Richard M. Ross Robert A. Schoellhorn Leo H. Schoenhofen Gilbert H. Scribner Jr. Irving Seaman Jr. Bernard H. Semler Glenn S. Utt Jr. Dean, School of Medicine. Vice President, Baylor University. Director and Member, Executive and Finance Committees, Household Finance Corporation, Chicago Retired Vice President (Abbott) Edward J. Ledder* Robert A. Schoellhorn Charles S. Brown* Bernard H. Semler* Glenn S. Utt Jr.* Chairman and Chief Executive Officer President and Chief Operating Officer Executive Vice President, Finance Executive Vice President. Charles J. Aschauer Jr. Group Vice President James L. Vincent Michael J. Balma Robert C. Barnes Tilden Batchelder John E. Condon David O. Cox* Lester E. Hammar James A. Hanley Milton J. Henrichs' Group Vice President Vice President, Personnel President and Chief Operating Officer Richard W. Kasperson Vice President. Regulatory Affairs Retired, former Chairman and Chairman, Scribner & Co.. Chicago Executive Vice President, Finance Transfer Agent and Registrar The First National Bank of Boston Executive Committee Arthur E. Rasmussen. Chmn.: James F. Beré. Edward J. Ledder. Richard M. Ross. Leo H. Schoenhofen, Gilbert H. Scribner Jr. Audit Committee Laurence R. Lee* David W. Ortlieb' William D. Pratt James M. Price, M.D. Roland W. Puder G. Kirk Raab Leo H. Schoenhofen, Chmn.: James F. Beré. Arthur E. Rasmussen. Gilbert H. Scribner Jr. Ira Ringler Jack W. Schuler Lucien J. Sichel Harry F. Upton' Joseph M. Bernik Lael F. Johnson Samuel E. Bradt Paul R. Rasmussen Vice President. Secretary and Vice President, and President. Vice President, Public Affairs Vice President. Scientific Development Vice President, Materials Management Vice President, and Executive Vice President, International Operations Vice President. Research and Vice President. Diagnostics Operations Vice President. Washington Vice President, Consumer Products Assistant Secretary Assistant Treasurer Assistant Treasurer •Member. Operations Committee Design Michael Reid Design inc Photographs Cover Jack O Grady Studios a omers - Stephen Feldman except lower le page 16 Lee Balte man Chairman's Comments/1 Hypertension - You Can't The DMS Story/8 Financial Statements/10 Cover: St. Basil's Cathedral in Red Square in Moscow. Russian architecture with classic onion domes was so interesting that IN&R used a negative print to highlight details of the building. Abbott recently signed a contract with the Soviets for infant formula production... see page 4. Investor News & Report is published quarterly for Abbott shareholders and investors. Others may receive the publication upon request from Commitment Magazine, published to Chairman's Comments Results for the first quarter show that we are off to a fine start and I'm confident that 1977 will be another good year. Sales for the quarter increased 11 percent over the same quarter in 1976 to a record $283.4 million. Again, our hospital, diagnostic and nutritional businesses set the pace. Net earnings for the first quarter rose to a record $25.2 million, 27 percent above the first quarter of last year. Earnings per share of 85 cents were 18 percent above the first quarter of 1976. The lower percentage increase in earnings per share results from the additional two million shares issued last August. This difference will also continue in the second quarter and, to a substantially lesser extent, in the third quarter. Throughout 1976, Abbott continued its policy of meeting with investment analysts and portfolio managers in response to their strong interest in the activities of the company. This March, for the first time in the company's history, a series of meetings was held with financial institutions and investment managers in major European centers.- including Edinburgh, London, Zurich, Geneva and Paris. The high degree of knowledge about Abbott, the number of Abbott investors present, and their strong interest in following future activities were encouraging. In the U.S., we have seen the growing involvement of government in the form of substantially increased regulations over research and manufacturing, experiments with price controls, concerns with the cost and administration of hospitals, and the proposals for far more comprehensive National Health Insurance. There is no question that there is a need for some form of National Health Insurance — particularly of a catastrophic nature. It should be expected that such government-sponsored programs will result in government concern with the cost of health delivery systems. The health care industry has a very challenging opportunity to contribute to the formulation of regulations, controls and programs that effectively and economically meet the needs of society. We must be particularly concerned that controls over the development and production of new drugs, devices or treatments are not so restrictive as to inhibit progress. One such restriction that exists today is the prohibition against exporting drugs to foreign countries unless they have been approved by the FDA even though the comparable agency to the FDA in a foreign country has approved the drug for sale in that country. This means that the only alternative for U.S. companies is to set up manufacturing and research facilities in other countries. This not only results in fewer jobs and a negative impact on the economy, but also in U.S. companies contributing to advancing health care in other countries at a more rapid pace than in the U.S. Hopefully, this type of restrictive legislation can be corrected. Sound J. boar Edward J. Ledder Chief Executive Officer Annual Meeting Highlights At 9:00 a.m., on the morning of April 15, Abbott shareholders gathered at the company's headquarters in Abbott Park for the Annual Meeting. Edward J. Ledder, chairman and chief executive officer, addressed the group (see "Chairman's Comments" in this issue), then turned the meeting over to R. A. Schoellhorn, president and chief operating officer. Here are excerpts from the president's address: "As part of our corporate growth strategy, Abbott will continue to pursue opportunities in international markets. The changing political climate and nationalistic trends in certain countries, however, will prompt a very selective approach in the future. Our strategies for expansion in international markets will be based on intensive evaluations of the long-term economic and political climate for each country. ... We recently began exclusive national marketing of a new specialty line of I.V. filters for the Millipore Corporation, the leading filter manufacturer in the U.S. - thus further strengthening Many shareholders toured Abbott Park after the Annual Meeting, then stayed for lunch in the cafeteria. The youngest shareholder present. our position in the I. V. filters market. Our agreement with Millipore also includes marketing rights overseas. "... We continue to concentrate on selected areas of the diagnostics market where our substantial and growing base of technology is matched with high growth potentials. "The MS-2, a major new instrument system under development, will identify the susceptibility of a microorganism to specific antibiotics and indicate the minimum concentration effective against that organism. We believe the MS-2 will be the first truly automated microbiological system commercially available. "Another new diagnostic instrument in the final stages of development is the ADC-500, differential cell counter. It computerizes the procedure for counting white blood cells and can scan and read 500 cells in a much shorter time than it takes to view 100 cells when manual procedures are used. It provides a much more accurate diagnosis and also identifies and tabulates both normal and abnormal cells. "... In April, we announced two new developments involving new pharmaceuticals from outside sources. First, as of April 30under a license agreement we began to market an oral tranquilizer for treatment of severe mental conditions, such as schizophrenia., Although the total market for this type of product is only about $150 million in the U.S. compared to $375 million for minor tranquilizers this product will further strengthen our position in the field of mental health agents. "The second event was the announcement of our reaching preliminary agreement with Takeda Chemical Industries Ltd. of Japan on the formation of a joint venture to develop and market new pharmaceutical compounds in the U.S. and Canada. Early efforts of the venture will be |