ABBOTT LABORATORIES - 10-K Annual Report

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)

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.

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. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No

The aggregate market value of the 1,487,147,688 shares of voting stock held by nonaffiliates of the registrant, computed by reference to the closing price as reported on the New York Stock Exchange, as of the last business day of Abbott Laboratories' most recently completed second fiscal quarter (June 30, 2004), was approximately $60,616,139,804. Abbott has no non-voting common equity.

Portions of the 2005 Abbott Laboratories Proxy Statement are incorporated by reference into Part III. The Proxy Statement will be filed on or about March 18, 2005.

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.

FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS,
GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS

Incorporated herein by reference is Note 7 entitled "Segment and Geographic Area Information" of the Notes to Consolidated Financial Statements included under Item 8, "Financial Statements and Supplementary Data."

Abbott has four reportable revenue segments: Pharmaceutical Products, Diagnostic Products, Ross Products, and International. Abbott also has a 50 percent owned joint venture, TAP Pharmaceutical Products Inc.

Abbott previously had five reportable segments. Effective January 1, 2004, Abbott's segments were reorganized to reflect the shift of certain hospital pharmaceutical products from the Hospital Products segment to the Pharmaceutical Products segment, and the separation of the vascular and spinal products businesses into separate non-reportable segments. In addition, as of January 1, 2004, the Diagnostic Products segment was reorganized into four separate divisions. For segment reporting purposes, these divisions are aggregated and reported as the Diagnostic Products segment.

On April 12, 2004, Abbott's board of directors declared a special dividend distribution of all of the outstanding shares of common stock of Hospira, Inc. For every 10 Abbott common shares held at the close of business on April 22, 2004, Abbott shareholders received one common share of Hospira stock on April 30, 2004. All of the shares of Hospira's common stock were distributed to Abbott shareholders on a pro-rata basis. Hospira included the operations relating to the manufacture and sale of hospital products including specialty injectable pharmaceuticals, medication delivery systems and critical care devices and injectable pharmaceutical contract manufacturing. Hospira included Abbott's Hospital Products segment after that segment's reorganization on January 1, 2004 and portions of the International segment. The income and cash flows of Hospira and the direct transaction costs of the spin-off have been presented as discontinued operations in the Condensed Consolidated Statement of Earnings and Statement of Cash Flows. Prior years' balance sheets have not been adjusted to reflect the effect of the spin-off. The prior years' segments have been adjusted to conform to the current year's presentation.

The Pharmaceutical Products segment's products include a broad line of adult and pediatric pharmaceuticals, which are sold primarily on the prescription, or recommendation, of physicians.

In addition, through an agreement with Boehringer Ingelheim, the Pharmaceutical Products segment co-promotes and distributes Flomax® for the treatment of benign prostatic hyperplasia, Micardis® for the treatment of hypertension, and Mobic® for the treatment of arthritis.

The Pharmaceutical Products segment markets its products in the United States and generally sells its products directly to wholesalers, government agencies, health care facilities, and independent retailers from Abbott-owned distribution centers and public warehouses. This segment directs its primary marketing efforts toward securing the prescription of Abbott's brand of products by physicians. Managed care providers (for example, health maintenance organizations and pharmacy benefit managers) and state and federal governments and agencies (for example, the Department of Veterans Affairs and the Department of Defense) are also important customers.

Competition in the Pharmaceutical Products segment is generally from other health care and pharmaceutical companies. The search for technological innovations in pharmaceutical products is a significant aspect of competition in this segment. The introduction of new products by competitors and changes in medical practices and procedures can result in product obsolescence in the Pharmaceutical Products segment, and 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.

The Diagnostic Products segment's products include diagnostic systems and tests for blood banks, hospitals, commercial laboratories, alternate-care testing sites, plasma protein therapeutic companies, and consumers. In the first quarter of 2004, Abbott acquired i-STAT Corporation, a leading manufacturer of point-of-care diagnostic systems for blood analysis. In the second quarter of 2004, Abbott completed its acquisition of TheraSense, Inc. TheraSense develops, manufactures and markets FreeStyle® blood glucose self-monitoring systems, and is a leader in developing systems that feature a very small sample size, rapid test results, and less painful testing.

In addition, under its strategic alliance with Celera Diagnostics, a joint venture between the Applied Biosystems Group and the Celera Genomics Group of Applera Corporation, the Diagnostic Products segment develops, manufactures and markets a broad range of in vitro molecular diagnostic products for disease detection, disease progression monitoring and therapy selection. Through a sales and marketing agreement with Enfer Scientific Ltd., the Diagnostic Products segment also distributes diagnostic tests in Europe and Japan that are used to detect bovine spongiform encephalopathy (BSE) in cattle.

The Diagnostic Products segment markets its products worldwide. These products are generally marketed and sold directly to hospitals, laboratories, clinics, 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 people with diabetes are also marketed and sold over the counter to consumers.

The Diagnostic Products 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. Although Abbott has benefited from technological advantages of certain of its current products, these advantages may be reduced or eliminated as competitors introduce new products. Certain of this segment's products are subject to restrictions on their sale in the United States. These restrictions are discussed in the section captioned, "Regulation" on pages 8 and 9.

The Ross Products segment's products include a broad line of pediatric and adult nutritionals. These products are sold directly to consumers, often on the recommendation of physicians or other health care professionals. The Ross Products segment also includes specialty pharmaceuticals. In the fourth quarter of 2004, Abbott acquired EAS Inc., a nutritional leader with a strong portfolio of brands, including AdvantEdge®, Myoplex®, and Body for Life®.

In addition, the Ross Products segment co-promotes Synagis®, for prevention of respiratory syncytial virus, under an agreement with MedImmune Inc.

The Ross Products segment markets its products in the United States, except for EAS® and Zone Perfect® retail products which are sold worldwide. In most cases, its products are distributed from Abbott-owned distribution centers or public warehouses.

It generally sells nutritional products directly to retailers, wholesalers, health care facilities, and government agencies. Currently, 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. In addition, nutritional products are also promoted through direct to consumer marketing efforts. Similac® Advance®, Isomil® Advance®, PediaSure®, Pedialyte®, Ensure®, Glucerna®, Zone Perfect®, and EAS® retail products are promoted directly to the public by consumer advertising. These products are generally sold directly to retailers and wholesalers.

The Ross Products segment's pharmaceutical products are generally marketed directly to physicians, health care facilities, and government agencies and sold through wholesalers. Primary marketing efforts for this segment's pharmaceutical products are directed at securing the prescription of these products by physicians.

Competition for nutritional products in the Ross Products segment is generally other diversified consumer and health care manufacturers. Competitive factors include consumer advertising, formulation, packaging, scientific innovation, price, and availability of private label product forms. Competition for pharmaceutical products in the Ross Products segment is generally from other health care and 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.

The International segment's products include a broad line of 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.

The International 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 or co-promoted 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. 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 for the International segment's pharmaceutical products is generally from other health care and 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. Competition for the segment's nutritional products is generally from other health care manufacturers and food companies. Nutritional products are subject to competition in price, scientific innovation, formulation, and promotional initiatives.

Under an agreement between Abbott and Takeda Pharmaceutical Company, Ltd. of Japan (Takeda), TAP Pharmaceutical Products 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 primarily for the United States and Canada. TAP markets Lupron®, an LH-RH analog, and Lupron Depot®, a sustained release form of Lupron®, in the United States. Lupron® and Lupron Depot® are used principally for the palliative treatment of advanced prostate cancer and for the treatment of endometriosis and central precocious puberty and for the preoperative treatment of patients with anemia caused by uterine fibroids. TAP also markets Prevacid® (lansoprazole), a proton pump inhibitor. Its principal indications are for short-term treatment of gastroesophageal reflux disease, duodenal ulcers, gastric ulcers, and erosive esophagitis.

TAP's products are generally sold directly to physicians, retailers, wholesalers, health care facilities, and government agencies. In most cases, they are distributed for TAP 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. Managed care purchasers (for example, health maintenance organizations and pharmacy benefit managers) are increasingly important customers.

Competition is generally from other 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 availability of over-the-counter drugs or the substitution of generic drugs for the brand prescribed has increased competitive pressures.

Abbott purchases, in the ordinary course of business, raw materials and supplies essential to Abbott's operations from numerous suppliers in the United States and abroad. There have been no recent significant availability problems or supply shortages.

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 and is licensed under a substantial number of patents and patent applications. Principal trademarks and the products they cover are discussed in the Narrative Description of Business on pages 1 through 6. These, and various patents which expire during the period 2005 to 2024, 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 adalimumab (which is sold under the trademark HUMIRA®), those related to clarithromycin (which is sold under the trademarks Biaxin®, Klacid® and Klaricid®), those related to divalproex sodium (which is sold under the trademark Depakote®), those related to lansoprazole (which is sold under the trademarks Prevacid® and Ogastro®), and those related to lopinavir/ritonavir (which is sold under the trademark Kaletra®), are material in relation to Abbott's business as a whole. The original United States compound patents covering adalimumab will expire in 2016. The original United States compound patent covering clarithromycin is licensed from Taisho Pharmaceutical Co., Ltd. of Tokyo, Japan, and will expire in 2005. The original United States compound patents covering divalproex sodium will expire in 2008. The original United States compound patent covering lansoprazole is licensed by TAP from Takeda and will expire in 2009. The original United States compound patent covering lopinavir will expire in 2015. The original United States compound patents covering ritonavir will expire in 2013 and 2014. The original United States composition patent covering lopinavir/ritonavir will expire in 2016. In addition, the patents, licenses, and trademarks related to fenofibrate (which is sold under the trademark TriCor®) are significant for Abbott's Pharmaceutical Products segment and the patents, licenses, and trademarks related to sevoflurane (which is sold under the trademarks Sevorane® and Ultane®) are significant for Abbott's International segment. The principal United States formulation patents covering the fenofibrate products will expire in 2009, 2011, 2018, and 2020. The principal formulation patents covering sevoflurane in the International segment's major markets will expire in 2018. Litigation involving Abbott's patents covering clarithromycin, its patents covering divalproex sodium, and its patents covering fenofibrate is discussed in Legal Proceedings on pages 11, 14 and 15.

Although the expiration of a compound patent may lead to increased competition, in most cases Abbott owns or has a license to other patents that expire after the original compound patent related to particular formulations, uses, or processes for manufacturing the pharmaceutical. These other patents and Abbott's other intellectual property, along with such other factors as a competitor's need to obtain regulatory approvals prior to marketing a competitive product and the nature of the market, may allow Abbott to continue to maintain exclusivity or have other commercial advantages after the expiration of the original compound patent.

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.

Abbott spent $1,696,753,000 in 2004, $1,623,752,000 in 2003, and $1,474,537,000 in 2002 on research to discover and develop new products and processes and to improve existing products and processes. The majority of research and development expenditures is concentrated on pharmaceutical products.

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 2004 were approximately $10 million and $58 million, respectively. Capital and operating expenditures for pollution control are estimated to approximate $6 million and $61 million, respectively, in 2005.

Abbott has been identified as one of many potentially responsible parties in investigations and/or remediations at 17 locations in the United States including 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 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 one Abbott-owned site, and is engaged in remediation at five other sites, in cooperation with the Environmental Protection Agency (EPA) or similar agencies.

While it is not feasible to predict with certainty the costs related to the previously described investigations 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.

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, product approvals and manufacturing, marketing and promotion, sampling, distribution, record keeping, 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.

Abbott is a party to a consent decree entered in 1999 that requires Abbott to ensure its diagnostics manufacturing processes in Lake County, Illinois conform with the FDA's Quality System Regulation. In 2003, the FDA concluded that those operations were in substantial conformity with that regulation. Abbott is introducing new diagnostics products manufactured at its Lake County, Illinois facility and continuing the process of reintroducing products removed from the market as a result of the consent decree.

Governmental regulatory agencies require prescription drug and medical device manufacturers to pay fees, such as application, product, and establishment fees.

International operations are also subject to a significant degree of government regulation and country-specific rules and regulations. Many countries, directly or indirectly, through reimbursement limitations, control the selling price of most health care products. Furthermore, many countries limit the importation of raw materials and finished products.

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.

Access to and 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. In 2006, a prescription drug benefit will be implemented under the Medicare program, providing eligible individuals with greater access to prescription drugs. Although it is not yet possible to assess the overall impact on Abbott, that impact is expected to be neutral, with any increase in volume likely to be offset by federal and state governments' efforts to manage the costs of Medicare and Medicaid programs. In addition, the federal government follows a diagnosis-related group (DRG) payment system for certain institutional services provided under Medicare or Medicaid and has implemented a prospective payment system (PPS) for services delivered in hospital outpatient, nursing home, and home health settings. DRG and PPS entitle a health care facility to a fixed reimbursement based on diagnosis 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 and some states are seeking additional rebates. The Veterans Health Care Act of 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. All states have conducted competitive bidding for infant formula contracts which require the use of specific infant formula products by the state WIC program, unless a physician requests a non-contract formula for a WIC client. States participating in WIC are required 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.

Abbott expects debate to continue during 2005 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 health care products and services.

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.

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.

Copies of Abbott's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through Abbott's investor relations website (www.abbottinvestor.com) as soon as reasonably practicable after Abbott electronically files the material with, or furnishes it to, the Securities and Exchange Commission.

Abbott's corporate governance guidelines, outline of directorship qualifications, code of business conduct and the charters of Abbott's audit committee, compensation committee, nominations and governance committee, and public policy committee are all available on Abbott's investor relations website (www.abbottinvestor.com) or by sending a request for a paper copy to: Abbott Laboratories, 100 Abbott Park Road, Dept. 383, AP6D2, Abbott Park, Illinois 60064-6400, attn. Investor Relations.

Abbott's corporate offices are located at 100 Abbott Park Road, Abbott Park, Illinois 60064-6400. The locations of Abbott's principal plants, as of December 31, 2004, are listed below.

Location		Reportable Segments of Products Produced
Abbott Park, Illinois		Pharmaceutical Products and Diagnostic Products
Abingdon, England*		Diagnostic Products
Alameda, California		Diagnostic Products
Altavista, Virginia		Ross Products
Barceloneta, Puerto Rico		Pharmaceutical Products and Diagnostic Products
Brockville, Canada		International
Campoverde, Italy		International
Casa Grande, Arizona		Ross Products
Columbus, Ohio		Ross Products
Dartford, England*		Diagnostic Products
Delkenheim, Germany		Diagnostic Products
Granada, Spain		International
Irving, Texas		Diagnostic Products
Jayuya, Puerto Rico		Pharmaceutical Products
Kanata, Canada*		Diagnostic Products
Karachi, Pakistan		International
Katsuyama, Japan		International
Liestal, Switzerland		International
Ludwigshafen, Germany		International
Matsudo, Japan		Diagnostic Products
Mexico City, Mexico		International
North Chicago, Illinois		Pharmaceutical Products
Queenborough, England		International
Redwood City, California*		Vascular — a non-reportable segment
Rio de Janeiro, Brazil		International
Santa Clara, California		Diagnostic Products
Sligo/Donegal/Cootehill/Finisklin, Ireland		Diagnostic Products and International
Sturgis, Michigan		Ross Products
St. Remy, France		International
Whippany, New Jersey		Pharmaceutical Products
Worcester, Massachusetts*		Pharmaceutical Products
Zwolle, the Netherlands		International

In addition to the above, Abbott has manufacturing facilities in seven other locations in the United States, including Puerto Rico. Outside the United States, manufacturing facilities are located in ten other countries. Abbott's facilities are deemed suitable, provide adequate productive capacity, and generally are utilized at normal and acceptable levels.

In the United States, including Puerto Rico, Abbott owns eight distribution centers. Abbott also has 17 United States research and development facilities located at: Abbott Park, Illinois; Alameda, California; Bedford, Massachusetts; Columbus, Ohio (two locations); Downers Grove, Illinois; East Windsor, New Jersey; Fairfield, California; Golden, Colorado; Irving, Texas; Long Grove, Illinois; North Chicago, Illinois; Parsippany, New Jersey; Redwood City, California; Santa Clara, California; Sunnyvale, California; and Worcester, Massachusetts. Outside the United States, Abbott has research and development facilities in Argentina, Canada, Germany, Ireland, Japan, the Netherlands, South Africa, Spain, Switzerland, and the United Kingdom.

Except as noted, the corporate offices, and those principal plants in the United States 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.

Abbott is involved in various claims, legal proceedings and investigations, including (as of January 31, 2005) those described below.

In 2001, the United States District Court for the Northern District of Illinois dismissed the shareholder derivative suits filed in 1999 against Abbott's directors as of November 1999 and certain other former directors in connection with Abbott's consent decree with the FDA regarding Abbott's diagnostic manufacturing operations in Lake County, Illinois. The suits had been consolidated as In re: Abbott Laboratories Derivative Shareholder Litigation. The plaintiffs alleged that the directors breached their duty of care by failing to prevent Abbott's alleged regulatory noncompliance and sought unspecified damages from the directors. Plaintiffs appealed to the United States Court of Appeals for the Seventh Circuit. In March 2003, the Seventh Circuit reversed the District Court's dismissal and remanded the case. On December 28, 2004, the trial court preliminarily approved a settlement of this matter pending a final approval hearing date, which is expected to occur in the first half of 2005. Under the terms of the settlement, a charter for the board's public policy committee has been adopted, Abbott will fund regulatory/compliance activities in the amount of $27 million, and the plaintiffs' attorneys fees will be paid from proceeds of insurance maintained by Abbott for its directors.

In the mid-1990s, a number of prescription pharmaceutical pricing antitrust suits were brought on behalf of retail pharmacies in federal and state courts as purported class actions. The retail pharmacies allege that pharmaceutical manufacturers, including Abbott, conspired to fix prices for prescription pharmaceuticals and/or to discriminate in pricing to retail pharmacies in violation of state and federal antitrust laws. The cases seek treble damages, civil penalties, and injunctive and other relief. Abbott filed a response to each of the complaints denying all substantive allegations. Abbott has settled all of the claims, with the exception of the claims brought on behalf of a group of retail pharmacies that "opted-out" of the class action settlement Abbott entered into in 1998. That group's claims are pending in the United States District Court for the Eastern District of New York. An investigation is also being conducted into the same allegations by the Illinois Attorney General.

Three cases are pending in which Abbott seeks to protect its patents for divalproex sodium (a drug that Abbott sells under the trademark Depakote®). In March 2004, in the case against TorPharm, a division of Apotex, Inc., ("TorPharm"), filed October 1997, the United States District Court for the Northern District of Illinois ruled in Abbott's favor finding that TorPharm's proposed product infringed Abbott's patents. The court entered an injunction barring TorPharm from manufacturing, using, selling, or offering to sell the generic divalproex sodium product until Abbott's patents expire, and directed that the effective date of any approval by FDA be no earlier than each patent expiration date. TorPharm has appealed to the Federal Circuit Court of Appeals. In the second case filed by Abbott in August 1992, the United States District Court for the Northern District of Illinois granted Abbott's motion for summary judgment against Alra Laboratories, Inc. ("Alra"), finding that Alra's proposed product infringed Abbott's patents. Alra appealed the decision to the Federal Circuit Court of Appeals. In March 2003, the Court of Appeals issued an order in Alra providing that the appeal would not be resolved on the merits and remanding the case to the lower court for a determination as to whether the lower court's judgment should stand or be vacated. The third case was brought by Abbott in May 2003 against Andrx Corporation, Andrx Pharmaceuticals, Inc., and Andrx Pharmaceuticals, LLC ("Andrx") in the United States District Court for the Southern District of Florida after Andrx submitted a Section 505(b)(2) NDA for a product described as sodium valproate tablets. That case was consolidated with a case Abbott had filed in April 2000 against the same parties. The earlier case has been dismissed.

A number of antitrust cases were pending in federal court (including a case filed by the Attorneys General of the States of Colorado, Florida and Kansas) and various state courts in connection with the settlement of patent litigation by Abbott involving terazosin hydrochloride, a drug sold by Abbott under the trademark Hytrin®. These cases (which were brought against Abbott, Geneva Pharmaceuticals, Inc., and Zenith Goldline Pharmaceuticals, Inc.) seek actual damages, treble damages, and other relief and allege Abbott violated state or federal antitrust laws and, in some cases, unfair competition laws. The federal court cases are pending in the United States District Court for the Southern District of Florida under the Multidistrict Litigation Rules as In re: Terazosin Hydrochloride, MDL No. 1317. On remand, the MDL court denied certification of a class of direct purchasers of Hytrin, but granted certification of a class of indirect purchasers. The United States Court of Appeals for the Eleventh Circuit has accepted an appeal from Abbott of the District Court's certification of a class of indirect purchasers. The MDL court has granted summary judgment in plaintiffs' favor finding that the challenged agreement was impermissible under federal antitrust law. The MDL court also granted summary judgment in Abbott's favor on certain of plaintiffs' claims finding both that Abbott's patent infringement lawsuits were not baseless and that Abbott did not defraud the patent office in obtaining the challenged patent. Cases are also pending in six state courts. Two of the state court cases, Asher and New Utrecht Pharmacy and Lisanti (both filed in 1999 in the Supreme Court of the State of New York, County of New York), were consolidated and are stayed pending the resolution of MDL No. 1317. The other state cases are: State of West Virginia, filed in October 2001 in the Circuit Court in Wyoming County, West Virginia; Daniels, filed in May 2000 in Superior Court in Orange County, California (stayed pending resolution of MDL No. 1317); Hopper, filed in October 2001 in the Superior Court in Pitt County, North Carolina; and Blue Cross/Blue Shield of Minnesota et al. v. Abbott Laboratories, et al., filed in August 2003 in the Circuit Court of Cook County, Illinois. Abbott has filed a response to each complaint denying all substantive allegations.

A number of cases, brought as purported class actions or representative actions on behalf of individuals or entities, are pending that allege generally that Abbott and numerous other pharmaceutical companies reported false pricing information in connection with certain drugs that are reimbursable under Medicare and Medicaid. These cases brought by private plaintiffs and State Attorneys General generally seek damages, treble damages, disgorgement of profits, restitution, and attorneys fees. The federal court cases have been consolidated in the United States District Court for the District of Massachusetts under the Multidistrict Litigation Rules as In re: Pharmaceutical Industry Average Wholesale Price Litigation, MDL 1456. The following previously reported cases have now been transferred to MDL 1456: International Union of Operating Engineers Local No. 68 Welfare Fund; County of Rockland; County of Westchester; Digel; State of California ex rel. Ven-A-Care of the Florida Keys; and Turner. One of the previously reported federal court cases, Rice, has been dismissed without prejudice. Two new federal cases have been filed and have been or will be transferred to MDL 1456: City of New York, filed in August 2004 in the United States District Court for the Southern District of New York; and County of Nassau, filed in November 2004 in the United States District Court for the Eastern District of New York. Cases are also pending in eight state courts: Swanston, filed in March 2002 in the Superior Court for Maricopa County, Arizona; State of West Virginia ex rel. Darrell V. McGraw, Jr., Attorney General, filed in October 2001 in the Circuit Court of Kanawha County, West Virginia; Peralta, a minor by and through his Guardian ad Litem, Filamena Iberia, filed in October 2001 in the Superior Court for Los Angeles County, California; State of Nevada, filed in January 2002 in the Second Judicial District Court in Washoe County, Nevada; Commonwealth of Kentucky ex rel. Albert B. Chandler III, Attorney General, filed in September 2003 in the Circuit Court of Franklin County, Kentucky; Commonwealth of Pennsylvania, filed in March 2004 in the Commonwealth Court of Pennsylvania; State of Ohio, filed in March 2004 in the Court of Common Pleas, Hamilton County, Ohio; State of Texas ex rel. Greg Abbott, Attorney General, filed in May 2004 in the District Court of Travis County, Texas; and State of Wisconsin, filed in June 2004 in the Circuit Court of Dane County, Wisconsin. Abbott has filed or intends to file a response in each case denying all substantive allegations.

In addition, various state and federal agencies, including the United States Department of Justice, the Florida and Illinois Attorneys General, and the Department of Audit and Control for the County of

Albany, New York, are investigating Abbott's marketing and pricing practices with respect to certain Medicare and Medicaid reimbursable products. These civil investigations seek to determine whether these practices violated any laws, including the Federal False Claims Act or constituted fraud in connection with the Medicare and/or Medicaid reimbursement paid to third parties.

A number of cases have been brought against TAP Pharmaceutical Products Inc., Abbott and Takeda Chemical Industries, Ltd. in various courts that generally allege that TAP reported false pricing information in connection with Lupron®, a product reimbursable under Medicare. The previously reported federal court cases have been consolidated in the United States District Court for the District of Massachusetts under the Multidistrict Litigation Rules as In re: Lupron® Marketing and Sales Practices Litigation, MDL 1430, and include: a Consolidated Class Action Complaint brought on behalf of all persons or entities who paid for Lupron® at a price calculated by reference to the published Average Wholesale Price from January 1, 1991 through September 2001; Empire Healthchoice, Inc., et al., v. TAP Pharmaceutical Products, Inc., Abbott Laboratories and Takeda Chemical Industries, Ltd., filed in June 2002 in the United States District Court for the District of Massachusetts; Cobalt Corporation v. Abbott Laboratories Inc., Takeda Chemical Industries Ltd. and TAP Pharmaceutical Products Inc., filed in August 2002 in the United States District Court for the District of Massachusetts; Health Care Service Corporation v. TAP Pharmaceutical Products, Inc., et al., removed to the United States District Court for the Eastern District of Texas in March 2003; and Liberty National Life Ins. Co. et al., v. TAP Pharmaceutical Products, Inc., et al., filed in the United States District Court for the Northern District of Alabama in October 2003. On November 24, 2004, the MDL court granted preliminary approval for a proposed nationwide settlement and also stayed all state class actions as to class claims pending a final approval hearing date, which is expected to occur in the first half of 2005.

Cases are also pending in various state courts, and have been brought as purported class actions or representative actions on behalf of individuals and/or insurance plans that paid any portion of the twenty percent co-payment cost under Medicare for Lupron® based on the published Average Wholesale Price (or, in some instances, any portion of the cost for Lupron®) and seek treble damages, and other relief. The cases allege TAP reported false pricing information in connection with Lupron®. The state cases are: Campbell-Hubbard, filed in June 2001 in the Superior Court for San Francisco County, California; Clark, filed in July 2001 in the Circuit Court of the First Judicial District, Williamson County, Illinois; Walker, filed in October 2001 in the Superior Court of New Jersey, Cape May County; Farris, filed in December 2001 in the Superior Court for San Francisco, California; Stetser, filed in December 2001 in the Superior Court, New Hanover County, North Carolina; Benoit, filed in February 2002 in the District Court of Jefferson County, Texas; and Grass, filed in September 2002 in the District Court of Jefferson County, Texas. A nationwide class has been certified in the Clark case. The previously reported nationwide class certification in the Stetser case was reversed by the North Carolina Court of Appeals and, on remand, the Stetser court certified a North Carolina statewide class. The court in Stetser has not ruled on plaintiffs' motion to proceed with their individual claims against TAP and Abbott. A New Jersey state class has been certified in the Walker case. The Walker state court found that the individual plaintiff opted-out of the proposed nationwide settlement and may proceed to trial with his individual claims. Abbott and TAP have filed responses in each case denying all substantive allegations.

A consolidated shareholder derivative complaint is pending in state court in the Circuit Court of Cook County, Illinois against Abbott's directors as of October 2001 alleging that these directors breached their fiduciary duties in relation to certain marketing and pricing practices at TAP. The complaint includes the following cases: Zimmerman, filed in October 2001; Thierman, filed in October 2001; and Raftery, filed in October 2001. The plaintiffs request damages, a return of salaries, reimbursement of their legal fees and costs, and various forms of other relief from these directors on behalf of Abbott. On January 6, 2005, the court preliminarily approved a settlement in this matter pending a final approval hearing date, which is expected to occur in the first half of 2005. Under the terms of the settlement, certain provisions were

included in the charter for the board's public policy committee, and the plaintiffs' attorneys fees will be paid from proceeds of insurance maintained by Abbott for its directors.

Six cases are pending in which Abbott seeks to protect its patents for fenofibrate (a drug Abbott sells under the trademark TriCor®). Cases are pending against the following companies: Teva Pharmaceutical Industries, filed in October 2002 in the United States District Court for the District of Delaware; IMPAX Laboratories, filed in February 2003 in the United States District Court for the District of Delaware; Par Pharmaceuticals, filed in February 2003 in the United States District Court for the District of New Jersey; Ranbaxy Laboratories, filed in May 2003 in the United States District Court for the District of New Jersey; Cipher Pharmaceuticals, filed in March 2003 in the United States District Court for the District of Puerto Rico; and Reliant Pharmaceuticals, filed in June 2004 in the United States District Court for the District of Delaware. Each of the lawsuits involves patents covering Abbott's 54 mg and 160 mg tablets. Teva, Impax, and Cipher have filed motions for summary judgment and Teva has filed a motion to lift the statutory 30-month stay that currently precludes the regulatory approval of its products. Abbott has filed oppositions to the motions.

Abbott is a defendant in numerous lawsuits involving the drug oxycodone (a drug sold under the trademark OxyContin®), which is manufactured by Purdue Pharma. Abbott promoted OxyContin to certain specialty physicians, including surgeons and anesthesiologists under a co-promotion agreement with Purdue Pharma. Purdue Pharma is a defendant in each lawsuit and, pursuant to the co-promotion agreement, Purdue is required to indemnify Abbott in each lawsuit. Most of the lawsuits allege generally that plaintiffs suffered personal injuries as a result of taking OxyContin. A few lawsuits allege consumer protection violations and unfair trade practices. One suit by a third party payor alleges antitrust pricing violations and overpricing of the drug. As of December 31, 2004, there are a total of 267 lawsuits pending in which Abbott is a party. 43 cases are pending in federal court; 224 cases are pending in state court. 246 cases are brought by individual plaintiffs, and 21 cases are brought as purported class action lawsuits. The previously reported action brought by the Attorney General for the State of West Virginia was settled by Purdue Pharma without admission of liability, and all claims against Abbott were dismissed with prejudice. A class of Ohio plaintiffs was certified in the case Howland v. Purdue Pharma, L.P. et al., Butler County Court of Common Pleas. The Ohio Court of Appeals affirmed certification, but on December 15, 2004, the Ohio Supreme Court reversed the certification of the class.

A consolidated shareholder derivative complaint is pending in state court in the Circuit Court of Cook County, Illinois against Abbott's directors as of June 2003 alleging that these directors breached their fiduciary duties in relation to certain business practices in the enteral nutritional business. The complaint includes Robert Corwin, filed in June 2003; Adele Brody, filed in August 2003; and Ted Gordon, filed in August 2003. In January 2004, Dennis MacCoumber filed a related additional shareholder derivative action in the United States District Court for the Northern District of Illinois. The suits seek compensatory damages, return of salaries, attorneys fees and other forms of relief. Abbott and the directors deny all substantive allegations. On January 7, 2005, the court preliminarily approved a settlement in this matter pending a final approval hearing date, which is expected to occur in the first half of 2005. Under the terms of the settlement, certain provisions were included in the charter for the board's public policy committee, and the plaintiffs' attorneys fees will be paid from proceeds of insurance maintained by Abbott for its directors.

Abbott is a defendant in a number of lawsuits involving the drug sibutramine (sold under the trademarks Meridia®, Reductil®, Reductyl™ and Reductal™) that have been brought either as purported class actions or on behalf of individual plaintiffs. The lawsuits generally allege design defects and failure to warn. Certain lawsuits also allege consumer protection violations and/or unfair trade practices. As of December 31, 2004, 118 lawsuits were pending in which Abbott is a party. 113 cases are being or have been transferred to the United States District Court for the Southern District of Ohio and are captioned, In Re Meridia MDL No. 1481. In July 2004, the United States District Court for the Northern District of Ohio granted Abbott's motion for summary judgment and dismissed Abbott from the 113 cases pending before

it in the case captioned, In Re Meridia MDL No. 1481. The cases are now on appeal. Four cases are pending in state court: Barley, filed in October 2002 in the Circuit Court of Jefferson County, Alabama; Titus, filed in October 2002 in the District Court of Nueces County, Texas; Killinger, filed in November 2002 in the Circuit Court in Lake County, Illinois; and a consolidated case pending in the Circuit Court in Lake County, Illinois that includes Lemetti, filed in March 2004 in the Circuit Court of Cook County, Illinois; Mosbah, filed in July 2003 in the Circuit Court of Cook County, Illinois; and Olinger, filed in January 2003 in the Circuit Court of Madison County, Illinois. One of the previously reported state court cases, Watson, filed in July 2002 in the District Court, Parish of East Baton Rouge, Louisiana, was dismissed in October 2004. Outside of the United States, one case is pending in Canada: Mandel, et al. v. Abbott, filed in June 2002 in the Ontario Superior Court of Justice, Toronto, Canada.

Abbott is a defendant in three cases pending in the United States District Court for the Northern District of Illinois related to Abbott's patents for clarithromycin (a drug Abbott sells under the trademarks Biaxin®, Biaxin®XL, Klacid®, and Klaricid®): Teva Pharmaceuticals USA, Inc., filed in August 2003; Genpharm, Inc., filed in October 2004; and Ranbaxy Laboratories Ltd. and Ranbaxy Pharmaceuticals, Inc., filed in December 2004. Teva and Genpharm have each brought a lawsuit seeking a declaration that their respective proposed generic immediate release clarithromycin products do not infringe certain Abbott patents and/or that the patents are invalid. The Ranbaxy lawsuit seeks a declaration that Ranbaxys' proposed generic immediate release clarithromycin product and proposed extended release clarithromycin product do not infringe certain Abbott patents and/or that the patents are invalid. Litigation relating to Abbott's clarithromycin patents is also pending in the United Kingdom, Netherlands, Spain, Belgium, and Canada.

Abbott is a defendant in several lawsuits that are pending in the United States District Court for the District of Minnesota and consolidated under the caption In re Canadian Import Antitrust Litigation alleging generally that Abbott and numerous other pharmaceutical manufacturers violated antitrust laws by conspiring to prevent re-importation of drugs from Canada. The consolidated lawsuit purports to be a class action brought on behalf of all United States residents who purchased and/or paid for brand name prescription drugs manufactured by the defendants. The plaintiffs seek an injunction prohibiting efforts to stop re-importation, a refund of all allegedly unlawful profits received by the defendants, treble damages, and attorneys fees.

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 dispositions should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

Executive officers of Abbott are elected annually by the board of directors. All other officers may be elected by the board or appointed by the chairman of the board. All officers are either elected at the first meeting of the board of directors held after the annual shareholder meeting or appointed by the chairman after that board meeting. Each officer holds office until a successor has been duly elected or appointed and qualified or until the officer's death, resignation, or removal. Vacancies may be filled at any time by the board. Any officer may be removed by the board of directors when, in its judgment, removal would serve the best interests of Abbott. Any officer appointed by the chairman of the board may be removed by the chairman whenever, in the chairman's judgment, removal would serve the best interests of Abbott. A vacancy in any office appointed by the chairman of the board may be filled by the chairman.

Current corporate officers, their ages as of February 18, 2005, and the dates of their first election as officers of Abbott are listed below. The executive officers' principal occupations and employment from January 2000 to February 18, 2005 and the current principal occupation of all other officers 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.

2000 to present — Chairman of the Board and Chief Executive Officer, and Director.

2001 to present — President and Chief Operating Officer, Medical Products Group, and Director.

2001 to present — President and Chief Operating Officer, Pharmaceutical Products Group, and Director.

2000 to 2001 — Executive Vice President, Pharmaceuticals and Chief Scientific Officer, and Director.

2000 — Elkan R. Blout Professor of Biological Sciences, Harvard School of Public Health and Professor of Medicine, Harvard Medical School.

2000 to 2003 — Senior Director, McKinsey and Company (a management consulting firm).

Jose M. de Lasa*, 63 (Mr. de Lasa has announced that he plans to retire in 2005.)

2004 to present — Executive Vice President, Finance and Chief Financial Officer.

2004 to present — Senior Vice President, Global Pharmaceutical Manufacturing and Supply.

2003 to 2004 — Vice President, Quality Assurance and Compliance, Medical Products Group.

2000 — Divisional Vice President, Manufacturing, Abbott International Division.

2001 to 2004 — Vice President, Japan Operations, Abbott International Division.

2000 to 2003 — Senior Vice President — Americas, Wm. Wrigley Jr. Company (a manufacturer and marketer of quality confectionery products, primarily chewing gum).

2000 — General Manager, Home Care Category, North America, Procter & Gamble Company (a manufacturer and marketer of a broad range of consumer products).

2002 to 2003 — Vice President, Global Commercial Operations, Diagnostic Products.

2001 — Divisional Vice President, Acquisition Integration Management, International Division.

2000 to 2001 — Divisional Vice President and Executive Director, Clara Abbott Foundation.

Vice President, Abbott Immunology Research Development and President, Abbott Bioresearch Center.

Vice President, Diagnostic Commercial Operations, Europe, Africa and Middle East.

Vice President, Pharmaceutical Products, Integrated Healthcare Marketing and Policy.

Karen L. Miller, 50 (Ms. Miller has announced that she plans to retire in 2005.)

Laura J. Schumacher, 41 (Ms. Schumacher has been elected Senior Vice President, Secretary and General Counsel, effective March 1, 2005.)

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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
	2004		2003
	high	low	high	low
First Quarter	47.25	39.28	40.85	33.75
Second Quarter	44.67	39.43	46.94	37.57
Third Quarter	43.20	38.26	45.09	37.65
Fourth Quarter	47.63	40.25	47.15	39.95

Market prices are as reported by the New York Stock Exchange composite transaction reporting system. On April 30, 2004 Abbott spun off all of the outstanding common shares of Hospira. For every 10 Abbott common shares held at the close of business on April 22, 2004, Abbott shareholders received one common share of Hospira stock on April 30, 2004. In the table above, market prices include the value of the Hospira business through the date of the spin-off. Subsequent to the spin-off, the value of Abbott shares no longer includes the value of the Hospira business.

There were 88,582 shareholders of record of Abbott common shares as of December 31, 2004.

Quarterly dividends of $.26 per share and $.245 per share were declared on common shares in 2004 and 2003, respectively. In addition, as noted above, a special dividend distribution of shares of Hospira, Inc. occurred in the second quarter of 2004. For every 10 Abbott common shares held at the close of business on April 22, 2004, Abbott shareholders received one share of Hospira common stock on April 30, 2004.

Abbott Laboratories is an Illinois High Impact Business (HIB) and is located in a federal Foreign Trade Sub-Zone (Sub-Zone 22F). Dividends may be eligible for a subtraction from base income for Illinois income tax purposes. If you have questions, please contact your tax advisor.

ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Title of Each Class		Name of Each Exchange on Which Registered


Common Shares, Without Par Value (including Preferred Stock Purchase Rights)		New York Stock Exchange Chicago Stock Exchange Pacific Exchange

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1, 2004 — October 31, 2004	136,644	¹	$	41.571	50,000,000	²
November 1, 2004 — November 30, 2004	937,165	¹	$	44.541	50,000,000	²
December 1, 2004 — December 31, 2004	538,941	¹	$	45.316	50,000,000	²
Total	1,612,750		$	44.5553	50,000,000	²

	Year ended December 31
	2004		2003	2002	2001	2000
	*(dollars in millions, except per share data)*
Net sales (a)	$	19,680.0	$