Q3 2019 Earnings Call

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I like to introduce Mr., Scotland, Weber, Vice President Investor Relations licensing and acquisitions.

Good morning, Thank you for joining us with me today are miles wide chairman of the Borden Chief Executive Officer.

Robert Ford, President and Chief operating Officer, and Brian Your Executive Vice President Finance and Chief Financial Officer.

Miles will provide opening remarks, and Brian will discuss our performance when I walk in more detail.

Following their comments, we'll take your questions.

Before we get started some statements made today maybe forward looking for purposes of the private Securities Litigation Reform Act of 1995.

Including the expected financial results for 2019.

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 habits operations, our discussion items, one a risk factors to our annual report on Securities and Exchange Commission Form 10-K for the year ended December 31st 2018.

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.

Please note that financial results and guidance provided on the call today for sales you P.S. enlighten <unk> of the piano will be for continuing operations only.

On the call on todays conference call as in the past non-GAAP financial measures will be used to help investors understand habits 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 <unk> Dot com.

Unless otherwise noted our commentary on sales growth for first to organic sales growth, which is defined in our earnings news release issued earlier today.

With that I'll now turn the call over ton miles.

Okay. Thanks, Scott good morning.

Today, we reported results of another strong quarter with ongoing earnings per share of 84 cents, reflecting 12% growth on an absolute basis, and even higher growth when excluding the impact of currency.

Sales increased more than 7.5% on organic basis in the quarter led by double digit growth in medical devices and sequential improvements in established pharmaceuticals and diagnostics.

We also narrowed all our full year adjusted earnings per share guidance range, the 323 to $3.25, which at current rates would reflect high teens growth, excluding the impact of currency and as at the upper end of the range. We set at the beginning of the year.

As we've discussed previously following our recent strategic shaping and acquisitions, we've been completely focused on running the company we built.

This focus on organic execution is delivering strong performance on a remarkably consistent basis.

Over the last eight quarters, we've averaged 7.5% organic sales growth worldwide with very little variation.

Also continued to strengthen our portfolio with new products expanded access and reimbursement coverage and generated new clinical data that further enhances the sustainability of our strong growth outlook going forward.

I'm, particularly pleased with the continued exceptional performance across several of our key growth platforms, including freestyle Liebreich microcool might for clip and Alinity, which I'll highlight as I'd summarize our third quarter results in more detail.

I'll start and our medical devices business, where sales increased double digits for the second quarter in a row.

And structural heart, we achieved 16% sales growth led by Mitraclip, our market, leading device for the treatment of mitral regurgitation or leaking heartfelt.

Hi, Andrew club sales increased more than 30% in the quarter, including us growth of nearly 50%.

During the quarter, we receive U.S. FTC approval for our next generation Mitraclip device and we initiated the first every U.S. pivotal trial for the minimally invasive treatment of tricuspid regurgitation.

Which will evaluate the safety and efficacy of our try clip repair system.

Turning now to freestyle library, our market, leading continuous glucose monitoring system that eliminates the need for routine fingersticks.

We achieved sales and a half a billion dollars in the quarter and continued to add significantly to our global user base as reflected by organic sales growth of nearly 70%.

During the quarter freestyle Libre obtained public reimbursement coverage in Ontario, and Qubec, becoming the first and only sensor based glucose monitoring system to be listed by any provincial health plan in Canada.

We also continue to advance our strategy to develop integrated solutions, where people with diabetes can seamlessly managed their condition across devices, including recent announcements that we're seeking to integrate libra with the insulin delivery technologies of Santa fee and tandem as was the digital care platform of amount of health.

This easy to use affordable device is changing the way millions of people manage their diabetes and our ongoing efforts to expand awareness adoption and access for Libra around the world will drive tremendous growth for years to call.

Turning now to diagnostics, where sales grew 6.5% in the quarter led by double digit growth in core laboratory diagnostics, the rollout of Alinity in Europe and other international markets continues to drive strong growth in our core laboratory business outside the U.S. and the U.S., where we continue to outperform.

On the market with our legacy architect system. We've made good progress achieving regulatory approvals of immuno assay and clinical chemistry test for Alinity and are beginning to ramp up our launch efforts in these areas.

With highly differentiated instruments, and a matrix rollout across multiple geographies and diagnostic testing areas overtime alinity is well positioned to be a multiyear growth platform for our diagnostics business.

In nutrition sales increased nearly 4% in the quarter led by double digit growth in international adult nutrition from third quarter in a row.

In pediatric nutrition above market growth in the U.S. and several other countries was partially offset by challenging market dynamics in greater China, which comprises a little less than 10% of our overall nutrition sales.

While consumers continue to trade up to premium brands, which is the segment, where we compete we've seen volume in the market declined due to historically low birth rates.

We remain focused on strengthening our portfolio and competitiveness across the various segments and purchases and channels in China, and given our broad portfolio and global footprint.

Anticipate continued strong performance across other geographies and long term growth opportunities such as adult nutrition.

I'll wrap up with established pharmaceuticals, or NPD, where sales increased 8% in the quarter led by strong growth in several geographies, including India, China, and Brazil sales growth in NPD has now improved sequentially for each of the last three quarters.

With leading market positions in several international growth geographies, you PD is well positioned for sustained above market growth and some of the largest and fastest growing pharmaceutical markets in the world.

So in summary, we are performing well across several areas or portfolio, resulting in another quarter of strong sales and earnings growth.

We continue to strengthen our product portfolios and key product platforms with a steady cadence of new product approvals reimbursement coverage and clinical data.

And we're well on track to deliver ongoing EPS and organic sales growth at the upper ends of the ranges we set at the beginning of the year.

I'll now turn the call over to Brian to discuss our results and outlook for the year in more detail Brian . Okay. Thanks miles 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.

Turning to our results sales for the third quarter increased 7.6% on an organic basis during the quarter. We saw the U.S. dollar strengthened modestly resulting in an unfavorable impact on sales of 1.9% from exchange or 50 basis points higher than if rates held study since the time.

Our call in July .

Reported sales increased 5.5% in the quarter.

Regarding other aspects of the piano the adjusted gross margin ratio was 59.2% of sales.

Adjusted R&D investment was 7% of sales.

And adjusted SGN expense was 29.1% of sales.

Turning to our outlook for the fourth quarter, we forecast adjusted EPS of 94 to 96 cents, which reflects nearly 17, a half percent growth at the midpoint.

We forecast organic sales growth of around 8% and.

And at current rates would expect exchange to have a negative impact of somewhat above one of the half percent on fourth quarter reported sales.

We forecast an adjusted gross margin ratio of approximately 59.5% of sales.

Adjusted R&D investment of around 7% of sales and adjusted EPS unit expense approaching 27.5% of sales.

Before we open the call for questions I'll now provide a quick overview of our fourth quarter organic sales growth outlook by business.

For established Pharmaceuticals, we forecast high single digit growth.

And nutrition, we forecast low to mid single digit growth.

In diagnostics, we forecast mid to high single digit growth.

And in medical devices, we forecast growth similar to the third quarter, which reflects continued double digit growth in several areas of this business.

We will now open the call for questions.

Thank you.

Ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish or move yourself from the Q. Please press the pound key for optimal sound quality. We ask that you. Please use your handset instead of your speaker phone when asking your question and again, ladies and gentlemen that star one to ask a question.

Yeah.

And our first question comes from David Lewis from Morgan Stanley . Your line is open.

Good morning.

A couple questions for me miles just want to start off on grow. So I mean this time of year investors are very focused on sustainability and you. Obviously said you know you've been averaging 75% for seven to eight quarters. So couple of questions. One give guidance for the fourth quarter implied a little bit of momentum deceleration in the business anything specific to call out there and then more specifically as you think about 2020.

Do you what are those drivers to get you confident that you can deliver growth in that 775% range that you can do in the last couple of years and then just one quick follow up.

Okay David.

Well I'll start with what you said, we have had eight straight quarters, averaging 75%.

Going into a fourth quarter, we actually are going to be close to eight and.

And then going into next year, I think where we are in the range. We again I think we gave a range at the beginning of this last quarter seven to eight somewhere in that range and frankly, I see no change to that I don't see any change to momentum at all here.

If anything we've got pretty strong momentum across the board, we've got sequential growth in a number of areas that we expected improvement in and we're seeing that NPD comes to mind.

Obviously our growth drivers.

The Bray and Mitraclip and the Alinity systems et cetera are all very strong structural hurts for a strong so.

As I said as I've said in the past many times. This is sustainable and strong going forward I see no change to momentum no change to progress no change to growth rates.

If anything you can get a touch better so and it clearly will in the fourth quarter. So it's pretty strong and and the earnings flows with it and we're not going to make any guidance forecasts or anything, but I think directionally here all fundamentals are strong for us.

Okay very helpful and just one quick product question minuses Theres been a library to obviously important driver for for next year I just want to get your commentary the longer. This product has not been approved it's led to kind of concern about the product the regulatory timeline. Your view tandem partnership yesterday suggests to us that you're still confident in Libra.

Hi, CGM.

Are you still confident LIBOR, two I CGM and how are you thinking about the timing of potential for for that product. Thanks. So much.

I'd say on the comment myself I'm going ahead, it to Robert Ford here to comment as well, but first or we confident absolutely. The product is performing wonderfully visit the growth is strong expansion is strong theres theres a lot to be pretty encouraged about and while I recognize a lot of people, including us are feeling impatience impatience doesn't.

Like the concern.

We're all in patient and we'd all like everything yesterday, but no it's not quite working out as yesterday and Robert can comment on that here, but there is nothing but good here looking forward with Libra and we anticipate a lot of expansion with this product including with.

Some of these partnerships that.

That we've announced in working with the interoperability with various partners.

What I think will be the future of glucose monitoring in diabetes management.

Thank all of this is not just on plan, but spectacular, particularly for diabetes patients and I have nothing but competence in it. So let me turn over to Robert to expand on that.

Yeah David.

Admittedly, it's taking longer than than we had expected you know, we obviously misjudged that we're currently working through a handful of open items with the agency and.

Well I can tell you on I've got the same confidence level that miles does I'm confident in the data I'm confident in the product right in the meantime, if you look at LIBOR rate in Q3, we had we had an exceptional Q3.

Sales of just under half a billion dollars that puts us on a $2 billion run rate here with growth rate over 70% our international business grew 50% and that's that's on a large base and then the U.S. sales sales nearly tripled so and its tripled because we're adding new patients at a strong.

And steady rate and it's a high rate and you can see that progression in our total Rx is so I.

And one of the challenges we've had over the like the nine months here is really been about how to polls are demand generation activities with aligning to our to our supply and we talk little bit about kind of some of those supply constraints.

So we've now released in the third quarter towards the end of the third quarter. Our next tranche of manufacturing capacity on plan on schedule and I can tell you. The commercial team right. Now is really feeling excited about not being able to have that constraint over in really start to intensify the commercial.

Oh promotional efforts, whether that advertising, whether that sampling et cetera, both in the U.S. and international I think thats that gives us a lot of lot of excitement as we as we exit the year going into next year. The value proposition still continues to be very strong to patients and physicians and payers and as Mike mentioned in his opening comments.

We achieved reimbursement in Canada public reimbursement, the only sensor systems reimbursed in Canada, and it's important because it's one of the top five largest glucose monitoring markets in the world and.

Similar to what we saw in some of these large markets. When we obtained national reimburse when we see a pretty accelerated kind of explosive growth. We saw that in Germany, we saw that in France and UK. So we expect to see that same trajectory in Canada. An early indications suggest that kind of same curve. So that will be also exciting for the team as.

As we move into Q4 and as miles also said, we're pleased with the partnership strategy that we've we've adopted we've gone through it at a very intentional phased approach.

For us with Big foot as you know, we then moved into announcing a or our agreements with insulin manufacturers like noble and Sanofi to connect leap rate to their pen systems and the next phase here, we'll start to move into insulin pumps and that was the agreement that we announced yesterday with tenant the co developing into.

Degraded system, because we know this is an important segment also connecting to pumps and we're now to phase, where we feel that we can start to kind of roll that out as we thought about our partnership strategy. So I think momentum here on LIBOR is exceptional it is very strong as we go into Q4, I think we got a lot of stuff going right fire.

And all cylinders, whether its commercial whether its operation whether it's our R&D program. So I'm very confident on the sustainability of lever in LIBOR going forward.

Great. Thanks, so much.

Thank you. Our next question comes from Larry Biegelsen from Wells Fargo. Your line is open.

Good morning, Thanks for taking the question. So so to from a one and capital allocation what a mitraclip, let me start miles with capital allocation now that you have more financial flexibility. How are you thinking about capital allocation in the importance of reloading the pipeline I think on the Q2 call you seem to de prioritize buyback.

Next but yesterday, you announced a $3 billion share repurchase authorization. So has your view changed and I just had one follow up button mitraclip.

Well I'd say.

You know look we've come through a period, where we paid down a lot of debt and.

I think we find ourselves in a good capital balance I think we're we've got gotten to the place where our net debt to EBITDA ratio is well ahead of what we targeted probably a year earlier than we expected that was with an aggressive pay downs strategy et cetera, our businesses performing strong our cash flows are strong can we.

You to pay down debt, we can can we refinanced debt. We can can we do things that are prudent good balance sheet management, yes.

And we're also generating cash we are generating sufficient cash more than sufficient cash to invest in a lot of manufacturing expansion.

For for all the new products, we've talked about Robert just mentioned one of the biggest and Oh thats fully funded and obviously coming online and good. So you say all right well then how about the dividend while we raised the dividend, 14% last December and we have targeted range, where we'd like to keep that dividend.

What percent of our our EPS et cetera. So as we go across all the things you can do with your cash returning cash to shareholders is also.

Positive thing to do if the conditions are right and if the return is good et cetera, and we want to be prepared to have that flexibility on the table as well we have not done significant share repurchases you know for several years, while we focused on the.

The paydown of debt, but now we wanted to add back the flexibility to do that as well. So I'd say in general we find ourselves in a strong cash position strong performance positioned good strong balance sheet position, we can continue to pay down some debt, but we've got the flexibility to do just about whatever makes sense for us on a return basis or return to shareholder basis.

We don't have any active M&A on the radar screen to the extent that we track or follow anything I'd say, it's your typical bolt ons and tuck ins and so forth that are additions to already strong businesses, we're pretty happy with our pipeline, we're pretty happy with our R&D pipeline. So our standards are pretty high right now about.

What's attractive and what may not be but but I'm not forecasting anything significant at all.

In the M&A areas so.

Obviously, we want to keep our options open here with how we manage cash for shareholder.

Very helpful and then on Mitraclip.

You have.

U.S. reimbursement goes up in October you, hopefully, we'll have coverage for the functional Tamar indication.

Next next spring. So are you thinking about 2020 as an inflection year for Mitraclip intend in Europe . It looks like sales improved growth improved this quarter. How are you feeling about mitraclip outside the U.S. Thanks for taking the question.

I'm going to cost I want to rub four Larry Thanks for the question. So do you know we filed our Mitraclip NCD was kind of opened in August .

So that timeline there is usually takes about nine months I mean, that's the that's a statutory maximum as we'll say when we did FMR.

In Mitraclip that took about seven months I think we'll be in the December January timeframe kind of trying to kind of get exactly what quarter, that's going to land and but in the meantime, you see kind of our growth rate or the reimbursement is gonna be important, but a structural heart was up mid teens and.

The big driver that was mitraclip up 30% up 50% in the U.S. So reimbursement is going to be important there are definitely be an inflection point when we get it but as I said in the in the previous call that is a component is it a building block here that we're focusing on so.

Opening new sensors is another kind of keep building block we have about 400 today and I want to gets about 550 over time.

And we've been supporting that with investments investments in our salesforce or clinical specialists are therapy development specialists. So that we can only train the centers trained the implanters to keep up with that demand that we see but also to support the demand generation through the development of these patient referral network. So.

Yeah.

So that investment is ongoing.

On target on plan in terms of how we're ramping up the field team and as Michael said in his opening comments. We continued to invest also in the innovation slide on the product development sites in July we obtained approval for our fourth generation Mitraclip, which.

Has the independent grasshoppers more sizes et cetera that creates a goods more options to to the position. So I think that mitraclip here is in its really early innings. There I think this is a multi year.

Multibillion dollar growth opportunity that we've got and it's going to continue to ramp over time, and we're making the investments to make sure we're going to lead in that so as I look. Thank you very high 20, I think we've got the right momentum and once we have NCD coverage, yes, I think there will be there will be an inflection to growth.

Thank you very much.

Thank you.

Our next question comes from Bob Hopkins from Bank of America. Your line is open.

Hi, Thanks, and good morning, just two quick product related questions.

First a follow up on the library to commentary just to kind of set expectations.

Just curious has there been any new data requests from the agency and.

Is it approval of library to in the U.S., you think possible next couple of months or could it took a little longer.

And Weve, what I would say as a follow <unk>. We've obviously misjudged that song, yes, so I'm not going to sit here and try and pinpoint the exact timeline of the approval.

As I said also we're actively working through a handful of open items with the agency and that's that's where we're at.

Okay Fair enough and then I also wanted to ask on.

Pediatric nutritionals in China and it's.

Just curious if you could elaborate a little bit more on the on the slow down there.

And then just wonder if you comment on China more broadly and.

You know your confidence in growth continuing in China. So just comment on Pdx Nutritionals in China. Please.

Let me, let me start off with and with the with the nutritional question. Here. Then so you saw our nutrition business was just under 4% we had really good growth in the us in pediatrics up 4%.

Double digit growth in.

International adult for the second quarter in a row. So our challenge here really was the international pediatric performance, which was really driven by greater China, and I would say seems real some challenging market dynamics years as miles mentioned, we're seeing the consumer trade up into the premium brand segment, but the volume has been declining partly because of.

Of these low birth rate. So this has led to what I would say at a much more competitive environment competitive in terms of pricing competitive in terms of promotional activities and this has now got our full attention a full attention from the management team here and our key thing is really focusing on the market dynamics on the market dynamic.

Fixed, but we've got to really focus on improving our competitive fitness our competitive position here in the pediatric segment were launching a series of new strategies here in the coming weeks regarding our media campaigns strengthening our our consumer relationship platforms. We've got so.

And plans to launch us and new products over the next several quarters. So I'd say that the key focus of US right now and in nutrition really has been.

At this point here to focus on on improving our competitive fitness and China.

And I'll I'll follow up on the rest of it the other businesses in China, and I'll give you a little bit of context I think.

Ill speak as a CEO , we the multinational Ceos of the World are we if we do business in China are we nervous about trade or we nervous about China, we nervous about all this.

Thank you can't help would be nervous about it but I'll tell you what's interesting while it's affecting some segments of the us economy and us businesses pretty directly it doesn't seem to be affecting us or our business.

The nutrition challenge, we have is completely separate from.

Any kind of trade or economic or autonomy issues other than birth rates and.

The performance in our device businesses, our diagnostics businesses, and so forth our double digits and strong.

You know, there's all kinds of ways that people can.

Hypothesize that maybe the Chinese government would intervene and make things more difficult and so forth for us multinationals.

But in our business, we actually don't see that and.

The product approvals are coming in a timely manner to.

The Chinese FDA is doing everything that they're supposed to do and for our products saw we havent seen any of that kind of friction at all and the demand for our products and the performance of our businesses in China has been strong other than the challenge we got with.

Pediatric nutrition.

All our other businesses are doing well.

Showed no signs of any kinds of issues. So while I know that there are industries and segments that.

Our tied to whether its automobiles oil big industries et cetera that may have challenges, particularly agriculture.

We're not seeing that and our China business is good.

Thank you very much helpful.

Thank you.

Our next question comes from Vijay Kumar from Evercore ISI. Your line is open.

Thanks for taking my question guys in up to two from me maybe miles starting off with that that last question on the macro China.

I know there are number of moving parts, China for by seven on the drug side. Some some questions around maybe a capex load on diagnostic slowdown.

Maybe just to be clear.

What is your exposure either on the drug or diagnostic side to China, I, maybe broadly comment on emerging markets in general it looks like some of those markets are slowing down and how is abbott position to handle some of the macro slowdown if it well.

We're all looking to digital they're trying to figure out who answers what part of that question.

I'd say this underlying growth in emerging markets is still good has it slowed some yes. It has slowed some but it's still good it's a relative thing so the underlying growth we see in India, Latin America, China et cetera. It's all good you can you can.

Hey, there's the occasional Argentina, okay. That's not good Argentina has its own thing but.

There are.

The advancement of healthcare systems advancement in demand for health products Pharmaceuticals, et cetera, strong China in particular for us for our pharmaceutical business strong we're doing well.

I think we have a lot of exposure all at Robert expand on that in a minute, but but overall I think the conditions for us in those markets remain strong as we've said many many times single most difficult thing would deal with this volatile currency, if it's volatile and sometimes it is sometimes it isn't and right now currency isn't exactly work.

And in our favor in those markets. So while we grow at a pretty healthy rate on underlying basis, and typically faster than the market.

Yes, the currency erases some of that Robert I'll, just be John the on the generic pharma in China, I think you're referring to the four plus ever for plus seven tendering process. There we haven't seen an impact and we don't anticipate a significant impact going forward. We have a we had a fairly.

Concentrated portfolio here products, just about 15 products and most of these products are in more specialized kind of segments in areas, where there is kind of difficult to manufacturer. So on the generic side of the pharma business, where we're we're less acceptable to this obviously, we're going to monitor what part of this process, we understand how the 10.

During process is going to work, but I think about kind of bigger impact we have less of an impact here given the portfolio products, we have in China.

That's helpful guys and just one quick one on not guidance, maybe for Brian Brian It looks like the Q4 guidance is implying really strong margin expansion, you know 200 basis points plus.

Just given some of the comments on FX.

Maybe clarify the FX hit to Q4 in the margin side.

In General is when you look at 2020, what kind of headwinds have been looking at from an FX perspective. Thank you guys.

Yeah front from a top line next year I'm not prepared to talk about next year, but I think there would be natural some flow through on the topline next year VJ, perhaps Scott going back to get back on that but let me circle back. If you look at Q3, you saw we had gross margins of 59.2% you're absolutely correct Foreign exchange had an impact on us of about 50 base.

These points otherwise you'd be at 59.7%. So I feel good about where we're guiding Q4 Q4 tends to be that quarter, we get a little bit more natural leverage as well and you'll see that play out through the bottom line pretty consistent with how we thought about this is the began the year.

No I mean gross margin improvement is just part of our DNA. It's part of what we do and what how we think about in addition to cash flow and it's something we're going to continue to improve upon across all of our businesses and I think you'd expect that to continue into next year. That's how we get the double digit growth that we usually start with and continue to invest back into our asked DNA and R&D for our growth.

Thanks, guys.

Thank you.

Our next question comes from Robbie Marcus from Jpmorgan. Your line is open.

Great. Thanks for taking the question.

Myles I was hoping you could touch on the diagnostics business. This is one you've called out for many quarters now is the durable multi year growth driver for the company. We saw fantastic growth in core lab this quarter, even without really benefit from Wendy hitting us maybe you could just update us on the status of where you aren't.

Europe in terms is that rollout what you're seeing in terms of competition because we're seeing some negative results from competitors and then the latest thoughts on U.S. launch in how we think that uptake there.

Okay. Thanks, Rob eminent Robert do that so Robbie we've we've talked about how this is a multiyear opportunity and we've been executing on this so very very focused here. If you think about the core lab and the rollout of delivery program, it's doing very well and you can see that you can see that in our top line.

The rollout has been particularly strong in Europe , we're winning over 50% of the businesses, where we targeted an entrenched competitor.

And if you think about kind of the renewal process, where we taney Neely nearly all of our current business that comes up for contract. So we placed over 3000 over 3700 instruments and when we give out that number we're talking about instruments that are actually placed in the market placed in the account running 10.

Yes, and generating revenues, so that's gone very well.

In the core did you saw that we also got an approval in the us for the Alinity blood and plasma screening. So this.

Fourth quarter here the teams already kind of rolling out that commercial launch we had a lot of success in rolling out the blood plasma systems in Europe and in Asia last year. So it's great to see that little bit ahead of schedule here in the U.S. and a teams I jumped on the opportunity as it relates to the immune assay side a lot of our focus here is really kind of.

Ramping up on the R&D side ramping up the the menu and the assay menu, let's say that assay completion rate of what we need to be kind of fully competitive in Europe is getting close to that 100% Mark that we need and then you assets a little bit behind but a lot of our focus here is to get those systems those asked.

Phase approved than in place and we'll start to see that kind of play affecting our growth rate in the U.S. as we move into into next year. So I think internationally, we're doing really well you asked we've got the opportunity here as the assay is come onboard to be able to accelerate our growth rate. So I'm really pleased with the momentum at the team has done here of course, we can we feel it can always.

Do better.

And that's what we're going to keep on pushing to.

Great. Thanks, and maybe just one quick follow up in Neuromodulation.

Numbers came in a little softer than the street was looking for I'm, assuming a big chunk of that was in the spinal cord stem market, maybe you could just update us as to what exactly you're seeing on the ground with add that and what you think is driving the deceleration in the market here in the U.S. Thanks, Yeah sure. So obviously still work in progress.

Here, it's a little bit longer than we had initially hoped when we talked about it over the last couple of quarters, we talked about.

The salesforce hiring in the sales force productivity and it's a very specific selling process here in devices and fewer new wrap it takes some time to kind of understand it up so that's been going thats been progressing well we've had some stabilization in the sales force in some of the monthly CPI. So we track them on their improve.

But we've also seen as you pointed out a little bit of a market decline, especially in the first half of this year and it follows a couple of years, a double digit growth right. So lot of our focus here is got to be on sales force execution and productivity. The the approval of proclaim XR. This quarter I think really provides a nice addition to the port.

Fully would provide the salesforce with a with a new technology to promote and early signs of the launch it's only been a couple of weeks, but early signs are positive we tend to look at our trials on our trials across the us in spinal as our leading indicator and I'd say early early signs are positive, but there's there's.

There's more monitoring there for us to to be aware of on the market side, There's really no third party data source here like we have in stance or pacemakers et cetera. So, it's it's a little bit difficult to peg the growth rate here.

We usually have to wait until everybody reports, we can kind of look at added up and kind of see where that so.

Yeah, I would anticipate here Q3 to be similar in terms of market growth rate.

The first half of this year, which is in that low to mid single digit decline here.

Appreciate it.

Thank you. Our next question comes from Rick Wise from Stifel. Your line is open.

Good morning, everybody.

Yes.

I am always embarrassed asked questions about the PD business because.

I always feel like I don't really understand it but I just had enough to say that you actually ex currency had.

Another solid quarter and many of the emerging markets that you're targeting maybe just.

Just help us understand some of your high level thoughts there. The outlook is it going as you would have expected growth has slowed a little bit relative to the last few years, but again seems like are on track and sustainably on track because that's the right way to think about it.

Yes, Rick I'd say.

I'm never quite a satisfied as I'd like to be that's for sure.

What we've learned a couple of things I think.

Of the seven or eight years, we've now been.

Fundamentally focused on emerging markets, they're growing economies and so forth.

I'd say if anything was under estimated it was the degree of volatility of currency, which is also heavily driven by the strength of us dollar and while we can't predict those things.

So just business is 100% in emerging markets, that's always a bit of a challenge now that said the underlying growth in those markets has been steadily strong and.

It's interesting one indicator of the attractiveness of those markets is.

Let's just say the multiples and prices and so forth that anybody who owns a pharmaceutical business in those markets thinks that the company is worth and it goes up track those for a long time, the probably some of the highest multiples in the world in any business.

Businesses that make money.

The other attractive the markets are attractive I know the attractive parts of branded generic pharmaceutical worldwide. There are the most profitable there they're very profitable markets for good branded products as compared to Europe , or the USA or something like that occurred in that business. So we targeted this business for a reason theres underlying.

Real growth brands matter quality matters breadth matters.

And it's got all the fundamentals that we think are stable durable attractive et cetera, and frankly, all those costs economies have progressed.

As we would like maybe not as stable in maybe not as strongly in some cases, but the growth there is still strong.

Our own challenge is.

R&D investments.

We continue to expand product lines and product depth.

Into the markets, we keep our R&D somewhat decentralized by region, India has its own Latin America has its own et cetera.

We're always looking for greater and greater productivity and greater and greater launch activity out of our teams every now and then we're going to run into in Argentina, Venezuela or.

Our tax issue in a country like we did in India couple of years ago et cetera that are going to put them the growth rate for a given year and we've seen that.

But the underlying fundamentals are quite strong quite good and we keep plugging away at all the fundamentals that we know how to manage and.

As you can tell this last year, we've had steady sequential improvement in our performance excluding exchange.

And they're up at 8% I think that's that's pretty good that means that we we know how to take the corrective actions to get stronger to get better to drive the business better and I think the fact that the managers of pharmaceutical business are up to an 8% growth rate and looking forward to even improvement that I think thats pretty strong so we like the business.

Great and if I could follow up just on two quick things.

At TCT, we saw some very solid portico data.

Soon we're still on track for mid 2020, U.S. launch any updates there be great on protocol and last just in the U.S. Mascara business still seems pressured.

Not really improving.

One of the issues what are you doing I know you're still focused on execution is it competition.

Is it.

How do you turn that portion of the business are up thank you.

Yes. This is Robert here. So on your reported code question, Yes, we submitted.

End of Q3, so we expect a kind of mid year approval here and launch and we're getting ready for that.

On your question on vascular as we previously mentioned there are couple what I would call non commercial items that impact the growth rate. Here. These are third party royalties third party manufacturing agreements that we put in places as part of the Saint Jude divestiture of some of the assets.

So those as those ramp down as those manufacturing agreements ramp down because of royalties ramp down the obviously impact the growth rate and weve allocated those those those agreements into the U.S. line, even though they are global their global agreement. So here if you if you remove the.

Those items that are naturally going down as we transition to manufacture over to the new to the new owners of those businesses and as the royalties ramp down you remove that out our vascular business was flat and the dynamic there was.

Really little bit of pricing that we've seen on the spend side, we continue to grow share in the U.S. actually and maintain a leadership position in the international markets and that price pressure was then offset by double digit growth in our endo and peripheral business and in our imaging and diagnostic business and Thats.

Part of our strategy, which is we know that there will be some pricing pressure on the DS side, and we know we need to make our investments to maintain our competitive position there, but we also know that were overinvesting in our endo and our imaging strategy. So that those businesses can get large enough and that those double digits than can can can reach.

We returned basket or two to two a healthy growth rate.

Thanks Robert.

Operator, we'll take one more question.

Thank you and our last question comes from Matt Taylor from Yes. Your line is open.

Hi, good morning, Thanks for taking the question I was hoping that you might just expand a little bit on the Libra dynamics given the continued strength that you've seen outside the U.S. could you comment on anything like installed base mix of type one versus type too.

Our payers getting involved today see value there anything like that that could help us understand the sustainability of the growth, especially outside the U.S., we continue to have.

Larger larger base.

Yes, so let's talk about that base I mean, the one way to describe it here that it's a very large and it's growing we focus a lot on the sale side, but if you look at the user base, where we're at the 1.5 close to 1.6 million users at the end of this quarter.

As we talk little bit at those little bit of constraint on that user base, given our manufacturing capacity. So as we've now at least it I think we've got the potential here that kind of grow that user base, even even faster what are the things that is important here that we've seen as.

Payors and contract start to look at this is that they're very convinced on the on the outcomes of using sensor based technology Theres a lot of clinical data that proves that we actually have RCP trials that showed that leave raid reduces hypo reduces time out a range reduces the time that patients are.

And hypoglycemia, and and we backed that up with some fairly large real world evidence trial, showing that and and competitors also have that too so.

The value proposition here is how do you get that outcome at a cost that makes sense for the payer where they can actually expand the use of the product in the technology into a much larger user base versus kind of nichey. It to kind of very small segments and that's been the value proposition that we've we've.

GAAP it and as I said in the beginning of the call that value proposition is not only very impact, but it is growing and we see that we see that and the negotiations we've had with Canadian reimbursement authorities, we see that expansion of the technology beyond just pipe won.

We're insulin users in other markets, we start seeing it expand into tight too. So we think the value proposition here is very strong and it's a real an opportunity to provide the benefits of the outcomes that are proven at a cost profile that make sense for the fourth for the payer so.

Yeah, and it's ultimately about having the impact on outcomes for patients and we're seeing that through our for our trials and through our real world evidence. If you think about the composition of the patients. We're looking at 50 50, we're getting a lot of type ones.

Insulin users, but we're also getting a lot of high twos type twos that are on single injections or type twos or an oral medication there are different utilization rates, but we're getting all those patients.

One quick follow up are you are you now completely unconstrained on manufacturing, yes, okay, great. Thanks, a lot of extra color.

Okay, I'm going to wrap up.

Where we started.

We had a strong quarter exceptionally strong quarter.

Our momentum continues we've got some great growth drivers in LIBOR rate Mitraclip. The alinity platforms. Other businesses there, they're all growing many of them double digits and across the board. So the balance of that performance across all businesses and across all geographies is heartening.

It is sustainable we are topline growth rate was 7.6%. This quarter, we think it will be close to eight in the fourth quarter and as we look into.

2020.

No reason to change any expectations about the strength of our topline sales growth rate, which is I think all of you know for a fairly large company unusual defined the other people that are able to do this or tech companies and so we've got some great stranger, owing to the strength of our pipeline our new product launches.

The improvements to access and door.

Reimbursement and further.

Capabilities of those products. So we've got a good sustainable road ahead of us.

Obviously, there are surprises or.

Things that don't meet our expectations from time to time or the speed with which we want to accomplish things, but overall I think this is.

Good evidenced through all the good good performance Super performance really unsustainably. So so we look at 2020 with great optimism and great expectations in spite of a lot of the uncertainties.

In the world and in the economies around the world.

We're feeling pretty pretty strong and pretty bullish about where we sit so with that we'll see in 90 days.

Well. Thank you operator, and thank you for all of your questions. This now concludes at its conference call. A webcast replay of this call will be available. After 11 am central time today on habits Investor Relations website at Evan Investor Dot Com.

Thank you for joining us today.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program you may all disconnect everyone have a wonderful day.