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. (Operator Instructions). 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.

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 disclosed 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.

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's sales, our results were strong in our growth markets and in line with our expectations 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% for 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 built a broad emerging market base that…

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 are confirming our ongoing earnings per share guidance of $1.98 to $2.04, which reflects double-digit growth over 2012 at the mid-point 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 would expect a 3% negative impact on sales in the third quarter and 4% in the fourth.…

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 vision care businesses. In our Vascular business, worldwide sales were flat on an operational basis, a step up than first quarter performance and consistent with previous guidance. International sales, which comprised more than 60% of total Vascular sales, increased 4% operationally. Growth was driven by new product, including our XIENCE PRIME, small vessels stent in Japan, 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 follow 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. and Japan, and continue 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 40% of…

Thank you. (Operator Instructions) Our first question today is from Larry Biegelsen from Wells Fargo.

Let me start with a couple of questions for Miles. Can you hear me okay?

I hear you fine.

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?

Well, I will take the macro environment first. I think whenever the economies of the world, wherever they may be go 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 are 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 involve the pundits and analysts and everybody else talk about the macro environment and the pace of recovery and so forth, I think, optimism and hope and so forth have driven a lot of wishful thinking that it is going to happen faster than it does, but frankly the problems of Europe or even the U.S. have been more serious and deep. They don't recover that fast, so that 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 would look at it and say I think it is all getting better. I think it is going to get 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 for the Dow everyday certainly doesn't reflect that. We have great days of exuberance and others days that aren't so exuberant, but. overall I think it's pretty steady. Now, as I have said in the past, there's 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…

It's helpful. Just one follow-up for you, Miles. So your performance in nutrition continues to be strong, particularly in emerging markets. How should we think about the dynamics taking place in China around the infant formula market? Secondly, the sustainability of the extremely high growth this quarter for adult nutrition outside the U.S.? Thanks.

I would say it is, 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 are all positive. 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 pretty 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 would 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 has been clear that it wants to improve it's 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 are paying attention to how these markets are developing. I mean, they are 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…

Thank you. Our next question is from David Lewis from Morgan Stanley.

Good morning. Miles, just a quick question on (Inaudible). It probably was the only business this morning that is performing, that's not a point at or above expectations and I wondered if just give us a sense of whether that you think that is more developed market pressure. Is that more just Abbott's delays with emerging market registrations and I think over the last three to four months 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?

I would tell you my over views haven't changed at all. I am glad our peers don't think it's interesting, because we don't need no 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 are very different than proprietary research based pharmaceuticals. And, I think one of the execution issues we've had is more of a cultural or philosophical business approach issue, because we have been so dominated by our research-based pharmaceutical business in the past. You have a business mindset around how you execute against that business and I think it's one of the reasons why few companies have succeeded at having proprietary pharmaceutical businesses and generic pharmaceutical businesses in the same company and I have said in the past I admired them to sell off or be one of the first pioneers of that at Novartis, but we 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 is 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. And, I don't…

Miles, that’s very, very helpful. Then just maybe a quick follow-up. Either persistent investor, a question (inaudible), in order for Abbott to transform their growth there seems to be the view that you need transformational acquisitions and I guess in your guidance, the mid to upper single-digit growth in the back half of the year which is ahead of your peers, you could choose small incremental deals. So, can you talk to us about the deals that you have done in the last June in recent days, is that more indicative of the kind of deals that we should see and does Abbott need, frankly a larger multibillion-dollar transaction to transform the growth rate?

I love the question. If you watch me or us over the last 10 to 15 years, one thing I think you can consistently say is I have never forecasted to anybody what we are doing or what we are looking at or whether you can expect us to be interested in M&A activity. So, I am 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 are 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 have seen that over 10 to 12 years. There are times when smaller, what you call bolt-on or whatever supplemental acquisitions fit, and they enhance the given business, then there is other times you make a bigger move. Whatever it is, the timing of those moves tend to be driven by opportunity, valuation, circumstances in the markets and so forth. 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 have done a lot of study, we followed businesses, we follow the market, and follow various things that we are interested in the target 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 will act on the opportunity. The problem is, you can't always predict when that’s going to be. We can't predict…

Thank you. Our next question is Mike Weinstein from JPMC.

Good morning, Miles. Thanks for taking the questions. So, Miles, if I just kind of step back and talk about the first half of the year, your accounts were a little bit difficult, but I think you would agree that 3.8% of constant currency is 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 getting you to kind of what you originally were hoping which was more mid-to-high single digit?

Well, you know 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 pretty carefully and know better than anybody, but I would say those two things have been a bit of a sluggish drag. No question. And, I think, we are improving both of those. The evidence of that remains to be seen in EPD and I understand the skepticism of investors or analysts on that one, but I am reasonably confident of EPD. I am just frustrated with the pace here. On vascular, the sequential improvement here is pretty good and our share positions in our core markets is pretty good. I mean, we've got leadership share positions in core stent businesses and so forth. I think, as it's 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 and austere market. However, that still isn't going to be some high double-digit rate or something as you know. So, I am 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, 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 would tell you the comps in…

I just want to follow-up on the vascular piece, if I could. So there is 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 we really went back a year plus ago, the thought was with prices had a super premium and trying to make it become 10% of the market on a volume basis, the 10% volume might mean 30% from revenue. Now last year, obviously that has changed a lot. It is still priced at a premium but nowhere near what we were talking a year ago. Is the goal for that to be a workhorse product? If so, where are you on tracking towards that goal? Then the second question is on this week's acquisition which really would be just from a strategy standpoint, why does Abbott and developer of XIENCE and IDEV Technologies need to go outside to buy a stent platform? Thanks.

Okay, let me talk about the drug first. Your characterization is exactly right. I think initial entry or strategy of that product was priced as a very new technology which I think niched it in to selective use. There was a very intentional decision on our part to drive it toward workhorse use, just as you characterized. To do that, I will 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 the 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. It is our intent to move it into workhorse status. I would say we are seeing that in increased volume, increased usage, increased pickup, increased account pickup and so forth and that we are 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 were moving that as fast as all the circumstances will allow without artificially distorting the markets. So I think you 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? Yes. You could, but clearly thought we had the 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 core standalone business and needs a strong position in this place, so we think that what IDEV gives us, so we think that not only helps us in that little space, we think it helps the endovascular business strategically as a package.

Okay. Thanks, Miles.

Did I get all your questions there mike?

Yes. You did. Thank you.

Thank you. Our next question is from Rajeev Jashnani from UBS.

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 the rest end of the market growth rate is and help us understand what price volume is that's driving that. Thanks.

I can't give you a specific market growth rate, because it's different for every country and every market. And, one of the difficult for this business, Rajeev, is, we think of a given geography as sort of three different segments. There is a proprietary pharma segment in our market, there is a commodity generic segment in the market and there is a branded generic segment in the market. And those different segments exist in practically every country. The question is, dominance or prominence in given economics strata in those markets. I mean, India is just a great example to point at, because you've got all three there. It's very much a branded generic market, even a branded market at a lower price points in rural settings. For that reason, we've got two brands in India. We've got True Care and we've got Abbott, and True Care is a world brand and at different price points, different product and different mix of product and the Abbott brands tend to be in the major urban areas and so forth. So, it depends. And, generally speaking, around the world, there aren't many data sources for us to get breakouts that way of those markets. So, we know we know, we know for 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 patented product or other, so I can't really give you that, but by country or overall, I think the 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 brand position right and so forth and our history and experience here has been, we grow much faster than the underlying market when we got those conditions in place and then the price trade off is such that it stratifies like a lot of markets, there's low priced product, there's mid-priced product. I can't say high priced. There's nothing high priced about it. We are 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, the breadth of the brand and the offering that we have. So, it's very much as I have 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 quality or international source or multinational source tends a get a pretty good share of the market at a pretty good price point.

Thanks. And, just a follow-up, I think Abbott has been pretty good operators of those in the markets that participate this one as you mentioned probably not where you wanted to be at this point in time, but what's the reasonable expectation for folks to have, or this business to get to more of a market rate of growth.

Well, I am little gun shy about forecasting one, because I have 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 and then I have got my own ambitions which I am already late on. So you always think as soon as you change management, you put new strategies in place that somehow next quarter it is 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 am impatient about that but I think we are not going to see what I would like to see in terms of the sequential momentum, hopefully until sometime next year.

Thank you, our next question is from Ben Andrew from 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 about where they are located, what they are charged with and when you think they may be able to have an impact on the businesses?

Well, I think they are 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 is going to be responsible for the emerging market part of the business and we are changing out, call it the marketing team and branding team that will support him in that business. So he is already in place, already pretty much up to speed. He is already familiar with us. He knows the markets well. Te knows the channels well. He knows the brands well and so forth, and I think that is going well. The other position we elevated from internally and one of our experienced and frankly, I would 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 the characteristics of European and 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. We have taken some of our experienced people from that background, like we have seen in emerging markets and supplemented his team with that. Because I think we have got a transition going on in some of these emerging markets to much broader branded generic marketing, more consumer related. So we are supplementing their teams that way. All of them are located in Europe together at the company or division headquarters which is (inaudible) and they are all working there together so that they are with each other every day and whether it is 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 are able to customize what we are doing either strategic or from a marketing standpoint for each of those segments.

You firmly have to go down paths, whether it is 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 too high?

Well, I think, first of all, we have to get our house in order, which we are doing and getting our strategy straight and the right people in place and so forth which we have done. I would 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 and fit well with what we wanted to in a given geography, well we would certainly look at it. I would tell you, and I think all 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 give 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 fit or safe or something isn’t that kind of multiple. I think today what you see out there is valuation expectations that are frankly just unrealistic. If that doesn’t change, we will be doing this organically. I think you have to be balanced or disciplined about the returns you expect and the hurdles you expect. The old adage that anything is for sale, as long as it is an overwhelming compelling price and I think if its an overwhelming price, it better have a good returns for our shareholders, or they are not 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 valuable for both side, and today I would tell you in this particular space you don't see and that is why you do not see very many deals getting done by anybody, buying anything to expand their footprint. I mean, our peers may say, gee it's an unattractive market. I don't think the markets are attractive all. I think, some of the M&A's are unattractive, but that just means you got to go at it more organically over time. And, frankly, if that's how it is we'll go at it organically.

Okay. Then one quick topic change, but going back to China. This is 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.

How do I think about that? I think about that, but we're probably going to see it again in a couple of years. I think you are going to see it over and over again, like I don't know, I have a lot of things I could say about I suppose, but I think you see this stuff all the time. I think, if you are 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 get over obsessed about any one of them. Is there a headache every day? Yes. Somewhere. 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 and 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 ride. And, 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 backroom here we are managing volatility every day. So, the way I think about it is we are going to be managing volatility every day and I stress to the management team, we got to be always kind of preparing plan B and what are you going to do and contingencies and so forth and that is a fundamental part of our whole planning and budgeting process all the time. And, if you look this year, six months, seven months end of the year, has the year gone like you would expected? The answer is no. Have we delivered the earnings we committed? Yes. We've exceeded them. So, I think you got to kind of plan that way every year.

Sure. The only question, Miles, is 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 is now taking up the mantel and canister and other countries as their healthcare cost rise, they say worked over there, why not here? So, how do you think about that exposure maybe over the five-year window? Then (Inaudible) incremental given kind of that risk of the broadening.

Possibility I guess exists, but the circumstance has tend to be pretty unique in given country. There is regimentation in Japan around price management from the government or price control from the government that every year or every two years depending what are devices, pharma or what are the segment and it tends to be a fairly predictable regimen. And, 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 U.S. or something and expect to be into 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 for more. And, life's a negotiation and it just keeps going that way whether it's Europe, or China, or Japan, or India or anywhere else, the ability to earn a return is always subject to certain negotiation of what a payer can pay or will pay for the service of product you provide. I think that's just part of the business.

We have time for one more question.

Thank you. Our final question today is from Jeff Holford from Jefferies.

Hi, Miles. Good morning and thanks for taking all these questions and give us some really useful color. I do have a couple of questions.

I think, one could ask Tom or Brian one or two, it would be okay.

No chance this morning. I have got a couple of questions, but I would 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 of [Abbott] one is great broad top line growth. And, the second point, we've got some great underlying margin expansion to look forward and that's what seem to really help out this quarter. I was very encouraged by the commentary around nutrition and the margins there. I wondered if you could just give us a bit better view here, is the cadence of delivering, I know there is margin improvement or can you give us a bit more color if it 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 overdelivering there?

I would say, first of all, that the performance in nutrition is the result of 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. Some of it's mix of products. Some of it is manufacturing process. Some of it, whether we make our own product or source it from a third party manufacturer. There is literally hundreds of things. We have made great progress and I think there is frankly a lot more to be made. We have commented in the past that we are fortunate to have some early 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 is more here. This is what I would say. As much as you would like to get even greater forecast out of me, I am 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 to this question, everybody is thinking about contingencies too. But the fact is the organization has got a cultural 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 proficiency of discretionary spending. A lot a lot of times you can go out and just cut SG&A but to make a quarter but frankly I think that is kind of quite shortsighted. In our case, on the discretionary side, if we look there for efficiency or…

I would just say that (inaudible), to your original question, I think things are ahead of schedule and you are seeing it in the gross margin. We are delivering above expectation 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 target that we have for each division, then the focus is going to be on what s more and how much better we can get beyond that and we are making very good progress getting towards those initial targets and we are going to keep working on improving beyond that.

I will just try one extra last quick question if I can. I know the time is short, but in terms of the 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 many of their established pharma businesses. Do you see opportunities in some of those reorganizations to potentially and augment what you have in your EPD business?

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 stood 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 market. You know how larger share position or brand position may be in that market. So, for us it will more likely be a consideration of geographic enhancement or geographic fit that it will be breadth of product line, because we are 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 cannot I should say I don't really have a point of view, because I haven't seen those assets yet.

So, thank you, Elan, and thank you all for your questions. 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. Pass code: 8703. The audio replay will be available until 4pm Central Time on Wednesday, July 31. Thank you for joining us today.

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