Abbott Laboratories ABT
Q2 2013 Earnings Call Transcript
Transcript Call Date 07/17/2013

Operator: Good morning, and thank you for standing by. Welcome to Abbott's Second Quarter 2013 Earnings Conference Call. All participants will be able to listen only until the question-and-answer portion of this call. Should you become disconnected throughout this conference call, please dial 1-773-799-3472 and reference the Abbott earnings call.

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

I would now like to introduce Mr. Brian Yoor, Vice President, Investor Relations.

Brian Yoor - VP, IR: Good morning, and thank you for joining us. Joining me today on the call will be Miles White, Chairman of the Board and Chief Executive Officer and Tom Freyman, Executive Vice President, Finance and Chief Financial Officer. Miles will provide opening remarks and Tom and I will discuss our performance in more detail. Following our comments, Miles, Tom, and I will take your questions.

Before we get started some statements made today maybe forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2013. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.

Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A Risk Factors to our Annual Report on Securities and Exchange Commission Form 10-K for the year ended December 31, 2012. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments except as required by law.

In today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which will be available on our website at abbott.com.

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

Miles D. White - Chairman and CEO: Thanks Brian. Good morning. This morning, we reported ongoing earnings per share of $0.46, exceeding our previous guidance range and we are confirming our full year 2013 EPS outlook for double-digit growth. Sales increased more than 4% operationally, led by continued strong performance in emerging markets as well as Diagnostics and Nutrition. Abbott continues to deliver on its expectations, despite the recent depreciation of several foreign currencies and a mixed global economy.

Before I comment on our results, let me address at a high level some of these dynamics. Our earnings performance was strong despite a more negative impact from foreign currency than we had forecasted in April. As you know, the yen depreciated further over the last few months and was the primary driver of unfavorable exchange. Several emerging market currencies also weakened late in the second quarter. This resulted in an unfavorable exchange impact on sales of 1.7%, more than our forecast of 1%. The underlying fundamentals are good; however, especially around gross margin improvement and expense management, which all are progressing ahead of schedule. As we look at total Company sales, our results were strong in our growth market and in line with our expectation in developed markets. Sales in developed markets declined about 1% in foreign exchange, which was less of a decline than we saw in the first quarter. Our businesses in these markets are generally more subject to reimbursement and austerity pressures, however in diagnostics one of our most durable growth businesses, sales in developed markets increased 3% before exchange.

While these markets continue to be challenging, we do expect better performance in the second half. Emerging market sales were $2.3 billion this quarter, increasing 13% before exchange, similar to our first quarter growth rate. We've built a broad emerging market base that helps to offset volatility that can occur in any one market. With more than 40% of our business in emerging markets, we're well positioned to benefit from the long-term demographic and economic trends that are taking place. While we can't perfectly predict the macro environment, we can manage our business to deliver durable and reliable results for shareholders, and we've done that consistently for years and we're able to do that because we have flexibility, we plan for contingent ices and we often times, dive out performance in other areas of our business.

This quarter, we exceeded our gross margin forecast of 54.5% delivering gross margin of 55% as a result of continued progress on our margin improvement initiatives. We now expect our full year gross margin to exceed our original guidance. This was the result of continued momentum from margin improvement in Nutrition and Diagnostics where we're ahead of our initial targets.

With that as context, I'll provide a high level review of our four business segments before Tom and Brian comment on the details of the quarter.

In Medical Devices, second quarter performance was in line with our expectations, driven by mid-single-digit international growth across vascular, diabetes care and vision care and as expected, global vascular results improved sequentially compared to first quarter. We've seen good momentum from many of our recent medical product launches, including our OptiBlue cataract IOL in Japan as well as Absorb, MitraClip, and XIENCE Xpedition which received approval in Japan last week.

On Monday, we also announced two acquisitions, IDEV, which expands our endovascular product portfolio and OptiMedica which gives us an immediate entry point into the laser cataract surgery market. While organic growth remains our top priority, these acquisitions bring Abbott leading technologies to capitalize on growth opportunities. IDEV's SUPERA stent is on the market in Europe and under FDA review to address the challenges of treating the superficial femoral artery or SFA. Treatment of the SFA is the largest and fastest growing segment of the peripheral market driven by the rising rates of diabetes and obesity. This acquisition rounds out our endovascular portfolio with the best-in-class technology to further penetrate this market segment. Our endovascular business is approaching $500 million in annual sales and increased 4% operationally this quarter.

OptiMedica's state-of-the-art laser system provides Abbott access to the rapidly developing laser cataract surgery market. Most cataract procedures are performed manually today, but a growing portion of the cataract market is moving to a laser-assisted surgery, especially as market shifts to premium IOLs. The acquisition of OptiMedica will allow while Abbott to have broader reach in the growing cataract segment. Cataract sales represent more than 60% of our vision care sales and this quarter increased in the high-single-digits as we build momentum with several new products that launched in the first half of this year. We expect to complete both of these acquisitions before year-end.

In Nutrition, worldwide sales increased 8.5% with equally strong performance in both Pediatric and Adult Nutrition. International sales increased 18.5%, driven by strong double-digit growth in emerging markets. We have broad reach around the world and have prioritized a group of markets, where we're expanding our footprint. This includes localizing R&D and building out local manufacturing. Our three new facilities in China, India and U.S. remain on track to come online later this year or early next year. Abbott's scientific heritage and new product development is critical to our success and leadership in the Nutrition market. As I mentioned last quarter, we're on track for approximately 70 new product launches this year and have completed more than 40 through the first half.

It's not only new products but the world of clinical data that allow us to grow, shape and further penetrate these markets. For example in our Adult Nutrition business, results from a health economic study announced last month demonstrates that supplementing with Oral Nutrition such as Ensure can decrease hospital length of stay, reduce hospitalization costs and readmission rates. With healthcare systems facing unprecedented budget pressures and challenges these results are encouraging. They represent an opportunity in both developed and emerging markets.

Nutrition operating margin also increased significantly again this quarter and we're on track to exceed 300 basis points of expansion for the full year. Our initial target of 20% is well within our reach and we intend to continue to look at ways to exceed that goal.

In our established pharmaceuticals division, sales were below our expectations. Global economic growth forecasts are lower than when we began the year. Last week, the IMF reduced its growth outlook driven by lower growth expectations in Europe and emerging markets and while we're seeing some impact from these market developments, we also need to improve our commercial execution.

To that point, we recently created two new commercial leadership positions that have separate responsibility for emerging and developed markets. This will sharpen our focus on the very different market specific needs in this business and enable us to achieve the growth targets that we've set. We have some work to do, to improve how we promote the Abbott brand to various channels, whether it's hospitals, pharmacies or the consumer. We're continuing to build our product portfolios through registrations targeted for specific markets and geographically we'll see a shift in sales to more high-growth emerging markets from 60% today to 75% over the next several years, which will also accelerate growth. While we continue to expect EPD sales growth to pick up in the second half, we now have more modest expectations for the pace of that acceleration. We're positive about the growth prospects for the EPD and its strategy as we move forward. We obviously have some things to do here.

Diagnostics continues to deliver on its expectations, with worldwide sales up 7.5%. Sales in emerging markets, which represent 35% of total Diagnostics sales, were up more than 15% in the quarter. This was led by Core Laboratory Diagnostics, where we continue to outpace market growth in our priority markets, China, Brazil, and Russia.

In Molecular Diagnostics, we returned to double-digit growth in the second quarter with sales up 13%. In June, we also launched the first FDA approved Hepatitis C genotype test, which allows physicians to match patients to the best treatment option based on their genotype. This is especially important as patients will benefit from many new pharmaceutical treatments over the next few years. The Diagnostics operating margin also came in ahead of our expectations as we continue to execute on our gross margin improvement plan. Despite the R&D investment we've been making for six new system platforms across our three Diagnostics businesses, we're well ahead of schedule to reach our initial operating margin target of 20%.

In summary, despite currency headwinds, our performance exceeded expectations. We're executing on our strategic priorities and confirmed our double-digit EPS growth target for the full year.

I'll now turn the call over to Tom to review our second quarter results and the 2013 outlook in more detail. Tom?

Thomas C. Freyman - EVP, Finance and CFO: Thanks, Miles. Today we reported ongoing diluted earnings per share for the second quarter of $0.46, exceeding our previous guidance range. Sales for the quarter increased more than 4% on an operational basis; that is, excluding an unfavorable impact of 1.7% from foreign exchange. The impact of foreign exchange on sales was 70 basis points more unfavorable in the quarter than the estimate we provided in April, reflecting further depreciation of the Japanese yen and weakening of several emerging market currencies late in the quarter.

Operational sales growth was driven by strong performance across a number of our products and businesses, including growth of more than 13% in emerging markets. Reported sales, which include the impact of exchange, increased 2.5% in the quarter.

The second quarter adjusted gross margin ratio was 55%, ahead of our previous guidance due to the impact of margin improvement initiatives in our Nutrition and Diagnostics businesses, as well as a lower headwind from exchange relative to previous expectations. In the quarter, ongoing R&D investment was 6.5% of sales, in line with previous expectations, and ongoing SG&A was around 31% of sales, somewhat lower than previous expectations.

Turning to our outlook for the full year 2013, today we're confirming our ongoing earnings per share guidance of $1.98 to $2.04, which reflects double-digit growth over 2012, at the midpoint of the range. We're forecasting operational sales growth; that is excluding the impact of foreign exchange in the mid to high-single-digits for the second half of the year. Based on current exchange rates, we expect exchange to have a negative impact of around 2.5% on our full year reported sales, which was 1.5% more negative than previous expectations. At current rates, we'd expect a 3% negative impact on sales in the third quarter and 4% in the fourth. Brian will review the growth outlooks by business in a few minutes.

We forecast an ongoing adjusted gross margin ratio for the full year of approximately 55.5%, which is favorable to our previous guidance, primarily due to strong performance in Nutrition and Diagnostics, as these businesses continue to execute well on margin improvement initiatives.

We also continue to forecast ongoing R&D of 6% to 7% of sales and ongoing SG&A expense somewhat above 30% of sales for the full year 2013. Overall, we project our full year adjusted operating margin to expand by more than 100 basis points in 2013, somewhat above our previous guidance.

We continue to forecast net interest expense of around $110 million in 2013, non-operating income of approximately $20 million, and around $50 million of expense on the exchange gain/loss line of the P&L.

Turning to the outlook for the third quarter of 2013, which we're providing for the first time, we're forecasting ongoing earnings per share of $0.51 to $0.53, which would represent strong double-digit growth at the mid-point of the range. We forecast specified items of $0.20 in the third quarter, primarily associated with intangible amortization expense and cost reduction initiatives, resulting in GAAP EPS guidance of $0.31 to $0.33.

Our operational sales growth in the third quarter is expected to be in the mid-to-high single digits, and as previously indicated, at current exchange rates, we expect roughly 3% negative impact from exchange on sales in the third quarter. This would result in reported sales growth in the low to mid-single digits. We forecast an ongoing adjusted gross margin ratio of approximately 55.5% of sales in the third quarter, which includes a negative impact from exchange of somewhat more than 1%. We also forecast ongoing R&D for the third quarter, somewhat above 6.5% of sales. Ongoing SG&A expense of around 30% of sales and non-operating income of around $15 million.

With that, I'll turn it over to Brian for the operating highlights by business.

Brian Yoor - VP, IR: Thanks Tom. This morning I'll provide an overview of second quarter performance and our outlook for the third quarter. My comments will focus on operational sales growth, which excludes the impact of foreign exchange.

I'll first discuss Medical Devices, which includes our vascular, diabetes care and vision care businesses. In our vascular business, worldwide sales were flat on an operational basis, a step up from first quarter performance and consistent with previous guidance. International sales, which comprise more than 60% of total vascular sales increased 4% operationally. Growth was driven by new products including our XIENCE PRIME small vessel stent in Japan, the XIENCE Xpedition, Absorb and MitraClip.

Last week, we announced the approval of XIENCE Xpedition in Japan, which we expect to drive further share gains. This approval follows the initiation of our Absorb randomized clinical trial in Japan, reaffirming Abbott's commitment to developing truly innovative treatment options for coronary artery disease. U.S. vascular sales in the second quarter were down nearly 7% impacted by market declines, partially offset by year-over-year share gains as a result of the XIENCE Xpedition launch. For the third quarter of 2013, we expect our global vascular business to increase in the low single digits on an operational basis. We expect to improve our performance in the second half of the year with the uptake of XIENCE Xpedition in the U.S., in Japan, and continued penetration of our new products, MitraClip and Absorb.

In diabetes care, global sales in the second quarter were relatively flat, in line with our expectations. International sales growth of 4% was driven by double-digit growth in the emerging markets as well as the continued uptake of our FreeStyle InsuLinx meter.

Abbott was recently selected as the exclusive supplier for the National Diabetes Awareness Program in Saudi Arabia, a country where 30% of the population has diabetes today. In the U.S., we saw continued share gains in the hospital and retail segments, where Abbott maintained its leadership position, offset by market pricing and reimbursement pressures. We continue to invest in the next-generation sensing technology which we expect to initially bring to market in Europe in the second half of 2014.

We project third quarter diabetes care sales growth to be relatively flat on an operational basis. As we have previously discussed, while we are forecasting strong growth in emerging markets, the 2013 implementation of CMS competitive bidding for Medicare patients will impact our U.S. sales this year.

In vision care, global operational sales increased approximately 2% in the second quarter. Cataract sales, which represent about 60% of our global vision care sales, continue to outpace the market in the quarter, led by strong double-digit growth in the emerging markets in our TECNIS brand of intraocular lenses.

We expect to see continued growth in our cataract business driven by several important new product launches this year. This includes the recent launch of TECNIS OptiBlue in Japan, which provides Abbott access to the largest segment of the Japan market and TECNIS Toric in the U.S., which gives Abbott access to the faster growing premium segment of the IOL market. The anticipated launch of TECNIS preloaded IOL in the U.S. will also contribute to accelerated growth in the second half of the year.

For the third quarter, in our global vision care business, we expect mid-single-digit operational sales growth, an improvement versus first half of the year as we continued to drive cataract growth with new launches and execute in emerging markets.

In Nutrition, global sales increased 8.4% in the second quarter on an operational basis. International Nutrition sales grew 18.4% in the quarter, including strong double-digit growth in emerging markets, which now comprise more than 45% of total Nutrition sales. Global Pediatric Nutrition sales grew 9% operationally in the quarter. International Pediatric sales grew 19% as we continue to execute on a number of geographic expansion initiatives and launch new product innovations, including the global rollout of our specialty tolerance formula products. U.S. Pediatric sales were down modestly, largely due to lower infant formula share in the WIC segment. Abbott remains the market leader in the non-WIC segment of the U.S. infant formula market.

Global Adult Nutrition sales, which comprise nearly 45% of total Nutrition sales, increased 7% operationally in the quarter. International Adult sales grew 17%, driven by strong growth of Ensure and execution of market expansion initiatives. U.S. Adult Nutrition sales were negatively impacted this quarter by the exit from certain non-core business lines as part of our margin improvement initiative. Excluding the impact of these exits, U.S. Adult sales grew low-single-digits.

As Miles mentioned earlier, a recent health economic study published in the American Journal of Managed Care found that nutritional supplementation in the hospital setting decreased hospital length of stay and total episode cost by more than 20%, and reduced the likelihood of being readmitted to the hospital within 30 days by nearly 7%.

As the clear global leader in adult nutrition, we are working to expand the market by raising awareness of the role that proper nutrition can play in improving patient outcomes and reducing healthcare cost.

As we look ahead to the third quarter, we expect our global Nutrition business to grow double-digits on an operational basis with strong international sales growth led by emerging markets and continued uptake of recently launched products.

In our Established Pharmaceuticals business or EPD, sales in the quarter were flat on an operational basis as growth in emerging markets was offset by declines in the developed markets. We continue to expand our presence and build local portfolios in 14 key emerging markets. Sales in these markets grew approximately 4.5% in the quarter and was somewhat negatively impacted by timing of product deliveries in certain markets, as well as implementation of the drug price control order in India which caused some delays in customer purchases late in the quarter. We expect growth in our 14 key emerging markets to improve in the second half of the year with strong growth in a number of emerging countries, including Brazil and India.

As expected, growth in other markets which includes Western Europe and Japan, was negatively impacted by overall macroeconomic conditions in these countries, including European austerity measures.

In the third quarter, we expect low single-digit operational sales growth from our established pharmaceuticals' business as we see improved growth in emerging markets due to portfolio expansion and execution of recent tender wins.

Lastly, in our Diagnostics businesses, Core Lab diagnostics continued its durable growth with operational sales increasing 6% in the quarter. About 80% of our Core Laboratory Diagnostics sales are generated outside the U.S. where we saw more than 8% operational growth in the quarter. Sales in the emerging markets increased double-digits, led by China and Russia, both growing more than 30%.

In Molecular Diagnostics, worldwide sales increased 13% on an operational basis in the second quarter, in line with our expectations for accelerated growth versus the first quarter. International sales increased nearly 18% on an operational basis, led by strong infectious disease growth, particularly in emerging markets, driven by the impact of new tenders, as well as the continued global expansion of our ALK gene test for non-small-cell lung cancer.

In June, we received approval for the first FDA-approved hepatitis C virus genotyping test in the U.S., which will enable physicians to create a personalized, targeted diagnosis and treatment path to improve clinical outcomes, further expanding Abbott's diagnostic testing options in the infectious disease area.

In Point of Care Diagnostics, worldwide sales increased 15.5% on an operational basis, driven by continued growth in the U.S. hospital segment, further penetration in the U.S. physician office labs, and strong double-digit growth in the emerging markets. For the third quarter, we are forecasting our Global Diagnostics business segment to generate high-single-digit operational sales growth, driven by a continued strong double-digit growth in Molecular and Point Of Care Diagnostics and mid to high-single-digit growth in Core Lab.

So, in summary, we're pleased with our financial performance through the first half of the year. We delivered earnings per share in the second quarter that exceeded our previous guidance range and despite a challenging global economy and recent fluctuations in currencies, we are confirming our 2013 ongoing EPS guidance.

We will now open the call for questions.

Transcript Call Date 07/17/2013

Operator: Larry Biegelsen, Wells Fargo.

Larry Biegelsen - Wells Fargo: Let me start with a couple of questions for Miles. Can you hear me okay?

Miles D. White - Chairman and CEO: I hear you fine.

Larry Biegelsen - Wells Fargo: So, Miles, how do you view the broader macroeconomic conditions and dynamics both in the developed world, as well as the emerging markets, including the impact of currency and maybe some color on how this impacts Abbott and your performance in the quarter and beyond?

Miles D. White - Chairman and CEO: Well, let me take the macro environment first. I think whenever the economies of the world wherever they may be, going into some recession or phase into some kind of adversity, at least as businesses and investors look at it, I think the natural tendency is to always forecast they're going to recover faster than they do. They recover gradually and I think that's what we are going to see here. I mean I think if you look back over the last few years and listen to all the pundits and analysts and everybody else talk about the macro environment and the pace of recovery and so forth, it really – I think optimism and hope and so forth have driven a lot of wishful thinking that it's going to happen at faster than it does. But frankly the problems of Europe, or even the U.S. have been more serious and deep that they don't recover that fast. So, rolls through to markets and it obviously rolls through to emerging markets too because they are so integral to now the global economy. So, I guess I look at it and say, I think it's all getting better. I think it's going to bet better. But it's going to be at a measured pace, and I don't think it's going to just suddenly be better and sometimes the trading in the market or the Dow everyday certainly doesn't reflect that. We have great days of exuberance and other days that aren't so exuberant. But overall, I think it's pretty steady. Now, as I have said in the past, there is a pretty big difference here and we can see it in our business between, call it, emerging markets and very developed economies. You take the U.S., Europe, Japan, Canada, et cetera as the developed markets and call the rest of the world evolving or emerging growth markets. There's a big difference here, and we can see it in our various businesses, as we look down the list of our businesses and we look at developed market growth and emerging market growth, it's dramatic. It's consistent. It's consistent for us except for one business and that one business is a pretty good measure of market health and market performance and that would be our branded generic drug business, where I think, it's frankly more our performance than anything else of our own execution. So we look at those businesses and in almost every case, the performance in emerging markets is either very high single-digits or frankly really healthy robust double-digit growth, and if you look across the developed markets, it's at best, single-digit and in a lot of cases, flat and declining. I think we're in a phase where those developed markets are absorbing all the austerity measures and other things that they had to absorb. So there's a pretty dramatic barbell here between the robustness of emerging markets and the sluggishness of developed markets and we happen to be indexed in both. I think that's a good thing, and we're broadly represented in the emerging markets. As I said a couple of times, a bad day in emerging markets is a lot better than a good day in developed markets often. While those developed markets are very important to us and we have a lot of share, a lot of customers and frankly, make a lot of profit there, as far as growth goes, the emerging markets are more robust. They are volatile sometimes, which is why it's good to be in a broad cross-section of them and not over indexed in a couple, and we are. We're very broadly represented across these markets and in a broad group of businesses. So, I would tell you, every day, there is something concerning in some market, some country, somewhere but overall in kind of the market basketball of all that it's a pretty strong overall economic picture and performance that I think has great long-term longevity. Now, having said that, it translates this volatility and currency too. It's a lot of these countries become a bigger part of our sales or other multinational sales where we're adjusting to less obsession about the euro and a lot more obsession about a whole basket of currencies that aren't nearly as predictable and often aren't as widely traded and so forth. So this year the yen has been significant driver of negative currency as I think is understood by all of our investors and shareholders and analysts and yourself and so on. And in addition, some of the more or larger emerging markets, like the BRICs, have also contributed lately to that. But I have to say this year it's pretty much dominated by the yen. So in any given year, it's a different currency that could impact our sales and because the Company is 70% or more international, that's something that we have to expect to manage and navigate all the time. And I would tell you that our shareholders and investors don't expect to ride that curve with us. They expect us to manage that for them and manage the overall global performance of the Company and we do as we are this year.

Larry Biegelsen - Wells Fargo: Just one follow-up for you, Miles. So, your performance in Nutrition continues to be strong, particularly in the emerging markets. How should we think about the dynamics taking place in China around the infant formula market and secondly, the sustainability of the extremely high growth this quarter for Adult Nutrition outside the U.S.?

Miles D. White - Chairman and CEO: I would say there's anomalies all the time in comparisons and so forth in any given segment of our business. But I would tell you that the demographics and the underlying market factors around our Adult Nutrition business are all good and they're all positive. And while I would never even let myself think that some extremely robust growth rate is sustainable indefinitely, I would tell you that the growth rate of our Nutrition business internationally, I think, is very sustainable for a long time because all the underlying demographics, whether the adult and pediatric business are all pretty good right now and I think for the foreseeable future. With regard to the China, I'd say I think most investors and most observers understand what's going on here, what's happening here. The government is stepping in to say this market, perhaps, has become a little too robust in a number ways and one might even speculate to the disadvantage of Chinese companies and I think the government's been clear that it wants to improve its dairy industry and improve the circumstances in that market. As you know they had some issue several years ago with the quality of dairy product and so forth, and you got to admire the fact that they make it a point to say, hey, we're going to pay attention to this, and at the same time, they're paying attention to how these markets are developing. I mean, they're looking at not only nutrition, they are looking at pharmaceuticals, they are looking at packaging companies. They are looking at a number of things. I think, China is an unbelievably impressive country and I think it's an impressive government that's managed its economic development incredibly well. I think, this is a small piece of that. In fact in almost any way, you kind of look at it and say, off all things you think that the government would pay attention to instant formula wouldn't make the top of most industries or businesses or lists, but in this case along with pharmaceuticals, packaging and a number of other industry segments it did. So, I think, we can manage this, I guess, is the way I'd put it. My sense of prospects for the Chinese market haven't changed, opportunity remains strong, opportunity remains robust. I think all the companies that have been mentioned as part of this investigation have all responded very cooperatively to the Chinese government. I don't know that from talking to anybody, but I've read the press reports and so forth. I know that we've cooperated with their investigation and this too shall pass and I think the market dynamics remain robust. Fortunately for us, China does not represent a disproportionately large portion of our Nutrition business or even our Pediatric Nutrition business. It's a big business for us there and we are big there, but we're so broad across so many countries that it doesn't disproportionately impact our performance. So, our prospects and forecasts haven't changed. Our EPS forecasts haven't changed. We've obviously modeled all that in great detail to the degree that we can, and to the extent that there's any impact on us financially, we believe it's manageable in other ways.

Operator: David Lewis, Morgan Stanley.

David Lewis - Morgan Stanley: Miles, just a quick question on EPD. It probably was the only business this morning that is performing – that's not a point at or above expectations, and I wondered if you'd just give us a sense of whether that you think that is more a developed market pressure. Is that more just Abbott's delays with emerging market registrations? I think over the last three to four months you have a lot of your peers saying this is not a particularly interesting business and maybe you can just comment in terms of the quarter and your views, have they changed at all about the ability to drive growth in this segment?

Miles D. White - Chairman and CEO: I'd tell you, my overall views haven't changed at all. I'm glad our peers don't think it's interesting, because we don't need more peers. There's plenty of competition in these markets today. I think these markets are developing exactly as we forecasted and I think the opportunity is what we forecasted. I think the biggest distinction here, and I don't think it's very well understood by a lot of people, is that the branded generic pharmaceutical businesses around the world are different than commodity pharmaceutical or generic pharmaceuticals, and they're very different than proprietary or research-based pharmaceuticals. I think one of the execution issues we've had is more of a cultural or philosophical business approach issue, because we've been so dominated by our research-based pharmaceutical business in the past; you have a business mindset around how you execute against that business. I think it's one of the reasons why few companies have succeeded in having proprietary pharmaceutical businesses and generic pharmaceutical businesses in the same company. And I've said in the past, I admire Dan Vasella for being one of the first pioneers of that at Novartis, but he separated them into Novartis and Sandoz and I think rightly so, because the way you operate those businesses, the whole marketing approach is just very different. If I had to say there's one particular thing that has been a shortcoming for us, I think we or our management team have approached this too much like proprietary pharmaceutical and not enough like the different kind of business that it is. This is a business that's very consumer-facing in a lot of countries, very brand dependent, very product line dependent, meaning breadth of product line and so forth. It's very different game. I don't think we've made that transition yet as well as we should have, and I think that's where we would diagnose ourselves as not having executed as well as we should have. Part of that's registration timing, part of it's the mix of product therapeutic areas and so forth available, part of it's just our own knowledge and expertise in those areas. So we've separated the markets into two big segments. But the fact of the matter is the countries are all quite different. In any case, developed markets have common characteristics, emerging markets have common characteristics, and we've got to do a much better job of making the adjustment to a branded generic pharmaceutical business. I would tell you that while a lot of our peers don't view it as attractive, there are some of our peers who do and I think we know who our longer term competitors are and who they will be. We think the opportunity is robust. We think we're underperforming and by any measure, whether we look at competitor performance, our performance, market performance, share, et cetera, we're underperforming. It pains me to say it, but we are. The good news in that is, I think we can change that and we're taking the steps to change that. So, I think our development of this business is going slower than I might like and it sticks out like a sore thumb relative to everything else. But nevertheless, my expectations of the business and what I think it could do for us remain the same. It's a very profitable business. Gross margins in the close 60% range. So, it's a very attractive business, I think, executed right. There hasn't been a long historic track record in these markets in this kind of a business as these develop. So there is a lot of pioneering going on here and it is pioneering by us and Sanofi and some other great companies that I think understand these markets and are all trying to position themselves properly for the growth of these healthcare systems. So, I remain pretty enthusiastic about it. You asked me about developed markets and I'd tell you, that part of this business is declining and it is experiencing all the same pressures that other businesses in Europe are. Europe, in particular, is tougher with generic products, whether branded or commodity or otherwise, and so we're certainly experiencing that too. If there is any part of this I'm most disappointed about, it's our performance in the emerging side. I expect what's happening in the developed side to keep being that way for a while, and I think we can mitigate that to some degree too, but the bigger issues here for us is how we're doing in the emerging markets.

David Lewis - Morgan Stanley: Just maybe a quick follow-up. The other persistent investor question or debate since the spin has been, in order for Abbott to sort of transform their growth, there seems to be a view that you need transformational acquisitions and I guess – and you're guiding the mid to upper single-digit growth in the back half of the year, which is ahead of your peers, and you did two small incremental deals. So, can you sort of talk to us about the deals that you've done, these last two in the recent days, is that more indicative of the kind of deals we should see and does Abbott need, frankly, larger multibillion dollar transactions to transform their growth rate?

Miles D. White - Chairman and CEO: I love the question. If you watched me or us over the last 10 to 15 years, one thing I think you can consistently say is I've never forecasted to anybody what we're doing or what we're looking at or where you can expect us to be interested in M&A activity. So, I'm going to waffle here and not give you a clue. I wouldn't want to indicate that there is a trend here of what we're interested in any way, shape or form. I would tell you that, I always remain vigilant and watchful about what opportunities may exist for us from a lot of perspectives, both conventional and unconventional, and you've seen that over 10 to 12 years. There are times when smaller, whether you call bolt-on or whatever, supplemental acquisitions fit, and they enhance a given business, and there's other times you make a bigger move. Whatever it is, the timing of those moves tends to be driven by opportunity, valuation, circumstances in the markets and so forth, and one of the things that I think has been a hallmark of our success, at least on the M&A side, it has been that we've done a lot of study, we've followed businesses, we've followed markets, we've followed various things we're interested in the targets for a long time, done a lot of due diligence and so forth. And by the time the opportunity drifts into the radar screen in the right way, with the right stars aligned and circumstances, we generally are pretty ready with a fairly well-developed point of view on valuation and so on, and we will act on the opportunity. The problem is, you can't always predict when that's going to be, and we can't predict it any better than you can, so we certainly can't forecast it to you. But if you ask me is there a set of opportunities that we're always watching or always looking for, that might be enhancing to the business? The answer is, yes. And as I've said many times in the past, I am mindful that investors are not looking for things that dilute the current performance or in some way stifle current performance of the Company. And it's also a hurdle for us that we have to know what we're going to do with the business and do better with it if we own it and earn an incremental positive return for the investor over and above what it might do standalone. I will tell you there's a number of things we've looked at out there where I think valuations are just out of this world stratospheric and unrealistic and that we've walked away from a lot of things because we thought valuations were unrealistically high or expectations were unrealistically high. And I don't think there's a particularly robust, should we say, opportunity set out there in a number of fields today. There might be a lot of things for sale, but they may not be for sale at a reasonable valuation. And I think investors who are interested in that sort of part of us should know that we're careful buyers. We buy when it makes sense and when it adds to our business and when we can meet our criteria and when we can do it right for you. And if valuations are too high or we can't make a strategic argument of why it's worth, whatever it may be, then we don't make the move. And that doesn't mean we're only going to do little deals like you just saw. The fact that they both got announced the same day was pure coincidence and we respond opportunistically when the opportunity presents itself, but it's not reactive. We've usually been pretty well prepared. So, I don't know if that gives you some context. But we always remain vigilant and looking. And for those who think we need something transformative, my email is public, you can send me those ideas.

Operator: Mike Weinstein, JPMC.

Michael Weinstein - J.P. Morgan: So, Miles, if I just kind of step back, I'm thinking about the first half of the year, your comps were a little bit difficult; but in aggregate, I think you'd agree that 3.8% of comps and currencies kind of not your target for overall Abbott. So, other than better execution in the EPD is there anything else that you think is kind of key to continue to kind of what you originally were hoping here which was more mid to high-single-digit?

Miles D. White - Chairman and CEO: Well, there's two businesses that have been a drag on us. One is our performance in EPD and one has been the entire vascular market, which you know because you watch them pretty carefully, and know it better than anybody, but I'd say those two things have been a bit of a sluggish drag, no question. Just as – and I think we're improving both of those. I think the evidence of that remains to be seen in EPD and I understand the skepticism of investors or analysts on that one, but I'm reasonably confident of EPD. I'm just frustrated with the pace here. On vascular, the sequential improvement here is pretty good, and our share positions in our core market is pretty good. I mean, we've got leadership share positions in the core stent businesses and so forth. I think as has been pointed out a number of times, our ambitions here are frankly to expand product lines in areas and geographies and so forth and drive a little better growth profile of that business in what is clearly an austere market. However, that still isn't going to be some high double-digit rate or something as you know. So, I'm pleased with the progress there, but it's not going to look like it did five, six year ago. So, we look at expanding and growing in new segments there and you saw a little bit of that earlier in the week with the acquisitions admittedly modest in size. The comment you make about the comparisons in the first half of the year, I'd say look, first half of the year comparisons, they were tougher, not even modestly tougher, we had difficult comparisons in the first part of the year and just as difficult as those were I'd tell you the comps in the second half of the year are equally sort of robust in the opposite direction. I mean, we've got really good comps in the second half. So the growth rates that we're going to see here on the bottom line, I look at and they're pretty heady and pretty high and we'll hit them, but I certainly wouldn't want you to trend line them for the long-term in some respects. They're not one-time, but they more accurately reflect, I think, the underlying performance of the business. The underlying growth performance of the business is better than we saw in the first half, and, for the long-term, probably not quite as robust as the mid-20% range you're going to see in the second half here. I'm talking on the bottom line, because, if you look at the guidance and so forth, we know we modeled, we understand what things we've lapped in the comparisons that get better or disappear and so forth and so EPS growth rate in the second half is mid-20s. So, that's pretty heady and I fear that you'll say, okay, well, we'll just take that and straight line it through 2014 and you'll just keep delivering at that level. Somewhere in there is the reality and I think the reality is quite healthy. We always target double-digit earnings growth and in fact, if you look over, I don't know, the last 10 years, whatever it's been, we set our guidance in that range practically every year. We wet a high hurdle; we set a robust hurdle. We set a hurdle of being reliable double-digit EPS growth and then we do our best to beat it. And generally speaking, I'd say, we've done that about 90% of the time that beat part. So, I think those kinds of dynamics still exist. At the beginning of the year I told you we did not rely on the markets improving for this to get better and we have not. We have the same questions a lot of other people do is how much to rely on market improvement to factor into our business. I think if these markets improve a little bit, we improved a lot. But I think right now what we're looking at is pretty good growth rates that are a lot more reflective of the identity of the Company, its growth, the mix of its businesses and so forth going forward as we've communicated last year and early this year and we knew the first two quarters would be tough, at least tough from a comparison standpoint and they have been. Unfortunately, they don't reflect what we think the Company is going to look like on an ongoing basis. Now, that said, all of us look at the top line too to measure sustainability over time of the businesses, and I think Nutrition, Diagnostics, even EPD and the improvements that we will have in some of these businesses are going to drive a lot of that growth and then to the extent that we have any supplemental opportunities in M&A, we'll look at that. But we don't factor that in because unless you got it in your hand, you can't comment on it.

Michael Weinstein - J.P. Morgan: Let me just follow up on the vascular piece if I could. So, I have really two questions here. So, one is, could you just talk about the evolution of the Absorb strategy relative to that product and where it fits in the marketplace? If everybody went back eight year plus ago, the thought was, let's prices had a super-premium and try and make it become 10% of the market on a volume basis, but 10% volume might mean 30% for revenue. Now, over the last year, obviously that's changed a lot. It's still priced at a premium, but nowhere near kind of what we were talking a year ago. Is the goal for that to be a workhorse product, and if so, kind of where are you on tracking towards that goal? And then the second question is on this week's acquisition, which really would be just from an outsider's viewpoint, why does Abbott and the developer of XIENCE with all the stent technology need to go outside to buy a stent platform?

Miles D. White - Chairman and CEO: Let me talk about Absorb first. Your characterization is exactly right. I think initial entry or strategy with that product was priced as a very new technology which I think niched it into selective use. And there was a very intentional decision on our part to drive it toward workhorse use just as you characterized. And to do that, if – I'll take Europe as an example. Most governments, frankly, the U.S. is the same longer-term, but if most health institutions, hospitals, governments, payers et cetera, are operating pretty much on fixed or pressured budgets, making room for technology that cost more than what it replaces is not high on their list. So, I think that what we have to acknowledge is if we want that product in broader workhorse use then not only do we cannibalize ourselves, but we take share from competition. But the only way we do that is not to be an incremental burden to the budgets that have to pay for those products as a philosophy. So, quite frankly intentionally, the price of that product has come down and its share and its penetration and its use is broadening and it is our intent to move it into workhorse status. And I would say we're seeing that in increased volume, increased usage, increased pickup, increased account pickup and so forth and then we're seeing it in the sequential sales performance of the product and its position in our portfolio. So that's exactly what we intend and we're moving that as fast as all the circumstances will allow without artificially distorting the markets. So, I think you've characterized it quite right. Remind me again what was the second question? IDEV, the position of that in the business. Why would you go out and spend? Quite frankly, we like their product. We like their product a lot. We wanted to enhance our own offering and surely. You know, can you do it yourself? Yeah, you could, but – clearly we probably had activity going in that area but this is quicker and we think better and we like the product, so it made sense to us to enhance our product line and accelerate the business and fill it out, because the endovascular businesses is – call it a standalone business. It needs a strong position in this place, so we think that's what IDEV gives us, so we think that not only helps us in that little space, we think it helps the whole endovascular business strategically as a package.

Operator: Rajeev Jashnani, UBS.

Rajeev Jashnani - UBS Research: Just wondering if you could help out on the EPD business, and I think you mentioned that the market growth rate is still relatively healthy and I was wondering if you could provide what your estimate of the market growth rate is and help us understand what price volume that's driving that.

Miles D. White - Chairman and CEO: I can't give you a specific market growth rate, because it's different for every country and every market, and one of the difficulties of this business, Rajeev is, we think of a given geography as sort of three different segments. Theirs is a proprietary pharma segment in the market; there's a commodity generic segment in the market; and there's a branded generic segment market in the market. And those different segments exist in practically every country. The question is the dominance or prominence given economic strata in those markets. I mean, India is just great example to point at because you've got all three there. It's very much a branded generic market and even a branded market at lower price points and rural settings and for that reason we've got two brands in India. We've got TrueCare and we've got Abbott. TrueCare is a rural brand and in a different price point, different product, and different mix of product. And the Abbott tend to be in the major urban areas and so for. So, it depends. And generally speaking, around the world, there aren't very many data sources for us to get breakouts that way of those markets. So, what we know, we know from being in the market, we know from the way we can segment. So, we don't even quote percentages of share because quite often it's contaminated with the patented product or other. So, I can't really give you that. But by country or overall I think this is easily – I think these segments are easily mid to high-single-digit market growth and our growth over that considerably higher where we get the strategy right and we have the breadth of the product line and the brand positions right and so forth. And our history and experience here has been we grow much faster than the underlying market when we've got those conditions in place. And then the price/volume trade-off is such that it stratifies like a lot of markets. There's low-price product, there's mid-priced product. I can't say high priced products. There's nothing high priced about it. We're of pretty good value in every market, but the consumer does make a distinction or the pharmacist makes a distinction between the brands he believes in and the quality, the breadth of offering or the configuration of the offering or whatever the case may be. So, we tend to get a premium for the quality, and the breadth of the brand and the offering that we have. So, it's very much as I've said in the past like our Nutrition business from the standpoint of the mix of consumer-facing and medically recommended or prescribed and a branded product that comes from a quality or international source or multinational source tends a get a pretty good share of the market at a pretty good price point.

Rajeev Jashnani - UBS Research: Just a follow-up, I think Abbott's been a pretty good operator in most of the markets that it participates in. This one, as you mentioned, is probably not where you wanted to be at this point in time, but what's a reasonable expectation for folks to have for this business to get to more of a market rate of growth?

Miles D. White - Chairman and CEO: Well, I'm little gun-shy about forecasting one, because I've been wrong thus far. But I think this is going to get to a mid-to-upper single digits sort of performance rate. The question is how fast. I mean, I've got my own ambitions, which I'm already late on. So you always think as soon as you change management, you put new strategies in place that somehow next quarter it's going to look better, and I think this is going to take a few quarters before we start to see the green shoots come up and the new growth come. I'm impatient about that, but I think we're not going to see what I'd like to see in terms of the sequential momentum, hopefully until sometime next year.

Operator: Ben Andrew, William Blair.

Ben Andrew - William Blair: I wanted to follow-up, Miles, on the comment about the two new heads that you hired in EPD and maybe talk a little bit about where they're located, what they're charged with, and when do you think they may be able to have an impact on the businesses?

Miles D. White - Chairman and CEO: Well, I think they're having an impact already. One of the people we hired was from outside the Company with a strong background, frankly, in generic and branded generic product marketing and he has got a broad experience, absolutely fabulous experience and pedigree and track record. He's going to be responsible for the emerging market part of the business and we're changing out, call it, the marketing team and branding team that will support him in that business. So, he's already in place, he's already pretty much up to speed. He was already familiar with this. He knows the markets well, knows the channels well, knows the brands well and so forth, and I think that's going well. The other position we elevated from internally and one of our experienced and, frankly, I'd say excellent performing managers who has a developed side and I would say, given the background of his experience, has the right balance of, what I would say are the characteristics of European developed markets in the pharma and generic spaces, but also the background and experience to understand how to transition where we can to branded generic consumer facing type marketing, and we've taken some of our experienced people from that background, like we've seen in emerging markets and supplemented his team with that, because I think we've got a transition going on in some of these emerging markets to much broader branded generic market and more consumer related. So, we're supplementing their teams that way. All of them are located in Europe together at the Company or division headquarters, which is Basel and they're all working there together so that they're with each other every day, and whether it's emerging markets or developed markets, they share quite a bit from the standpoint of the marketing, branding and commercial teams. But the commercial teams and the support are all dedicated to each of their specific segments so that they're able to customize what we're doing either strategically or from a marketing standpoint for each of those segments.

Ben Andrew - William Blair: I mean, you clearly have to go down both paths whether it's acquisition path or build internally to enter new emerging markets. But does this strengthen the ability to maybe use the latter if the pricing on the former is just too high?

Miles D. White - Chairman and CEO: I think, first of all, we got to get our house in order, which we're doing, and get our strategies straight and the right people in place and so forth, which we've done. I'd say, okay, so far so good, let's get our strategy working internally here the way we want to before we complicate life with an acquisition or something else. If an acquisition or an opportunity presented itself that fit well and fit well with what we wanted doing to in a given geography, well, we'd certainly look at it. I would tell you– and I think all of us know this, but I would tell you that today the valuation expectations for most of those are just out of sight. The acquisition we made of Piramal in India was a pricey acquisition, but it gave us the number one position in the market by far in a profitable, growing, key, large market. That was worth something, and when we look at that long-term, that's worth a lot. But a multiple valuation like that in markets where all you can be is fifth or sixth or something isn't worth that kind of multiple. And I think today what you see out there is valuation expectations that are frankly just unrealistic. If that doesn't change, we'll be doing this organically. I think you have to be balanced about – or disciplined about the returns you expect and the hurdles you expect. The old adage, anything is for sale, as long as it's an overwhelming compelling price and I think if it's an overwhelming and compelling price, it better have a good return for our shareholders, or they're not going to think we did a good thing for them. So, it's not like you can just go out and create M&A activity. It's got to have the right intersection of value for both sides, and today I'd tell you in this particular space, you don't see that, and that’s why you do not see very many deals getting done by anybody, buying anything to expand their footprint. I mean, our peers may say, it's an unattractive market. I don't think the markets are unattractive at all. I think, some of the M&A's unattractive, but that just means you've got to go at it more organically over time, and, frankly, if that's how it is we'll go at it organically.

Ben Andrew - William Blair: Then one quick topic change, but going back to China. This is the second time in two, three years that we've seen a pricing disruption whether it's market based or government based. How do you think about that in terms of investment…?

Miles D. White - Chairman and CEO: How do I think about that? I think about that, that we're probably going to see it again in a couple of years. I think you're going to see it over and over again, like – I don't know, I have a lot of things I could say about it I suppose, but I think you see this stuff all the time. I think, if you're over obsessed about China, you would over obsess about China. If you are over obsessed about Brazil, or India, or Russia, or somewhere else, you could over obsess about any one of them. Is there a headache every day? Yeah, somewhere, but overall, we're in a lot more than China. So I look at this and I think, I suppose we should learn to deal with these sorts of things on a rolling, ongoing basis, because I don't think they stop. But I think what it does say is, you don't necessarily want to be disproportionately indexed in a given geography if you can't take the volatility of the ride. So for us, we're in a lot of geographies purposely and we know that the balance of that mix of geographies is what stabilizes that volatility, because it offsets to some degree and that overall, we can deliver much higher growth, more reliably on a sustainable basis. But in the back room here, we're managing volatility every day. So, the way I think about it is, we're going to be managing volatility every day and I stress to the management team, we've got to be always kind of preparing plan B and what are you going to do if, and contingencies and so forth, and that's a fundamental part of our whole planning and budgeting process all the time and, if you look at this year, six months, seven months into the year, you said, has the year gone like you expected? The answer is no. have we delivered the earnings we committed? Yes, we've exceeded them. So, I think you've got to kind of plan that way every year.

Ben Andrew - William Blair: Sure, and where I was going with the question Miles was really what's the risk that other countries start to follow the model? We saw in Japan historically every couple of year, big reimbursement cut, China's now taken up demand mantel and other countries as their healthcare costs rise, they say, it worked over there, why not here? So, how do you think about that exposure maybe over the five-year window? Then you've mainly answered it, I'm just curious if anything incremental given kind of that risk of a broadening.

Miles D. White - Chairman and CEO: Well, the – possibility I guess exists, but the circumstances tend to be pretty unique to a given country. There's a regimentation in Japan around price management from the government or price control from the government that every year or every two years depending on whether your devices, pharma or whatever segment tends to be a fairly predictable regimen. What it tells you is, you want to be very close to your markets, you want to have your medical affairs, government affairs, regulatory affairs, people, in country, in markets; you can't have those relationships from Europe or the U.S. or something and expect to be in tune with your markets every day. So, I think it's possible that similar philosophies could exist other places. But what it basically boils down to is kind of that age old – they want to buy it for less and we want to sell it for more. Life's a negotiation and it just keeps going that way. And whether it's Europe or China or Japan or India or anywhere else, the ability to earn a return is always subject to a certain negotiation of what the payer can pay or will pay for the service or product you provide, I think, that's just part of the business.

Operator: Jeff Holford, Jefferies.

Jeffrey Holford - Jefferies: I've got a couple of questions, but I'd like to just lead off on margins, because I think it's the most important thing that hasn't been talked about yet on the call. I mean, it's a very nice quarter evidencing that the two lines about it; one is the great broad top line growth; and the second point we've got some great underlying margin expansion to look forward to and that's what seem to really help out this quarter. I was very encouraged by the commentary around Nutrition and the margins there. And I wondered if you can just give us a bit better view here in terms of is it just cadence of delivering these margin improvements or can you give us a bit more color on if this is going to run longer or shorter in terms of timeline and how much further beyond the 20% of sales do you think right now we can get to given that you seem to be over-delivering there?

Brian Yoor - VP, IR: Yeah, I would tell you, first of all that the performance in Nutrition is the result of a fairly detailed comprehensive plan with literally over 100 different initiatives and so forth. Some of those are quick and easy and some take more time and some of it's mix of products, some of it is manufacturing process, some of it's whether we make our own product or source it from a third-party manufacturer. There's literally hundreds of things. We've made great progress and I think there's frankly a lot more to be made. We've commented in the past that we're fortunate to have some fairly public comparisons to some of our competitors for some of our segments that give us some benchmarks to sort of judge how we are doing in given places. But I think there's more here. This is what I'd say. And as much as you'd like to get even greater forecast out of me, I'm always trying to get it out of the business too because there is that caution of let's not fully commit all of it to Miles and Tom and the corporation. So we leave ourselves a little cushion because as I just explained previous questions, everybody is kind of thinking about contingencies too. But the fact is the organization has got a culture and a mindset around cost management, investment management, expense management. We do make a distinction internally between that which will drive improved gross margin before discretionary spending and the management or efficiency of discretionary spending. A lot of times you can go out and just cut SG&A to make a quarter, but frankly I think that's kind of shortsighted. And in our case, on the discretionary side, if we look there for efficiency or cost management, we're looking at primarily G&A or we're looking at where spending is valuable versus where it's not so valuable, bang for the buck, hit rate, et cetera. So, Tom and I, over the course of this year – and partly as the exercise out of the split and the transition service agreements and the back office stuff with AbbVie, we are looking at the manner in which we support all of our businesses and the cost of that support and how we do it and so forth to make ourselves more efficient. I think when you go through an exercise like the split, it's the time to do that, it certainly allows you the ability to do that to look at whether you can spend your general and administrative expenses better, more efficiently and so on, and we are, because I wouldn't want investors to misthink that somehow we're shortchanging the businesses or starving the businesses from the standpoint of R&D investment or sales and marketing investment because we're not and we don't have to. So, we do make a distinction about moderating spending and where and how so that we don't harm the longer term prospects of the businesses, but the longer-term sustainable improvements in profits, frankly, tend to be above that gross margin line and your real cost or pricing, the mix of your products, how you manufacture, all those sorts of things, and that's where this is coming from in Nutrition. This is not because they're raising price. This is all fundamental cost and structure management about the way they conduct that business. This is very durable and long sustainable profit improvement, and there's a lot more here, I think, and we think and we know the plan to get and I'm going to have Tom add to that, if he will, for a minute.

Thomas C. Freyman - EVP, Finance and CFO: Yeah, I'd just say that to your original question, I think, things are ahead of schedule and you're seeing it in the gross margin, delivering above expectations and it really is a function of executing programs I have more quickly, more efficiently and getting more savings sooner than what we might have expected a while back. So, that's primarily what's happening and obviously the closer we get to the 20% initial targets we had for each division, then the focus is going to be on what more and how much better we can get beyond that and we're making very good progress getting towards those initial targets and we're going to keep working on improving beyond that.

Jeffrey Holford - Jefferies: I'll just try one extra last quick question, if I can, I know the time is short, but in terms of M&A, you said you don't want to be very specific. You did mention in EPD, product breadth as being one of the issues now, a lot of the large cap pharma companies are looking to separate or breakout, a lot many of their established pharma businesses. Do you see opportunities in some of those reorganizations to potentially augment what you have in your EPD business?

Miles D. White - Chairman and CEO: Well, I can't comment on what any of the other companies may have or what they intend to do with their assets, but I can tell you this, it would be of interest, if it fit us geographically. It's not that we lack products or lack breadth, we have breadth. We've got tremendous breadth in our EPD business that the value primarily to any kind of M&A addition to EPD is geographic footprint or share footprint in a given market, how larger share position or brand position maybe in that market. So, for us, it will more likely be a consideration of geographic enhancement or geographic fit than it will be breadth of product line because we're not challenged from a breadth standpoint. The opportunity is really in bigger geographic footprints. So, that would be kind of how we look at it and to the extent that those assets out there that may sit back, we'll have a look, but today, I can honestly tell you I don't really have a point of view because I haven't seen those assets yet.

Brian Yoor - VP, IR: Well, thank you, Elaine, and thank you all for your questions and that concludes Abbott's conference call. A replay of this call will be available afternoon Central Time today on Abbott's Investor Relations website at www.abbottinvestor.com, and afternoon Central Time via telephone at 402-344-6835, passcode, 8703. The audio replay will be available until 4 pm Central Time on Wednesday, July 31. Thank you for joining us today.

Operator: Thank you. This concludes today's conference. You may disconnect at this time.