Operator:

Good morning and thank you for standing by. Welcome to Abbott’s second quarter 2024 earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question by pressing the star-one-one keys on your touchtone phone. This call is being recorded by Abbott. With the exception of any participants’ questions asked during the question and answer session, the entire call including the question and answer session is material copyrighted by Abbott. It cannot be recorded or rebroadcast with Abbott’s express written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Robert Ford:

Thanks Mike. Good morning everyone and thank you for joining us. Today we reported organic sales growth of more than 9%, excluding COVID testing sales. We also reported adjusted earnings per share of $1.14, which exceeded analyst consensus estimates and represents a 16% sequential increase from the first quarter. Based on our performance in the quarter and confidence in our outlook for the remainder of the year, we raised our guidance and now forecast full year organic sales growth, excluding COVID testing sales, to be 9.5% to 10% and adjusted earnings per share in a range of $4.61 to $4.71. Our performance continues to be driven by broad-based growth across the portfolio with growth this quarter led by double-digit growth in medical devices and high single-digit growth in established pharmaceuticals and nutrition. In addition to benefiting from outperforming expectations on the top line, we are also seeing positive contribution from gross margin expansion coming from continued execution from our supply chain teams, lower commodity costs, and favorable sales mix. I’ll now summarize our second quarter results in more detail before turning the call over to Phil, and I’ll start with nutrition, where sales increased 7.5% in the quarter. Strong quarter in the quarter was led by double-digit growth in international adult nutrition and U.S. pediatric nutrition. International adult nutrition continues to perform at a very high level. The five-year compound annual growth rate of this business is more than 10%, which in addition to our market-leading position and commercial execution reflects the impact from positive demographic trends that drive increasing demand for our Ensure and Glucerna brands. Through the investments we’ve made to expand capacity, we are well positioned to continue to capitalize on these secular demand trends. On the topic of litigation, regarding pre-term infant formula and human milk fortifier, Abbott stands by our products and the information provided to the neonatologist specialists who have used them for decades. Necrotizing enterocolitis, or NEC, is a terrible gastrointestinal disease that primarily affects premature infants, and it is devastating to families; however, plaintiff lawyers are advancing a theory that is without merit or scientific support. These products, which are sold for hospital use, are incorporated into a feeding regimen along with human milk by experienced specialists and are an important part of the standard of care for the majority of preterm infants. Their use is supported by medical associations in the United States and other countries around the world. The products and their ingredients have been reviewed and are deemed safe for use by regulators, who have also reviewed their labels. There has been no increase in the rate of NEC, meaning these cases have not emerged in response to a trend or any new information, yet we’re seeing plaintiffs’ lawyers investing millions of dollars in misleading TV advertising in an attempt to move physician decisions from the hospital to the courtroom. Total revenues for these products are about $9 million annually, and have remained at that level for the past several years. If these products were no longer available, physicians would be deprived of the vital food that is needed in the NICU. This would create a public health crisis affecting every state across this country. We believe it’s important for all who have an interest in health of preterm infants, who recognize the need for these products and to take action accordingly. Moving to diagnostics, where sales increased 6% excluding COVID testing sales, growth in the quarter was driven by high single-digit growth in core laboratory diagnostics and double-digit growth in point-of-care diagnostics. In core lab diagnostics, we continued to drive growth through increased adoption and utilization of our market-leading systems and global demand for our extensive testing menus across the areas of immunoassay, clinical chemistry, hematology, and blood screening. While our Alinity family of diagnostic systems first launched more than six years ago, given the long contract cycles common in the diagnostics industry, we continued to see a benefit in our contract renewal and competitive win rates with several recent large account wins expected to increasingly contribute to growth in the second half of the year. Turning to EPD, where sales increased 8% in the quarter, EPD continues to deliver at a high level as this business executes its unique branded generic strategy in emerging markets, where growth is supported by favorable demographic trends, including increasing populations, growing middle classes, and increasing focus on expanding access to healthcare. As you recall, we identified biosimilars as a new strategic growth pillar for this business. With our extensive presence in emerging markets, we have a unique opportunity to scale a licensing model that is capital efficient and can bring access to these life-changing medicines to millions of people in emerging markets. We began implementing this strategy last year when we announced an agreement to commercialize several biosimilars in the areas of oncology and women’s health, with the first of these expected to launch in 2025. We recently completed additional agreements that provide Abbott access to biosimilar versions of market-leading autoimmune disease and GLP1 medications. Biosimilars represent the highest growth segment in the branded generic pharmaceutical market, and we look forward to continuing to build one of the most complete portfolios in the industry. I’ll wrap up with medical devices, where sales grew 12%, in diabetes care, Freestyle Libre sales were $1.6 billion in the quarter and grew 20%. We announced in June that we received FDA approval for two new over-the-counter continuous glucose monitoring systems called Lingo and Libre Rio, which are based on Libre’s glucose technology that is now used by more than 6 million people around the world. While over-the-counter availability is a new option in the United States, we’ve been selling over-the-counter in international markets since Libre launched 10 years ago. Given our clear leadership position in these markets, we have demonstrated our ability to tailor solutions, approach and communication for the various types of users who compose the CGM customer base. Lingo is designed for consumers who are willing to improve their overall health and wellness. The Lingo wearable sensor and app will track glucose, provide personalized data, insights and coaching to help create and maintain healthy habits. Libre Rio is designed for adults with Type 2 diabetes who do not use insulin and typically manage their diabetes through lifestyle modifications. In electro-physiology, growth of 17% was driven by double-digit growth in all major geographic regions, including 17% growth in the U.S., which represents an acceleration compared to the growth in the first quarter. Growth was broad-based across the portfolio and included 20% growth in ablation catheters. In structural heart, growth of more than 15% reflects an acceleration in growth compared to the first quarter and was led by several recently launched products that are driving new adoption and share capture in attractive high growth areas, including TAVR, LAA, and tricuspid repair. This quarter, we launched our tricuspid repair device, TriClip in the United States and continued our trend of capturing market share in the global TAVR market. In rhythm management, growth of 6% was led by Aveir, our highly innovative leadless pacemaker, and in June we announced that we received CE mark in Europe for Aveir to be used in dual chamber pacing procedures, which is the largest segment of the pacing market. In heart failure, growth of 9% was driven by our market-leading portfolio of heart-assist devices that offer treatment for both chronic and temporary conditions. In neuromodulation, growth of 8% was driven by strong demand in international markets for our Eterna rechargeable spinal cord stimulation device, which obtained CE mark in Europe last year. In vascular, we received FDA approval in late April for our Esprit dissolvable stent, a breakthrough innovation for people who suffer from blocked arteries located below the knee. Esprit is designed to keep the arteries open, deliver a drug to support vessel healing prior to completely dissolving over time. New products like Esprit combined with the investments that we made in our vascular business, both organically and inorganically, have expanded our presence in faster growing areas and increased the future growth outlook for this business. In summary, we exceeded expectations both the top and bottom lines and, as a result, we raised our financial outlook for the year. We continue to make good progress on our gross margin initiatives and, more importantly, our pipeline continues to be highly productive, and thus we’re well positioned to deliver strong results for the remainder of the year. I’ll now turn over the call to Phil.

Operator:

Thank you. At this time, we will conduct a question and answer session. [Operator instructions] Our first question will come from Larry Biegelsen from Wells Fargo. Your line is now open.

Robert Ford:

No Larry, I think I said everything I said during my prepared comments. I guess the only add here is I think this is way overblown in terms of its impact, and we are--we’re working to obviously defend our position and--you know, working with all the different stakeholders so that they are aware of the situation, the gravity of the situation as it progresses. But I said all I had to say right now in my prepared comments, and if there’s a need to kind of give further updates, we will.

Robert Ford:

Sure, well I’m seeing what I thought I was going to see. It might be a little different from what some of you thought you were going to see, but what we’ve been seeing is obviously an increase in the market, so right now the market has accelerated, seems to be growing above 20%, so when you look at our 17%, it’s lower than the market but it’s actually growing faster than what it was growing pre-pandemic, or just after we had done the acquisition. We’ll see if the--I mean, that growth is obviously in value. We’ll see if the growth in procedures actually translates. We are actually in more procedures than what we were in the past, given our mapping and our teams, but I think it’s a little bit too early to say if the actual number of procedures is going to significantly increase. The market has accelerated, but it’s predominantly, I think, price right now with the introduction of this new product. It’s predominantly being used in de novo procedures, atrial procedures, right, and we think that’s about a third of all ablation procedures, Larry. The other two-thirds, we continue to see, whether it’s re-dos, VT, SVT, ablations, in that case we continue to see RF really being viewed as the better option for those procedures. We’ll see how that’s going to translate over time, but OUS, the penetration is around 10%, 15%. It’s been pretty stable. From the point of view of mapping, I think we haven’t seen a real big change of what we saw during those first couple of months of launch and in the last call, so over 90% of cases here in the U.S. are still being used as mapping. We’ve got a 50 share of those mapping cases. I don’t try and look at different types of denominators to get to that market share, so I make sure my team just basically has the best access and, from what we’re seeing, it’s about 50%. RF catheters, similar to what we saw in the last call, still being used in about 20% of the PFA cases, so we continue to see that. I think the net effect of all of this is the market’s growing, it’s accelerating. We’ve got a strong position. Everything that we’ve talked about in the past, about our opportunity with the mapping and all of the other consumables is there. RF still plays a role, it’s still an important role, and our business has actually grown faster than what it was growing before. If you look at ’19, we were about 12%, ’18 was about 14%, so we’re actually doing better now. I think that is positive for the market, which is why we’ve invested heavily in our PFA portfolio, which will--you will start to see hit the market in the--I’d say next year, I’m not going to try and time the quarter here, but definitely next year. I think this is good and the teams have done an incredible job at executing the strategy that we laid out, so kudos to them.

Operator:

Thank you. Our next question will come from Travis Steed from BofA Securities. Your line is open.

Robert Ford:

Sure. Obviously TriClip was an important launch and helped to accelerate the growth rate, Travis, but I think it’s pretty broad-based here. I mean, if you look at TriClip, we were ready to go because we had certain built-in advantages in this area, right - we had the scale, we had the sales force, the manufacturing capacity, so we were ready to go. I think from our estimates here, even though we launched a quarter after our competitor with their system, I think the repair device is already in twice as many accounts as the replacement system, so we had a natural kind of built-in advantage here as we went to the market, and the cases are doing very well. The feedback has been very positive. But I think it’s really broad-based here. Navitor has done very well, both in international markets and in the U.S., and the value proposition is starting to gain more traction - you know, great clinical profile, excellent hemodynamics, and that’s driving a lot of opportunity for us in international and U.S. markets. We shared some data from our registry, from our Japan registry, and great safety also, so that’s doing very well. Amulet, we saw really nice growth in the U.S. for Amulet this quarter - it was about 45%, so that product is doing very well and we’re focusing here on continued, what I would call penetration in same store sales, so we’re about close to 20% in the accounts that we’re in. We’re in about half of the market here in the U.S., so our opportunity here is to continue to expand the sales force and go to newer accounts, so that’s done very well, too. MitraClip, I think we continue to see some continued growth internationally. In the U.S. with competitive activity, that’s kind of slowed down a little bit of the growth, but I think with TriClip now coming into the market and gaining traction, we’ll be able to provide a value proposition across both repair systems and drive there. So structural heart, the growth rate has accelerated from Q1, doing very well, and I’d say it’s really across a full portfolio approach versus just really trying to single out one product or one technology. There’s work we have to do in MitraClip - that’s clear, in the U.S., internationally it’s done very well; but all the other products that I’ve talked about are doing very well and gaining market share, and gaining adoption, so that’s why you saw structural heart’s growth rate actually accelerate, and I continue to see that that’s going to be definitely for the rest of this year and going into next year.

Robert Ford:

Well, you’re trying to cover a lot of ground there with that question. You could probably spend a whole call going through all of that. I think at its highest level, Libre continues to do very well. There’s still a lot of growth opportunity. Obviously the basal opportunity is the biggest one, and we’re doing--having great progress over there, but even in the MDI segment, there’s still a lot of penetration to occur in the MDI segment. I think in the U.S., there’s still about a third of multiple daily injectors that aren’t using CGM, and international developed markets, it’s around 50%, so there’s plenty of growth in Libre. Our strategy here with Lingo and Libre Rio is just really to have a full portfolio and look at this as a platform where we can expand the use of the sensor technology across different types of diabetes populations, but also what is probably the larger market, which is people that don’t have diabetes, right? I think if you--if you take--right now, I would say we’re doing to launch it here in the U.S. and we’re going to start expanding globally, and we’ll see how it looks like and what it takes to win there. But what I do know, based on the U.K. experience, is that it takes some time to educate and communicate with a patient population that, while excited about having new tools to drive healthier habits, they do need some time to understand its use. But I think it’s a pretty big opportunity for us and one that we’ve disproportionately invested to be able to get into this position. I think if you take Lingo and you look at U.S. and Western Europe, the adult population there, you’ve got about 400 million people in those markets. If you take a single-digit penetration rate, a few sensors a year, you’re looking at a multi-billion opportunity there, and we’re not there yet. I think once we’ve got better understanding of how this is going to work, we’ll be better at forecasting it; but just at a high level and looking at it from a total adult population and relatively, I’d say, modest penetration rate, it’s a pretty big opportunity. Like I said in my comments, we’ve done this for a while since we’ve launched internationally, and we’ve learned a lot and we’re going to bring that learning and experience here to the U.S., so it’s an exciting opportunity for us.

Operator:

Thank you. Our next question will come from Robbie Marcus from JP Morgan. Your line is open.

Robert Ford:

Yeah, I don’t think--so from an insurance coverage perspective, if you’re referring to Lingo specifically for non-diabetes, I think it’s going to be--you know, I don’t think that that’s going to be something that we’re building a forecast assuming reimbursement coverage over it, even though I agree with you - you know, there is nice data that shows that people that don’t have diabetes can benefit from this, Robbie, and it helps sustain behavior modification. Ultimately this is what it is, right - it’s using data to be able to kind of help people that want to stay healthy, give them more information, and ensure that they can refine their habits or change habits. I think that that is at the core there - it’s really communicating directly with consumers. If you think about the diabetes space and how CGM uptake, you needed both a communication with the patient and you needed obviously a communication with the physician. I think that that’s still important for the non-diabetes. I think that some people will want to have some sort of recognition from the healthcare professional that this might be a good investment to do in, right, and the key thing here is just the utilization. I don’t think you’re going to see people that don’t have diabetes use this, you know, a sensor 365 days a year, but like I said, if they’re using a couple times a year, there’s still a benefit, and we’ll be generating data on this over time. I think it’s going to be important to generate data, even if it’s not to communicate to payors to get reimbursement, but even if it’s to communicate to physicians, the primary care and the direct consumers, that there’s a value here of doing that. I think the key thing here is personalization and how do you personalize information and the data and the coaching, so the strategy here is, yes, you’re doing to have to use TV to be able to communicate, but I don’t think it’s--I don’t think given our experience here that you could just go on TV and blast TV advertising and you’ll get this big uptake. You’re going to have to do some on-the-ground kind of gorilla marketing - let’s call it like that, together with TV advertising to really be able to open up the market and then sustain it, right, and sustain its use. That’s how we’re thinking about it, and that’s why we have a separate team completely removed from the Libre and the diabetes team, that they’re focusing on how to execute this strategy. I think it’s more of an S-curve growth versus an out-of-the-gate. I know that everybody is focused on what the sales are in the second half, whether it’s me or the competitor. I think the bigger picture here is, hey, there’s a really big opportunity here and if we do it right, it’s an opportunity that will be more than a flash in the frying pan. It will sustain itself and it could become standard, so.

Robert Ford:

Yes, I mean, ultimately I think this whole leadless is going to change the growth trajectory of our CRM business. If you look at CRM, it grew 7% last year, it’s grown 7% the first half of this year - it was previously a flat business, and we’ve been doing that, I would say, with good success on dual, but I wouldn’t say that it’s at full cycle yet, because one of the things that we’re working on is ensuring that we’re doing the training and we’re getting physicians comfortable with the procedure, right? It’s a completely different procedure versus what the entire industry has been accustomed to. We’re using mapping, we’re going into the groin versus doing pockets above the chest, so it is a little different and we’re focusing on that. That being said, we’ve been able to accelerate the growth rate just with a single chamber. I think right now after two years, we’ve probably captured about 50 share, but to your point, the bigger opportunity is in dual, and the procedures are going great. Once physicians get several under their--you know, experience with several of them, they’re talking about okay, how do we accelerate this and an opportunity to drive more patients into it, but we want to make sure we’ve got a pretty large base of well-trained, great outcomes physicians across the United States. Listen, this is a $3 billion global segment and there really hasn’t been much innovation in it, and here you have something that’s truly unique and differentiated, and I’d say once we feel that we’ve gotten to a point where we feel good about the capabilities and training and the amount of physician coverage that exists, this is definitely a product that I can see going a little bit more mainstream, having more direct consumer communications because of the value proposition it affords them, so I think this is a great opportunity for us. It might be under-appreciated with the market, but it is definitely appreciated amongst me and the device team and the CRM team, and we’re working hard to get to that point where you can really let it go strong.

Operator:

Thank you. Our next question will come from Josh Jennings from TD Cowen. Your line is now open.

Robert Ford:

Was that an attempt to get to the 2025 kind of question? I’d say, listen - we’ve been saying that we made investments during COVID to accelerate the company, make it stronger, build our portfolio so we could accelerate the growth, right? If you look at the last six quarters, we’ve been delivering top tier, high single digit, double digit growth, and this is on a company that’s doing $40 billion-plus of revenues, so I think that’s pretty impressive. If you look at our med tech portfolio, it was the fastest growing med tech portfolio last year, fastest growing in the first quarter of this year. We’ll see what happens this second quarter, but we’ve positioned the company to be able to deliver this, and do I think that we can continue to deliver this top tier performance throughout this year and into next year? Yes, I absolutely do, because of, one, what we’ve built, and then just the evidence and the proof points that we’ve been able to reliably and sustainably deliver that. So yes, we feel good about our ability. The markets that we’re participating in are attractive, so they are markets that we lead, and when those markets grow, our leadership benefits. There are markets that are attractive that we’re entering, and there’s plenty of opportunity for market share gain; and there are markets that are attractive that we’re building, and there’s no real clinical opportunity--or there’s a clinical opportunity for our products that we’re developing to come in there, so as we build those markets, they become attractive and our position gets solidified. I think that framework applies to all four of our business units have opportunities across those three frameworks. On the M&A front, yes, if we’re able to find an asset that makes sense strategically to us, makes sense financially that could add even further to that growth, then we’ve got the balance sheet to be able to do that; but it’s not dependent--as I’ve told you, it’s really focused on the organic side to be able to deliver this top tier growth.

Robert Ford:

Well, we look at our portfolio on an ongoing basis. I don’t think there’s this one moment in the year that we do it - we’re doing it on an ongoing basis, and the company has a history of ensuring that the portfolio that is assembled is not only delivering value to patients and governments and healthcare systems, but it’s also delivering value to our shareholders. We historically haven’t shied away from asking ourselves the questions and answering those questions, and if there’s an opportunity to create value through addition or through subtraction, then the company has shown that it’s ready to do that. I think the two fundamental questions about that is, is there an opportunity to create value for shareholders, and is there somebody that could do better with our businesses? Right now, you look at what we’re doing with our businesses, we’re performing at the highest level across all of the four segments. We’ll see what happens during this earnings season here, but I feel very good about the team and what they’re doing. Obviously there are areas that we could always do better, and we focus on that; but at the highest level, all four of our sectors have been delivering outstanding growth, market-leading growth, and quite frankly innovating and fulfilling our purpose and our mission, which is to help people live healthier lives. I like the diversity. The diversity provides both defense and offense capabilities, and as long as you’re managing them within each one of their segments, allocating capital that is proportionate to their growth and their industry, and we spend a lot of time managing all four segments, then I think we’re doing a good job at running them.

Operator:

Thank you. Our next question will come from David Roman from Goldman Sachs. Your line is open.

Robert Ford:

Sure, I’ll let Phil take that.

David Roman:

Super helpful, thank you. Then maybe just on the capital allocation side, maybe thinking about the other side of Josh’s question, if you look across the sector here, we’ve seen M&A pick up a little bit in the second quarter - I think there were two billion dollar-plus transactions announced with transaction multiples starting to trend toward the lower end of historical levels. But could you maybe give us your latest perspective on the M&A environment and how you’re thinking about capital allocation as your cash balance continues to build nicely here?

David Roman:

Appreciate all the perspective, and thanks for taking the question.

Danielle Antalffy:

Hey, good morning guys, thanks so much for taking the question. Congrats on a really good quarter here. Robert, one of the things that struck me when we spoke--I have two product-specific questions, when we last spoke is how you’re looking at the sustainability of historically slower growing businesses and areas exposed to historically slower growing markets, so obviously I’m thinking CRM. Can you talk a little bit about the strategy there - obviously Aveir is a big part of that, and just leadless pacing in general, and how sustainable--I mean, it’s been, like, multiple quarters now of organic growth in the mid-plus single digit range, and then just one follow-up, another product question.

Danielle Antalffy:

Okay, that’s helpful. Then the follow-up question is on the structural heart side of things, and I know Amulet has been on the market for a little bit here, but my impression is that now it’s kind of like Abbott is no longer fighting with one hand tied behind their back. Can you talk a little bit about that, and your 45% growth, I think you said in the quarter, where to from here for Amulet? Thanks so much for taking the questions.

Danielle Antalffy:

Thank you.

Operator:

Thank you. Our final question will come from Vijay Kumar from Evercore ISI. Your line is open.

Robert Ford:

Sure. You know, this is one where I’d say there’s a couple phases to the strategy. The core premise of this, Vijay, is if you look at the emerging markets and the disease prevalence that exists in these emerging markets, they’re no different than the disease prevalence in the U.S or Europe. You could look at some of them are higher, etc., but in general there’s an opportunity to bring these biologics into the emerging market. For a variety of reasons, those markets have not been a priority for the originators. Their main focus has obviously been in the international developed markets - U.S., Western Europe, Japan, Canada, Australia, etc., so this provides just a patient need opportunity that we want to size up. What we’ve seen through some of our--you know, we have done some more regional biosimilar deals that we’ve launched, and what we’ve seen is that the growth of the molecule grows significantly once a biosimilar enters in terms of penetration into a patient population. It’s a different dynamic in developed markets, as we know, but in emerging markets the category really expands, so what we wanted to do is to say, okay, before we start to think about manufacturing, before we start to think about that, we want to be able to understand what is the uptake of these products once you go ahead and put a concerted effort to developing these types of products in emerging markets. It fits right into our wheelhouse, where we’ve got relationships with governments, we have relationships with physicians, and we’ve got relationships with the distribution area. The question is how can you do it in--how can you execute that strategy that’s capital efficient and doesn’t erode gross margin of that business, and I give a lot of kudos to the team because they’ve really been able to position our presence in these markets as an advantage to these players that really aren’t focusing on emerging markets, they’re focusing more on the opportunity that exists in developed markets, and now they can partner with one single company, reputable company to be able to use that capacity in other markets. I’d say we’re in the phase right now of, okay, is there sustainability to this, so the deals that we’ve done give us access, our gross margin is not dilutive, and we’re going to see how it goes. As you think about the ramp-up of what we’ve got in the pipeline, we’ll start launching in 2025, but you look at some of the big molecules that will come up for us ’26,’27, that’s I think when some of these very large oncology opportunities that we have will play a huge role for us and accelerate the growth there.

Robert Ford:

Yes, well we’ve done a lot of share repurchases over the last couple of years, say catching up a little bit, to maybe not doing as much repurchasing after the two acquisitions we did in 2017 and 2018. If you look at our repurchases and dividends, it’s been about $20 billion that we’ve returned over the last four years, Vijay - $20 billion in dividends and buybacks, and that accounts for a good amount of our free cash flow over the last couple of years to our shareholders. We’re not--the year’s not over, and again we’ll see opportunities. We’ve got plenty of opportunities to be able to do that, so I’d say I think we’ve done a pretty good here at returning cash back to our shareholders over the last couple of years, and that commitment we’ll maintain, so.

Mike Comilla:

Thank you Operator, and thank you all for your questions. This now concludes Abbott’s conference call. A webcast replay of this call will be available after 11:00 am Central time today on Abbott’s Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Mike Comilla:

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; Bob Funck, Executive Vice President, Finance; and Phil Boudreau, Senior Vice President, Finance and Chief Financial Officer. Robert and Phil will provide opening remarks. Following their comments, we'll take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2024. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended December 31, 2023. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com. Note, that Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis because the Company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the press release issued earlier today. With that, I will now turn the call over to Robert.

Phil Boudreau:

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates unless otherwise noted, are on an organic basis. Turning to our first quarter results, sales increased 4.7% on an organic basis, which as expected includes the impact of year-over-year decline in COVID testing related sales. Excluding COVID testing sales underlying base business, organic sales growth was 10.8% in the quarter. Foreign exchange had an unfavorable year-over-year impact of 2.9% on first quarter sales. During the quarter, we saw the U.S. dollar strengthen versus several currencies, which resulted in exchange having a more unfavorable impact on sales compared to exchange rates at the time of our earnings call in January. Regarding other aspects of the P&L, the adjusted gross margin ratio was 55.7% of sales, adjusted R&D was 6.7% of sales and adjusted SG&A was 29.4% of sales in the first quarter. Lastly, our first quarter adjusted tax rate was 15%. Turning to our outlook for the full year, we now forecast full year adjusted earnings per share of $4.55 to $4.70, which represents an increase at the midpoint of the range compared to the guidance range we provided in January. We also raised the midpoint of our guidance for organic sales growth. We now forecast organic sales growth, excluding COVID testing to be in the range of 8.5% to 10%. Based on current rates, we expect exchange to have an unfavorable impact of approximately 2.5% on full year reported sales, which includes an expected unfavorable impact of approximately 3% on second quarter reported sales. Lastly, for the second quarter, we forecast adjusted earnings per share of $1.08 to $1.12. With that, we'll now open the call for questions.

Robbie Marcus :

Two for me. I'll just ask them both up front. First, Robert, we almost never see Abbott raise guidance particularly on the top line in the first quarter. Looking back over the past, I don't know, 5, 10 years, it's very rare. First part is what gave you the confidence to raise the midpoint of the guidance this early on in the year? And then second, obviously, there's been a lot of concern during the quarter with competitor’s loss in a case for NEC as it relates to infant nutrition. I was hoping you could address that what's your stance on the ongoing litigation? I think there's about a thousand cases that have been filed and any upcoming data points or timelines we should be looking for.

Robbie Marcus:

Appreciate it, Robert. Thanks a lot.

Larry Biegelsen:

Good morning. I'll echo, Robbie's, congratulations on the strong start to the year here. Robert, I just wanted to focus on EP. A multipart question here, but just one. The EP business grew nicely in the first quarter in the U.S. and outside the U.S. Can you talk about what drove that? What you're seeing with PFA in the different geographies? Your expectations for your EP business going forward before the Volt launch? Just lastly, it sounds like we should expect the Volt approval in Europe sometime next year based on the filing date. Just want to confirm that.

Operator:

Our next question will come from Josh Jennings from Cowen.

Robert Ford :

On your international question, I mean, it's always difficult to forecast exactly by month a quarter coverage kind of payment decisions. I can tell you though that the team has a full global map of all the work that's being done regarding clinical information and negotiations, et cetera. It's difficult to kind of forecast it, but what I have said is on previous calls and on some of my prepared remarks that I think you're going to see this just this build that will be occurring globally in the market as the data proves and shows the clinical medical and health economic benefit by reimbursing for this patient population. And I think we're well positioned there. Internationally, I think we got some pretty large markets already. Canada, Japan, France, Italy, Germany, those are markets that are either fully reimbursed or starting their process. And like I said, I think you will see as the year progresses, whether it's in medical events or just as the year progresses, I think you'll see more coverage decisions. Maybe they don't get splashy, big PR news, but we are seeing continuous increasing there on that. On the U.S. side, I guess I disagree with your premise that I'm going to be trading share gains on the pump side for share losses on the non-insulin side. I mean, I'm just, right now I'm looking at the data, third party audited data, 7 out of every 10 new prescriptions for this basal population, which is primarily served by the primary care channel, 7 out of 10 are going to Libre. I think our product's going to get even more competitive and compelling, I think this is a great opportunity and our objective here is to maintain kind of our shared dominance and our share leadership as it results in this patient segment. But we do have an opportunity here to participate a little bit more actively in what is a little bit more of a smaller segment of the population, but nonetheless a very important one, which is the AID and the market system. There's 150,000 to 200,000 new starts a year. There's an opportunity for share gain also of existing users. I think that, the opportunity to bring a dual analyte sensor with ketones. We showed some data at ATTD this year, that showed the safety benefit or the value proposition of a dual analyte sensor for AID system. I think that's going to be a compelling value proposition. We are working with all the pump companies here and I think as the year progresses, we'll see connectivity occur whether it's with Libre 2 Plus our streaming product or whether it's with Libre 3. This is an area that we are focusing on and it's a new segment for us to compete in. But I don't think that, we are going to be taking our eye off the ball as it relates to the basal opportunity that exists.

Robert Ford:

I'm not going to comment on our pricing strategy for competitive reasons. It is a differentiated and novel technology. There is an opportunity, but we'll have to see how this all plays out. You got NTAP submissions and all this stuff going on right now. What we are focused on here is, launching the product and getting cases ramped up and that's what's happening. I got some feedback yesterday from the team after a couple of weeks, real nice cadence of growth. We are obviously focusing on our initial cases on most of the account that were part of our pivotal trial, but just but just real nice cadence growth there and great feedback from physicians and patients post-surgery. I mean, if you're trying to poke at, what's the breakdown going to be about replace and repair, listen, I think it's good to have options. I guess my view here is that, I believe that, probably safety is a key driver here, just to start off with. I think TriClip has shown a very strong excellent safety record, both in clinical trials and real world use. I think that's going to play a key role here in determining repair versus replace. I expect repair or TriClip at least to be the preferred option unless the valves are too damaged and then obviously replacement is the only option. But there is a large pool of patients here. You got 5 million people globally, 2 million people here in the U.S. and it's going to be an opportunity here that we will be generating more data, expand the indication of the product. I think this is easily a $1 billion opportunity for us here as we build the capabilities and as we build more clinical data.

Travis Steed:

Maybe just while we're on the pipeline, talk a little bit about AVEIR it sounds like that that product's going really well. And then I had a question on gross margins as well. Trying to think about is this the right pace to kind of get back to pre-COVID levels and still the opportunity kind of longer term for gross margins?

Travis Steed :

Just on gross margins, kind of thinking about the path back to pre COVID levels over the long term and is this the right kind of cadence that you're -- this year's cadence, the right way to think about that?

Operator:

Our next question will come from Vijay Kumar from Evercore, ISI.

Robert Ford :

As I said, there are certain challenges that still remain with us from January and FX is one of them. I'll let Phil answer that one. On your question on pipeline, listen, I could spend a whole hour on this just going through the pipeline, but I guess I would bucket them into like three categories, Vijay. I would say you got your current contributors and Libre and Alinity, they still operate like pipeline projects and products. We still got multiple innovations going through them. MitraClip, great familiarity, AVEIR, Navitor, TriClip, Amulet, PROTALITY or our concussion tests, I think got great opportunity and CardioMEMS, I mean, these are all products that I would still characterize them as early innings. Yes, they're established, but they're still early innings and they got a lot of growth rate there. The second group of products I would call, probably near-term future contributors, so think about it in the next 12 to 18 months, these products coming to market and starting to kind of generate revenue there. Our lingo product, I'm very excited about that and bringing that to the U.S. and expanding that globally. Our dual analyte sensor, our Volt system Esprit, which is our drug eluding bioabsorbable stent for below the knee. It will be the first of its kind. We are developing a whole new Alinity system that will target a segment of the market that we currently don't participate in. And there'll be more to come on that. And then just the great opportunity we have with biosimilars into the emerging markets and doing it in a very capital efficient way. And bringing that and leveraging our position there. That's our next 12 to 18 month kind of catalyst there. Then thinking about beyond 2026, I mean, we are working on a PFA, RF catheter. You got leadless, another kind of leadless pacing system that would be launching. We have a second generation Amulet, excited about entry into the IVL market sometime in 2027, coronary DCB, we're working on kind of new TAVR systems also that allow us to branch out into other segments. We've got a whole plethora of new analytes in our bio wearables market that will start to come out and have different applications in 2026. And then on top of that, all the clinical work that we're doing to expand indications, expand market, whether it's in TAVR, whether it's in LAA, whether it's in mitral. So we've got, I'd say a real nice cadence here of products and pipeline beyond, I'd say, the next 12, 18 months. We're looking at this '26, '27, '28 and I feel really excited about that. There's obviously more that we need to do and add, but I think the base here looks really good in terms of the pipeline. And then I think your question on FX, Phil, you want to take that?

Operator:

Our next question will come from Joanne Wuensch from Citi.

Robert Ford:

Sure. On the point of care concussion test, I guess I'd summarize the opportunity here in twofold. I think there's a market conversion component to this, Joanne. I mentioned there are 5 million ER visits to diagnose a concussion. The number one method there to use that is on a CT scan. I think there's an opportunity here to transform that and allow one to get a faster response in that emergency kind of emergency room visit, which is where the -- and the point of care team already have a good position with some of our other blood gas and other assays that we provide to that segment. I think this will slide right into that team. The value proposition here is going to be, okay, what's the cost of the system and can we bend that cost curve. I think we've shown a little bit how we think about things Joanne, if you look at Libre, if you look at Binax, if you look at how we think about pricing our products, when it comes to market conversion and the opportunities that we have there? We'll be able to do it at a nice return for our shareholders. I think that's an important part. The market expansion opportunity that we have, I think is going to still require some work on the product. Right now the product is approved whole blood, but it's a venous draw. We're going to be working on a capillary draw and if you can then run this assay, taking a sample from a finger prick, then you can look at bringing that technology even closer to where the need for a rapid concussion test would be. You could just look at how many universities exist in this country, how many high schools exist in this country? You can do some multiplications there and say, this is a great market creation, market expansion opportunity. I think that that's how we're thinking about it commercially, conversion and creation slash expansion. There's some more work to be done in terms of the product and the claims and the trials there. This will be a multi-year kind of program over here where we'll start to see kind of nice growth in that segment. And then your other question was about the portfolio and balance sheet. And do we like the four segments? The answer to that is yes, we like all the four segments. We feel that it gives us a real unique view into the healthcare system as a whole starting with nutrition that's obviously the bedrock of good health. But then, things happen and you need to get a diagnosis. And we've got a great diagnostic portfolio that we've been expanding on and building on to make sure that we can capitalize on all the different types of modalities and locations where people can get tested. And then, once a physician knows what the problem is, then they got to run through treatment, right? And we do that either through a medicines business or through a medical device business. I think all four segments are super well aligned to the global demographics and trends in healthcare. And so we like that there's always opportunities to add, and we've shown that if there are areas that we feel that we can bring value in a combination then as you mentioned we've got a strong balance sheet and strategic flexibility to do that. As long as we feel that we can add value to that asset. We felt like that about CSI, we felt like that about St. Jude. We felt like that about Alere. And those deals, they obviously help kind of reshape the company and accelerate our growth rates. But I think that's predicated on us really believing that we can kind of bring value and we're not trying to fill some top line gap or some issues. ROIC for us matters, profitability matters. We've got opportunities and we could be a little bit more selective to be able to add, but I like the four segments that we're in. And they've been well to shareholders, especially the long-term shareholders.

Matt Miksic :

Congrats on the really strong quarter, particularly med devices. I had one follow-up on the -- sorry, here, background. One question on structural heart. Robert, you talked a little bit about the portfolio and the combination of the leading peer device and MitraClip of being a little bit more mature in the category of structural heart, but being kind of augmented by some of these new products like most recently, obviously TriClip. And if you could talk a little bit about sort of the momentum in the portfolio as well as how much of the build out of this portfolio is still coming organically or under review kind of strategically, I appreciate it.

Mike Comilla:

Operator, we'll take one more question, please.

Danielle Joy Antalffy :

And yes, congrats on a strong start to the year. Robert, we spent a lot of time talking about the durability of growth in the med tech business. So I don't want to get too greedy, but just following up on Joanne's question regarding you guys do have a strong balance sheet. Are there any areas -- I guess sort of how do you feel about the state of the med tech business today? And do you feel there are growth areas within med tech that maybe Abbott isn't participating in today that Abbott could or should participate in today? And where are you looking beyond your current markets, if at all? I'll just leave it to one.

Mike Comilla:

Thank you, operator, and thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 am Central Time today on Abbott's Investor Relations website at abbotinvestor.com. Thank you for joining us today.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participant's questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission.

Michael Comilla:

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; Bob Funck, Executive Vice President, Finance; and Phil Boudreau, Senior Vice President, Finance and Chief Financial Officer.

Robert Ford:

Thanks, Mike. Good morning, everyone, and thank you for joining us. Today, I'll discuss our 2023 results as well as our outlook for this year. But before I do that, I think it's important that we take a moment to look back at the challenging environment that we all faced over the last few years and how our actions during that time have positioned the company to be in an even stronger position today than before the start of the pandemic.

Operator:

[Operator Instructions] And our first question will come from Larry Biegelsen from Wells Fargo.

Robert Ford:

Thanks, Larry. I mean, as I said in my prepared remarks and quite frankly, as we talked about throughout most of 2023, the impact of the strategy we took to take some of the COVID revenue and reinvest in the base business. I think ultimately, that's really the factor here. I mean, we operate in these 4 business segments and their underlying attractiveness still is very sustainable.

Operator:

Our next question will come from Joshua Jennings from Cowen.

Robert Ford:

Sure. I mean, listen, we hear a lot of companies talk about working here to recover to their operating margin and try to get back to their op margin pre-pandemic. We're in a pretty unique position, I'd say, versus our peers here. Our op margin profile is already at -- is already at the pretty pandemic level. And I think what you saw us do there, Josh, and I talked a little bit about it in my comments, is I think we managed very well strategically the spending piece of it. We accelerated the spending investments when we were at our -- COVID sales were at their peak levels a few years ago. And then we held that spending flat these last couple of years, even though our top line was growing pretty significantly here.

Marie Thibault:

I wanted to ask a little bit more about your Electrophysiology business. That segment has been very strong, and I've been impressed that you've been able to put up that European growth rate in the face of some competitive PSA launches. So I would love to hear what's going on behind the scenes there, how you're getting those growth rates and how you're thinking about the U.S. EP business as we see some PSA launches this year?

Operator:

And our next question will come from Robbie Marcus from JPMorgan.

Robert Ford:

Sure. Strong growth in Q4 under $1.5 billion. U.S. was up 32%. And I'd say still haven't -- team hasn't even had to unleash L3 in the U.S. market in 2023, I think you'll see that now really hit in 2024. But being able to put those kind of growth rates in the U.S. without even having to launch L3 with a competitive new system. I think that speaks a lot about our position, our scale and our brand.

Operator:

Our next question will come from Danielle Antalffy from UBS.

Robert Ford:

Yes. Thanks. I don't know if I regret using that terminology or not now, Danielle, but I guess I would say, yes, they are great products, and we didn't think about calling them that because they were going to be a flash in the pan for 1 or 2 years. We look at these as really long-term great growth opportunities that we have that will significantly add to the company over the next few years. And quite frankly, they have added a good amount of growth for us this year, and they'll accelerate.

Joanne Wuensch:

Nice start to the year or nice end to last year, too. So here is a question I have in Nutrition, you've done a great job of sounds like returning to normalcy. I'm wondering if there are pockets that still need to sort of get back on track or whether we should think of this returning to sort of a mid-single-digit segment growth category.

Operator:

And our next question will come from Vijay Kumar with Evercore ISI.

Robert Ford:

Well, yes, we've got a strong balance sheet and provides us a lot of flexibility on our capital allocation plan. On the M&A side, Vijay, listen, I think it starts off with -- we've got great pipeline. We have great organic opportunities here to be able to kind of drive top-tier sustainable growth. So that ends up putting -- allowing us to be in a selective position here where we're not trying to use M&A as a way to kind of bulk up our top line or to cover any kind of top line gaps that might be there. So that allows us to be sustainable -- allows us to be more selective. And if there are opportunities that fit strategically and can generate an attractive return, then like you said, you've done the math, we've got the flexibility and the firepower to do that. But I'm not looking to acquire businesses simply to make the top line look good.

Operator:

And our last question will come from Travis Steed from BofA Securities.

Robert Ford:

Yes. I don't think that we're seeing kind of any kind of catch-up or pent-up or anything like that. I think what you're seeing here is more -- at least I can speak for our portfolio. I just think you're seeing more adoption of the technologies, right? So I think there was some disruption. We've talked about it in some parts of some procedures that require a little bit more preop planning or imaging before and imaging after. I mean I think those -- that combined with the labor shortages that occurred 2022. I think that, that probably slowed a few of them down, but I don't think that there was a bolus returning as a result of that.

Michael Comilla:

Okay. Thank you, operator, and thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on Abbott Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott.

Robert Ford:

Thanks, Mike. Good morning, everyone, and thank you for joining us. Today, we reported third quarter adjusted earnings per share of $1.14. Based on our performance through the first 9 months of the year, we raised the midpoint of our full year adjusted earnings per share guidance and narrowed the range to $4.42 to $4.46. Organic sales growth on the base business, which excludes COVID testing, increased double digits for the third consecutive quarter and was led by double-digit growth in all 4 of our major businesses.

Joshua Jennings:

Congratulations on another strong quarter. Robert, organic revenue growth nearly touched the mid-teens range for the core business in 3Q, and realize we've recently talked about the sustainability of the momentum generated this year. But I think investors would like to hear about your confidence level in the core business, delivering high single-digit organic revenue growth and solid margin expansion in 2024 off the 2023 comp that's only retire over the course of this year.

Larry Biegelsen:

Just to be clear, it's Wells Fargo. So Robert, China has been in the news a lot. Love to hear your thoughts on how you're thinking about China, big picture. How is Q3? And what are you expecting from the VBP impact in the EP business and from the anticorruption initiatives we've been hearing about there.

Operator:

Our next question will come from Robbie Marcus from JPMorgan.

Robert Ford:

Sure, Robbie. Obviously, this has been a hot topic over the last couple of months. And let me just start off by saying with 20-plus years of experience in diabetes. I think every time new therapies, new technologies come to address this disease in this population, I think it's all great. And these are great new medications that are going to have very positive effect on the treatment of diabetes. There's obviously a lot of investor -- thanks to Robbie, about the potential impact of these drugs and what's going to happen to different industries and different companies.

Robert Marcus:

Really appreciate that, Robert. Maybe if I could sneak 1 more in on CGM, something that I think has really flown under the radar with the GLP-1, noise is you've recently gotten type 2 basal coverage in France. You have it in the U.S. and Japan as well. Just thinking about future opportunities in countries to approve type 2 basal, which could materially expand your reimbursed coverage opportunity around the world. How should we think about that? And how do you size that opportunity over the next few years for Abbott.

Operator:

Our next question will come from Danielle Antalffy from UBS.

Operator:

Our next question will come from Joanne Wuensch from Citibank.

Robert Ford:

Sure. We never believe that we were going to recover all the share in a quarter, right? So the way this market works and the way we've kind of modeled it out is that we'll showing month-by-month kind of sequential increases in our market share.

Joanne Wuensch:

M&A, particularly given pullbacks on valuations?

Operator:

Our next question will come from Vijay Kumar from Evercore ISI.

Robert Ford:

Yes. So the way this is kind of working out, right, this was announced recently, I think proposals are due within the provinces that are going to be bidding, Vijay, I'd say, in the next 30 days, right? And then there's like another 30 days, 30 to 60 days to evaluate all the proposals.

Vijay Kumar:

That's helpful, Robert. And my second one, I know you touched upon PFA. I think Abbott's launching their own PFA at some point in fiscal '25, '26. How should we think in the interim, right? I think your peer had pretty robust assumptions for what percentage of procedures would be PFA. Is Abbott concerned about share loss when you think about that medium-term time frame? And are there offsets to it, right? When you haven't touched upon Lingo. I think previously you had said Lingo could be as big as Libre, where will be on Lingo launch?

Operator:

Our next question will come from Matt Miksic from Barclays.

Robert Ford:

Sure. On your question on TriClip, yes, so we submitted to the FDA for review earlier this year. It's my understanding that CMS is going to review this in parallel also. I think I made a comment to this last time, we'll likely see a panel review here, and I don't think it's unexpected to be quite honest with you. A lot of the novel therapies go through an advisory panel process with TAVR, saw with MitraClip. So I expect that to be the case here for TriClip. Right now, the expectation of that panel is I said the date that we think we have right now is January but we'll have to see how that occurs.

Robert Ford:

Yes, it's my understanding here that we'll see a launch sometime by the end of this year with Tandem. And we're excited about that. There's about 150,000 to 200,000 new pump users globally. So I think this is an area that we've historically haven't been a player in, and now we will be a player in. We've launched an AID system in Europe, let's say, more towards the end of last year into this year, and I was reviewing the results of the team.

Operator:

And our last question will come from Jayson Bedford from Raymond James.

Robert Ford:

Sure. Yes, there's visibility. I mean, the visibility is in the first half of 2024, then I'd say no, but we do have a plan to be able to kind of drive gross margin and gross margin expansion. I'd say as you look at it into next year, Jayson, there's really a couple of elements here that will be tailwinds for us. I'd say lower commodity costs, that for sure. And those were pretty big headwinds for us in, I'd say, in 2022 and 2023.

Philip Boudreau:

Jayson, relative to 2023 COVID testing sales forecast full year is about $1.5 billion here.

Michael Comilla:

Thank you, operator, and thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Second Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott.

Robert Funck:

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis.

Joshua Jennings:

Congratulations on another strong quarter. The core business is generating nice momentum. Organic sales growth accelerating, earnings power increasing.

Robert Ford:

Sure, Josh. Yes, it was a very strong quarter, broad-based growth. And -- but listen, I still think that we could do better, and I know my team feels that also. If you go back a little bit in terms of a couple of years when COVID was happening, we always said that there was a great hedge share for us, right? And when COVID would subside, we would have a strong base business and making investments.

But the base business is doing really well. And I'd say, from a geographic perspective, it was pretty broad-based also across all geographies:

U.S. Europe, Asia. Obviously, China reopening was really positive, too. But it wasn't like this over-indexing in our growth rate with China opening. I mean if you look at our growth rate, excluding China, it was -- it only added about 1 point of growth to that 11.5%. So it's pretty broad-based across the market.

Operator:

And our next question will come from Larry Biegelsen from Wells Fargo.

Robert Ford:

Sure. Well, that group of products, they did pretty well in the quarter. Combined, those products, they grew about 40%, Larry. If you take the Q2 run rate and annualize it, it's annualizing to about a little over $650 million. I expect to do better than that in the year as the next quarters progress.

Operator:

Our next question comes from Danielle Antalffy from UBS.

Operator:

Our next question will come from Vijay Kumar from Evercore ISI.

Joanne Wuensch:

Briefly, can you sort of tear apart the Electrophysiology growth rate of 17%? How much of that is in the U.S.? How much of that is oUS? And what do you think is driving that? And then I'll just jump in with my second question, which is, if you have reclaimed about 75% of the Pediatric Nutritional business, can you get to 100%? Or do you think you're more or less where you can get to?

Robert Ford:

No, I kind of made my team, and I also kind of said publicly that our target here is to get back to 100% of our market share by the end of the year. A big driver of that is the manufacturing and the manufacturing kind of ramp up. And we started the manufacturing -- reopened the manufacturing process in July for specialty of last year and August and September for non-specialty. So that manufacturing has provided us the supply we need to fulfill the demand. We've got a very strong brand in Similac, and you're seeing that.

Marie Thibault:

I wanted to ask a fairly high-level one here on the Diagnostics business. Now that COVID testing is sort of behind us, Core Lab was really strong this quarter. I just want to kind of get an update on the areas of investment and growth in Diagnostics testing today. The Alinity rollout, how that's progressing? And whatever else, in terms of tests or trends, we should be paying attention to now in Diagnostics?

Operator:

Our next question comes from Matt Miksic from Barclays.

Matthew Miksic:

Great. And then the -- just on the pipeline. We hadn't heard much about what was happening with CSI post the acquisition, and, obviously, important strategic fit and add around peripheral and their platforms there. But they did have this IVL program that was kind of in process. I'm just wondering if you're ready to comment on where that is or when we might start to hear more about the progress there or your expectations for that?

Michael Comilla:

Operator, we'll take one more question, please.

Jayson Bedford:

Maybe just on margins. It looked like there was a nice lift to base business' up margin. And I'm just wondering, is this all related to the improvement in Infant Nutrition? Or are there other factors at work? And then maybe just as a bit of a related question. You talked about the inflationary impacts on gross margin. I think we all understand that. But I'm wondering if you're seeing input costs actually start to come down now? And if so, when will we start to see that impact the P&L?

Michael Comilla:

Thank you, operator, and thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's First Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participants' questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission.

Scott Leinenweber:

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we'll take your questions. .

Larry Biegelsen:

Congratulations on a nice start to the year. So Robert, you raised the base business organic growth and held EPS flat despite lower expected COVID testing sales. Can you please provide more color on the trends you're seeing across your businesses and geographies that allowed you to maintain EPS? And how does that feed into 2024? It sounds like you're thinking more about the base business, ex testing going forward? And I have 1 follow-up.

Larry Biegelsen:

That's super helpful. Just for my follow-up, Robert, Cardio and Neuro was strong this quarter at about 8.5% organic. Can you talk about the trends there and the sustainability of that? There's still concerns in the investment community about your EP business with PFA competition coming.

Operator:

Our next question comes from Josh Jennings from Cowen.

Robert Ford:

Sure. I mean I think as I said to Larry, I mean, I think it starts with the top line, right, and being able to drive that top line and especially the top line coming from our med device portfolio, which obviously has margins that are accretive to the overall company. So looking at the growth drivers there, whether it's the Structural Heart portfolio, the EP portfolio, Libre and Diabetes or recovery in Nutrition. I mean, I think these are all important areas of top line growth that will drive accretion to our margins.

Joshua Jennings:

I was on mute. I apologize. I wanted to just, related follow-up, you already touched on taking price, Rob. And would love to hear mostly on the device business, how pricing is shaping up in 2023. But also if you could touch on any other businesses where price is turning into a tailwind for your business that would be great to hear.

Robert Marcus:

Great. Congrats on a nice quarter here. Maybe to start, Robert, we just saw you get approval earlier this week for Medicare reimbursement for type 2 patients that use basal insulin for Libre 3. Clearly, a really big opportunity. But would love to get your thoughts on, first, how this impacts Abbott. And then broader how you see improving reimbursement, both in the U.S., around the world evolving over the next few years and the benefit it could add to the Libre business?

Robert Marcus:

Great. And maybe a quick follow-up here. Structural Heart had been challenged throughout the pandemic, and here we are with a nice double-digit growth quarter from you. Can you speak to -- is this the start of a strong recovery here? Anything in the quarter that feels durable to you? And then also, you had some, in my opinion, good TriClip data at [ ACC ] earlier this year. Your thoughts on how that might evolve over the year as well.

Frederick Wise:

Sorry for my scratchy voice, a little bit. I was hoping we could talk about Diagnostic broadly ex COVID, you're thinking about what's next, broadly for the franchise as COVID wanes. But more specifically, we haven't had an [ Alinity ] update in a while. I know this is a multi-platform, multiyear rollout process. Where are we in that process? How much more do we have to go? And any other diagnostic perspectives you'd want to share?

Frederick Wise:

Okay. That's very thorough. As a follow-up, I wanted to focus on Nutritional, but I'm going to also sneak in a quick CardioMEMS as well. Nutritional, it's great to see the 10% performance, the strong U.S. recovery. It sounds like you're making solid progress. What's next -- when do we get back to normal in your view? And what is the new normal growth? And just to sneak in the CardioMEMS, jeez, I've been watching the CardioMEMS story, Robert, for over a decade back to St. Jude days. And I always thought it was great technology. What's Abbott's special sauce that you're driving such a superb performance? And where do we go from here with CardioMEMS. So why -- what's happening?

Vijay Kumar:

Congrats on the [indiscernible] this morning, and I had 1 back, Robert, on this base EPS question. I think based on some of the numbers you disclosed, it looks like the base earnings EPS is about $4.10 in fiscal [ '23 ], excluding COVID testing. Assuming base EPS grows double digits, historical average algorithm, we're looking at something like 450-ish for fiscal '24. The variables here are of endemic COVID testing run rate, [ what if ] inflation coming down and capital deployment assumptions, right? So if you could just parse out, is $250 million, $300 million like a right number for endemic COVID testing. And what is your current inflation -- total gross inflation that Abbott has taken a hit on versus prepandemic? And what part of that inflation is coming down? Or could there be some pricing offsets in that cap deployment?

Vijay Kumar:

Understood. And then sorry, Robert, capital deployment, I think CSI acquisition, people thought was on the smaller side. How are you thinking about capital deployment? And then one on product side. The Libre U.S. number, 50% was a big number. Is there anything from a competitive perspective that's going on? Is Abbott gaining share? Or is this the underlying market growth?

Vijay Kumar:

On cap deployment, cap deployment.

Operator:

Our next question comes from Joanne Wuensch from Citi.

Robert Ford:

Okay. I'll take the EPD question here. Listen, I think that this is a -- we've been doing this for many years here, I would say. I think we've carved out this, I talked about this, nice little space for us in the global pharma market, which is, I call, fast-growing emerging markets with a branded generic focus. There's a way of how to operate in this. It's not operating the way you would operate with proprietary pharma. And it's different from operating in pure generics.

Robert Funck:

Yes. So Joanne, in terms of kind of net interest expense for the year, we're forecasting a few hundred million dollars there. And then you had a question on share buybacks. As you know, historically, we do buybacks to offset dilution. And so we did some buybacks in the first quarter, again, a few hundred million dollars' worth of buybacks.

Operator:

Our next question will come from Danielle Antalffy from UBS.

Robert Ford:

Sure. I think it was double-digit growth in the quarter. I think what we saw there was continued international momentum, and I think that's a great opportunity for us is to be able to expand the technology internationally. We have a new manufacturing site that we invested in, that's up and running, and I think that will give us the opportunity to be able to expand this more internationally. So I think that's a great growth driver for us.

Danielle Antalffy:

Okay, that's great. And then on Amulet, the question I have there is really about where you think you are in the launch. I mean that's a product that very high growth market. But let's be honest, you launched, I think, that product during Omicron right? So just curious about how you would characterize where you are in the launch of Amulet.

Operator:

And our last question will come from Matt Miksic from Barclays.

Robert Ford:

Yes. I guess the way I'm seeing this, and I've traveled quite a bit during this first quarter, and I made the statement in my opening remarks. I sense in talking to systems and talking to consumers, again, not just in the U.S., but around the world that there is this focus now of, okay, COVID is behind us, but I want to stay healthy, I want to get healthy, and I want to stay there. So as it relates to procedures, what I'm seeing is people say, listen, I've been putting this off not because of COVID, not because there's some sort of backlog. But I've been putting this off for a couple of years, I want to go and address this. Or on the consumer side of our products, whether it's EPD or Nutrition, we're seeing, again, a lot more focus on, okay, I'm going to spend some of my disposable income on these products, on these health products.

Scott Leinenweber:

Thank you, operator, and thank you for all of your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participants' questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission.

Scott Leinenweber:

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we'll take your questions.

Robert Funck:

Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis, which excludes the impact of foreign exchange. Turning to our results. Sales decreased 6.1% on an organic basis in the quarter. COVID testing-related sales were $1.1 billion in the quarter, which, while stronger than the forecast provided back in October, reflect a year-over-year decline versus sales in the fourth quarter of the prior year. Excluding both COVID testing-related sales and U.S. infant formula sales that were impacted by manufacturing disruptions last year in our Nutrition business. Total Abbott sales increased 7.1% on an organic basis in the fourth quarter and 7.4% for the full year 2022.

Robert Marcus:

Robert, maybe to kick it off, I appreciate the guidance, but there's a lot of moving parts through the different business lines with macro involved with a lot of new product launches involved. Maybe you could just build up how we should be thinking about how you came up with the guidance range on both the top and bottom lines given all the moving parts?

Robert Funck:

Yes. So if you think about the kind of the cadence of our business for 2023, it really starts with the top line and some of the things that Robert kind of talked about. First, we have a lot of the new product launch activity, especially in our medical device businesses. You got products that either launched last year, we'll be launching this year. I'm sure we'll talk about some of those on the call today. So you'll see the impact of those launches kind of grow over the course of the year, kind of feather into that top line.

Larry Biegelsen:

Robert, I feel compelled to ask about Libre again, just given how important it is. So maybe I'd like to hear from you the outlook for 2023. How should we think about worldwide growth? Can it exceed 20% this year? And can you talk about international, where you've been negatively impacted by the supply issues and the transition to Libre 3 in Germany, when do you expect those issues to be resolved? And just the growth drivers like basal and the vitamin C, resolution, what are some of the growth drivers to look forward to this year for Libre? And I had one follow-up.

Larry Biegelsen:

That's super helpful. Just one brief follow-up. You talked about being excited about the TriClip opportunity at JPMorgan. I think it was just a month. I know it's limited in what you can say because you're presenting the TRILUMINATE data at ACC. But how are you thinking about that opportunity relative to mitral? Do you still -- and do you still expect approval in the U.S. by year-end '23?

Joshua Jennings:

Robert, I was hoping just to follow up on Larry's question just on Libre, but just thinking more kind of in the out years and this $10 billion target that you've set. I think maybe just -- I think you outlined everything for 2023, probably holds true for over the next 5 years. But just if you could reiterate your confidence we're not in that $10 billion out-year target? And just you expect consolidation between pump and CGM companies. And maybe it would be just great to hear strategic rationale of whether a combined pump CGM offering under one roof would be advantageous for either Abbott or another company?

Robert Ford:

Sure. Well, I mean, I guess on Libre, to your question on how to get to $10 billion by 2028, I mean, the math will say 15%, right. How do you get 15%. I mean there are real 3 key areas, and I talked a little bit about them. But I'd say, first of all, it's to continue to have a dominant share in the heavy insulin user segment. We have that today with the non-pumpers with the MDI both in the U.S. and globally, internationally. So the real focus there becomes, okay, how do we focus now on the pumper segment and the connectivity over there. And like I said, I think we'll do that with a little bit of catch-up with Libre 2 in terms of what is currently offered in the market.

Joanne Wuensch:

I have 2. The first one has to do with Nutrition. And if you could outline where the company is in terms of the recovery and when do you think it will return to growth? And then the second question has to do with the use of cash, what are your thoughts on it and where you are on share repurchases?

Joanne Wuensch:

Use of cash and whether -- where would you stand on share repurchases?

Operator:

And our next question will come from Vijay Kumar from Evercore ISI.

Robert Ford:

Well, I'll let Bob talk a little bit about some of the potentially other macro factors. But the ones you've just mentioned here. I mean China, it's an important market for us, Vijay. It's an important growth market, and it's good that it's moved to a more kind of reopening play. I think that has not only a big impact for us in China, where we've got a strong position. I mean, we're not overly reliant, I'd say it's about less than 5% of our total sales. But nonetheless, it's an important kind of growth market for us.

Vijay Kumar:

Understood. And then Bob, one for you on the gross margins you're at 56%. That's a step down year-on-year. When I look at pre-pandemic, you guys were at 59%. Is there a simple bridge Bob on how much of this has been inflation, you did spoke for hedging impact. Is that all hitting your gross margin line? And why shouldn't inflationary pressures improve? And when can we start seeing gross margins creep back up to pre-pandemic levels?

Operator:

And our next question will come from Travis Steed from Bank of America.

Robert Funck:

Yes. So yes, on the gross -- on the operating margin, yes, we're around 22% kind of where we were pre-pandemic. We're getting the high single-digit growth on the top line kind of in the -- excluding the COVID testing. We're getting leverage down the P&L, which Robert talked about, where we were able forward invest over the last couple of years. So we're going to get leverage in the expense area, and that gets you to around 22% op margin.

Travis Steed:

Okay. That's helpful. And a couple of product questions on EP. I think you mentioned the new EP catheter mapping system. I know that was new, maybe I missed that in the past. I'm curious how you're thinking about pulsed-filed ablation and the impact on your EP business. And then the other product question was on Libre. The Vitamin C, is that on Libre 2 or Libre 3 just want to understand the pathway to get vitamin C on Libre 3 and the timing there?

Operator:

And our last question will come from Matt Miksic from Barclays.

Robert Ford:

Sure. I mean I think those 5 products that I discussed on the last call, and we talked about them exiting at an annual run rate of [ 500 ]. They actually exited at a run rate of [ 550 ] and they grew around -- they grew around 100%. So I expect those 5 products to kind of have maybe not 100%, but pretty high growth rate in next -- in this year.

Scott Leinenweber:

Thank you, operator, and thank you for all of your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Third Quarter 2022 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participant's questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission. I would now like to introduce Mr. Scott Leinenweber, Vice President, Investor Relations, Licensing and Acquisitions.

Robert Marcus:

Great. Congrats on the quarter. Robert, maybe we could start, we're already towards the end of 2022. And I think people's attention are really shifting to next year. Just with so many moving pieces, both in revenues and down the P&L with currency and inflation and COVID testing assumptions and so on. So I was hoping sometimes at this point in the year, you might give us some early thoughts on next year. Anything you can provide to help us narrow the range of outcomes would be great.

Robert Marcus:

That's really helpful. And maybe one for Bob. The fourth quarter implied EPS guide came in a little bit lower than the Street. We also saw a much bigger FX headwind. So how should we be thinking about the impact to the bottom line in third quarter? What's implied in fourth quarter? And if we start thinking about our models for next year, Robert gave us the top line considerations. How do we think about FX at current rates heading into next year?

Larry Biegelsen:

Two product-related questions for me. First, I wanted to start with Libre. A lot going on there, Robert. Obviously, the exciting news this quarter was the type 2 basal LCD from CMS. So I'd love to hear your thoughts on that opportunity. Our back of the envelope math suggests that could be a $1 billion opportunity for Abbott in 5 years. I'd love to hear if you agree. And just lastly, on the vitamin C timing of that resolution and any color -- any additional color you want to provide on Libre. And I did catch in your prepared remarks, you talked about non-insulin patients that was interesting. And I did have one follow-up.

Robert Ford:

Yes. So it wasn't unexpected. Every time at TCT, there's always an expectation of a landmark study or an approval. So that wasn't unexpected. They got approval for DMR. That's one of the smaller indications, about 1/3 of the market. We've competed with PASCAL internationally already for a couple of years. I expect to see some trialing in the U.S. And the question is going to be how much it is going to stick.

Operator:

And our next question will come from Joanne Wuensch from Citibank.

Robert Ford:

Sure. Well, I mean, I think we've talked about how important the Structural Heart portfolio was for us even when we go all the way back to the acquisition of St. Jude and really building this franchise. So we've been intentional about doing that. MitraClip had a good quarter. We had a growth of about 6%. That was impacted a little bit in the U.S. but we had double digit -- almost double-digit growth internationally.

Scott Leinenweber:

Yes. I'd say, Joanne, as Robert mentioned, it is kind of the remaining basket of that Structural Heart business that's driving a lot of the growth there, Amulet, being a component of that. Launched in the U.S. continues to go very well, nice traction. In particular, I would say, in the early adopter accounts as it started late last year. Our share in those accounts is around 40% now at this point.

Joanne Wuensch:

As my follow-up question, in Nutrition, one of the things we talk with investors about is, how do you think about the recovery in that segment once your supply is back up? Do you see yourself just returning to growth of the market rate or taking a good percentage of the share back? Or any guidance you could give us remodel forward would be helpful.

Operator:

And our next question comes from Josh Jennings from Cowen.

Robert Ford:

Yes, I think that's -- looking at the market between government contracts and nongovernment contracts is something that we spent a lot of time this year doing because obviously, those government contracts, they're high-volume and they ultimately skew a little bit of kind of the run rate as we're trying to kind of run rate this. So if you look at our Q4 number, our Q4 number that we're forecasting is really what I would call an endemic state, right?

Joshua Jennings:

Excellent. Just one follow-up on Libre. You mentioned just the path to achieving full iCGM status and understand there's a segment of the CGM that will open up for Libre, but I was wondering if you could just share your thoughts on the potential impact to clinician sentiment towards accuracy of the platform, payer sentiment in terms of whether there could be any formulary prioritization decisions considering the pricing? And then on the other side of that, how are you -- any new thoughts on pricing for Libre 3 particularly in this inflationary environment.

Vijay Kumar:

Robert, maybe my first one for you. The headline organic ExCo within 3Q was 3%-ish low singles. When you back out some of these the supply chain impact, I think you mentioned Germany and Nutrition, what was the underlying organic growth? And when can we get back to an environment where there is no mismatch in the headline organic and underlying rate? It's a clean number. So maybe just talk about that cadence to normality.

Vijay Kumar:

That's helpful. And then maybe one on the financial side. I think when gross margins were down Q-on-Q. I'm wondering what was the FX incremental inflationary impact. I think Robert Funck mentioned $0.10 of FX impact in Q4. Should we annualize that to $0.40 of FX impact for next year? I'm not sure how to think about FX and inflationary impact for next year. And we didn't talk about Lingo. Shouldn't that be an incremental driver here and not '23?

Robert Ford:

On your question on Lingo, Vijay, we have factored in a launch into next year. We have not factored that launch here in the U.S. So it is an international launch. It's a different business model, as I talked about it, more of a direct-to-consumer wellness subscription model. And we're on target here to come out of the gates to that in Q1. We are going to be launching into what I would call a little bit of a challenging environment.

Scott Leinenweber:

Operator, we'll take one more question.

Travis Steed:

I did want to ask on China, how do you see the recovery shaping up there. There's going to be another headwind next year and any new VBPs that you see coming up in China?

Travis Steed:

No. That's helpful. And I did want to ask about the M&A environment, too, since it hasn't come up yet on this call. And also kind of how it relates to your thinking of the device growth longer term, if you're still able to grow at the high end of med tech. And if the Fab 5, as you called, is enough to do that? Or if you need to augment device growth with M&A over time?

Scott Leinenweber:

Thank you, operator, and thank you for all of your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott Second Quarter 2022 Earnings Conference Call. [Operator Instructions]

Robert Funck:

Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis, which excludes the impact of foreign exchange.

Robert Marcus:

Congrats on a good quarter. Robert, maybe to start -- maybe I'll get a little greedy here since we're only sitting in July, and half of '22 is done. But I think the focus for investors is quickly shifting to next year, and there's a lot of moving pieces going on in 2022, a lot of assumptions we have to make in the go forward of 2023.

Robert Ford:

Sure. Well, I think there's a lot of uncertainty for everybody regarding 2023. I think you've kind of highlighted some of the aspects as it relates to our business here. But the macro environment still is pretty challenging, and I don't think it's unique to us.

Robert Marcus:

Great. Maybe just as a follow-up to that, Robert. You were talking about the cost structure at Abbott, and this is something we're hearing from basically everyone, that inflation, supply chain, et cetera. You're in this enviable position where you've probably grown operating margins more than anyone else in medtech since the start of COVID. A lot of that has been from the benefit of COVID testing sales, which are at healthy margins and still healthy reinvestment against that.

Robert Ford:

Yes. I always appreciate you like to get at the next year's number in a couple of different ways, Robbie. I guess, I would say on the cost structure piece, I don't necessarily fully agree with you, the way you characterized it in terms of COVID being the ultimate driver here.

Joshua Jennings:

I was hoping to start with a follow-up on the raise of the 2022 EPS guidance floor and just better understand the puts and takes. I think there are some questions around the $0.30 beat in 2Q and the $0.20 increase, again, realizing that it is a floor.

Robert Ford:

Sure. Yes. I think you'll see -- I mean, we've seen a lot of companies kind of beat their Q2 and either maintain their guidance for the full year or actually reduce it. And we looked at our numbers very carefully, and we basically looked at the strength of our base business.

Joshua Jennings:

And just one follow-up on the Medical Devices business, and it's encouraging to hear you talk about kind of quick improvement in the back half, and you did have that tough comp in 2Q.

Operator:

And our next question will come from Larry Biegelsen from Wells Fargo.

Robert Ford:

Yes, I can, Larry.

Larry Biegelsen:

That was very comprehensive. Really appreciate it. Just for my follow-up, Robert, I know I've asked this a lot on recent calls, but you're sitting on a lot of cash. And we have seen a recent re-rating of valuations.

Robert Ford:

Well, on the COVID testing side, I mean, I guess, we'll have to kind of see how things play out right now. I mean, I guess, that was the same comment last year. And as I said, we're selling more. We're probably selling more what we sold more in the first 6 months here versus last year.

Joanne Wuensch:

I'm going to put them all upfront. Some questions regarding your Structural Heart franchise. Could you give us sort of a state of the union or update on where you are on some key products, MitraClip, Portico and Amulet?

Robert Ford:

Sure. On the Structural Heart side, I talked about how this is such an important division for us and the focus that we've had there. So I'd say on Amulet, we've had a very good quarter in Amulet aligned to the trends that we were hoping for. We've got an expansion of the amount of accounts that are using the product and also an expansion on the amount of implanters that are completing and performing this procedure.

Robert Ford:

Sure. Well, listen, we've always kind of had a balanced approach for deploying our cash. We're mindful of our cash on hand. We're investing in the dividend, and we've been growing that dividend, and that's an important part of it.

Vijay Kumar:

Congrats on a strong 2Q here. One on this guidance here, when you look at the base floor for fiscal '22, $4.90, you guys did close to $3.15 of earnings in first half, so the implied earnings for back half was -- the floor is $1.74. That's annualizing to about $3.50-ish.

Robert Funck:

Vijay, this is Bob, I'll take that call -- question. I think it's -- I think using an implied kind of fourth quarter exit rate as an indicator kind of how we're thinking about '23 probably wouldn't be prudent at this point. There's obviously a lot going on in the macro environment that warrants further monitoring and assessment.

Vijay Kumar:

That's helpful. And maybe one last one. With the second half base business guidance mid-single digit to high single digits, if I look at 2Q ex China and ex Nutrition, the base business did north of 7%, which is in line with the high single sort of trajectory that investors have baked in. The back half of mid-single to high single...

Scott Leinenweber:

Vijay, I would just say, as Bob said in his prepared remarks, excluding Nutrition, we expect high single digits for the kind of remainder of the businesses to your point. So the math you're doing there is right.

Operator:

And our next question will come from Travis Steed from Bank of America.

Robert Ford:

Yes.

Robert Ford:

Yes. Listen, the commitment to grow the operating margin is always there. We've -- we always shoot for that growth. You had a big if there, and that's the big if, right, if the conditions remain the same.

Robert Ford:

Yes. I think we made an announcement about the partnership several -- about 1 month, 1.5 months ago. So yes, that's with Ypsomed, a local European manufacturer, and another partner. So yes, our target is to be able to launch that by the end of the year in Europe. .

Operator:

And our last question will come from Jayson Bedford from Raymond James.

Robert Ford:

Sure. Well, as I said, we restarted in July 1, and we began production of the specialty formulas. The production of the Similac, which we call our more base formula, I mean, we're very close to that, Jayson, is what I would say. I don't want to necessarily kind of put an exact date here, but we're not talking months, we're not talking weeks. So we're very close there, and we obviously have a team that's ready to go and to ramp up.

Jayson Bedford:

So Robert, when we look at '23 for USP, is it -- the debate just around market share, and I'm assuming from a manufacturing standpoint, you should be clean in '23.

Operator:

This concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's First Quarter 2022 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participant's questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbot's expressed written permission.

Scott Leinenweber:

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we will take your questions.

Robert Ford:

Thanks, Scott. Good morning, everyone, and thank you for joining us. Today, we reported results of another strong quarter. Earnings per share were $1.73, reflecting more than 30% growth compared to the prior year. Sales increased 17.5% on an organic basis in the quarter, led by double-digit growth in Medical Devices, Established Pharmaceuticals as well as Diagnostics, both with and without COVID testing-related sales.

Operator:

[Operator Instructions] And our first question comes from Robbie Marcus from JPMorgan.

Robert Ford:

Sure, Robbie. I think you've been on these calls for a while. We rarely raised in Q1, I would say. And despite that, I mean, we've had a great start to the year as pointed out. And there's a lot of good things going on at the company. We talked a little bit about procedure recovery in the comments. We've seen good recovery in our device portfolio, especially in cardiovascular, seen routine diagnostic testing improving albeit a little bit slower than what we've seen in devices, but definitely the trend of recovery is there. .

Robert Marcus:

Great. And maybe as a follow-up, I think a lot of investors are focused on the go forward, realizing that January and February weren't the strongest months due to some of the elevated Omicron levels. So we heard Johnson & Johnson yesterday talk about reaching pre-COVID volume levels in April. It sounds like you exited and continue to see strong growth coming out of the quarter and into second quarter. I was hoping maybe you could give us a little more color on just the volume trends you're seeing, particularly in devices and diabetes, which was one that missed the street a little bit in the quarter? And how you're seeing the geographic spread and any differences there?

Operator:

Our next question comes from Vijay Kumar from Evercore ISI.

Robert Ford:

Sure. Well, I mean I think you hit on the key points there. I mean inflation -- additional inflation pressures is impacting some of that. We've got a couple of hundred million dollars that we've contemplated throughout the rest of the year in terms of friction on supply chain costs, input costs, freight and distribution.

Vijay Kumar:

And then one on Libre. Sequentially, your revenue has declined. And I guess my question is you've been adding, I think, a couple of hundred thousand new patients starts. Is that new patient starts changing at all? How should we think about the incremental reimbursement in Japan? And was the seasonality or what drove the sequential Libre revenue trends?

Operator:

Our next question comes from Josh Jennings from Cowen.

Robert Ford:

Yes. On your question on MitraClip and Amulet, so I'll talk a little bit about MitraClip. I'd say the progression of MitraClip in the quarter was very similar to my commentary on our cardiovascular procedure, right? So we obviously had high COVID case kind of impacted but started to really accelerate growth towards the end of February and into March. So as those cases came down, we saw the improving growth rate.

Operator:

Our next question comes from Larry Biegelsen from Wells Fargo.

Robert Ford:

Sure. Well, we had a really strong quarter regarding testing, Larry. And I think to answer your question, I think you have to kind of look at what's going on a little bit right now in the U.S. and internationally. In the U.S., we saw cases decline pretty significantly in February. But I think we all agree that some of those cases that are being reported aren't covering all cases because of the use of the at-home testing systems, right, that are currently available. So I think that's part of the process that we're seeing as testing -- as we're moving more into this kind of endemic state.

Robert Ford:

Sure. On the M&A side, yes, I mean, I'll sound like a broken record here, Larry. I mean we're always looking. We're always studying. We're always looking at ways to be able to add to the company and add to our business, but it needs to be strategic. And from that perspective, I don't want to dilute our growth rate. I don't want to dilute our profiles. We need to make sure that we're looking at assets that will be additive to our growth into our profile. So at least the top line. So that's always there, and we're always looking.

Joanne Wuensch:

I'd like to circle back a little bit to the nutritional business. A lot of the feedback that I get from investors is some level of concern regarding brand name, brand damage, if you will. And I'm curious your thoughts on what it would take to sort of revamp this business up?

Joanne Wuensch:

Yes.

Joanne Wuensch:

And as a follow-up, forgive me for asking it this way. What's next? I mean, I don't think we're going to be talking about COVID testing in a year. I hope we're not going to be talking about it. But how do you see the sort of forward momentum of the company? Big picture?

Operator:

Our next question comes from Travis Steed from Bank of America.

Robert Funck:

Yes. Travis, I'll take the question. This is Bob. So as we said back in January, we did incorporate a sizable impact into our 2022 guidance, which was about $500 million on the gross margin line. And as Robert mentioned, we've now incorporated an additional $200 million in gross margin impact in our current guidance. The biggest impact we're seeing is really on logistics and commodities and some other manufacturing inputs. It's not so much on the labor front. Labor is a smaller portion of our total product cost. So it's really on the commodities.

Travis Steed:

And then given your presence in China, I would just kind of love to hear your thoughts on both China from a procedure standpoint and also a supply chain standpoint, just given how much of the business you have there? And any thoughts on the progress you're making with Libre 3 and the FDA would be great, too.

Robert Ford:

Sure. Like I mentioned in the call, we filed as an ICGM. I don't have much to kind of update you there regarding that. I will say that we have moved Libre 3 in Europe into -- from kind of more of a limited rollout in Germany a while back to kind of more of an accelerated conversion from Libre 2 to Libre 3.

Operator:

Our last question will come from Matt Miksic from Credit Suisse.

Operator:

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

Operator:

Good morning and thank you for standing by. Welcome to Abbott's Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participant's questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's express written permission.

Scott Leinenweber:

Good morning and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we will take your questions.

Robert Ford:

Thanks, Scott, and good morning, everyone, and thank you for joining us. Today, we reported another strong quarter and highly successful year for Abbott. For the year, we reported organic sales growth of 23% and ongoing earnings per share of $5.21, which reflects more than 40% growth compared to the prior year and exceeded the original EPS guidance we set last January.

Robert Funck:

Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis, which excludes the impact of foreign exchange.

Operator:

[Operator Instructions] And our first question comes from Larry Biegelsen from Wells Fargo.

Robert Ford:

Sure, Larry. I'd say at the beginning of the year, you're coming into the year and you're trying to find the right balance, right? You're trying to find the right balance on your long-term growth opportunities that Abbott has, which I think are pretty unique, and balancing that with, I'd say, probably some uncertainty. And I'd say every year, there's a little bit of uncertainty at the beginning of the year, but I'd say this year is probably a little bit more than usual. So you're trying to find that balance, and I'm pretty sure we'll talk about some of the long-term growth opportunities.

Larry Biegelsen:

That's super helpful. Robert, just for my follow-up, Libre had another remarkable year. How are you thinking about Libre growth in 2022? And what are the drivers of that growth this year?

Robert Marcus:

I'll also add my congratulations on a nice quarter. Two for me. I'll ask them both upfront. First question, maybe you could spend a minute on cadence throughout the year. First quarter has a lot more COVID testing sales than we had thought but also implies somewhat of a different cadence than we have been thinking. So just top and bottom line, what are the impacts there? How is inflation, FX hitting throughout?

Robert Ford:

Well, your first question has got multiple subquestions there, Robbie. So let me take the first one, and then I'll go back -- so I can take the second one, and then I'll go back to your first one because it does contemplate some of the challenges on inflation that might be worthwhile spending some time just talking a little bit about also.

Robert Funck:

Okay. Yes. And Robbie, you actually kind of asked about currency and inflation. I'll cover currency first. I mean we saw the U.S. dollar kind of strengthen since the middle of last year, in particular over the last few months. And so as I said in my opening remarks, at current rates, that's about a 2% headwind on the top line for the year. We're going to see that -- a greater impact in the first quarter, around 3% and kind of -- and in the second quarter. And it'll get -- the impact will be a little bit less severe as we go -- kind of go through the course of the year into the back half of the year.

Operator:

Our next question comes from Vijay Kumar from Evercore ISI.

Robert Ford:

Sure, Vijay. So we made a decision to put a stake in the ground here and start talking about what we've always believed to be another opportunity, a sizable opportunity for Abbott, and that was really using the Libre platform that we had developed to look into other analytes, other areas. I talked about this recently, and quite frankly, we've talked about it several years ago also. And you referenced some of the analytes that we have been working on

Vijay Kumar:

That's helpful, Robert. And maybe my second question, in the balance sheet, I think you guys probably have over $40 billion of capacity right now conservatively. With valuations coming down, what kind of opportunities do you see? And one of the things that always frights me is Abbott is very large in diagnostics, #1, #2 in most of your end markets. If you look at diagnostics, liquid biopsy, cancer screening diagnostics is -- that's a massive opportunity, but I don't see Abbott having a stake in the ground in that area. Is that an area that would interest Abbott?

Operator:

Our next question comes from Josh Jennings from Cowen.

Robert Ford:

Sure. On your first one, I mean, like I said, we derisked, we fully funded, and we've got the potential upside for the COVID testing. If COVID testing in that scenario, which I think is highly unlikely, kind of falls off, then we'll have to obviously look at kind of the investments we're making and kind of make the adjustments that we have to make, especially as we start to move into 2023.

Robert Ford:

Got it. Got it. So listen, yes, we're in the beginning here. There's still a lot of opportunities, still a lot of underpenetration, whether it's internationally or type 2s. As I've said, key aspect here is to ensure your pipeline is relevant and is advancing. We've launched Libre 3 in Europe, and we'll be expanding that launch now globally.

Joanne Wuensch:

I have a big picture one and a specific one. Big picture, one of the themes of your keynote address at CES was the marriage of tech and medtech. And I'm curious if you could highlight how you sort of take that lens in terms of your product pipeline.

Robert Ford:

Sure. So yes, I've talked about this convergence. And quite frankly, we've seen this convergence occurring probably when we are doing the St. Jude acquisition and integration. And we started to set a lot of our portfolios to be able to connect to whether it's consumer electronics or cloud or other elements like that to ultimately be able to empower the consumer and just provide better solutions to ultimately improve outcomes.

Operator:

Our next question comes from Matt Taylor from UBS.

Robert Funck:

Yes. Matt, I'll take that. This is Bob. So we don't really think about earnings or at the bottom line base versus COVID. We manage the whole company. Obviously, the first quarter is benefiting from the majority of the COVID sales that we've got forecasted at this point in time, kind of our starting point. But we funded our growth throughout the rest of the quarter. So what you have is COVID testing, initial COVID testing sales in that first quarter, but our investments throughout the entire year. And so as we update our COVID testing each quarter, kind of as Robert talked about, that will fall through, certainly at a higher level than our overall margin profile.

Matthew Taylor:

Got you. Can I just have one follow-up on -- so on gross margin, you mentioned that there was about $500 million headwind from inflation and supply chain. And so I guess if we add that back in, you're getting to gross margins closer to 60%. Ex that, I was just wondering if you could talk about expectations for gross margins going forward longer term if things normalize. And if you could kind of see those levels in 2023, if things improve or just pluses and minuses on gross margins longer term?

Operator:

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a wonderful day.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott.

Robert Ford:

Thanks, Scott. Good morning, everyone, and thanks for joining us.

Robert Funck:

Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis, which is consistent with our previous guidance.

Operator:

[Operator Instructions] Our first question comes from Robbie Marcus from JPMorgan.

Robert Ford:

Sure. I think regarding COVID testing, we obviously -- since the start here of the pandemic, we've been learning a lot. And I think one of the things that as we developed our strategy for that, we always believe that the rapid test was going to be a kind of more sustainable part of the business. And I think we were pretty right there. I'd say the key thing that I -- and I made this in the comments, in the opening comments, the key thing that we learned over the last, let's say, couple of months here is that the vaccine is just an incredible tool for the value. It's had a huge impact on public health around the world.

Robert Ford:

Yes. I mean I think like I said, we're still in our process. We'll give our guidance in 2022 in January, like we always do, Robbie. And I want to see a little bit more in terms of how this pandemic is unfolding here, especially on the COVID side, but on the base business side. I think our base business, I would say is, we've been pretty good at forecasting our business both from a top line, from a margin on our base business.

Robert Hopkins:

Congrats on some solid execution. I just have 2 questions. And in the interest of time, I'll just mention them both upfront because the first one is pretty straightforward. The first question is just on Amulet, and I realize it's very early in the launch. But just would love your sort of top-down comments on how things are going. And maybe any metrics you can share in terms of perhaps like the percentage of your U.S. coronary accounts that are now active with Amulet. So we'd love some just color there.

Robert Ford:

Okay. Well, I'll take the Amulet and then I'll let Bob kind of talk to kind of the inflation supply chain. I mean I would just say it is manageable, but -- that we have a great team. So -- and I'll let Bob cover that.

Joshua Jennings:

Congratulations on the strong 3Q results. Hopefully, Rob, hoping to just hear maybe some puts and takes or help us understand some of the puts and takes of the 2022 operating margin. Clearly, COVID testing is going to be a factor, but any other drivers of operating margin expansion that you would highlight as we move into 2022 and then any other levers that Abbott is able to pull to drive earnings next year, depending on how the COVID testing environment plays out.

Robert Ford:

Sure. I mean I've always -- we've always said that Libre was a platform. We always -- I know every time you put out a number, it becomes like the next what is that and what's after that. And so we've launched Libre 2. It's doing very well in the U.S. We've launched Libre 3 in Europe, and we'll obviously be rolling Libre 3 out. Regarding your question on analytes, yes, I mean that is an area that we are intentionally looking at, which is using the platform of Libre, the manufacturing platform to be able to develop new analytes.

Larry Biegelsen:

Robert, I wanted to focus on the device side and the pipeline. Just starting with Amulet, to ask Bob's earlier question in another way, the surveys seem to be coming back, suggesting Amulet can take about 1/3 of the U.S. market and maybe even 20% next year. It's not easy for a second to market to become a market leader, but Amulet has a nice profile. What's your reaction to some of these consensus estimates for share? Do you think you can do better? And I had a follow-up.

Larry Biegelsen:

That's helpful. And then I wanted to ask about Portico and CardioMEMS. So with Portico, you have Navitor outside the U.S. Do you think you need that in the U.S. to really drive share? And do you think you can compete in the -- without an intermediate low-risk indication, which I don't think you'll have until about 2024. And just lastly on CardioMEMS, how are you feeling about the label expansion and the commercial opportunity, given the COVID impact you mentioned on the GUIDE-HF trial?

Cecilia Furlong:

Great. I wanted to ask about just your neuromod business, SCS as well as other deferrable procedures. And can you walk through just sequential trends in the quarter if you started to see recovery in some of the -- in some of your more deferrable procedures trending ahead of others and also how you're thinking about the ability to recapture deferred procedures that the majority of procedure recapture can occur in 4Q or staffing shortages. Do some of this recovery in procedure recapture flow into 2022?

Cecilia Furlong:

Great. And I wanted to ask you as well about your recent acquisition of Walk Vascular and really at a high level, can you talk about your outlook just for the underlying market growth in the peripheral space over the next several years versus some of the other high-growth target end markets, including diabetes and EP? And are there other areas you look to build out around your vascular business? And beyond that, too, just what's your current outlook for pursuing a PE indication for the thrombectomy system?

Operator:

Our next question comes from Vijay Kumar from Evercore ISI.

Robert Ford:

Okay. So regarding the Q4 forecast of $1 billion to $1.4 billion here, our capacity is we can do significantly more than that, Vijay, especially as we've -- Q3, we didn't have the full ramp-up, but now we're finishing this month. We'll be in full ramp-up mode. So we can do more than the $1.4 billion. I think the factor here that we're looking at is, as I said in the opening comments here in the first question, I continue to see the surveillance in the screening market to continue to increase. And that's with kind of Binax and ID NOW also.

Robert Ford:

Well, we're going to have to -- yes, so the DoD contract is actually a -- I think you're quoting the maximum amount of the contract, which I know is kind of what got a lot of the news headlines. But the contract actually has a minimum amount, which is significantly lower than that, less than $100 million. So it's really going to depend here on the DoD and the federal government in terms of their purchasing. We factored in a little bit of that minimum piece in Q4. And as I talk about going into next year, that will be a portion of the part that we will feel comfortable with adding on. So -- but it's a pretty big range, Vijay, in terms of what the maximum is and what the minimum is.

Robert Ford:

The comment was more about ensuring that we don't -- you don't see that there is a drop in investment. When you look at our profile in Q3 in terms of R&D, it's down to 6%. Our SG&A is down to 25%. So that comment was more about there's a little bit of a distortion factor here because of COVID, and we're going to make sure that we continue to invest in the business. If you look at the investment we've made, Vijay, this year, we've added about $1 billion between R&D and SG&A to the business so that we can continue to drive the top line and, at the same time, drive the long-term sustainability of the business with the R&D investments.

Operator:

Our next question comes from Matt Miksic from Credit Suisse.

Scott Leinenweber:

Thank you, operator, and thank you for all of your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott.

Since the beginning of the pandemic, we've seen 2 factors positively impact Adult Nutrition demand:

new users are entering the category and existing customers have increased their usage. And as the global market leader, these dynamics are driving strong growth for our Ensure and Glucerna brands.

Robert Funck:

Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis, which is consistent with our previous guidance.

Operator:

[Operator Instructions] Our first question comes from Bob Hopkins from Bank of America.

Robert Ford:

Sure. Listen, we obviously had a very strong quarter in terms of recovery. I mean we had planned to see that recovery in the U.S. and in Europe and in certain Asian markets, and that recovery has largely played out the way we had anticipated. I'd say probably a little bit better even than what we thought. I don't think what we're seeing here with relating to like increase in COVID cases, I don't think that you'll see the same -- or at least we're not seeing the same kind of impact in terms of hospitals shutting procedures down, stopping testing, et cetera. I think it's a very different situation where we are this year versus where we are last year, even though if you look at the case, global case counts, they're pretty much in line to where we were in October last year. We've got therapeutics. We've got vaccines. We've got testing. So we're not seeing that.

Robert Hopkins:

Okay. That's really helpful. And then my second question for Bob. I'd love you to comment on 2 things, if okay. One, just you had a nice EPS beat relative to consensus and really relative to the way you guys just guiding the quarter. But you're leaving guidance the same. Just wanted to understand that dynamic. Why not boost the EPS a little bit?

Robert Funck:

Yes. Bob, I'll take the first question on the guidance for this year. Clearly, about 1/3 of that beat was due to the little higher COVID sales than we have projected. Obviously, forecasting COVID is quite challenging. And so that was about 1/3 of beat. About 2/3 really was better performance in the base business versus how The Street had modeled that. And so the way we look at it, we gave a pretty wide range on earnings guidance back at the beginning of June. And that really kind of accounts for any kind of fluctuations or changes in the COVID testing in the back half of this year as well as kind of underlying base business performance. So we feel really comfortable about the range we have and feel that kind of captures different scenarios around COVID testing.

Robert Marcus:

Great. Congrats on a good quarter. Bob, maybe to follow up on the last question. There's a lot of moving pieces down the P&L right now. You had a really good operating margin in the quarter. I was just wondering if you could update us on the latest on how you're thinking of reinvestment of COVID testing revenues, how that's flowing through the P&L. And if you have any preliminary thoughts on the impact or benefit it might add to next year as people think about their models now.

Robert Marcus:

Great. And maybe just a quick follow-up. We have some -- coming back to new product launches and clinical data sets. We have 2 interesting ones coming at ESC later in August with CardioMEMS and with Amulet. I was just hoping we could get the latest thoughts on approval timing, product launch potential and how we should think about near-term expectations for product launches, given the COVID environment is still impacting hospitals to a degree.

Operator:

Our next question comes from Vijay Kumar from Evercore ISI.

Robert Ford:

Sure. I mean I think the Med Device kind of grew again, Q2 versus 2021. That growth rate has been increasing and has been sequentially improving, as I said, in the first question. Obviously, the recovery is not uniform across all businesses. So if you look at our device portfolio, one of the parts of the portfolio that we've seen a little bit of a lagging recovery here has been in Neuromodulation, where I'd characterize that as a little bit even more elective than some of the other procedures. And we've seen, say, like a little bit of a slower recovery trend in that business versus, say, for example, a Structural Heart, an EP or a Diabetes business.

Vijay Kumar:

That's helpful. And then maybe one on the product side on CardioMEMS. We did some work. It looks like it's an interesting trial. It's a pretty large trial, I think, 3,600 patients enrolled, that's fairly large. I guess assuming some of these results, if they were to mimic CHAMPION or the original trial in terms of reduction in heart failure hospitalizations. I think mortality is an endpoint here. Should CardioMEMS be a multibillion-dollar product for Abbott? The reason I'm asking is historical adoption trends have been quite slow, but your investments in such a large trial suggests some optimism. So I'm curious how you guys are thinking about the longer-term opportunity.

Larry Biegelsen:

Just 2 for me. I'll start with Libre, Robert. Just maybe at a high level, your thoughts on kind of the road map for Libre from here, given that you're closing in on $1 billion a quarter in sales. And more specifically, any update on the launch of Libre 3 in Europe and how delays at FDA might impact the timing of Libre 3 in the U.S. And I had one follow-up.

Larry Biegelsen:

That's helpful, Robert. And just lastly for me. I know I've asked about this on a few earnings calls, but I'm just curious how your thoughts on capital allocation are evolving, given your strong balance sheet. We know valuations are relatively high. Are there areas where you think valuations look more attractive? And historically, the sweet spot for Abbott's been acquisitions in the $5 billion to $10 billion range. Is that still the case? I mean, obviously, St. Jude was an exception to that, but just curious to see how your thoughts are evolving on M&A.

Matthew Taylor:

So I did want to ask one about COVID testing. And we know your guidance for the year here implies lower sales in the last 2 quarters. I was wondering if you could just give us any insight into the trends that you're seeing in testing, especially outside of the U.S. where we have less visibility, so we can think about some of these different scenarios that you're baking into the guidance for the rest of the year.

Robert Ford:

Yes. Like at a high level, I would say, yes, we're seeing kind of that same kind of recovery trend, again, within its own kind of segment. Our immunoassay and clinical chemistry business, which represents about 80% of our core lab business, that actually was up high single digits in Q2 versus Q2 of 2019. So we are seeing that recovery on the core lab. There are some assays that haven't recovered as much. What we've seen here in the U.S. is that we're seeing post-surgery policies here from certain hospitals do less overnight stays. So when you're doing that, you're getting a little bit less of that. But I'd say that's offset with higher share gain and growth in new accounts with the rollout of Alinity. So we're seeing that kind of high single digit.

Operator:

Our next question comes from Joanne Wuensch from Citibank.

Robert Ford:

Sure. Listen, we've talked about this a couple of times on a couple of calls already, and I just think it's a little bit too early to kind of provide that forecast given there's so many different kind of moving parts. We're starting our process right now. But I don't think the framework changes versus what we've talked about, which is our underlying business, so excluding COVID testing, it will clearly be very well positioned for very strong growth, top line and bottom line just based on the trends that we're seeing, based on the pipeline, the new products that we have in the pipeline that we have in place. So our underlying base business will clearly be set up for very strong top and bottom line growth.

Joanne Wuensch:

And then I've heard the word pipeline investment a couple of times there. Other than some of the names that we've -- or products that we've already focused on, such as Amulet, CardioMEMS and Libre 3, are there other products in the pipeline that you'd like to draw our attention to?

Joshua Jennings:

Robert, just wanted to ask a multipart question on just duopolies in the U.S. market. You're about to create one with the entrance at Amulet. And then down the line, you'll be in a different position as the first mover in the duopoly being created by a competitor coming into the edge-to-edge mitral repair market. And I was hoping if you could just give us your views on U.S. duopolies in terms of second player coming into the market, catalyzing market growth, how you think about that, the risk for competitive pricing to ensue and then the potential for that second mover to capture share and where those can lay out.

Operator:

Thank you. This concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's First Quarter 2021 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participants' questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's express written permission.

Scott Leinenweber:

Good morning, and thank you for joining us. With me today are Robert Ford, President and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance, and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we'll take your questions.

Robert Ford:

Thanks, Scott. Good morning, everyone, and thank you for joining us. Today, we reported the results of a very strong quarter. Ongoing earnings per share were $1.32, reflecting more than 100% growth compared to the prior year. Sales increased 33% on an organic basis in the quarter.

Robert Hopkins:

Congratulations on the strong Q1 revenue and profit growth. I don't think I can recall the last time the company put up 100% earnings growth, so impressive there.

Robert Ford:

Okay, thanks. On your first question regarding kind of the U.S. Binax OTC launch, so yes, we're very excited about that. We see this is a as a significant opportunity, and quite frankly, a trend that's been happening overseas and is kind of now happening here in the U.S., which is this move, this accelerated move here from, say, more hospital lab-based testing to more rapid testing outside of that environment, where consumers and people can get the results at a much faster rate, and quite frankly, with a little bit less hassle, less process. So we see this as a significant opportunity. It's easy and it's affordable. And I think that's a key part here, Bob, as we think about surveillance testing and serial testing. It needs to contemplate those 2 areas, right? It needs to be affordable.

Robert Ford:

I mean that's -- I guess that's the model here where we start to model different ways, different parts of all these elements that I explained to you, and it's going to be difficult. I'm not going to put out an assumption there of what COVID testing level is required, but I do feel that a good portion of it is going to be sustainable. And we'll get a lot of the share of the COVID testing that's remained. So...

Robert Marcus:

Great. And I'll echo Bob's congratulations on a very nice quarter. Maybe just to follow up, Robert, I'd love to get a sense. One of the key investor topics, as you just touched on, is the double-digit target for EPS growth next year. And part of that, it looks like you're front-loading a lot of expenses into 2021 here. You grew OpEx about $300 million versus last year.

Robert Ford:

On the high 20s operating margin, yes, that does appear to be the case. Regarding the areas of investment. I mean I talked a lot about these in terms of the investments we're making. I'd say from a bigger picture perspective, we want to make sure that we're spending and investing a good portion of these COVID testing profits into the R&D portion of the P&L. We believe that is a very sustainable investment.

Robert Ford:

Yes. I mean I think as I said in my prepared comments and on the first question, too, I mean we saw a nice recovery. Obviously, there was obviously some -- a little bit of a slowdown in January. So we had a nice pickup, I'd say, in October, November where -- sorry, yes October, November, where we saw procedure growth rates return to growth. And I'd say December, January saw that decline as the cases increased, but saw real nice progression in the month of February and then very strong growth in March.

Larry Biegelsen:

Robert, one for me on capital allocation; and one on your favorite topic, I think, Libre. So a lot of questions around 2022. And my question is, how important is it to hit that double-digit EPS growth target in 2022? And your thoughts around capital allocation helping you achieve the $5.50 in EPS, is it a buyback or an accretive deal, something you would consider to get there? And I have one follow-up on Libre.

So I think this is going to set a whole new standard for us on every dimension:

size, ease of use, accuracy, alarm performance, wear experience, all that. It's all great. It's all good.

Operator:

Our next question comes from Vijay Kumar from Evercore ISI.

Robert Funck:

Vijay, this is Bob. Yes, your math is spot-on. Our first quarter was up over 2019 and by around 10%.

Vijay Kumar:

That's helpful, guys. And then one on the antigen testing side, I saw the press release yesterday launching the asymptomatic consumer version of the product.

Robert Ford:

Yes. So on the $6.5 billion to $7 billion, yes, that remains unchanged. It's difficult to forecast here in that tight range that you'd expect from Abbott. But yes, we continue to forecast sales at around that level.

Vijay Kumar:

Correct.

Vijay Kumar:

Yes, I'm planning on stocking up, Robert.

Matthew Miksic:

Just a quick question for me, if I could, is just on some of the pipeline opportunities around Amulet and CardioMEMS in Portugal, if you could provide us with maybe an update on those programs. And secondly, on just the progression of MitraClip, this has been a device and procedure that was a little bit more impacted by the slowdown over the winter. And just love to get a sense of what the trajectory looks like now heading into Q2.

Matthew Taylor:

So I wanted to go back to the idea of the double-digit growth and the investments that you're making this year. You called out R&D, and we've seen DTC has been stepping up. I think there's a lot of Libre commercials there now.

Robert Ford:

Sure. So I'd say on the base business side, our identity, our target was really sustaining a 7% to 8% growth rate pre-COVID. And I'd say with these investments that we're making, excluding any kind of year-over-year comp, we'd probably be at the higher end of that 7% to 8% range, I mean, once you factor in maybe a Q1 comparison on the base business. Next year, you're probably growing a little bit higher than that, Matt. But at the high end of that 7% to 8% is what we're looking at, with all these investments and product development and portfolio development.

Robert Ford:

Yes, I think the answer to that is yes. We've definitely been elevated to a kind of higher level of partnership here with a lot of hospitals and IDNs and institutions as it relates to their kind of COVID testing. There's been large set of accounts that we've historically been out of and now had the opportunity to place our instruments and show what we can do.

Operator:

Our next question comes from Joanne Wuensch from Citibank.

Robert Ford:

Yes. So we did see a little bit of a slowdown in trials towards the end of the year and the beginning of the year, and we saw that start to pick up a little bit now. We think that we like our position.

Joshua Jennings:

Congratulations on the quarter. I wanted to, Rob, just to ask about your commentary about the potential to pursue M&A to support, if need be, to support the double-digit earnings growth in 2022. And anything you can provide investors or analysts with in terms of the areas of focus? I mean should we be thinking that each business unit could receive some support with the acquisition?

Operator:

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.

Operator:

Good morning, and thank you for standing by. Welcome to Abbott's Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participant's questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission.

Scott Leinenweber:

Good morning, and thank you for joining us. With me today are Robert Ford, President and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Finance Officer. Robert and Bob will provide opening remarks. Following their comments, we'll take your questions.

Robert Ford:

Thanks, Scott. Good morning, everyone, and thank you for joining us. Today, we reported another highly successful year for Abbott during what's been the single most disruptive health care event in our lifetimes. For the full year, we reported organic sales growth of nearly 10% and ongoing earnings per share of $3.65, which reflects double-digit growth and is at the upper end of our guidance range we set last January when we were expecting a normal economy. Performance like this after the pandemic struck is a real achievement and demonstrates the strength of our diversified business model.

During the past year, we continue to expand our Nutrition portfolio with several new product and line extensions, including the continued rollout of infant formula products across our Similac brand family that contain human oligosaccharide or HMO, which supports a healthy immune system. Global expansion of our PediaSure, Glucerna and Ensure brands, including the continued rollout of Ensure high-protein products; and the launch of 4 new Pedialyte rehydration products:

Pedialyte Zero Sugar, Sport, Organic and Immune Support.

Robert Funck:

Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis.

Robert Hopkins:

Congrats on all the success and progress you guys are having. So Robert, so much that I could ask about here, but I'll go high level with my question and ask, if you wouldn't mind, putting that $5 earnings -- or at least $5 in earnings for 2021, a guidance number in perspective for us given that, that $5 is above even what The Street was modeling for 2022. And specifically, I guess the way I'd ask the question is, I'm sure investors would love some perspective on how COVID testing impacts that guidance, how you're thinking about the base business. And maybe most importantly, given how much higher $5 is compared to expectations, I'm sure investors would love to hear your early thoughts on whether or not Abbott can grow at its sort of traditional rates off of that $5 number next year. So sorry for the long-winded question, but would love any perspective.

Robert Ford:

Sure. It's a little premature to just skip across all the way to 2022. But we have -- but listen, when -- we didn't do 2021 in isolation. So yes, we looked at 2022 and looked at all those different scenarios that I talked about. So I can probably give you some general comments over here. I mean I think we're forecasting a lot of growth this year, and we're going to be looking to build on it.

Operator:

Our next question comes from Matt Taylor from UBS.

Robert Ford:

Sure. So let me talk about kind of numbers and ranges here then, and then I'll spend time talking a little bit about sustainability of the testing. As I said, I don't see the demand just kind of dropping off even with the vaccine rollout. We achieved $2.4 billion in Q4. So if you annualize that, it'll go -- it will annualize for around $10 billion. So I can expect probably Q1 is going to be at that range of about $2.5 billion or so.

Matthew Taylor:

Great. Maybe I'll just ask a quick follow-up on Panbio. That's a big new piece of the story here. I think you rightly pointed out, may take longer in some countries for things to improve. So maybe testing lasts longer there. Could you talk specifically about Panbio and what you're able to do capacity-wise? Or any way to frame that opportunity?