morningstar research conference

Morningstar Research Conference

Michael WarmuthSenior Vice President, Established PharmaceuticalsAbbott

2© 2011 Abbott LaboratoriesMorningstar Research Conference

Forward-Looking Statement

Some statements in this presentation may be forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995. 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 1A, “Risk Factors,” to Abbott’s Annual Report on Securities and Exchange Commission Form 10-K for the year ended December 31, 2010, and are incorporated by reference. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments.


A Broad-Based Health Care Company

U.S.

Proprietary Pharmaceuticals

International

Vascular

Molecular DiagnosticsVision Care

Innovation-Driven Device Businesses $5BN

$15BN

$15BN

Total 2010 Abbott Sales: $35BN

Established Pharmaceuticals

NutritionalsCore Diagnostics

Durable Growth Businesses

Diabetes CarePoint of Care Diagnostics


• Expanding reach in fast-growing emerging markets

• Growing three times the rate of developed markets– Driven by population growth, rising incomes, modernization of health

systems and increase in treatment of chronic diseases

Emerging Markets: Abbott Well-Positioned


Emerging Markets: Abbott Well-Positioned

• More than quadrupled international sales over past decade• In 2010, approximately 23% of total sales from emerging markets

– Growing to >30% in 2014– Emerging markets include all countries/regions excluding the

developed world: U.S., Canada, W. Europe, Japan and Australia

International Sales

2010: $20.0 Billion

2000:$4.7

Billion

Emerging Market Sales

2010 2014

>$8BN

>$14BN

International Presence


Diverse Exposure to Emerging Markets

2010 Emerging Market Sales: >$8BN

30%

25%20%

15%

10%


Emerging Markets Nutritionals, Diagnostics and Vascular Strategy

• Second-largest emerging markets business

• Enhanced strategic focus to maximize opportunities around the world

• >$2BN in 2011 emerging market nutritional sales; expect to double over next five years

Nutritionals

• Strong performance in key markets such as China, Russia

– Placement of new ARCHITECT system– Further penetration of markets

Diagnostics

Vascular

• Strong growth across emerging markets

• Growth in procedure volumes and share gains

• 1Q11 emerging markets vascular sales up more than 45%


Emerging Markets Pharmaceutical Strategy

Strategic actions provide critical mass and the right structure to become one of the largest pharmaceutical companies in key emerging markets

2001 2010 2010 2010 2011

Abbott Legacy/Knoll

Zydus Cadila

Solvay Pharmaceuticals

Piramal Healthcare Solutions



Creation of Established Pharmaceuticals

Proprietary Pharmaceuticals


• New division enables greater focus on the products, markets and commercial opportunities for established pharmaceuticals outside of the U.S.

– Strong presence and brands in developed world– Emphasis on accelerating growth in emerging markets

• Also globalized Proprietary Pharmaceuticals • Began reporting new division results 1Q11

Global Pharmaceuticals


Global Pharmaceutical Market Value is Expected to Expand to $1+ Trillion by 2014

Source: IMS Health, Market Prognosis, March 2010. New Pharmerging definition

Top 5 EuropeMarket Size: US$170-200Bn

1-4%

USMarket Size: US$360-390Bn

~3%

JapanMarket Size: US$100-130Bn

2-5%

Pharmerging MarketsMarket Size: US$260-290Bn

14-17%

Rest of WorldMarket Size: US$180-210Bn

4-7%

2014 Global Growth Forecast

2014 Sales and 2009-2014 Compound Annual Growth Rate (CAGR)


Pharma Growth Is Shifting From Developed to “Pharmerging” Markets

“Pharmerging” Markets

• Brazil

• Russia

• India

• China

• Argentina

• Mexico

• Venezuela

• Poland

• Romania

• Turkey

• Ukraine

• Indonesia

• Pakistan

• Thailand

• Vietnam

• Egypt

• South Africa

Source: IMS Health, Market Prognosis, March 2010

U.S. Other developed countries

17 “Pharmerging” countries

ROW


Established Pharmaceuticals Business Model

Sales & Marketing

Model

Business Model

Key Business

Levers

• Molecular innovation, high product differentiation

• Deliver R&D value w/ high quality data (outcomes/HEOR)

• Highly differentiated products

• Premium prices

• Small, specialized sales force

• Significant long term investment (data, competitive advantages).

• Manufacturing cost

• Commercial strategies

• Capacity to quickly develop, manufacture, register, and market incremental innovations

• Modestly differentiated products • Lower prices, but attractive

margins

• Large sales force

• Leverage reputation, therapeutic area presence, relationships

• Strong marketing to build brands

Pure Generics

• Undifferentiated products

• Lowest price points

• Target pharmacies, wholesalers, government

• Low SG&A spend; promote portfolio vs. individual products

• Manufacturing scale, cost

• Very low/no R&D spend

• Provide large discounts, accept much lower margins


Patented Pharmaceuticals


Value of Established Pharmaceuticals in Emerging Markets

Established pharmaceuticals driving majority of growth in fastest-growing markets

Continued innovation in formulation, new indications

Importance of proven, well-established distribution systems to ensure reliable supply

Trustworthy, high quality brands greatly valued in markets with fear of counterfeiting


Established Pharmaceuticals Snapshot

Commercial Footprint

• Vast commercial footprint with products sold in >130 countries• Strong knowledgeable sales force, distribution channels

Manufacturing

Development

Broad Portfolio

• Large portfolio of 500+ established products with significant brand equity spanning therapeutic areas

• Driving manufacturing efficiencies through lean processes without compromising product quality, availability or reliability

• ~$5BN in 2011 sales; ~50% in emerging markets• Margin Profile: Accretive to corporate profile• Sales Growth: High-single-digit, strong double-digit in emerging markets

• Capacity to quickly develop, register and market product improvements based on customer feedback

• Launching hundreds of new products over next 5 years


Abbott India Pharmaceuticals Business Overview

• One of the world’s fastest-growing markets• Dominated by branded generics; predominantly self-pay • Acquired Piramal in 2010; became largest pharma company in India• Largest pharmaceutical sales force in India

2009 2020

$12.6BN

$55BN

Source: India Pharma 2020, McKinsey & Company

India Pharma Market Growth


Pharmaceutical Marketshare Leadership in India

Source: IMS

$ M

illio

ns

6.9%

5.2%4.7%

4.2%3.7% 3.7%

3.3% 3.2% 3.1%2.7%

Abbott GSK Pfizer

Market Share


Key Emerging Markets Focus and Accelerate

• India and China: focus and acceleration plans resulting in above market growth:

– India: In-market growth >30% anticipated in 2011– China: In-market growth >50% anticipated in 2011

• Expand focus to Russia, Brazil and Turkey:– Increase commercial footprint and patient access – Pursue organic and inorganic growth strategies

• In all five key markets:– Long-term strategy– In-market experience: Existing infrastructure and local leadership

strengthened by Solvay Pharmaceuticals– Platforms for future investment and targeted business

development activity


• Broad exposure to emerging markets

• Strategic actions provide critical mass in key emerging markets

• Abbott well-positioned to capture growth

Summary

Morningstar Research Conference

Michael WarmuthSenior Vice President, Established PharmaceuticalsAbbott

morningstar research conference

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