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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBER 1-2189
[LOGO] ABBOTT LABORATORIES
AN ILLINOIS CORPORATION 36-0698440
(I.R.S. employer identification
number)
100 ABBOTT PARK ROAD (847) 937-6100
ABBOTT PARK, ILLINOIS 60064-6400 (TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Shares, Without Par Value New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES _X_ NO ____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE BEST
OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE 1,402,593,853 SHARES OF VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT, COMPUTED BY USING THE CLOSING PRICE AS REPORTED
ON THE CONSOLIDATED TRANSACTION REPORTING SYSTEM FOR ABBOTT LABORATORIES COMMON
SHARES WITHOUT PAR VALUE ON JANUARY 29, 1999, WAS APPROXIMATELY $65,132,952,049.
ABBOTT HAS NO NON-VOTING COMMON EQUITY.
NUMBER OF COMMON SHARES OUTSTANDING AS OF JANUARY 31, 1999: 1,517,068,371.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ABBOTT LABORATORIES ANNUAL REPORT FOR THE YEAR ENDED DECEMBER
31, 1998 ARE INCORPORATED BY REFERENCE INTO PARTS I, II, AND IV.
PORTIONS OF THE 1999 ABBOTT LABORATORIES PROXY STATEMENT ARE INCORPORATED BY
REFERENCE INTO PART III.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Abbott Laboratories is an Illinois corporation, incorporated in 1900.
Abbott's* principal business is the discovery, development, manufacture, and
sale of a broad and diversified line of health care products and services.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS,
GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS
Incorporated herein by reference is the footnote entitled "Segment and
Geographic Area Information" of the Consolidated Financial Statements in the
Abbott Laboratories Annual Report for the year ended December 31, 1998 (1998
Annual Report), filed as an exhibit to this report.
NARRATIVE DESCRIPTION OF BUSINESS
Abbott has six revenue segments: Pharmaceutical Products, Diagnostic
Products, Hospital Products, Ross Products, International, and Chemical and
Agricultural Products. Abbott also has a 50 percent owned joint venture, TAP
Holdings Inc.
PHARMACEUTICAL PRODUCTS
This segment's products include a broad line of adult and pediatric
pharmaceuticals which are sold primarily on the prescription or recommendation
of physicians.
The principal products included in this segment are the anti-infectives
clarithromycin, sold in the United States under the trademark
Biaxin-Registered Trademark-, and various forms of erythromycin, sold primarily
as PCE-Registered Trademark- or polymer coated erythromycin,
Erythrocin-Registered Trademark-, and E.E.S.-Registered Trademark-; agents for
the treatment of epilepsy, migraine and bipolar disorder, including
Depakote-Registered Trademark- and Gabitril-Registered Trademark-; a broad line
of cardiovascular products, including Hytrin-Registered Trademark-, used as an
anti-hypertensive and for the treatment of benign prostatic hyperplasia;
Abbokinase-Registered Trademark-, a thrombolytic drug; TriCor-TM- for the
treatment of elevated triglycerides; and the anti-viral
Norvir-Registered Trademark-, a protease inhibitor for the treatment of HIV
infection. In addition, this segment co-promotes the proton pump inhibitor
Prevacid-Registered Trademark- (lansoprazole), for the short-term treatment of
duodenal ulcers, gastric ulcers, and erosive esophagitis, under an agreement
with TAP Pharmaceuticals, Inc.
This segment markets its products in the United States. These products are
generally sold directly to wholesalers, government agencies, health care
facilities, and independent retailers from Abbott-owned distribution centers and
public warehouses. Primary marketing efforts for pharmaceutical products are
directed toward securing the prescription of Abbott's brand of products by
physicians. Managed care purchasers (for example, health maintenance
organizations and pharmacy benefit managers) are increasingly important
customers.
Competition is generally from other broad line pharmaceutical companies. A
significant aspect of competition is the search for technological innovations.
The introduction of new products by competitors and changes in medical practices
and procedures can result in product obsolescence. Price can also be a
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* As used throughout the text of this report on Form 10-K, the term "Abbott"
refers to Abbott Laboratories, an Illinois corporation, or Abbott
Laboratories and its consolidated subsidiaries, as the context requires.
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factor. In addition, the substitution of generic drugs for the brand prescribed
has increased competitive pressures on pharmaceutical products which are
off-patent.
DIAGNOSTIC PRODUCTS
This segment's products include diagnostic systems and tests for blood
banks, hospitals, commercial laboratories, alternate-care testing sites, and
consumers.
The principal products included in this segment are screening tests for
hepatitis B, HTLV-I/II, hepatitis B core, and hepatitis C; tests for detection
of HIV antibodies and antigens, and other infectious disease detection systems;
tests for determining levels of abused drugs; physiological diagnostic tests;
cancer monitoring tests including tests for prostate specific antigen;
laboratory tests and therapeutic drug monitoring systems such as
TDx-Registered Trademark-; clinical chemistry systems such as Abbott
Spectrum-Registered Trademark-, Abbott Aeroset-TM-, Abbott Alycon-TM-, and
Abbott Vision-Registered Trademark-; Quantum-TM-; AxSYM-Registered Trademark-,
Commander-Registered Trademark-, IMx-Registered Trademark-, and Abbott
PRISM-Registered Trademark- lines of diagnostic instruments and chemical
reagents used to perform immunoassay diagnostic tests; the
Murex-Registered Trademark- line of microtiter-based immunoassay test kits; the
LCx-Registered Trademark- amplified probe system and reagents; the Abbott
TestPack-Registered Trademark- system for rapid diagnostic testing; a full line
of hematology systems and reagents known as the Cell-Dyn-Registered Trademark-
series; the MediSense-Registered Trademark- line of blood glucose monitoring
meters and test strips for diabetics including Precision
Q.I.D.-Registered Trademark-, the Precision G-Registered Trademark- hospital
system, the ExacTech-Registered Trademark-, the MediSense II-TM-, and the
ExacTech RSG-TM-; and the Fact Plus-Registered Trademark- and Fact
Plus-Registered Trademark- One Step pregnancy tests. In addition, this segment
distributes the i-STAT-Registered Trademark- point-of-care testing system
through an exclusive long-term sales and marketing alliance with i-STAT
Corporation. In the second quarter of 1998, Abbott acquired, for cash, all of
the outstanding shares of International Murex Technologies Corporation, a
manufacturer of microtiter-based immunoassay test kits.
This segment markets its products worldwide. These products are generally
marketed and sold directly to hospitals, laboratories, and physicians' offices
from Abbott-owned distribution centers and public warehouses. Outside the United
States, sales are made either directly to customers or through distributors,
depending on the market served. Blood glucose monitoring meters and test strips
for diabetics and the Fact Plus-Registered Trademark- and Fact
Plus-Registered Trademark- One Step pregnancy tests are sold over the counter to
consumers.
This segment's products are subject to competition in technological
innovation, price, convenience of use, service, instrument warranty provisions,
product performance, long-term supply contracts, and product potential for
overall cost-effectiveness and productivity gains. Some products in this segment
can be subject to rapid product obsolescence. Abbott has benefited from
technological advantages of certain of its current products; however, these
advantages may be reduced or eliminated as competitors introduce new products.
HOSPITAL PRODUCTS
This segment's products include drugs and drug delivery systems,
perioperative and intensive care products, cardiovascular products, renal
products, oncology products, intravenous and irrigation solutions, related
manual and electronic administration equipment, and diagnostic imaging products
for hospitals and alternate-care sites.
The principal products included in this segment are hospital injectables
including Carpuject-Registered Trademark- and FirstChoice-Registered Trademark-
generics; premixed intravenous drugs in various containers;
ADD-Vantage-Registered Trademark- and Nutrimix-Registered Trademark- drug and
nutritional delivery systems; anesthetics, including
Pentothal-Registered Trademark-, Amidate-Registered Trademark-,
Ultane-Registered Trademark-, isoflurane and enflurane; products for anxiety,
nausea and pain associated with surgery; cardiovascular products including
Opticath-Registered Trademark- and OptiQ-TM- advanced sensor catheters,
Transpac-Registered Trademark- for hemodynamic monitoring, peripheral wires,
catheters and other specialty cardiac products; Calcijex-Registered Trademark-
and Zemplar-Registered Trademark-, injectable agents for treatment of bone
disease in hemodialysis patients; intravenous solutions and related
administration equipment sold as the LifeCare-Registered Trademark- line of
products, LifeShield-Registered Trademark- needleless products, and
Venoset-Registered Trademark- products; irrigating fluids; parenteral
nutritionals such as Aminosyn-Registered Trademark- and
Liposyn-Registered Trademark-; Plum-Registered Trademark-,
Omni-Flow-Registered Trademark- and Abbott
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AIM-Registered Trademark- electronic drug delivery systems; Abbott Pain
Manager-Registered Trademark-; patient-controlled analgesia systems;
venipuncture products; diagnostic imaging products used in MRI (magnetic
resonance imaging) and CT (computed tomography) imaging; and
Faultless-Registered Trademark- rubber sundry products.
This segment markets its products in the United States. They are generally
distributed to wholesalers and directly to hospitals from Abbott-owned
distribution centers and public warehouses. This segment also develops and
manufactures products for other companies.
This segment's products are subject to competition in technological
innovation, price, convenience of use, service, product performance, long-term
supply contracts, and product potential for overall cost effectiveness and
productivity gains. Some products in this segment can be subject to rapid
product obsolescence. Abbott has benefited from technological advantages of
certain of its current products; however, these advantages may be reduced or
eliminated as competitors introduce new products.
ROSS PRODUCTS
This segment's products include a broad line of adult and pediatric
nutritionals. These products are sold primarily on the recommendation of
physicians or other health care professionals. The segment also includes
specialty pharmaceuticals and consumer products.
Principal nutritional products include various forms of prepared infant
formula, including Similac-Registered Trademark-, Isomil-Registered Trademark-,
Alimentum-Registered Trademark-, and Similac NeoSure-TM-; and other adult and
pediatric products, including Ensure-Registered Trademark-, Ensure
Plus-Registered Trademark-, Ensure-Registered Trademark- High Protein,
Ensure-Registered Trademark-Light, Jevity-Registered Trademark-,
Glucerna-Registered Trademark-, PediaSure-Registered Trademark-,
Pedialyte-Registered Trademark-, and Pulmocare-Registered Trademark-. Principal
consumer products include the dandruff shampoo Selsun
Blue-Registered Trademark-; Murine-Registered Trademark- eye care and ear care
products; and Tronolane-Registered Trademark- hemorrhoid medication. The
principal pharmaceutical product is Survanta-Registered Trademark-. In addition,
this segment co-promotes Synagis-Registered Trademark- under an agreement with
Medimmune Incorporated.
This segment markets its products in the United States. Nutritional products
are generally sold directly to retailers, wholesalers, health care facilities,
and government agencies. In most cases, they are distributed from Abbott-owned
distribution centers or public warehouses. Primary marketing efforts for
nutritional products are directed toward securing the recommendation of Abbott's
brand of products by physicians or other health care professionals. Competition
is generally from other broad line and specialized health care manufacturers.
Nutritional products are subject to competition in price, formulation,
scientific innovation, and promotional initiatives.
This segment's pharmaceutical products are generally sold directly to
physicians, retailers, wholesalers, health care facilities, and government
agencies. In most cases, they are distributed from Abbott-owned distribution
centers or public warehouses. Primary marketing efforts for pharmaceutical
products are directed at securing the prescription of Abbott's brand of products
by physicians. Competition is generally from other broad line pharmaceutical
companies. A significant aspect of competition is the search for technological
innovations. The introduction of new products by competitors and changes in
medical practices and procedures can result in product obsolescence. Price can
also be a factor. In addition, the substitution of generic drugs for the brand
prescribed has increased competitive pressures on pharmaceutical products which
are off-patent.
Consumer products and Ensure-Registered Trademark- retail products are
promoted directly to the public by consumer advertising. These products are
generally sold directly to retailers and wholesalers. Competitive products are
sold by other diversified consumer and health care companies. Competitive
factors include consumer advertising, formulation, scientific innovation, price,
and availability of generic product forms.
Ensure-Registered Trademark- is the leading adult nutritional and
Similac-Registered Trademark- is a leading infant formula in the United States.
(Source: A. C. Nielsen Co.)
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INTERNATIONAL
This segment's products include a broad line of hospital, pharmaceutical and
adult and pediatric nutritional products marketed and primarily manufactured
outside the United States. These products are sold primarily on the prescription
or recommendation of physicians and other health care professionals. This
segment also includes consumer products.
This segment's principal products include the anti-infectives
clarithromycin, sold under the trademarks Biaxin-Registered Trademark-,
Klacid-Registered Trademark- and Klaricid-Registered Trademark-, tosufloxacin,
sold in Japan under the trademark Tosuxacin-Registered Trademark-, various forms
of the antibiotic erythromycin, sold primarily as PCE-Registered Trademark- or
polymer-coated erythromycin, Erythrocin-Registered Trademark-, and
E.E.S.-Registered Trademark-, and Norvir-Registered Trademark-, a protease
inhibitor for the treatment of HIV infection; Lupron-Registered Trademark-, also
marketed as Lucrin-Registered Trademark-, used for the palliative treatment of
advanced prostate cancer, treatment of endometriosis and central precocious
puberty, and for the preoperative treatment of patients with anemia caused by
uterine fibroids; Prevacid-Registered Trademark- (lansoprazole), a proton pump
for the short-term treatment of duodenal ulcers, gastric ulcers, and erosive
esophagitis; various cardiovascular products, including
Loftyl-Registered Trademark-, a vasoactive agent; Hytrin-Registered Trademark-,
also marketed as Hitrin-Registered Trademark- and Flotrin-Registered Trademark-,
used as an anti-hypertensive and for the treatment of benign prostatic
hyperplasia, and candesartan, sold under the trademarks Blospress-TM- and
Tiadyl-TM-, an angiotension 2 antagonist; meloxicam, a preferential COX-2
inhibitor; various forms of infant formulas and follow-on formulas, including
Similac Advance-Registered Trademark-, Gain-Registered Trademark- and Abbott
Grow-TM-; various adult medical nutritionals, including
Ensure-Registered Trademark-, Glucerna-Registered Trademark- and
Jevity-Registered Trademark-; and a broad line of hospital products, including
the anesthesia products sevoflurane (sold outside of the United States primarily
under the trademark Sevorane-Registered Trademark- and in a few other markets as
Ultane-Registered Trademark-), isoflurane and enflurane; specialty generic
injectables such as Calcijex-Registered Trademark- and
Survanta-Registered Trademark-; and electronic drug delivery systems sold in
selective international markets.
This segment's pharmaceutical and nutritional products are generally sold
directly to government agencies, retailers, wholesalers, and health care
facilities. In most cases, they are distributed from Abbott-owned distribution
centers. Certain products are co-marketed with other companies. Some of these
products are marketed and distributed through distributors. Primary marketing
efforts for pharmaceutical products are directed toward securing the
prescription of Abbott's brand of products by physicians. Competition is
generally from other broad line and specialized pharmaceutical companies. A
significant aspect of competition is the search for technological innovations.
The introduction of new products by competitors and changes in medical practices
and procedures can result in product obsolescence. In addition, the substitution
of generic drugs for the brand prescribed has increased competitive pressures on
pharmaceutical products. Primary marketing efforts for nutritional products are
directed toward securing the recommendation of Abbott's brand of products by
physicians or other health care professionals. Competition is generally from
other broad line and specialized health care manufacturers and food companies.
Nutritional products are subject to competition in price, formulation and
promotional initiatives.
This segment's hospital products are generally distributed to wholesalers
and directly to hospitals from distribution centers maintained by Abbott. This
segment is subject to competition in technological innovation, price,
convenience of use, instrument warranty provisions, product performance,
long-term supply contracts, and product potential for overall cost effectiveness
and productivity gains. Products in this segment can be subject to rapid product
obsolescence. Abbott has benefited from technological advantages of certain of
its current products; however, these advantages may be reduced or eliminated as
competitors introduce new products.
CHEMICAL AND AGRICULTURAL PRODUCTS
This segment's products include agricultural and chemical products, bulk
pharmaceuticals, and animal health products.
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Principal agricultural and animal health products include plant growth
regulators, including ProGibb-Registered Trademark- and
ReTain-Registered Trademark-; herbicides; larvicides, including
VectoBac-Registered Trademark-; biologically derived insecticides, including
DiPel-Registered Trademark- and XenTari-Registered Trademark-; anti-infectives,
and medical surgical products, including Propoflo-TM-,
Isoflo-Registered Trademark- and LIFECARE-Registered Trademark-. Principal
chemical products include erythromycin, leuprolide, and terazosin hydrochloride.
This segment markets its products worldwide. Agricultural, animal health and
bulk pharmaceutical products are generally sold to agricultural distributors,
growers, companion animal health product distributors, veterinarians and
pharmaceutical companies from Abbott-owned distribution centers and public
warehouses. Outside the United States sales are made either directly to
customers or through distributors, depending on the market served. Competition
is primarily from chemical, animal health and agricultural companies.
Competition is based on numerous factors depending on the market served.
Competitive factors include product performance, quality, price, and
technological advantages.
TAP HOLDINGS INC.
Under an agreement between Abbott and Takeda Chemical Industries, Ltd. of
Japan (Takeda), TAP Holdings Inc. (owned 50 percent by Abbott and 50 percent by
an affiliate of Takeda), together with its subsidiary, TAP Pharmaceuticals Inc.
(TAP), develops and markets pharmaceutical products in the United States. TAP
markets Lupron-Registered Trademark-, an LH-RH analog, and Lupron
Depot-Registered Trademark-, a sustained release form of
Lupron-Registered Trademark-, in the United States. Lupron-Registered Trademark-
and Lupron Depot-Registered Trademark- are used principally for the palliative
treatment of advanced prostate cancer and the treatment of endometriosis. TAP
also markets Prevacid-Registered Trademark- (lansoprazole), a proton pump
inhibitor, and has a co-promotion arrangement with Abbott for
Prevacid-Registered Trademark-. Its principal indications are for heartburn and
other symptoms associated with gastroesophageal reflux disease (GERD), erosive
esophagitis, short-term treatment of duodenal ulcers, the maintenance of healed
erosive esophagitis and duodenal ulcers. Abbott has marketing rights to certain
Takeda products in select Latin American markets. Abbott also markets
Lupron-Registered Trademark-, Lupron Depot-Registered Trademark-, Lupron
Depot-Ped-Registered Trademark-, and Prevacid-Registered Trademark- in select
markets outside the United States.
TAP's products are generally sold directly to physicians, retailers,
wholesalers, health care facilities, and government agencies. In most cases,
they are distributed from Abbott-owned distribution centers. Primary marketing
efforts for pharmaceutical products are directed toward securing the
prescription of TAP's brand of products by physicians. Certain products are
co-marketed with Abbott. Managed care purchasers, for example, health
maintenance organizations (HMOs) and pharmacy benefit managers, are increasingly
important customers. Competition is generally from pharmaceutical companies. A
significant aspect of competition is the search for technological innovations.
The introduction of new products by competitors and changes in medical practices
and procedures can result in product obsolescence. In addition, the substitution
of generic drugs for the brand prescribed has increased competitive pressures on
pharmaceutical products which are off patent.
INFORMATION WITH RESPECT TO ABBOTT'S BUSINESS IN GENERAL
SOURCES AND AVAILABILITY OF RAW MATERIALS
Abbott purchases, in the ordinary course of business, necessary raw
materials and supplies essential to Abbott's operations from numerous suppliers
in the United States and overseas. There have been no recent significant
availability problems or supply shortages.
PATENTS, TRADEMARKS, AND LICENSES
Abbott is aware of the desirability for patent and trademark protection for
its products. Accordingly, where possible, patents and trademarks are sought and
obtained for Abbott's products in the United States and all countries of major
marketing interest to Abbott. Abbott owns, has applications pending for, and is
licensed under a substantial number of patents. Principal trademarks and the
products they cover are discussed in the Narrative Description of Business on
pages 1 through 5. These, and various patents which
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expire during the period 1999 to 2019, in the aggregate, are believed to be of
material importance in the operation of Abbott's business. Abbott believes that
no single patent, license, trademark (or related group of patents, licenses, or
trademarks), except for those related to clarithromycin, are material in
relation to Abbott's business as a whole. The original United States compound
patent covering clarithromycin is licensed from Taisho Pharmaceutical Co., Ltd.
of Tokyo, Japan, and will expire in 2005. In addition, the patents, licenses,
and trademarks related to Depakote-Registered Trademark- and
Hytrin-Registered Trademark- are significant for Abbott's Pharmaceutical
Products segment. The original United States product patents covering
Depakote-Registered Trademark- will expire in 2008. In the United States, the
original compound patent covering Hytrin-Registered Trademark- has expired.
Litigation involving Abbott's patents covering Depakote-Registered Trademark-
and Hytrin-Registered Trademark- is discussed in Legal Proceedings on pages 11
and 12.
While it is not feasible to predict with certainty the date on which a
generic form of terazosin hydrochloride, the drug which Abbott sells under the
trademark Hytrin-Registered Trademark-, could become available in the United
States, management currently does not expect a generic form of terazosin
hydrochloride to become available before the end of the second quarter of 1999.
Abbott believes generic competition would adversely impact sales of
Hytrin-Registered Trademark-. In 1998, Abbott recorded United States sales of
Hytrin-Registered Trademark- of $542 million. Pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, Abbott
cautions investors that the foregoing statements regarding generic terazosin
hydrochloride are forward-looking statements or projections and are subject to
risks and uncertainties that may cause actual results to differ materially from
those projected. These include developments in the pending litigation. Economic,
competitive, governmental, technological and other factors that may affect
Abbott's operations are discussed in Exhibit 99.1.
SEASONAL ASPECTS, CUSTOMERS, BACKLOG, AND RENEGOTIATION
There are no significant seasonal aspects to Abbott's business. The
incidence of certain infectious diseases which occur at various times in
different areas of the world does, however, affect the demand for Abbott's
anti-infective products. Orders for Abbott's products are generally filled on a
current basis, and order backlog is not material to Abbott's business. No single
customer accounted for sales equaling 10 percent or more of Abbott's
consolidated net sales. No material portion of Abbott's business is subject to
renegotiation of profits or termination of contracts at the election of the
government.
RESEARCH AND DEVELOPMENT
Abbott spent $1,221,593,000 in 1998, $1,302,403,000 in 1997, and
$1,204,841,000 in 1996 on research to discover and develop new products and
processes and to improve existing products and processes. Abbott continues to
concentrate research expenditures on pharmaceutical and diagnostic products.
ENVIRONMENTAL MATTERS
Abbott believes that its operations comply in all material respects with
applicable laws and regulations concerning environmental protection. Regulations
under federal and state environmental laws impose stringent limitations on
emissions and discharges to the environment from various manufacturing
operations. Abbott's capital and operating expenditures for pollution control in
1998 were approximately $28 million and $49 million, respectively. Capital and
operating expenditures for pollution control are estimated to approximate $19
million and $54 million, respectively, in 1999.
Abbott has been identified as one of many potentially responsible parties in
investigations and/or remediations at 21 locations in the United States and
Puerto Rico under the Comprehensive Environmental Response, Compensation, and
Liability Act, commonly known as Superfund. The aggregate costs of remediation
at these sites by all identified parties are uncertain but have been subject to
widely ranging estimates totaling as much as several hundred million dollars. In
many cases, Abbott believes that the actual costs will be lower than these
estimates, and the fraction for which Abbott may be responsible is
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anticipated to be considerably less and will be paid out over a number of years.
Abbott may participate in the investigation or cleanup at these sites. Abbott is
also voluntarily investigating potential contamination at two Abbott-owned
sites, and has initiated remediation at four sites, in cooperation with the
Environmental Protection Agency (EPA) or similar state agencies.
While it is not feasible to predict with certainty the costs related to the
previously described investigation and cleanup activities, Abbott believes that
such costs, together with other expenditures to maintain compliance with
applicable laws and regulations concerning environmental protection, should not
have a material adverse effect on Abbott's financial position, cash flows, or
results of operations.
EMPLOYEES
Abbott employed 56,236 persons as of December 31, 1998.
REGULATION
The development, manufacture, sale, and distribution of Abbott's products
are subject to comprehensive government regulation. Government regulation by
various federal, state, and local agencies, which includes detailed inspection
of and controls over research and laboratory procedures, clinical
investigations, and manufacturing, marketing, sampling, distribution,
recordkeeping, storage, and disposal practices, substantially increases the
time, difficulty, and costs incurred in obtaining and maintaining the approval
to market newly developed and existing products. Government regulatory actions
can result in delay in the release of products, seizure or recall of products,
suspension or revocation of the authority necessary for their production and
sale, and other civil or criminal sanctions.
In late 1998, the United States Food and Drug Administration (FDA) suspended
its approval of the release of production lots of Abbott's pharmaceutical
product Abbokinase due to Current Good Manufacturing Practice concerns raised by
the FDA following inspections of Abbott and its raw material supplier. In
January 1999, after Abbott revised the product's labeling to add additional
warnings and the FDA issued a health care provider information sheet, the FDA
released certain lots that were under its review. The FDA subsequently
established new criteria for the release of additional lots. Abbott is
instituting changes to its procedures in response to the FDA. Abbott cannot
predict whether these changes will resolve FDA's concerns or the effect of this
matter on future sales of Abbokinase. During 1998, Abbott sold approximately
$277 million of Abbokinase, primarily in the United States.
Continuing studies of the utilization, safety, and efficacy of health care
products and their components are being conducted by industry, government
agencies, and others. Such studies, which employ increasingly sophisticated
methods and techniques, can call into question the utilization, safety, and
efficacy of previously marketed products and in some cases have resulted, and
may in the future result, in the discontinuance of marketing of such products
and may give rise to claims for damages from persons who believe they have been
injured as a result of their use.
The cost of human health care products continues to be a subject of
investigation and action by governmental agencies, legislative bodies, and
private organizations in the United States and other countries. In the United
States, most states have enacted generic substitution legislation requiring or
permitting a dispensing pharmacist to substitute a different manufacturer's
version of a pharmaceutical product for the one prescribed. Federal and state
governments continue to press efforts to reduce costs of Medicare and Medicaid
programs, including restrictions on amounts agencies will reimburse for the use
of products. In addition, the federal government follows a diagnosis-related
group (DRG) payment system for certain institutional services provided under
Medicare or Medicaid. The DRG system entitles a health care facility to a fixed
reimbursement based on discharge diagnoses rather than actual costs incurred in
patient treatment, thereby increasing the incentive for the facility to limit or
control expenditures for many health care products. Manufacturers must pay
certain statutorily-prescribed rebates on Medicaid purchases for reimbursement
on prescription drugs under state Medicaid plans. The Veterans Health Care Act
of
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1992 requires manufacturers to extend additional discounts on pharmaceutical
products to various federal agencies, including the Department of Veterans
Affairs, Department of Defense, and Public Health Service entities and
institutions.
In the United States, governmental cost-containment efforts have extended to
the federally funded Special Supplemental Nutrition Program for Women, Infants,
and Children (WIC). All states participate in WIC and have sought and obtained
rebates from manufacturers of infant formula whose products are used in the
program. Over the last five years, all of the states have conducted competitive
bidding for infant formula contracts which require the use of specific infant
formula products by the state WIC program. The Child Nutrition and WIC
Reauthorization Act of 1989 requires all states participating in WIC to engage
in competitive bidding or to use any other cost containment measure that yields
savings equal to or greater than the savings generated by a competitive bidding
system.
Governmental regulatory agencies require prescription drug manufacturers to
pay fees. The FDA imposes substantial fees on various aspects of the approval,
manufacture, and sale of proprietary prescription drugs. The FDA's authority to
impose these fees was reauthorized by the Food and Drug Administration
Modernization Act of 1997.
Abbott expects debate to continue during 1999 at both the federal and the
state level over the availability, method of delivery, and payment for health
care products and services. Abbott believes that if legislation is enacted, it
could have the effect of reducing prices, or reducing the rate of price
increases, for medical products and services.
International operations are also subject to a significant degree of
government regulation. Many countries, directly or indirectly through
reimbursement limitations, control the selling price of most health care
products. Furthermore, many developing countries limit the importation of raw
materials and finished products. International regulations are having an impact
on United States regulations, as well. The International Organization for
Standardization (ISO) provides the criteria for meeting the regulations for
medical devices within the European Union. Abbott has made significant strides
in gaining ISO 9000 and European Norm 46000 certification for facilities that
manufacture devices for European markets. The FDA recently adopted regulations
governing the manufacture of medical devices that appear to encompass and exceed
the ISO's approach to regulating medical devices. The FDA's adoption of the
ISO's approach to regulation and other changes to the manner in which the FDA
regulates medical devices will increase the cost of compliance with those
regulations.
Efforts to reduce health care costs are also being made in the private
sector. Health care providers have responded by instituting various cost
reduction and containment measures.
It is not possible to predict the extent to which Abbott or the health care
industry in general might be affected by the matters discussed above.
INTERNATIONAL OPERATIONS
Abbott markets products in approximately 130 countries through affiliates
and distributors. Most of the products discussed in the preceding sections of
this report are also sold outside the United States. In addition, certain
products of a local nature and variations of product lines to meet local
regulatory requirements and marketing preferences are manufactured and marketed
to customers outside the United States. International operations are subject to
certain additional risks inherent in conducting business outside the United
States, including price and currency exchange controls, changes in currency
exchange rates, limitations on foreign participation in local enterprises,
expropriation, nationalization, and other governmental action.
8
ITEM 2. PROPERTIES
Abbott's corporate offices are located at 100 Abbott Park Road, Abbott Park,
Illinois 60064-6400. The locations of Abbott's principal plants are listed
below.
LOCATION INDUSTRY SEGMENTS OF PRODUCTS PRODUCED
- -------------------------------------------------------- --------------------------------------------------------
Abbott Park, Illinois Pharmaceutical Products, Diagnostic Products, and
Hospital Products
Abingdon, England Diagnostic Products
Altavista, Virginia Ross Products
Ashland, Ohio Hospital Products
Austin, Texas Hospital Products
Barceloneta, Puerto Rico Pharmaceutical Products, Diagnostic Products, and
Chemical and Agricultural Products
Bedford, Massachusetts Diagnostic Products
Brockville, Canada International
Campoverde, Italy International
Casa Grande, Arizona Ross Products
Columbus, Ohio Ross Products
Delkenheim, Germany Diagnostic Products
Haina, San Cristoba, Dominican Republic Hospital Products
Irving, Texas Diagnostic Products
Laurinburg, North Carolina Hospital Products
McPherson, Kansas Hospital Products
Montreal, Canada International
Morgan Hill, California Hospital Products
North Chicago, Illinois Pharmaceutical Products, Hospital Products, and Chemical
and Agricultural Products
Queenborough, England International
Rocky Mount, North Carolina Hospital Products
Salt Lake City, Utah Hospital Products
Santa Clara, California Diagnostic Products
Sligo/Donegal/Cootehill/Finisklin, Ireland Diagnostic Products and International
Sturgis, Michigan Ross Products
St. Remy, France International
Tokyo, Japan Diagnostic Products
Zwolle, The Netherlands International
9
In addition to the above, Abbott has manufacturing facilities in five other
locations in the United States, including Puerto Rico. Outside the United States
manufacturing facilities are located in 14 other countries. Abbott's facilities
are deemed suitable, provide adequate productive capacity, and are utilized at
normal and acceptable levels.
In the United States, including Puerto Rico, Abbott owns 11 distribution
centers. Abbott also has 14 United States research and development facilities
located at: Abbott Park, Illinois; Ashland, Ohio; Bedford, Massachusetts;
Columbus, Ohio (two locations); Irving, Texas; Long Grove, Illinois; Madera,
California; McPherson, Kansas; Morgan Hill, California; Norcross, Georgia; North
Chicago, Illinois; Santa Clara, California; and San Diego, California. Outside
the United States, Abbott has research and development facilities in Argentina,
Australia, Canada, France, Germany, Ireland, Japan, The Netherlands, South
Africa, Spain and the United Kingdom.
The corporate offices, and those principal plants in the United States that
are listed above, are owned by Abbott or subsidiaries of Abbott. The remaining
manufacturing plants and all other facilities are owned or leased by Abbott or
subsidiaries of Abbott. There are no material encumbrances on the properties.
ITEM 3. LEGAL PROCEEDINGS
Abbott is involved in various claims and legal proceedings, including (as of
January 31, 1999), one antitrust suit and five investigations in connection with
Abbott's sale and marketing of infant formula products, 134 antitrust suits and
two investigations in connection with Abbott's pricing of prescription
pharmaceuticals, two cases involving Abbott's patents for divalproex sodium, a
drug that Abbott sells under the trademark Depakote-Registered Trademark-, five
cases involving Abbott's patents for terazosin hydrochloride, a drug that Abbott
sells under the trademark Hytrin-Registered Trademark-, and one antitrust suit
involving Hytrin-Registered Trademark-.
The infant formula antitrust cases allege that Abbott conspired with one or
more of its competitors to fix prices, restrain trade and monopolize the market
for infant formula in violation of state antitrust laws. The suits have been
brought on behalf of individuals and name Abbott and certain other infant
formula manufacturers as defendants. The cases sought treble damages, civil
penalties, and other relief. On November 7, 1997, the Louisiana District Court
dismissed the plaintiff's complaint in the case that was pending in Louisiana.
The plaintiffs have appealed that decision. The appellate court has certified
the questions raised in the appeal to the state supreme court for its
consideration. In 1997, a case purporting to be a statewide consumer class
action was filed in state court in St. Louis, Missouri. It was voluntarily
dismissed in December 1998. Investigations are being conducted by the Attorneys
General of the states of California, Connecticut, New York, Pennsylvania, and
Wisconsin. These matters are no longer considered a possible material legal
proceeding and, therefore, no further information will be given with respect to
them.
As of January 31, 1999, 116 prescription pharmaceutical pricing antitrust
cases were pending in federal court and 18 were pending in state courts. The
prescription pharmaceutical pricing antitrust suits allege that various
pharmaceutical manufacturers and pharmaceutical wholesalers have conspired to
fix prices for prescription pharmaceuticals and/or to discriminate in pricing to
retail pharmacies by providing discounts to mail-order pharmacies, institutional
pharmacies, and HMOs in violation of state and federal antitrust laws. The suits
have been brought on behalf of individual consumers and retail pharmacies and
name both Abbott and certain other pharmaceutical manufacturers and
pharmaceutical wholesalers and at least one mail-order pharmacy company as
defendants. The cases seek treble damages, civil penalties and injunctive and
other relief. Abbott has filed or intends to file a response to each of the
complaints denying all substantive allegations. The federal cases are pending in
the United States District Court for the Northern District of Illinois under the
Multidistrict Litigation Rules as In re: Brand Name Prescription Drug Antitrust
Litigation, MDL 997. The state cases are pending in the following state courts:
Tuscaloosa County and Clarke County, Alabama; Alameda County, California;
Monterey County, California; San Francisco County, California (eight cases); San
Joaquin County, California; Johnson County, Kansas;
10
Prentiss County, Mississippi; Mecklenburg County, North Carolina; and Cocke
County and Davidson County, Tennessee. Abbott entered into settlement agreements
in twelve consumer lawsuits pending in the following jurisdictions: Arizona,
Florida, Kansas, Maine, Michigan, Minnesota (2), New York, North Carolina,
Tennessee, Washington, D.C., and Wisconsin. The court in each jurisdiction must
approve the agreement before it becomes final. Courts in Arizona, Florida,
Maine, Michigan, Minnesota (2), New York, Washington, D.C. and Wisconsin have
approved the settlement agreement. The investigations are being conducted by the
Attorney General of Illinois and the Federal Trade Commission.
As of January 31, 1999, two cases were pending involving Abbott's patents
for divalproex sodium, a drug that Abbott sells under the trademark
Depakote-Registered Trademark-. On October 24, 1997, after having been notified
that TorPharm, a division of Apotex, Inc. ("TorPharm") had applied to the
Federal Food and Drug Administration (the "FDA") for approval for a generic
version of divalproex sodium, Abbott sued TorPharm in the United States District
Court for the Northern District of Illinois alleging patent infringement.
TorPharm contends that its product does not infringe Abbott's patents and that,
in any event, the patents are invalid and unenforceable. On August 28, 1992,
after having been notified that Alra Laboratories, Inc. ("Alra") had applied to
the FDA for approval for a generic version of divalproex sodium, Abbott sued
Alra in the United States District Court for the Northern District of Illinois
alleging patent infringement. Alra filed counterclaims alleging that Abbott
fraudulently delayed Alra's entry into the market for divalproex sodium and
seeking money damages. Alra contended that its product did not infringe Abbott's
patents and that, in any event, those patents were invalid and unenforceable.
Alra filed motions for summary judgment on the issues of infringement and
validity. Abbott filed a motion for summary judgment on the issue of
infringement. On October 20, 1997, the court granted Abbott's motion for summary
judgment and found that Alra's product infringes Abbott's patents. The court
denied Alra's motions for summary judgment on the issues of infringement and
patent invalidity and dismissed the lawsuit. Alra filed a motion for
reconsideration of the court's ruling. That motion was granted in part and
denied in part. The court has stayed its earlier rulings on validity and
infringement pending further proceedings.
As of January 31, 1999, five cases involving Abbott's patents for terazosin
hydrochloride, a drug that Abbott sells under the trademark
Hytrin-Registered Trademark-, were pending in the United States District Court
for the Northern District of Illinois. Abbott has been separately notified first
by Geneva Pharmaceuticals, Inc. ("Geneva") in April 1996, and then by Novopharm
Limited ("Novopharm"), Invamed, Inc. ("Invamed"), Mylan Pharmaceuticals, Inc.
("Mylan"), and Warner Chilcott, Inc. ("Warner") that these corporations had
applied to the Federal Food and Drug Administration for approval for a generic
version of terazosin hydrochloride. Abbott sued each of these corporations
alleging patent infringement. These lawsuits were filed on June 4, 1996, against
Geneva, on September 13, 1996, against Novopharm, on August 1, 1997, against
Mylan, on October 28, 1997, against Invamed and on April 6, 1998, against
Warner. These corporations contend that Abbott's patent which covers their
version of terazosin hydrochloride is invalid and unenforceable. Additionally,
in April 1996, Zenith Laboratories, Inc. ("Zenith") sued Abbott in the United
States District Court for the District of New Jersey alleging that Abbott had
engaged in unfair competition, abuse of process, tortious interference with
prospective economic advantage, and fraud in attempting to protect Hytrin from
generic competition. Zenith sought money damages and a declaration that certain
of Abbott's patents covering terazosin hydrochloride are invalid. Abbott filed
counterclaims alleging patent infringement. On March 31, 1998, Abbott and Zenith
reached an agreement that resolved the litigation between the parties. In the
settlement, Zenith acknowledged the validity of Abbott's terazosin hydrochloride
patents and agreed to refrain from selling a generic version of terazosin
hydrochloride until the expiration of one of Abbott's patents for terazosin
hydrochloride (U.S. Patent No. 4,251,532). On April 1, 1998, Abbott and Geneva
reached an agreement under which Geneva will not market its Food and Drug
Administration approved generic terazosin hydrochloride products until
resolution of the pending litigation between the parties. Abbott agreed to make
quarterly payments to Zenith and monthly payments to Geneva until the date on
which they may enter the market for terazosin hydrochloride under their
agreements. Both Zenith and Geneva would be free to enter the market for
terazosin hydrochloride
11
in the United States, if certain of Abbott's patents for terazosin hydrochloride
were determined to be invalid and if another company legally enters the generic
market in the United States. The Geneva, Invamed, and Novopharm cases were all
pending before the same judge, who, on September 1, 1998, entered a judgment in
each of those cases ruling that the Abbott patent at issue in those cases is
invalid. Abbott has appealed these rulings. On November 19, 1998, the judge
hearing the Warner case granted Warner's motion for summary judgment applying
the ruling issued September 1 in the Geneva, Novopharm and Invamed cases to the
Warner case as well. Abbott has appealed this ruling. Warner has voluntarily
dismissed its counterclaims that had alleged that Abbott's conduct with respect
to Hytrin-Registered Trademark- violated the antitrust laws. Mylan has also
filed a motion for summary judgment seeking to have the ruling issued September
1 in the Geneva, Novopharm and Invamed cases applied in its case, as well.
On December 18, 1998, Louisiana Wholesale Drug Co. sued Abbott, Geneva and
Zenith in the United States District Court for the Southern District of Florida
alleging that Abbott's agreements with Geneva and Zenith regarding terazosin
hydrochloride violate the federal antitrust laws. The case purports to be a
class action and seeks actual damages, treble damages, civil penalties, and
other relief. Abbott intends to file a response denying all substantive
allegations.
While it is not feasible to predict the outcome of such pending claims,
proceedings, and investigations with certainty, management is of the opinion
that their ultimate disposition should not have a material adverse effect on
Abbott's financial position, cash flows, or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of Abbott are elected annually by the board of directors at the
first meeting held after the annual shareholders meeting. Each officer holds
office until a successor has been duly elected and qualified or until the
officer's death, resignation, or removal. Vacancies may be filled at any meeting
of the board. Any officer may be removed by the board of directors when, in its
judgment, removal would serve the best interests of Abbott.
Current corporate officers, and their ages as of March 1, 1999, are listed
below. The officers' principal occupations and employment from January 1994 to
March 1, 1999 and the dates of their first election as officers of Abbott are
also shown. Unless otherwise stated, employment was by Abbott for the period
indicated. There are no family relationships between any corporate officers or
directors.
MILES D. WHITE**, 43
1994 -- Vice President, Diagnostic Systems and Operations.
1994 to 1998 -- Senior Vice President, Diagnostics Operations.
1998 to 1999 -- Executive Vice President and Director.
1999 to present -- Chief Executive Officer and Director.
Elected Corporate Officer -- 1993.
ROBERT L. PARKINSON, JR.** 48
1994 to 1995 -- Senior Vice President, Chemical and Agricultural Products.
1995 to 1998 -- Senior Vice President, International Operations.
1998 to 1999 -- Executive Vice President and Director.
1999 to present -- President, Chief Operating Officer and Director.
Elected Corporate Officer -- 1989.
JOY A. AMUNDSON**, 44
1994 -- Vice President, Corporate Hospital Marketing.
1994 to 1995 -- Vice President, Abbott HealthSystems.
1995 to 1998 -- Senior Vice President, Chemical and Agricultural Products.
1998 to present -- Senior Vice President, Ross Products.
Elected Corporate Officer -- 1990.
13
THOMAS D. BROWN**, 50
1994 to 1998 -- Vice President, Diagnostics Commercial Operations.
1998 to present -- Senior Vice President, Diagnostics Operations.
Elected Corporate Officer -- 1993.
GARY P. COUGHLAN**, 55
1994 to present -- Senior Vice President, Finance and Chief Financial
Officer.
Elected Corporate Officer -- 1990.
JOSE M. DE LASA**, 57
1994 -- Vice President and Associate General Counsel, Bristol-Myers Squibb
Company (Health and personal care products company).
1994 -- Vice President, Secretary and Associate General Counsel,
Bristol-Myers Squibb Company.
1994 to present -- Senior Vice President, Secretary and General Counsel.
Elected Corporate Officer -- 1994.
WILLIAM G. DEMPSEY **, 47
1994 to 1995 -- Divisional Vice President and General Manager, Abbott
Critical Care Systems.
1995 to 1996 -- Divisional Vice President, Hospital Products Business Sector
Sales.
1996 to 1998 -- Vice President, Hospital Products Business Sector.
1998 to present -- Senior Vice President, Chemical and Agricultural
Products.
Elected Corporate Officer -- 1996.
RICHARD A. GONZALEZ**, 45
1994 to 1995 -- Divisional Vice President and General Manager, U.S. and
Canada, Diagnostic Products.
1995 to 1998 -- Vice President, Abbott HealthSystems.
1998 to present -- Senior Vice President, Hospital Products.
Elected Corporate Officer -- 1995.
ARTHUR J. HIGGINS**, 42
1994 -- Regional Director, Europe, Africa, and Middle East.
1994 to 1995 -- Divisional Vice President, Commercial Operations, Abbott
International Division.
1995 to 1996 -- Divisional Vice President, Pacific, Asia, and Africa
Operations.
1996 to 1998 -- Vice President, Pacific, Asia, and Africa Operations.
1998 to present -- Senior Vice President, Pharmaceutical Operations.
Elected Corporate Officer -- 1996.
14
THOMAS M. WASCOE**, 52
1994 to 1999 -- Divisional Vice President, Human Resources, Diagnostics
Operations.
1999 to present -- Senior Vice President, Human Resources.
Elected Corporate Officer -- 1999.
JOSEF WENDLER**, 49
1994 to 1995 -- Vice President, Pacific, Asia, and Africa Operations.
1995 to 1998 -- Vice President, European Operations.
1998 to present -- Senior Vice President, International Operations.
Elected Corporate Officer -- 1993.
CATHERINE V. BABINGTON**, 46
1994 to 1995 -- Director, Corporate Communications.
1995 to present -- Vice President, Investor Relations and Public Affairs.
Elected Corporate Officer -- 1995.
PATRICK J. BALTHROP, 42
1994 to 1995 -- Divisional Vice President and Sector General Manager,
Diagnostic Products.
1995 to 1996 -- Divisional Vice President and General Manager, U.S. and
Canada, Diagnostic Products.
1996 to 1998 -- Vice President, Diagnostics Operations, U.S. and Canada.
1998 to present -- Vice President, Diagnostics Commercial Operations.
Elected Corporate Officer -- 1996.
MARK E. BARMAK, 57
1994 to 1995 -- Divisional Vice President and Associate General Counsel,
Litigation.
1995 to present -- Vice President, Litigation and Government Affairs.
Elected Corporate Officer -- 1995.
CHRISTOPHER B. BEGLEY**, 46
1994 to 1996 -- Vice President, Hospital Products Business Sector.
1996 to 1998 -- Vice President, MediSense Operations.
1998 to present -- Vice President, Abbott HealthSystems.
Elected Corporate Officer -- 1993.
15
DOUGLAS C. BRYANT, 41
1994 to 1995 -- Regional Sales Manager, Diagnostics Division.
1995 to 1997 -- General Manager, United Kingdom and Ireland, Diagnostics
Division.
1997 to 1998 -- Commercial Director, Asia and Pacific, Diagnostics Division.
1998 to present -- Vice President, Diagnostics Operations, Asia and Pacific.
Elected Corporate Officer -- 1998.
GARY R. BYERS**, 57
1994 to present -- Vice President, Internal Audit.
Elected Corporate Officer -- 1993.
THOMAS F. CHEN, 49
1994 -- General Manager, Korea and Taiwan.
1994 to 1996 -- General Manager Taiwan and People's Republic of China Task
Force.
1996 to 1998 -- Regional Director, Taiwan and People's Republic of China.
1998 to present -- Vice President, Pacific, Asia, and Africa Operations.
Elected Corporate Officer -- 1998.
KENNETH W. FARMER**, 54
1994 to present -- Vice President, Management Information Services and
Administration.
Elected Corporate Officer -- 1985.
EDWARD J. FIORENTINO, 40
1994 -- Business Unit Director, Antimicrobials, Pharmaceuticals Division.
1994 to 1998 -- Divisional Vice President, Marketing, Pharmaceuticals
Division.
1998 to present -- Vice President, Pharmaceutical Products, Marketing and
Sales.
Elected Corporate Officer -- 1998.
THOMAS C. FREYMAN**, 44
1994 to present -- Vice President and Treasurer.
Elected Corporate Officer -- 1991.
STEPHEN R. FUSSELL, 41
1994 to 1996 -- Vice President, Total Compensation, Nestle USA (diversified
food company).
1996 to 1999 -- Divisional Vice President, Compensation and Benefits.
1999 to present -- Vice President, Compensation and Development.
Elected Corporate Officer -- 1999.
16
DAVID B. GOFFREDO, 44
1994 to 1995 -- Divisional Vice President, Pharmaceutical Products Sales and
Marketing.
1995 to 1998 -- Vice President, Pharmaceutical Products, Marketing and
Sales.
1998 to present -- Vice President, European Operations.
Elected Corporate Officer -- 1995.
GUILLERMO A. HERRERA, 45
1994 -- Regional Director, Europe, Abbott International.
1994 -- General Manager, Abbott Spain and Portugal.
1994 to 1996 -- Area Vice President, Latin America.
1996 to 1998 -- Vice President, Latin America Operations.
1998 to present -- Vice President, Latin America and Canada Operations.
Elected Corporate Officer -- 1996.
JAY B. JOHNSTON, 55
1994 to present -- Vice President, Diagnostic Assays and Systems.
Elected Corporate Officer -- 1993.
JAMES J. KOZIARZ, 50
1994 to present -- Vice President, Diagnostic Products Research and
Development.
Elected Corporate Officer -- 1993.
JOHN M. LEONARD, 41
1994 to 1996 -- Venture Head, Pharmaceutical Products Research and
Development.
1996 to 1997 -- Therapeutic Area Venture Head, Pharmaceutical Products
Research and Development.
1997 to 1999 -- Divisional Vice President, Pharmaceutical Development,
Pharmaceutical Products Research and Development.
1999 to present -- Vice President, Pharmaceutical Development.
Elected Corporate Officer -- 1999.
JOHN F. LUSSEN**, 57
1994 to present -- Vice President, Taxes.
Elected Corporate Officer -- 1985.
17
EDWARD L. MICHAEL, 42
1994 -- Business Unit Manager, Diagnostics Division.
1995 to 1996 -- Director, Area Operations and Scientific Development.
1997 to present -- Vice President, Diagnostics Operations, Europe, Africa,
and Middle East.
Elected Corporate Officer -- 1997.
DANIEL W. NORBECK, 40
1994 to 1995 -- Senior Project Leader, Pharmaceutical Products Research and
Development.
1995 to 1998 -- Divisional Vice President, Area Head, Pharmaceutical
Products Research and Development.
1998 to 1999 -- Divisional Vice President, Discovery, Pharmaceutical
Products Research and Development.
1999 to present -- Vice President, Pharmaceutical Discovery.
Elected Corporate Officer -- 1999.
THEODORE A. OLSON**, 60
1994 to present -- Vice President and Controller.
Elected Corporate Officer -- 1988.
WILLIAM H. STADTLANDER, 53
1994 to present -- Vice President, Ross Medical Nutritional Products.
Elected Corporate Officer -- 1993.
MARCIA A. THOMAS **, 51
1994 to 1995 -- Divisional Vice President and General Manager, Infectious
Diseases Diagnostics.
1995 to 1996 -- Divisional Vice President, Quality Assurance and Regulatory
Affairs, Diagnostics Division.
1996 to present -- Vice President, Quality Assurance and Regulatory Affairs.
Elected Corporate Officer -- 1996.
STEVEN J. WEGER, JR.**, 54
1994 to 1996 -- Divisional Vice President, Strategic Planning and Technology
Assessment, Diagnostics Division.
1996 to present -- Vice President, Corporate Planning and Development.
Elected Corporate Officer -- 1996.
18
SUSAN M. WIDNER, 42
1994 to 1995 -- Business Unit Manager, Diagnostics Division.
1995 to 1996 -- Director, Venture Marketing, Diagnostics Division.
1996 to 1998 -- Divisional Vice President, Worldwide Marketing, Diagnostics
Division.
1998 to present -- Vice President, Diagnostics Operations, U.S. and Canada.
Elected Corporate Officer -- 1998.
LANCE B. WYATT**, 54
1994 to 1995 -- Divisional Vice President, Quality Assurance and Regulatory
Affairs, Pharmaceutical Division.
1995 to present -- Vice President, Corporate Engineering.
Elected Corporate Officer -- 1995.
- ------------------------
** Pursuant to Item 401(b) of Regulation S-K, Abbott has identified these
persons as "executive officers" within the meaning of Item 401(b).
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRINCIPAL MARKET
The principal market for Abbott's common shares is the New York Stock
Exchange. Shares are also listed on the Chicago Stock Exchange and the Pacific
Exchange and are traded on the Boston, Cincinnati, and Philadelphia Exchanges.
Outside the United States, Abbott's shares are listed on the London Stock
Exchange and the Swiss Stock Exchange.
MARKET PRICE PER SHARE
-------------------------------------
1998 1997
----------------- -----------------
HIGH LOW HIGH LOW
------- ------- ------- -------
First Quarter................... 39 7/16 32 1/2 30 1/4 24 7/8
Second Quarter.................. 42 11/16 34 7/8 34 7/16 26 7/16
Third Quarter................... 45 11/16 36 5/8 34 1/4 29 3/8
Fourth Quarter.................. 50 1/16 39 34 5/8 28 1/2
Market prices are as reported by the New York Stock Exchange composite
transaction reporting system. Pre-split prices have been adjusted to reflect the
May 1998 stock split.
SHAREHOLDERS
There were 107,209 shareholders of record of Abbott common shares as of
December 31, 1998.
DIVIDENDS
Quarterly dividends of $.15 per share and $.135 per share were declared on
common shares in 1998 and 1997, respectively after reflecting the May 1998 stock
split.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference for the years 1994 through 1998 are the
applicable portions of the section captioned "Summary of Selected Financial
Data" of the 1998 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference is management's discussion and analysis of
financial condition and results of operations for the years 1998, 1997, and 1996
found under the section captioned "Financial Review" of the 1998 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated herein by reference is the section captioned "Financial
Instruments and Risk Management" of the 1998 Annual Report.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference are the portions of the 1998 Annual Report
captioned Consolidated Statement of Earnings, Consolidated Statement of Cash
Flows, Consolidated Balance Sheet, Consolidated Statement of Shareholders'
Investment, Notes to Consolidated Financial Statements, and Report of
Independent Public Accountants (which contains the related report of Arthur
Andersen LLP dated January 14, 1999.) Data relating to quarterly results are
found in Note 11.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference are "Committees of the Board of Directors"
and "Information Concerning Nominees for Directors" found in the 1999 Abbott
Laboratories Proxy Statement ("1999 Proxy Statement"). Also incorporated herein
by reference is the text found under the caption, Executive Officers of The
Registrant on pages 13 through 19.
ITEM 11. EXECUTIVE COMPENSATION
The material in the 1999 Proxy Statement under the heading "Executive
Compensation," other than the Report of the Compensation Committee, the
Performance Graph, and Security Ownership of Executive Officers and Directors is
hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the text found under the caption
"Information Concerning Security Ownership" and the material under the heading
"Security Ownership of Executive Officers and Directors" in the 1999 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS FORM 10-K.
1. FINANCIAL STATEMENTS: The Consolidated Financial Statements for the
years ended December 31, 1998, 1997, and 1996 and the related report of Arthur
Andersen LLP dated January 14, 1999, appearing under the portions of the 1998
Annual Report captioned Consolidated Statement of Earnings, Consolidated
Statement of Cash Flows, Consolidated Balance Sheet, Consolidated Statement of
Shareholders' Investment, Notes to Consolidated Financial Statements, and Report
of Independent Public Accountants, respectively, are incorporated by reference
in response to Item 14(a)1. With the exception of the portions of the 1998
Annual Report specifically incorporated herein by reference, such Report shall
not be deemed filed as part of this Annual Report on Form 10-K or otherwise
deemed subject to the liabilities of Section 18 of the Securities Exchange Act
of 1934.
21
2. FINANCIAL STATEMENT SCHEDULES: The required financial statement
schedules are found on the pages indicated below. These schedules should be read
in conjunction with the Consolidated Financial Statements in the 1998 Annual
Report:
SCHEDULES PAGE NO.
- ---------------------------------------------------------------------------------------------- -------------
Valuation and Qualifying Accounts (Schedule II) 25
Schedules I, III, IV, and V are not submitted because they are not applicable or not required.
Supplemental Report of Independent Public Accountants 26
Individual Financial Statements of the registrant have been omitted pursuant to Rule 3.05,
paragraph (1) of Regulation S-X.
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K: The information called
for by this paragraph is incorporated herein by reference to the Exhibit Index
on pages 28, 29 and 30 of this Form 10-K.
(b) REPORTS ON FORM 8-K DURING THE QUARTER ENDED DECEMBER 31, 1998:
No reports on Form 8-K were filed during the quarter ended December 31,
1998.
(c) EXHIBITS FILED (SEE EXHIBIT INDEX ON PAGES 28, 29 AND 30).
(d) FINANCIAL STATEMENT SCHEDULES FILED (PAGE 25).
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Abbott Laboratories has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ABBOTT LABORATORIES
By /s/ MILES D. WHITE
------------------------------------
Miles D. White
Chief Executive Officer
Date: February 12, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Abbott
Laboratories on February 12, 1999 in the capacities indicated below.
/s/ DUANE L. BURNHAM
- -------------------------------------------
Duane L. Burnham
Chairman of the Board
and Director
/s/ MILES D. WHITE
- -------------------------------------------
Miles D. White
Chief Executive Officer and Director
(principal executive officer)
/s/ ROBERT L. PARKINSON, JR.
- -------------------------------------------
Robert L. Parkinson, Jr.
President, Chief Operating Officer
and Director
/s/ GARY P. COUGHLAN
- -------------------------------------------
Gary P. Coughlan
Senior Vice President, Finance and
Chief Financial Officer
(principal financial officer)
/s/ THEODORE A. OLSON
- -------------------------------------------
Theodore A. Olson
Vice President and Controller
(principal accounting officer)
/s/ K. FRANK AUSTEN, M.D.
- -------------------------------------------
K. Frank Austen, M.D.
Director
/s/ H. LAURANCE FULLER
- -------------------------------------------
H. Laurance Fuller
Director
/s/ DAVID A. JONES
- -------------------------------------------
David A. Jones
Director
/s/ DAVID A. L. OWEN
- -------------------------------------------
David A. L. Owen
Director
/s/ BOONE POWELL, JR.
- -------------------------------------------
Boone Powell, Jr.
Director
/s/ A. BARRY RAND
- -------------------------------------------
A. Barry Rand
Director
23
/s/ W. ANN REYNOLDS
- -------------------------------------------
W. Ann Reynolds
Director
/s/ ROY S. ROBERTS
- -------------------------------------------
Roy S. Roberts
Director
/s/ WILLIAM D. SMITHBURG
- -------------------------------------------
William D. Smithburg
Director
/s/ JOHN R. WALTER
- -------------------------------------------
John R. Walter
Director
/s/ WILLIAM L. WEISS
- -------------------------------------------
William L. Weiss
Director
24
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(UNAUDITED)
AMOUNTS
ALLOWANCES FOR DOUBTFUL BALANCE AT PROVISIONS CHARGED OFF
ACCOUNTS AND SALES BEGINNING CHARGED TO NET OF BALANCE AT
DEDUCTIONS OF YEAR INCOME(a) RECOVERIES END OF YEAR
- ------------------------------------------------------------ ----------- ------------- ----------- -----------
1998................................................ 167,406 41,441 (17,895) 190,952
1997................................................ 153,424 28,193 (14,211) 167,406
1996................................................ 157,990 7,389 (11,955) 153,424
(a) Represents provisions related to allowances for doubtful accounts and net
change in the allowances for sales deductions.
25
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Abbott Laboratories:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in Abbott's Annual Report incorporated by
reference in this Form 10-K, and have issued our report thereon dated January
14, 1999. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. Schedule II is the responsibility of Abbott's
management, is presented for purposes of complying with the Securities and
Exchange Commission's rules, and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 14, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of the following into Abbott's previously filed S-8 Registration
Statements 33-4368 for the Abbott Laboratories 1986 Incentive Stock Program,
33-39798 for the Abbott Laboratories 1991 Incentive Stock Program, 333-09071,
333-43381 and 333-69547 for the Abbott Laboratories 1996 Incentive Stock
Program, 333-13091 for the Abbott Laboratories Ashland Union 401(k) Plan and
Trust, and 33-26685, 33-51585, 33-56897, 33-65127, 333-19511, 333-43383, and
333-69579 for the Abbott Laboratories Stock Retirement Plan and Trust and into
Abbott's previously filed S-3 Registration Statements 33-50253, 333-06155,
333-63481, and 333-65601:
1. Our supplemental report dated January 14, 1999 included in this Annual
Report on Form 10-K for the year ended December 31, 1998; and
2. Our report dated January 14, 1999 incorporated by reference in this
Annual Report on Form 10-K for the year ended December 31, 1998.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 9, 1999
27
EXHIBIT INDEX
ABBOTT LABORATORIES
ANNUAL REPORT
FORM 10-K
1998
10-K
EXHIBIT
TABLE
ITEM NO.
- ----------
3.1 * Articles of Incorporation-Abbott Laboratories, filed as Exhibit 3.1 to the Abbott Laboratories
Quarterly Report on Form 10-Q for the Quarter ended March 31, 1998.
3.2 Corporate By-Laws-Abbott Laboratories.
4.1 * Indenture dated as of October 1, 1993, between Abbott Laboratories and Harris Trust and Savings Bank,
filed as Exhibit 4.1 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30,
1993, on Form 10-Q.
4.2 * Form of 5.6% Note issued pursuant to the Indenture filed as Exhibit 4.2 to the Abbott Laboratories
Quarterly Report for the Quarter ended September 30, 1993, on Form 10-Q.
4.3 * Form of Medium-Term Note, Series A (Fixed Rate) to be issued pursuant to the Indenture filed as
Exhibit 4.3 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.4 * Form of Medium-Term Note, Series A (Floating Rate) to be issued pursuant to the Indenture filed as
Exhibit 4.4 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.5 * Resolution of Abbott's Board of Directors filed as Exhibit 4.5 to the Abbott Laboratories Quarterly
Report for the Quarter ended September 30, 1993, on Form 10-Q.
4.6 * Actions of the Authorized Officers with respect to Abbott's $200,000,000 5.6% Notes filed as Exhibit
4.6 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on Form
10-Q.
4.7 * Actions of the Authorized Officers with respect to Abbott's Medium-Term Notes, Series A filed as
Exhibit 4.7 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.8 * Officers' Certificate and Company Order with respect to Abbott's $200,000,000 5.6% Notes filed as
Exhibit 4.8 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.9 * Form of 6.8% Note issued pursuant to Indenture filed as Exhibit 4.9 to the 1995 Abbott Laboratories
Annual Report on Form 10-K.
4.10 * Actions of Authorized Officers with respect to Abbott's $150,000,000 6.8% Notes filed as Exhibit 4.10
to the 1995 Abbott Laboratories Annual Report on Form 10-K.
4.11 * Officers' Certificate and Company Order with respect to Abbott's $150,000,000 6.8% Notes filed as
Exhibit 4.11 to the 1995 Abbott Laboratories Annual Report on Form 10-K.
4.12 * Resolution of Abbott's Board of Directors relating to the 6.4% Notes filed as Exhibit 4.12 to the 1996
Abbott Laboratories Annual Report on Form 10-K.
4.13 * Form of $50,000,000 6.4% Note issued pursuant to Indenture filed as Exhibit 4.13 to the 1996 Abbott
Laboratories Annual Report on Form 10-K.
4.14 * Form of $200,000,000 6.4% Note issued pursuant to Indenture filed as Exhibit 4.14 to the 1996 Abbott
Laboratories Annual Report on Form 10-K.
28
10-K
EXHIBIT
TABLE
ITEM NO.
- ----------
4.15 * Actions of Authorized Officers with respect to Abbott's 6.4% Notes filed as Exhibit 4.15 to the 1996
Abbott Laboratories Annual Report on Form 10-K.
4.16 * Officers' Certificate and Company Order with respect to Abbott's 6.4% Notes filed as Exhibit 4.16 to
the 1996 Abbott Laboratories Annual Report on Form 10-K.
4.17 * Form of $200,000,000 6.0% Note issued pursuant to Indenture filed as Exhibit 4.2 to the Abbott
Laboratories Quarterly Report for the Quarter ended June 30, 1998, on Form 10-Q.
4.18 * Actions of Authorized Officers with respect to Abbott's 6.0% Note filed as Exhibit 4.3 to the Abbott
Laboratories Quarterly Report for the Quarter ended June 30, 1998, on Form 10-Q.
4.19 * Officers' Certificate and Company Order with respect to Abbott's 6.0% Note filed as Exhibit 4.4 to the
Abbott Laboratories Quarterly Report for the Quarter ended June 30, 1998, on Form 10-Q.
4.20 * Form of $200,000,000 5.40% Note issued pursuant to Indenture filed as Exhibit 4.2 to the Abbott
Laboratories Quarterly Report for the Quarter ended September 30, 1998, on Form 10-Q.
4.21 * Actions of Authorized Officers with respect to Abbott's 5.40% Note filed as Exhibit 4.3 to the Abbott
Laboratories Quarterly Report for the Quarter ended September 30, 1998, on Form 10-Q.
4.22 * Officers' Certificate and Company Order with respect to Abbott's 5.40% Note filed as Exhibit 4.4 to
the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1998, on Form 10-Q.
Other debt instruments are omitted in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. Copies
of such agreements will be furnished to the Securities and Exchange Commission upon request.
10.1 * Supplemental Plan Abbott Laboratories Extended Disability Plan, filed as an exhibit (pages 50-51) to
the 1992 Abbott Laboratories Annual Report on Form 10-K.**
10.2 * The Abbott Laboratories 1986 Incentive Stock Program filed as Exhibit 10.2 to the 1997 Abbott
Laboratories Annual Report on Form 10-K.**
10.3 * The Abbott Laboratories 1991 Incentive Stock Program filed as Exhibit 10.3 to the 1997 Abbott
Laboratories Annual Report on Form 10-K.**
10.4 * Consulting agreement between Abbott Laboratories and K. Frank Austen, M.D. dated, December 15, 1997
filed as Exhibit 10.4 to the 1997 Abbott Laboratories Annual Report on Form 10-K.**
10.5 * Abbott Laboratories 401(k) Supplemental Plan, filed as Exhibit 10.7 to the Abbott Laboratories 1993
Annual Report on Form 10-K.**
10.6 * Abbott Laboratories Supplemental Pension Plan filed as Exhibit 10.1 to the Abbott Laboratories
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.**
10.7 * The 1986 Abbott Laboratories Management Incentive Plan filed as Exhibit 10.1 to the Abbott
Laboratories Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.**
10.8 Abbott Laboratories Non-Employee Directors' Fee Plan.**
10.9 * The Abbott Laboratories 1996 Incentive Stock Program filed as Exhibit 10.9 to the 1997 Abbott
Laboratories Annual Report on Form 10-K.**
29
10-K
EXHIBIT
TABLE
ITEM NO.
- ----------
10.10 * 1998 Abbott Performance Incentive Plan filed as Exhibit 10.1 to the Abbott Laboratories Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998. **
10.11 Consulting arrangement between Abbott Laboratories and Duane L. Burnham dated, December 23, 1998.**
12 Computation of Ratio of Earnings to Fixed Charges.
13 The portions of the Abbott Laboratories Annual Report for the year ended December 31, 1998 captioned
Consolidated Statement of Earnings, Consolidated Statement of Cash Flows, Consolidated Balance Sheet,
Consolidated Statement of Shareholders' Investment, Notes to Consolidated Financial Statements, Report
of Independent Public Accountants, Financial Instruments and Risk Management, Financial Review, and
the applicable portions of the section captioned Summary of Financial Data for the years 1994 through
1998.
21 Subsidiaries of Abbott Laboratories.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule.
99.1 Cautionary Statement Regarding Forward-Looking Statements.
The 1999 Abbott Laboratories Proxy Statement will be filed with the Securities and Exchange Commission
under separate cover on or about March 9, 1999.
- ------------------------
* Incorporated herein by reference. Commission file number 1-2189.
** Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
Abbott will furnish copies of any of the above exhibits to a shareholder
upon written request to the Corporate Secretary, Abbott Laboratories, 100 Abbott
Park Road, Abbott Park, Illinois 60064-6400.
30