Avastin. It is growing twice the rate of competitors across the world and is the leading anti T&F product in Europe recently surpassing Enbrel in patient share.

A large part of our success is due to HUMIRA’s robust clinical profile which we are adding to this year with additional data. HUMIRA® remains a significant component of our growth story, that hasn’t changed. We continue to expect HUMIRA® to grow strong double-digits over the next several years.

For this year, we have updated our expectations to reflect these trends. We expect global HUMIRA® operational sales growth of 25% to 30%, excluding the negative impact of exchange, and reported sales growth of 15% to 20% which includes the impact of exchange.

This updated forecast for HUMIRA® is captured in our guidance for double-digit EPS growth for 2009, which is the same as our original guidance.

Back in January when we issued our 2009 guidance, we did so with a high degree of confidence in our overall planning assumptions. It was difficult to predict the degree of impact the weak US economy would have on our US business; however, we planned conservatively so that we could absorb any impact.

As we move through the course of the year we will make adjustments to spending; however, our spending levels will remain strong and at a level that will support the continued long-term growth of our businesses. Tom will walk you through the details of that in a moment.

HUMIRA’s one leg of growth in our overall portfolio of growth businesses, and it’s certainly an important one, but it is also important not to let it over shadow the balance of our other businesses. Last year our collective mix of diverse growth businesses delivered outstanding results. We reported total sales of nearly $30 billion; EPS growth in the mid-teems; record operating cash flow and we returned more than $2 billion in cash to shareholders in the form of double-digit dividend increases and share repurchases. We are on track for a similar level of performance in 2009.

Abbott is broadly diverse in many ways, operationally, financially, geographically and as you listen to our remarks today and look through our earnings news release you will see that come through. Over the years we refined and reshaped our business portfolio through strategic acquisitions, divestitures, restructuring spin offs and alliances. Today we have one of the best mixes of healthcare businesses in the industry. Abbott’s current portfolio of businesses is strong, it is highly diverse, and its growth prospects are outstanding. I continue to be very optimistic about our future as we continue to target sustainable double-digit EPS growth.

With that, I will turn the call over to Tom and I will be here for Q&A.

Tom Freyman

Thanks Miles. I will now take a few minutes to walk through our results for the first quarter and our outlook for 2009.

Abbott delivered ongoing earnings per share of $0.73 for the first quarter, up almost 16% and $0.03 above the mid-point of our previous guidance range. We achieved this strong growth despite the dynamics Miles mentioned and the impact of generic Depakote entrance and we are confirming our 2009 EPS guidance.

Regarding sales operational growth in the quarter, which is before exchange, was 5.4% reflecting particularly strong growth in our global nutritionals, global vascular, and international pharmaceuticals businesses. Exchange was unfavorable 6.1% somewhat more unfavorable than our previous forecast so, on a recorded basis, sales declined slightly.

Excluding the negative effect of the decline in Depakote sales from the generic competition, up 3½ percentage points, operational sales growth in the quarter was 8.9%. Generic competition began for the ER version of Depakote this quarter and the immediate release version in the third quarter of 2008. Depakote negatively impacted global pharmaceutical sales growth by 6 percentage points and US pharmaceuticals sales growth by more than 13 percentage points.

US pharmaceutical sales were approximately $150 million below our expectations for the quarter due to somewhat slower than expected market growth in certain segments including injectable anti-T&Fs and a related reduction in customer purchases. HUMIRA® accounted for somewhat more than half of the $150 million.

The adjusted gross margin ratio in the quarter was in line with our expectations at 58.1%. This reflects an improvement of 130 basis points from the prior year. This was driven primarily by improved performance of the vascular and diagnostics businesses.

Regarding spending levels in the quarter, both SG&A and R&D expense as a percentage of sales were in line with our forecast. R&D expense was 9.5% of sales reflecting continued investment in our pipeline including programs in vascular and biologics as well as neuroscience, oncology, and HCV. On an ongoing basis, excluding the impact of exchange, R&D increased nearly 5%.

SG&A expense was under 29% of sales, a decline from the prior year, reflecting our 2009 expectation of SG&A leverage. On an ongoing basis, a gain excluding the impact of exchange, SG&A increased nearly 2%.

Regarding the Other Income line of the P&L in the first quarter, our reported results included the derecognition of contingent liabilities associated with the conclusion of the TAP joint venture last year. The $800 million favorable pre-tax P&L impact of this was excluded from ongoing results. So, on an ongoing basis, that is, excluding this gain, other income was $155 million which was in line with our previous forecasts. The tax rate for ongoing operations in the quarter of 17.8% is in line with our previous guidance.

As Miles mentioned, today we confirmed our 2009 earnings per share guidance of $3.65 to $3.70 reflecting double-digit growth over 2008. Our sales forecast includes an estimated negative impact from foreign exchange of around 6.5% for the full year based on year-to-date and current exchange rates. This is unfavorable by more than a full percentage point compared to our original outlook for the year.

We expect operational sales growth, excluding this exchange, in the high single-digits and low single-digit growth on a reported basis for the full year including the incremental sales from AMO.

We continue to forecast a modest improvement in the full year gross margin ratio over 2008 with a ratio somewhat above 58.5% for 2009.

As I mentioned, we expect to deliver significant SG&A leverage in 2009 with SG&A as a percentage of sales of roughly 26% for the full year, which will be a reduction of more than 100 basis points this year. The SG&A ratio on the first half of the year is forecast to be higher than the full year average and in the second half we expect a greater SG&A leverage with the ratio below the full year average. We are forecasting R&D as a percentage of sales for the full year of approximately 9%.

Regarding other aspects of our 2009 outlook, we continue to expect other income of approximately $300 million related to the conclusion of the TAP joint venture and we’re forecasting net interest expense of $350 to $400 million including financing costs associated with the AMO transaction.

We continue to project a 2009 tax rate of 17.5% to 18%. As a result, when you look at the overall T&L for 2009 we expect further improvement in our operating margin ratio, as well as our net margin ratio. Again, our vascular business will be a significant contributor.

Now let’s turn to our quarterly outlook for the remainder of 2009.

For the first time we are providing second quarter ongoing earnings per share guidance of $0.87 to $0.89. This second quarter guidance reflects EPS growth in line with the forecast we provided on the fourth quarter call in January. You may recall that there is a high level of TAP related income in the second quarter of 2008 that’s impacting the growth comparison.

We’re forecasting low singe digit sales growth in the second quarter on a reported basis. This includes an estimated negative impact from exchange approaching 9%, so on an operational basis that is excluding exchange sales growth will be in the low double-digits. We expect an ongoing gross margin ratio of around 58.5% in the second quarter.

Other income, again related to our previous TAP joint venture, is forecast at around $50 million in the second quarter and the tax rate is expected to be in line with our full year guidance of 17.5% to 18%.

For the third and fourth quarters we continue to forecast low double-digit EPS growth. In the third quarter we’re forecasting low single-digit sales growth on a reported basis impacted by nearly 8% negative exchange. For the fourth quarter we expect reported sales growth in the mid single-digits as the negative impact of exchange moderates. So for both quarters we are forecasting operational sales growth in the high single-digits.

Overall we remain well positioned with our diversified mix of global businesses as we continue to forecast another year of double-digit EPS growth in 2009.

With that, let me turn it over to John for the business operating highlights.

John Thomas

Thanks Tom. This morning I will review the performance of our major business segments, medical products, pharmaceuticals, and nutritionals. I will focus primarily on operational sales, which are given on a constant currency basis, as I mentioned before, that is excluding the impact of foreign exchange.

Let me start with our medical products and our vascular business where worldwide operational sales were $645 million in the first quarter and that was up more than 45%. Sales were driven by the continued success of our drug-eluting stent XIENCE V®. Global DES franchise sales, which include XIENCE as well as other third-party DES product revenues, were more than $330 million in the quarter; more than triple the first quarter sales of last year.

In Europe XIENCE market share was in the mid to high 20s and we’ve been gaining approximately two share points each quarter. In the US XIENCE market share remains steady in the high 20s. Total XIENCE platform, which includes PROMUS, has captured about half of the market.

Market dynamics remain positive as US PTI volumes are growing in the single digits. US DES penetration has steadily risen over the last five quarters and is approximately 75%, up more than 2 percentage points versus the fourth quarter 2008 and 10 percentage points year-over-year.

XIENCE has clearly established its reputation as the best drug-eluding stent in the class based on its superior clinical data as well as best in class deliverability profile.

At the American College of Cardiology medical meeting in March we presented three-year data from our XIENCE clinical trial SPIRIT II results demonstrated that the clinical advantages of XIENCE continue to increase over Boston Scientifics’ TAXUS® Express2™ and TAXUS® Liberte™ stents between two and three years. XCIENCE maintained a low rate of cardiac death, a low single-digit MACE rate of 6.4% and had no additional stent thrombosis. The observed cardiac death rate for TAXUS® Express2™ and TAXUS® Liberte™ was about 3x higher, between two and three years and the MACE rate increased by 40% to about 15%.

The additional SPIRIT data presentations we have planned for this year will continue to support the reputation of XIENCE as a market-leading, best in class drug eluding stent.

We also look forward to launching XIENCE in several additional countries over the next year including China, Canada and Japan, where we continue to expect a fourth quarter 2009 approval and an early ’10 launch.

Behind XIENCE V® we have a robust vascular pipeline which I will briefly review at the end of all of my remarks.

For the second quarter our Abbott vascular, we expect sales to grow strong double-digits lead by continued success of XIENCE V® and, more importantly, this growth is driving significant operating margin expansion in this business segment.

Now let me turn to our diagnostic business where worldwide operational sales were up 6% in the quarter with more than 5% growth in the US and 6% operational growth internationally.

In our core laboratory diagnostics segment, which includes immunochemistry and hematology, operational sales were up more than 4% this quarter. PRISM as well as ARCHITECT sales were up strong double-digits worldwide as menu expansion helped to drive growth in our large installed instrument base.

In the US we launched CELL-DYN Emerald in the quarter, our new hematology instrument, for small to mid-sized labs. We also continue our efforts to improve profitability in the core diagnostics business reducing overall costs, improving efficiencies and expanding operating margins. We have seen customer demand transition to our newer architect platforms and we expect this, along with initiatives, to roughly double profit and cash flow over the next several years in this division.

In our point of care business operational sales this quarter grew double-digits. In molecular diagnostics operational sales also increased double-digits, and in February we presented data confirming our Real-Time PCR Viral Load Test is state of the art for measuring variant strains of the virus.

So for our worldwide diagnostic businesses in the second quarter, we anticipate reported sales to decline in the high single-digits, which includes the negative impact of foreign exchange. This includes a double-digit decline in laboratory diagnostics, which is in line with our expectations given that the vast majority of this business is international, and we focused this business for, as I said, more profitable growth. In addition, we expect double-digit growth in molecular diagnostics in the second quarter and mid single-digit growth in point of care.

In our other medical products businesses worldwide operational sales in our diabetes were down mid single-digits this quarter. In the US we have successfully grown prescription share offset by a double-digit decline in the US market due to economic pressures. We target our efforts to continue to educate patients on the importance of regular glucose testing. Outside of the US we continue to grow share faster than the market.

In the second quarter, in our global diabetes business, we expect low to mid single-digit decline in reported sales, which includes the negative impact of foreign exchange.

Let me move on quickly to our new vision care business. We completed the acquisition of Advance Medical Optics on February 25, as you know. AMO has been renamed Abbott Medical Optics and has transitioned very smoothly into the Abbott organization. This new business enhances and strengthens Abbott’s diverse mix of medical device businesses and gives us a leadership position in the large and growing vision care market. This includes the number two market position in cataract surgery where AMO recently launched its new Tecnis multifocal intraocular lens in the US. It has performed well in International markets and we would expect similar performance here in the US.

AMO holds the number one market position in refractive surgery or LASIK. Subsequent to closing the acquisition AMO achieved a major contract win with LCA Vision; expanding AMO’s install base and reflecting the continuity of the business within Abbott.

Given that we closed AMO at the end of February, we reported one month of US sales in the quarter only and no International sales in accordance with our accounting principles.

I will now move on to pharmaceuticals where worldwide operational sales were up slightly in the quarter impacted by the expected decline of Depakote sales, as Tom mentioned, as a result of generic competition. Excluding the impact of Depakote, worldwide operational pharmaceutical sales increased 7%.

In our immunology business global HUMIRA® operational sales were up nearly 28% including strong International operational sales growth of nearly 50%. Outside of the US, as Miles mentioned, HUMIRA® continues to perform exceptionally well. It shares the number one position in RA in Western Europe and in Canada with close to 40% of the market. There continues to be significant room for continued biologic penetration in International markets where penetration rates are in the single to low double-digits in certain countries.

While currency has had a more unfavorable impact on reported growth than we had originally anticipated, operational sales growth for HUMIRA® in International markets is tracking in line with our outlook for the year.

In the US HUMIRA® prescription growth has continued at a strong rate, outpacing the market. Total HUMIRA® prescription growth in the first quarter was roughly 18% and the latest March data, as Miles indicated, shows 24% in terms of TRX growth. We are also gaining share across indications. In Crohn’s, HUMIRA® US prescription share is approaching 45% and we’ve been pleased with our launch into the psoriasis market where HUMIRA® total US prescription share now exceeds 30%.

We also have a number of efforts underway to address market growth and increase adherence with our current patients. In addition to the patient assistance programs mentioned earlier, we are targeting our direct consumer efforts in both RA and psoriasis. Our psoriasis campaign recently began and has already started to increase patient awareness of HUMIRA and drive incremental share performance.

Last month we received FDA approval for our psoriasis starter pack which will help ensure patients initiating HUMIRA therapy are started on the right dose and will help with patient adherence. We found patients that begin therapy with the appropriate starting dose have better efficacy levels and stay on therapy longer.

We continue to be well positioned in this market. Our success is driven by HUMIRA® best in class profile and differentiating clinical data. HUMIRA® is the only biologic with radiographic inhibition data out to five years in patients with both early and established RA. We also have a number of upcoming data presentations that will add to our already robust body of data including three-year efficacy and safety data in Crohn’s disease which will be presented at the upcoming Digestive Disease Week meeting in May and we’ll be presenting additional long-term data regarding HUMIRA’s ability to stop disease progression at the EULAR meeting in June.

So, as Miles discussed, we have captured current market conditions and recent exchange rate trends in our adjusted outlook for HUMIRA®.

In our lipids franchise, Niaspan and TriCor/TriLipix continue to grow with sales up modestly. As you recall, we received approval for and began shipping TriLipix in the fourth quarter of last year, which also impacted first quarter sales. Total prescriptions continue to grow faster than the cholesterol market with Niaspan prescriptions up roughly 10%. We’ve been pleased with the early results following in the January launch of TriLipix, our next generation of fenofibrate and the first and only fibrate approved for combination use with statins. Prescription trends indicate a rapid acceptance of TriLipix. Growth of new patients has resulted in total market share gains for the overall TriLipix/TriCor franchise. The indication for combination use with a statin has been an important factor in our early success with new combination use accounting for approximately 30% of TriLipix prescriptions.

At the recent ACC meeting, data from a new study of TriLipix used in combination with the lowest available dose of Crestor show that the combination led to greater improvements in all three lipids than the corresponding mono therapy. TriLipix has now been studied for all of the most commonly prescribed doses of Crestor, 5, 10 and 20 mg in large controlled clinical trials. In all studies, TriLipix combination therapy improved HDL and triglycerides compared to Crestor alone and improved LDL compared to TriLipix alone.

Abbott’s product portfolio is uniquely positioned to address the growing need for adjunctive and combination therapies, treatments that outpatients achieve recommended lipid goals and the penetration of adjunctive therapies is still very low. So, for the second quarter in our lipid franchise we expect double-digit growth.

Moving on to some of the other products within our pharmaceutical business quickly, regarding Synthroid, US sales in the quarter were $86 million. We expect more than $400 million in total US Synthroid sales this year.

In Lupron global sales in the quarter were $192 million for the quarter. We expect approximately $800 million in total global Lupron sales in 2009.

In summary, in our worldwide pharmaceutical business for the second quarter we expect a low single-digit sales decline which includes the continued impact of generic competition on Depakote sales, as well as the negative impact of foreign exchange.

Next let me move on to our global nutritionals business where operational sales were up 10.6% driven by high-teens operational growth in International markets where demand continues to increase for our high quality nutritional products.

In pediatric nutritionals performance was especially strong where operational sales outside of the US were up 22%. Abbott now holds the number one share position in several major markets across Asia and Latin America and in China we’ve continued to steadily increase our market share. And, ask we announced earlier this year, we are now manufacturing out of our new nutritional facility in Singapore. This 500,000 square foot facility addresses the growing need globally demand for our products, including the rapidly expanding Asian markets.

In the US nutritional sales increased in the quarter more than 4%. This was primarily driven by mid single-digit growth in adult nutrition with a strong performance of Glucerna and Ensure as well as our therapeutic nutritional products which make up a significant portion of our adult nutritional sales.

As we look at the second quarter in our nutritionals business in the US, we expect mid to high single-digit sales growth and flat sales, approximately, outside the US, which includes the impact of foreign exchange.

Finally, let me quickly cover our broad based pipeline. We launched, as you know, nine new products last year and this year we’re submitting multiple new drug applications, advancing several new drugs and devices through development, including initiation of pivotal trials for one of our industry leading oncology compounds.

Let me walk you through the major opportunities quickly.

We expect a fourth quarter approval and a 2010 launch, as I mentioned, for XIENCE in Japan. Japan is a more than $500 million DES market that has had consistently high DES penetration rates and a preference for [olumus] based platforms. We also expect to launch our next generation DES called XIENCE PRIME by year-end in Europe.

XIENCE PRIME capitalizes on the proven attributes of XIENCE and at the same time improves deliverability, especially in longer lengths and with complex anatomy. We will begin our US clinical trials for XIENCE PRIME the middle of this year.

Another addition to our DES portfolio is Xience Nano(NYSE:TM). This is a small vessel stent that is on the market in Europe and it is in development here in the US.

We are also working on a number of coronary products including a next generation bare metal stent, front line and high-pressure balloons, and new guide wires and we’re launching multiple new products this year.

In pharmaceuticals we now expect to submit our TriLipix-Crestor fixed dose combination product in the third quarter of this year, and that is ahead of our original timeline. We have now presented all of our data that supports our US regulatory filing.

In partnership with SkyePharma we submitted the regulatory application for the combination asthma product Flutiform, also in the first quarter.

HUMIRA continues in phase III development for indications of ulcerative colitis and pediatric Crohn’s disease.

Also in late stage development is ABT-874 our anti-IL-12/23 biologic. We’re completing our phase III pivotal trials and are planning for a global regulatory submission of this product next year.

In oncology we have three compounds in Phase II development, our multi-targeted kinase inhibitor, our PARP inhibitor, and our Bcl-2 inhibitor. We expect to advance our Bcl-2 inhibitor into pivotal trials this year. As you may recall, this compound received accolades in the oncology clinical community for its ability to attack cancer in a fundamentally new way, triggering a switch in cancer cells causing them to die.

We also have three hepatitis C compounds that are now in human clinical trials. This includes both HCV prolim rays and protease inhibitors. Abbott is the only company with these two classes of compounds in development with the potential to have the best HCV drug cocktail on the market in the coming years, if things go well.

We have numerous programs, also, in early clinical development, including compounds to address Alzheimer’s disease, schizophrenia, and pain, as well as small molecule compounds for the treatment of several autoimmune diseases. And, we have the most advanced bioabsorbable drug-eluting stent in the industry back in DES with the opportunity to reach the market ahead of the competition. Abbott is the only company with long-term clinical data evaluating the safety and performance of this next generation technology.

In summary, despite a weak US economy, Abbott delivered another strong quarter with EPS growth of almost 16%, which was ahead of our original outlook. We entered the year with a conservative plan so that we could absorb any factors that impact our business and given the diversity of our businesses, we expect to deliver on our double-digit EPS target in 2009.

With that we will now open the call, operator, for questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Rick Wise from Leerink Swann.

Frederick Wise - Leerink Swann Llc

Let me start off with a big picture question since we have the pleasure of Miles on the call again. Miles I am real clear that you all are going to drive low double-digit EPS growth as you leverage expenses, improve mix and margins, and so forth. I would be curious to hear your thoughts on the right aspirational sales growth and top line growth, ex currency, that we should think about for the next few years. What do you aim for and do you feel like you have the firepower inside Abbott today to get there?

John highlighted the pipeline, but said a little differently, it is a perennial question. Do you need the M&A? Do you need to acquire to hit your growth goals? Thanks.

Miles White

First let me put it in kind of a target perspective. I think that we have the firepower across the company right now, based on what I see, to do high single-digits plus on the top line. It is hard to make a call about what this economy means, because we are now seeing, for the first time, the real impact of the current economic downturn, which is severe, arguably, across all industries, impacting healthcare in ways we haven’t seen in the past. I think that’s new for everybody. It is not as severe, obviously, in our industry as it is in other, so we can say we’re not getting hammered per se, we’re taking a dent here as an industry, but the fact is it’s a different economic environment than many of us have seen in decades.

With that, I would say we have the firepower for the high single-digits plus, which obviously would leverage to double-digits on the bottom line and that’s our target. I just don’t know how the overall economy will impact that. I think we have that firepower anyway. We have it because of our products and the mix of businesses we have and how acutely patients need the products we have and so forth. So, I am optimistic and I don’t see anything to change that yet.

I don’t think this quarter, for example, is some kind of harbinger of gee these are the growth rates we’re going to see in the future. You have to remember that our entire growth rate this quarter in our whole business was in effect negated by Depakote going generic. I would argue that there are very, very few companies, I can count two or three tops, that can deliver the quality of this performance, or this kind of performance, in this kind of environment, in this kind of economy, and when a product as large as Depakote goes generic. So, do we have the firepower? Yes. I think we have the firepower.

Going to the second part of your question, whether we would need any M&A activity, the answer is no. We don’t need it. And, we’re not necessarily looking for any large M&A of any kind. I’m amused by the company X dust up, etc… as you might guess, but at the end of the day we’re looking at opportunities in the M&A field primarily as very opportunistic. Strategically we know places in our businesses where we would like to add to our business, or enhance our business, but we don’t need it to make our goals and so forth, but we are always looking to add strength to the company. I have said that before. There is nothing new there. There is no new position in that or new philosophy in that.

Our philosophy regarding any kind of acquisitions or product deals and so forth has not changed. We don’t need large deals to achieve our financial objectives or strategic objectives. We’re not evaluation any large deals. I have a clear bias towards smaller to mid-sized type things that are quite manageable.

At least relative to our size of the game, AMO is an outstanding addition to the company. I think it’s an outstanding company, an outstanding business and an outstanding segment, so I think that’s just a terrific addition.

As there are opportunities that are on strategy for us to add to the company we will certainly evaluate it and we will certainly look at it and I think our M&A track record speaks for itself.

That’s a long answer, but I think it answers your question, although I don’t feel the need to run out and do a deal to sustain what we have forecasted to shareholders.

Frederick Wise - Leerink Swann Llc

If I could follow up on that, basically you are saying, Miles, that your goal is to still grow top line upper single-digits and bottom line low double digits. This year specifically, maybe this question is for Tom, the $365 to $370 guidance unchanged, but I’m guessing that with Miles comments, and the companies comments, about the weak economy and now with HUMIRA in the US starting from a lower point there might be a little less up side to that than you might have hoped when you conceived that kind of guidance as you reported the fourth quarter.

Miles White

I am going to take that question away from Tom. I think it’s premature to call that. You know, we beat our mid point of our range this quarter, exceeded it, and we didn’t change our guidance because I think after one quarter in this year with some of the things that we’re all still watching, I think it’s premature to make a call on that yet. What I am confident of is based on everything I see we’re going to make the impact. I am very confident we are going to be right where we said we’d be in terms of our guidance. Now, I said that last year too and we ended up exceeding by $0.10 for the year. I don’t think this is the same kind of year, but I think we went into this year very confident, with a conservative plan etc…so that we could meet investor expectations that we set and do it in a way that’s high quality and sets us up well for continued growth in ’10 and beyond.

So, I think it’s premature to make the call. I don’t know what the other things that are overhanging this industry are going to turn out to be. We’ve tried to model healthcare reform and all of the potential elements of it like everybody else. We think the timing is late in the year, if there is any at all. We’ve estimated all of that, but I think the prudent thing to say right now is hey look, the company is strong, performance is strong, we need the lap Depakote going generic here we are. We’re maintaining that earning growth and I think what investors ought to have confidence in is that we’re going to deliver the earnings growth we said and we’re not going to have to do anything extraordinary to do it.


Your next question comes from Mike Weinstein from J.P. Morgan.

Mike Weinstein - J.P. Morgan

Let me start with HUMIRA. I probably have a lot of questions here, but let me try and just narrow it down to two areas. One, I think it would be helpful if you talked about what you’re doing to help patients out right now and what programs are new versus existing programs and what impact we should expect.

Second, maybe you could help us understand a little bit better, versus what, I think, the street was expecting, HUMIRA sales in the US were about $100 million light. What is your view of where that $100 million went? Also, you talked about customers reducing inventories; how much of that was wholesalers, how much of it was impacted by your move to specialty pharmacies. I would like to know your different thoughts on components of that $100 million shortfall.

Miles White

Let me take a start at that and then I’m going to hand it over to John to help me out a little bit here, Mike. I am not sure we can be terribly precise about that, but we can be directionally correct, I think.

Wholesalers manage their inventories to a certain level based on the growth trajectory of a product. We know that the growth trajectory of HUMIRA was pretty strong here in the US.

Actually it is still strong, but relatively speaking, at a higher level on a trajectory basis in October, November, December etc… coming out of ’08 and inventory levels were appropriate for that kind of growth trajectory. We also know that it adjusted rather suddenly right at year-end and early in the year, partly because of all the reasons I noted on the call. The managed care plans changed at that point, the customer starts over again with their co-pays or their deductibles and so forth.

We saw that same pattern last year, we just didn’t see it to the same degree, but when the growth trajectory of the segment alters then I think it’s natural for wholesalers and customers to alter as well to that new trajectory.

Secondly though, I think there is an extra amplification on it, because we have seen the distribution system of the wholesalers for consumer products, for any number or products out in other industries besides ours, all tighten up in this first quarter, and all take their inventories down and manage their working capital much more efficiently. In fact there has been a lot printed about that. I think we see it across a number of businesses here where people are tightening up and trying to be very efficient in cash management and so forth. So, there is some impact of that, but there is a limit as to how far that can go.

We’ve got a pretty good feel that our inventories, we have a feel for what they are out there. We’re pretty confident and know that they are less than a month, so there is a limit to how far tightening can go before it’s just not doable anymore. We are in a place where we think that’s kind of washed out. They’ve made their adjustment, which is why we view it as kind of a one-time thing. I think it’s exacerbated, to some degree, by this notion of specialty pharmacies.

We like the role that specialty pharmacy plays. I would say more than half of the volume now goes through specialty pharmacies. That’s a good thing, because that makes a big difference in patient adherence and duration of time on the medicine. This is particularly important for an injectable like HUMIRA. So, we view that as a positive for HUMIRA and that shift we view as a positive, but there is an underlying adjustment that goes with it, that they don’t have a typical stocking profile that your standard primary care drug or something has for the wholesalers. As I said, they tend to be more of a just in time type thing, so that’s added something to it.

Overall, it is the first quarter where you see these adjustments, so I look at that and I look at last years model or thing and I think you know what, we didn’t adequately model it ourselves; obviously analysts and investors didn’t either, but we look at the underlying strength of the business. You look at the sellouts from the wholesalers to the pharmacies and so forth and that remains strong. The underling PRX growth rate, as you have seen, January, February, March, continues to get stronger and stronger again.

So I am confident that a lot of the actions that we have taken to adjust, whether it is through specialty pharmacies or our marketing mix, which I will come to in a minute on the co-pays and so forth, they are all going in the right direction here to support the product, support the products underlying growth, its share gain, etc… We can see that week to week in the evidence and it’s taken awhile for that to manifest itself and I think we’re quite fortunate that we got this data on March this morning so that you all could see that too and see that what we’re telling you is actually happening.

Now with regard to the mix, we’ve had a number of patient assistance programs and so forth, but in fact we have had to enhance those. I would tell you that my view today is that the kinds of things we’re doing to support patients and their ability to get access to, and/or deal with co-pays and so forth in the insurance system, are better bang for the buck investments for us than certain DTC advertising and other things that would be typical in our industry. We’re seeing the impact of some of that already, but I expect to see more and more as the year progresses.

John, do you want to add anything to that?

John Thomas

Yes Mike. I think as we have talked about before, we have historically offered patients assistance programs to patients in need and those who are eligible. What we have done here recently is to expand those programs and in fact the end of March we launched a new program that offers really a comprehensive support level for various types of patients who might be trying to make a decision between treatment that could really affect their disease long-term and potentially save their life and other financial obligations. So, we think we’ve made that easier for patients in terms of a new level of co-pay assistance.

A lot of this stuff is available on a website called Patients who go there this will triage them to various programs that we have that are either in existence or expanded to cover people and help people who have insurance or don’t have insurance. Either way we think those things are the right thing for patients. They are also beneficial, as I mentioned earlier, in terms of longer adherence to therapy, which is also beneficial to patients.

Mike Weinstein - J.P. Morgan

If I could ask Tom one follow up question relating to a couple points in your income guidance. You reduced your SG&A expectations for the year. I think you had them guiding to 27%, I think you talked about on the call being 26%. Some of that is driven by the increased FX impact on the company, but I was hoping you could give us some sense of where you are tightening the belt. Then the second item you adjusted was your interest expense guidance for the year, which you brought down your interest expense by $50 million. Is that from lower rates, or are you paying down debt faster? Could you give us some insight into that?

Tom Freyman

Yes, on the interest basically we are seeing lower short-term interest rates on the debt and we do have some higher cash balances than we expected, so we are earning a little more on that side.

The SG&A, certainly we are expecting a degree of tightening here. It is really less critical areas, more administrative type areas that are not impacting the business in any way long term. I think in this environment, given what we saw in the first quarter, a little tightening is appropriate and you are right, we will be a little bit lower than the original forecast we had at the beginning of the year.


Your next question comes from Bruce Nudell from UBS.

Bruce Nudell - UBS

I have a question regarding the average size of co-pay that the average patient pays. Also, how are the co-pays accounted for? Do they come off the top line of reported numbers, or are they embedded in SG&A or cost of goods somehow?

Miles White

The average co-pays for most patients are $40 to $45 per script so that is essentially [interposing].

Bruce Nudell - UBS

Is that for all drugs or?

Miles White

No, for HUMIRA, we are talking about HUMIRA and those programs are an offset to sales.

Bruce Nudell - UBS

An offset to sales, so in part was that part of the explanation for the weakness this quarter?

Miles White

Very little in the quarter, there is a little bit of add in. It is not a dramatic impact, but it will result in somewhat lower sales as we progress through the year.

Bruce Nudell - UBS

So as we look forward on that regard, HUMIRA has been taking about five points of price per year for awhile. Is a way to think about it to just, if these programs persist, to assume that ASP inflation is going to be more moderate than that?

Miles White

Yes, that is an offset to sales. For the full company we expect low single-digit type impact from price.

Bruce Nudell - UBS

Okay and just a more structural question about the markets. It looked to us that both IBD and psoriasis were the growth drivers for the T&F category in the US last year. Crohn’s looks decently penetrated; ulcerative colitis is not, but you don’t have a label there and psoriasis is always been a tough nut to crack, despite the fact that both categories showed good growth last year for the market and you especially. Just qualitatively, do you think that those markets are sufficient to sustain a healthy rate of growth for the T&F category in the US and HUMIRA specifically?

Miles White

Yes, Bruce, I will tell you what, we actually do. I mean, those are not well penetrated markets at all yet. In fact the penetration, whether it is rheumatology, gastroenterology, or dermatology, it is low, very low in the US and it’s especially low overseas, so we think there is frankly an enormous amount of penetration and growth potential left in all of those markets to drive continued growth.

Bruce Nudell - UBS

Thanks so much.


Your next question comes from David Lewis from Morgan Stanley.

David Lewis - Morgan Stanley

Tom I just have a quick question on Avastin here and two questions on International HUMIRA. One, the 20% currency rate, or FX effect on HUMIRA versus 12% for pharma, can you talk about that, specifically explaining why you see such a dramatic disconnect. Secondarily, International inventories we have not talked about yet on this call. A lot of companies are talking about International weakness; not so much from managed care, obviously, but certainly in destocking and emerging market weakness. Can we talk about how we’re not going to see that type of effect in HUMIRA [interposing].

Tom Freyman

We have not seen any of that in International markets in the first quarter. We have been pretty resilient, particularly in the pharma business, but really everywhere. So, we as yet have not seen much and we’re not anticipating a lot. I think there’s a lot more durability as to reimbursement for pharma products in particular that would result in that.

I think the reason you are seeing more HUMIRA exchange affect than your average product is it’s more of a Europe centric business for us. Our other pharmaceutical businesses tend to be more evenly dispersed across the various countries and so year-over-year, as you know, the euro has moved quite a bit and that is why you are seeing proportionately more impact of exchange on HUMIRA.

David Lewis - Morgan Stanley

Okay that is helpful. I guess secondarily, and this relates to a question you had before for Miles, but this inventory dynamic is really sort of a wash. The key dynamic is really sort of underlying fundamental demand and in a sense your guidance implies that the next three quarters of the year you are going to average sort of 15% US market growth. Besides the script data, I wonder if you could point to any data metrics market surveys that kind of give us the comfort that that 15% US growth is achievable or maybe growth higher than that is achievable.

Tom Freyman

Well David, I think the main thing is [interposing]

Miles White

Are we talking all of the business or just the HUMIRA?

Tom Freyman

Yes, HUMIRA, the script data that we mentioned this morning, the underlying quarterly data at about 18%, 19% for TRX is now going up, accelerating to 24% in March. That gives you a pretty good sense of underlying demand in the US that continues to be pretty robust there and obviously outside the US we talked about we continue to grow about 2x the rate of Enbrel and Remicaid outside the US.

Miles White

David, another thing I would add too, I would take you back to some of the dynamics that are unique for the first quarter. This is when all of the adjustments happen in the insurance plans and so forth. One of the biggest reasons that we see what we’ve seen is the co-pays, is the deductibles and so forth. We tend to get through that in the first quarter. We saw the pattern last year. I think we’re seeing it again this year, just more dramatic. We have addressed it, so at this point I think the dynamics in the remaining three quarters are not the same and the barriers to the patient are not the same. In fact they are considerably reduced at that point. If you look at the sellouts, the script rates, the new script rates and so forth, I think all of that underlying evidence is there to validate what we’re telling you.

David Lewis - Morgan Stanley

Okay Miles, just a follow up on that point. Obviously the US pharma was weak, probably in economic sensitivity. Obviously they are exposed to some of the same managed care and prior auth issues. The reason why HUMIRA is being more adversely affected you think is just the relative growth rate in the inventories, is it a psoriasis issue?

Miles White

No, I will tell you what, let’s face it, it is an expensive product. I think that expensive products like HUMIRA are going to experience that kind of focus more than your less expensive primary care growth. This is one that gets a lot of inventory attention by a wholesaler. It gets a lot of attention by the managed care plan. It gets a lot of attention by the patient, because the patient, I will tell you, is economically very, very sensitive to co-pays and a $5, $10, $20, $25.oo co-pay matters to a patient. Well this is a significantly more costly drug and so I think you see a disproportionate impact on it, to a degree, or at least a greater sensitivity to it. So, I do think it gets a disproportionate sensitivity, but I think it is because of the kind of drug it is. Now, it is not an infused drug. You don’t have to go to an infusion suite like a cancer oncology drug and so forth, so the dynamics around it are a little bit different. I think that’s why products like this we’ll see more sensitivity that way than others, but we’ve seen it. I’m glad the first quarter is done.

David Lewis - Morgan Stanley

Miles, one last question, and I will jump back in queue. So, your HUMIRA growth, obviously, in the US has gone, since you’ve been cut in half at about three months. But, your view is this is much more transitory or economic and you don’t believe this is going to change Abbott’s strategic planning as it thinks about its business the next 12 to 24 months?

Miles White

I am definitely not going to change my strategic planning, but I will give you this reaction. I am sort of a combination of annoyed and amused with the reaction that investors have to HUMIRA. We look at the growth rate of this product and people are disappointed that somehow 20%, 25% isn’t seemingly attractive enough. This product over the next several years will add several billion more dollars to Abbott Laboratories performance, which is the equivalent of another HUMIRA and the reaction of some analysts and investors to that just boggles my mind.

David Lewis - Morgan Stanley

Okay, thank you very much.


Your next question comes from Glenn Novarro from RBC Capital Markets.

Glenn Novarro - RBC Capital Markets

I would like to switch the conversation to the other major growth driver, at least viewed by investors, which is XIENCE. If I heard correctly, in your prepared remarks US XIENCE maintained market share, but did not gain share, is that correct? Then my follow would be if it didn’t gain share is it because of the TAXUS trialing or the endeavor on RX trialing? Then lastly, because some of that trialing probably ended earlier in the quarter, were the month-to-month trends improving for XIENCE through out the quarter in the US?

Miles White

I think the key there is we are growing internationally. We grew about two share points quarter-over-quarter where we continue to gain share. We are the leading DES product by far now in most markets outside the US or we will be soon. In the US, yes, there is a little bit of impact, as expected, from some of the sampling of products. These are modest size products that had a temporary blip in market share that’s coming back down. XIENCE continues to hold steady in the high 20% range. The overall market we are seeing a little bit of pricing pressure and I think a competitor talked about this yesterday. Not in the XIENCE platform, per se, where share and price have been pretty steady, but in some of these other products that have to compete on price and I think this competitor mentioned they had about a 5% reduction in price. So that is having the effect of the flattening, if you will, quarter-to-quarter fourth quarter to first quarter, but with these new products launching the pipeline that I mentioned, we expect that we will continue to see some very steady performance in the US and probably a more rapid growth outside the US.

Glenn Novarro - RBC Capital Markets

But to my question, I could see how XIENCE would lose share in the early part of the quarter, as TAXUS Liberte was launched late last year. So, did share dip in January and February and come back in March? I am just trying to understand why ZIENCE has continued to gain share outside the US, but share [interposing].

Miles White

That is really a result of this sampling that we talked about and the trialing. That is the main reason why there is some temporary dip in share in January/February, and now it is back up. We will see what March does, but it has been holding up in the high 20’s.

Glenn Novarro - RBC Capital Markets

Okay and one thing on pricing. Who is using price in the marketplace to try to gain share? Also, what are the dynamics occurring in the labs between PROMUS and XIENCE. Is there any price competition between the two stents?

Miles White

The price has been pretty healthy. We have maintained a healthy ASP. Boston has talked about this. I don’t speak for them, but they have maintained price that they’ve said many times, there pattern was to adjust that they are not selling it broadly at a discount. Like I said, I think where you are seeing some of that is certain competitive products like Cypher in certain accounts where they are selling short dated product at a discount. You would expect that given the data set that we have versus them. Our data is superior. It is superior to TAXUS. We just showed some additional data. We will have more data coming out throughout the year. That data has yet to play out into the market place, the ACC SPIRIT II/III data which was very positive and confirmatory in longer term. You will probably see the results of that in the coming months.

Glenn Novarro - RBC Capital Markets

All right thank you.


Your next question comes from Sara Michelmore from Cowen and Company.

Sara Michelmore - Cowen and Company

Just one question back on HUMIRA; we talked a little bit about the total prescription trends that it does look like some of the new prescription trends have started to slow. I am just wondering if you could just give us your thoughts on [interposing].

John Thomas

Actually, Sara, this is John. If you saw that the March data, which I understand most people haven’t because it is hot off the press. The TRX growth was 24% was 11% new RX growth. That is up considerably from the last couple of months.

Sara Michelmore - Cowen and Company

Okay and if you think about some of the economic sensitivity that you’re seeing, can you just discuss that. Is it really a compliance issue with people that are already on the drug, or are you seeing it also in terms of people getting on those new prescriptions?

John Thomas

It is a combination of both really. We are disproportionately disadvantaged along with the other self-injectable in terms of co-pays. The IV product doesn’t have that same dynamic, so it has been a case, as we talked about, of higher co-pays and those co-pays are up year-over-year in the double digits for most patients. The prior authorization is part of it, so what used to take two weeks to get a prior authorization is taking four to six weeks. I think it is a combination of all of those different dynamics. We are addressing those through the programs that we mentioned.

Sara Michelmore - Cowen and Company

Okay and can you give us an update on the formulary progress with TriLipix?

John Thomas

It is making steady progress. Our management team does an excellent job with that. I will tell you that in the lipid franchise in general, with TriCor, Niaspan we’ve had very good coverage in the 80%, 85% coverage, and we’re currently moving up. It is very early, so it is probably 20%, 30%, in that range right now. But, we would expect it to get up into that normal lipid range of 85%, 90%.

Sara Michelmore - Cowen and Company

But it is tracking in line with your expectations?

John Thomas


Sara Michelmore - Cowen and Company

Lastly John, I don’t know if you talked about Kaletra in the quarter? It was a little bit lighter than we expected in the quarter. What is going on there?

John Thomas

Kaletra, we did see a decline there, as we expected. Particularly in the US where there is more competition. We saw an adjustment here, a temporary affect of some of its reduced purchasing that happened in a couple of our other products. Kaletra is one of them. So, you have that dynamic together with the PI market in the US that is a little bit slower, and some new competition. So, we expect that we will perform better going forward. Outside the US, obviously, the situation was different and most of that was foreign exchange impact.

Sara Michelmore - Cowen and Company

Okay thank you.


Your next question comes from Catherine Arnold from Credit Suisse.

Catherine Arnold - Credit Suisse

I know that HUMIRA has been a constant point of conversation and I just need to ask a couple more questions, because I think, obviously, the normalization of expectation here is really everybody’s goal here on this call. So, I apologize for that in advance, but a couple of things. I wondered if you could comment on the IMS audit, how reliable they are given that there is now a bigger move of HUMIRA through specialty pharmacy and how that impacts it. Are they on a lower side or the high side versus real demand? Compared to your comment about 18% for the quarter it seems like they may actually be on the low side relative to what you were seeing.

John Thomas

As you probably know, and most people know, there has been some changes with IMS, some fluctuations and some restatements, so we tend to buy our data directly from specialty pharmacies and as we mentioned specialty pharmacies is becoming a bigger piece of the mix. It is now over 50% of total HUMIRA sales. So that data is very accurate, so we feel very comfortable with our projections for the full year and the acceleration of the growth. I would say IMS has been a little bit up and down, but overall I think that the current data you are seeing is pretty close to what we expect, at least in March.

Catherine Arnold - Credit Suisse

Okay and then on the prior authorization cycle, I believe that you had said that there used to be a more typical two week prior auth cycle for new patients as they move from plan to plan at the beginning of the year. We saw an extended prior auth cycle for HUMIRA given that there was managed put in place with some higher hurdles to try to get that process done. I want to make sure that, is it your take that we are largely through this disruption and even as we have been on this call, have been getting questions about some of the statistics on demand. I know you mentioned the 24% March growth, but as you look at the IMS adjustment factors it looks like February was not 19%, it was 23% and March was closer to 21%, so roughly they are about the same.

The questions I am getting as I am listening to your call are was this really an up tick or are we sort of, February/March growth looks pretty comparable. So, I am wondering if you could comment on that. That might be because the prior authorization situation kind of settled down and the February/March normalized growth.

John Thomas

Yes, well we definitely think we’re through the main bulk of these prior authorization extensions, so I think that was a temporary affect that does happen at the beginning of the year. We are obviously into the second quarter now, so that should be, for the vast majority of it, done. Our data is very accurate, like I said, and we expect that the February/March data looks good, it looks strong; it is in the mid 20s.

Catherine Arnold - Credit Suisse

I wonder if you could tell me what percentage are now enjoying your co-pay assistance programs in the US?

John Thomas

We have about 12% of our total patients are on various types of assistance programs.

Catherine Arnold - Credit Suisse

Okay and then your guidance for the year on HUMIRA, are you assuming that you get any of the downfalls in inventory back that you lost in the first quarter? If that happens would that be a positive, or is that already baked in guidance?

John Thomas

We are not expecting that throughout the year and we are not expecting that in the fourth quarter, so if there was any increased purchasing activity by the wholesalers or others in the fourth quarter that would be incremental to the guidance we gave.

Catherine Arnold - Credit Suisse

Okay, at risk of over staying my welcome, I just wanted to ask Miles one more thing which is about company X. I appreciated your comments about [amusement} but I know that was something that people focused on. I was wondering if you could give us your side of the story on that reference?

Miles White

It is real simple. If the company X comment was intended to imply that Abbott competed for Wyeth it is false. We did not compete for Wyeth.

Catherine Arnold - Credit Suisse

Perfect, thank you.


Your final question comes from Larry Biegelsen from Wachovia.

Larry Biegelsen - Wachovia Capital Markets

What are you guys assuming f or the approval of Golimumab in your HUMIRA guidance for 2009 in the US and international?

Miles White

We have baked that into our model. We expect them; I think I’ve got a [PADUPA] here at the end of next month. We’ve expected that. That’s in our model. For many of the reasons we’ve talked about we do believe they’ll have a position ion the market, but it won’t be a significant impact to HUMIRA for all of the reasons we’ve mentioned before, fourth or fifth products to market that don’t offer any additional clinical benefits typically are not picked up and don’t drive as much. We’ve baked that into our forecast. We fully expect new competition which also has the benefit of driving increased promotional activity.

Larry Biegelsen - Wachovia Capital Markets

My second question is not HUMIRA related. In the past you have traditionally provided some peak sales estimates for late stage pipeline products and you are filing two this year, one of which you have already filed, Flutiform, and the second the fixed combination of TriLipix in Crestor. If you would care to give us any kind of expectations on those two products at this point, that would be helpful.

Miles White


Larry Biegelsen - Wachovia Capital Markets

The answer is no to both of those?

Miles White

No to both of the answers, nope. All right, what is next?

Larry Biegelsen - Wachovia Capital Markets

Miles while we have you, in regards to healthcare reform, do you see upside from increased coverage of the non-insured? People have focused mostly on the negative pricing pressure aspects of it, but do you see some upside potentially?

Miles White

I don’t know that I would characterize it as upside per say. I mean I expect that out of healthcare reform a lot more people are going to be covered and it is obviously going to create, whether we call it volume opportunity for additional expansion in the number of categories, but at this point I think it is all speculation. I think it would probably have some positive offset to whatever we may see that people have speculated as negative, but at this point was have so many different models of the impact of the various aspects of healthcare reform. We obviously expect that to be an offset, but where it all settles out depends on what the whole mix looks like.

If you told me which things were going to happen and how I would tell you well here is what it’s worth. But, as it is today, it is just speculation at this point. I think that is why there is so much uncertainty among people out there. I mean, we have all done our models. We have all done our estimates. You could ask me is it positive, is it negative? I think it is going to sort out in some balance in the middle where a lot more people will have coverage. That is good. We will see some pressure on industry pricing and other things. That is not good. But will it net all out? I think it will net out in a balance somewhere, Larry, I just don’t know where.

Larry Biegelsen - Wachovia Capital Markets

And what is your view, Miles, on the taxing of overseas profits?

Miles White

Well I don’t think it’s a real good thing, but at this point it too is speculation. You have to look at what happens in Washington, because the drill is always the same. The most extreme proposals and ideas get floated so that people can react to them and they react, and then there tends to be this negotiating in the public domain back and forth with speculation. At the end of the day we tend not to see the most radical things happen. In this case I think it is kind of the same.

I think this government, obviously, is looking for sources of revenue. They think that is a source of revenue, but I would reiterate this country already has the second highest corporate tax rate in the world and no country in the world taxes overseas earnings. So, if the government were to determine that that was somehow a favorable thing to do, I think they would severely impact the competitiveness of US multinational corporations in a lot of these countries around the world. I think then you would see companies react accordingly.

We serve investors, we serve returns, etc…and companies would react accordingly and I think that implies a broad range of potential activities. At the end of the day that certainly mitigates against what the government may think it gains from something like that. So, at the end of the day I think it is all speculation designed to see what kind of reception such a thing would have. I think, if they are listening, it has got a bad reception. So, we’ll see.

Larry Biegelsen - Wachovia Capital Markets

Thank you.

John Thomas

That concludes our conference call. A replay will be available after 11:00 central Time on our investor relations website at and after 11:00 am Central via telephone at 402-220-3880 confirmation code 7609229. The audio replay will be available until 4:00 pm next Wednesday April 29.

Thank you all for joining us today. Please call us if you have any follow up questions.


Thank you and this concludes today’s conference. You may disconnect at this time.

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