Abbott Annual Shareholders Meeting
Miles D. White, Chairman and Chief Executive Officer
April 27, 2012
[Slide 1: Event Title]
[Slide 2: Miles White, Title]
In 2011, Abbott delivered exceptionally well on its commitments to you, our
shareholders. Abbott people continued to execute effectively against our strategies,
generating strong results despite a very challenging industry environment. Around the
world we saw slow economic growth, increasing currency pressures, and austerity
measures in a number of developed country markets. Nevertheless, we delivered sales
growth of nearly 11 percent, and ongoing earnings-per-share growth of almost 12
At the same time, we took deliberate steps in each of our businesses to help position them
for continued long-term success. And, most notably, we initiated the next stage in our
company’s evolution. In order to more effectively align Abbott’s long-term strategic
goals with our shareholders’ best interests, we announced that we will separate our
businesses into two industry-leading, publicly traded companies by the end of this year.
[SLIDE 3: Creating Two Leading Companies]
The first of these will be a diversified medical products company that will retain the
Abbott name. This company will be composed of our established pharmaceuticals
business, diagnostics, devices, nutritional products and animal health. If it were a stand-
alone entity this year, it would have sales of more than $22 billion. The second will be a
roughly $18-billion research-based pharmaceutical company consisting of Abbott’s
current proprietary pharmaceutical business.
Last month, we announced that this new company will be called AbbVie. The name is a
blending of Abbott and “vie”. The first syllable serves as a constant reminder of the
company’s enduring connection to Abbott; the second is derived from the root of the
Latin word for life, and calls attention to the vital work the company will continue to
advance as it improves the lives of people around the world.
I will continue to be Chairman and CEO of Abbott; and Rick Gonzalez will serve as
Chairman and CEO of AbbVie. Many of you know Rick already, but I’d like to introduce
him formally – Rick, if you’d please stand. Rick is a 30-year Abbott veteran who is
currently head of our global Pharmaceutical Products Group. Earlier, he was Abbott’s
President and Chief Operating Officer, so he’s ideally suited for this new role.
These two organizations will have very distinct business and investment identities, but
they will both build on the strong foundation we’ve created and, most importantly, they
will both operate with the values that have made Abbott great for almost 125 years.
This decision is the logical outcome of changes that have taken place in our business
environment and the strategic actions we’ve taken over the past dozen years to meet
them. These actions have dramatically reshaped and strengthened Abbott. In this time, we
have transformed our company – entering new businesses, expanding our presence in
emerging markets and aggressively building our pharmaceutical pipeline.
Through this process, Abbott has evolved into two distinct halves, with different
business models and very different demands and priorities. Today, research-based
pharmaceuticals have different approval and life cycles, research and development
profiles, regulatory environments and geographic market focuses than our other
For all practical purposes, these two halves are already functioning as separate, highly
successful companies. Converting them into independent operations, with distinct
investment identities, will provide you, our shareholders, with two unique -- and highly
attractive -- investment opportunities.
[SLIDE 4: Shared Strengths, Distinct Identities]
On their first day of independent operation, both businesses will be Fortune 200
companies, and in the top ten in their respective industries. They will both have broad
product portfolios and global reach. They will have very strong balance sheets and
significant, durable cash flow. Both are expected to pay a dividend that, when combined,
will at least equal the Abbott dividend at the time of separation.
They’ll be different in important ways, as well. The research-based pharmaceutical
company is a higher margin business, with a more intense research focus, and more of its
business concentrated in developed markets. The diversified medical products company
will have a higher growth rate, because more of its business is in emerging markets,
which are growing faster.
But these attributes are not mutually exclusive. Abbott will continue to be research-
driven and highly profitable; and AbbVie will continue to be strong around the world,
including in developing markets. The process of separating the two companies – which,
as you would expect, is complex -- will be complete by the end of this year. We have an
established cross-functional working team devoted to managing this effort, and we’ve
achieved a number of important milestones in the separation process.
We’re proceeding steadily toward our year-end goal, but, until then, we’ll continue to
operate as one Abbott, pursuing the strategies that helped us generate the strong results
we achieved last year, and that will position both new companies for sustained success.
[SLIDE 5: 2011 Results]
For 2011, we increased sales by almost 11% [10.5%], grew net ongoing earnings by
almost 13% [12.8], and increased ongoing earnings per share by about 12% [11.8%].
Each of our businesses contributed to this success, as you’ll see when I discuss their
[SLIDE 6: Dividends]
Our strong performance has also made it possible for Abbott to continue to pay a rising
dividend over the years. In February we announced our 353rd
dividend to be paid since 1924. Last year, we returned $3 billion to shareholders in the
form of dividends, and Abbott has now increased its dividend payout for 40 consecutive
years. This year, Abbott has declared an annualized dividend of $2.04 per share
We are a member of the S&P 500 Dividend Aristocrats Index, which tracks companies
that have annually increased their dividend for at least 25 consecutive years. Our
consistent string of dividends also led us to be named a leading dividend stock by Money
[SLIDE 7: 1-Year Total Return]
These results have allowed us to continue delivering a strong return for our shareholders,
as you can see in this chart, which shows the total return we provided investors in 2011.
Total return is the combination of stock price growth plus dividends paid. Our total
return of almost 22% in 2011 was our best performance in five years.
[SLIDE 8: 5-Year Total Return]
And, as you can see, over the past five years we’ve generated a greater total shareholder
return than any other company in our diversified peer group. Our stock price has
continued to rise since we announced our intention to separate into two leading
companies, hitting an all-time high this week.
Looking at the highlights from each of our businesses will give you a better sense of how
these results came about, and how we’re going to sustain our success going forward. I’ll
start with the Diversified Medical Products businesses, which include four segments of
roughly equal size: Established Pharmaceuticals, Nutritionals, Diagnostics, and Medical
Devices. In these businesses our strategy of building innovative portfolios of patient-
focused products, combined with our opportunity in fast-growing emerging markets, will
position us very well for sustained success.
[SLIDE 9: Business Highlights – Established Pharmaceuticals]
Our newest business in this group is Established Pharmaceuticals. In its first full year of
operation as a separate division, it delivered sales in excess of $5 billion, up almost 20
percent [19.8%], including the acquisition of Piramal Healthcare. With Piramal, Abbott
has become the number-one pharmaceutical company in India, one of the world’s fastest
Branded generics are a key part of our strategy to expand Abbott’s presence in emerging
markets, and we are very well positioned in this space. We have an extensive portfolio
that continues to grow quickly -- last year in EPD we benefited from 250 product
approvals, new formulations and new registrations, and we expect to add more than a
thousand over the next several years. We’re building this new business on our solid
reputation for quality, consistent efficacy and safety, and a reliable supply chain.
Because EPD’s business model aligns more closely with Abbott’s diversified medical
products businesses, it will remain a part of Abbott after the separation.
[SLIDE 10: Business Highlights – Nutritionals]
Our global Nutrition business delivered almost 9 percent growth [8.6%] for the full year
2011. In the U.S., we’ve regained our position as the infant formula market leader with
Similac. We also continued to drive double-digit growth of our toddler brand, PediaSure.
Abbott is the global leader in adult nutritional products, as well, with our Ensure line of
balanced nutrition products and condition-specific offerings such as Glucerna, for people
with diabetes. In this category, we’ll continue to grow by introducing leading-edge,
science-based products like our new Glucerna Hunger Smart shakes. These are
formulated to help people with diabetes manage their hunger along with their blood-
Outside the United States, sales increased about 14 percent [13.9%] for the full year, as
we continued to drive growth in emerging markets, where rising populations and personal
incomes are leading to higher demand for our products. Our nutritional sales in emerging
markets account for more than 40 percent of our total nutritional business, and increased
17 percent for the full year. In China alone, we expect nutrition sales to reach nearly $1
billion by 2014.
To meet the growing global demand for our nutritional products, we’re building new
manufacturing facilities in important markets around the world. Earlier this month, we
broke ground for a state-of-the-art nutrition manufacturing facility in Ohio to meet U.S.
demand for products like Ensure and Glucerna. We plan to have it operational late next
year. And we’re building additional advanced facilities in China and India to meet the
growing demand in those countries as well.
[SLIDE 11: Business Highlights – Diagnostics]
In Diagnostics, our core laboratory business grew sales for the year by close to 8
percent [7.9%]. In this business, we’re focusing on tests and instruments that match
the needs of global healthcare systems by lowering costs, improving productivity, and
enhancing patient care. We delivered particularly strong growth in emerging markets
such as China, where we continue to place new Architect testing systems.
In our Molecular Diagnostics business, we delivered growth of almost 15 percent
[14.7%] compared with 2010. We launched three new infectious disease assays for
our m2000 molecular diagnostics platform in Europe: a qualitative HIV-1 assay, a test
for a virus common in transplant recipients, and a test for hepatitis B. And we
received approval from the FDA for a new molecular diagnostic test designed to
detect abnormal gene rearrangements in some lung-cancer tumors. The test is
intended to identify patients who will benefit from a new cancer therapy from Pfizer.
And, finally, our Point-of-Care Diagnostics business delivered more than 10 percent
growth [10.4%], thanks to incremental innovations like the i-STAT Wireless handheld,
which was launched in the U.S. last year. This device allows real-time transmission of
diagnostic test results directly from the patient bedside.
We will continue to grow each of these Diagnostics businesses through continued
innovation. This year we expect to launch approximately 20 new tests designed to
speed the process of identifying and treating disease, improving healthcare outcomes
and, ultimately, reducing costs.
[SLIDE 12: Business Highlights: Medical Devices]
Moving on to our Medical Device businesses… in Diabetes Care, sales grew by 7
percent [7.0%] in 2011. In this business last year, we launched our new InsuLinx
glucose monitor in Europe. With its integrated insulin calculator, Insulinx is the
foundation for our new-product pipeline in this business, which is focused on
incorporating new technologies to improve the testing experience for insulin-
Our Medical Optics business delivered almost 5 percent growth [4.6%] for the year.
We launched five new vision-care products in 2011, including the Tecnis Toric
intraocular lens, which was introduced in Europe. Our Vision Care pipeline is
balanced across our Lasik, Cataract and Eye Care Solutions business lines, with
numerous products launching over the next five years.
And in our Vascular business, we grew sales more than 4 percent [4.4%] and launched
several important new products last year that solidified our position as the number-one
vascular-device company globally.
This business will benefit this year from four new products -- Xience PRIME, our next-
generation stent that’s also approved for long lesions; the XIENCE nano stent, which is
designed to treat coronary artery disease in small vessels; and the TREK and MINI-
TREK coronary catheter systems, which were introduced in the U.S. and Japan.
In Europe, we received CE Mark approval for ABSORB, our bioresorbable vascular
scaffold, and we expect a full commercial launch by the end of this year.
Last Fall, ABSORB was cited by Business Week magazine as an example of a “Modern
Medical Marvel”; and was named the winner of the Medical Devices category in the
2011 Wall Street Journal Technology Innovation Awards. An Abbott innovation has
won this award in four of the last five years.
And we expect numerous other product launches to drive growth in this business over
the next several years, including the U.S. launch of ABSORB, as well as our MitraClip
device for mitral regurgitation, and our recently announced new drug-eluting stent,
Xience Xpedition, which we anticipate launching in Europe in the second half of this
Abbott Vascular is another of our businesses that continues to perform well in emerging
markets. This geographic segment, which accounts for nearly 20 percent of total vascular
sales, increased 25 percent for the full year.
Moving to the other side of our business.
[Slide 13: Business Highlights – Research-Based Pharmaceuticals]
In Research-Based Pharmaceuticals, which grew by 11 percent [11.0%] last year,
Humira continues its extraordinary performance. Humira sales were up more than 21
percent [21.1%] versus 2010, reaching almost $8 billion [$7.9B]. And it is expected
that Humira will become the world’s best-selling medicine this year.
In recognition of its continuing success, and the positive impact it’s had on patient’s
lives, Pharmaceutical Executive Magazine recently named Humira its “Brand of the
This business also got a boost last year with FDA approvals for two products -- a new
formulation of AndroGel, our testosterone restoration therapy, that uses less volume
than earlier versions; and a new, six-month administration formulation of Lupron for
advanced prostate cancer. Those approvals helped both drugs achieve double-digit
growth for the year. We also delivered double-digit growth for Creon, our pancreatic
[Slide 14: Pipeline News – Research-Based Pharmaceuticals]
And our pharmaceutical pipeline is very promising. We have significantly more
compounds in development than we had just five years ago, and we’ve seen some
very encouraging data. Today, I’d like to focus on just a few research programs that
are of particular interest:
Our new developmental treatments for the Hepatitis C Virus, or HCV, have shown
the potential to be leaders in this category by effectively curing HCV infection with a
short course of therapy. Earlier this month, we presented excellent Phase 2 results for
our HCV compounds, which suggest that they may be more effective -- and better
tolerated -- than the current standard treatment.
Another late-stage highlight is bardoxolone, which is in Phase 3 trials for chronic
kidney disease. Bardoxolone has the potential to prevent and even reverse the
progression of this disease. No previous treatment has ever been shown to do this.
Bardoxolone could change the treatment landscape and have a significant economic
benefit to the healthcare system. We’re developing this compound with our partner,
Reata. We recently expanded that agreement to jointly develop and commercialize
their entire portfolio of next-generation anti-inflammatory treatments. This crosses a
number of disease states, including rheumatoid arthritis, multiple sclerosis and
chronic obstructive pulmonary disease.
And, earlier this year, we agreed to collaborate with the Dutch company Galapagos to
develop and commercialize a promising compound for the treatment of rheumatoid
arthritis and other auto-immune diseases. This drug -- which is in a class known as JAK
inhibitors but is more selective than previous drugs in this class -- has the potential to
offer an effective oral treatment option for these conditions.
These are just a few of the promising treatments we currently have in development.
We’ve been working hard to accelerate our pharmaceutical R&D program, and that
effort is beginning to bear fruit. In 2011, we advanced two agents into Phase 3
development and now have more than 20 compounds or new indications in late-stage
development. In addition to these successes across our range of businesses, Abbott
continues to make a difference in people’s lives as a leading corporate citizen of our
[SLIDE 15: Global Citizenship]
Ten years ago, Abbott committed to donate 20 million rapid HIV tests to help prevent
mother-to-child transmission of HIV in the developing world. I’m pleased to report that
we reached that goal this month.
Last year, I told you about our initial response to the devastating earthquake and tsunami
in Japan. Our commitment to the relief effort extended well into the year. Abbott
eventually donated more than $3 million to provide medical and social services, as well
as food, shelter and supplies to the victims of this disaster.
In Haiti, Abbott scientists and engineers are working with the non-profit organization
Partners In Health to combat malnutrition.
We’ve entered into a four-year joint research and licensing agreement with the Drugs for
Neglected Diseases initiative to create medicines for a variety of tropical diseases.
We’ve continued our strong commitment to environmental stewardship as well. In fact,
we have already met our 2015 environmental stewardship goals, reducing both our water
usage and our CO2
As a result of our efforts, Abbott was included for the fourth consecutive year on the
global "100 Best Corporate Citizens" list compiled by Corporate Responsibility
magazine. We were ranked number one in our sector in the social responsibility category
of Fortune Magazine’s Most Admired Companies list. And we were named to the Dow
Jones Sustainability Indexes for the seventh consecutive year. This is the world's top
recognition for leadership in responsible economic, environmental, and social
[SLIDE 16: Recognition]
These positive external recognitions extend across all aspects of our operations. Among
The Great Place to Work Institute named us to its "Best Workplace" lists in countries
Working Mother magazine again named us to its "100 Best Companies" list, for
providing family-friendly benefits, programs, and workplace culture.
Both The Scientist and Science magazines again named us one of the top employers of
scientists in our industry.
For the fourth year in a row, The Deal magazine named us its Most Admired Corporate
Dealmaker in healthcare for our effective strategic use of mergers and acquisitions over
the past three years.
Barron's Magazine again named us to its annual list of "Most Respected Companies" for
And, finally, we were recently ranked second on Fortune Magazine’s annual list of the
most admired companies in our industry. This list is seen as the leading gauge of
So, as you can see, despite a very difficult environment, we continue to grow our
businesses -- making a difference in more lives, in more places, than ever before.
The challenges we face aren’t going to go away. But, as our results demonstrate, we have
the right strategies in place, and the right people to implement them. Our businesses are
strong, and ready for their futures – carrying forward Abbott’s legacy as two independent
companies, positioned for continued success in the future of healthcare.
# # #
Miles D. White
Chairman and Chief Executive Officer