Chairman's Letter

In 2009, we managed through two challenges that faced every multinational company — the impact of the global recession and currency fluctuations. In addition, Depakote sales were impacted by nearly $1 billion due to generic competition. We exceeded our expectations despite these events, delivering double-digit earnings growth.

This past year also demonstrated the balance within our diverse mix of businesses and the strength of our financial position. We generated record operating cash flow of more than $7 billion. And, we returned nearly $2.5 billion to shareholders in the form of dividends, reflecting an 11 percent increase and representing the 37th consecutive year of Abbott dividend increases.

Our return of cash to shareholders through dividends, together with Abbott’s stock price appreciation, has generated a total shareholder return of 20 percent over the last three years — compared to a decline of 16 percent for the Standard & Poor’s Index (S&P 500) over the same time period. Our five-year total shareholder return of 32 percent was 30 percentage points higher than the return of the S&P 500, which delivered 2 percent.

To sustain this level of performance going forward, last year we took strategic actions to augment and reshape our business portfolio for the long term, adding early- and late-stage pipeline technologies, as well as new growth platforms.

This includes the addition of Solvay Pharmaceuticals, which expands our footprint in Eastern Europe and emerging markets, adding approximately $2.9 billion in annual sales of stable, global pharmaceutical brands. With Solvay, we expect to more than double our overall presence in emerging markets. Solvay also adds approximately $500 million of incremental R&D investment capacity. We plan to use this funding power to drive future pharmaceutical growth. The addition of Solvay is significantly accretive to Abbott’s ongoing earnings-per-share in 2010 and beyond.

We further broadened our medical products business early in 2009 by entering the vision care market with Advanced Medical Optics. We augmented this business later in the year with Visiogen, adding a new and promising late-stage pipeline technology. The vision care market is a sustainable, long-term growth platform, and Abbott is now a leader in LASIK and cataract technologies. Cataracts are the leading cause of vision loss among people 55 years and older, and the need for vision correction is rising as the global population ages.

In our vascular business, we entered the fast-paced sector of structural heart repair with the acquisition of Evalve and its pioneering technology for the minimally invasive treatment of mitral regurgitation, the result of a structural heart defect. In molecular diagnostics, we added Ibis Biosciences, a leader in advanced molecular diagnostics. Its biosensor technology helped detect the earliest cases of the 2009 H1N1 flu virus, and was recognized with top innovation awards from both The Wall Street Journal and The Scientist magazine.

These actions have enriched our mix of businesses for the near and long term. Over the past decade, we’ve built leading positions in a broad range of high-growth, technology-driven markets. We’ve also continued to invest in R&D, spending $2.7 billion across our pipeline programs to sustain our performance over the long term.

Pharmaceuticals
In our global pharmaceuticals business, we continued to make progress, both commercially and in our pipeline.

Across our pharmaceutical pipeline, we have a balance of near-term, lower-risk opportunities, as well as earlier-stage biologics and small molecules with real potential to change how diseases are treated. We expanded our early-stage pipeline with the addition of two new biologics — one for the treatment of chronic pain and the other for the treatment of cancerous tumors. These complement our existing development programs, including neuroscience, where we recently advanced two compounds for Alzheimer’s disease; oncology, where we have two compounds in advanced clinical trials and several others in earlier stages; hepatitis C, where we’re building on our foundational work in HIV; and immunology, where we have next-generation work in biologics and small molecules.

Commercially, our international pharmaceutical operational sales grew at a strong pace in 2009, and we also improved our global pharmaceutical operating profits despite the impact of generic Depakote. Humira had another great year, with operational sales growth of more than 20 percent worldwide and more than 40 percent internationally over 2008. We expect Humira’s strong growth to continue as penetration rates in key therapeutic areas remain low, particularly outside the United States.

In 2009, we also saw steady share gains in one of the largest pharmaceutical markets: lipid management. We successfully launched Trilipix, our next-generation fenofibrate medicine focused on reducing triglycerides. And, Niaspan remains the number-one prescribed therapy for raising HDL or “good cholesterol.” Certriad, our late-stage pipeline compound combining AstraZeneca’s Crestor with Abbott’s Trilipix, is intended to address all three lipid parameters — LDL, HDL, and triglycerides — and is expected to be approved in the United States in the first half of 2010.

Nutritional Products and Medical Products
In our global nutrition business, growth remains strong. We expect to maintain double-digit sales growth internationally as we further expand our presence in emerging markets and bring new, innovative products to consumers and patients around the world. Of particular note is the renewed growth of our nutrition business in the United States, where we launched more than 25 new formulations, product lines and packaging improvements in 2009. And, we have extended our market leadership in infant formula with the strength of Similac Advance EarlyShield. We now have the greatest market share advantage over the competition in a decade.

In our global medical products business, it was a breakout year for Abbott Vascular, led by the outstanding performance of our Xience V drug-eluting stent (DES). We are the world’s leading manufacturer of coronary stents and guide wires for use in opening blocked or narrowed arteries.

Xience V continued to be the number one DES on the U.S. market in 2009. In Europe, last year, we launched our next-generation DES, Xience Prime. Its success has bolstered Abbott’s market-leading position in Europe. In February 2010, we launched Xience V in Japan, which is off to a strong start. Japan is the world’s second-largest DES market, and represents a new growth opportunity for Abbott in 2010 and beyond. The success of Xience also has contributed significantly to this division’s operating profits, which more than doubled from 2008. We expect continued steady profit improvement in vascular again this year and over the next several years, as well.

Our vascular business also has the most robust pipeline in the industry. We expect to launch 10 new technologies over the next five years. Our bioabsorbable DES, which we believe represents the future of coronary artery disease treatment, is at least three years ahead of competitors. Evalve’s minimally invasive MitraClip device is on the market in Europe and is under FDA review in the United States. The only current surgical alternative for patients is invasive, open-heart surgery.

For diagnostics, 2009 was one of our best years in a decade. Our core laboratory diagnostics business remains a global leader. We launched new products in 2009, including a number of new instruments and assays. Most importantly, after a thorough rebuilding process, this business has improved its profitability significantly.

Fit for the Future
So, it was, again, a year of strong performance across our major businesses. Our strategy has been strongly endorsed by a decade of superior growth and top-tier performance versus our peers. That strategy positions us well to navigate the challenges of our operating environment.

As we look back on 2009, we met our major strategic and financial goals and invested in new opportunities that will help us achieve consistent performance in the coming years.

As we enter 2010, we have very good visibility on Abbott’s future. We’re fortunate to have a seasoned management team, we’re pleased with our momentum, and we remain optimistic about the fundamental performance of our businesses. Our well-defined leadership positions across multiple growth areas, our significant cash flow, our well-diversified base of reliable earnings, and the proactive actions we’ve taken to augment our portfolio, all position us well for the foreseeable future. For 2010, we anticipate another year of strong growth.