Good morning and thank you for standing by. Welcome to Abbott’s Fourth Quarter 2016 Earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question by pressing the star, one key on your touchtone phone. Should you become disconnected throughout this conference call, please redial the number provided to you and reference the Abbott earnings call. This call is being recorded by Abbott. With the exception of any participant’s questions asked during the question and answer session, the entire call, including the question and answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott’s express written permission. I would now like to introduce Mr. Scott Leinenweber, Vice President, Investor Relations.

Good morning and thank you for joining us. With me today are Miles White, Chairman of the Board and Chief Executive Officer; and Brian Yoor, Senior Vice President, Finance and Chief Financial Officer. Miles will provide opening remarks and Brian will discuss our performance in more detail. Following their comments, Miles, Brian and I will take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2017. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott’s operations are discussed in Item 1(a), Risk Factors to our annual report on Securities and Exchange Commission Form 10-K for the year ended December 31, 2015, and in our quarterly report on Form 10-Q for the period ended June 30, 2016, as well as in St. Jude Medical’s annual report on Form 10-K for the fiscal year ended January 2, 2016 and St. Jude Medical’s quarterly report on Form 10-Q for the fiscal quarter ended April 2, 2016. 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. Please note that fourth quarter financial results and guidance provided on today’s call for sales, EPS and line items of the P&L will be for continuing operations only. 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 measures in our earnings news release and regulatory filings from today, which will be available on our website at abbott.com. Our commentary on sales growth refers to operational sales growth, which excludes the impact of foreign exchange unless otherwise noted. With that, I will now turn the call over to Miles.

Okay, thanks Scott, and good morning. Today I’ll discuss our 2016 results, as well as our outlook for 2017. For the full year 2016, we achieved ongoing earnings per share of $2.20, representing double-digit underlying growth. Continued strong performance across many of our businesses and operating margin expansion enabled us to deliver adjusted earnings per share at the upper end of the initial guidance range we set forth at the beginning of last year. Importantly, 2016 was a year of significant shaping for Abbott. We’ve lined our businesses with long-term growth trends, and it’s been our intention to build leadership positions in all areas of healthcare where we compete. This past year, we took multiple strategic steps to ensure we’re in the right businesses that provide the best opportunities for our future. I’ll start with the pending sale of our medical optics business, or AMO. We entered the vision care business several years ago with the intent that AMO would be a foundational cornerstone for us to build upon. Under Abbott, this business performed well, gaining share and improving operating profitability; however, as we looked over the long term, we didn’t see sufficient opportunities for us to build AMO into a more broad-based leader in vision care. Strategically, the decision was made to strengthen our medical device business in a market that offered the greatest long-term growth and leadership potential, and that market is cardiovascular care, one of the largest and most important areas of healthcare. The recent acquisition of St. Jude Medical creates the kind of market-leading position we seek in all of our businesses. This includes strong positions in nearly every area of the $30 billion cardiovascular device market, including coronary stents, cardiac rhythm management, atrial fibrillation, and heart failure. Importantly, Abbott now has one of the strongest…

Okay, thanks Miles. Today we reported fourth quarter adjusted earnings per share from continuing operations of $0.65, in line with our previous expectations. Sales for the quarter increased 3.8% on an operational basis, excluding an unfavorable impact of 1% from foreign exchange. Reported sales increased 2.8% in the quarter. Regarding other aspects of the P&L, the adjusted gross margin ratio was 57.4% of sales, adjusted R&D investment was 6.3% of sales, and adjusted SG&A expense was 28.3% of sales, all in line with previous guidance. Overall as we look back at 2016, we achieved our financial objectives for the year, including mid-single digit operational sales growth and margin improvement to once again deliver double-digit underlying adjusted earnings growth. Turning to our outlook for the full year 2017, today we issued guidance for adjusted earnings per share of $2.40 to $2.50, which reflects double-digit underlying growth of Abbott’s base business, accretion from the acquisition of St. Jude of $0.21, the pending sale of our medical optics business which is expected to close in the first quarter of 2017, and the expected unfavorable impact of foreign exchange on our operating results based on current exchange rates. In terms of our 2017 sales forecast, please note that all references to sales growth unless otherwise noted are on a comparable basis which adjusts the 2016 basis of comparison to include St. Jude’s 2016 results adjusted for the recent sale of its vascular closure business, and excludes sales of our medical optics business. On this basis, our 2016 sales baseline would be $25.4 billion, and we forecast comparable operational sales growth in the mid single digits for the full year 2017. Based on current exchange rates, we expect exchange to have a negative impact of around 2.5% on our full year comparable reported sales. We…

[Operator instructions] Our first question comes from Mike Weinstein from JP Morgan. Your line is now open.

Thank you. Can you hear me okay?

Yes.

Okay, perfect. Good morning, Miles. A couple things I wanted to touch on first. So one, can you talk about the St. Jude performance in the fourth quarter? The St. Jude CRM sales ended up coming in below, it looks like, the street’s expectations, and the guidance for the first quarter seems to suggest that that business is still struggling from the recalls they had in the third quarter. So if you could touch on the St. Jude performance and then the outlook there. Then second, the overall business, the expectation I think that Brian laid out was that the business would grow operationally low single digits in the first quarter, but then get to mid-single digits for the year. So if you could just walk us through that, that’d be great. Thanks.

Okay, first comment on St. Jude fourth quarter, CRM I think has continued to struggle. I mean, we can see that in the sales and the share and so forth. I expect that to be rectified imminently here, shortly. The good news is we’ve seen in other markets around the world when they’ve gotten their MRI claim, they have recovered and restored whatever position they have lost. That’s obviously been an overhang for them for this last year and the fourth quarter was no exception. So the good news is we expect that very shortly, but your observation about it was correct. I’ll turn to Brian here for a little bit of underlying detail on your second question.

Sure, Mike. A step-up in sales throughout the year is simply what Miles message is - the stabilization of the CRM that we just talked about on the MRI claim, but also the opportunity to penetrate the accounts that we have with the combined businesses together is another contributor as we go to the market with a much broader presence of products as we call on the various accounts. Also, you’ll note that they had some nice approvals that we talked about with EnSite Precision, a key driver of growth in atrial fibrillation which has been growing in the double digits. We expect a lot of continued strong growth here, and there’s also a couple key catalysts here that we’re expecting as we move through the year, one being Confirm, which is in the heart failure space with atrial fibrillation - we expect that to be a unique contributor for the patients who have atrial fibrillation, and then also the continued contribution of neuromodulation. They recently had the Verse [ph] technology, which has had a lot of success and we expect that to continue, and then that for deep brain stimulation as well. Finally, there’s one more catalyst, and that’s HeartMate 3. It’s been doing really well in Europe. They’re the leader there. We do expect an approval of HeartMate 3 in the U.S. as we move through 2017, and that would be a contributor on the back half.

Okay, and then just quickly on your bridge, if you would Brian, the assumed impact from both FX and from the AMO divestiture for 2017?

Yes, the assumed--again, on a comparable reported sales basis, which Scott--and we filed an 8-K this morning, it’s 2.5% of sales on a comparable basis, and then the AMO business will likely have sales in the first quarter of no more than a couple hundred million dollars. But as you recall, the full year was about $1.2 billion.

Sorry, I meant EPS.

Oh, on the earnings per share? De minimis, Michael, on AMO. It typically is not a big earner in the first quarter just based on the pattern of spending; and again, if there is a little de minimis contribution, that also plays into the moving parts of where we’re offsetting the dilution that we’re seeing from the vascular closure divestiture.

I’m sorry, Brian, I was talking about the full year bridge for 2017, so the FX headwind I think in our modeling, we were at about $0.08 for FX for the full year. Is that close--

You’re in the range. You might be a little bit north of that, Mike. We are probably closer to a dime.

Okay, and the AMO divestiture, is that still about $0.11?

You’re right, Mike, and remember this offset to--the AMO divestiture is $0.11, but we’re deploying proceeds, so the net is $0.07. That is a complete wash with otherwise what we had a long time ago with our general purpose financing, which was also negative $0.07.

Understood, thank you guys.

Thank you. Our next question comes from Matt Taylor from Barclays. Your line is open.

Hi, thanks for taking the question. I wanted to explore, I guess, some of the trends in nutrition, because you talked about improvement throughout the year as well there, too. So obviously we know about some of the challenges that you had in China last quarter, and you had some puts and takes in the results this quarter. Can you walk us through your assumptions for how China fares for the early part of the year until you lap your comps, and then what else is driving that improvement in nutrition?

Hi Matt, this is Scott. I’ll touch on it very quickly. As you know, market conditions continued to remain relatively challenging in China for all competitors. It is a market dynamic. We do expect as we go through the year, our performance in that business to improve. Certainly as we start to lap through some of the impacts that we started to feel in the third and fourth quarter here of 2016, you’ll see some natural improvement but we also expect our business to improve as well. If you go outside of China, though, really there’s been nice performance in Latin American and in Southeast Asia. We continue to perform very well in the U.S. on the pediatric side of the business, and then obviously as you know, optically our results have looked a bit suppressed because of our scale-down in Venezuela, so our results and our performance in 2016 actually are a little bit higher than the print would indicate there as well. So we have a number of initiatives in place in China. We’re well prepared and understand the situation on the ground, and we’ll work our way through it at the beginning of this year and we expect our growth rates there to improve throughout the year.

Great, then just one follow-up on that earlier CRM question. Just because MRI is such a big deal, can you talk about why you have confidence that, I guess, the pacemaker approval could be imminent, and can you give us any update on the timeline for your high power expectation for the timing of that approval in the U.S.?

Yes, so I’ll touch base on the high power piece initially. So our updates on that are it will be later in the year. We’re looking at about the fourth quarter there for both of those high power devices. The pacemaker piece, we think is a little bit more imminent. We’ve had ongoing discussions with the FDA on that front and we feel like that one is right around the corner and should start to contribute here fairly early in the year, but the other two will be second half of ’17 items.

Great, thanks for the color.

Thank you. Our next question comes from Rick Wise from Stifel. Your line is open.

Good morning everybody. Hello Miles. It’s hard to resist asking you a bigger picture question. Obviously we’re witnessing what could be dramatic political policy changes in Washington. [Indiscernible] it seems like a lot could have potentially positive impacts on Abbott, but there’s some worrisome things as well - hospital capital spending uncertainty post-ACA changes, trade agreements--especially with some of the trade agreement changes. It’s hard, again, to resist asking you, how are you thinking about some of these issues? Are you concerned that this is all going to be a net plus or a negative? How are you adapting, et cetera, especially given your significant OUS exposure?

You know, it’s hard to speculate. I’d say in general I’m optimistic, and I’d say for a number of reasons. Some of the things that have been talked about won’t necessarily directly affect us. They may affect a number of multinationals. Obviously our new administration is pro-business, but there’s a lot of moving parts in that, as you know. The things I look for that might affect us, I think early on, I think we’re all waiting to see if there’s a tax reform package that would allow us the ability to access overseas cash and repatriate cash, et cetera. I think that would make a big difference for a lot of multinationals. I don’t really expect to see any changes in the Affordable Care Act directly affect us as much as I think they’ll affect other segments of the healthcare industry or business, and I think a lot of the effort will be pointed at other segments more than the spaces we’re in. At least as far as that is impacted, we’re primarily a diagnostic device company in the United States, so I think that to some degree, some of that impact could be favorable for us. The other things that I watch going forward is policies that affect strong dollar-weak dollar - you know, strength of currencies and so on, because we’re so geographically diverse internationally. I mean, I think one of the benefits - it’s not the primary benefit - but one of the benefits of the St. Jude acquisition is it does spread and balance us into developed market currencies a little more than we have been, and in general I’d like to see stability in the currency markets for us relative to the dollar, which has been a headwind for us for at least four years now. I think that will affect all multinationals. So you know, while there’s a lot of uncertainty around the various things that this administration appears to be making priorities out of, I’d say that there are relatively few that would impact us early on, and I think the impact is likely to be favorable, that being primarily tax and/or cash access.

Turning to a cash flow question, maybe Brian, you’d want to talk about the cash flow outlook post-the St. Jude deal, and maybe any stepped up initiatives to focus even more on even better cash generation potential and help us think what that might mean for debt pay down over the next couple of years and your targets there.

Brian is point at me to take that question, Rick. You know, there is a stepped up emphasis on cash flow, definitely, and I’d say we’ve always been a pretty strong cash flow generator. We balance our use of cash, as you know, among internal capex, dividend, share repurchase, M&A activity, and so forth. Obviously for the next little while, we’re not going to be putting a lot of emphasis into M&A. We’re going to hold back on magnitude of share repurchase, et cetera. We’re maintaining our dividend, growing it a bit, and a lot of emphasis will be put on, I’d say, rapid pay down or reduction of debt. I think that’s kind of a prudent place to be for the nearest term, so we’re being very, very prudent about cash use, cash flow, et cetera internally. I think we can do that for a while here and put ourselves back in a range where I think a conservative financial company like us would be, and get back to kind of the normal balance. You know, we’ve slowed the growth of the dividend. Will we restore that? We will, but we want to get to some targets, some leverage targets first, and we want to get there rapidly. So you know, not only in terms of our internal investments and so forth that we’ve across the board got a very emphasis on freeing and generating cash, and I’d say generally when we’ve had even a little bit of emphasis on that in the past, we’ve done very well, so that definitely is getting a lot of attention right now.

Just one last quick one from me on Libre. Libre is off to a clearly brilliant start in Europe, and you’ve said, I think, second half ’17 filing in the U.S. How do we think about growth from here and what kind of label you’re hoping for to drive U.S. adoption of the technology? Thanks.

Well, it’s already filed, but it’s--you know, I have to say, to be honest, the FDA has shifted sand on us a couple times here, so consequently we’re seeking both claims, replacement claim and adjunctive claim. We’re going parallel path on this, and I think that the performance of the product thus far ex-U.S., Europe and other countries, has been frankly excellent and does have replacement claim and so forth. I think the potential for the U.S. is extraordinary, and I think not only is the product itself an extraordinary product, but I think its value proposition is unparalleled. So--and I think the reason we’ve been able to get reimbursement in Europe and drive uptake as much as we have owes to the fact that governments there recognize the value proposition in the product as not only impact for patients but impact on the cost to the healthcare system. So I’d say at this point, I clearly can’t predict what the FDA’s timelines and so forth are going to be here, but we’re upbeat about the potential for it.

Thank you very much.

Thank you. Our next question comes from Glenn Novarro from RBC Capital Markets. Your line is open.

Good morning, guys. Just a follow-up on the MRI ICD. Last year, St. Jude was telling the street approval, I think somewhere around the second quarter of 2017. You’re now saying kind of fourth quarter of 2017. Can you talk to us about what’s creating this delay, what’s the hold-up at the FDA?

You know, I think you’re referencing--I think you’re confusing two different products possibly here, which is high voltage versus low voltage. In effect, we’re telling you now we expect the low voltage, which is the primary bulk of use, imminently here, which you could read first quarter, not second quarter, and high voltage later in the year. Two different areas.

Yes, I’d just add to that as well. Obviously we’ve been working with them on the low voltage piece. There’s a bit of a gating factor and [indiscernible] generally run in parallel as well, so those discussions overlap and the process overlaps for a period as well, so there’s some sequencing to that. I will say on all of these timing items that I gave [indiscernible], all of those were contemplated along those lines in our deal model, so there’s nothing different in our deal model relative to those timelines.

Okay, all right. I guess for some reason, I thought they were assuming a 4Q16 pacemaker MRI safe approval, and a 2Q17 MRI safe ICE approval. But let me just ask you one other question. The cash proceeds that you’re getting from selling the medical optics business to J&J and the cash proceeds that you’ve received from the asset sales to Terumo, have you applied that to your 2017 guide; in other words, are the cash proceeds being used to pay down debt or are we waiting to get more clarity on Alere? Thanks.

No, we’re not waiting for more clarity. We’ve pretty much applied it to our entire borrowing scheme, et cetera. No surprise, we’ve been able--you know, as we went into this, we had planned for many different paths and outcomes, so it’s contemplated in our financing.

Okay, great. Thanks for the clarity, guys.

Thank you. Our next question comes from Larry Biegelsen from Wells Fargo. Your line is open.

Hey guys, good morning. Thanks for taking the questions. First on EPB and diagnostics, the Q4 guidance was a little softer than the full year 2017 guidance. Can you talk about what’s driving that and what drives the acceleration? And just second for me, Brian, can you talk a little bit about the margin profile of the company beyond 2017? The guidance you gave for this year implied, if my math is right, about a 22% operating margin and a better gross margin than we expected. Just a little color on how to think about the margins going forward, thanks.

Sure. Larry, I assume when you’re talking about established pharma, you’re referring to the Q1 guidance, and it is a little bit low. In 2016 it was the last, and it was just the timing of when these shipments are received of some essential medicines into Venezuela, so that’s just causing the last of our quarters of comps here. They’ll step up right to the growth rates we’ve been accustomed to seeing for several quarters now, which has been high single, even double digits based on the strength of this business. That’s with respect to EPB. With respect to the margin and how to think about it, there definitely is the impact of bringing in St. Jude into the mix, and that provides some natural accretion there. You’re probably in a very tight range there with what you referenced in terms of a profile of 22%. I think of the expansion over ’16 being roughly half mix, but also synergies. Keep in mind we’re going to improve the profiles that historically St. Jude have had, and those will ramp significantly in Q2 and even further from there as we move through the year. Then finally, gross margin, as you know, and operating margin has always been a focus for us, and if you want to deliver double-digit underlying base earnings growth, you’re going to be naturally in that 70 to 80 BPs of range based on mid-single digit top line growth.

Brian, thanks for that. On the diagnostic business, I didn’t hear you comment as to why--I mean, if I heard the guidance correctly, you expect low to mid-single digits in Q1, but greater than mid-single digits for the full year. If you could just comment on that, that’d be great, and that’s it for me. Thanks guys.

Yes Larry, what we anticipate in diagnostics, which as Miles mentioned in his prepared remarks had some really strong growth, in particular as we hit the second half to the year and Alinity really starts to gain some traction and we gain access to some contracts on that front, so there’s some natural strength there in the back half of the year. In the first half of the year, the first quarter what you’re seeing, to Brian’s point on EPD, there was a smidgen of Venezuela in the first quarter of 2016 in diagnostics, and you’re also seeing some of that last scale-down within our genetics business which is well known and as expected in our molecular diagnostics business as well. So it’s more of a comparable item there. The underlying strength of that business is strong, and it will actually pick up steam as we head out through the year.

Thanks for taking my questions, guys.

Thank you. Our next question comes from Kristen Stewart from Deutsche Bank. Your line is open.

Hi, just a modeling question then a big picture question. For the interest expense line item, I think you’re modeling about $700 million for the full year. That does include, I think, some of the debt that was taken out for Alere. What are you assuming with that for the balance of the year in terms of redeployment? Is that assuming going down to pay down debt or share repurchase, or how should we just think about that to the extent Alere does come or doesn’t come in, in terms of accretion?

Yes Kristen, the way to think about the build of the 700 is we took out $15 million of debt for the St. Jude transaction, and I think that was somewhere around 3.75%. Keep in mind, too, we’re also assuming some debt from St. Jude as well - that was a contributor to the addition of debt, and we just had our ongoing normal debt that had interest on it for Abbott. When you add all those things up, and then to Miles’ point say that we said we’ve contemplated the deployment of proceeds from the divestitures that we earlier talked about, that’s how you net out to the 700.

Okay, great, and then I guess big picture for Miles, you’d mentioned obviously earlier in your remarks, this is a significant year of shaping for Abbott. Certainly I think we can all agree to that - it’s been several years of shaping. As you look over the next three to five years, how do you just think about Abbott overall? Is it likely that we’ll see another kind of reshaping of the mix, any thoughts on further divestitures of the businesses or potential, I guess, break-ups? I know you’re obviously putting a lot in in 2017 here, but I guess how do you just think about the evolving healthcare environment and kind of macro environment now, relative to the mix of your businesses? Thanks.

Well, I’ll put this in a little bit of context. When we spun off AbbVie, which has now been four years ago, there was a lot of, call it post-separation, call it clean up to do. We had to take the attendant overhead in the company down, finish the back office separations and so forth with AbbVie, and as you know, we did want to reshape some of our portfolio. We sold the developed market generic drug business to Mylan and we acquired CFR and Veropharm, so we made a number of moves that we think positioned the EPB business very strongly. We had great organic internal investment in diagnostics and strong business that really wouldn’t benefit from a lot of M&A in nutrition, and the weaker part of the company that got attention from analysts, investors and others that we believe needed strengthening as a fourth leg of the company was medical devices. With the St. Jude acquisition, we think we’ve pretty directly addressed that, and having placed our investment on the cardiovascular health segment, which we believe is pretty important, we determined we didn’t have the same opportunity in medical optics to build and add on and grow onto that, like in this case J&J would, so we divested that. Now at this point, having made all those significant changes, we look at the company and say, we’ve got four very strong sectors that are very well positioned in their respective product markets and their respective geographic markets. Our challenge, or at least opportunity now looking forward for the next few years is integrate St. Jude and, frankly, focus on the organic pipelines of new products coming, and execute so that we can see the growth benefit of the strength of these four segments around the world, so in their various segments want to see the growth out of ADD for all these new systems, we want to see the growth out of St. Jude in our vascular business for their new products. Obviously the same with EPB, which has got a very good sustained growth track, and same with our nutrition business. So I’d say we’re going to be focused pretty operationally here for the next several years. That’s our intent. I think when you go through a phase where you’ve made a number of transactions, people get very transaction focused, and we’re still an operating company. That’s what we intend to be here, is an operating company, and operate them very well and grow the targets that we’ve grown. We’ve always had double-digit earnings targets and we’ve positioned ourselves in growth markets, both product and geographically for the purpose of sustaining that identity for investors to be double-digit earnings growers and so forth. With the new product pipelines and the strategic positioning of the company, I think we’re extremely well positioned to deliver on that, so that’s going to be our focus for the next few years.

Okay, and you’ve certainly made a lot of individual purchases in the stock, so clearly I guess that expresses your view on what the future holds.

I’d say it very much expresses my view on what the future holds. You know, you always hear these comments about alignment with your shareholders. I am a shareholder, and I believe that the stock represents excellent value, and that’s why I bought the shares.

Perfect, thanks very much.

Thank you. Our next question comes from Bob Hopkins from Bank of America Merrill Lynch. Your line is open.

Hi, thanks very much for taking the questions. Can you hear me okay?

Yes.

Great, good morning. So first question is, I just wanted to make sure I understand the fourth quarter growth rates in a little bit more detail. Would you be willing to give us the--you know, what was the core legacy Abbott growth rate this quarter ex-Venezuela? I know it was 3.8% organically, but how much did Venezuela detract from that?

Yes, our core growth rate excluding Venezuela would have been around 5%.

Okay, so--and most of that drag goes away in Q1?

Well as we discussed earlier, we’ll have bits and pieces in EPB mainly, but then we’re through it.

Okay, and then two other quick things. I was wondering if you could give us for the fourth quarter, what was the legacy growth rate of St. Jude’s revenue base, kind of ex-divestitures. I was just curious what a clean revenue growth rate was for St. Jude in the fourth quarter.

Yes, so a clean growth rate, it was in the low single digits, on the upper end of that around 2.5% or so. You know, we expect obviously as we go through the year with some of the launches, with the approvals on the MRI side, with EnSite Precision and some of these other innovations that are coming, as well as with some of the modest revenue synergies that we have baked in initially, that will ramp over time, that the St. Jude combined business with ours should accelerate growth here in 2017 over ’16.

And then just lastly, really quickly on 2017, two quick things. One, the EPS guidance for the first half was a little bit below where the street was. Can you help us understand the cadence of the earnings power over the course of the year, like maybe what percentage of their earnings is in the back half, just given that Q1 number was a little bit below what we were thinking? And then also, I was just wondering if you could give us your view on Abbott’s opinion of the outlook for the growth rate of the ICD market as we look forward into 2017, given that that’s been obviously challenged of late. Thank you.

Let me take the first one here, Bob. I think it’s safe to assume that you’re going to have greater than 50% on the back half of the year, and also contemplated in that is the benefit of this financing also that we talked about. The combination of that, the deployment of our proceeds to generate benefit and synergies ramp is just going to naturally put you into a stronger second half versus the first half. The other thing in the first quarter I’d just note is that when you think about the FX impact, it has a modestly heavier impact on Q1 relative to the other quarters, so we feel comfortable with this ramp, we know the pieces are in place, some of them are just simply comps.

And then on ICDs?

Yes, we expect that market to be relatively flat as an overall market, which would be a little bit of price down offset by some modest volume.

Thanks very much for taking the questions.

Thank you. Our next question comes from David Lewis from Morgan Stanley. Your line is open.

Good morning. Maybe two quick ones for Brian and then one strategic question for Miles. Brian, I have two questions. It’s been a long time since we got the first synergy number - almost a year. Any greater clarity, kind of post-close of St. Jude, how you’re thinking about that synergy number, either the mix of revenue or cost synergies, the absolute size of that number, and the cadence over the next couple years?

Yes David, nothing really. We said it was going to be linear, fairly linear. We talked about the mix being heavier on the SG&A side initially and then the revenues ramping over time. I’d say the difference about us versus just putting a revenue--or excuse me, a fully synergy number out there is we go out and identify these relatively fast as part of our normal acquisition due diligence, so those are well in place, they’re in plans to be executed. We hope to do a little better maybe in the first year than what we said in linear, but we’ll see how that plays out over the year.

Okay, and I know you and Miles both stressed free cash flow earlier on in the call. Is there any kind of target, either in ’17 or ’18, as a percent of net income we should be thinking about in terms of free cash? That’s a question for Brian. And then Miles, I just think given what happened earlier this week, it’s pretty interesting - the two best consumer-oriented device companies were probably yourselves and J&J, and they’re buying one of your consumer-based franchises but they announced they want to get out of their other consumer-facing diabetes franchise. Can you just talk about how you see the diabetes franchise going forward and why you think that’s the right consumer franchise for Abbott to stay in, versus ophthalmology where you made a different decision? So those two, and I’ll jump back in queue. Thank you.

Yes, I would say we’re in kind of a unique position relative to a lot of the traditional competitors in this space in diabetic glucose monitoring. In the past, the four major competitors there, and there’s always--there’s a lot of other smaller ones, it’s been a finger prick and a little chip business, and we have a unique position here with Libre that is a completely different product that eliminates the need for that finger stick and gives a continuous glucose read that’s, frankly, impactful for the patient, both Type 2 and Type 1 in a very different way. I think that puts us in a unique position to see a transformation of that market and to benefit from it, if not lead it. Others don’t have that, and I think that the competition in what I’ll call the traditional part of the market and the commodity nature of it, the economics of it have clearly changed negatively in the past couple of years. Ironically, J&J kind of led that, and in our case we’ve got a different position with Libre that I think gives us a unique platform to benefit as one of the disruptors. Going forward, I believe that platform has possible utility for us in other testing segments, so in our case we see a growing business that as we replace the traditional finger stick business, not only ours but others, I think there’s an opportunity there that’s a real growth opportunity and a very valuable one.

Okay, and Brian, just on free cash? Is there a decent percentage to think about, maybe this year or next year as a percent of net income that the free cash generation can be?

Yes David, let me provide some context too. I think you saw our cash flow from 2015. I think with all the things that Miles mentioned [indiscernible], you should expect to see a little bit of a step-up when you get to the K in ’16, showing the step function of the efforts we’re making here on free cash. You know, it’s tough to completely model out what the ongoing sustainable, I’ll say, free cash flow conversion is to net income in the early years with an integration, but if you look at St. Jude, they are a very powerful cash earner. We’re excited about bringing that into the portfolio. If you take away the one-time things that are transitory, David, that go with an integration, be that expense or capital that bears fruit long-term, we’ll probably be in that competitive range that you see others, probably somewhere in that 70% to 80% range. That’s probably what we’d target.

Great, thank you so much.

Operator, we’ll take one more question.

Thank you. Our final question comes from Matt Miksic from UBS. Your line is open.

Hey, thanks for squeezing me in. So just one follow-up here. I know there’s been a number of questions on MRI and St. Jude, but maybe just a couple of clarifications, if I could. We hear some different expectations in the field around these low power pacer leads, and if you could just clarify whether this is a new lead system you’re waiting on, which was our original understanding, or whether we should expect the pending approvals to relate to labeling on existing leads? It’s a nuance that obviously could make a difference as we think about the ramp. And I have one follow-up.

Okay. Yes, our initial expectation will be a new lead, and I think that’s a strong position for us, we like that. But we are also seeking approval on the existing lead so that we can provide that as well for existing patients, but I think going forward we like the notion of new lead and so we expect the initial approval here to be that.

Great, and then the follow-up, Miles or Scott, if I could, on EPB. One of the things that we get often, questions we get often is just around the sustainability of this growth that you’ve seen - impressive sort of high single, low double digit. It’d be helpful if you could shed some light on maybe what we can--the drivers of that business, how we can think about sustainability, what potential future growth drivers could be to carry this into ’18 or beyond would be very helpful.

Yes Matt, this is Scott. You know, that business has been delivering at a high level here fairly consistently for years, quite frankly, since it’s been reshaped. You know, the demographics in these markets are aligned with growth for the long term. The model that we operate, quite frankly, is quite unique. There’s not another multinational company or a local company, quite frankly, that operates the model that we operate with the variety of shareholders, including the trade channel, which is a very powerful channel for us. So given the demographics and the model we operate and the strong brands that we have, we see this growth rate as highly sustainable over the long term.

And that’s through sort of--is it portfolio expansion of that product? Is it also geographic expansion on that sort of core model that you’re describing?

You’ve got several drivers of growth, Matt. It’s first of all the call it growth or emergence of a middle class in a lot of emerging markets. Remember, this business is 100% focused in what characterize as emerging markets, and the middle class income growth and the growth of their healthcare systems alone is a major underlying growth driver. Most of these markets are not reimbursement-driven, they’re consumer driven and have a model that is both a combination of call it medically driven through the physician or consumer driven through the patient and the pharmacist. So all the drivers of that growth and the distribution structure and so forth say this has got strong underlying growth. I’d say it’s target rich for geographic expansion in addition, and beyond that portfolio expansion, so a lot of our organic effort internally is driven toward expansion of key therapeutic areas, expansion of product, formulation innovation on product, and distribution management. In a lot of these countries where we are the leader, we’re a leader with not that big a share, so you get all the benefits of being the leader on the shelf, the leader in distribution, the leader in breadth, et cetera, with a lot of potential expansion and share gain as well. So all of the various factors that would drive growth are pretty favorable in these geographies and product areas that we’ve targeted.

That’s great, thank you.

Thank you, Operator, and thank you for all of your questions. That concludes Abbott’s conference call. A replay of this call will be available after 11:00 am Central time today on Abbot’s Investor Relations website at abbottinvestor.com, and after 11:00 am Central time via phone at 404-537-3406, pass code 35472887. The audio replay will be available until 4:00 pm Central time on Wednesday, February 8. Thank you for joining us today.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone have a wonderful day.