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Executives

Thomas C. Freyman - Chief Financial Officer and Executive Vice President of Finance

John B. Thomas - Vice President, Investor Relations

Analysts

Michael Weinstein - J.P. Morgan

Jami Rubin - Goldman Sachs

David Lewis - Morgan Stanley

Glenn Novarro - RBC Capital Markets

Bruce Nudell - UBS

Frederick Wise - Leerink Swann

Sara Michelmore - Cowen & Co.

Derrick Sung - Sanford Bernstein

Larry Biegelsen - Wells Fargo Securities

Catherine Arnold - Credit Suisse

Abbott Laboratories (ABT) Q2 2009 Earnings Call July 15, 2009 9:00 AM ET

Operator

Welcome to Abbott's second quarter 2009 earnings conference call. All participants will be able to listen-only until the question and answer portion of this call. (Operator Instructions).

This call is being recorded by Abbott. With the exception of any participants' questions asked during the question and answer session, the entire call including the question and answer session is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission.

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

John B. Thomas

Good morning and thanks for joining us. Also on today's call will be Tom Freyman, Executive Vice President, Finance and Chief Financial Officer. 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 diversified businesses. Following our comments, as always, we will take any questions that you have.

Some statements made today may be forward-looking. Abbot 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 1A, Risk Factors, to our annual report on 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 we have done 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 earnings news release and regulatory filings from today, which are available on our website at www.abbott.com. In addition, we will include operational sales results today as we did in the first quarter which are given on a constant currency basis, i.e., excluding foreign exchange, and of course, you can find all of that in our earnings news release.

With that, I will turn the call over to Tom.

Thomas C. Freyman

Good morning. Today we are pleased to report second quarter ongoing earnings per share of $0.89, at the high end of our guidance range of $0.87 to $0.89. We are also confirming our 2009 EPS guidance range reflecting double digit EPS growth and issuing our third quarter outlook, the midpoint of which reflects EPS growth of nearly 13%. This is particularly strong growth given the negative impact from generic Depakote this year and the global economic environment.

Regarding sales this quarter, operational growth, i.e., before exchange was 10.5% reflecting strong growth in our global vascular, international pharmaceuticals, and US nutritional businesses. Exchange was unfavorable 8%. So, on a reported basis, sales increased 2.5%. Recall that our international businesses report sales on a one-month lag, so our exchange impact reflects year-over-year currency changes for the three months ended, May 31st. This is the largest negative impact on exchange we have experienced in a single quarter in many years.

Excluding the negative effect of the decline in Depakote sales from generic competition of more than 4%, operational sales growth was 14.6%. Depakote negatively impacted global pharmaceutical growth by more than 7% and US pharmaceutical growth by nearly 15%.

The adjusted gross margin ratio in the quarter was 59.2%. This reflects an improvement of 80 basis points from the prior year. This was driven by improved performance of the nutritional and diagnostic businesses and a favorable impact on the ratio from foreign exchange. This improvement occurred despite the negative impact from lower Depakote sales.

Regarding spending levels in the quarter, both SG&A and R&D were in line with our forecast. R&D on an ongoing basis and excluding impact of exchange increased nearly 6% reflecting continued investment in our pipeline including programs in vascular and biologics as well as neuroscience, oncology, and HCV.

SG&A expense was 26.5% of sales reflecting our 2009 expectation of significant SG&A leverage. On an ongoing basis, excluding the impact of exchange, SG&A increased nearly 5%. Non-op income was $13 million, somewhat below our forecast. This line primarily reflects payments from Takeda related to our previous joint venture. It can also include other non-op items. In the quarter, we had some modest non-recurring offsets from Takeda and somewhat lower sales related payments. We expect this to normalize to the $50 to $60 million range over the third and fourth quarters.

Tax rate in the quarter was 17.8%, in line with our previous guidance.

As I mentioned earlier, today we are confirming our 2009 earnings per share guidance of $3.65 to $3.70 reflecting double digit growth over 2008. Regarding the 2009 sales outlook for the full year, we expect low to mid single digit growth on a reported basis including the incremental sales from AMO.

Our sales forecast for the full year includes an estimated negative impact from foreign exchange of somewhat more than 5% based on year-to-date performance and current exchange rates. As a result, we expect operational sales growth for the full year excluding exchange in the high single digits. We are forecasting a full year gross margin ratio of approximately 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 somewhat above 26% for the full year, which would reflect a reduction of more than 100 basis points this year. We continue to forecast R&D as a percentage of sales for the full year of approximately 9%.

Regarding other aspects of our 2009 outlook, we expect other income to approach $300 million related primarily to the conclusion of the TAP joint venture and we’re forecasting net interest expense of roughly $400 million including financing cost associated with the AMO transaction. As a result, when you look at the overall P&L for 2009, we expect further improvement in our operating margin ratio as well as our net margin ratio.

As we look at the third quarter, for the first time we’re providing third quarter ongoing earnings per share guidance of $0.88 to $0.90. The midpoint of this range reflects nearly 13% EPS growth. Also in the third quarter, we’re forecasting low to mid single digit sales growth on a reported basis. This includes an estimated negative impact on exchange of approximately 6%. So, on an operational basis, which excludes exchange, sales growth would be in the high single digits. We expect an ongoing gross margin ratio of 57% to 57.5% in the third quarter which is consistent with the gross margin ratio in the third quarter of 2008 despite the impact of Depakote.

Other income again primarily related to our previous TAP joint venture as forecast at around $60 million in the third quarter and the tax rate is expected to be between 17.5% and 18%.

Overall, we’re pleased with our second quarter performance and our ability to forecast another year of double digit EPS growth in 2009 including double digit EPS growth in the third quarter. We remain well positioned with our diversified mix of global businesses where we achieved market share gains in several of our leading growth franchises this quarter.

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

John B. Thomas

This morning, I will review the performance of our major business segments; pharmaceuticals, medical products, and nutritionals. I’ll focus primarily on operational sales which are given on a constant currency basis as I mentioned excluding the impact of foreign exchange. Our news release also contains a review of results for sales on both a reported and operational basis.

Let me begin with our pharmaceutical business where worldwide operational sales increased more than 11% excluding the impact of Depakote. In our immunology business, global Humira operational sales were up nearly 33% to more than $1.3 billion. This was driven by very strong international operational sales growth of 44% and more than 20% growth in our US business, in line with underlying demand. US Humira sales were $635 million, ahead of expectations.

We continue to grow faster than self-injectable anti-TNF market as reflected in this morning’s monthly prescription data which shows an accelerating TRx and NRx growth for Humira. In Crohn’s, Humira US prescription share is approaching 45%, and we’re pleased with our performance in the dermatology market where Humira total US prescription share now exceeds 35%, a gain of more than 20 share points since the psoriasis approval. In Western Europe, earlier this year, we surpassed Enbrel, and now hold the No. 1 share position in the total biologics market. Strong double digit market growth continues in each of the major European countries.

While we’ve seen several new competitors launch into the market this year, we haven’t seen much of an impact given Humira’s impressive profile in what continues to be an efficacy driven market. Our success across therapeutic indications is driven by Humira’s best-in-class profile and growing body of differentiating clinical data. During the quarter, we presented data in EULAR showing that more than half of patients with early rheumatoid arthritis treated with Humira plus methotrexate showed no further joint damage at 5 years.

Successful RA treatment depends on early diagnosis and aggressive treatment to prevent joint damage, and these data serve as further evidence that receiving the right treatment early yields the best outcomes.

The Humira product label includes 5-year radiographic progression data for established RA patients which demonstrate that Humira not only treats the symptoms but stops joint damage from getting worse. Humira is the only biologic with its proven long-term radiographic inhibition data in both patients with established and early RA. This is particularly important in today’s efficacy driven market significantly differentiating Humira from other products.

We also presented data at the Digestive Disease Week or DDW meeting which continues to demonstrate that Humira improves symptoms, induces and maintains remission, and reduces the need for steroids in Crohn’s disease. The gastroenterology segment continues to represent a significant opportunity for Humira. Beyond Crohn’s disease, phase III studies of Humira in ulcerative colitis and pediatric Crohn’s disease are ongoing. We plan to file regulatory applications for both indications next year.

Humira continues to represent a steady growth driver for Abbott in the coming years, and there continues to be room for additional patients to benefit as penetration in this overall market remains low.

So, based on the performance of Humira in the second quarter, we are very comfortable with our previous full year outlook for global Humira reported sales growth of 15% to 20% which includes the impact of exchange and operational sales growth of 25% to 30% excluding the negative impact of exchange.

Moving on to our lipid franchise, Niaspan sales were $208 million, up nearly 7%. TriCor Trilipix franchise sales were $336 million and that was up more than 9%. Both Niaspan and Trilipix continue to outperform the total cholesterol market which is growing in about the 4.5% range.

We’re pleased with the results of the launch of Trilipix, our next generation fibrate and the first and only fibrate approved for combination use with statins. Prescription trends indicate continued strong acceptance of this product. Growth of new patients has resulted in total market share gains for the overall franchise.

During the quarter and ahead of expectations, Abbott and AstraZeneca announced the FDA regulatory filing for Certriad, the fixed-dose combination of Trilipix and Crestor. Certriad provides comprehensive lipid management targeting all three lipids, HDL, LDL, and triglycerides, all in a single pill. The filing for Certriad is supported by data from multiple studies of Trilipix in combination with the most commonly prescribed doses of Crestor 5, 10, and 20 mg in large controlled clinical trials. In these studies, combination therapy improved HDL and triglycerides compared to Crestor alone, and improved LDL compared to Trilipix alone.

Abbott and AstraZeneca also announced an expanded partnership agreement to include AstraZeneca’s co-promotion of Trilipix in the United States. As a reminder, Abbott began co-promoting Crestor in 2008. Both agreements strategically positioned Abbott and AZ sales forces for the future approval of Certriad.

Also during the quarter, at the American Diabetes Association meeting, Abbott presented data demonstrating Trilipix in combination with Crestor helped patients with mixed dyslipidemia and type 2 diabetes meet ADA lipid targets. The analysis of two large clinical trials show combination therapy helped up to three times more patients reach all three key lipid targets than the predetermined monotherapy. Approximately 100 million US adults have dyslipidemia; of these, approximately 34 million have mixed dyslipidemia, a combination of two or more lipid abnormalities. Prevalence is expected to arise given increasing diabetes and obesity rates.

Abbott’s product portfolio is uniquely positioned to address the growing need for adjunctive and combination therapies, treatments that help patients achieve recommended lipid goals, and there continues to be significant opportunity for patients to benefit from adjunctive therapies as penetration rates remain low. So, as we look ahead for the third quarter in our lipid franchise including Trilipix and Niaspan, we expect double digit growth.

So moving on now to some other products within our pharmaceutical business, Synthroid is on track this year to deliver more than $400 million in total US sales. Global Kaletra sales were $343 million including nearly 14% operational international growth. Global Lupron sales were close to $200 million for the quarter and we expect approximately $800 million in total global Lupron sales in 2009.

Briefly, before we move to the performance of our medical products businesses, let me cover a few highlights from our pipeline. As I mentioned, Humira continues in phase III development for indications for UC and pediatric Crohn’s disease, and we expect US and EMEA regulatory filings next year. Also in late stage development in our immunology pipeline is ABT874 which is our anti-IL1223 biologic. We’re completing our phase III pivotal trials in psoriasis and planning for a global regulatory submission next year. We also continue phase II development in Crohn’s disease.

In oncology, we have three compounds in phase II development; our multi-targeted kinase inhibitor ABT869, our PARP-inhibitor ABT888, and our Bcl-2 inhibitor ABT263. During the quarter, we presented data on ABT263 and ABT869 at the American Society of Clinical Oncology or ASCO meeting showcasing our progress in this area. Both compounds were discovered by Abbott’s scientists and are being co-developed by Abbott and Roche formerly Genentech, and we now expect to initiate pivotal studies of ABT869 later this year.

We also have three hepatitis C compounds in human clinical trials including both polymerase 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 in the market in the coming years. These compounds have the potential to shorten treatment duration, improve tolerability, and increase cure rates.

We have numerous programs 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.

So, in summary, in our worldwide pharmaceutical business, as we look ahead to the third quarter, we expect sales growth to be flat on a reported basis which includes the continued impact of generic competition on Depakote sales as well as the negative impact of foreign exchange. Excluding foreign exchange, we expect operational sales growth in worldwide pharmaceuticals in the mid single digits.

Now, let me move on to our medical products and our vascular business where worldwide operational sales were $658 million in the second quarter or up more than 40%. 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 approximately $330 million in the quarter. In the Europe last month, we received CE mark for Xience Prime, our next generation drug-eluting stent. Xience V market share in Europe is now in the high 20s, and with Xience Prime now proved, we’d expect to see our market share position continue to steadily improve.

Xience Prime will be available in a broad-size matrix including sizes for small vessels and long lesions up to 38 mm. Xience prime uses the same flow study drug and proven bio-compatible polymer as our market leading Xience V stent. In addition, it offers a novel stent design and modified design for greater flexibility and improved deliverability. Xience Prime uses cobalt chromium technology which allows for very thin struts while maintaining strength to support the vessel and excellent visibility under x-ray during a stent implantation procedure. It’s also based upon the proven design of the multi-link family of stents which is the most widely used stent platform in the world and has been used in more than 2 million implants worldwide.

We recently made the first shipments of Xience Prime to select accounts and received a very positive feedback from several of the key opinion leaders who have implanted Prime. They’re clearly impressed with the deliverability of the platform particularly in challenging cases.

Last month, we also began enrollment in our US clinical trial for Xience Prime that is called Spirit Prime. This trial will build on the body of clinical evidence that supports Xience V through our Spirit family of clinical trials. We expect to launch Xience Prime in the US in the first half of 2012. We’re continuing to promote our 3-year Spirit II trial results which demonstrated the clinical advantages of Xience continued to increase over Boston Scientific Taxus Express and Taxus Liberte stents between 2 and 3 years.

We’re also continuing to execute on our strategy to drive Xience platform share which as you know includes both Xience as well as Boston Scientifics’ Promus. This has resulted in second quarter total Xience platform share that accounts for more than half of the total US market. Xience V alone holds share in the high 20s and remains the No. 1 drug-eluting stent.

The US DES market dynamics remain very positive with PCI volumes up low single digits, and US DES penetration is in the mid 70s, up nearly 10 percentage points from a year ago.

Xience V has clearly established its reputation as the best in class drug-eluting stent based on its superior clinical data as well as its deliverability profile, and with Xience Prime, we’re taking a significant step forward. The additional Spirit data presentations we’ve planned for later this year including three-year Spirit III data and one-year Spirit IV data at TCT will continue to support the reputation of Xience as a market leading, best-in-class drug-eluting stent.

We also look forward to launching Xience in several additional countries over the next year including China, Canada, and Japan. Behind Xience V and Xience Prime, we continue to advance several new products through development. So, let me briefly walk you through some of the more significant opportunities in vascular.

As I mentioned, we expect a fourth quarter approval and an early 2010 launch for Xience V in Japan. Japan is a more than $500 million DES market that had consistently high DES penetration rates and a preference for very low loss and highly deliverable platforms. Another addition to our DES portfolio is called Xience Nano. This small vessel 2.25 mm stent is on the market in Europe and it’s in development in the US.

We’re also working on a number of coronary products including a next generation bare metal stent, a frontline and high pressure balloon and new guidewires, and we’re launching multiple new products this year. In fact, our next generation balloon Voyager NC continues to perform very well in the US, growing share by more than 50% in the non-compliance balloon segments since its launch earlier this year.

And finally, we have the most advanced bio-absorbable drug-eluting stent in the industry with the opportunity to reach the market potentially years ahead of the competition. We’re actively enrolling patients in the next phase of our absorbed clinical program. Abbott is the only company with long-term clinical data evaluating the safety and performance of this next generation technology and we’re pleased with our continued progress in this area.

So, as we look ahead into the third quarter for Abbott vascular, we expect sales to be up low single digits on a year-over-year basis reflecting the impact of foreign exchange. Most importantly, we continue to drive considerable operating margin expansion in this business for the full year as we’ve discussed in the past.

Now, let me turn to our diagnostic business where worldwide operational sales increased about 4% in the second quarter. In our core laboratory diagnostic segment which includes immunochemistry and hematology, operational sales were up in the low single digits this quarter. Prism as well as Architect sales were up double digits worldwide as menu expansion helped to drive growth in our large installed instrument base. At next week’s AACC meeting, we’ll launch our new Architect C4000 and CI4100 instruments worldwide. Designed to meet the needs of small and mid sized laboratories, these analyzers will complete our Architect family. Pre-launch feedback from customers around the world has been exceptional and we anticipate quick acceptance of these new Architect systems.

Also during the quarter we continued efforts in our core diagnostic business to reduce overall costs, improve efficiencies, and expand operating margins.

In our point-of-care business, operational sales grew double digits in the quarter driven by strong cartridge sales. In molecular diagnostics, operational sales also increased strong double digits. In the quarter, Abbott advanced key molecular diagnostics programs showcasing our cutting edge science and disease monitoring and personalized medicine. For example, the Ibis T5000 was instrumental in identifying the H1N1 virus through collaboration with the Naval Health Research Center in San Diego. Abbott’s M2000 instrument in real-time PCR HIV1 assay were recently recommended by leading HIV/AIDS researchers to be the standard system for NIH sponsored HIV/AIDS clinical trials.

Earlier this week, we also expanded our work in pharmacogenomics and announced an agreement with Glaxo SmithKline to develop a companion diagnostic for its non-small cell lung cancer therapy currently in phase III clinical trials. These examples demonstrate Abbott’s dedication in anticipating disease trends to better develop future molecular diagnostic tests.

So, for our worldwide diagnostic business as we look ahead into the third quarter, may anticipate mid single digit decline which includes a negative impact of foreign exchange. A mid single digit decline is expected in our core laboratory business with double digit growth in molecular diagnostics and high single digit growth in point of care.

In our other medical products businesses, worldwide operational sales in our diabetes business increased 2.6% in the quarter. While the market has been negatively impacted by the economy to some degree, we continue to grow our prescription share. We’ve targeted our efforts to continue to educate patients on the importance of regular glucose testing and we continue to be focused on growing our share. In the third quarter in our global diabetes business, we expect a low double digit decline in reported sales which includes the negative impact of foreign exchange.

Let’s move on to our vision care business where sales in the quarter were $265 million. AMO continues to hold the No. 1 market position refractive with leading share in Excimer technology. We also hold the No. 2 market position in cataract surgery over gaining share with our Tecnis monofocal and multifocal IOL franchise. We also hold a No. 3 share position in corneal care.

Next, let me cover our global nutritional business where operational sales were up 9.2% in the quarter. Internationally, operational sales were up 8.4% with pediatric nutritionals up 11.7%. We launched our next generation Similac and gain products in Mexico with plans to expand at 8 more countries this year. The new formulations further build upon our scientific heritage focusing on brain, bone, and immunity claims. We continue to expand our presence in emerging markets as these areas present a growing opportunity for both pediatric and adult nutrition products.

In the US nutritional sales increased 10%. Over the last year, this business has launched a total of more than 25 new brands, new product lines, or new packaging, allowing Abbott to gain significant share across its brands in both pediatric and adult nutritional businesses. We’re now the leader in every category in which we compete. In our infant formula business where we’ve grown our share significantly in the last 12 months, we’re the clear market leader. In the retail segment, we hold a commanding share lead over the next competitor.

As you know, last year we launched our new Similac Advance EarlyShield infant formula which includes a unique blend of nucleotides, probiotics, and antioxidants that support the baby’s immune system and are closer than ever to breast milk. This new formulation was introduced in our simple pack, an innovative rip, flip, scoop design package. The inside and outside innovations of Similac EarlyShield had been very well received by our customers.

Our adult business is also performing well. We’ve launched a number of new ad campaigns and we’re focusing on the science behind our products. We continue to be share leaders in both our Glucerna and Ensure brands as well as our therapeutic nutritional products which make up a significant portion of our adult nutritional sales.

So, as we look ahead into the third quarter on the nutritionals business in the US, we expect mid to high single digit growth and outside the US we expect double digit growth which includes the impact of foreign exchange.

So, overall in summary, we’re very pleased with our strong performance this quarter, our outlook for double digit EPS growth this year and the progress we’ve made regarding new product flow including the earlier than expected submission for Certriad and the CE mark we received for Xience Prime.

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

Question-and-Answer Session

Operator

(Operator Instructions). Our first question is from Michael Weinstein - J.P. Morgan.

Michael Weinstein - J.P. Morgan

Let me start with Humira, the June IMS monthly Rx’s that were out this morning and the total Rx’s were up 28%; my question is with the revenues you showed this morning, do you still think that there was some de-stocking this quarter; actually thought we might see some re-stocking in light of how much product came out of the category in the first quarter because it still would appear to be that your growth is still a little bit below demand trend.

Thomas C. Freyman

I think that’s an interesting question and possibly true; as you know, we struggled with the data for a number of months in this whole market in what true demand is; when we looked at inventories at the end of the first quarter, we are very comfortable with where we are at and we continue to be very comfortable at the end of the second quarter. The question is, was underlying demand in the quarter a little stronger than what our reported sales show; and yes, with the data that came out today, I said that’s possible, but as I said earlier, we struggled with this data, I think everyone has in these segments, and I think as the year plays out, we’ll see if that’s really true.

John B. Thomas

I’d add to that, Mike, that there’s been a lot of questions about the IMS data and I think what it’s demonstrating is that as this market, the self-injectable anti-TNF market in particular shifts from a retail focused to a specialty pharma focused IMS and they acknowledge this with an uphold and they put out on Monday morning is having some challenges sort of capturing the full essence of what’s going on in the market; so, it’s just one data point; I think what we’d like to tell people is it’s interesting it’s important to track, but it’s one point in an otherwise strong market and it doesn’t really reflect the overall reality, it’s certainly not a perfect science, and our internal data that we see continues to support the expectations that we put out there that I talked about in my call script about 15% to 20% reported and 25% to 30%, and I think you’re seeing that as some of these re-statements come out, we get a little clarity on what the real underlying strength is.

Thomas C. Freyman

But obviously the second quarter does show that the acceleration in the market that we had anticipated and talked about on the first quarter call is happening, and as John said, things are very much in line with our expectations we set back at that point in time and may be going a little better than that.

Michael Weinstein - J.P. Morgan

Tom, you’re going to launch Xience Prime in Europe in the third quarter, you already have the approval; do you know if your OEM partner that markets right now Promus is going to market Promus Prime or are they going to wait for their own project approval?

Thomas C. Freyman

Yes Mike, it’s our understanding and I think Boston has been pretty public about that that they’re developing their own Taxus element and Promus element products, and last I heard they had every indication of launching those products in Europe later this year some time; so, it appears that that’s part of their strategy, so it’s probably best to let them answer any specific questions about plans from here.

Michael Weinstein - J.P. Morgan

So, is it your understanding that you will be the only one launching a prime product and it won’t be a Promus Prime?

Thomas C. Freyman

That is correct.

Michael Weinstein - J.P. Morgan

And then last question; you announced during the quarter the co-promo on Trilipix, when shall we see that kick into effect and can you give us just some marketing plans between the two companies?

Thomas C. Freyman

We did announce this expanded agreement to co-promote Trilipix in the US with AZ. Their sales force began detailing that on July 1st; so, it’s similar to the co-promotion agreement that we had for Crestor that we signed if you recall last July, and I think they’re both reflective of both companies’ belief that this is a growing market, these are very strong products and strategically position both sales forces well as we prepare for the more important bigger opportunity Certriad which is going to address the modest to severe patient population and we think would do that pretty well.

Operator

Our next question is from Jami Rubin - Goldman Sachs.

Jami Rubin - Goldman Sachs

I just have a couple; Tom, if you could go over again the issues related to other income this quarter which was just $13 million, if you could clarify why there wasn’t a TAP payment, what that payment would have been, and also if you could quantify what the non-recurring charges were this quarter; should I assume that it sort of normalized, other income is around $50 million, and based on my math that would be about 2 pennies per share, but if you could add color around that, first.

Thomas C. Freyman

Yes, as I said, certainly there were payments during the quarter and there was a partial offset, we took some small amount of off-charges associated with some equity securities we had that would partially offset the number in the quarter, and there’s always going to be a little noise in this line beyond the TAP payments solely. We really believe that based upon the sustainable sales pay for the products that is subject to these payments, 50, 60, may be even a little more as a normalized quarterly level, obviously Takeda is in transition with their portfolio with some of their older products nearly end of their lifecycle and they’ve got some other products ramping up; so, there’s always going to be some noise quarter over quarter, and as I indicated in my remarks, $50 to $60 million over the last two quarter per quarter is more of a normalized level.

Jami Rubin - Goldman Sachs

And just a followup question on Humira, obviously there are new competitors to the marketplace with Simponi and Cimzia, but thus far it seems that those products have had a negligible impact; can you talk about what you’re hearing anecdotally; it is also early and typically it takes managed care of 6 months to add these products to their formulary, so, I’m just wondering if you could add a little bit more color around what you’re seeing there; and then just third question around Humira, international operational sales growth up 44%, how durable is the pricing environment or the reimbursement environment in Europe?

John B. Thomas

To answer your last question first, it’s very durable. We continue to see very strong penetration, good growth opportunities, it has not been a significant factor; we understand the government cycles and the payer programs very well and we forecast those out, and as we look into next year, we expect continued strong double-digit growth for Humira internationally; don’t see payers as a significant hurdle; I think, they understand the benefits of the product and as we continue to put out more clinical data that shows earlier treatment with the product is important for stopping disease progression and radiographic data and all these things help as we continue to penetrate in what is a very under-penetrated market.

With regard to new competition, there have been a couple of new competitors on the market. I would say that they are tracking in line with our very modest expectations. You probably see this as well and I am sure you can appreciate that the first 8 to 12 weeks of a product’s launch pretty much define the long-term success of the product. So, I’d say that both of those products are going as we expected. In fact, if you look at the one larger product from our competitor in the self-injectable category, Simponi, it’s I believe, the last I checked, had about 500 TRx’s total on a weekly basis and that’s been about the same for the last three weeks. To put that in perspective, there are 61,000 total prescriptions in this market every week. We have about 26,000 total prescriptions. The other product, Cimzia; their indication for RA has had negligible impact if any on the market. So, it’s going along as we expected, and I think, as we look at Humira, obviously very comfortable with the overall competitive profile, the clinical profile, and as I said in my remarks, it’s an efficacy driven market and the anecdotal feedback we’re getting is there is a full appreciation for the fact that Humira efficacy is best in class.

Operator

Our next question is from David Lewis - Morgan Stanley.

David Lewis - Morgan Stanley

Tom, just a couple of questions here on leverage, and then maybe going back to TAP here for a second; I assume you’re still saying that TAP is going to come in close to $300 million for this year; if that’s the case and if you think about the sustainable gross margins that you see largely in diagnostics and some other areas, why don’t we see upsides in numbers this year if this gross margin holds an TAP returns here in the back half?

Thomas C. Freyman

Obviously, TAP doesn’t impact the gross margin line; that’s in the non-op category. As I said, regularly over these calls, over the last few calls and as we forecasted ’09, Depakote has been a big wind for us as we go through the year as a profitable pharmaceutical product, and I think the fact that we’re holding gross margins steady to slightly favorable for the year is a huge testament to the underlying profitability of our growth products and how they’ve overcome the Depakote situation. Obviously, we will have lasted Depakote this year, by the end of the year, and I think we can start seeing a little more of the underlying profitability, the improvements in margins in the diagnostics business continuing leveraging of volumes through vascular and our pharma portfolio, it’ll start moving that gross margin a little faster the way we all want to see it going. So, I think the accomplishment this year in light of the headwind is very good.

David Lewis - Morgan Stanley

So if gross margins hold these gains and obviously TAP returns in the back half, you still don’t believe there can be an upside of these expectations?

Thomas C. Freyman

What expectations are you talking about?

David Lewis - Morgan Stanley

Earnings expectations?

Thomas C. Freyman

We hold our guidance steady. I’d remind you that the upper end of our guidance is 370; so there is plenty of room to overdeliver midpoints and the types of things we talked about earlier in the year, and I think in this environment at this point in time we’ve pretty much chosen to keep our powder dry. Certainly, the possibility of dropping more pennies is there and we also have to look at 2010 and ask ourselves if we really want to set ourselves up to continue to drive the momentum we saw in this quarter. If you look at what happened in the pharma business this quarter compared to the angst in the first quarter, it was really a return to normal, and so, I feel really good about our momentum, not only with Humira, but with all the products, and carrying that momentum into 2010 is something we’re going to have to think about as we look at the earnings power of the company and what we want to do with that.

David Lewis - Morgan Stanley

A related question heading into 2010; as we think about your operational growth of 10.5%, which is effectively one of the highest in healthcare, still driving earnings growth in line with that top line; as earnings or top lines, I think, as it decelerates heading into 2010, how confident are you in an ability to still deliver 10% to 12% earnings growth?

Thomas C. Freyman

I don’t know what you’re talking about, about the top line decelerating. First of all, we’ve never provided any forecast of that at all. As a matter of fact I think on our last quarter’s call, Miles talked about sustainable growth of our top line of upper single to low double. We feel very good about our ability to maintain sales growth. If you’re touching on 2010, what I would say about that obviously it’s six months from our typical time of providing guidance, it’s very very early, and there are a lot of things going on, but we always target double-digit growth as a baseline and that continues to be what we’re going to be doing as we go into 2010, and I think we’re going to have a very healthy top line to support it.

David Lewis - Morgan Stanley

John, just one quick question and I’ll jump back in queue, just on AMO specifically; can you just talk about trends in that business, whether you see a relative stabilization or whether that business is tracking in line with plan?

John B. Thomas

It’s definitely tracking in line with our model. Remember when we announced the deal, we took a conservative stance on this business given the economy and the fact that LASIK is a big part of their business and we know that LASIK is affected by people’s decisions around something like that, and people are trying to save and so forth. So, I’d say it’s going as we thought, it is to some degree a smaller business, but it is a wild card if you will on the economy. When the economy starts to improve, would expect that in particular LASIK procedures would pick up and that would be a strength for us going forward. So, I’d say in line. Cataract continues to do well; it’s a mid high single-digit type grower. The solutions business is a mid single-digit type grower. As I mentioned, once the economy starts to turn, LASIK is clearly a double-digit grower and obviously has the largest installed base.

Operator

Our next question is from Glenn Novarro - RBC Capital Markets.

Glenn Novarro - RBC Capital Markets

When I think about two issues that we get pushed on the most, obviously it’s Humira, and I think you put that issue to rest today with an excellent Humira quarter. The other tends to be the tax rates. I am just wondering what your views are on what the government may do with international earnings. It seems like from what J&J was saying that that issue was put to rest, but I just want to get your thoughts on that, Tom.

Thomas C. Freyman

There was a lot of noise on this, earlier in the year there was a proposal floated, but things have gone very very quiet in the last month or so, last 6 weeks. Obviously there is a lot more focus on healthcare reform and I think that’s what everyone is talking about. To me it’s encouraging that more and more it seems like any proposals in this area are not going to be used as a pay for healthcare reform, and that if any thing changes, it will probably push more in 2010 and be more in a comprehensive approach to the tax policy which is obviously a wise thing to do. It’s very unclear where that would ever lead. So, I agree with the comments made yesterday; this seems to have gone to the backburner and the fact that it’s not being linked to healthcare, I think, is a positive.

Glenn Novarro - RBC Capital Markets

So when I think about the tax rate for 2010 and beyond; we’re modeling the tax rate moving up a bit from about 18% to maybe 19%; that’s realistic, we shouldn’t expect any major uptick over the coming years?

Thomas C. Freyman

Even on the tax reform proposals that were floated earlier, they were talking about implementation starting in 2011. So, even if there were changes, I don’t think 2010 would be inconsistent with the trends we’ve had.

Glenn Novarro - RBC Capital Markets

Just quickly across the tape very early this morning, there was some M&A speculation regarding Sylvan, Abbott was mentioned in that. I am wondering if you can provide some comments there.

Thomas C. Freyman

As we’ve said many times before, when we always look at opportunities across our businesses, we just don’t comment on rumors or speculations. I did see the article you’re referring to and I guess I can say as I read it that we have no interest in expanding our participation in the fenofibrate market which was implied in that article, because we already have a very strong presence there and an adequate investment. I guess that’s all I can say on the article I saw today.

Glenn Novarro - RBC Capital Markets

Just as a followup on the M&A strategy, I think you’ve been consistent this year saying nothing major on the horizon; is that accurate, and maybe just want to reiterate what your thoughts are on M&A for the rest of this year.

Thomas C. Freyman

We’ve always said that we have no interest in mega-mergers; if that’s what you’re talking about, major. We’ve always done very well with either smaller niche or augmentations of our business-type acquisition or medium-sized deals that are very manageable from a synergies point of view or from an integration point of view that have interesting characteristics, and I think that continues to be our strategy. We’re very comfortable with that, and really consistent with my earlier comment, we’re always looking at things and there’s nothing that I can talk about today, but if anything did come to pass, it would be something that would be strategically beneficial for Abbott if we pursued it.

Operator

Our next question is from Bruce Nudell - UBS.

Bruce Nudell - UBS

When we look at the IMS scripts for Humira, clearly the restatement had a big impact on the impression people come away with, but if you just say absolute scripts stay about where they are for the last month or so and no restocking in 4Q which has historically been a strong restocking quarter, you get to like the 14% revenue growth or so for the year, a little under $2.6 billion. First of all, is restocking in 4Q a thing of the past and also, the one lingering thing that’s in the IMS data is NRx trends which had in the past pretty well paralleled TRx trends. They’ve diverged and they’ve gone better with the restatement but they are not quite where the TRx growth rates; could you give any feel for the technical significance for that or is it just remaining under-sampling of NRx given the channels today.

Thomas C. Freyman

Obviously in the fourth quarter of ’08 as we talked about in the first quarter call, in the anticipation of continued very strong growth that we saw in the fourth quarter of ’08, there was some purchasing of inventories by the trade getting ready for that, and for the fourth quarter was strong. We do not expect that to recur this year, obviously you won’t have that buying that you saw in ’08 and so I think you’re going to see probably the fourth quarter Humira sales will be below the scripts generated because the comps to the prior year will not be there. So, I think you’re going to see a break in that trend consistent with what you suggested, and John can talk about the NRx data.

John B. Thomas

As I mentioned earlier, I think this shift from retail to specialty pharma where we’re seeing a growing shift and use of specialty pharma which is good; it’s good for the product, it’s good for patients, and that shift has definitely impacted data collection and reporting by services such as IMS. So, they’re trying to keep up with that. I would say that there’s going to be fluctuations in this data. The internal tracking data that we use as I mentioned before supports our position of strong continued growth and probably low double-digit to the mid teens type growth in the US on a revenue basis.

Bruce Nudell - UBS

With volume being more closely approximated by TRx, is that fair?

John B. Thomas

Yes, TRx has been more reflective of really what’s happening and that’s been in the low 20s if you look at the new data that came out today, the June monthly data, that was out. The TRx was actually, as somebody mentioned earlier, was up to 28, and NRx was 16. We think the overall average there is probably in the low 20s for TRx growth for the quarter and I think that’s fair. That’s probably a pretty accurate assessment.

Bruce Nudell - UBS

There was another bit of news that came out that was opaque to the street pertaining to I think Arbiter-6 with Niaspan versus Zetia with a new interval endpoint; everything was on top of statin therapy; do you guys have any insight into what actually happened in that trial and when might those results be disclosed, and do you think it’s fundamentally important for Niaspan?

Thomas C. Freyman

Well, it’s not our study. It’s an independent investigator study and what appeared to happen there is in June that independent steering committee for this Arbiter-6 Halt trial stopped the study based on the results of a pre-certified blinded interim analysis. What they did say is that it wasn’t stopped due to any safety concerns; they didn’t say anything further than that. So, we can’t really speculate on it since it’s not our study, but I would tell you there is a pretty significant body of clinical evidence if you look back at some of the previous studies that show the ability of niacin to promote regression of arteriosclerosis. So, that’s encouraging, but we don’t know the study results and we’ll find out probably when you do.

Operator

Our next question is from Frederick Wise - Leerink Swann.

Frederick Wise - Leerink Swann

A couple of vascular and stent questions if I could; Boston’s Promus products are possibly set to launch late this year or early next year, but are orders to you for Promus likely to affect second half sales and are you seeing any pullback or would you expect to see any pullback in orders, and just how do you want us to think about the second half as those events possibly approach?

Thomas C. Freyman

Clearly, we forecasted in the numbers we provided today for the likely slowdown in those purchases. I think John can add a few things here.

John B. Thomas

We’re not in a position to comment specifically on the ordering patterns. I would just say as we’ve said many times before we have and we will continue to meet the customer demands for Xience V, and we’ll continue to supply our partner here in accordance with the distribution agreement. So, we have ample supply of Xience to provide them within set ordering pattern parameters.

Frederick Wise - Leerink Swann

Let me follow up from a different angle; the international stent story seems very dynamic in the near-term with a lot of product launches; Japan, etc., obviously US, the big deal would be 2012, but US vascular business overall in the last three quarters has been about $395 million. can you give us some perspective on how do we think about that going forward; is it basically static, what are the moving pieces there, and more specifically, drilling down to the US stent number, it was something like $9 million or $10 million sequentially last; are you losing ground on the stent side; is it something else, and maybe what turns that around in the second half or 2010?

John B. Thomas

We’re actually pretty pleased with our DES franchise sales. They’re in line with what we expect for the quarter and the year. As you know, there are different components in that including Xience, Promus, and some third-party revenue that we get as a result of Medtronic Endeavor agreement. As that Medtronic revenue has gone down as their market share has gone down, that’s affected it to some degree. We’ve seen Xience go up, we’ve seen Promus go up; we like that. I think what’s changed there is that in those accounts, in those Boston accounts, where they have strongholds, we’re encouraging our sales forces, encouraging them that if they can’t choose Xience to choose Promus, and so as a result the platform share between Xience and Promus has grown nicely up into the low to mid 50s, and so that’s pretty good, and we’re encouraged by the trends in the market with PCI volume increasing in the low single and DES penetration rates in the mid 70s. So, we see steady improvement and further execution from our sales force as we continue to promote the good clinical trial results that we just had. So, we’re still expecting about a billion dollars in sales this year, and that’s right in line with our thinking, and obviously Tom can talk more about this, but the big impact is to the bottom line this year for this division.

Thomas C. Freyman

Yes, we saw again in this quarter very very strong op margins for vascular which as you know was losing money a couple of years ago and all of that is playing out very nicely that the profit contribution is significantly more than the sales contribution, and we think that’s going to continue into 2010.

Frederick Wise - Leerink Swann

Just a final push on that if I could Tom, do we think of the US business in dollars as roughly flat until we get to the approval in 2012?

Thomas C. Freyman

I wouldn’t think that. You’ve got market growth, you’ve got share opportunities, and you’ve got other things in the portfolio. John went through a long list of innovations planned in that vascular area beyond stents. So, I perceive growth in the US market even before the timeframe you mentioned.

Operator

Our next question is from Sara Michelmore - Cowen & Co.

Sara Michelmore - Cowen & Co.

Let me just go back to the AMO business just to clarify there; is the revenue performance this quarter in line with your expectations and if you could just give us an update now that you’ve got it under your belt here, plus the quotes for four months plus, what kind of changes or integration progress have you made with that business?

Thomas C. Freyman

I’ll just say the sales are right in line with our model expectations; this has been a very straightforward integration. We’ve left the management team intact and the organization is operating independently as most of our medical devices businesses are, and I think the chemistry with the team there and with the Abbott team is very very good. So, we’re very pleased with the way it’s progressing and there have been no surprises. We have a little more work to do to fully integrate, but that should be completed by the end of this year.

Sara Michelmore - Cowen & Co.

On Trilipix, can we just get an update on the formulary status of that product, what’s the progress been and can you just give us the sense of where it’s tracking relative to your plan this year?

Thomas C. Freyman

Yes, we continue to make very good progress. As we’ve said in the past, our managed care organization does an excellent job of getting on formulary and we would expect that we continue to gain formulary position. I’ll not be able to give you specifics today, but I would say we’re very well positioned, and we’re very pleased with how that product has performed with the launch which is going according to expectations and we continue to pick up more TriCor patients that are now taking Trilipix as well as new patients to combination therapy.

Sara Michelmore - Cowen & Co.

On Humira; the last quarter you talked about some of the new marketing programs that you had initiated earlier in the year, some of the patient assistance programs and things like that; could you just give us an update in terms of the progress of those specific marketing programs and what you continued, what you think has been successful or not?

Thomas C. Freyman

Yes, we did talk about that earlier in the year as we responded to some modest economic pressure that we’re seeing for higher-cost therapies that other companies are seeing as well with new copay programs and some new efforts to further expand awareness of our patient education initiatives and patient assistance programs through myhumira.com and some other things. I’d say those are going very well. Clearly, they’re having an impact. The patients appreciate it and we’re retaining more patients and also picking up new patients. So, I’d say overall we’re very pleased.

Sara Michelmore - Cowen & Co.

On Spirit IV; how significant is that trial do you think in terms of the potential post-release market dynamics if that was in fact to be positive; what’s your latest view on that?

Thomas C. Freyman

I think there’s clearly some attention around that. We’ll see at TCT. By the way, it’s likely that we will do an analyst meeting at that event. We’ll get you details on all that later, but we’re anticipating the release of Spirit IV as well as Spirit III three-year data. I think, given that it’s evaluating as you know a more real-world patient population that’s more complex and in some cases up to three lesions with the maximum of two lesions per vessel, some bifurcations and the fact that more than 30% of those patients in that study are diabetics, I think, there’s a lot of focus on it and rightly so, we’ll see what the results show, and that could give us an opportunity if it’s positive to have another advantage against our primary competition.

Operator

Our next question is from Derrick Sung - Sanford Bernstein.

Derrick Sung - Sanford Bernstein

A question on the stent market and pricing there; we’ve heard that at least in the ortho market, hospitals have been getting more aggressive and they’re pushing back and renegotiating contracts, etc.; can you speak to what the pricing environment is in the drug-eluting stent market today?

Thomas C. Freyman

Yes, I’d say we’re very pleased with our premium price which is still the high end of the market. There has obviously been some modest downward price in that market, but that’s particularly amongst a couple of our competitors and not Xience. So we’ve held price very well. Our average ASP is still the highest in the market and relatively stable based on the market average. So, we think it deserves the price premium. We’re still doing quite well as you know gaining share. So, I would say that there are always pockets here and there that people hear about, but nothing overall in terms of overall price.

Derrick Sung - Sanford Bernstein

So, you’re not seeing a more aggressive stand from the hospitals in terms of their pushback on pricing?

Thomas C. Freyman

There’s a little bit of that obviously. There’s some economic pressure on hospitals overall, but we’ve been able to maintain good pricing and very reasonable rates and prices for Xience given its clinical advantages.

Derrick Sung - Sanford Bernstein

Let me ask you to dive into a little bit more detail on gross margins. I think you called out earlier in the call nutritionals and diagnostic systems contributing to the gross margins; can you get a little bit more specific there; in nutritionals, how much of that is commodity prices, and in diagnostics, just specifically, where is that margin coming from, and give us a sense of how sustaining all that would be say when we launch 2009?

Thomas C. Freyman

Diagnostics as you know we undertook a pretty extensive cost reduction initiative in the middle of ’08 and we’re starting to see some of the fruits of that. Interestingly, we’re seeing a firmer pricing in diagnostics too, and we talked a little bit about the way we’ve approached our product portfolio and our offerings. This was a business that saw steady modest declines in price year over year, and we’ve been able to firm that up and actually do a little better in price historically. So, diagnostics; it is really a broad-based approach to improving the profitability of the business; we’re starting to see some of the benefits of that on the gross margin line and on the op margin line. Nutritionals; obviously, commodities are much better than they were a year to 18 months ago. This is a market where we’ve been, particularly outside the US, when the commodities went up, we were able to pass some of that through in the form of price. So, that’s been a mitigator, and some of that carried forward and allowed us to move the gross margins a little bit better in nutrition. So, it’s just basic blocking and tackling, good trends, good cost management, and some degree of pricing.

Derrick Sung - Sanford Bernstein

On Humira, internationally, you’ve been seeing above 40% growth for more than the last few quarter, that’s a pretty high growth rate; how sustainable is that; and I know that you’ve been talking about international penetration being low, but is there something more to it than international penetration; how can you get us comfortable with the sustainability of that.

Thomas C. Freyman

I’d say a couple of things. The execution of our organization outside the US has been outstanding. A lot of this has been market growth, but a lot of it has been share gain, and I don’t think you can diminish that at all. I think we’re really good at it and have done a tremendous job in execution on all the indications, and that’s been a big part of our success. As we look at ’10, we see continued very strong double-digit growth for Humira. It’s going to be a nice contributor for us outside the US as it will be in the US. Can you grow 40% to 50% forever; obviously not, but we see 2010 as very very strong.

Operator

Our next question is from Larry Biegelsen - Wells Fargo Securities.

Larry Biegelsen - Wells Fargo Securities

Following up on Arbiter-6 Halt, do you guys have any idea when we will see the results and based on your reading of the design paper, do you think it was not stopped for futility?

John B. Thomas

It’s not our place to comment on that Larry, and it’s the investigators’ responsibility and decision as to where that data may be presented or if it’s going to be in a major scientific publication, I think you’d be better off asking him. Certainly, there are some big conferences coming up like ACC in the spring and AHA in November. So, what to see; it’s his decision.

Larry Biegelsen - Wells Fargo Securities

On the Humira monthly study that you guys completed, I understand you don’t want to say much for competitive reasons, but when could we expect to see that data for the first time; would it just be if the trial was successful and you had enough dated label?

John B. Thomas

I don’t have any further information there in terms of timing of when that might happen. That’s a small study, it’s interesting, we’re evaluating it, but there’s really not much more to say at this point.

Larry Biegelsen - Wells Fargo Securities

On the Accord study, do you guys know when that data is going to be presented, and you’ve commented publicly that you thought it was a poorly designed study; what are you doing to mitigate the risk, do you plan to do a better designed study?

John B. Thomas

Obviously, the Accord study is not our study; it’s an NIH study, it’s still in progress, so we can’t speculate on results. I believe, it’s fairly well known that it’s expected in early 2010 or late this year. I would just say that it’s I think pretty well known in the physician community that the expectations on that study given the trial design and the baseline characteristics of the patient population, that the expectations are modest, and so we continue to talk to clinicians about it. I don’t think, from the ones we talked to, expected to change anybody’s treatment practice pattern based on the data that’s already existing out there with the benefits of triglycerides and the fact that these are patients that had only moderately elevated borderline normal triglycerides; they’re not your typical patients that’s treated which is generally defined as patients who have triglycerides well in excess of 200. So, it’s not clear when that’ll be out, but I think the expectations are pretty modest and they should be.

Operator

Our final question today is from Catherine Arnold - Credit Suisse.

Catherine Arnold - Credit Suisse

I just wanted to ask you about Vicodin CR and given the FDA panel, if you could just talk about what you think the process is there in terms of approval and given a change in your view on the opportunity; and then, I wanted to comment on the currency hit to Humira; obviously, the last two quarters you’ve highlighted that it’s been more powerful for Humira than the consolidated impact; could you give us any guidance for the back half of the year if we think about currencies staying where it is or using average rates for the second quarter; how we should be thinking about modeling Humira currency impact international sales.

John B. Thomas

I would just tell you we’re continuing to evaluate next steps on a program path for Vicodin CR. We have nothing specific to share at this time, but I think the expectations have been dialed back on that program as you know. We don’t have any Vicodin CR sales in our model for this year, and I think, most people have taken it out and we dialed it down, and that’s fine. I would say and you’ve probably seen there is something posted to clinicaltrials.gov that we’re developing a modified formulation of Vicodin CR. It’s a phase II study, and so we’re looking at potentially next steps to bring that program forward. The CLR that we received last year, we’re not talking about the details, but I would just say that the previous formulation we had of that Vicodin CR program is no longer in development, but we do have this Meltrex form, and I would consider it a wildcard type R&D program. As far as the FDA panel on pain products, I think it’s important to put that in context. For Abbott, we showed up in some reports on that as if we were selling all of Vicodin. You probably know, 99% of the market is generic, we don’t sell that. Our branded Vicodin is only $30 million to $40 million per year.

Catherine Arnold - Credit Suisse

I mean if you can get more forward looking.

John B. Thomas

The panel is really, I would say, it’s an advisory panel, it’s not binding; it’s the agency’s call. I think a ban on these products as it was discussed is probably not going to happen, that seems pretty unlikely. These are products that have been used safely for decades and a lot of patients need them and trust them and some of these panels sometimes, as you probably know, there was an FDA advisory committee with Darvon, Darvocet, and that committee voted for a ban, but the FDA decided that a stronger warning was more appropriate. So, perhaps, we’ll see something like that.

Thomas C. Freyman

The Humira question; what should guide here is kind of a country mix issue, and this is similar to what we saw in the first quarter just to give you a few data points. During the quarter, the euro was about 15% weaker than the prior year, the Sterling was 26% weaker, and in both of those markets Humira is a larger percentage of the sales base than other products; it’s a very large percent of the sales base; whereas the yen was about 6% stronger in the quarter and it’s a very small percent there because we’re still ramping up in Japan. So, when you run all these mix FX through, that’s really why Humira has a bigger exchange impact relative to the average product in our international pharmaceutical business. I think you can expect that to continue in the third quarter as we talked about roughly 6% across the company is what we would guess the exchange is going to be in the quarter assuming current rates hold. I think by the fourth quarter we see exchange being pretty flat to slightly negative, and so pretty much that will evolve through by then.

John B. Thomas

That concludes our conference call. I would say in conclusion that we’re obviously very pleased with the strong quarter which we believe was ahead of the estimates as of a few days ago at least. We delivered very strong double-digit operational sales growth. We confirmed double-digit EPS for the full year. As Tom mentioned, we continue to target double-digits going into 2010. We have good momentum in our base businesses. Humira performance was very strong this quarter. We look forward to a full year, that is continued strong growth, with that product as well as some of our other major operating businesses, and with that we are going to conclude the call. A replay will be available after 11 o’clock Central Time today on our Investor Relations website at abbottinvestor.com and after 11 Central via telephone at 402-20-0185, confirmation code 9401. The audio replay will be available until 4 pm on Wednesday, July 29, 2009. Thank you all for joining us.

Operator

Thank you. This concludes today’s conference. Thank you for participating. You may disconnect at this time.

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Source: Abbott Laboratories, Q2 2009 Earnings Call Transcript
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