Good morning ladies and gentlemen and welcome to the Baxter International’s, third quarter earnings conference call. Your lines will remain in a listen-only mode until the question-and-answer segment of today’s call (Operator Instructions). As a reminder this call is being recorded by Baxter and is copyrighted material.

It cannot be recorded or rebroadcast without Baxter’s permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Mary Kay Ladone, Corporate Vice President, Investor Relations at Baxter International. Ms. Ladone, you may begin..

Thanks Pam. Good morning everyone and welcome to our Q3, 2014 earnings conference call. Joining me today are Bob Parkinson, CEO and Chairman of Baxter International; Ludwig Hantson, President, BioScience; and Bob Hombach, Chief Financial Officer.

Before we get started, let me remind you that this presentation, including comments regarding our financial outlook, new product developments and regulatory matters contain forward-looking statements that involve risks and uncertainties and of course our actual results could differ materially from our current expectations.

Please refer to today’s press release and our SEC filings for more detailed concerning factors that could cause actual results to differ materially. In addition, in today’s call, non-GAAP financial measures will be used to help investors understand Baxter’s ongoing business performance.

A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in our earnings release issued this morning and available on our website. Now I’d like to turn the call over to Bob Parkinson..

Thanks Mary Kay. Good morning and thank you all for calling in. As you saw in this morning’s press release Baxter reported strong financial results for the third quarter, which exceeded expectations. Relative to our guidance which included vaccines adjusted earnings increased 9% to $1.35 per diluted share and worldwide sales advanced 13%.

Excluding foreign currency and Gambro, from both periods, global sales increase 6%. I am very pleased with overall organic sales performance from ongoing operations as the third quarter represents the highest quarterly growth of this year.

This affords us the opportunity to increase investments and research and development and further enhance manufacturing and quality and operational excellence as we position our company for sustained success.

In recent months we’ve continued to make progress in strengthening the portfolio with new collaborations advancing the new product pipeline through the achievement of meaningful milestones and the organization remains engaged in working to separate Baxter into two leading global healthcare companies aimed at enhancing shareholder value over the long term.

For example within BioScience we are building on the strategic decision to expand our presence in the area of oncology, leveraging the company’s heritage of success in developing new therapies that treat unmet medical needs for patients with rare diseases.

Not only has living Ludwig been building an experienced team of oncology leaders including senior clinical development, business development and proven commercial executives but we also continue to see partnership opportunities to expand the pipeline.

You may recall that last month we signed an exclusive license and collaboration agreement with Merrimack Pharmaceuticals for the development and commercialization of MM-398, an investigational drug candidate for the treatment of patients with metastatic pancreatic cancer, previously treated with the gemcitabine-based therapy.

As you know pancreatic cancer is a rare and deadly disease that’s difficult to diagnose and has limited treatment options. Through this agreement BioScience gains exclusive commercialization rights for all potential indications of MM-398 outside the United States and Taiwan.

MM-398 has demonstrated robust survival results in a global Phase 3 trial that will be the basis for regulatory submissions outside the U.S. beginning in 2015. BioScience now has four oncology assets; MM-398, [inaudible] and BAX-069 with the potential for numerous indications for patients with hematologic and solid malignancies.

We look forward to discussing the progress of the oncology portfolio and advancement of the pipeline in the future. The bioscience organization also continues to enhance its focus on specific disease areas, centered on core areas of expertise in hematology, immunology and through technology platforms like gene therapy and biosimilars.

It's for this reason that we elected to divest the commercial vaccines business, including the NeisVac-C and FSME vaccines and during the third quarter announced a definitive agreement with Pfizer.

We're working to close this transaction in the fourth quarter and continue to explore strategic options, including the potential for partnering or divesting the R&D development programs focused on influenza and line disease.

In addition we've also achieved an array of significant pipeline milestones including the FDA approval of HYQVIA is the first subcutaneous immune globulant, a transformational subcutaneous treatment for adult patients with primary immunodeficiency.

HYQVIA is the first subcutaneous immune globulant treatment approved with the dosing regimen requiring only one infusion per month and one injection site per fusion to deliver it full therapeutic dose while maintaining the same efficacy safety and tolerability profile in its currently marketed products.

Today many patients received IV infusions in a doctor’s office or infusion center and current subcutaneous treatments require weekly or bi-weekly treatment with multiple infusion sites per treatment.

We expect to launch HYQVIA in the United States next week and are evaluating regulatory requirements and initiation of additional clinical trials for new indications.

As a reminder the global market for primary immunodeficiency is approximately $2 billion and only approximately 35% of patients are treated subcutaneously, providing a unique opportunity for HYQVIA as a differentiated therapy.

In addition in August Baxter released positive top line results from the Phase 3 pivotal clinical trial of BAX-855, an extended half-life recombinant Factor VIII treatment for hemophilia A based on ADVATE.

BAX-855 met its primary endpoint in the control and prevention of bleeding, routine prophylaxis and peri-operative management for patients who are 12 years or older with patients in a twice weekly prophylaxis arm experiencing a 95% reduction in median annualized bleeding rates as compared to those in the on-demand arm.

In addition BAX-855 was also affected in treating bleeding episodes 96% of which were controlled with one or two infusions and approximately 40% of patients were bleed-free. No patients developed inhibitors to BAX-855 and no treatment related serious adverse events including hypersensitivity were reported.

Our continuation and pediatric studies are progressing and we're planning to submit a biologics license application to the FDA before the end of 2014.

Also during the quarter Baxter received FDA approval of RIXUBIS for routine prophylactic treatment controlled and prevention of bleeding episodes and peri-operative management in children with hemophilia B. We launched RIXUBIS in the U.S. late last year for the adult population and are very pleased with its market acceptance.

Our application for adults and pediatric patients is currently under review in the European Union and we expect a regulatory decision later this year.

Within the medical products business recent highlights include an exclusive agreement with Rockwell Medical to commercialize their leading hemodialysis concentrate product line in the United States and in select overseas markets. Hemodialysis concentrates help to clean a patient's blood and remove waste and extra fluid from the body.

This agreement enhances Baxter's comprehensive range of therapeutic options across home, in center and hospital settings for patients with end stage renal disease. And finally we recently announced the expansion plans at our state of the art manufacturing facility in OPELIKA, Alabama to help address the growing global demand for dialyzers.

Baxter will invest nearly $300 million in the OPELIKA site and we expect to begin commercial production in 2016 augmenting several other recent capacity expansions for dialyzers across our footprint.

In addition to delivering solid financial results and accelerating innovation the organization is fully engaged in the process of separating Baxter into two leading global healthcare companies; one, focused on developing and marketing innovative biopharmaceuticals and the other on life-saving medical products.

During the quarter, as you know we formally unveiled Baxalta Incorporated as the name of the new publically traded biopharmaceutical company.

The name Baxalta celebrates and sustains our heritages as an innovator and legacy of leadership by incorporating the Baxter name and coupling it with Alta which derives from opus which is Latin for high or profound. Upon completion of the separation Baxalta Inc.

will trade at the New York stock exchange under the symbol BXLP and Baxter International will continue trading on the New York stock exchange under the symbol BAX.

While the corporate headquarters of both companies will be located in Northern Illinois, we recently announced that Baxalta is forming a new global innovation and research and development center in Cambridge, Massachusetts.

This will position the new company to optimize R&D productivity, accelerate innovation by building on its robust pipeline in core areas of expertise, strengthen and increase R&D collaborations with partners in new and emerging biotech areas and enhanced patient care globally.

As many of you know we’ve now named our senior leadership teams for both companies and have established the international and commercial structures for both organizations.

We have elevated several senior leaders into new roles and have complemented our strong commercial and operational teams with some new talent including experienced professionals from leading biotech pharmaceutical and medical device companies.

Many of you have also asked about appointments within Investor Relations and today I am pleased to announce that Mary Kay Ladone after a 26 year career at Baxter will become Corporate Vice President of Investor Relations for Baxalta upon completion of the spin.

In the interim Mary Kay will continue in her current role and will be responsible for the ongoing Investor Relations efforts at Baxter.

In conjunction with Mary Kay’s appointment I am pleased to announce that Scott Bohaboy, a senior level Finance Executive with eight years of experience at our company will become Baxter’s Vice President of Investor Relations and Treasurer.

During his tenure Scott has held several senior financial roles with Baxter including in corporate planning, the U.S. hospital business, our Asia Pacific region and he currently serves as Vice President, Finance for our international operations. Scott also has previous experience in Investor Relations at two other companies earlier in his career.

In addition Clare Trachtman, who many of you already know will be named Vice President Investor Relations for Baxter and will report directly to Scott. Both Scott and Clare will continue in their current roles for the near future and will work closely with Mary Kay and her IR team as we transition into two separate companies in mid-2015.

In closing, Baxter has an established history of executing successful spin-offs and we believe this separation provides two unique and compelling investment opportunities for shareholders.

Our decision underscores our commitment to ensuring our long-term strategic priorities remain aligned with shareholders’ best interest while we seek to improve our competitive position and performance, enhance operational commercial and scientific effectiveness and create long-term value for patients’, heathcare providers’ and other key stakeholders.

As always I’d be happy to address any questions you may have with regards to the spin-off or other topics during the Q&A and so with that I’ll now turn call over to Bob Hombach. Bob please..

Thanks Bob, and good morning everyone. As Bob mentioned, adjusted earnings per diluted share in the third quarter advanced 9% to $1.35, which exceeded our previously issued guidance range of $1.28 to $1.32 per share.

This performance reflects strong sales growth as well as continued investments in research and development, unplanned gains from equity investments totaling $0.03 per diluted share which will be reinvested in the business and adjusted income from discontinued operations of $26 million or $0.04 per diluted share.

As we mentioned in the press release GAAP earnings of $0.86 per diluted share, includes income from discontinued operations of $21 million, or $0.04 per diluted share and after-tax special items totaling $273 million, or $0.49 per diluted share, primarily for intangible amortization and costs associated with upfront product development and milestone payments, integration of the company’s acquisition of Gambro AB and Baxter’s planned separation.

Now let me briefly walk you through the P&L by line item before turning to the financial outlook for 2014.

Please note that with a few exceptions for purposes of today’s discussion I will focus my comments on the adjusted P&L line items as seen on page 10 of the press release which shows the reconciliation of adjusted and GAAP earnings and reflects the Vaccine franchise as a discontinued operation.

For reference we disclosed historical financial information for the vaccines franchise last week and have also posted the schedules to the Investor Relations page of Baxter’s website. Starting with sales, worldwide sales of approximately $4.2 billion advanced 13% on both a reported and constant currency basis.

Excluding Gambro from both periods Baxter sales rose 5% on a reported basis or 6% on a constant currency basis reflecting an acceleration of organic growth versus the first half of the year.

You may recall that our sales guidance for the quarter included vaccine revenues, which were expected to decline given the receipt of lower milestone payments versus last year. When including vaccine revenues Baxter global sales grew 5% on a constant currency basis which is at the high end of our previously issued guidance range. Sales in the U.S.

increased 7% and international sales excluding Gambro and foreign currency also increased 7%. Sales from emerging markets, which now represent almost 25% of total Baxter sales, advanced nearly 20% given very strong performance in the BRIC markets driven by the timing of tenders.

In terms of individual business performance global BioScience sales totaled approximately $1.7 billion and advanced 8% on both a reported and constant currency basis. And despite a difficult comparison the U.S. bio therapeutics franchise BioScience reported the highest quarterly growth in almost two years.

Within the product categories hemophilia sales of $942 million increased 11% on both reported and constant currency basis.

This is the fourth consecutive quarter of double-digit ADVATE growth which continues to be driven by strong global demand as well as benefits from recent tender wins in the UK and Australia and conversion to recombinant therapy in Brazil where to-date we have converted approximately 40% of the estimated 10,000 hemophilia A patients and continue to expect to generate sales of more than $100 million in 2014.

In the U.S. ADVATE growth was high single-digits supported by continued conversion to prophylactic treatment and very minimal loss of share to a new competitive entrant. We are also benefiting from the launch of new products and indications. RIXUBIS, our treatment for hemophilia B patients was launched in the U.S.

late last year and we continue to be pleased with its uptake. Our hemophilia performance also reflects robust demand and double-digit growth in FEIBA for the treatment of hemophilia patients with inhibitors.

As you may recall only 15% to 20% of inhibitor patients globally are treated prophylactically and with approvals of this new indication across multiple large geographies like the U.S., Canada, Australia and Japan. We expect this to represent a significant growth opportunity for our hemophilia franchise over the long-term.

In biotherapeutics sales of $546 million improved sequentially due to enhanced product availability and we continue to see robust demand and stable market growth for our immunoglobulin and albumin therapies globally. Sales growth for this product category was 3% in the quarter on a reported basis and grew 4% on a constant currency basis.

As mentioned on our last earnings call we expected an acceleration in international growth this quarter as we are building on our position in many foothold markets. And we also expect the growth in the U.S. to moderate due to tough comparisons created by supply availability and the easing of constraints beginning in the third quarter last year.

In addition we are being prudent in managing our global supply and inventory levels as we prepare for the upcoming HYQVIA launch which is expected next week. And given the renewal of albumin licenses in China we are once again optimizing our geographic mix with albumin shipments into that large and growing market.

In BioSurgery sales totaled $185 million and increased 7%. On a constant currency basis sales rose 6% driven by increased penetration for surgical sealants like TISSEEL and FLOSEAL. In medical products global sales of more than $2.5 billion increased 17% on a reported basis and were up 18% on a constant currency basis.

Excluding Gambro medical product sales grew 4% on both reported and constant currency basis. Within the product categories renal sales were approximately $1.1 billion which includes a contribution from Gambro of $391 million. Recall that we closed the Gambro acquisition in September last year and recorded sales of $100 million.

Excluding Gambro from both periods renal sales of $664 million increased 3% or 4% on a constant currency basis. Strong global PD growth of 7% was somewhat offset by the impact of the CRRT divestiture. As mentioned last quarter PD patient gains remain strong particularly in the U.S. where PD sales increased 12% for the quarter and the 13% year-to-date.

Given this very strong demand we are experiencing back orders and are expediting shipments as we remain committed to ensuring patients have interrupted access to their therapy.

We continue to produce PD solutions at maximum capacity, are working to expand capacity to meet the growing demand and are beginning to source product from our facility in Castlebar, Ireland through the much appreciated support of the FDA which granted a temporary import license.

Going forward we will continue to work with customers to carefully manage inventory and maintain continuity of care for our patients. We are very appreciative of the close collaboration and great support we received from the agency in this regard.

Going forward we will continue to work with customers to carefully manage inventory and maintain continuity of care. Within the fluid systems category sales of $827 million increased 4% on a reported basis and 5% on a constant currency basis. Performance is driven by favorable demand and pricing for IV therapies.

As you may know to date we have not experienced any new competition for cyclophosphamide and we're updating our guidance for this new assumption. For your reference sales of U.S. cyclophosphamide in the third quarter were approximately $120 million and were lower than the prior year and sales on a year-to-date basis now total $345 million.

Specialty pharmaceuticals, which includes our inhaled anesthetics and nutritional therapies posted sales of $386 million reflecting an increase of 4%.

Sales rose 3% on a constant currency basis, driven primarily by mid-single digit growth of our anesthesia portfolio where we are increasing international penetration and low single digit growth for nutritional therapies.

Finally sales in bio pharma solutions which is our pharma partnering business totaled $256 million and increased 5% on reported basis or 3% on a constant currency basis. Performance can be attributed primarily to strong pharmacy compounding revenues. Turning to the rest of the P&L gross margin in the quarter was 50.5% compared to 52.7% last year.

Positive mix from franchises within bioscience was primarily offset by the impact of foreign exchange and Gambro which collectively reduced the rate by approximately 130 basis points.

In addition the gross margin was impacted by product mix within medical products, expedited freight for PD solutions and lower than expected production volumes as we continue to make investments to enhance our quality systems, processes and operational excellence to meet evolving regulatory requirements.

SG&A totaled $921 million, and increased 13% with the Gambro acquisition accounting for the vast majority of the growth. Excluding Gambro SG&A increased 2% as leverage was derived from benefits associated with our business optimization initiatives.

This was partially offset by select investments in promotional and marketing initiatives for new product launches in bioscience and incremental customer freight and logistical expenses to support the strong demand for IV solutions. R&D spending in the quarter of $292 million increased 16% versus the prior year.

Excluding Gambro R&D rose 8% driven by the addition of new R&D programs in bioscience through acquisitions, the acceleration of other programs in the areas of hematology, oncology and immunology and investments in renal therapies aimed at improving patient outcomes across the continuum of care.

The operating margin in the quarter of 21.6% is lower than last year's operating margin of 23.8%. Excluding Gambro the operating margin was 23.4% reflecting the impact of foreign exchange and incremental investments referenced earlier. Interest expense was $31 million in the third quarter compared to $45 million last year.

As expected we benefited from debt maturities and a favorable change related to the mix of floating versus fixed interest rates.

Other income totaled $39 million and was driven primarily by the favorable foreign exchange impact on balance sheet positions and approximately $20 million or $0.03 per diluted share in unplanned equity gains related to investments in the Baxter Ventures fund.

The tax rate was 21.8% for the quarter, in line with our expectations and as previously mentioned adjusted earnings per diluted share advanced 9% to $1.35. Turning to cash flow on a year-to-date basis, cash flow from operations totaled approximately $2.1 billion.

DSO ended the quarter at 55.9 days and excluding Gambro Baxter's DSO was 53 days lower than the prior year by more than two days. Inventory turns of 2.2 are modestly higher than the prior period and lastly to-date we repurchased approximately 7 million shares for $500 million on a net basis, 1.5 million shares for $200 million.

Finally let me conclude my comments this morning by providing our updated financial outlook. For the full year we expect adjusted earnings from continuing operations of $4.86 to $4.89 per diluted share.

After adding the expected earnings contribution from the vaccine franchise of approximately $0.27 per diluted share this guidance is in line with our previously issued and disclosed range of $5.10 to $5.20 per diluted share.

In addition we have updated our assumptions for cyclophosphamide and do not expect any new competition before the end of the year.

While this has resulted in a transitory benefit it is offsetting incremental headwinds associated with foreign currency in the fourth quarter of approximately $0.04 per diluted share and other investments to enhance quality and operational effectiveness in the medical products business and additional investments in SG&A and R&D in BioScience.

Specifically by line item of the P&L and starting with sales, we now expect sales growth excluding the impact of foreign currency of approximately 11% to 12%, which includes annual sales of more than $1.6 billion for Gambro. At current foreign exchange rates we expect reported sales growth of approximately 10% to 11%.

Excluding Gambro we expect Baxter’s organic sales to grow approximately 4% on a constant currency basis. For the full year we continue to expect gross margins for the company of approximately 50.5%. This compares to the prior year gross margin of 51.7%. In terms of expenses we now expect R&D and SG&A to grow in low to mid-teens for the full year.

We expect interest expense to total approximately $150 million and other income to total approximately $90 million for the full year.

We expect the tax rate of approximately 22%, slightly higher than our original expectations as the vaccine franchise carry a very low tax rate and we expect a full year average share count of approximately 547 million shares which assumes approximately 300 million in net share repurchases.

From a cash flow perspective we continue expect to generate cash flow from operations of approximately $3.5 billion which excludes the cash cost associated with the spin-off of the biopharmaceuticals business.

We now expect capital expenditures of $1.8 billion to $1.9 billion which excludes pre-spin capital expenditures primarily in the area of information technologies. Let me move to sales and expand on our assumptions for the two businesses in the major product categories.

Beginning with medical products on a constant currency basis, including the contribution of Gambro we now expect sales growth of approximately 15% and excluding Gambro we expect sales for medical products to grow approximately 3%.

Specifically we continue to expect renal sales to grow approximately 40%, we now expect Fluid Systems sales to grow approximately 4%, as we assume no material impact from cyclophosphamide competition this year.

We continue to expect specialty pharmaceutical sales, which includes our nutritional therapies and inhaled anesthetics to grow in the 3% to 5% range and we expect our biopharma solution sales to be flat for the full year.

For BioScience we are once again raising our guidance and now project sales growth, excluding foreign currency of approximately 6%.

Our outlook includes strong growth in our global hemophilia franchise of approximately 8% fueled by underlying global demand for ADVATE, conversion to recombinant therapy in Brazil, new tender wins and continued benefits from new product launches including RIXUBIS and fiber prophylaxis.

For the biotherapeutics franchise we continue to expect growth of approximately 4% driven by increased demand and the contribution from the HYQVIA launch. And finally for our BioSurgery business we continue to expect growth in low to mid-single digits.

As mentioned in our press release for the fourth quarter we expect earnings per diluted share from continuing operations, excluding special items of $1.30 to $1.33, we expect sales growth excluding the impact of foreign currency of approximately 3% and we expect reported sales to be flat to the prior year.

Before I open up the call for Q&A let me take a moment to update you on some of the financial aspects of the spin. First we expect to file our initial Form 10 for Baxalta before the end of this year, which will include historical financial results on a GAAP basis for the years 2010 through 2013 and year-to-date results for 2014.

These financial statements will be prepared as if on a standalone basis and derive from Baxter’s consolidated financials and will include allocations of various costs previously held at Baxter corporate level.

I would highlight that these financial statements are inherently limited as costs associated with corporate overhead, income taxes, support services and interest expenses may not be indicative of future costs associated with running Baxalta as an independent standalone corporation.

We expect to file amendments to the Form-10 in 2015 results which will include 2014 and year-to-date 2015 financial results for Baxalta, in addition, to pro forma adjustments to reflect the impact of expected debt and interest expense and other associated agreements and transactions.

As we previously disclosed we are in the process of designing the two new organizations and at this point our rough estimate of initial dis-synergies including [stranded] cost is approximately 2% of total Baxter sales or more than $300 million.

About half of these costs will be incurred beginning in the second-half of 2015 and both companies will have the opportunity to reduce a meaningful portion of these costs over the next several years post spin.

In addition, spin related costs incurred in the first-half of 2015 will be considered special items and will be excluded from our adjusted earnings. Also, as we continue to work through the details of our IT ownership and manufacturing footprint we have not uncovered any substantial issues from a tax perspective.

While we will finalizing the capital allocation strategies of each of the businesses in the coming months we expect that both will have strong balance sheet, generate significant cash flow and have the flexibility to follow a disciplined capital allocation approach which balances reinvestment of business in CapEx, R&D and M&A with returning value to shareholders in the form of dividend and share repurchases.

We look forward to sharing more information with you as we get closer to completing the spin. While we continue to work through the complexity this process is unfolding in line with our expectations and we continue on track toward a mid-2015 completion.

This assumes the Form-10 registration statement is declared effective by the SEC and final approvals have been obtained including from our Board of Directors.

As we proceed towards the separation date we plan to host an investor conference in the second quarter of 2015 to introduce you to the new senior management teams and provide investors with more information regarding the strategies, growth prospects and financial outlooks for each company.

We recognize that investors and analysts would like more information to help them model both companies separately and the intent of the conference is to help you establish a base line as each company will have a different financial profile after the separation.

We will also engage in a comprehensive Investor Relations effort, including investor road shows for both companies with the respective senior management teams several weeks before the spin-off is completed. Thanks. And now I’d like to open-up the call for Q&A..

Thank you. We will now begin the question-and-answer session. (Operator Instructions). I would like to remind participants that this call is being recorded and a digital replay will be available on Baxter International’s website for 30 days at www.baxter.com. Our first question comes from David Roman of Goldman Sachs. Your line is now open..

I want to start with the hemophilia franchise and just taking a step back for a second, at the last time you provided your long range plan, I think you had talked about hemophilia as a 3 to 4% grower and you have caveated in there the potential for new competition which we are now starting to see.

Can you maybe just help us put into context the year-to-date growth that you have seen and the 8% guidance that you provided, how much of that is a reflection of some benefits you are seeing this year versus the potential to see a substantially higher growth rate in that franchise than what you had initially targeted?.

Well I’ll make a couple of comments and then maybe I’ll turn over to Ludwig to give you some more perspective on the dynamics we see in the hemophilia market.

You know the guidance we gave several years ago, what was over a five year period and 3% to 4% growth clearly pre-competition we expected to grow faster than that and then with the impact of competition it would moderate over the timeframe.

You know clearly we have had a very strong 2014 to-date and given how things have played as we’ve discussed previously the overall competitive landscape has played out largely as we expected, if not slightly better in terms of what others have been able to achieve with on label indication for an enhanced extended half-life product and so I think going forward we have the opportunity to certainly achieve that if not potentially exceed that long-term guidance, but maybe I will turn over to Ludwig to add some color here on market dynamics..

Yes, thanks for the question, David. So at this moment we are not changing our five year sales CAGR of 3% to 4% but as Bob was saying there is a probability for us to go beyond these numbers. The numbers that I gave you or that we gave you couple of years ago clearly were probabilized for R&D milestones.

As we are hitting our R&D milestones it means that the likelihood that we are going to over achieve those numbers it’s greater and we do expect that in addition to ADVATE and continuous fiber growth and continued growth in emerging growth countries that our new product launches such as RIXUBIS, [inaudible, 855, recombinant [inaudible] will have an impact here on the five year plan..

Okay. And maybe just to follow-up on the emerging markets more broadly, the 20% FX neutral number that you gave, I know you said there is strength in BRIC and timing of tenders, so maybe you could just help us frame up those markets a little bit more broadly.

We’ve seen some disruption across the healthcare landscape there the past several quarters, how confident are you on being able to sustain call the mid-teens type growth rate in those franchises on a go-forward basis?.

Well the big one for us is clearly Brazil. I think we have a strong plan in place, the strategy is there. As Bob was saying we have converted 4,000 out of the 10,000 hemophilia A patients so far. Just to remind you, this was a plasma market. In addition to that it was an on-demand market. So we are moving from plasma to recombinant.

In addition to that we are moving a lot of those patients from on-demand to pre-feed. So we feel pretty good with the strategy that we have in Brazil. So this is our biggest one. But in addition to that we have opportunities in China where we’ve launched.

In addition to that we got approval for ADVATE in Russia as well as in Turkey where we are launching and outside of these emerging growth markets clearly the UK tender as well as the Australian tender will continue to help us moving forward..

And David across the entire business between medical products and BioScience, as we said medical products about 25% of sales already in emerging markets, very strong presence and with the renal franchise and the broad portfolio great opportunity to continue to grow there.

BioScience has only penetrated about 15% of sales in emerging markets and that’s really the opportunity here to continue to accelerate growth as Ludwig has laid out. So we feel very good about our positioning in emerging markets and the ability there to sustain double-digit growth going forward..

Got it, thank you..

Thank you. Our next question comes from David Lewis of Morgan Stanley. Your line is now open..

Good morning. There has been a lot of new job promotions and opportunities for people in the room so congratulations to all involved, but just two quick questions. The first one Bob Hombach, for next year and I appreciate you gave us some good details relating to step up cost and but I wonder if you could help us understand a couple of things.

Is there sense of what the impact of FX could be for ‘15 given that cyclo competition has not happen yet this year, how you are thinking about cyclo for next year or any other important dynamics we should be thinking about for ‘15 numbers? And then what do we actually going to hear from an investment perspective in January Bob? And then a quick follow-up..

Sure, so starting with FX, clearly very volatile timeframe here just within the last couple of weeks.

As we indicated we expect an incremental headwind of about $0.04 here in the fourth quarter and given where rates have been throughout the course of the year where -- there was a timeframe where things looked like they might be getting slightly better.

I think the fourth quarter, I think would be fairly indicative of what we are likely to see if rates stay where they are at today on a run rate basis.

So yeah, we are probably in the ‘15 there $0.20 range of a headwind if rates stay where they are at today for 2015, but again lot of volatility here and we’ll see where things are at as we get to January and give guidance.

For cyclophosphamide we continue with a very robust competitive intelligence effort to understand where things are at, again we know there are seven or eight players who are awaiting approval. We continue to hear that it’s likely to be in the not too distant future. But you know again the specificity around that just isn’t great.

So I think as you get to January we will have a better sense but again we framed that it’s a $0.50 contributor to profit for Baxter and overtime we expect numerous entrants and the vast majority of that to go away with likely producing an impact in 2015. But at this point no further clarity that we have got to give.

So and as it relates to what you are going to hear in January you know we continue to work through a number of things here.

But I think key assumptions like sales guidance I think we will be in very good position as we always give sales guidance for the franchises in the two businesses and in the process of doing that I think we will make very clear what our assumptions are on key value drivers like the hemophilia franchise like cyclophosphamide which will clearly have a very meaningful impact.

We will also be able to give you a sense of FX and pension and so on.

So while it may be a challenge to give a full P&L level of detail we normally do for the full year given the mid-year split I think we will be able to give you a lot information to give you a good sense of where the profitability trends are heading for each of the two businesses but very clearly be able to give you sales guidance..

Okay, very helpful. And maybe a quick one for Bob Parkinson. You know Bob one of the key catalysts that coming out as we think about the Baxter business, the medical products business for next year and the year after is this dynamic of cost opportunity and some of the things you may be able to get after.

It’s not clear to us whether there is a true cost opportunity like an SG&A opportunity in medical products or the opportunity you see is more from portfolio reshaping which could be very positive for gross margins over time. So I think this is kind of shaping up as a kind of key investment debate.

So maybe help us understand how do you see the cost opportunity broadly defined in medical products?.

Sure David. So obviously as we get closer to the spin we will be in a position to be actually quite specific in terms of what are the elements that we believe are going to drive earnings for the new Bax if you will at a, I believe, meaningfully faster rate than top line revenue growth.

Cost structure is very much part of that but let me just take a minute, maybe to comment on the other aspects or the other dimensions that we believe can drive margin improvement over time, first and foremost we have been very specific in terms of the future synergies associated with Gambro, both the margin drop through on commercial synergies as well as cost structure synergies, which I will tell we are tracking very well through 2014 and that’s a material improvement overtime which will make a large contribution to the earnings growth of new Baxter, if you will, going forward.

Focus on mix shift of products so you know the re-launch of CIGMA, if you will with the recent approval provides great opportunity to recapture margin.

I think I commented on this specifically in the last quarterly call but that’s a big opportunity to regain market share in the infusion pump business, intensifying focus in areas that continue to be undeveloped markets on a global basis like biosurgery, like parenteral nutrition, and then of course the anesthesia franchise.

So there is mix shift effect toward higher growth, higher margin products which also will contribute to accelerated bottom line growth.

Portfolio, you mentioned that in your question David, is also a big part of it and I tell you we will be very aggressive in evaluating the existing portfolio, not only from a business and product point of view but from a geographic point of view.

There may be businesses that we want to stay in, in certain markets but exit in other market and obviously to do that will provide fuel for adding to that portfolio through bolt-on acquisitions and so on.

And then cost structure clearly is an element, I think once we are able to spit up the two new companies and we through that process obviously integrate all the corporate support functions in the two businesses and get a better line of sight I will tell you I think there is significant opportunity to fundamentally take up cost structure.

And then lastly, new product introductions like [inaudible] or next generation CRRT Systems, second generation infusion pump platform.

So that kind of frames the various dimensions that will continue to margin enhancement and growth again at a faster rate than revenue and as we get close to the spin we will be in a position to be much more specific including the aspect of cost structure on all those elements okay..

Right, thank you very much..

Thank you. Our next question comes from Matt Miksic from Piper Jaffray. Your line is now open..

Hi, everybody thanks for taking the questions. A couple of follow-ups, just to drill down a little bit in to hemophilia U.S. versus OUS, I mean you obviously have very strong worldwide number and driven by -- but in the U.S. just to understand how you're looking at the rest of the year.

I guess what are you assuming in terms of the ADVATE launch, haven't seen much competition yet but are you still dialing in pressure in the back half that would be helpful color and one more follow-up?.

Well thanks for question, Matt. First of all we continue to expect solid growth across the hemophilia franchise, both on the U.S. side as well as the international side. As far as the ADVATE U.S. market share is concerned we gave you guidance that we expect a decline of high single digits in between the Biogen launch and the 855 launch.

So 855 continues to be on track, you have seen the Phase 3 data. We continue to move towards a BLA submission before the end of this year and as you saw Q3 sales data in the U.S. ADVATE remained strong. We grew by 8% and year-to-date we have a net patient gain versus previous year and this is on top of our continued prophy conversions.

So we believe that since the launch date approval about four months ago we have seen a very minimal share loss and we're also aware that several patients switched back to ADVATE over the last weeks. And we realize that this data is still early but so far it’s aligned with our expectations..

And then one more, same subject, we talked about this before, there in our checks I guess and conversations indicate increasing interest in sort of fine tuning the dosing for patients and aligned with your PK analysis and data that you put out of couple of years ago, [My PK Fit] reaching the U.S., can you walk through maybe the timeline and how much of a factor is that going to be as you look at the competitive landscape over the next year..

So one of our strategies is to continue to strengthen the ADVATE label. So as you know we just launched the [BAXA 3] device, [My PK Fit] is another opportunity for us to strengthen the label. We got approval in Europe and we are launching in selective countries as we speak for U.S., this is under regulatory review. It’s a 510(k) submission.

The impact of that will be very limited this year. This will be more a 2015 event..

Thanks so much..

Thank you. Our next question comes from Bob Hopkins of Bank of America Merrill Lynch. Your line is now opened..

Great thanks.

Can you hear me okay?.

Yeah we can Bob, go ahead..

Great, thanks.

Just a follow up on that ADVATE comment about anecdotally hearing that some patients are switching back, can you just kind of develop that little bit more what are the circumstances behind that, what's happened that they switched back and then I was just wondering if you could comment if your guidance that you gave last call, that you don’t expect ADVATE share loss in the U.S.

of more than single digits, if that still holds given what you are seeing..

Yes. As I mentioned -- so thanks for the question Bob as I mentioned we expect that the ADVATE U.S. market share will decline high single digits between the launch and the 855 launch so to be more specific on the 855 launch, so submission before the end of this year. So 855 hitting the market by the end of next year. So that’s the timeframe.

Yes, we have anecdotes, we know of several patients who switched back for different reasons. I am not going to talk more about why those patients switched back but we're really pleased with the fact that ADVATE is the gold standard and remains the gold standard in hemophilia..

So no change to that guidance?.

No change in the guidance..

Okay. And then last question for me just very quickly on the back on the U.S. plasma side I know you walked through the U.S. result this quarter pretty fairly but I am just wondering was that number for the U.S.

business about as you expected or was that a little bit weaker?.

Well, I think the most important thing here is that U.S. demand for IG remains strong and is growing with the market which is double digit.

So that is the critical piece here and then Bob was talking about we had a major event last year as well as we are gearing up for the HYQVIA launch, we want to make sure that space in the inventory for HYQVIA which we will be shipping next week..

And Bob the major event that Lu is referring is the fact that we were able to enhance our capacity situation and in Q3 begin shipments at an increased level, so we had a difficult comp here in the third quarter..

Great, that’s very helpful. Thank you..

Thank you. Our next question comes from Mike Weinstein of JPMorgan. Your line is now open..

Thank you. Just a couple of follow-ups to some of the earlier questions.

So one will we see the full data set on 855 at ASH, that’s going to…?.

Well we have submitted to ASH the design and now we are submitting at the late breaking news so we don’t have a full yes yet, so we will keep you posted. Having said that I think we have disclosed the most critical information on the 855 study with all of you and again to repeat what the key messages were.

First of all we had great control of bleeding 95% of the bleeds were reduced; 40% of the patients were bleed free. No inhibitors, no cases of hypersensitivity and with the PK profile extension of 40% to 50% versus ADVATE. So these were the key messages. We will keep you posted if it will be an ASH event..

Okay, and Ludwig, while I’ve got you here on 826 can you just give us an update on when you think you will be in the humans with that?.

Our objective is by the end of next year that we will be in studies..

Okay.

Want to clarify just the commentary Bob Hombach on 2015 and expectations or set expectations around guidance, so in January you’ll guide for revenues and you’ll gave some other items but you don’t actually gave EPS guidance for 2015 is that correct?.

Well, we certainly will for the first half of the year, but for the full year it becomes very tricky with the mid-year separation at the investor conference in early Q2 would be the timeframe I think when we would lay out the full year picture in more detail for both companies..

And that first half guidance you are saying you will exclude the dis-synergies that you will start to incur in the first half, you’ll actually back those out?.

Well we do expect that to be fairly minor because we will time the adding the resources that creates a duplicative corporate overhead as and when we need to in order to be prepared and appropriately prepared on July 1.

So there will be some cost there but we don’t expect that aspect of it will be overly significant but we will call that out separately yes..

Okay, last question for you and I will drop. You reiterate your cash flow guidance for the year but I was looking at the cash flow statement, looks like you are down 2% for the year, your guidance is $3.5 billion which is close to up 10%.

So is that, you are confident in the big fourth quarter in your cash flows?.

Yes if we look at things, working capital was a bit below, a bigger drain on cash flow here in the third quarter than last year, receivables and payables in particular, some of that just have to do with the timing of a strong sales quarter and when that occurred and when we are likely to collect that.

So yes there is a big fourth quarter here driven primarily by the timing on some of these working capital items..

Great, thank you guys..

Thank you. Our next question comes from Lawrence Keusch of Raymond James. Your line is now open..

To circle back on HYQVIA, and I just want to get some further thoughts on the ability to line up the patients the care givers and the payers as you launch that product as well as see if you are willing to talk at all about price? And then for Bob Parkinson, I am wondering if you can talk a little bit about the environment that you are seeing both in the U.S.

and overseas in the med products business J&J obviously indicated that there was some slightly improvements in utilization just want to see what you guys are seeing?.

So with respect to HYQVIA we are really pleased with the approval and we’re gearing up as was mentioned. We are planning to ship product next week and that’s on target.

When our goal for HYQVIA is to be the preferred and leading subcu treatment for PID and that should be supported by differentiation and we plan to expand HYQVIA into neurological indications in the coming year, so beyond PID.

At this moment there is a broad market awareness, there is high interest from physicians patients on HYQVIA and we are expecting accelerated sales in Q4. Which respect to pricing we’re introducing HYQVIA to the PBMs and the payers as we speak.

Our pricing strategy is consistent with HYQVIA’s differentiated and unique value which is to provide subcu IG treatment that can be administered once a month. A dose is equivalent to that of IV IG. So with respect to the price consistent with Europe we will be launching at a price premium..

I understand.

Can you say how much that might be?.

At this point Larry you know until we get things finalized and get some traction in the market place I think it’s premature to talk about that..

Okay..

Larry, Bob Parkinson here in terms of hospital utilization I did see J&J’s comments, I guess our view would be pretty much in line with that. Clearly hospital activity in developed markets around the world is not as dormant as it was a year ago. So I would say there is a slight improvement there but falling far short of being robust.

I think I would distinguish that however, from the emerging markets and allow the general economies of the emerging markets have been softer than anticipated. In terms of dollar spin on healthcare these markets continue to dedicate more of their national budgets to healthcare.

So you got so many therapies and procedures that previously there was no access or limited access in undeveloped market. So we do see a more robust growth underlying demand in emerging markets..

Okay, great. Thank you..

Thank you. Our next question comes from Kristen Stewart of Deutsche Bank. Your line is now open..

Hi, thanks for taking the question.

I just wanted to get a little bit better sense of exactly where some of the investment spending is taking place and to what extent, just talking there I guess the underlying net income growth of the company, if you were to take out the Gambro accretion for the share, because it looks like next year, just adding up some of the things that you had referenced with $0.50 for cyclo, you have got separation added dis-synergy cost FX, I assume pension may actually be a headwind next year.

It just seems that next year’s shaping up to be a challenging year, potentially more of the decline in overall performance, [inaudible] to the underlying business..

Sure, sure. Well again I think we are pleased with the strong organic top line growth of the underlying business that we’ve seen across some of the key franchise this year and good strong momentum there that we expect that to carry forward in to next year.

As we look at some of these high leverage variables it’s a little difficult sitting here in October to have a clear sense of where some of these are going to go.

As we mentioned cyclo but the longer this goes, the more likely it is that not just one but multiple players will get approval in fairly short order which means that the market dynamic could change pretty dynamically and the impact could be accelerated. So again we are looking at $0.50.

I don’t have a sense of how much of that would impact 2015 at this point but that will be a very high leverage variable depending upon when that occurs.

As I mentioned earlier FX at current rates would be around $0.15 to $0.20 headwind incrementally but again a lot of volatility there, pension interest rates have moved dramatically in the last two or three weeks.

That has certainly become more of a potential headwind, as we have gauged it previous, every 25 basis points change in the discount rate amounts to about $20 million impact to the P&L. So we have seen about 75 basis points move here relative to where it was last year.

There are other factors that play into that including asset returns and so on, so that’s not necessarily a one for one but thinking about that at the moment in the $50 million to $60 million potential headwind at this point at current interest rates would be where we will be at, at the moment.

So stripping a lot of that out and if you look at Baxter today ex-FX in 2014 we are talking about operating income growth in high single digits here. So I think the operating performance has been very good.

We are cautiously making incremental investment though in SG&A to support multiple new product launches in BioScience that have already occurred and could occur going forward. We have ramped up R&D expense a bit as well through some of business development activity that we have done within bio that will continue into 2015 as well.

We did talk about some of the operational challenges, largely driven by very strong demand in PD and IV solutions as well that are causing us some incremental headwinds here and some of that is likely to continue into next year.

I will gauge that in the fourth quarter as approximately a $0.03 headwind or around $20 million to $25 million of incremental impact that we are likely to see operationally within medical products. So a lot of moving pieces here and a lot of volatility around a few of these factors.

So again a bit early to look at the picture for 2015 but I think the underlying business is actually performing pretty well..

What is the underlying business ex the contribution from Gambro from an earnings perspective?.

We talked about a 4% top-line growth and with some leverage in the P&L. So I would gauge it in the mid to high single digits today..

Okay.

And then just in terms of the cost you guys had mentioned with business optimization cost that offset spending on quality, how should we just think about the quality spend and can you just remind me if you have any outstanding FDA warning letters or notable 483s?.

Yes Kristen, Bob Parks, maybe let me take that because most of that activity would be in the new vacs domain.

One of the challenges that we are managing through right now is a combination of one hand, expanding capacity on both IVs and PD where we are experiencing unprecedented growth on PD in the United States and pretty robust demand for IVs while concurrently managing through some existing warning letters and ensuring that we continue to enhance our production standards.

I mean we are focusing on areas like particular container integrity and some of these areas that as we expand capacity we have to make sure that we maintain the focus on these other quality issues, particularly in facilities that are older and facilities in most notably North Carolina, where we have an outstanding warning letter.

So we want to balance expansion of capacity on one hand, yet be very vigilant to ensure that we have acceptable -- meet acceptable quality standards and that’s really the area that we are investing. And so we have added headcount there, investment in terms of process modifications and so on while we are also expanding capacity.

In fact we are bringing on a new line in [North Co] to produce more PD solutions to assist us in managing through some of the short-term product shortages that we have that hopefully we will be able to manage through that, through I would say the first quarter of 2015.

But we are sensitive to the existing warning letters and make sure we can bring those to a close at a time when we are expanding capacity. I will tell you we have very constructive dialog going with the agency.

We actually had a regulatory meeting with them last week to talk about how we balance achieving systemic or systematic improvements really in quality and ensure that the supply issue is addressed. You may recall a year ago the U.S.

market was in very short supply on IV solutions, and here we are approaching flu season and we read about Ebola and all these other things. So the agency is very sensitive as they should be as are we to supply.

It’s why we are encouraged that they stepped in and provided the kind of support they did to approve PD product to be manufactured in Castlebar, Ireland to ship to the U.S. to help address our issue.

So those are the things we are balancing and Bob kind of quantified the financial impact of that, that will continue for a while but I think at a certain point we will certainly manage down those costs and get back to a more normalized level..

Okay..

Thank you. We have time for two more questions..

Thank you. Our next question comes from Bruce Nudell of Credit Suisse. Your line is now open..

Thanks for taking my question. Ludwig there is just kind of a general anxiousness about the pace of change in the hemophilia A treatment optionality as it were. The [two] molecule the bio specific antibody mimics the co factor behavior factor A could be subcu, could be relatively long lasting good in inhibitor patients and relative low immunogenicity.

Could you just comment on molecules such as this and your long-term positioning of the company and give some assurance that Baxter has the options covered is it were?.

Yeah, so, well thanks for the Bruce. We believe that we have a solid short-term and long-term strategy for our hemophilia franchise. As you know we are building breadth and depth in our hemophilia portfolio and I think it’s also fair to say that we are doing better at hitting the R&D milestones.

We continue to monitor the competitive landscape and we are aware of the technologies that you were mentioning, the [inaudible] opportunity well the company is still in early clinical development and the clinical data is limited.

As a matter of fact one of our exploratory programs is in subcu technology and a couple of years we moved the subcu treatment into the clinic. However we have to stop the program because of the lack of efficacy. To go back to our strategy we believe we have a strong strategy.

First of all we continue to strengthen the ADVATE label we talked about [My PK Fits] as well as well as Baxter-3 we have strong Phase 3 data for 855, which we will be submitting by the end of this year.

We plan to bring 826 as well as our gene therapy program for hemophilia A into the clinic into the next 12 to 18 months and all of these are the programs that we have. So 855, 826 and gene therapy we believe are programs that are post proof-of-concept.

When you think about the ultimate goal of hemophilia treatment it is to have sustainable higher level of factor expression without peaks and troughs because you will induce -- you would see dramatic or spontaneous bleeds and the protection should be there irrespective of the patients activity level and we believe that gene therapy could be a true game changer.

And with respect to our progress in the technology we are really pleased with early clinical date in our hemophilia B program. We see factor level expression in our patients that is sustained over a longer period of time and as I mentioned we are planning to bring this to the clinic in about a year from now..

And Bob my follow-up pertains to the U.S. dialyzer opportunity you know there was a press release this quarter about enhancing your manufacturing capability.

Could you just scale that opportunity for us because I know Baxter is a little bit light on the share side, how big is it, is it something that should be considered as a major initiative for the new Baxter?.

Yeah, well that’s Bruce, Bob Parkinson here, so clearly expansion of dialyzer capacity is one of multiple drivers to the renal growth long-term, as I think you know even before the acquisition Gambro was constrained on capacity on dialyzer.

Our share on dialyzers today is obviously disproportionately low so I think there is a significant opportunity there long-term. We are encouraged by the recent performance of the Gambro business in the third quarter. Our sales were up mid-single digits and we are starting to I think get focused and aligned after the integration.

So that will represent a step function in growth when that capacity comes on in 2016 but in the mean time we have done some other things with third party suppliers and so on which will allow us to increase the supply. So right now the demand is exceeding our ability to supply.

We have some smaller interim expansions that should help that out in the short-term but it won’t be as material until the OPELIKA capacity comes on. So that’s a significant opportunity and a significant driver for long-term renal growth for us..

And how big is the U.S.

market for dialyzers?.

In terms of, in dollars?.

Yeah..

Yeah, so just defining the Gambro businesses we acquired it the dialyzers represented about $500 million in sales for Gambro on a global basis but as Bob mentioned very underrepresented in the U.S. market and through this OPELIKA expansion and the others that Bob mentioned we expect that over three to four years to increase capacity by 50%.

And so as we grow into that capacity this represents an opportunity to grow and grow share and grow up 50% off the $500 million base that we have got in the coming years. So a fairly meaningful opportunity here but clearly given the very low monitor placements that Gambro had historically in the U.S.

and overall capacity constraints again very, very small player at the moment..

Mary Kay can get back to you Bruce with the exact specific answer to your question. I don’t know for the U.S. market. The reality is the production at OPELIKA will source global markets not just the U.S. and the largest opportunity is outside the U.S.

for a number of reasons including obviously the concentration with Fresenius given their centers that they run and where they utilize their own dialyzers and so that’s a major segment of the U.S. market that largely is off the table even when we get expanded capacity.

So this is really more of a global opportunity but we will get back to you with the specifics on that..

Thanks so much..

And our last question please..

Our last question comes from Glenn Novarro of RBC Capital Markets. Your line is now open..

Hi, good morning guys. Two questions, one for Ludwig and one for Bob Parkinson. Ludwig outside the U.S. the hemophilia franchise did very well and you called out Brazil and you called out some tenders. I am curious about the tenders; I think those tenders are UK and Australia.

When you start on a new tender, is there a channel fill and are the sales you see there one time or are these just remain sustainable at current levels into the fourth quarter of next year is there any way you can quantify what the tenders gave you in the third quarter? And then for Bob Parkinson, some of the companies that have reported so far have talked about some softness in Europe.

I am wondering if you can comment on what you are seeing on the supply side of the business in Europe? Thank you..

Yes, Glenn it’s Bob Hombach, let me answer the financial aspects of the tenders and maybe Ludwig can make some comments about our somewhat unique position particularly in Australia. So the UK and Australia represent very good opportunity for us. We had very little share in the UK from the last tender and we are completely out of the Australian market.

And so I would frame these as about $50 million in incremental sales opportunity combined between the two.

We will realize about $20 million of that $50 million here in the back half of 2014, less than $10 million contribution in the third quarter ramping up a bit in the fourth and the other $30 million of that $50 million we’ll get in 2015 as we get up to scale.

I guess but the one thing I would add about Australia is our preferred position there in the tender gives us an opportunity to perhaps get disproportionate share of the overall Australian market which may allow us to go a bit above the $50 million overall that I mentioned..

Glenn repeat your question on the supply side Europe, I wasn’t sure what you are getting out there if you could just maybe rephrase that?.

So if you look at some other companies that have reported so far this week they have talked about some softness in Europe so I was wondering what you are seeing if you can provide any commentary in Europe.

I know in 3Q you always getting to see some softness due to seasonality but I wonder if there is anything from an economic point of view that or whatever you are seeing that would create any softness in Europe at this point?.

Yes well I commented earlier on just hospital activity of developed markets versus emerging markets and distinguishing the two. I would say Europe clearly Western Europe is the softest area globally and I think to a large degree that is directly correlated with the general economic condition Glenn.

So we see less robust demand in Europe for example than we do in the United States and I would project that given the broader macroeconomic environment that’s likely to continue. So it’s really about market share to drive growth and so on as opposed to depend upon robust underlying hospital activity if you will..

Okay, thank you..

Yes..

Thank you. Ladies and gentlemen this does conclude today’s conference call with Baxter International. Thank you for participating and everyone have a wonderful day..