Q1 2021 Abbott Laboratories Earnings Call

April 20, 2021

[music].

Good morning, and thank you for standing by welcome to Abbott first quarter 2021 earnings conference call all.

All participants will be able to listen only until the question and answer portion of this call.

During the question and answer session, you'll be able to ask a question or question. The star one key on you touched on phone should you become disconnected throughout this conference call. These $3. The number provided to you in reference to Abbott earnings call.

This call is being reported 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 I would now like to introduce Mr. Scott Leinweber Vice President.

Investor Relations licensing and acquisitions.

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.

Before we get started some statements made today may be forward looking for purposes of the private Securities Litigation Reform Act of 1095, including the.

Expected financial results for 2021.

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 one a risk factors to our annual report on form 10-K for the year ended December 31 2020.

Abbott undertakes no obligation to release publicly any revisions to forward looking statements as a result of subsequent events or development.

Except as required by law.

Please note that financial information provided on the call today for sales EPS and line items of the P&L will be for continuing operations only.

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 Dot com.

Unless otherwise noted our commentary on sales growth refers to organic sales growth, which excludes the impact of foreign exchange with.

With that I will now turn the call over to Robert.

Thanks Scott.

Everyone and thank you for joining us.

Today, we reported the results of a very strong quarter ongoing.

Ongoing earnings per share were $1 32.

Reflecting more than a 100% growth compared to the prior year.

Sales increased 33% on an organic basis in the quarter.

At the start of the year, we issued full year guidance that reflected another year of strong performance and through the first quarter, we're right on track with those expectations.

Our full year 2021, adjusted earnings per share guidance of at least $5 remains unchanged and reflects over 35% growth compared to last year.

Our strong first quarter were comprised of several factors, including.

Global Global Covid testing related sales of $2 $2 billion with rapid tests compromising roughly 85% of those sales.

Strong sales growth across all four of our major business areas, which resulted in base business organic sales growth, excluding COVID-19 testing related sales of nearly 6%.

Growth contributions and momentum from several recently launched products across all of our businesses.

And the impact of significant investments, we're making across our portfolio in R&D and commercial initiatives that will further strengthen our sustainable growth profile.

I will now summarize our first quarter results before turning the call over to Bob.

And I'll start with nutrition.

Where sales increased nearly six 5% in the quarter.

Performance was led by our adult nutrition business with sales growth of more than 18% in the quarter.

The pandemic has brought a lot of awareness to the value of good nutrition, including immune support which is helping to bring new users into the category and more specifically to our market leading ensure in concern to brands.

Pediatric nutrition sales declined two 5% in the quarter.

Recall during the first quarter of last year. This business experienced significant pantry stocking ahead of the shelter in place restrictions in several countries at the start of the global pandemic.

Our sales growth this quarter in pediatric nutrition reflects that difficult year over year comparison.

In the U S and several international markets, we continue to capture share with our leading portfolio of infant formula and toddler brands.

In diagnostics sales increased 115%, which was led by significant demand for our portfolio of COVID-19 tests as well as improvement in the base business.

As I mentioned earlier strong COVID-19 testing related sales were led by our rapid point of care platforms.

Now by index now in <unk> as we continue to see demand shift towards rapid testing worldwide.

During the quarter <unk> now received U S emergency use authorization for over the counter nonprescription self use for people with or without symptoms. We began shipping test kits to major retailers yesterday.

Just as importantly, our underlying base business continues to improve driven by improving routine diagnostic testing levels and the continued rollout of our liberty platforms, excluding COVID-19 testing related sales, our core lab and molecular diagnostic businesses, both achieved double digit sale.

<unk> growth in the quarter.

Turning to established pharmaceuticals, where sales grew over 6% in the quarter was particularly strong given the comparison versus a strong first quarter last year.

Performance in the quarter was led by double digit sales growth in India, China and Brazil.

While we continue to see elevated COVID-19 case levels across several emerging markets. The business is executing at a high level to ensure patients have access to a branded generic medicines.

And lastly, I'll cover medical devices, where sales grew nearly 9% in the quarter.

Led by strong growth in structural heart rhythm management, electrophysiology and diabetes care.

Although procedure volumes across our cardiovascular and Neuromodulation businesses were impacted early in the year by elevated coast case rates in certain countries, including the U S.

We saw growth improved throughout the quarter and exited with good momentum.

On average in March U S procedure levels were up mid single digits compared to pre COVID-19 baselines across our cardiovascular business with some areas even higher.

In structural heart sales were up mid teens overall with growth contributions coming from several products within our innovative portfolio, including Mitraclip try clip portico and others.

Mitraclip sales grew more than 15% in the U S, where we achieved our highest number of monthly procedures ever in the month of March.

In January CMS expanded reimbursement coverage for Mitraclip, which significantly increases the number of people who can benefit from this market leading device.

And I'll wrap up with diabetes care, where growth was led by freestyle libre sales of nearly $830 million.

The global user base for Libre has now surpassed 3 million users driven by market expansion and awareness efforts as well as ongoing new product launch activity in every major market around the world.

So in summary, we're off to a very strong start and right on track with our expectations for the year.

All four of our major businesses are achieving strong growth with.

We're particularly pleased with the growth contributions in momentum of several recently launched products and we're well positioned to achieve more than 35% EPS growth.

As we have forecasted at the beginning of the year.

And now I'll turn it over the call to Bob to discuss our results and outlook for the year in more detail Bob.

Thanks, Robert as Scott mentioned earlier, please note that all references to sales growth rates.

Otherwise noted are on an organic basis, which is consistent with our previous guidance.

Turning to our results.

Sales for the first quarter increased 32, 9%.

Which was led by strong performance across all of our businesses along with strong global Covid testing related sales.

Organic sales growth was balanced with 34% growth in the U S and 32% growth internationally.

Covid testing related sales were also balanced geographically.

With a little more than half of those sales coming from international markets.

Foreign exchange had a favorable year over year impact of two 5% on first quarter sales.

During the quarter, we saw the U S dollar strengthened somewhat versus several currencies, which resulted in a slightly less favorable impact on sales compared to exchange rates at the time of our earnings call in January.

Based on current rates, we would expect exchange to have a favorable impact of approximately 4% on our second quarter reported sales.

And we'd now expect exchange to have a favorable impact of nearly 2% on our full year 2021 sales.

Regarding other aspects of the P&L for the first quarter.

The adjusted gross margin ratio was 58, 3% of sales.

Adjusted R&D investment was 6% of sales.

And adjusted SG&A expense was 25, 1% of sales.

As Robert mentioned, the strength of our business performance has created an opportunity to significantly increase our investments in R&D and SG&A to further strengthen our pipeline and growth initiatives.

During the first quarter, our combined investments in these areas increased approximately $200 million.

Compared to the same quarter last year.

And was at the highest level since our separation with Abbvie.

For the first quarter.

Net interest expense was $124 million non operating income was $73 million and our adjusted tax rate was 15%, which is consistent with our full year effective tax rate from last year.

With that we'll 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 to remove yourself from the queue. Please press the pound key for optimal sound quality, we kindly ask that you. Please raise your hand.

Instead of your speaker phone when asking your question and again, ladies and gentlemen that Scott and then one to ask a question.

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

Oh, Thanks, and good morning.

Congratulations on a strong Q1 revenue and profit growth.

I can recall the last time the company put up a 100% earnings growth. So.

<unk>, there I guess I guess I'd love to hear your thoughts on two important topics.

Robert If you don't mind the first topic is.

By next now OTC I was wondering if you could just talk a little bit about capacity and your early thoughts on how you think demand will play out for that product.

So that's the first topic and then I'll just go ahead and list the second one.

In the interest of time and the second topic is a little bit longer term oriented because last quarter you expressed some confidence in <unk> ability to drive double digit earnings growth in 2022 off of that $5 number for this year and the question I would have is based on what Youre seeing today has anything changed with your views and then I think investors would also love.

To hear.

If you assume more conservative testing scenario, how does that impact that goal of double digit earnings growth next year. So.

Just wanted to listen all upfront there and thanks for taking the questions.

Okay. Thanks.

On your first question regarding kind of the U S.

<unk> OTC launch so yeah, we're very excited about that we see this as a.

As a significant opportunity and quite frankly, a trend thats 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, we're a little bit of less.

Less hassle less less process.

We see this as a significant opportunity.

Z, it's affordable and I think that's a key part here Bob as we think about <unk>.

Surveillance testing in serial testing it needs it needs to contemplate those two areas right it needs to be affordable, it's difficult to do serial testing on PCR when you.

You've got a cost of $100 plus and takes between two to three days to get that so I think we're not we're in a great opportunity here to be able to capitalize on that I think this is something that people are going to want to buy and have in their homes and stock up in their homes think of it as maybe your new.

Your new element in your medicine cabinet.

But we've been seeing this shift happen.

Towards the end of last year and definitely into this quarter here this move towards towards rapid specifically in the U S. We've got a great position.

As a lot of this OTC is going to require understanding of the retail and the retail environment and retail channel and those are capabilities that as you know through our nutrition business through our diabetes business.

No it operate in operating pretty well in there. So we're excited and I think this is going to eliminate a lot of the barriers that exist for frequent testing.

A key aspect of that is obviously scale, we have to have scale to be able to meet.

To be able to meet the demand.

Quite frankly.

The leaders here in terms of in terms of production we've got.

And establish capacity this quarter now that we can do about 150 million rapid tests per month across all of our different platforms. So we feel very good about about that position we feel good about this opportunity.

To your second question on 2022.

Yes, we did you did mentioned our confidence back in January and we commented on our call and to be honest day Nothings nothing has changed on that front.

Nothing has changed over the last 90 days we.

We start our planning process every year, we target double digit growth and we talked about some of the key elements and laid out some of the key elements that.

To have that confidence to be able to drive that double digits in 2022, whether it's the <unk>.

Pace of recovery of our base business Covid testing, new product launches investments spend et cetera.

None of that has changed I mean, if you look at the pace of our recovery on our base business, that's done very well cardio and neuro finished the quarter very strong we grew double digits as I said in my prepared remarks in core lab in molecular diagnostics excluding COVID-19.

Libre is growing rapidly nutrition, and <unk> or accelerating their growth rates with pipeline in a market that supports that sustained growth, we've got momentum with a lot of our product launches.

Mitraclip G four try clip.

I'd say, our mapping systems, our new CRM devices.

And then we've got coming out of this year going into next year for key product launches that we feel very very good about we're very excited about them given given our position given the product offering and the value proposition of them.

And you know those are low.

<unk> entered in the la market here in the U S potential expansion of indications for cardio mens entering the lead list pacemaker.

With single Chamber, and then follow that with a dual chamber entering the U S. <unk> market I mean, all four of those opportunities are multibillion dollar segments and we've been working hard on the last call. It 18 months to get us ready to be in a position in 2022 to be able to capitalize on that so the underlying base business.

The pipeline all of that is kind of heading in the right direction and don't see any changes if anything this acceleration to kind of what we talked about 90 days ago, and we continue to believe a good portion of the Covid testing is sustainable.

As I said, there is a clear trend here to move towards rapid formats. We're the dominant producer here of these rapid tests.

Making about $150 million.

So wherever that wherever that market goes we know that will be it will be the share leader here for sure.

So you look at all these different components here, Bob we still feel very confident about our double digit.

The one thing I'll say is that as you look at all of these different businesses, probably one thing that we can try and model now, but it will probably be different.

January is just how the how the mix of those businesses are going to are going to contribute to that double digit growth.

It always ends up differently in terms of how we planned we did we did double digit in 2020.

And it was very different versus how we set it up in January of 2020. So if you look at our history, we were pretty consistent about delivering on that.

If there is any caution here I guess for next year, it would already be seem to be priced here into RPE, so but that being said.

I don't think anything has changed from the last 90 days from our perspective, we feel very good about our double digit.

That's great. Thank you and then just if it was a more conservative testing environment, how does that impact the way you think about things.

I mean, that's I guess, that's the that's the model here, where we start to model different ways different parts of all of these elements that I explained to you in.

It's going to be difficult im not going to put out.

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 will get a lot of the share of the COVID-19 testing that has remained so.

Great. Thanks for taking the questions.

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

Great.

Echo Bob Congratulations on a very nice quarter maybe.

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 Youre Frontloading a lot of expenses into 2021 here you grew opex about $300 million versus last year. So I'd love to see if I could just get a little more meat on the bones in terms of the road map to that double digit EPS more down the P&L.

Versus the top line, which you just talked about in and does it imply sort of high twenties operating margins to get there.

On the high Twenty's operating margin yet.

To be the case regarding regarding the.

The areas of investment I mean, I talked a lot about these.

In terms of the investments, we're making I'd.

I'd say from a bigger picture perspective, we want to make sure that we're spending and investing a good portion of these costs. These COVID-19 testing profit into the R&D portion of the P&L. We believe that is a very sustainable investment and I, if I look across all the businesses in devices and diagnostics and rapid.

Gnostics in nutrition all of these businesses have opportunities to invest in R&D and we've got clear programs across all of them.

To build the.

R&D.

Programs.

That will sustain our growth.

Beyond 'twenty two 'twenty three 'twenty four a lot of the products that I just mentioned.

Whether it's the ones. We've just launched over the last kind of quarter, two or three quarters plus the four key areas that we're looking at entering in 2022, those are going to drive a lot of our revenue growth and those have already been funded.

But I would say the investments here really looking into next generation products in diagnostics expansion in our portfolio and devices that will lead to new.

New product launches and 23% and 24 on the SG&A side.

We're making sure that we're supporting our big growth products.

I'd say, probably a lot of the SG&A is going towards libre, and driving and driving libre awareness and growth both in the U S and international markets and Youll start to see that ramp up even more as we go throughout the year both in terms of the spend.

<unk>.

And the return on the top line.

We're making investments also in nutrition to.

Strengthen our brands and capitalize on the expansion.

Especially in the adult nutrition side of the market and expanding footprint and several of our device businesses, where we know that.

Clinical specialist and sales force et cetera is important to be able to support not only the expansion of our current products, but the launch of new products.

Great really helpful and maybe just a quick follow up.

We're all really interested to hear not just about how the devices business did in first quarter, but really the forward commentary on what Youre seeing exiting March and into April here. So if you have any early feedback on the exit rates and what you're expecting in terms of cash.

Catch up that'd be really helpful. Thanks, a lot.

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 little bit of a slowdown in January.

We.

<unk> had a nice pick up I would say in October and November were sorry October November where we saw procedure growth rates return to growth.

And.

I'd say December January saw that saw that decline as the cases increased but.

Real nice progression in the month of February and then very strong growth in March and Rob What we've tried to do also is we try to look at.

The March is a tricky month, because you've got those two weeks of last year, where things kind of really kind of shut down so.

We look at marks not only versus last year, but also looking at it versus March of 2019, and quite frankly, the whole quarter versus 2019, and we actually see growth rates in this quarter that are higher than.

Then our pre pandemic rates in 2019 in Q1 of 2019. So I think we saw a real nice nice growth in core lab that was very positive to see we saw double digit growth there and that's a good indicator of routine testing coming back to hospitals saw a double digit there are molecular diagnostics.

Business, excluding COVID-19 in PCR Covid testing.

It was up 30%. So that's a real positive sign that our strategy of utilizing the <unk> M to launch into the market with Covid and then kind of build off the menu is also having a having a positive impact over there too. So I would say very good exit rate.

And as we look at the first two weeks of April.

We look at it every every week here.

A real nice progression, so I didn't see the bolus coming in and then the drop I actually saw continued nice improvement in structural heart in.

And EEP.

And even in CRM. So those are those are that's a nice trend as we're going into the second quarter, two and we will start to see a little bit of opening up here in Europe I'd say, the one area that was a little bit softer for US was Europe, given all the shutdowns there, but again I would say the first couple of weeks in Europe are looking pretty good.

That's great to hear I appreciate the color. Thanks.

Okay.

Thank you. Our next question comes from Larry <unk> from Wells Fargo. Your line is open.

Good morning, Thanks for taking the question Robert One from 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 low double digit EPS growth target in 2022, and your thoughts around capital allocation, helping you achieve.

The $5 50 in EPS is a buyback or an accretive deal something you would consider to get there and I had one follow up on Libre.

Sure well, we start every year as I said targeting double digit if you look at where we are in 2021, <unk> 2019 were up 53%.

We'll be targeting as I said double digit in 2022, and again theres multiple ways.

Of how we can get there.

In terms of business mix et cetera, we do have a strong balance sheet.

And that provides us a lot of strategic flexibility, we try and have a balanced approach there.

Larry in terms of balancing between short and long term.

Investing the business and providing some of that returned back to back to our shareholders. So.

Whether it's in the form of dividend, we're committed to a strong growing dividend is an important part of our identity on the share repurchasing we've historically.

<unk> really looked at share repurchasing to offset some of the dilution we could be looking to do a little bit more than that.

Going in this year going into next year.

And then from a from a from an M&A perspective.

I'd say, we're always actively monitoring we're always actively looking at.

Youll always hear me say that I'm, not going to I'm not going to tip my hand.

And give up any kind of competitive advantage there, but if there is something that that is attractive something that has got growth that won't dilute our topline growth profile, which I, which I think is best in class.

Or that we can do better with we're always going to be interested.

But we're always going to be prudent about deploying our cash Larry always keeping our shareholders happy balancing the long the long term to short term the internal and external.

This is not a this is not a kind of a new CEO vs. Prior CEO philosophy. This has always been this has always been an Abbott philosophy, we're good stewards of that capital.

And good stewards of finding that right balance that I just described.

That's very helpful and then libre.

Should we think about the growth for the remainder of the year the comps get a little easier.

You talked about 40% as an aspirational goal.

Last call and just what's the latest on the Libre three launch in Europe, and if you give us any color on the U S.

We certainly appreciate it.

Im not sure we will get it today, but thank you for taking the questions.

Sure.

Just put out a goal.

Of growing 40%.

In 2021.

Tom.

You mentioned compares.

Comparison, yeah, there was a little bit about those a little bit of a.

<unk> got a little bit of a balance here between Q1 and Q2, So Q1 last year we saw.

Some some stocking up.

In international and in the U S. So I look at our 30% here and on top of a pretty strong quarter last year is really really positive momentum.

We will have some effect.

On the reverse side of that in Q2.

So then it becomes really a second half can we kind of sustain this kind of mid thirties and accelerated into into the forties in the second half and the answer is we believe so we've got a great portfolio, we've got great momentum and making the investments whether it's field force whether.

Direct to consumer advertising not just in the U S, but around the world significant investments to building awareness for the category.

I mean, we've achieved 3 million surpassed $3 million.

Users around the world.

That's three we could say hey, that's three times, our next competitor, but the reality is.

Penetration for us and for the category is still pretty significant. So there is plenty of room here for us to invest in growth and we'll be doing that on the back of our.

Our not only our commercial investments, but also R&D.

Your question on Libre, three that we launched that into Europe at the end of this quarter, we're right, where we want to be.

We start off usually small and focused here Larry we learn we learned with the consumer we learn with the HCP in terms of what resonates we learned with our manufacturing.

We've got a lot of capabilities in terms of how to manufacture at scale, but theres always a little bit of a learning curve here. It is a new platform.

And we learned with insurance and insurance, which is over and all those things and once we get all of that kind of lined up.

Then then we accelerate and we go break but I've got we've got a lot of strategic flexibility here with Libre, two and Libre three I think it's I think we're in a great position feedback.

Feedback has been really good I mean, we've launched this with about over 1000 Hcp's. We've got close to a couple of hundred patients that we've now kind of just try to see what their reactions are with the products and it's been extremely positive. There's a lot of social media there im not im not very fluent in German.

But I can tell a facial expression of awesomeness and coolness in amazement factor and you can see those in and the videos of these patients that are using it. So I think this is going to set up a whole new standard for us on every dimension.

<unk> of use accuracy alarm performance, where experience all of that.

All great its all good.

So regarding your question on Libre timeframe I think you answered it so that's good.

Non or provide any details here, but.

I'm, just really excited about libre III and the combination of the portfolio, having both two and three I just think it provides us a lot of strategic flexibility.

Thanks, so much.

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

Hey, guys congrats on the print and thanks for taking my question Robert.

Robert I just wanted to ask you on fiscal 'twenty one.

I look at Q1, excluding contribution from Covid Gregg base business it looks like Tom.

It was up 10% organic.

Versus pre pandemic.

19 levels one.

Is that math, correct, and if theyre starting off at 10% I guess.

Are we looking at perhaps teens kind of growth for fiscal 'twenty, one on the top line on the base business.

Hi, Vijay this is Bob Yes, your math is spot on our first quarter was up over 2019.

By around 10%, So we had really good.

Really good performance in the quarter and the base business, you really saw that across kind of the portfolio.

Businesses and then we would expect to continue to see.

Strong growth during the course of the.

The rest of the year in particular as a medical.

Device procedures continue to improve and we would expect to see kind of that base business growth.

Mid teens.

That's helpful guys and then one on the.

And it's in that testing side.

The press release yesterday.

Launching the asymptomatic com consumer version of the product.

I guess, how where revenues recognized this recognize on shipment in.

What are the early.

Early demand looking like from retailers rates, the Cvs and Walgreens.

Walgreens Walmart.

And is there.

Expectation of six five to 7 million for fiscal 'twenty, one is that on cash.

Thank you.

Yes, so on the six 5% to seven yes that remains unchanged.

<unk> to forecast here.

In that tight range that you would expect from Abbott, but yes, we continue to forecast sales at around at around that level.

Regarding your question I think it was regarding the <unk> OTC in the U S correct.

So you're referring to.

Correct, Yeah, so, yes, I mean, we.

We received approval for the product.

Several weeks ago, and we immediately started our manufacturing process. It is a different presentation from the previous buying X test in which we provide two tests.

And the necessary consumables to run those tests. So we started manufacturing that and began shipping.

Literally yesterday to retailers and we will start with <unk>.

Cvs Walgreens, Walmart and you can expect all the other retailers food merchants et cetera too.

Roll into that.

As we expand and start manufacturing and accelerating our manufacturing so.

Yes, we shipped the product and the revenue is booked when when the when the when the asset is transferred over to the retailer.

I think this is going to be as I said, a great opportunity. It's a channel we know very well I think few diagnostic companies that have this this product have the capacity the manufacturing scale.

And the channel experience and domain here too.

It's kind of.

Really compete so we feel very good about our position.

We will start we start off with the initial stocking orders.

And then from then we will roll out more more.

More distribution and we expect.

The price point hear Vijay that theres going to be.

A great opportunity for a lot of households in the U S to be able to have testing on hand ready to go.

At their house, so we expect that there'll be a nice repeat purchase also.

Yes.

I am planning on stocking up Robert Thanks appreciate the comments.

Thank you for that.

Thank you.

And our next question comes from Matt Mcclintock from Credit Suisse. Your line is open.

<unk>.

Hi.

Quick question from me if I could.

Just on some of the pipeline opportunities around amulet cardiome.

Cardiome Ms reported dollars if you could provide a split.

Maybe an update on on.

John those program and.

Secondly on just the.

The progression of Mitraclip This is Ben.

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.

Yes.

So a couple there so on on the amulet side, yes listen we've got experience in this category outside of the United States and the international markets and the product is very well, we filed with the FDA late last year.

We think this is a very very attractive market, it's approaching about $1 billion today, and it's growing double digits and as I said I think.

<unk> is a very competitive product.

In its current form.

We're obviously, we'll obviously be investing as part of some of those R&D investments I mentioned in next generations. There also but even in its current format.

Performs very well and we've got a great experience in Europe.

We believe a lot in this market in this segment and so we've also initiated.

Catalyst trial. So we started a new trial late last year and this is a trial comparing amulet to know at drugs, which is currently the standard treatment option for people with AAF.

That are at risk of a stroke. So we think that this will be a significant.

And a growth driver after we launch also.

Results, there will take a little bit longer to divulge those would probably in the 2023 timeframe, but it just shows our commitment to this segment because.

Because we believe we've got a great product great product portfolio pipeline and it's a great segment here so I.

I think you had another question on Mitraclip.

Mitraclip that very well.

In the quarter, obviously, it got impacted by.

Covid last year. It was on a great trajectory and kind of got slowed down is as obviously the ICU beds in hospitals move towards.

Treating COVID-19, but.

We had we had great growth in in Q1 were up in the mid teens in the U S.

So that was good as I said in my prepared comments, we had our highest number.

Procedures ever in the month of March and.

It wasn't just catch up because I've looked at the procedures and the first two weeks of April and they continue to move up so that's that's very positive for us.

We're making our investments not only on the pipeline side, new new new versions of Mitraclip, but also more importantly in the market development.

Really to expand the funnel of patients being treated creating those patient referral networks with the cardiologists on our implanting centers. So that's done very well and I think the NCD.

That got approved in January opens up a significant opportunity for us with Mitraclip remember.

We're only we're only about five to six maybe 7% penetrated right now in the total available market here and I think that we've got a lot of runway for growth.

In the mitral space.

And I think you also had a question on cardio Mems.

We expect to file for a label expansion relatively soon.

This would also significantly broadened the U S market opportunity.

We plan to pursue CMS reimbursement.

After we obtain that that label expansion.

Spansion. This segment continues to grow our Q1 growth in cargo Mems was.

North of 20%.

And that market has started to recover also from from the pandemic and I like the position we have in them.

Thank you.

Our next question comes from Matt Taylor from UBS.

Your line is open.

Thank you for taking the question.

So I wanted to go back to the idea of the double digit growth in the investments that youre, making this year you called out R&D and we've seen.

DTC has been stepping up I think theres a lot of libre commercials. They are now I guess my question is when you think about these investments.

The sustainability historically, we've thought about Abbott is driving 7% growth that was your algorithm pre COVID-19 do you think that the investments could lead to more sustainable higher post.

<unk> organic growth and then how quickly can you toggle them up and down if the environment changes quickly to manage every day.

Sure.

So I would say on the base business side.

Our identity, our target was really.

Sustaining a 7% to 8% growth rate.

Pre COVID-19 and I would say with these investments that we're making excluding any kind of year over year comp would probably be at the higher end of that seven to eight range. I mean once you factor in maybe at Q1 comparison on the base business next year, probably growing a little bit higher than that.

Matt but at the at the high end of that seven to eight is what we're looking at with all of these investments and product development and portfolio development.

As I said big.

Big portion of our Covid.

Cash flows and profit part of it goes to our shareholders, but part of it goes back into the business and.

And we've got a lot of flexibility here to toggle that investment up or down.

If we need to.

Probably say that each business has has their list of go to areas that we've all agreed to.

Our next next steps.

If we have more opportunity to invest in the business we know exactly.

Exactly where to go.

<unk>.

As it relates to toggling down yes.

It wouldn't be toggling down R&D, I think thats more of a sustainable kind of investment that sustains our growth rate, it's easier to toggle on SG&A and we've got that capability is also if we need to.

Great.

I just had a follow up on diagnostics via the underlying growth as you called out in core lab and molecular was impressive and I'm wondering if we're going to see you get increased momentum in the underlying business because of your success with Covid diagnostics do you think you can leverage that larger installed base and drive to higher growth in the core diagnose.

Business over time now.

Yes, I think the answer to that is yes.

We've definitely.

Ben elevated to a kind of a higher level of partnership here with a lot of hospitals and idms and institutions as it relates to their kind of COVID-19 testing there's been.

Large set of accounts that we've historically been out of an NAV has had the opportunity to.

To place our instruments and show what we can do so.

So the answer to that is yes on the core lab for sure you saw you're seeing a little bit of that strategy play out in the molecular side of the business we're in.

We haven't we haven't seen these kind of growth rates in our molecular business excluding.

Covid in a very long time, and we were up close to 30% excluding COVID-19 testing a lot of that has to do with.

The instruments that replacing and getting the test pull through.

On the other assays on the other tests so.

On the rapid side too.

Just look at it from a from a core lab perspective.

The sustainability of Covid is one one portion of it is the actual COVID-19 test. The other portion of it is the installed base that replacing as a result of that.

Talked a little bit about this building sustainability of a rapid.

Testing channel beyond just Covid and Covid is allowing us to do that but if you think about for example, our I'd now instrument where.

We basically seeded the market here for an opportunity to do much more in the world outs.

Outside of Covid.

Bye bye make by placing these instruments, we had roughly about 19000 boxes in the U S. In 2019, and we're currently at 75000 boxes. So we almost quadrupled our installed base there will they all be as productive.

From a COVID-19 testing perspective at the highest level of the pandemic one two years out no probably not but there'll be very productive with all of our other assays in that installed base will continue to grow and we will continue to produce for us. So to answer your question, Yes, I do think this is.

A great opportunity here for us to continue to rollout our <unk> platform.

On the core lab on the molecular side and continue to build our rapid testing channel.

And our rapid and the Rapids business.

Alright, Thanks Robert.

Yes.

Yeah.

Thank you. Our next question comes from Joanne Wuensch from Citibank. Your line is open.

Thank you very much for taking the questions put them both upfront.

With an idea of how youre thinking about revenue for the remainder of the year, particularly I'm going to ask questions about COVID-19 diagnostic revenue in 2021 and then my second question is you do it.

The other areas in med tech that are starting.

Can you point.

That high single digit growth rate.

Anything you can add color on basket, our CRM would be helpful. Thank you.

Sure so kind of growth rate in our diagnostic business the way the way to think about it is at least how we've modeled it is we will see our.

Let's call it non COVID-19 diagnostic business continue to accelerate continue to grow.

Obviously youll have comps over there Joanne in Q2 and Q3.

That will that will be producing some some some some mid teens kind of growth numbers in this business, but I think we always look at at least the way we're managing it here is we're always looking at it on a two year CAGR. So we can get back up to that kind of 10, 11, and 12% growth rate that we were seeing in our core lab business.

On a two year CAGR.

Basically our target to be able to get to those numbers.

Covid testing, it's difficult to forecast right now I can't I can't give you.

That quarterly progression of that I think the range that we've given.

Last call I continue to reiterate it but it's going to be a little bit difficult here to get the exact calendar <unk> the exact mix the exact geography.

Right in terms of the in terms of the Covid testing, what I will say, though is that I do continue to believe that the shift from lab based PCR still play a role in Covid, but I think that the bigger role will be played by the rapid testing as it relates to surveillance.

And as I said, I think we're well positioned there.

I think your second question was regarding.

Some of the other devices.

I'd say listen I am very pleased with.

CRM.

I'm not saying that.

Completely turned it around but it's a great.

It's a great a progression that we're seeing here.

The launch of our ICD and CRT DS with the gallant.

Brand with Bluetooth capability in Europe and U S.

All of the numbers show that where we're picking up share and that's the ultimate measure here.

And I am excited about the.

The ability for us to enter the <unk> segment.

And next year with with our product and the and the capabilities that and the value proposition that that product will bring versus competitive systems.

Thats done very well.

I'd say heart failure.

One of the challenges there is probably that's probably the slowest part of the device portfolio to recover a lot of those procedures require.

Some ICU stays.

So I think that one's was one where we saw a little bit of impact to market I'd say, our share has started pretty high around the mid 80%, 85%. So thats, mostly a market condition that we'll see come back, but I think that the.

Cardiome Ms is another great opportunity for us, where we saw growth in the quarter for 26% so.

<unk>.

I don't know if I covered all the device areas that you wanted me to hit on.

<unk> had a neuroma that would be great and then yeah.

So we did see a little bit of a slowdown in trials towards the end of the year and at the beginning of the year and we saw that start to pick up a little bit now.

We think that.

We like our position, we recently launched our remote.

Moat.

Programming.

And monitoring.

System. The nearest spear I think that's going to create a whole new.

Opportunity for us in terms of business model in terms of our ability to service to patients and the physicians better with that.

So we started to roll it out in the U S. I think it applies to both SCS.

And EPS two we've gotten great feedback on that so I think that we'll see sequential improvement on our performance in neuro not only as we lap the comps, but also as as the Neurostar gets widely used and then we've got a nice pipeline of products to be launched towards the end of the year here.

Thank you very much.

Operator, we'll take one more question.

Thank you and our last question comes from Josh Jennings from Cowen Your line is open.

Hi, good morning, Thanks for taking the questions and congratulations on the quarter I wanted to Rob just to ask about your commentary about the potential to pursue M&A to.

To support that.

If need be that support the double digit earnings growth in 2022, and anything you can you can provide investors and analysts with in terms of the areas of focus I mean should we be thinking that each each business unit.

Received some support.

With the acquisition.

Specifically on medical devices.

Follow up to Julians question, but should we be thinking about potential the bolstering our heart failures of asking or bonds and some of the software businesses here I mean, you have such a pipeline.

Had such success with internal development initiatives as medical device scenario, where you could add and then lastly, just on just structural heart business in the U S youre going to be adding amulet and portico in the near term and just how are you thinking about that bench.

Pension a specialized sales force, but should we be thinking about individual sales teams from Mitraclip tavern and left atrial appendage occlusion and how.

With that I will shape out thanks for taking the questions.

Yes, so I think on the M&A side.

You'll hear me say the same thing, which is I think it always starts off.

Strategically.

Does the business.

We're looking at have a strategic fit.

<unk> Abbott both from a market position from a financial standpoint.

So we wouldn't be looking at anything.

That doesn't fit us strategically just to fill.

And EPS.

We want businesses that we can grow that we can that we can obviously you operate in.

Well into into into the company.

So I think it always starts like that.

It's always starts with the strategic fit and.

And then if it's attractive.

If the timing is right.

Then we'll look at it I think all the areas that you mentioned.

All areas that we look at so we look at all those areas that you mentioned, we look at diagnostics. We look at all of the areas. We're always studying and we're always paying attention to the new technologies, the new companies et cetera. So.

I just wouldn't I just wouldn't.

Tip, my hand here and give anything away.

In terms of our competitive position here sales.

Regarding your second question on.

Sales forces.

It always it always depends but we tend to have a viewpoint here Josh ware.

We believe that kind of focus.

And dedicated teams has always been best that's kind of how we've run our businesses.

It's how we run our businesses from for many many decades, we don't try and bring things together that don't make sense just for the just for the just for the sake of synergies if we.

If we believe we're in growth areas in growth businesses, then we'll fund them as growth business in growth areas and quite frankly, all of the businesses that you talked about in structural heart our areas of high potential growth. So we will we will treat them and resource them as such.

So I'll just close here by saying, we set guidance of at least $5, which is about 35% growth year over year.

After 13% growth in 2020, and we feel very good about our first quarter, we feel that our first quarter puts us on track.

Two to achieve those at least those $5, we have multiple ways to get there.

The COVID-19 market is going to move more and more towards rapid and our position in this in this segment of Covid testing is unmatched with our capabilities, our scale et cetera, and we believe a good portion of those tests that COVID-19 testing market will.

Remained at least into 2022 and.

Im very pleased with the pace of recovery of our base of our base business Abbott or let's call. It the non COVID-19 side of our business and we're making investments.

In 2021, so we can accelerate our growth in 2022 and beyond and we've talked about there's also so we feel very good about the position we're in today.

And the position we have this year and going into next year.

Very good. 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 am central time today.

<unk> Investor Relations website at Abbott Investor Dot Com.

Thank you for joining us today.

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

[music].

Yes.

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Okay.

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Good morning, and thank you for standing by welcome to Abbott first quarter 2021 earnings Conference call. All participants will be able to listen only until the question I asked a portion of this call.

During the question and answer session, you'll be able to ask a question operating this fall one key on your Touchtone phone should you become disconnected throughout the conference call. Please redial. The number provided to you in reference to Abbott earnings call. This call is being reported 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.

I'd now like to introduce Mr. Scott, Lyne, and Weber, Vice President Investor Relations licensing and acquisitions.

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.

Before we get started some statements made today may be forward looking for purposes of the private Securities Litigation Reform Act of $19 95.

Including the expected financial results for 2021.

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 <unk>.

Abbott undertakes no obligation to release publicly any revisions to forward looking statements as a result of subsequent events or development.

Except as required by law.

Please note the financial information provided on the call today for sales EPS and line items of the P&L will be for continuing operations only.

Today's conference call as in the past non-GAAP financial measures will be used to help investors understand abbott's ongoing business performance.

Unless otherwise noted our commentary on sales growth refers to organic sales growth, which excludes the impact of foreign exchange with.

With that I will now turn the call over to Robert.

Thanks, Scott Good morning, everyone and thank you for joining us.

Today, we reported the results of a very strong quarter ongoing.

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.

At the start of the year, we issued full year guidance that reflected another year of strong performance and through the first quarter, we're right on track with those expectations.

Our full year 2021, adjusted earnings per share guidance of at least $5 remains unchanged and reflects over 35% growth compared to last year.

Our strong first quarter were comprised of several factors, including.

Global Global Covid testing related sales of $2 $2 billion with rapid tests compromising roughly 85% of those sales.

Strong sales growth across all four of our major business areas, which resulted in base business organic sales growth, excluding COVID-19 testing related sales of nearly 6%.

Growth contributions and momentum from several recently launched products across all of our businesses.

And the impact of significant investments, we're making across our portfolio in R&D and commercial initiatives that will further strengthen our sustainable growth profile.

I'll now summarize our first quarter results before turning the call over to Paul.

And I'll start with nutrition.

Where sales increased nearly six 5% in the quarter.

Performance was led by our adult nutrition business with sales growth of more than 18% in the quarter.

Pediatric nutrition sales declined two 5% in the quarter.

Our sales growth this quarter in pediatric nutrition reflects that difficult year over year comparison.

In the U S and several international markets, we continue to capture share with our leading portfolio of infant formula and toddler brands.

In diagnostics sales increased 115%, which was led by significant demand for our portfolio of COVID-19 tests as well as improvement in the base business.

I mentioned earlier strong COVID-19 testing related sales rillette by our rapid point of care platforms.

Now <unk> now and <unk> as we continue to see demand shift towards rapid testing worldwide.

Just as importantly, our underlying base business continues to improve driven by improving routine diagnostic testing levels and the continued rollout of our linear platforms.

Excluding COVID-19 testing related sales, our core lab and molecular diagnostic businesses, both achieved double digit sales growth in the quarter.

Turning to established pharmaceuticals, where sales grew over 6% in the quarter was particularly strong given the comparison versus a strong first quarter last year.

Performance in the quarter was led by double digit sales growth in India, China, and Brazil, and while we continue to see elevated COVID-19 case levels across several emerging markets. The business is executing at a high level to ensure patients have access to a branded generic medicines.

And lastly, I'll cover medical devices, where sales grew nearly 9% in the quarter led by strong growth in structural heart rhythm management, electrophysiology and diabetes care.