Abbott Laboratories

Thanks, Elan. Good morning, everyone.

Thanks for joining us. Today, we're going to be discussing 2 important Abbott news events.

First, our announcement to separate into 2 independent publicly-traded companies, one in diversified medical products and the other in research-based pharmaceuticals. And second, we'll be talking about our strong third quarter ongoing earnings results.

Joining me on today's call is Miles White, Chairman of the Board and Chief Executive Officer; Tom Freyman, our Executive Vice President of Finance and Chief Financial Officer; Rick Gonzalez, Executive Vice President Global Pharmaceuticals and Larry Peepo, Divisional Vice President of Investor Relations. Miles and Rick will review the strategic rationale related to our announcement this morning, as well as provide an overview of each of these new companies and their investment identities.

Tom will discuss certain financial aspects and conclude with a brief review of our third quarter results, which we summarized today to allow for sufficient time to discuss today's other major announcements. Details on our third quarter can be found in our earnings news release.

Following our comments today of course, we'll take any questions you have as always. I'd also note that we posted a 12-page slide deck to our Abbott website this morning at www.abbottinvestor.com, and this deck summarizes the details of our announcement this morning regarding the separation.

In addition, this morning, I'm pleased to announced that we will be hosting a 2-hour Investor Meeting this coming Friday in New York. Miles, Rick Gonzalez, Tom Freyman, as well as Dr.

John Leonard, our Head of Pharmaceutical Research and Development will be in attendance, along with myself, Larry and some other people from our Investor Relations and Media Department. At Friday's meeting, we'll discuss the growth opportunities in Abbott's diversified medical products business, as well as growth opportunities in the research-based pharmaceutical company.

We're going to walk you through the pharmaceutical pipeline in more detail and we'll spotlight certain programs that we're particularly enthused about, including early data from our HCV trials and Rick will talk about -- more about that in a minute. So given that you're going to hear from us this coming Friday, we're going to try to limit and focus our call today and try to keep it to approximately an hour.

Before we get started, let me remind you that some statements may be forward-looking, including the planned separation of the research-based pharmaceutical company from the diversified medical products company and the expected financial results of the 2 companies after separation. 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, and there is no assurance as to the timing of the planned separation or whether it will be completed.

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, 2010, and then the interim reports filed on Form 10-Q for subsequent quarterly periods. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments.

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

And with that, I'm now pleased to turn the call over to Miles. Miles?

Okay, thanks, John. Good morning.

As you can see from our strong third quarter results, Abbott delivered another quarter of strong performance across our mix of businesses. Our ongoing earnings per share growth was more than 12%, as we've now posted double-digit growth in 17 of our last 18 quarters.

We'll generate similar performance for the full year, which will again place us among the top performers in our peer group. So we're pleased with our consistent financial performance.

But as evidenced by today's other important news, we are taking a significant next step in aligning our long-term strategic goals with our shareholders' best interest. Today's announcement to separate into 2 publicly-traded companies in diversified medical products and research-based pharmaceuticals is a logical step in the further evolution of our company.

Over the past 12 years, our actions have dramatically reshaped Abbott. Let me give you some background and examples.

Since 1998, Abbott has nearly quadrupled in revenues to nearly $40 billion in annual sales. During that same 12-year period, we shifted our geographic sales mix from what was more than 60% U.S.-based sales in 1998 to more than 60% international sales today.

In 2001, the reshaping of our pharmaceutical business began in earnest when we purchased Knoll Pharmaceuticals, which included an R&D program that's now called by its well-known commercial name HUMIRA. As you know, HUMIRA is on track to soon become the world's leading biologic for autoimmune diseases with annual sales this year of approximately $8 billion.

And today, our total research-based pharmaceutical business generates nearly $18 billion in annual sales. In 2006, we globalized our leading Nutritionals business to sharpen its focus and better capture international growth opportunities and it worked.

We doubled the division's international sales over the last 5 years. Also in 2006, we acquired Guidant vascular and subsequently built our existing vascular business into a leading interventional cardiology company, headlined by the number one global drug-eluting stent brand XIENCE.

In the last 4 years, we've also rebuilt our core diagnostic business to deliver higher returns, doubling its operating margin and significantly improving its cash flow. So these are just some of the actions that we've taken over the last decade.

More recently, we've moved to advance our strategy with an eye toward 2 major initiatives: rapid expansion in fast-growing emerging markets and a concerted effort to reenergize and retool our research and development pipeline. To that end, we significantly accelerated our emerging markets presence with the acquisitions of Solvay and Piramal Healthcare Solutions, the latter of which has positioned Abbott as the largest pharmaceutical company in India, the second fastest growing pharmaceutical market in the world.

We also created a new Established Pharmaceuticals division, a separate, fully integrated $5-billion branded generics pharmaceutical business that provides the infrastructure to expand in emerging markets. And we aggressively rebuilt our late stage research-based pharmaceutical pipeline through concentrated internal R&D efforts, as well as strategic in-licensing and late stage collaboration.

In the last 4 years alone, we've tripled the number of new molecular entities. And in the last 2 years, we've doubled our late stage programs.

Each of these major strategic changes, plus other advancements that we've made along the way has continually strengthened Abbott to better compete in our ever changing healthcare environment. The news we announced today to separate into 2 independent companies is driven by the same disciplined, deliberate and aggressive process.

As John mentioned, we'll be hosting an Investor Meeting in New York this Friday morning to further discuss today's news, including details on the 2 companies' growth prospects and new product pipelines, which offer both companies the opportunity for stronger and more sustainable growth. So, given our 2-hour Analyst Meeting in Friday, we're going to keep our comments brief today, touching on only the strategic rationale, the key benefits to shareholders and a summary of each respective company's unique investment identity.

The strategic rationale and action behind today's announcement is the result, as I said, of a deliberate and exacting process and part of the strategic evolution that's been underway for quite some time. We're now ready to separate into 2 independent, publicly-traded companies because the investment identity and the operating model of each separate enterprise is very different from the other.

It's just that simple and straightforward. Our Proprietary Pharmaceuticals business is more research intensive than the rest of Abbott and that's by design based on its business needs and strong sources of cash flow and earnings power.

As you're all aware, pharmaceutical and biologic companies have to produce innovative medical treatments that demonstrate clear patient benefits. These specialized proprietary medicines are more often used in the developed world, including the U.S.

and Europe, where best-in-class therapies generate significant demand. The majority of revenues for this new pharma company will be generated from developed markets with 45% of revenues outside the United States.

So that's a snapshot of the new Proprietary Pharmaceuticals company. The Abbott diversified medical products company has countless sources of high-growth opportunities that are well-balanced across literally hundreds of different product brands, different business franchises and different payers.

The pipeline includes dozens of game-changing medical technologies, next-generation diagnostic systems and devices, newly-formulated nutritional brands and an array of other incremental enhancements such as consumer-friendly packaging, new product flavors and other meaningful brand initiatives. The diversified medical products company will embody a vast portfolio of medical technologies and consumer Nutritionals that will resonate in the developed world, but even more importantly, in the most rapidly growing emerging markets where Abbott is well positioned.

We've taken actions over the last several years to pick up our pace of expansion into international markets that offer the most promising growth prospects based on improving socio-economic conditions. This is nowhere more evident than in the key BRIC countries such as India.

Abbott is the #1 company in India because we moved quickly on a unique asset in Piramal Healthcare Solutions. It was a rare opportunity, so we acted fast and we're pleased that we did.

So in summary, there's no question that both our research-based pharmaceutical and diversified medical products businesses have evolved over time in very different ways into 2 very distinct and compelling investment identity. For example, the new pharmaceutical company is today generating nearly $18 billion in annual sales.

It's delivered market-leading performance, including double-digit top line growth in 4 of the last 5 years. That performance was built on a sustainable mix of well-known prescription brands, including HUMIRA.

Going forward, we've strengthened the pharmaceutical pipeline through more productive discovery and development, strategic in-licensing agreements and select late stage collaborations. This company will generate robust and sustainable cash flow with the flexibility to accelerate pipeline programs as needed and the ability to leverage breakthrough medications that can deliver meaningful benefits for patients.

The end result should be strong and steady shareholder returns, including a competitive dividend policy. I'm pleased to announce today that the research-based pharmaceutical company which will be named at a later date will be led by Rick Gonzales, a 30-year Abbott veteran who currently serves as Executive Vice President of our Global Pharmaceutical business.

Rick has served in numerous senior leadership positions throughout his Abbott career, including Head of our Medical Products business, and for several years as the company's President and Chief Operating Officer. Those investors who followed us over the years know that Rick is an experienced, well-respected senior leader within Abbott, as well as within the healthcare industry.

I have every confidence that Rick will do an exceptional job as Chairman and CEO of the new Proprietary Pharmaceuticals company. I don't think it could be in better hands.

I will continue to serve in my current position as Abbott's Chairman and Chief Executive Officer. So let me quickly summarize what the new Abbott will look like and again, we'll talk more about this on Friday.

Abbott as a diversified medical products company will generate revenues of approximately $22 billion in sales, supported by a multitude of durable high-growth franchises. Our portfolio will remain as well-balanced as it is today, with 4 major business segments, each roughly similar in size including Nutritionals, Established Pharmaceuticals, Diagnostics and Medical Devices, which encompasses our vascular devices, Vision Care and Diabetes Care businesses.

Approximately 40% of our customer mix will be self-pay, making it generally less dependent on the U.S. economy.

In fact, approximately 30% of total Abbott diversified medical product sales will be generated in the United States, with 70% of sales generated x U.S. Emerging markets sales will be the largest geographic component and nearly 40% of total Abbott diversified medical product sales.

We'll continue to expand in emerging markets because that's where the growth is, and that growth is now 3x the growth rate of the developed world. We also plan to more effectively leverage the power of the Abbott corporate brand across each of these diversified medical product segments.

For example, in our global Nutritionals and branded generics businesses, we'll take advantage of channel synergies to more efficiently reach our growing customer base. So what can investors expect from the diversified medical products company in terms of growth?

Well, here's what I expect. I expect the company to deliver at least high single-digit sales growth and sustainable double-digit ongoing earnings per share growth, which should place it among the most attractive large cap healthcare investments.

We'll achieve this with balanced success across Nutritionals, Established Pharmaceuticals, Diagnostics and Medical Devices. Nutritionals will be the largest business for now and one of the strongest global players in the industry with well-known brands such as Similac and Ensure.

It generates high return on invested capital and very strong cash flow. We expect to grow our worldwide Nutritional sales at a double-digit pace, with a cadence of new product launches and increased penetration in key international markets such as China, India and Brazil.

We'll also significantly improve both the gross margin and operating margin profile of this business. Our Established Pharmaceuticals Division or EPD is among the leading branded generics businesses in the world, generating more than $5 billion in sales from a portfolio that's composed of literally hundreds of different brands.

EPD enjoys a significant commercial footprint and boast a registration pipeline of more than 1,000 individual products, which are beginning to launch now in numerous geographic markets. As a result, we expect EPD to generate sustainable, mid-to-high single-digit sales over the next several years with strong double-digit sales growth in the largest emerging markets.

We'll continue to optimize its cost structure as well, driving efficiencies where needed. Our Global Diagnostics business includes the world's leading immunoassay and blood screening businesses, as well as our faster growing point of care and molecular diagnostic segments, which today are modest in size but will be meaningful to earnings in just a few short years.

We expect molecular diagnostics, for example, to exceed $1 billion in sales by 2015. Our concerted effort to dramatically improve bottom line performance in diagnostics has resulted in steady operating margin expansion.

That will continue as will better cash flow generation. And finally, we have Medical Devices.

We define this segment with our global vascular business, our Diabetes Care business and our Vision Care business. As you know, our vascular business has a healthy and strong commercial presence that's defined by the industry's best-in-class drug-eluting stent XIENCE.

In a matter of just a few short years, XIENCE and XIENCE PRIME have captured the #1 share position in what is a competitive DES global marketplace. But this is not just a XIENCE story, we have an industry-leading pipeline that contains upward of 20 new products with a near-term launch of XIENCE PRIME in the U.S.

and a robust pipeline of DES, structural heart and endovascular development programs. These range from our bioresorbable vascular scaffold or BVS, which has the potential to restate the DES market, to our MitraClip next-generation structural heart valve.

In Diabetes Care, we'll continue to focus on the insulin-dependent patient, a segment where we're growing faster than any other competitor in the U.S. And in Vision Care, we expect to launch numerous new products and technology advancements over the next several years, with an eye toward operating margin expansion.

In summary, the new diversified medical products company will maintain Abbott's heritage of financial strength with abundant sources of revenues and cash flows and considerable flexibility to invest in strategic priorities and new growth initiatives. The company will be a well-balanced blend of diverse healthcare businesses and new geographies driven by a broad mix of payers and unique base of customers, many of whom are living in high-growth emerging markets, where income levels are steadily on the rise along with socio-economic conditions.

So with approximately $22 billion in sales, the diversified medical product should be without question one of the most attractive and largest healthcare investment opportunities. It should also be among the fastest growing.

Abbott's high single-digit top line growth, coupled with continued margin expansion will deliver sustainable double-digit ongoing EPS. As the environment has changed, so too has our company.

We've reshaped, advanced and grown Abbott in a manner that makes today's news possible. As a result of this separation, our shareholders will benefit from 2 new companies that have evolved into 2 distinct investment opportunities and identities.

With that, I'll now turn the call over to Rick to discuss the new research-based pharmaceutical company in more detail. Rick?

Thank you, Miles, and good morning. As Miles indicated, our new research-based pharmaceutical company has a long track record of demonstrated commercial and operating strengths.

These attributes position us well for sustainable performance going forward and help us succeed when we become an independent publicly-traded company. Having worked in leadership positions across Abbott for quite some time, including leading our pharmaceutical business for the last 2 years, I can tell you this is truly a very strong business.

It's an organization with a long track record of industry-leading performance. This includes double-digit sales growth, 4 out of last 5 years, a significant accomplishment in today's healthcare environment.

The fact that we have maintained such strong performance underscores the strength and experience of our pharmaceutical management team. We have industry-leading specialty-focused portfolios that include a mix of growth brands such as HUMIRA, as well as sustainable performers such as Synthroid and Lupron among others.

Over the past several years, we built a promising R&D pipeline of specialty medicines, focused on important disease states such as Hepatitis C, chronic kidney disease, multiple sclerosis, oncology and other areas of significant medical need. Since I will providing a more detailed overview of our pharmaceutical business and R&D pipeline on Friday, I'll keep my message focused on 2 basic things today.

First, the sustainable performance of our existing commercial portfolio. And second, a brief review of select highlights from our advanced late stage pharmaceutical pipeline.

Our new research-based pharmaceutical company generates nearly $18 billion in annual sales today, driven by strong marketing presence and leadership positions across more than 20 major pharmaceutical brands. These include: HUMIRA, our market-leading biologic for immune diseases, which has an 8-year track record of commercial success; Kaletra and Norvir, Abbott discovery HIV protease inhibitors that changed the global landscape of HIV treatment; Synthroid for thyroid disease, one of the most widely-prescribed medicines that doctors choose to give their patients in the U.S.; Lupron, a market-leading therapy for prostate cancer, endometriosis and other conditions; Synagis, a biologic for infants suffering from respiratory disease; CREON, a leading therapy for conditions associated with cystic fibrosis; AndroGel, the #1 therapy for correcting low testosterone levels in men and numerous other medications.

So let's start with HUMIRA, which will remain a significant growth driver for our new independent company. HUMIRA has the best-in-class profile, including a strong track record of demonstrated clinical performance, utility across a broad spectrum of indications and a well-established safety profile.

And these strengths have played out in the marketplace as evidenced by HUMIRA's strong ongoing performance. Despite the entry of several new competitors over the last few years, HUMIRA continues to gain market share and demonstrate strong growth and there's plenty of runway left.

As Miles said, this year we expect annual sales for HUMIRA to reach approximately $8 billion. This level of performance is a testament to the outstanding commercial execution, as well as the significant benefits HUMIRA delivers for a wide array of patients suffering from serious medical conditions such as rheumatoid arthritis, Crohn's disease, psoriasis and ankylosing spondylitis and others.

I expect our organization to sustain this positive momentum as it drives to meet the demand in an expanding overall anti-TNF market, where penetration rates remain low across all 3 therapeutic areas: rheumatology, dermatology and GI. We will also add to our broad list of approved uses for HUMIRA with the launch of several new indications, as well as other product enhancements that we anticipate will further improve the overall patient experience.

In addition to our proactive long-term growth strategy, we planned for some possible changes in the anti-TNF market; including the potential approval of an oral competitor, as well as the possible entry of biosimilars in the later years of our long-range plan. Orals and biosimilars may both someday have a place in the market, but their potential entry will not materially change HUMIRA's strong growth profile.

HUMIRA will remain a growing sustainable and leading commercial global brand in the years to come. The global anti-TNF biologic market is significant and continues to grow nicely.

In addition to HUMIRA, several other market-leading brands in our current portfolio will complement our total company sales growth story. To that end, we expect this portfolio, including HUMIRA's sustainable robust growth outlook to help us achieve an expected total top line growth profile for the new company of flat to low single-digit sales growth in 2013 and '14, consistent with Wall Street consensus and similar to our pharmaceutical peers.

Factored into this growth outlook are realistic expectations for our more mature lipids franchise, which we've said in the past will see generic entrance beginning in mid-2012. And beginning in 2015, we expect our sales growth to accelerate based on HUMIRA's continued strong underlying growth, as well as the launch of new products from our late stage pipeline.

So finally, let me touch briefly on select highlights from our pipeline, which I'll cover in more detail on Friday. Like all pharmaceutical and biotech companies, our business relies on a productive R&D engine, capable of generating a steady stream of products that serve unmet patient clinical needs.

Over the past few years, we've rapidly advanced our internal programs such Hep C, and we've added 11 new assets through a concerted focus on strategic licensing, acquisitions and partnering activity. As a result, we've tripled the number of new molecular entities with more than 30 in human cynical trials today.

We now have a total of 20 new compounds or indications in Phase II and Phase III development. Our focus is on medicines that hold promise in difficult to treat diseases with significant market opportunities.

Our goal is to develop products that have strong clinical performance and deliver meaningful economic value in today's healthcare environment. Bardoxolone, a compound we license from Reata Pharmaceuticals is a great example of this.

This treatment which is in Phase III development for chronic kidney disease has the potential to dramatically change the treatment landscape. Current therapies only modestly slow the progression of the disease, while bardoxolone has the potential to markedly improve patient outcomes.

We expect commercialization for bardoxolone as early as 2014. In neuroscience, we're addressing conditions such as Alzheimer's disease, Parkinson's, schizophrenia, pain and MS.

Daclizumab, our next generation biologic for MS is in Phase III development. Our recently announced results from our Phase II registrational trial suggest that daclizumab may offer patients the right balance of high efficacy and a manageable safety profile.

We expect to launch in 2015. I'm also particularly enthused about our internal Hepatitis C development program.

Our compounds have the potential to dramatically change how patients are treated today, by improving tolerability and cure rates and significantly shortening therapy duration. We're projecting market entry in 2015 for a triple combination HCV therapy.

On Friday for the first time, we'll give you a preview of some select early-stage data from our HCV program. These 3 opportunities alone, bardoxolone, daclizumab and HCV, can together generate multibillion-dollar peak year sales if successful.

In addition, we have other promising medicines progressing through our pipeline and we'll discuss some of these on Friday as well. In summary, we have a very compelling opportunity to create a new independent publicly-traded pharmaceutical company, with a distinct identity for our shareholders.

Today, we're very fortunate to have a unique sustainable growth driver in HUMIRA, one of the most successful pharmaceutical products of all time, as well as leadership positions in a host of other sustainable global commercial brands. We also expect to see meaningful contributions from our pipeline in the coming years.

In the meantime over the next 12 months, we will focus on running the global Proprietary Pharmaceuticals business within Abbott just as we would normally. As you know, this business has strong margins and generates robust sustainable cash flow.

As an independent company, this financial strength provides the opportunity for healthy returns to shareholders, including an industry competitive dividend. With that, let me turn the call over to Tom for some transaction details.

Thanks, Rick. Let me review some of the key aspects of the transaction as we see them today.

We expect to accomplish the separation through a tax-free distribution to shareholders. At the time of separation, Abbott's then current shareholders will own 100% of both publicly-traded companies.

The final distribution ratio will be determined later in the process. We expect the separation to be completed by the end of next year, subject to regulatory approval and final approval of the distribution of shares of the new company by our Board of Directors.

Both companies are expected to have strong balance sheets and cash flow to support the strong investment-grade credit rating. Credit ratings for the 2 companies will be determined by the rating agencies based upon financial projection and capital structures that will be determined in the coming months.

We'd expect a tender for a portion of the current Abbott long-term debt outstanding in conjunction with this transaction funded with debt issued by the new pharmaceutical company. It's expected that Abbott and the new pharmaceutical company will pay a dividend, that when combined, would equal the Abbott dividend at the time of separation.

We expect to incur onetime separation costs, including bond refinancing costs over the course of the separation process. These costs will be quantified at a future date and will be treated as onetime items in our quarterly reporting.

As a result, there's no impact from this separation to our 2011 ongoing earnings per share guidance. The complete audited financial statements that will result in a 3-year financial history for the new pharmaceutical company, this information will be part of a Form 10 filing which is targeted to occur in the next few months.

And finally, we expect to complete this process in an efficient manner given the experience in integration and separation that we built over the years. I'll close our prepared remarks with a brief summary of our third quarter earnings release.

As you've now seen, we reported very strong third quarter results that beat the Street estimates and were at the high-end of our forecast. We delivered another quarter of double-digit sales and ongoing earnings growth, with ongoing earnings per share of $1.18, up 12.4%.

And we confirmed our full year outlook for double-digit ongoing EPS growth in 2011. Sales growth in the quarter was 13.2%, including a favorable 5.3% impact from exchange rates.

Organic sales growth in the quarter was nearly 7%. The majority of our major businesses have delivered double digit reported sales growth.

This includes more than 15% growth for Durable Growth businesses, driven by double-digit growth in Nutritional, Core Laboratory Diagnostics, Diabetes Care and Established Pharmaceuticals. Our Proprietary Pharmaceuticals business also delivered strong growth, with reported sales up more than 13%.

This reflects impressive worldwide performance for HUMIRA, which increased nearly 26% on a reported basis and more than 18% excluding exchange. HUMIRA is on track to exceed the sales guidance of high teens growth that we raised just last quarter.

In our innovation-driven device businesses, sales increased 6%, including continued double-digit growth in molecular diagnostics and double-digit international growth in vascular and medical optics. And emerging markets continued to represent a significant growth contributor with sales in the quarter of $2.6 billion, an increase of 21% consistent with the high growth expectations we have for these markets.

Regarding other aspects of the P&L in the quarter, the adjusted gross margin ratio was 60.4% ahead of our previous forecast driven by improved product mix. As reflected in higher SG&A expense, we increased our litigation reserves for previously disclosed litigation identified as a specified item in our earnings release.

Turning to our full year outlook. Today, we're confirming our expectations for double-digit ongoing earnings per share growth for 2011 and narrowing our guidance range.

Our guidance for the full year is $4.64 to $4.66, reflecting 11.5% growth at the midpoint of the range. For the fourth quarter, today, we're issuing ongoing earnings per share guidance of $1.43 to $1.45.

The midpoint of this ongoing EPS range represents continued double-digit growth over the prior year. We forecast specified items of $0.30 in the fourth quarter, primarily reflecting integrations costs from past acquisitions and cost of previous restructuring actions.

We're forecasting mid-to-high single-digit sales growth in the fourth quarter including a favorable effect from foreign exchange of approximately 1%, and a gross margin ratio approaching 61%. So in summary, while we delivered another strong performance in the quarter, more significantly we announced a major strategic change for Abbott.

The separation of Abbott into 2 publicly-traded companies creates 2 enterprises that are well positioned in their respective markets. Abbott is expected to be one of the fastest-growing large cap diversified medical products company with a durable mix of products.

And the research-based pharmaceutical company will be a leader in its industry with a strong and sustainable portfolio of specialty medicines and a promising pipeline. We believe that both of these companies will be attractive opportunities for investors.

And with that, I'll turn the call back to John and we will take your questions.

Thanks, Tom. Elan, we're now ready to take questions please.

I just wanted to ask a couple of questions. Just apart from splitting up the 2 businesses and getting the higher values for those businesses, obviously the device business has been under pressure, not under pressure but the multiple has reflected concerns around the HUMIRA franchise and therefore, you haven't gotten full value for some of your Durable Growth businesses.

But aside from splitting up the businesses and getting what you would think, what you would imagine to be appropriate valuation for the 2 very distinct businesses with different risk and growth profiles going forward. Can you talk about some of the other advantages to breaking up such as how we should think about capital deployment, how we should think about operating margins of these businesses?

I mean, one thing that we have noticed is that Abbott has a very large overhead or redundancy that I would think would be able to go away if you complete this transaction. So if you could just talk about some of the other efficiencies that you can create by splitting up the 2 companies.

And then I have a question for Rick on the pharma business. I mean, clearly, HUMIRA was a big driver of the overall business and will be an even bigger driver in terms of its contribution to the Proprietary Pharmaceuticals business.

With competition coming in the next year or 2 from tofacitinib, with competition from biosimilars, clearly this will be an issue and I'm just wondering if you could talk a bit about strategies you have in place to protect that franchise?

Okay, Jami, that may be the longest question I've ever experienced in my 13 years. The fundamental -- let me just get by way of back on the -- the fundamental basis for the separation here.

And I heard a comment this morning from another analyst source that causes me to want to make sure I make the point. We've always pursued a diverse model and we believe in that model and we believe in the diversity of the business and the growth opportunities it gives us and frankly, the reliability and sustainability over time.

But what’s happened here is we've been so successful in our Proprietary Pharma business over time. It's grown quite large.

And frankly, arguably, I believe it will be very successful going forward. I think when the companies are split, I believe both will be valued at the top of their peer groups, but for very different reasons.

In a portfolio of diverse companies, the characteristics of those businesses need to be similar. And as our Proprietary Pharma business has grown large, it has different characteristics and it's also quite dominant now in the portfolio.

And I think that it's given the company clearly an identity of pharma with, oh by the way, you have these other diverse businesses. But as you can see by how we proposed to split, the company has $22 billion in a very diverse mix of similar characteristic businesses as I described, and a very successful Proprietary Pharma business that is delivering great returns and cash flows and has great potential and durability going forward, but it's a business that investors seeking return will look to.

Investors who are looking for a large cap diverse double-digit grower aren't necessarily looking for the same type of investment identity as pharma. So what happens here as the pharma piece got so big and is different, that these 2 investments make sense separately and both are of a critical mass and size that they have great sustainability going forward as independent companies, et cetera.

And as we divide them, their characteristics, their P&Ls, their balance sheets, et cetera, are quite different. The capital structure, I'll have Tom deal with in just a minute, but both have strong cash flows, both have strong pipelines of products, arguably, they're different.

One is dependent on big products, one is dependent on hundreds or thousands of products over time. The diverse company will be dependent on a lot of market growth and international expansion.

The pharmaceutical company is still quite heavily a developed market company and it will too have emerging market opportunities, but it's very much a developed market game. So they become very different.

And I think that both will be valued more accurately or frankly, appreciated more by investors. And I think we'll see that we attract investors who haven't been in our company or haven't invested in our stock, as we allow them the choice of these 2 distinct identities.

I think there's opportunity for operating margin expansion and gross margin expansion, particularly in the diverse company. I think visibility to margins in the pharma company, what will compare quite favorably to its peer group.

I think you'll see that. With regard to the overhead question you asked, I would say we're always looking at the opportunity to be more efficient.

And given the distinctive separation of the companies, that is something that we will look at because there's a different mix for the pharma business and a different mix for the international-based diverse products business, and we will be looking for those opportunities to be a lot more efficient. That's about all I'd say about that at the time.

But at this point, I think... [Audio Gap]

The points I'd make and I think we made these points in the remarks. I mean both of these companies are going to have extremely strong cash flow, both of them are going to have very good balance sheet.

It's going to give both companies a lot of options to use that cash flow. I mean, we've talked about our expectations on the dividend, then I -- there will continue to be a dividend in line with what Abbott is paying today is our current view.

The one thing I'd point out on cash flow is between the 2 businesses and if you look at our amortization expense, which as you know is a fairly large item in our P&L, in the $1.4 billion range. More of the amortization relates to the diversified company than to the new pharmaceutical company, which means that the cash flows are even a little more balanced than the profit levels when you look between the 2 businesses.

So both are healthy. They're going to have a lot of options and both managements will -- it's kind of a nice problem to have as they move forward as they consider what to do with those cash flows.

I was just wondering if Rick was going to address my question or we could wait until Friday, but that is going to be the key pushback in my opinion, which is the pharma business is now completely dominated by HUMIRA. And how, Rick, we should be thinking about that equation going forward with competition coming from tofacitinib and biosimilars 2016?

I think it's a very good question, Jami. I'd characterize it this way.

So I'd start at the very top. If you look at where our pipeline starts to emerge in 2015 and beyond in a very meaningful way, it will add to the performance of the business above and beyond HUMIRA.

If you look at the performance of HUMIRA, we believe that performance is very sustainable going forward. In fact, if you look back to 2007, HUMIRA has grown on average, $1.1 billion every year and we believe that is sustainable and actually slightly accelerating as we move from 2011 to 2012.

Now what drives that is the ability to continue to penetrate the markets that we're in today like RA, like psoriasis, like Crohn's. Those markets are still tremendously underpenetrated.

I'll give you an example. Psoriasis has a penetration rate of about 6%.

Our most mature market, RA, has a penetration rate in the 20% range. And so the goal here and you've seen us introduce programs around the world that allow us to be able to drive the market to grow faster to early diagnosis of patients and then cycling them through less effective old therapies more rapidly.

And you've seen that market growth particularly outside the U.S. emerge very, very rapidly, where the market is growing mid-teens in many countries around the world, even in Europe.

And so there's still a lot of opportunity to drive growth for HUMIRA in the markets we're in today. Additionally, we have 6 indications that we are in the process of developing and submitting for HUMIRA.

Those 6 indications will have a material impact on the growth of the product going forward. And they're likely to be indications that competition doesn't have, at least out of the blocks.

So I would tell you that I feel very confident that HUMIRA has a lot of legs going forward and can continue to be a sustainable growth vehicle for us for a long, long time. Now let me address the competition.

I'll start with orals first. As we look at this market, let's just say from a global standpoint.

This is a very difficult market for competitors to break into. And you know the data as well as I do.

So 6 competitors have entered the biologic market over the last 5 years. Not one of them has gotten over 3% market share collectively in total.

All 5 of them have not gotten over 11% market share. So the 3 major players: us, Enbrel and Remicade control between 80% and 90% of this market.

So it's a difficult market to break into because safety is a critical component, and those 3 products have the longest safety database of any products on the market and have very good efficacy. I mean, these drugs work well.

They get the efficacy in patients that physicians want to see and patients want to have. And so this isn't a market that competitors break into easily, particularly if they don't have long-term safety data and very good safety data.

Now, we don't know what the oral products labels going to look like. We've looked very carefully.

I've looked very carefully at the data that has come out of their trials thus far and I'd say, I'd characterize it right now based on what I know, as roughly equivalent efficacy to HUMIRA or other TNFs. Safety profile that's similar to TNFs from an infection rate maybe slightly higher, it's hard to tell based on the data at this point.

And then other safety questions that’ll have to be addressed from labeling standpoint like increases in creatinine, increases in anemia that have caused patients to drop out and increases in LDL. I'd say based on what we believe the profile of a product has to be to get rapid uptake in the market, we're relatively comfortable with being able to defend our position against oral products.

Biosimilars, I think are a different issue. First of all, as you know, our molecular patent doesn't expire until early 2017 in the U.S.

and 2018 in Europe, so we feel that the product is very well-protected to that point. We have numerous IP patents from a process standpoint that go beyond that.

We'll have to see which of those is applicable to any competitor that comes forward. From a regulatory standpoint, clearly in the U.S., the regulatory path is still undefined.

I think what we do know is that the FDA will hold a biosimilar product to a standard similar to the innovative product from the standpoint of efficacy and safety. And so that will require in all likelihood significant clinical trial work, which will be expensive and time consuming.

But I think the biggest issue will be that in all likelihood these products will not be interchangeable. In fact I think it's highly unlikely that they will be interchangeable, like oral solid generics are.

And so it creates a very different competitive dynamic when they have to go out and apply SG&A and that SG&A has to be effective in the marketplace and they're going to have to sell on their own data. Not use the innovator's data.

And so it will be a very significant issue to come head-to-head against the established players and be able to take share away. Now that's not to say that we take either competitor lightly.

I can tell you that we do a lot of planning to try to understand how we're going to be able to deal with that, and I think our strategies around that make me feel comfortable that HUMIRA will be a very sustainable brand. And as I said, I also look at our pipeline and I look at a number of the assets in that pipeline that will emerge in 2015 and beyond, and I feel pretty comfortable that will be a very meaningful impact going forward.

Let me do a couple of financial questions first and then talk more strategy and, Tom, hopefully you can help here. But maybe 2 quick ones.

Tom, first off, when I think about the tax structures of these 2 businesses, the proprietary pharma piece would seem to have a lot lower tax structure versus the durable medical products business. Am I thinking about that correctly?

And is there any damage to the tax structure from the split? I'm assuming no, but if you could give me your thoughts on that, that will be helpful.

Yes, Mike, we're not going to go into a lot of modeling issue today as we talked about in the beginning. We're trying to focus today more on the strategic discussion here.

What I would say is, I think it's accurate that between the 2 companies, the diversified will be a little bit higher than the other company but that's about as much as we'll share with you today.

Okay. And then on the proprietary piece, can you give us an estimate of the percentage of the profits in the proprietary piece that would come from HUMIRA post-spin?

As you know, we -- if you're looking at -- just to get a sense of profitability on these businesses, we do disclose in our segment footnotes these businesses broken out. So that gives you a good sense overall.

And clearly, HUMIRA is an important product for us. You can have a sense of the relative sales and -- so it's definitely an important part of that business.

But as Rick said, it's one that we think has a very long-term future, lots of growth opportunity, continuing to grow, new indications and plenty of opportunity to be a long-term contributor to the business.

Okay, last financial piece. You talked, Miles, about growth in some of the DMP pieces, or medical profits pieces.

You talked about Nutritionals, growing double digits. You talked about some other pieces including vascular.

You often suggest that those businesses would accelerate, like Nutritionals globally hasn't grown double digits. It's grown more like high-single digits and so there was some expectation that growth would accelerate.

Could you just maybe touch on why should we assume that those businesses accelerate and how DMP goes from being what right now looks to be more mid-single digits to high-single digits?

Yes, we'll go into more on it on Friday, Mike. But actually, let me correct you.

Nutrition has grown double digits outside the United States and frankly, I do expect even more acceleration from the businesses particularly as we expand the footprint in emerging markets and internationally. So I do expect not only acceleration of the sales but also acceleration of the bottom line.

And those programs are underway. But this is the -- the performance and elements are there now and we are seeing that.

At any given point in time, one country or another, is going to look different than the mix of the whole. But yes, we can talk about that more on Friday.

Okay. Just so I'm clear, you're taking the whole Nutritionals business, not just international piece, right?

You mean on this side of the business?

Yes, right.

Yes.

Okay. All right, Okay.

Because I was talking about overall growth profile in Nutritionals but...

Yes you'd be right about overall but the international piece has doubled in size in the last 5 years, and we can back into that growth rate, that's clearly double digits.

Right, absolutely. So let me just talk more strategy stuff.

So I guess what people are asking me probably #1 today, is the decision on why today versus a year ago or a year from now, so the timing question. And then 2 in your -- in the math that you did on this in trying to -- you're going to go through a very tough process here in splitting the company up.

How much value in your estimation are you unlocking by the math that you guys did in doing this to make it worthwhile?

I'm going to enjoy answering that one. Let me address the why now.

There's actually method in the madness as to why now. As you know, we acquired Solvay and Piramal and we went through an integration process.

And then frankly, a separation process internally of our Proprietary Pharma business and our Established Pharmaceutical business which are very, very different businesses. So we had kind of a double task there of not only the integration of the legacy Abbott businesses, but also those 2 new ones and not to mention our additional agreement with Zydus in India, which enhanced our product lines.

But there was a process there to establish that infrastructure and stabilize all of that and separate the 2 pharma businesses. That is essentially complete.

And that was necessary work to do regardless. But we needed that to be complete and we also wanted some of our pipeline initiatives on the Proprietary Pharmaceutical side to have been completed.

And frankly, our internal organic pipeline to have advanced in order to be at a point of what we would consider to be readiness. Those are the primary drivers of why now.

I don't think we'd have been ready a year ago and I think we are ready now. We've got the positioning and a lot of the work done, so that the difficulty of separation, frankly, has -- a lot of it's been done and it's ready to go.

So there's no real point in waiting now as we get on with it. With regard to unlocking, as you might guess, I've looked at more investment banker and consultant and other presentations and estimations and so forth of the so-called unlocking of value.

I would not venture an estimate or a guess because I've been here long enough to have seen a PE of a company in the high 20s and a PE in the low teens or whatever. You can talk about unlocking value.

But at the end of the day, the background of what's happening in a marketplace with the values of companies as a whole, of the economy as a whole can clearly affect that up or down. Do I think investors will realize or see or recognize higher value on both sides of the company as separate companies?

I do. I think investors will appreciate both companies more than is the case today because I think there will be a lot greater appreciation and attraction to investors who focus on these 2 very different investment profiles.

The same investor doesn't invest in both profiles necessarily and vice versa. So I think we'll see appreciation for both companies.

But what happens in the overall marketplace over time, I don't know. So I wouldn't venture a guess.

I leave that to you guys.

And, Miles, really just 2 questions. One, any considerations instead of a tax-free spend for an outright sell of the pharma business and maybe even to some degree even rights to HUMIRA as one would think about this perceived unlocking of value or either less reliance on a single product?

And then the second question's a little more related to strategy. And if you go back to your Q4 comments, one asked either about sentiment around HUMIRA or either selling the -- or spending out the Nutritionals business.

You commented or at least the sentiment I took away was that the sentiment in the market is wrong. We need to do a better job of really talking about each particular business and the long-term opportunities and you seemed to harp on this notion of, if you make a knee-jerk decision on what the market wants you to do in the very, very near term, you may be wrong a year or 2 years or 3 or 5 years later.

And I'd like for you to comment on that because that seems to be slightly different in tone than what we see today.

Okay. Let me deal with the first part, did we consider a selling?

I think the obvious here is, first of all, that would take a long time. And secondly, the tax on a sale like that and whether there was somebody that was interested in such a thing is prohibited.

Now, I have to tell you, I think we've got 2 long-term sustainable companies here. We have no interest in selling.

We have no intention to sell. We're not looking to sell it or merge it with something else, et cetera.

We think we've got the best path for investors here, which is 2 independent companies going forward that both have great cash flow, profits, growth prospects, et cetera, depending on the company here. But they're 2 different investments.

And I think that, for investors and for the sustainability of these investments, is the right path for both companies. Otherwise, I don't think we're doing the right thing if we just try to sell it.

That doesn't strike me as the right path here at all, which is why we believe the path of separation and letting investors appreciate each country -- company appropriately is the right path. With regard to the last call or whatever that you're referencing, the call at the time or the question at the time was a focus on Nutritionals.

And the point I tried to make at the time and let me be clear, this was in our planning and preparation for some time. This is not some knee-jerk reaction to the last few months or years even.

We have been considering what is the appropriate long-term disposition of the company or companies for several years. Obviously, I can't speculate about that to analysts or investors on any given call.

But as you know, analysts speculate to me. So when they speculate to me publicly about, for example, in this case nutrition, one thing I feel obligated to do sometimes is disabuse us of the notion of some path that may not be correct.

And that isn’t correct and it wasn't correct at the time. I do think what I reflected or intended to reflect at the time was kind of the precursor to this notion of investors will appreciate the parts of the company differently.

There is a different investment identity to different parts of the company. And I think that the notion that the different parts of the company weren't being appreciated that way or different investors weren't seeing it that way was clearly in those comments, and that's probably the tone you heard.

But the answer to that which I think you see today, I think is the right answer. I don't think it's to just break things up into little pieces.

I do believe there is value in the diversified model that is Abbott. We believe that fundamentally and I think that's been proven out over decades.

But I also note that the characteristics of the elements of that diverse model do have to have a common or complementary characteristics and balance. And the big distinction here is, it was our Proprietary Pharma business that did so well and dominated the identity of the company over time.

And not only were we out of balance, but the identity of that business is very different as it evolved. So what we ended up with is 2 very distinct, successful pieces.

And the notion that nutrition was, the proper piece of that was the part that I didn't agree with because it's very consistent with a lot of the characteristics of the rest of the company, the growth prospects, et cetera, at the time it was being compared to a PE of a competitor. Now, I think all of us in this industry would love to have the PE of that competitor.

Who knows how sustainable any of these PEs are over time. But I think that the mix as we’ve described it today is correct, given our strategy as a diverse company in healthcare with a particular balance.

So I don't think this is at all inconsistent, Tony, with what the tone I communicated at the time. I think it's frankly very consistent.

But at the time, I couldn't say to you, hey, good idea but you got the wrong business, that you carved out here. That's kind of the essence of this.

That the notion at the time, the question I got was more a notion of, are you sure all of this mix fits together? That's how I would take it.

And the hypothesis was, gee, the nutrition was the one you could carve out. I think the notion had merit.

I think the Proprietary Pharma business is the one that has the distinctly different identity and I think this makes sense today.

Miles, just a quick question that's been addressed here a little bit, but I want to ask it maybe in a very different way. We believe Abbott is undervalued and the primary issue certainly does seem in the eyes of most investors to be confusion over HUMIRA.

So as I think about your current multiple, it does imply real concern around HUMIRA, its cash flow growth and profitability. But you are in management is much more bullish on the potential for HUMIRA than consensus.

So I wonder why not wait to see for that to be appreciated in the market as competitive threats prove less material than those people think, which is only really 2 to 3 years away?

Well, I think 2 things. First of all, I think that the -- this split is not about confidence around HUMIRA.

It's around the identities of the businesses as I described earlier. I agree with you that the company is underappreciated and perhaps undervalued, but I don't know any CEOs out there who wouldn't claim that their companies are undervalued.

I think the entire sector may well be undervalued. The entire stock market could be undervalued.

It depends on your perspective for the business, it depends on your perspective of the development of international markets, it depends on your perspective of a lot of things. I'd support your notion that we're undervalued.

But I think the notion of a split here, it has the right merit, logic, given our intent regarding the investment identities of the company and what belongs in the diverse mix. At the end of the day, the questions around HUMIRA's durability will clearly be answered.

I think we will go a long way toward answering that even more thoroughly on Friday. Rick answered a lot of it earlier in the phone call.

But I think we can respond to the durability of HUMIRA going forward. As Rick acknowledged earlier, the growth of HUMIRA continues to be very strong and continues to be in excess of about $1 billion a year.

That's equivalent of a so-called blockbuster a year here in growth. Now granted, that's not going to happen forever, but there's obviously several years left of that kind of durability and growth and strength in that business and that franchise.

And I believe that with further explanation on Friday, we will further lay out why we see the development of the market, the biosimilars, the orals, et cetera, as we do and investors will make their choices. But I think we have evaluated that pretty closely and pretty carefully over the last couple of years.

We have a view. We have a view of the durability of HUMIRA.

We'll share that with investors and I think the obvious next question an investor has is, what about after HUMIRA? What then?

And I think that greater visibility to the pipeline of the Proprietary Pharmaceuticals business will go a long way towards filling in those gaps for analysts and investors, and I think we're beginning to fill those gaps now. But even if there were great visibility to that on the part of investors and analysts and even if there were great understanding of all of that.

By the same, we would still be splitting the company because we believe there are 2 really distinct different and valuable investment identities here that make sense as 2 separate public companies.

That's very clear. And maybe just one more strategic question.

You, like a lot of healthcare CEOs have talked about the healthcare environment and what they may look like over the next 3 to 5 years. And I guess the question is, isn't size an asset in this environment and I wonder, will this limit your flexibility at all?

For example, if your device franchise standalone, needed more breadth to compete and more bundling were occur in that segment of the marketplace, couldn't HUMIRA cash flow have enabled future acquisitions there? So simply, is size an asset?

Does this limit your flexibility at all?

No, I don't think it limits our flexibility at all. You got to remember, we're a very large company becoming 2 very large companies.

These are both large cap companies at the end of the day. They're both very strong companies and they both have very strong cash flow.

The cash flow of each of these companies is equivalent to what the entire company was not that long ago. The cash flows are very strong on both sides.

I don’t feel like either one of these 2 companies is going to be constrained or limited by what it may wish to do. We're not actively seeking large acquisitions.

I think at least on the side of the diverse medical products company, I'd tell you that I think is there is so much potential for growth and sustained double-digit margin growth that we can do that organically. For us, any acquisitions or additions to the company, I think will be very much opportunistic and because there's an opportunity we believe we can uniquely leverage in the mix of our business over time.

Will there be those opportunities? I think there will be over time and we'll react to them and evaluate them as they come and we'll be able to do it opportunistically and we'll have no shortage of capital or flexibility to do it.

On the Proprietary Pharma side, I think the same is true. I think as there are pipeline opportunities for Rick to add to that business.

There is no shortage of capital flexibility to do so. Both will have very strong cash flows.

We are not reliant as a company on HUMIRA alone. As I indicated earlier, all of these businesses are generating positive cash flow today.

And actually, and if you went back 10 years ago, that wasn't true. The Diagnostics business didn't generate cash.

The Diabetes business didn't generate cash at the time. Today they do.

All of these businesses generate strong cash flow. So no shortage of flexibility.

I'll start with sort of pick up where you left off with David's question. Is it too soon, Miles, to talk in little more detail about your preliminary vision for the ongoing Abbott.

You said, you made some comments we’ll continue to expand in emerging markets. I'd expect to hear that.

You're already a strong presence. But you talked about channel synergies and you talked -- you highlighted the self-paid mix.

Maybe help us think here. Where does Miles White see the company going over the next 5 years, more of a consumer-oriented company, is there other capital -- opportunities in capital or IT?

Just any preliminary thoughts would be fabulous?

Well, Rick, as we've talked about on previous calls, the emerging markets in particular are big growth opportunity because of the expansion of those economies and the expansion of the healthcare systems in those economies. And the structures of those markets are very different.

Not different just with each other, but different than, say, the U.S., Europe, Japan historically. They are much more self-pay markets than reimburse markets in general, and our Established Pharmaceuticals or branded generics business and our Nutritional businesses are generally speaking in those markets, self-pay businesses.

And yet growing very rapidly in those markets. They share common outlets.

They share common distribution channels and so forth. And while we have not, at this point, attempted any kind of synergy between them, they do share common visibility, brand, outlet, pharmacy, wholesaler, et cetera, in all those markets.

And I think that footprint will definitely benefit us going forward. I think it's a plus to have a mix of sources of how your products are paid for.

For a company, in our business, if you're solely dependent on the U.S. and Europe, well, then you're going to be dependent on governments and payers that are highly concentrated.

And that's going to be true of the characteristics of our Proprietary Pharma business and that's been the case for a lot of our mix of business over time. One of the things that was attractive to me about the ophthalmology business was that a big chunk of that business is consumer discretion business, the LASIK business.

And while that business has been pressured by the economy in the last few years, I like the fact that we're not just dependent on government reimbursement in a lot of cases for payment for our products. Because I think for those countries, those businesses, those products, where consumers make the decision, your businesses is somewhat less vulnerable to large structural moves in the payment system.

So I think that mix is good. I think that we will continue to expand in emerging markets because as I said earlier, growth is there.

We are not ignoring developed markets. There's a big chunk of the company, both companies frankly in developed markets and those are important markets to us.

But I will tell you that I think the developed markets will be much slower growers for the future, and a lot of the growth will come internationally and especially in emerging markets. So I think that the obvious distinction that way between the pharmaceutical business and the diverse medical products business is -- the diverse medical products business has the market growth, the expansion, the expansion of those economies, a tailwind of growth.

It's not going to be that dependent on single large products. The pharmaceutical business will always be dependent on single large products because that's the nature of that business.

And the productivity of our R&D and therefore, the importance of our pipeline and the durability of products like HUMIRA, very important for that business. And I think that's why our pharmaceutical business has been so successful over the last decade and I think will continue to be going forward, but those are different, in different market dynamics.

Just a follow-up, you highlighted the potential for improving gross margins and operating margins. Maybe you want to talk a little bit about that.

Is that factory consolidation? Is it just realigning how products are made and where and distributed?

Is that significant in your mind? And maybe just, Tom, when will we see you start reporting some kind of breakdown for the 2 companies differently?

Will it wait until the Form 10-Q comes out?

Rick, I'll just say we're going to explain more about this on Friday, the first question on margins.

Rick, in our segment information, you already have quite a bit of basis for understanding the major businesses here. So, I mean, obviously we do need to go through this carve-out financial process, which is going to take several months.

And that's when you'll see a little more specifically more of a fully allocated picture of the pharma business than what you see in the segment footnotes. But you have pretty good information right now.

And I'd say, as we get later into the process, after we do the Form 10 and get closer to the true separation, we'll be getting more granular on how these 2 businesses look.

Just to answer the granular point you put upfront on the gross margin. There are several businesses here that are changing the structure of manufacturing and other things, the sourcing and even how they go to market in some cases.

Diagnostics is having a great program underway that way and has expanded its gross margin. Diabetes Care, same.

Nutritionals, major programs underway right now to change the mix of its gross margin. Some of it is our manufacturing strategy globally.

Some of it's whether we make it ourselves versus source-it, et cetera. There are a number of factors that contribute to it.

But we will talk about it a little more on Friday.

I have 2 questions. One, the Established Pharmaceuticals business, I wonder if you can walk through the reasoning why that wasn't put with the pharmaceutical business?

I would've expected that this could have been a nice buffer against any pipeline failures and government intervention that you mentioned, so maybe comment on that? Then the second question, I wonder, we're all asking about timing, but also -- we're now in this unusual period now where there's Health Care Reform implementation.

We've got a super committee discussing further Medicare cuts. I wonder if this also played into the time now to do the split?

Okay, first comment on the Established Pharmaceuticals business and the Proprietary business. I'll tell you, other than the fact that they both have the word pharmaceutical in their headline, they're really different.

Their business models are different, the markets where -- that are attractive to them are different. The Proprietary Pharmaceuticals business is very much a developed economy business for all the reasons we know.

The kinds of products that we sell and the cost of those products and so forth, their affordability and so on. Those are developed market products.

The Established Products division at least here, you'll note doesn't have a U.S. business and won't.

It is not our anticipation to be in the U.S. because it wouldn't make money here.

And at the end of the day, we are trying to earn a return on the investors' capital. So that business will stay focused on international markets.

And then the nature of the competition and the selling, frankly, Glen, has a lot more in common with businesses like our nutrition business than it does the Proprietary Pharma business. It's a business about a breadth of product line and key leaders in key categories, your feet on the street, than relationships with many, many pharmacies and wholesalers and so forth in these emerging markets.

The business model and how money is made are very, very different. And there isn't actually a lot in common there.

So it made sense to us that the Established Pharmaceutical business belonged with the other very Durable Growth business and not with the Proprietary Pharma business. With regard to Health Care Reform, I would say Health Care Reform is a contributor to the environment in general.

It clearly has impacted the environment for healthcare products. It has impacted the environment for pharmaceuticals and/or medical device products.

Frankly, so has the debt crisis and pay crisis in Europe. The impacts on the economies in the U.S.

and Europe, aging populations, all the things that we know are happening to pressure the healthcare products markets in the U.S. and Europe, all contribute to a different environment.

And at the end of the day, I'd say all that does is change the nature of the environment in which we compete and operate. That's going to clearly have an impact on all the businesses, not just pharma.

This is not motivated solely by Health Care Reform at all. But the Health Care Reform, you could say, is a contributor to the overall environment that has contributed to a bigger consideration about the investment identities of these 2 businesses.

I wanted to probe a little bit on the pharmaceutical business if I could. I know, I for one, have been looking for more and more disclosure on your pipeline.

And I guess we'll get that on Friday. But I know you have a high level of optimism about the outlook for that business and I am anxious to hear the details.

But clearly, some of the assets like hepatitis and MS are very much changing quickly in terms of standard of care and have a lot of intense competition. So there is, let's just say, there is some risk in terms of the pipeline of that particular Proprietary Pharmaceuticals business.

How are you thinking about that in regards to business development? And if you could comment about the cash flow outlook, I think that you're sort of implying HUMIRA will probably grow another $1 billion per year for, I would say, a couple of years.

I don't know if that would mean, a couple means 2 or 3 to me. But at the same time, you're losing the lipids franchise.

So there's -- where are we in the adequacy of the cash flow for business development? Because I'm sure you want to make sure that there's some cushions and buffer in the outlook for the pipeline, given the competitive dynamics in some of the key franchises in the late stage.

And given, obviously, longer-term acknowledgment of some risks on HUMIRA. That's a mouthful, I appreciate that.

It was a long question. A big part of that we're going to answer on Friday.

I would tell you, we understand the competitive dynamics pretty well in hepatitis, as well as MS and I think we can walk through that on Friday. I'd also tell you just don't focus on hepatitis and MS.

Bardoxolone is a big asset. We have a number of other assets that we'll talk to you about.

But clearly, the areas we're going into are areas of high unmet clinical needs. They're competitive, okay.

I think we understand the profile that we need. HUMIRA, I think you described -- you’ve described it in a way that's consistent with what we think, although I would say, I have view that's different than you about sustainability.

And that is the key to this, right? We believe there's strong underlying growth that will be maintained for a longer period of time.

We believe there's plenty opportunity to penetrate these markets. And on top of that, the pipeline will play out.

There certainly will be a period where the generic impact on our dyslipidemia franchise will depress overall growth rates but the underlying growth rate will be very, very strong. And so when that plays through, you'll see it pop back up to very healthy growth.

Most of them have been asked, but I'm just wondering, I think you answered why you separated emerging established products from the Proprietary business because of the risk profile and the cash flow characteristics and persistency make it fit more with the medical products business. But I'm just wondering, when you acquired those businesses, you did talk about the opportunity to cross-sell the 2 companies' products, I'm just wondering if there's any dis-synergies associated with separating those 2?

I know you talked about that they have been separated largely internally. And if there's a plan to commercializing some of your proprietary products in those emerging markets that are dominated by these established products and then I have another question?

It's interesting. I don't expect the synergies, and the companies will, in some cases, still maintain common brands in some examples where the EPD business will have a brand overseas in some markets and the Proprietary business will have it in the U.S.

or some others. That's not uncommon.

As you know, products like Enbrel or Remicade and others have had 2 companies marketing them in different markets over time. So I think, that some of the things that some might assume would be dis-synergies or conflicts won't be and it won't be for us.

So I don't see that there's an issue there. The notion of cross-selling and shared.

The company is, frankly, where it makes sense can cooperate. We're not going to be in any kind of direct competition any way, we aren't now.

So I think that -- I don't think there's any threat to the original comment. Although clearly, Barbara, neither necessarily relies on that for its success.

I think both can be completely independently successful without reliance on the other even if there are some shared assets. Rick, you want to add anything to that?

No. I mean, I think that covers it.

I mean, clearly, emerging markets aren't as significant for the Proprietary business as they are for the other business. But they are a significant contributor to our growth in certain emerging markets where you have reimbursement access.

That's the key for the proprietary product.

I think that's an important point. The Proprietary business will also have opportunities in the emerging markets, and we'll definitely go after those opportunities.

They have presence there now, they have people there now and there's market there now, albeit smaller in terms of numbers of people or whatever but sizable in terms of dollars for some of the places that Rick mentioned.

So, Barbara, you had one more question?

Yes. The question really is about the outlook.

You made this very specific comments about the growth outlook both for top and bottom line in the medical products business. You spoke to sort of competitive low single-digit top line growth for Proprietary business, but you didn't comment on earnings.

And I'm just wondering, given the fact that the company has been diversified and along with that your investor base is looking for persistency and consistency and double-digit earnings growth, whether there is likely to be any change in the investment profile of the Proprietary business, i.e. do you see opportunities to spend more on that business that you were reluctant to do and maybe believe you should be doing that you were married to a business with different kinds of expectations?

I think if you look at the investment identity of pharmaceuticals within Abbott, I would say that the way we plan, the way we run businesses within Abbott, it's -- although we're all part of a big family, the reality is we build our own P&Ls, our plans by year, and we try to invest in a way that's appropriate for the right return for the investor. And so I can tell you without question that the pharmaceutical business was never underfunded on programs that they believe that they could advance more rapidly.

Now, it depends a lot on the evolution of your pipeline. As you get more and more of your pipeline in Phase III, it's far more expensive to be able to develop those products.

But whether we were inside of Abbott or outside of Abbott, that would be the same investment profile that will drive the business in order to maximize the return on that investment going forward.

Barbara, I think you'll see eventually here in the split of the companies in their P&Ls and balance sheets and so forth, a profile in the Proprietary Pharma business is pretty healthy, a profit profile and a spending profile is pretty healthy. Its R&D spending compares well.

Its SG&A spending compares well, particularly given the focus of its business in specialty categories. I agree with what Rick said.

It's not in any way been underfunded or had to subsidize anything else. When you look at the whole Abbott Laboratories and you look at the profiles of R&D spending or profits and so forth, there's a dilution that occurs there in the mix of all of that, that makes it difficult to see the individual profiles of businesses.

The R&D intensity of Nutritionals business by comparison is low-single digits. It's not necessarily to spend nor does it take more.

And when you marry the size of the sales of a business with a lower profile, where your spending is much higher in SG&A than it is on R&D and so forth, and you look at the combined total, I think you could question that. But as you see the Proprietary business broken out, I think what you'll see is a very healthy profile that in no way constrains it.

And I think you'll see proper profiles that are competitive and the other businesses as well on the other side.

That concludes our conference call today. As I mentioned earlier, we did post a 12-page slide deck to our Abbott Investor website that summarizes today's announcement about the separation into 2 publicly-traded independent companies.

I also mentioned if you joined us late in the call that we are hosting an investor meeting this Friday, October 21 in New York from 9:00 a.m. to 11:00 a.m.

where we'll discuss the growth opportunities in each of these businesses in more detail and answer some of the questions that came up today as well. Miles, Rick, Tom, and Dr.

John Leonard, who I mentioned is our Head of R&D for Pharma will be in attendance, along with Larry and me and some other folks. Additionally, if you listened to a replay or if you'd like to listen to a replay of our conference call today after 11:00 a.m.

Central Time, it will be available on our Investor Relations website at abbottinvestor.com and after 11:00 a.m. Central Time, via telephone at (203) 369-3519, confirmation code 2128756.

The audio replay will be available until 4:00 p.m. on Wednesday, November 2.

So thank you, all, for joining this morning. We look forward to seeing hopefully many of you in New York on Friday or in the coming weeks and months as we talk to you individually about this transaction and the growth opportunities going forward.

Have a good day.