Financial Review (2 of 5)

Results of Operations

Sales

The following table details the components of sales growth by reportable segment for the last three years:

Total %			Components of Change %
Total Net Sales	Change		Price		Volume		Exchange
2006 vs. 2005	0.6 (a)		0.6		0.2		(0.2	)
2005 vs. 2004	13.5		0.1		12.1		1.3
2004 vs. 2003	13.9		1.6		9.1		3.2
Total U.S.
2006 vs. 2005	(7.5) (a)		2.4		(9.9	)	—
2005 vs. 2004	13.0		0.8		12.2		—
2004 vs. 2003	12.8		3.8		9.0		—
Total International
2006 vs. 2005	10.9		(1.3	)	12.7		(0.5	)
2005 vs. 2004	14.2		(0.7	)	12.0		2.9
2004 vs. 2003	15.3		(1.0	)	8.9		7.4
Pharmaceutical Products Segment
2006 vs. 2005	(9.5) (a)		1.8		(11.0	)	(0.3	)
2005 vs. 2004	14.9		0.6		13.0		1.3
2004 vs. 2003	16.2		3.2		9.6		3.4
Diagnostic Products Segment
2006 vs. 2005	5.9		(1.7	)	8.1		(0.5	)
2005 vs. 2004	11.2		(0.7	)	9.9		2.0
2004 vs. 2003	11.1		(1.2	)	6.9		5.4
Nutritional Products Segment
2006 vs. 2005	9.6		(0.4	)	9.7		0.3
2005 vs. 2004	9.7		(0.5	)	9.4		0.8
2004 vs. 2003	10.2		(0.1	)	8.9		1.4
Vascular Products Segment
2006 vs. 2005	327.7		(4.6	)	333.2		(0.9	)
2005 vs. 2004	14.7		(0.4	)	14.5		0.6
2004 vs. 2003	19.3		(1.7	)	21.0		—
(a) The Pharmaceutical Products segment had an agreement with Boehringer Ingelheim (BI) to co-promote and distribute three of its products in the U.S. In 2005, Abbott and BI amended the agreement and effective January 1, 2006, Abbott no longer distributed or recorded sales for distribution activities for the BI products. The increases in sales for 2006 excluding BI products were 11.6 percent for total net sales, 12.3 percent for total U.S. sales and 7.8 percent for Pharmaceutical Products segment sales.

A comparison of significant product group sales is as follows. Percent changes are versus the prior year and are based on unrounded numbers.

(dollars in millions)		2006		Percent Change			2005		Percent Change			2004		Percent Change
Pharmaceuticals —
U.S. Specialty	$	3,505		25		$	2,799		16		$	2,410		26
U.S. Primary Care		2,505		2			2,463		—			2,466		12
International Pharmaceuticals		5,157		8			4,776		14			4,202		18
Diagnostics —
Immunoassay		2,272		4			2,187		2			2,141		2
Diabetes Care		1,136		6			1,067		35			791		46
Nutritionals —
U.S. Pediatric Nutritionals		1,128		3			1,097		(4	)		1,146		5
International Pediatric Nutritionals		899		29			698		17			598		13
U.S. Adult Nutritionals		1,097		2			1,077		15			934		15
International Adult Nutritionals		785		10			716		8			665		13

Increased sales volume of HUMIRA and increased volume and price for Kaletra and Depakote favorably impacted U.S. Specialty sales. Increased sales volume for TriCor and Omnicef favorably impacted U.S. Primary Care sales and were partially offset by lower U.S. sales of Biaxin due primarily to generic competition for the immediate-release formulation. U.S. sales of Biaxin were $151 million, $306 million and $458 million in 2006, 2005 and 2004, respectively. Increased sales volume of HUMIRA favorably impacted International Pharmaceuticals sales, partially offset by decreased sales volume in 2006 due to generic competition for clarithromycin. Diabetes Care product sales growth in 2005 and 2004 was favorably impacted by the acquisition of TheraSense in the second quarter of 2004. The decrease in sales of U.S. pediatric nutritionals in 2005 was primarily due to overall infant nutritionals non-WIC category decline and competitive share loss. International Pediatric Nutritionals sales increases were due primarily to volume growth in developing countries. U.S. Adult Nutritionals sales in 2005 and 2004 were favorably impacted by the acquisition of EAS in the fourth quarter of 2004. Abbott has periodically sold product rights to non-strategic products and has recorded the related gains in net sales in accordance with Abbott’s revenue recognition policies as discussed in footnote 1 to the consolidated financial statements. Related net sales were $199 million in 2006, $177 million in 2005 and $144 million in 2004.

The expiration of licenses, patent protection and generic competition can affect the future revenues and operating income of Abbott. Significant ongoing generic activities, and significant patent and license expirations in the next three years are as follows. The U.S. composition of matter patent for Depakote expires in 2008. Abbott holds non-composition of matter patents on the extended release form of Depakote. U.S. sales of Depakote in 2006 were $1.2 billion. In 2004, the FDA granted approval for generic competition to Synthroid and generic competitors have entered the market. U.S. sales of Synthroid were $470 million in 2006 and $498 million in 2005. Clarithromycin is now subject to generic competition in most European markets. European market sales of clarithromycin in 2006 and 2005 were $329 million and $416 million, respectively. In the U.S., clarithromycin is marketed in two forms, the immediate release and the extended release forms. In May 2005, the composition of matter patent on clarithromycin expired, and several immediate release generic products were launched by competitors. Abbott holds non-composition of matter patents for the extended release form of clarithromycin. In December 2006, an extended release generic product was launched by a competitor. The U.S. District Court of the Northern District of Illinois has denied Abbott’s request for grant of a temporary restraining order against the competitor. There may be further generic competition for clarithromycin in other countries in 2007 depending on the results of legal proceedings related to the patents. Upon the December 2005 expiration of a court order related to licenses for sevoflurane, Baxter is now permitted to market a competitive form of sevoflurane. In addition, sevoflurane has been subject to generic competition from other competitors in isolated markets outside of the U.S. and further generic competition in international markets is possible. Worldwide sales of sevoflurane in 2006 and 2005 were $799 million and $874 million, respectively. The composition of matter patent for Omnicef expires in May 2007. Abbott holds an additional non-composition of matter patent for Omnicef. Sales of Omnicef in 2006 and 2005 were $637 million and $495 million, respectively. The Pharmaceutical Products segment markets all of the above products. The patent for Prevacid, which is licensed by TAP Pharmaceuticals (TAP), expires in 2009. Abbott records TAP’s results on the equity method.

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