Abbott Laboratories

Good morning, and thank you for standing by. Welcome to Abbott's fourth quarter 2018 earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your questions by pressing star 1 on your touchtone phone. Should you become disconnected throughout this conference call, please redial the number provided to you and reference the Abbott earnings call. This call is being recorded by Abbott. With the exception of any participants' questions asked during the question and answer session, the entire call, including the question and answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's express written permission. I would now like to introduce Mr. Scott Leinenweber, Vice President, Investor Relations, Licensing, and Acquisitions.

Good morning, and thank you for joining us. With me today are Miles White, Chairman of the Board and Chief Executive Officer of and Brian Yor, Executive Vice President, Finance, and Chief Financial Officer. Miles will provide opening remarks, and Brian will discuss our performance and outlook in more detail. Following their comments, Miles, Brian, and I will take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2019. AVID 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 AVID's operations are discussed in items 1A, Risk Factors, to our annual report on Securities and Exchange Commission Form 10-K, for the year ended December 31, 2017. AVID undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. Please note that fourth quarter financial results and guidance provided on the call today for sales, EPS, and line items of the P&L will be for continuing operations only. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com. Unless otherwise noted, our commentary on sales growth refers to organic sales growth. which is defined in our earnings news release issued earlier today. With that, I will now turn the call over to Miles.

Thanks, Scott, and good morning. Today I'll discuss our 2018 results as well as our outlook for 2019. For the full year 2018, we achieved ongoing earnings per share of $2.88, representing 15% growth versus the prior year. Strong performance across our businesses along with underlying margin expansion and our synergy capture from recent acquisitions enabled us to achieve EPS at the upper end of the initial guidance range we issued at the beginning of last year, despite unfavorable currency shifts as we progressed through the year. With our recent strategic shaping completed, our focus in 2018 was on running the company we've built, and the result was an excellent year by every measure. All four of our major businesses performed well, contributing to overall organic sales growth of more than 7 percent, which is above the initial guidance range we set at the beginning of last year. At the same time, we generated operating cash flow of more than $6 billion, returning $2 billion to shareholders in the form of dividends, and announced a 14 percent increase in our dividend beginning this year. We also increased our investments in capabilities for the future, including expanding manufacturing capacity in two important areas that will drive significant long-term growth, Freestyle Libre, our revolutionary continuous glucose monitoring system, and Alinity, our family of highly differentiated diagnostic systems. And lastly, following two major acquisitions in 2017, we repaid more than $8 billion of debt, which significantly enhances our strategic flexibility going forward. Our performance this past year demonstrates the strength of our strategy and execution, And for 2019, we're forecasting another year of strong financial performance. As we announced this morning, we forecast organic sales growth of 6.5% to 7.5% and adjusted earnings per share of $3.15 to $3.25, reflecting double-digit growth. I'll now provide a brief overview of our 2018 results and 2019 outlook for each business. I'll start with nutrition, where sales increased mid-single digits in 2018, reflecting a notable improvement in our growth rate versus the prior year. Sales growth this past year was well balanced across our pediatric and adult nutrition businesses. Internationally, our focus on enhancing competitiveness with our well-known and trusted brands led to strong growth in both Asia and Latin America. In China, we saw improvement in both the market and our performance, after the government transitioned to new food safety regulations in that country at the beginning of last year. And in the U.S., growth was driven by our pediatric nutrition business, led by above-market growth of Similac, our market-leading infant formula brand, and Pedialyte, our market-leading rehydration brand. Overall, the fundamental demographic and socioeconomic trends in the global nutrition market remain favorable, and our position in the market remains very competitive. In established pharmaceuticals, or EPD, sales grew 7% in 2018, led by double-digit growth in both India and China. Our strategy in EPD is unique and quite simple, to build significant presence, scale, and leadership positions in the most attractive emerging markets, where long-term growth in medicines will be driven by aging populations and the related rise in chronic diseases, increasing incomes, and expanding access to care. We built our business over time through a series of strategic steps to be powered globally but driven locally. A global scale sets us apart and provides a unique competitive advantage versus local players, particularly when it comes to manufacturing and innovation. And our local decision-making allows us to be nimble and navigate the complexities of each country. Healthcare spending in most emerging markets is less than half that of developed markets, which means there's lots of room for future growth. and our focus continues to be on strong execution across all elements of our business model to capitalize on the growth opportunities ahead. Moving to diagnostics, where we've consistently achieved above market growth with our leading platforms. 2018 was no different with global organic sales growth of 7%. This past year was particularly important as we accelerated the launch of Alinity, our family of highly differentiated instruments in Europe and other international markets. Customer feedback has been outstanding, which quite frankly isn't a surprise to us given that Alinity was designed based on countless hours of listening to and observing the needs of our customers. These systems are designed to be more efficient, running more tests in less space, generating results faster, minimizing human errors while continuing to provide quality results. In 2019, while the international launch continues to gain momentum, we anticipate obtaining U.S. regulatory approvals for a critical mass of our test menu over the coming months. which will allow us to accelerate the launch of Alinity in the U.S. later this year. 2018 was also an important year for our newly formed rapid diagnostics business. We achieved our sales and synergy targets for the year and are very pleased with the pace and progress of the integration of this business. We also made important advancements in our pipeline with new product launches in the areas of diabetes and cardiac care, as well as molecular rapid tests for infectious diseases. These new products, along with continued focus on strong execution across our portfolio, will drive accelerated growth for this business going forward. And lastly, I'll cover medical devices, where sales grew 9% in 2018, exceeding the initial guidance range we set at the beginning of the year. Strong growth this past year was led by several areas, including electrophysiology, structural heart, and diabetes care, as well as stabilization in our rhythm management and vascular businesses. In electrophysiology, growth of 20% was led by our heart mapping and ablation portfolio. During the year, we advanced our product portfolio in this area with the launch of our Advisor HD catheter, which creates highly detailed maps of the heart. And earlier this week, we announced US FDA approval of our innovative TactiCath sensor-enabled catheter, which will further strengthen our competitiveness in this highly underpenetrated market. In structural heart, 2018 was a landmark year for our business. We achieved double-digit growth and, perhaps more importantly, announced clinical trial results from MitraClip, our market-leading device for the minimally invasive repair of the mitral valve, which demonstrated improved survival and clinical outcomes in patients with the most prevalent form of this heart disease. We submitted this study data to the US FDA during the fourth quarter to support consideration of an expanded indication for MitraClip. If approved, this advancement would further enhance our leadership position in this large and highly underpenetrated disease area and offer the potential to create a new multibillion-dollar cardiac device market over time. And lastly, in diabetes care, we achieved growth of 35% in 2018. Growth was led by Freestyle Libre, which achieved global sales of more than a billion dollars, an increase of 100% versus the prior year. During the fourth quarter, we added 300,000 new users. As of the end of 2018, there are now approximately 1.3 million active users worldwide, of which approximately two-thirds are Type 1 diabetics and one-third are Type 2. In the US, we saw an accelerating trend of new users as we ramped up our awareness efforts during the second half of the year, and pharmacy insurance coverage continued to increase, including an emerging trend of seeing Libre granted preferred co-pay status versus competitive systems due to its compelling overall value proposition. In Europe, during the fourth quarter, we initiated the launch of Libre 2.0, which includes optional alarms that warn patients if glucose levels fall out of range. Due to our unique product design and highly automated manufacturing process, we're able to offer this feature to Libre users without increasing the cash pay price. This affordable and simple to use device is fundamentally changing the way people with diabetes manage their disease. And given the fact that more than 400 million people are living with diabetes around the world, Libre promises to be a significant growth driver for years to come. So in summary, 2018 was another outstanding year for us. We achieved our strategic and financial objectives despite challenging currency shifts during the year. Our top tier performance demonstrates the strength of our strategy, our portfolio, and our execution. And for 2019, we're forecasting continued strong organic sales growth and double-digit EPS growth. I'll now turn the call over to Brian to discuss our 2018 results and our 2019 outlook in a bit more detail. Brian.