Press Release

2006 Net Earnings Excluding Specified Items excludes after-tax charges of $306 million, or $0.20 per share, for acquired in-process and collaborations research and development and $82 million, or $0.06 per share, for cost reduction/integration activities and other, primarily related to the Guidant acquisition and an after-tax gain of ($54 million), or ($0.04) per share, for a fair value adjustment for the gain-sharing aspect of the BSX stock purchase.

2006 Net Earnings Excluding Specified Items excludes after-tax charges of $306 million, or $0.20 per share, for acquired in-process and collaborations research and development and $100 million, or $0.07 per share, for cost reduction/integration activities and other, primarily related to the Guidant acquisition and an after-tax gain of ($54 million), or ($0.04) per share, for a fair value adjustment for the gain-sharing aspect of the BSX stock purchase.

U.S. pharmaceutical sales growth of 27 percent was led by HUMIRA, which increased 44 percent in the United States. Prescription trends are strong as HUMIRA continued to gain market share in the rheumatology, dermatology and gastroenterology markets. In the quarter, Abbott received European approval for HUMIRA in Crohn's disease and initiated the U.S. Crohn's launch, which is off to a strong start. Recently, Abbott raised its 2007 global sales guidance for HUMIRA to more than $2.8 billion.

Abbott's lipid franchise also had a strong quarter with TriCor sales up 21 percent and Niaspan sales of $170 million. Niaspan is now expected to achieve approximately $650 million in sales this year.

Sales of Abbott's international pharmaceuticals increased 8 percent during the quarter, including a 6 percent favorable impact from exchange. International growth was favorably impacted by the continued strength of HUMIRA, with sales up 58 percent and double-digit growth of Kaletra, based on the continued strength of the international launch of Kaletra tablets.
 

The core laboratory diagnostics business had strong performance in the quarter. Sales of immunochemistry and hematology products increased more than 10 percent (including a 4 percent favorable impact from exchange) and point of care sales grew more than 25 percent. During the quarter, Abbott signed agreements with two major group purchasing organizations to supply a broad line of immunochemistry and hematology products, which represent a significant sales opportunity over the next several years.

Nutritional products sales growth was led by continued double-digit sales growth in International Nutritionals. Partially offsetting this growth was an expected decline in U.S. nutritional sales, consistent with previous forecasts and reflecting the completion of the co-promotion of Synagis in the U.S. during 2006.
 

R&D investment increased 5 percent, or 8 percent excluding specified items, reflecting continuing investment in our pharmaceutical and medical products pipelines, including HUMIRA, ABT-335, ABT-874, controlled-release Vicodin and XIENCE V.

SG&A expense increased 18 percent, including the impact of the Guidant and Kos acquisitions and specified items. Excluding the impact of acquisitions and specified items, SG&A expense increased approximately 10 percent, driven by new and ongoing promotional initiatives, including new indications for HUMIRA and the continuing international launch of XIENCE V.
 

The second-quarter 2007 adjusted gross margin ratio increased 10 basis points to 58.0 percent favorably impacted by improved product mix and partially offset by the reduction in the contribution from Synagis in the United States, as well as generic competition on Omnicef and Biaxin XL sales. As a reminder, U.S. co-promotion for Synagis ended in 2006.

• Under GAAP, once a decision to divest a business has been reached, depreciation and amortization expense on the related long-term assets is suspended. Direct transaction costs relate to deal-specific expenditures that have been included in the reported results.
• Under GAAP, if a business is reclassified to Continuing Operations from Discontinued Operations, cumulative depreciation and amortization expense not previously recorded must be subsequently recorded. As a result, the after-tax impact of suspended depreciation and amortization expense from the first-half 2007 of $79 million, or $0.05 per share, will be recorded in the third quarter, and treated as a specified item at that time. This will fully offset the favorability of this item in the first half, resulting in no net impact for the full year.

The other second-quarter 2007 specified items are primarily related to integration costs associated with 2006 acquisitions, continuing cost reduction initiatives in global manufacturing operations and a write-down of Omnicef inventory related to the introduction of generic competition. These items are partially offset by a fair value adjustment for the Boston Scientific (BSX) stock and realized gains on sales of the BSX stock and suspension of depreciation and amortization expense for the core diagnostics businesses. In accordance with accounting standard SFAS 159, Abbott's investment in BSX stock is being accounted for at fair value. Changes to the fair value of the BSX investment are required to be reflected in the income statement, which is tracked as a specified item, along with any related realized gains/losses on disposition of this stock.

The pre-tax impact of the specified items by Consolidated Statement of Earnings line item is as follows (dollars in millions):
 
 

Abbott is making significant progress across a number of late-stage programs in its broad-based pipeline, including:

•  HUMIRA
  • Crohn's disease – In June, Abbott received European regulatory approval.
  • Psoriasis – In April, Abbott announced its submission for global regulatory approval.
  • Juvenile RA – In May, Abbott announced its submission for global regulatory approval.
  • Ulcerative colitis – Entered into Phase III development in 2006.
  • Asthma – Entering into Phase II development shortly.

• XIENCE V Drug-Eluting Stent – Abbott submitted the final module of its FDA application for U.S. approval for XIENCE V in May, on track for a U.S. launch in the first half of 2008. XIENCE V was launched in Europe and Asia in 2006. Abbott also has additional next-generation drug-eluting stents in development.

• Controlled-release Vicodin – Abbott is developing a controlled-release form of its pain brand, Vicodin, which is currently in Phase III development. Abbott plans to submit for regulatory approval in the second half of 2007.

• Simcor – In April, Abbott submitted its regulatory application for Simcor, a combination therapy to address both HDL and LDL cholesterol.

• ABT-335 – Abbott's next-generation fenofibrate is currently in Phase III development as a stand-alone therapy. Development also continues on a fixed-dose combination of either TriCor or ABT-335 with CRESTOR, to address all three lipid parameters in a single pill. Regulatory submission for the stand-alone therapy is expected in the second half of 2007.

• ABT-874 – In immunology, Abbott's anti-IL 12/23 biologic, ABT-874, has demonstrated promising results in early studies for Crohn's disease and psoriasis. The company has decided to move ABT-874 into Phase III development for psoriasis later this year.

• Diabetes Care Pipeline – In June, Abbott's FreeStyle Navigator Continuous Glucose Monitoring System received European regulatory approval. The FreeStyle Navigator remains under active U.S. FDA review. Also in development is a fully integrated blood glucose monitoring system combining a meter, test strips and lancing capabilities in one device.

• m2000 Molecular Diagnostics System – In May, Abbott received U.S. FDA approval for the RealTime HIV-1 viral load test for use on the m2000 molecular diagnostics system. Abbott expects to expand its menu of infectious disease assays over the next few years.

• Abbott PRISM – In July, Abbott received FDA approval for its hepatitis C (HCV) test for use on the Abbott PRISM diagnostics system. The approval of the HCV test completes the PRISM hepatitis panel, which also includes three additional hepatitis B tests. Additional retrovirus screening tests for use on Abbott PRISM are currently under FDA review.
   

Abbott is advancing leading-edge scientific discoveries in its early-stage pipeline. Following are selected highlights from Abbott's early-stage development pipeline:

• Oncology
  • In the second quarter, Abbott announced a collaboration with Genentech to develop and commercialize two Abbott oncology compounds. Developed by Abbott scientists, ABT-869, a multi-targeted kinase inhibitor and ABT-263, a Bcl-2 protein antagonist, represent promising, unique approaches to treating cancer. Abbott and Genentech will work together on all aspects of research, development and commercialization.
  • Additional oncology compounds in Abbott's pipeline that are not part of the collaboration include: a PARP-inhibitor, which prevents DNA repair in cancer cells, enhancing the effectiveness of current cancer therapies; an oral anti-mitotic in Phase II for non-small cell lung cancer and neuroblastoma; and, a biologic anti-tumor agent with a novel mechanism of action.

• Neuroscience
  • Abbott's neuroscience pipeline includes several unique approaches for treating a number of diseases including schizophrenia, Alzheimer's disease and pain. Compounds under development include neuronal nicotinic receptor antagonists and D3 receptor antagonists, which play a role in regulating pain, memory and other neurological functions.

• Hepatitis C
  • Abbott has partnered with Enanta Pharmaceuticals to develop protease inhibitors for the treatment of hepatitis C, which affects more than 170 million people worldwide.

• Bioabsorbable Drug-Eluting Stent
  • In March, Abbott presented encouraging data from the world's first clinical trial for a fully-bioabsorbable drug-eluting stent (DES) to treat coronary artery disease. The bioabsorbable DES is designed to be slowly metabolized by the body and completely absorbed over time.
     

The core laboratory diagnostics, point of care and molecular diagnostics businesses have been reported in the second quarter and will be reported in the future as Worldwide Diagnostics Sales. The historical sales of this group of businesses is presented below (dollars in millions):