Q4 2022 Abbott Laboratories Earnings Call
Speaker 1: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial *11.
Speaker 2: The conference will begin shortly. To raise and lower your hand during the Q&A, you can dial *11. Good morning, and thank you for standing by. Welcome to Abbott's fourth-quarter 2022 earnings conference call. All participants will be able to listen only until the question and answer portion of this call.
Speaker 3: During the question and answer session, you will be able to ask your question by pressing the star 1-1 keys on your touchtone phone. This call is being recorded by Abbott. With the exception of any participants' questions asked during the question and answer session, the entire call, including the question and answer session, is material copyrighted.
Speaker 4: Thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer, and Bob Funk, Executive Vice-President of Finance and Chief Financial Officer.
Speaker 5: Robert and Bob will provide opening remarks.
Speaker 6: Following their comments, we'll take your questions.
Speaker 7: Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2023.
Speaker 8: 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.
Speaker 9: Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2021.
Speaker 10: 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.
Speaker 11: In today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance.
Speaker 12: 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 avit.com.
Speaker 13: Note that Abbott has not provided the GAAP financial measure for organic sales growth, excluding COVID testing sales.
Speaker 14: On a forward-looking basis, the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth.
Speaker 15: And last, unless otherwise noted, our commentary on sales growth refers to organic sales growth, which excludes the impact of foreign exchange.
Speaker 16: With that, I will now turn the call over to Robert.
Speaker 17: Call over to Robert. Thanks, Scott, and thanks for being here with us.
Speaker 18: Good morning, everyone, and thank you for joining us. Today, I'll discuss our 2022 results as well as our outlook for this year.
Speaker 19: For the full year 2022, we achieved ongoing earnings per share of $5.34.
Speaker 20: Which is well above the original EPS guidance we set at the beginning of the year.
Speaker 21: As you know, macro business conditions have been highly dynamic and challenging over the last few years, particularly for US-based multinational companies.
Speaker 22: COVID-19 pandemic played a big role in this, of course.
Speaker 23: We saw the US dollar strengthen significantly.
Speaker 24: and inflation reached new heights last year.
Speaker 25: Supply chains continue to face challenges.
Speaker 26: And our healthcare customers have been navigating staffing challenges that are negatively impacting certain medical device procedure trends and routine diagnostic testing volumes.
Speaker 27: Thank you.
Speaker 28: As we start the new year, however.
Speaker 29: Well, all these factors remain headwinds.
Speaker 30: I'm cautiously optimistic that we're starting to see them peak and, in some cases, ease a bit.
Speaker 31: Thank you.
Speaker 32: Over the past few months,
The impact of COVID-19 on society has lessened.
Economies around the world are increasingly reopening.
In the US, the US dollar weakened a bit.
And inflation has eased somewhat.
and hospital-based procedures and routine testing trends continue to steadily improve in many areas.
As you know, COVID testing has been a big part of our story these past couple of years.
And I'm proud of what our team has built.
A full suite of tests across several platforms.
and the intentionality and how we established a leading role in the world's response to the pandemic.
In total, we have delivered nearly 3 billion COVID tests globally since the start of the pandemic.
Thank you.
Going forward.
We expect COVID-19 to transition into more of an endemic, seasonal-type respiratory virus.
And with that, COVID testing, though still important.
was expected to decline significantly.
We expect variants will continue to emerge and therefore our tests will remain an important part of our leading respiratory testing portfolio, along with flu, RSV and strep.
We offer this across multiple testing platforms, including lab-based systems in hospitals.
Small desktop devices in urgent care centers and physician offices.
as well as at-home tests.
As we reflect back on the impact of COVID-19 testing efforts.
Over the last few years, it's clear that our success in this area will have a positive, long-lasting impact on the company.
It strengthened our strategic position and diagnostics through the expansion of our installed base of instruments, including IDNow, our rapid point of care molecular testing platform, and through the opening of new testing channels such as physician offices and at-home testing.
Including R&D and commercial initiatives in support of several recent and upcoming new product launches, while at the same time increasing returns to our shareholders in the form of dividend growth and share repurchasing.
Lastly, it further strengthened our overall financial health and balance sheet, which will provide significant strategic flexibility as we look to build and grow the company even further.
I'm proud of the role we played in fighting COVID over the past few years. It reinforced our purpose, had a meaningful impact on society, and enhanced our long-term strategic position going forward.
Turning now to our outlook for 2023, as we announced this morning.
We forecast ongoing earnings per share of $4.30 to $4.50.
We forecast organic sales growth, excluding COVID testing sales, in the high single digits.
And we forecast around $2 billion of COVID testing sales for the full year 2023. rolled out today between April 23 and January 14.
I will now provide more details on our results by business area before turning the call over to Bob.
I'll start with nutrition.
where sales declined around 6% in both the fourth quarter and full year as a result of manufacturing disruptions at one of our US infant formula facilities last year.
Production at the facility is up and running.
And as we've mentioned previously, our initial supply priority was for the WIC (Women, Infants, and Children) Federal Food Assistance Program, to ensure underserved participants have access to infant formula.
As our manufacturing capacity has continued to recover,
We've been able to increase production of our non-WIC brands.
With a focus on serving the broader infant formula market and building up inventory levels on retail shelves.
Turning to diagnostics.
As expected, sales growth in the fourth quarter was negatively impacted by the year-over-year decline in COVID-19 test sales.
COVID testing sales were $1.1 billion in the fourth quarter, with rapid testing platforms including BinaxNOW in the US, Panbio internationally, and IDNow globally comprising approximately 95% of these sales.
Excluding COVID testing sales, worldwide diagnostics grew by over 11% in the fourth quarter.
Growth in the quarter was led by rapid diagnostics where excluded COVID-19 tests sales increased 30% compared to the prior year.
As I mentioned earlier, during the pandemic, we significantly expanded the installed base of ID Now and opened new testing channels.
The expanded footprint drove strong growth and supported testing needs when the flu and other respiratory infections surged late last year.
During the past year, we continued the rollout of Alinity, our innovative suite of diagnostic instruments.
and expand test menus across our platforms for immunoassay, clinical chemistry, and molecular testing.
Moving to established pharmaceuticals, or EPD, where sales increased by 8% in the fourth quarter and over 10% for the full year.
EPD continues to perform at a high level.
having carved out an attractive growth space in the global pharmaceutical market.
Specifically, our geographic focus is on fast-growing emerging markets with a broad portfolio targeting attractive therapeutic areas.
The strong performance in the quarter was led by double-digit growth across several geographies, including India, China, Brazil, and Mexico.
And I'll wrap up with medical devices.
Where sales grew 7.5% in the fourth quarter and 8% for the full year.
Growth in both the quarter and full year was led by double-digit growth in electrophysiology, structural heart, and diabetes care in the US.
Internationally, sales growth was negatively impacted by COVID surges in China during the fourth quarter, as well as lingering supply challenges in a couple of areas.
In diabetes care, fourth-quarter sales of Freestyle Libre, our market-leading continuous glucose monitoring system, grew over 40% in the US, and global Libre sales reached $4.3 billion for the full year 2022.
We continue to strengthen our medical device portfolio with numerous pipeline advancements and launches, including recent US regulatory approvals of Aver, our highly innovative leadless pacemaker used to treat people with slow heart rhythms.
Eterna, the smallest implantable, rechargeable spinal cord stimulation system currently available on the market for the treatment of chronic pain.
Freestyle Libre 3, which provides continuous glucose readings in the world's smallest and most accurate wearable sensor.
Libra was recently named the best medical technology of the last 50 years by the Galen Foundation.
And finally, Navitor, our latest generation transcatheter aortic heart valve replacement system.
Thank you.
So in summary.
2022 was another highly successful year for Abbott.
We are optimistic about the early signs we are seeing of an improving operating environment and excited about the growth opportunities that lie ahead for all of our businesses.
We continue to strengthen our overall strategic position with a steady cadence of innovative technologies that are either in the early stages of launching or expected to launch over the course of this year.
I'll now turn over the call to Bob.
Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates
unless otherwise noted, are on an organic basis, which excludes the impact of foreign exchange.
Thank you.
Turning to our results.
Sales decreased 6.1% on an organic basis in the quarter.
COVID testing-related sales were $1.1 billion in the quarter, which, although stronger than the forecast we provided back in October, reflects a year-over-year decline compared to sales in the fourth quarter of the previous year.
Excluding both COVID testing related sales.
and US infant formula sales that were impacted by manufacturing disruptions last year in our nutrition business.
Total Abbott sales increased 7.1% on an organic basis in the fourth quarter and 7.4% for the full year 2022.
Foreign exchange had an unfavorable year-over-year impact of 5.9% on 4th quarter sales.
which resulted in a somewhat favorable impact on sales compared to exchange rates at the time of our earnings call in October, as we saw the dollar weaken a bit late last year.
Regarding other aspects of the P&L for the quarter, the adjusted gross margin ratio was 55.6% of sales, which reflects the impact of the nutrition manufacturing disruptions and inflation we've experienced on certain manufacturing.
and distribution costs across our businesses.
Adjusted R&D investment was 6.5% of sales, and adjusted SG&A expense was 28% of sales in the fourth quarter.
Turning to our outlook for the full year 2023.
Today, we issue guidance for full year, ongoing earnings per share.
of $4.30 to $4.50.
For the year, we forecast organic sales growth, excluding the impact of COVID testing-related sales, to be in the high single digits.
We forecast COVID testing related sales of around $2 billion, with around $750 million forecasted in the first quarter.
Based on current rates, we would expect exchange to have an unfavorable impact of approximately 1% on our reported full-year sales.
which includes an expected unfavorable impact of approximately 3% on our first-quarter reported sales.
We forecast an adjusted gross margin ratio for the full year of approximately 56% of sales.
Also for the year, we forecast an R&D investment of around $2.5 billion.
and an SG&A investment of around $11 billion, which reflects investments to support several ongoing and upcoming new product launches and strategic growth initiatives.
We forecast a net interest expense of around $300 million.
Non-operating income of around $450 million.
and a full-year adjusted tax rate of approximately 14% for the year.
Thank you.
As Robert mentioned,
the strength and resiliency of our business.
Particularly since the start of the pandemic.
Has allowed us to concurrently invest in our strategic priorities.
Provide strong returns to our shareholders.
and further strengthen our financial health, which provides a strong base on which to grow the company going forward.
With that, we will now open the call for questions. Thank you. At this time, we will conduct the question and answer session.
As a reminder, to ask a question, you will need to press star 11 on your telephone.
You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1-1 again.
For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. Again, press star 11 to ask a question. Please stand by while we compile the Q&A roster.
And our first question will come from Robbie Marcus from J.P. Morgan. Your line is open.
Oh, great. Thanks. Good morning, everyone.
Robert, to maybe kick things off, I appreciate the guidance, but there are a lot of moving parts through the different business lines with macro involved and a lot of new product launches involved. Maybe you could just build up how we should be thinking about
How did you come up with the guidance range on both the top and bottom lines, given all the moving parts?
Sure.
I mean, there's obviously a macro environment here that's been complex, and you mentioned it. As I said in my remarks, I think things have gotten significantly better compared to...
compared to where we were in October during our last earnings call. So, I think that we factored in some of that improvement and some of that stabilization. I mean, I don't necessarily think that we have too many moving parts here. Obviously, the company has a lot of different...
And the impact of the recalled products last year, right? So, from a COVID perspective in 2022, we actually sold more tests than we did in 2021. And then obviously, the impact of recalled products, yeah, that was a negative. Both of those will be split next year.
So, if you take those out of the equation, you kind of go back to what we were growing pre-pandemic, right? Which was top-tier, high single digits, 7 to 8% growth. That's what we grew in 2022, again, excluding COVID and the impact of the recalled products. And then, if you take that comparison out for the recalled products this year as we return them.
our guidance is obviously making sure that we feel that our top line is taking advantage of all the good parts, all the good product launches, et cetera, that we have. And from that perspective, I think a lot of what we're doing kind of supports that ongoing process.
That ongoing high single-digit growth rate. If you look at our device portfolio, we'll be looking at a high single-digit growth rate, low double-digit growth rate, a combination of both kinds of recovery: the steady recovery procedures that we're seeing, combined with all these product launches that we've got lined up, which will ultimately have a full-year impact.
Well set up to be able to drive those high single, high single, sorry, high single-digit, low double-digit growth rates. I think we're going to continue to see strong performance in EPD. I think as the world continues to reopen, those emerging markets continue to be a great opportunity for us. For more information, please visit online at ShadeOfficials.org.
We've strengthened our position in diagnostics throughout these years, and we'll see continued successful rollout of Alinity in our core and molecular diagnostics, and then the recovery and in from Formula 2. So I think you put all that in place. Our core business, Abbott, that we knew pre-pandemic.
is actually stronger than we were pre-pandemic with the investments that we made. And I think that's the other part of, I guess, in the P&L if you look at what we've been able to do this year; it's because of COVID and the investments that we made during COVID in these growth areas. We're able to drive this high single-digit growth across the company with a fairly flat.
Investment line, whether it's R&D and SG&A. So really getting the leverage across the businesses. So, I mean, I think it really starts with our top line and the confidence we have in the products we're launching, the pipeline, and the positions we have. And then, you know, COVID.
You know, COVID, we forecast about 2 billion next year, and I think that's the right number right now. Obviously, we see kind of society transitioning here. We've got a strong installed base. We've got manufacturing capacity. We haven't factored in any kind of real surge.
But if that happens, we do have the capacity to be able to do that. So I'd say those are some of the moving pieces there. But fundamentally, we're in a real strong position in terms of our long term growth opportunities, leading positions in these attractive growth areas.
Strong pipeline, which I'm sure we'll get into some of them, and a strong balance sheet. So, that's how this has been constructed, and I think we're in a good position here.
Great. Thanks, Robert. Really helpful. Maybe one for Bob.
You know, you give us the full-year guide and you give some commentary on the PML, which is really helpful. But how should we be thinking about some of the quarterly cadence here? How do FX flows work? What is FX?
On the bottom line, how did that compare to 22 and any just things we should be thinking about first, first, second, first, on the panel? Thanks a lot. Yeah, so if you think about the cadence of our business for 2023, it really starts.
with the top line, some of the things that Robert kind of talked about. You know, first we have a lot of new product launch activity, especially in our medical device businesses. You know, products have either launched last year or will be launching this year. I'm sure we'll talk about some of those on the call today.
So you'll see the impact of those launches kind of grow over the course of the year, kind of feather into that top line. Secondly, we are seeing a steady improvement in procedure trends in the U.S. and Europe . We've been seeing that and we expect to continue to see kind of a steady improvement there on procedure trends over the course of the year.
For China, Robbie, I'd say we've assumed a softer start in Q1, given some of the dynamics there at the beginning of this year, but we anticipate that this will improve over the course of the year. So, all those changes and impacts on the top line will build over the course of the year and flow through.
Regarding earnings, as Robert talked about, we're going to get leverage in the middle here. And so, for the first quarter, we think earnings will be approximately a dollar, and then we'll build from there.
On your question about foreign exchange, rates have improved a bit recently, but exchange is still a headwind, particularly on earnings.
You know, at current rates, as I said in my opening remarks, there's approximately a 1% headwind on sales. EPS, you know, it's a little bit more than a 30-cent headwind for us in 2023.
The fallout from the impact when currencies move like we have seen over the last year is always complex.
You know, translation is just a part of the impact, and while that has improved,
From where we were a few months ago, it still remains a headwind.
One of the biggest drivers that we're seeing is the impact of our hedging program.
We realized pretty significant ups and gains last year that won't repeat this year.
And you can truly see the impact of those hedging gains on our 2022 results.
Last year, there was a pretty significant exchange head that went on sales, you know, by a little over 5% or $2.1 billion, but a fairly modest impact on earnings. It was less than a dime.
And that was really the benefit we realized last year on those hedging gains that won't repeat in 2023. And that's not a unique dynamic that we're seeing; we're seeing that from some other multinationals as well.
Thanks a lot. Thank you. One moment for our next question, please. And our next question will come from Larry Beigleson from Wells Fargo. Your line is open. Good morning. Thanks for taking the question, Robert. I feel compelled to ask about Libre again, just given how important it is.
In Germany, when do you expect those issues to be resolved? And just the growth drivers like basil and the vitamin C resolution, what are some of the growth drivers to look forward to this year for Libre? And I had one follow-up. Thank you.
Sure, Larry. Well, I think Libra had another great year with full-year growth of over 21%, strong growth in the US, at over 42%, and internationally. Um, you know, it kind of grew in, in, in those mid-teens numbers. We were impacted.
In Q4, I expect, you know, one or two more months of, you know, until we can completely resolve that, but a significant improvement over there. On our international performance, I think one of the key things on the international side is, you know, it was a little bit of this, this, this supply chain on chips that we had. Like I said, it is most.
And it takes about a year and a half to two years to actually complete. For Libre A3, we wanted to go more aggressively in some of these markets. So that takes our sales force away from new demand generation to making sure that we can get the scripts and do all the behind-the-scenes work for those upgrades.
I would say that it's still ongoing, but I'd call it about 80 to 85% complete. So, that allows us, starting now in 2023 on the international side, to start kind of driving new additions here. So, I'd say.
I expect a continued growth in the US in terms of market expansion, you know, basal opportunity I think is a great opportunity. And I think it will start in the US, but I think we're seeing that also internationally. And now that we've got, you know, the supply chain issue largely behind us.
and with the upgrade cycle largely behind us, we can focus our demand generation activities on new users. So I think that's one key driver of growth for us. Can we see a path for another 20% growth in 2023? Yes, I can, and I think there are numerous growth opportunities. I think one of them, as you mentioned
It'll be a US-only phenomenon. But in the US, we'll probably start first. You've got about four million type two basal patients. In the US, about a third of them are on Medicare. And even if you assume a reasonable market penetration, you also have to assume...
you know, a difference in annual utilization rates versus, you know, a Type 1, an MDI, or a Pumper. But even if you take all that into consideration, the opportunity, you know, starts with a 1 billion and it can range, you know, depending on the speed and the uptake of that. So I think this is a great growth opportunity. And like I said, I don't think it's a...
Submitted our response. We're working with the FDA on this.
And, you know, I'm not going to try to forecast that approval, but what I will say is that, you know, as soon as that gets approved, then we'll start to see the product within a couple of quarters connected to IED pump systems. We have already launched a connected IED system, AID system in Europe. Initially, you know, the initial results of the receptivity of that product.
Development activity for us is going to be, you know, running our trial for the.
For the combined glucose-ketone sensor with the FDA and generating the data to support a dual sensor. Because I think, again, as I've mentioned, it seems to be the go-to sensor for pump users that will have this ability to measure glucose and ketones and factor that into the algorithms.
So that's obviously having a lot of focus of us in terms of running that trial. And then finally, I would say outside of Libre, the Lingo platform is another kind of key growth driver for us. I talked about expanding Libre, the Libre platform outside of diabetes and using this platform as more broadly.
I've talked about Libre being a $10 billion product by 2028. That implies a 15% annual growth rate. We'll do better than that this year. And I think the opportunities we have to be able to drive to that kind of revenue for this product are very real. And I think we've been executing very, very.
you can say because you're presenting the trial and eliminate data at ACC. But how are you thinking about that opportunity relative to Mitral? Do you still expect to, do you still expect approval in the US by year end 23? Thanks for taking the questions.
I think it's a great opportunity for us, and I think that we've shown that we're definitely one of the leaders when it comes to clip-based heart valve repair market. Do I think it could be bigger than Mitral? I'm not sure I would go that far yet, but I...
We have a large group of implanting physicians that are familiar with the CLIP technology and are familiar with mapping that CLIP technology in the procedure. We made some changes to the delivery device for the CLIP. It's a little different anatomy, a little more challenging to get there with the CLIP in the tricuspid area. But, I think...
And I think it's a great opportunity for us. We've already seen a really nice traction of that in Europe. We launched that in 2021. The team wanted to launch it right in the middle of COVID. And I must say, at the beginning, I was somewhat against that, but they proved me wrong. And the product has done really well in Europe. So I think this is another great opportunity.
All right, thanks so much.
Thank you. We have time for one more question.
And our next question will come from Josh Jennings from Cowen. Your line is open.
Hi, thanks for taking the questions. Good morning.
Robert, I'm hoping to follow up on Larry's question, just thinking more in the out years and this $10 billion target that you've set. Maybe just, I think you outlined everything for 2023, which probably holds true for over the next five years. If you could reiterate your confidence.
we're not in that $10 billion out-year target. And you expect consolidation between pump and CGM companies. It may be great to hear the strategic rationale of whether a combined pump CGM offering under one roof would be advantageous for either Abbott or another company. And then.
The second question is just on the Arbiter and the launch here in the United States. What would represent a win for Abit from a U.S. share gain perspective? And what segment is the low-hanging fruit considering the current label? Is it the elderly patients who don't have a long life expectancy that are high-risk or even intermediate risk?
How do you expect an avatar launch to play out and add to the medical device growth in 2023? Thanks for taking the questions. Sure. Well, I guess on Libre, to your question on how to get to $10 billion by 2028, I mean, the math would say 15%, right? How do you get to that 15%? I mean, there are really three key areas, and I talked a little bit about them, but...
How do we focus now on the pumper segment and the connectivity over there? And, like I said, I think we'll do that with a little bit of catch up with Libre II in terms of what is currently offered in the market. But then, to leapfrog that, I think the combined sensor, or glucose-ketone sensor, is...
Is ultimately the way we'll play. And we'll see which pump company is going to want to line up to be first on that connectivity, if and once we get that approval. Because again, I continue to hear from KOL the importance of that product for the pumper segment. So.
The second part is the basal expansion. And, you know, like I said, you can look at the basal population globally, assume a certain penetration rate globally, a certain utilization rate, and that adds a significant amount of growth to that number. And then the third piece of that is really expanding Libre beyond just diabetes.
Important segment. It's one that benefits quite significantly from a combined system. We're now, you know, focusing more aggressively on that. As it relates to an all-in-one, you know, I think the market has spoken in terms of, you know, the
The pumpers want choice. They want to be able to choose the best sensor-pump combination. So, I think right now, my view on that is that consumers have spoken, the market has spoken, and the regulators have spoken. They want that interchangeability, and I believe our focus should be on providing the best sensor.
For the pump systems that are out there. So I think I covered your Libre questions. I believe you had a question on Navigator. Listen, we're excited about this. It's a large market, it's a large segment here in the US, about $3 billion.
Our label is about 50 percent, sorry, is about 50 percent of the market because we're only approved right now for the high-risk patients. But it's got a strong clinical profile. I mean, we'll be sharing data at CRP specifically to this, but I mean, we've already released some data on
on it last year comparing it to other valve systems. So I think that we've been very intentional about wanting to enter this market and to do it in a way that is sustainable. Expectations, I mean I've talked a little bit about this. There are obviously two pretty well entrenched players.
allow us to pick up share. If I look at where we are in Europe , we launched this in Europe . And we have high single digit share in Europe . And we're not in all centers. We're in about half of the market. In the centers that we are implanted and available, our share is in the mid-teens.
So, you put that together, and we're at a high single, but where we're competing, we're in the mid-team. So, I think this will be a ramp. I think we've got the sales force in place. We want to roll this out in a way that allows us to be sustainable in that strategy, to be able to achieve a double-digit share gain over the next couple of years. Appreciate it, thank you.
Thank you. One moment for our next question, please. Our next question will come from Joanne Wunsch from Citibank. Your line is open. I heard you mention the minus sign there.
Good morning and thank you for taking the questions. I have two. The first one has to do with nutrition, and if you could outline where the company is in terms of recovery, and when do you think it will return to growth. The second question is about the use of cash. What are your thoughts on it and where you are regarding share repurchases?
Thank you. Sure. Well, on nutrition, as I said in the opening statements, production at Sturgis is up and running. The team is working around the clock, nonstop, very hard. Number one focus here, as I said, was to serve the customers, get product back on shelves. We started with WIC. The inventory levels on the WIC contracts are very good.
as we entered into Q4, and we then started to focus on our non-WIC brands, and that's progressed very well in the fourth quarter, and as we go into this year, looking very good. A lot of us we noticed that our growth for our pure prices forendra won thecystoankind awarditta su Television.org whimsy Remi &
So I would say if you look at our growth rate, obviously you've got this year-over-year comparison. You're going to see the growth already in Q1, Joanne, right? Because we were impacted last year in February. But I guess the right way to look at this is to strip away the comparison, strip away, you know, the year-over-year effect of coming.
have largely recovered. And we're seeing a nice cadence of recovery in the non-Wix share here in the US. So, I think you'll start to see that growth rate already in the print in Q1, obviously in Q2 and Q3. But the important thing here is we're looking at our share.
And the share recovery is very much in line with our forecast that we've set for the full year. I'd like to see our market share return to pre-pandemic levels by the end of the year.
And then, sorry, what was your other question? Thank you. Use of cash and where would you stand on share repurchases? Thank you. Sure. Well, use of cash, you know, I talked about this. We've taken this balanced approach. I'd say if I were to rank it in terms of use of cash, we're committed.
To grow a dividend, a strong and growing dividend, is probably our number one use of cash. We announced an increase of about 9% in our dividend last year. So, I would say that is priority number one. Number two is obviously ensuring that all these new products that we are launching are appropriately resourced in terms of manufacturing.
And a lot of our CapEx investments. On the buybacks we did, you know, throughout the first nine months of last year, we had about three billion of buybacks. You know, I'd say we probably did a little bit of catch-up there, Joanne, in terms of the buybacks.
Catching up to some of the dilution as we were focusing on getting our leverage down post-acquisitions. So, we are doing a little bit of catch-up there, and I'd say in terms of buybacks going forward, we will be contemplating them and they will be largely focused on offsetting any kind of dilution that we have this year.
The M&A side, which I know is always a question, so I'll preempt anyone over there who's got that on their list. I've talked about it on several calls; we're interested. We're actively assessing the opportunities, whether it's tucking in or up. Clearly, the valuations here have come down somewhat, and I think they need to stabilize a little bit.
We've got that strategic flexibility on our balance sheet to do that. And we're going to be looking at businesses where we can bring value, whether we can accelerate sales, whether we can enhance an R&D program or enhance its probability of success, a growth area that we can build and have a path to building a position or even if it's just to augment.
Thank you. One moment for our next question, please.
And our next question will come from Vijay Kumar from Evercore ISI. Your line is open. Hi guys, thanks for taking my question. Good morning to you, Robert. Maybe my first question on your organic growth assumptions here. I think I heard
A plus is a reasonable number for our 23. What is that accounting for in terms of any impact from China, supply chain, and any VBP impact? If you could provide some assumptions around those macro factors, that would be helpful.
I'll let Bob talk a little bit about some of the potential other macro factors, but the ones you've just mentioned here, I mean, China, it's an important market for us, Vijay. It's an important growth market and it's good that it has moved to a more reopening play. I think that has not only a big impact.
For us in China, where we've got a strong position, I mean, we're not overly reliant. I'd say, you know, it's about less than 5% of our total sales, but nonetheless, it's an important growth market for us. And I think that reopening in China is going to have a real positive spillover effect in other areas of the world. And I would say predominantly in Asia, Southeast.
As that starts to move down, I think we'll see a pretty strong rebound in our growth prospects over there. So, you know, the VVP that you mentioned, yeah, I mean, that does have an impact. It's more restricted to 2023 in our electrophysiology business. So we'll see a little bit of an impact there, but I think that the market opens up for a little bit of a shift in the market.
In 2019, our vascular business was back to what I would call pre-VBP levels this year, so there was an impact. In that case, we didn't necessarily win some of the contracts. In the case of EP, we did win the contract or a portion of the contract. So I'd say on a macro level, yes, we've got some of these headwinds.
Margins here are at 56%. That's a step down year on year. When I look at pre-pandemic, you guys were at 59%. Is there a simple bridge, Bob, on how much of this has been inflation? You did speak about hedging impact. Is that all hitting your gross margin line? And why shouldn't inflationary pressures improve?
And when can we start seeing gross margins creep back up to pre-pandemic levels? Yeah, so, you know, as I said in my opening remarks, around 56% for the year. That's a modest step up from where we exited last year. As you would expect, VGA, in this environment, you know, there are a lot of different dynamics.
see a repeat of those hedging gains that we had in '22. So that's a headwind, you know, that's a bit of a headwind there. On the positive side, I'd say we're, you know, forecasting the recovery in the US infant nutrition business, which will contribute positively, and as that recovery occurs over the course of the year, that will have a more positive impact. We also have gross margin improvement programs across all of our businesses that
contribute to our gross margin. If you, to your question about kind of where we were pre-pandemic and what we're guiding to this year, kind of I'd say the biggest impact on a cumulative basis has really been inflation and that's really the, I'd say the big difference here in terms of you know where we're guiding right now and where we were.
Pre-pandemic, but as we continue to see an acceleration and from a mixed standpoint, and continue to work at some of our costs, we'd expect over time to see that gross margin continue to improve.
Thank you, guys. Thank you. We have a moment for our next question, please.
And our next question will come from Travis Steed from Bank of America. Your line is open. Hi, good morning. Thanks for taking the questions. Just a follow-up to Vijay's question. On the inflation piece, is that still a billion dollars baked into the $440 guidance? I want to make sure I understand what's baked in on the gross margin line, and then anything to call out on the 2023 operating margin extension, some of the moving parts to achieve the margin expansion?
The P&L, which Robert talked about, where we were able to forward-invest over the last couple of years, we're going to get leverage in the expense area, and that gets you to about 22% off margin. In terms of inflation, we are going to see a carry-over impact from last year. Still pretty meaningful, but we've been able to mitigate a good portion of that through both our gross margin. I'm not saying anything unbathed on the road; crash, crash, crash, crash, crash, crash, crash, crash, crash, crash, crash, crash, crash, crash, crash, crash.
Improvement programs that we have across our businesses as well as taking some price where we can. Okay, that's helpful. A couple of product questions on EP. I think you mentioned the new EP catheter mapping system. If that was new, maybe I missed that in the past. I'm curious how you're thinking about cryoablation and the impact on your EP business.
And then the other product question was about Libre. The vitamin C, is that in Libre 2 or Libre 3? I just want to understand the pathway to getting vitamin C in Libre 3 and the timing there.
Sure, on the Libre III, VITC, I mean it's going to start off with Libre II, so we want to get that done first and then we'll progress onto Libre III. So the focus right now is on Libre II and then we'll move to Libre III. Regarding your question on EP, I think the new catheter that we've launched in Japan and started to launch in Europe towards the end of last year is our...
That combination is very powerful. Regarding PFA, you know, it's definitely an area of interest. We've been investing in it. We actually had two internal programs, held a bake-off, and chose the one we felt stronger about.
taking some of the learnings that we're seeing from the current on market products. And you know there's obviously some trialing that's ongoing right now, but I would say it's a growth opportunity. It's an interesting area. I think it's still too early to say in terms of will the market move completely over.
that are being put in development right now. So, an important area and important investment area for us in EP definitely benefited from the investments that we made during COVID. And I think it's an important product to have. It has the ability to convert.
I think it will convert a portion of the market. My sense is Cryo is probably the first one. But how much of Cryo? Still up to see. But definitely an interesting area for investment.
My sense is Cryo is probably the first one, but how much of Cryo? Still up to see, but definitely an interesting area for investment. Thank you.
We'll take one more question. Thank you. One moment for our next question. And our last question will come from Matt Mixick from Barclays. Your line is open. As you courses all settle down, in all the boats on the course, the writing.
Hey, thanks for fitting me in. I figured maybe just if we could wrap it up with an update on a couple of the pipeline products, the 5 products Robert that you've highlighted in the past, the Amulet and Cardio. Maybe if you could just talk a little bit about where you are with these launches in terms of size and scale.
Momentum and maybe what kinds of catalysts can we look for, metrics we can see for these two products this year. Thanks. Sure. I mean, I think those five products that I discussed on the last call, we talked about them exiting at an annual run rate of 500. They actually exited at a run rate of 550.
Regarding Amulet, listen, I think it's, like I said, it's a great space. We've been rolling out the product last year, building the sales force. Our key focus here is, of course, ensuring good implanting techniques with the physicians. We're in about 225 accounts right now.
and then expanding. We do want to start to expand more as our sales force has increased. The competency of our sales team has increased and our clinical team has increased. We feel more confident now to be able to expand to more accounts and that's what we'll be focused on. You know, another key catalyst of growth here is obviously the trial that we've been investing in, the catalyst.
which is to compare Amulet to novel oral anticoagulants. So that's another opportunity. It's not one in 2023, but continuing enrollment in that trial is an important driver for the long-term growth strategy here of Amulet. Cardi BEMBS has done very well.
We saw an indication of expansion last year in the US. We've seen a nice step up in sales. I think it's a great long-term opportunity. I think it's part of those five products that are driving a lot of growth. And I'd say probably the next big area. I mean, we've been investing in sales for.
With the data that we've collected as part of all of our trials, I think they look very strong as part of that group of five products.
I like that. Yeah, I close up the, the call here. Just a few a few remarks.
The operating environment still remains challenging, right? But it's not as challenging as we saw back in Q3 of 2022 in October. There are definitely signs of stability here. There are signs of improvement, whether it's in the macroeconomic side or specifically in the segments that we are competing in.
And Abbott is well positioned. We are well positioned to both capitalize on this improving environment and to navigate if there is any unforeseen volatility here. That's what our portfolio has been built for. That's what our balance sheet is set up for. It is set up for these kinds of situations.
these kind of scenarios. We always knew that pandemic level testing was not a base case. We knew that eventually this would move down to an endemic like testing. And we're, you know, our view here is that in 2023 we'll start this process of moving to that. And so as a result of that, we did do this forward investing into our growth areas, whether it's devices, banking.
the cost pressures, the company recognized those cost pressures, we talked about this now. You know, to Vijay's question, you know, we're going to be working relentlessly on getting our gross margin, you know, back to that pre-pandemic level and it's a combination of, you know, working at our cost profiles and our GMI programs, but also as we accelerate the growth in our def-
while at the same time investing for the long term. So thank you for being on the call overall. I think Abbott is very well positioned as we kind of exit this kind of pandemic state and move into more of an endemic state. I think we're well positioned and now it's all about execution.
Thank you, operator, and thank you for all of your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11 a.m. Central Time today on Abbott's investor relations website at AbbottInvestor.com. Thank you for joining us today. Thank you.
This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day. The conference will begin shortly. To raise and lower your hand during Q&A, you can dial *11.
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Good morning, and thank you for standing by. Welcome to Abbott's fourth quarter 2022 earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your questions by pressing the star 1 keys on your touch-tone phone.
This call is being recorded by Abbott. With the exception of any participants' questions asked during the question and answer session, the entire call, including the question and answer session, is copyrighted material by Abbott. It cannot be recorded or rebroadcast without Abbott's express written permission. I would now like to introduce.
Mr. Scott Lineweber, Vice President, Investor Relations, Licensing, and Acquisitions. Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer, and Bob Funk, Executive Vice President, Finance, and Chief Financial Officer.
Scott Lineenweber, Vice President of Investor Relations, Licensing, and Acquisitions. Good morning and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer, and Bob Funk, Executive Vice President of 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 1995, including the expected financial results for 2023. Abbott cautions that these forward-looking statements are subject to risks.
and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors.
In our annual report on Form 10-K for the year ended December 31, 2021, AVID undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments except as required by law. On today's conference call, as in the past,
Non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at Abbott.com.
Note that Abbott has not provided the GAAP financial measure for organic sales growth, excluding COVID testing sales, on a forward-looking basis, because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth.
Which excludes the impact of foreign exchange. With that, I will now turn the call over to Robert. Thanks, Scott. Good morning, everyone, and thank you for joining us.
Today, I will discuss our 2022 results, as well as our outlook for this year. For the full year 2022, we achieved ongoing earnings per share of $5.34.
which is well above the original EPS guidance we set at the beginning of the year. As you know, macro business conditions have been highly dynamic and challenging over the last few years, particularly for U.S.-based multinational companies.
The COVID-19 pandemic played a big role in this, of course. We saw the US dollar strengthen significantly, and inflation reached new heights last year.
Supply chains continue to face challenges, and our healthcare customers have been navigating staffing challenges that negatively impact certain medical device procedure trends and routine diagnostic testing volumes.
As we start the new year, however, while all these factors remain headwinds, I am cautiously optimistic that we are starting to see them peak and, in some cases, ease a bit. Over the past few months, the impact of COVID-19 on society has lessened.
And economies around the world are increasingly reopening. The US dollar weakened a bit.
And inflation has eased somewhat. Hospital-based procedures and routine testing trends continue to steadily improve in many areas. As you know, COVID testing has been a big part of our story in the past couple of years. I am proud of what our team has built: a full suite of tests across several platforms.
and the intentionality and how we established a leading role in the world's response to the pandemic. In total, we've delivered nearly 3 billion COVID tests globally since the start of the pandemic.
Intentionality and how we established a leading role in the world's response to the pandemic. In total, we've delivered nearly 3 billion COVID tests globally since the start of the pandemic. More access to technology is useful, especially as we have many more cells struggling to.
We expect COVID-19 to transition into a more endemic, seasonal type of respiratory virus. As such, COVID testing, while still important, is a major part of the COVID-19 pandemic.
was expected to decline significantly. We expect variants will continue to emerge, and therefore our tests will remain an important part of our leading respiratory testing portfolio, along with flu, RSV, and strep, which we offer across multiple testing platforms.
Including lab-based systems in hospitals, small desktop devices in urgent care centers and physician offices, as well as at-home tests.
As we reflect back on the impact of COVID-19 testing efforts.
Over the last few years, it's clear that our success in this area will have a positive, long-lasting impact on the company.
It strengthened our strategic position and diagnostics through the expansion of our installed base of instruments, including IDNow, our rapid point of care molecular testing platform, and through the opening of new testing channels such as physician offices and at-home testing.
It enabled us to increase investments in priority growth areas across the company, including R&D and commercial initiatives in support of several recent and upcoming new product launches.
while at the same time increasing returns to our shareholders in the form of dividend growth and share repurchasing.
Lastly, it further strengthened our overall financial health and balance sheet, which will provide significant strategic flexibility as we look to build and grow the company even further.
I'm proud of the role we played in fighting COVID over the past few years. It reinforced our purpose, had a meaningful impact on society, and enhanced our long-term strategic position going forward.
Turning now to our outlook for 2023, as we announced this morning, we forecast ongoing earnings per share of $4.30 to $4.50.
We forecast organic sales growth, excluding COVID testing sales, in the high single digits.
And we forecast around $2 billion in COVID testing sales for the full year 2023. I will now provide more details on our results by business area before turning the call over to Bob.
$2 billion of COVID testing sales for the full year 2023. I'll now provide more details on our results by business area before turning the call over to Bob. I'll start with nutrition.
where sales declined by around 6% in both the fourth quarter and the full year, due to manufacturing disruptions at one of our US infant formula facilities last year. Production at the facility is up and running.
As we have mentioned previously, our initial supply priority was for the WIC (Women, Infants, and Children) Federal Food Assistance Program, to ensure that underserved participants have access to infant formula. As our manufacturing capacity has continued to recover, we have been able to increase the production of our non-WIC brands.
With a focus on serving the broader infant formula market and building up inventory levels on retail shelves.
Serving the broader infant formula market and building back inventory levels on retail shelves. Turning to diagnostics.
As expected, sales growth in the fourth quarter was negatively impacted by the year-over-year decline in COVID-19 test sales.
COVID testing sales were $1.1 billion in the fourth quarter, with rapid testing platforms including BinaxNOW in the US, Panbio internationally, and ID NOW globally comprising approximately 95% of these sales.
Excluding COVID testing sales, worldwide diagnostics grew by over 11% in the fourth quarter.
Growth in the quarter was led by rapid diagnostics where, excluding COVID-19 tests, sales increased by 30% compared to the prior year. As I mentioned earlier, during the pandemic, we significantly expanded the installed base of ID Now and opened new testing channels.
The expanded footprint drove strong growth and supported testing needs when the flu and other respiratory infections surged late last year.
During the past year, we continued the rollout of Alinity, our innovative suite of diagnostic instruments.
and expand test menus across our platforms for immunoassay, clinical chemistry, and molecular testing. Moving to established pharmaceuticals, or EPD, where sales increased 8% in the fourth quarter and over 10% for the full year. EPD continues to perform at a high level.
Having carved out an attractive growth space in the global pharmaceutical market, we have specifically focused on fast-growing emerging markets with a broad portfolio targeting attractive therapeutic areas.
The strong performance in the quarter was led by double-digit growth across several geographies, including India, China, Brazil, and Mexico.
And I'll conclude with medical devices, where sales grew by 7.5% in the fourth quarter and 8% for the full year.
Growth in both the quarter and full year was led by double-digit growth in electrophysiology, structural heart, and diabetes care in the US.
Internationally, sales growth was negatively impacted by COVID surges in China during the fourth quarter, as well as lingering supply challenges in a few areas. In diabetes care, fourth-quarter sales of Freestyle Libre, our market-leading continuous glucose monitoring system, were affected.
grew over 40% in the US, and global Libre sales reach $4.3 billion for the full year 2022.
We continue to strengthen our medical device portfolio with numerous pipeline advancements and launches, including recent US regulatory approvals of Aver, our highly innovative leadless pacemaker used to treat people with slow heart rhythms. Eterna, the smallest implantable rechargeable spinal cord stimulation system currently available on the market, is designed for the treatment of chronic pain.
Freestyle Libre III, which provides continuous glucose readings in the world's smallest and most accurate wearable sensor. Libre was recently named the best medical technology of the last 50 years by the Galen Foundation. And finally, Navator, our latest-generation transcatheter aortic heart valve replacement system.
So, in summary, 2022 was another highly successful year for Abbott.
We are optimistic about the early signs we are seeing of an improving operating environment and excited about the growth opportunities that lie ahead for all of our businesses.
We continue to strengthen our overall strategic position with a steady cadence of innovative technologies that are either in the early stages of launching or expected to launch over the course of this year.
I'll now turn over the call to Bob. Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates.
unless otherwise noted, are on an organic basis, which excludes the impact of foreign exchange. Turning to our results.
Sales decreased by 6.1% on an organic basis in the quarter. COVID testing related sales were $1.1 billion in the quarter, which, while stronger than the forecast we provided back in October, reflect a year-over-year decline compared to sales in the fourth quarter of the prior year.
Excluding both COVID testing related sales and US infant formula sales that were impacted by manufacturing disruptions last year in our nutrition business, total Abbott sales increased by 7.1% on an organic basis in the fourth quarter and by 7.4% in the fourth quarter.
For the full year 2022, foreign exchange had an unfavorable year-over-year impact of 5.9% on fourth-quarter sales.
which resulted in a somewhat favorable impact on sales compared to exchange rates at the time of our earnings call in October, as we saw the dollar weaken a bit late last year. Regarding other aspects of the P&L for the quarter,
The adjusted gross margin ratio was 55.6% of sales, which reflects the impact of the nutrition manufacturing disruptions and inflation we've experienced on certain manufacturing and distribution costs across our businesses.
Adjusted R&D investment was 6.5% of sales, and adjusted SG&A expense was 28% of sales in the fourth quarter. Turning to our outlook for the full year 2023.
Today, we issue guidance for four-year, ongoing earnings per share.
of $4.30 to $4.50. For the year, we forecast organic sales growth, excluding the impact of COVID testing-related sales, to be in the high single digits. We forecast COVID testing-related sales of around $2 billion, with around $750 million.
Forecasted in the first quarter, based on current rates, we expect exchange to have an unfavorable impact of approximately 1% on our reported full-year sales, which includes an expected unfavorable impact of approximately 3% on our first quarter reported sales.
We forecast an adjusted gross margin ratio for the full year of approximately 56% of sales. Also for the year, we forecast R&D investment of around $2.5 billion and SG&A investment of around $11 billion.
which reflects investments to support several ongoing and upcoming new product launches and strategic growth initiatives. We forecast net interest expense of around $300 million, non-operating income of around $450 million.
and a full-year adjusted tax rate of approximately 14% for the year.
adjusted tax rate of approximately 14% for the year, as Robert mentioned.
the strength and resiliency of our business, particularly since the start of the pandemic.
Has allowed us to concurrently invest in our strategic priorities.
Provide strong return to our shareholders, and further strengthen our financial health, which provides a strong base on which to grow the company going forward. With that, we'll now open the call for questions.
Thank you. At this time, we will conduct the question-and-answer session.
As a reminder, to ask a question, you will need to press star 11 on your telephone.
You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1-1 again.
For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. Again, press star 11 to ask a question. Please stand by while we compile the Q&A roster.
And our first question will come from Robbie Marcus from J.P. Morgan. Your line is open.
Oh, great. Thanks. Good morning, everyone. Robert, maybe to kick it off, I appreciate the guidance, but there are a lot of moving parts through the different business lines with macro involvement and a lot of new product launches involved. Maybe you could just.
Please build up how we should be thinking about, you know, how you came up with the guidance range on both the top and bottom lines, given all the moving parts. Sure.
I mean, there's obviously a macro environment here that's been complex, and you mentioned it, and as I said in my remarks, I think they've gotten significantly better versus where we were in October on our last earnings call. So, I think that we factored some of that improvement and some of that stabilization in there. I mean, I know.
I don't necessarily think that we've got too many moving parts here. I mean, obviously, we run a, you know, the company's got a lot of different businesses and business segments. But, I mean, if you look at, if you look at really the 2 areas, I would say, Robbie, that kind of have had this effect of, you know, maybe sometimes distorting the results a little bit, it is our COVID testing business.
year. So if you take those out of the equation, you kind of go back to what we were growing pre-pandemic, right, which was, you know, top-tier, high single digits, seven to eight percent growth. That's what we grew in 2022, again, excluding COVID and the impact of the recalled products.
And then, if you take that component out on the recall product side this year, as we return to the market and look at the base business, obviously, without the COVID tests being, we're going to be growing high single digits, probably at a higher end of that pre-pandemic rate, probably 8 plus percent. So, I think it starts with the top line and.
That's probably the number one part of our guidance is obviously making sure that we feel that our top line is taking advantage of all the good parts, all the good product launches, etc. that we have. And from that perspective, I think a lot of what we're doing kind of supports that ongoing high single-digit growth rate. If you look at our device portfolio...
At Aeterna, on the neuromodulation side, our mapping system, NEEP, we're going to launch a new ablation catheter. The device portfolio is well set up to drive those high single-digit, low double-digit growth rates.
I think we're going to continue to see strong performance in EPD. I think as the world continues to reopen, those emerging markets continue to be a great opportunity for us. We've strengthened our position in diagnostics throughout these years, and we'll see continued successful rollout of Alinity in our core and molecular diagnostics, as well as the recovery from Formula 2.
I think you put all that in place; our core business, Abbott, that we knew pre-pandemic is actually stronger than we were pre-pandemic with investments that we made. And I think that's the other part of, I guess, the P&L. If you look at what we've been able to do this year, it's because of COVID and the investments that we made during COVID in these growth areas, we were able to drive this high single-digit growth across the company with a fairly.
We forecast about 2 billion next year, and I think that's the right number right now. Obviously, we see society transitioning here. We've got a strong installed base. We've got manufacturing capacity. We haven't factored in any kind of real surge.
But if that happens, we do have the capacity to handle it. So, I would say those are some of the moving pieces there. But fundamentally, we are in a really strong position in terms of our long-term growth opportunities, leading positions in these attractive growth areas, and strong pipelines, which I am sure we will get into some of them.
And a strong balance sheet. So that's how this has been constructed, and I think we're in a good position here. Great, thanks Robert, really helpful. Maybe one for Bob.
You know, you give us the full year guide and you give some commentary down the PML, which is really helpful. But how should we be thinking about some of the quarterly cadence here, how FX flows, what is FX?
You know, we probably said that you either launched last year or will be launching this year. I'm sure we'll talk about some of those on the call today. So you'll see the impact of those launches grow over the course of the year, kind of blending into the top line. Secondly, you know, we are seeing a steady improvement in procedure trends in the U.S. and Europe. We've been observing that, and we expect to continue seeing a steady improvement in procedure trends over the course of the year. In our nutrition business, we will see improvement as we continue to supply the market, particularly in the non-wicked segment of the infant formula market in the U.S., and so we will recover our share there. We will have the impact of that over the course of the year.
For China, Robbie, I'd say, you know, we've assumed a software start in Q1, given some of the dynamics there at the start of this year, but we anticipate that it will improve over the course of the year. And so, all those changes and all those impacts on the top line that build over the course of the year will flow through.
You know, the running are trial for the combined glucose ketone sensor with the FDA and generating the date of support, a dual sensor. Because I think, again, as I've mentioned, it seems to be the go-to sensor for pumpers will be this ability to measure glucose and ketones and factoring that into the algorithms. So that's obviously having a lot of focus in terms of running that trial. And then finally, I would say outside of Libre, the Lingo platform is another kind of key growth driver for us. You know, I talked about, you know, expanding Libre, the Libre platform outside of diabetes and using this more broad laborer, for much more broad target. You know, that we have a separate team that's been working on that development Larry. We will be.
I know it's limited in what you can say because you're presenting the tri-laminate data at ACC. But how are you thinking about that opportunity relative to Mitral? Do you still expect approval in the US by the end of 2023? Thanks for taking the questions.
The uptake of the tricuspid repair market, I think, will be faster than the uptake for the mitral just because, I think when mitral was launched, it was the first repair system. And now you have a large group of implanting positions that are familiar with the clip technology, are familiar with mapping that clip technology in the procedure. We did make some changes to the delivery device for the clip, a little different anatomy, a little bit more challenging to get there with the clip in the tricuspid area. But I think that it's a great opportunity. I mean, I think there's 3 million people today that suffer from tricuspid regurgitation. There's not a lot of really good...
and I think the combination of those two products in the employing physician will be very powerful for Abbott.
of those strategies are what ultimately we gives us confidence that we can get there and we can sustain that 15% growth rate over the next kind of five years. Regarding questions on pumps, listen, I think that it's an important segment. It's one that benefits quite significantly from a combined system. We're now focusing more aggressively on that.
It's a large segment here in the US, about $3 billion. Our label constitutes about 50% of the market because we're only approved right now for high-risk patients. But it has a strong clinical profile. I mean, we'll be sharing data at CRT specifically regarding this, but we've already released some data on...
The comp from a mixed standpoint, as we continue to see an acceleration in our medical device business with some of these new product launches.
Those are at higher gross margins than the overall company and that will positively contribute to.
Two our gross margin if you to your question about kind of where we were pre pandemic and what we're guiding to this year kind of I'd say the biggest impact on accumulative basis has really been inflation.
And Thats really the I'd say the big difference here in terms of.
Where we're guiding right now and where we were pre pandemic, but as we continue to see an acceleration from a mixed standpoint and continue to work at some of our cost.
We would expect over time that you see that gross margin to continue to improve.
Understood. Thank you guys.
Thank you.
One moment for our next question please.
And our next question will come from Travis Steed from Bank of America. Your line is open.
Hey, good morning, Thanks for taking the question just a follow up to <unk> question on the inflation piece is that still a $1 billion baked into the 440 guidance so to make sure I understand what's baked in on the gross margin line and then anything to call out on the 2023 op margin expansion kind of the moving parts to get.
Margin expansion there it looks like 22% is kind of what's implied by the guidance.
Yes, so the gross on the operating margin, yes, we're around 2% kind of where we were pre pandemic.
Getting a high the high single digit growth on the top line kind of in the excluding the Covid testing, we're getting leverage down the P&L, which Robert talked about we were able to forward invest over the last couple of years, we're going to get leverage in the expense area and that gets you to about.
Around 22% op margin in terms of inflation.
We are going to see a carryover impact from last year still you're still pretty meaningful.
But we've been able to mitigate.
Good portion of that through both our gross margin.
Improvement programs that we have across our businesses as well as taking some price where we can.
Okay. That's helpful and a couple of product questions on <unk> I think you mentioned, the new EP catheter and mapping system.
Maybe I missed that in the past.
And curious how youre thinking about wholesale ablation and impact on on your EP business and then the other part of question was on Libre.
<unk> Libre III I want to understand the pathway.
<unk> three and the timing there.
Sure on the Libre III did see I mean, thats going to start off with Libre. Two so we want to get that done first and then we will and then we'll progress onto Libre III. So focus focus right now is on Libre, two and then and then we'll move to Libre three.
On your question on <unk>, I mean, I think the new catheter that we've launched in Japan and start to launch in Europe towards the end of last year as our packaging.
<unk> flex, which is really using contact sports together with.
The flexible tip that we had in our flex catheter so.
The feedback we've gotten that is really really positive. So I think the combination here of our enhanced new mapping system together with.
Our market, leading mapping catheter and HD grid, and now bringing tack to flex that combination is very powerful.
Regarding PFA.
It's <unk>.
It's definitely an area of interest we have been investing in it.
We've actually we actually had to internal programs had a bake off.
And saw the one that we felt stronger about.
Taking some of the learnings that we're seeing from the current on market products.
And.
There is obviously some some trialing that's ongoing right now, but I would say.
It's a growth opportunity, it's an interesting area.
I think it's still too early to say in terms of will the market move completely over to this technology or not I think it's important to have it.
And hence why we're investing in our program and incorporating into our into our R&D program all of sudden that the deficiencies that we've heard from some of the on the current on market products are the ones that are being put in development right now.
So important area, an important investment area for us in EP definitely benefited from kind of the.
The investments that we made during COVID-19.
And I think it's an important product to have.
Its ability to convert.
I think it will convert a portion of the market My senses cryo is probably the first one but.
But how much of cryo.
Still up still up to see but definitely an interesting area for investment.
Great. Thank you.
We'll take one more question.
Thank you one moment for our next question.
And our last question will come from Matt <unk> from Barclays. Your line is open.
Hey, Thanks for your opinion.
Peter maybe just if we could wrap it up with an update on a couple of the pipeline products.
Thanks, Robert that you've highlighted in the past amulet cardio them maybe.
If you could just talk a little bit about.
Where you are with these launches in terms of.
At scale.
Momentum and maybe what kind of catalysts. We can we can look for metrics we can see.
For these two products this year thanks.
Sure.
Those five products that I discussed on the last call.
We talked about them.
<unk> at an annual run rate of 500, they actually exited at a run rate of $5 50, and they grew around they go round.
100%, so I expect those five products too.
Two two.
Kind of half.
Maybe not 100%, but pretty high growth rate.
And next in this year.
Regarding amulet listen I think it's like I said, it's a great space.
We've been rolling out the product last year building the sales force.
Key focus here is obviously ensuring.
Good.
Implanting technique.
With the physicians were in about 225.
Accounts right now I expect that.
In terms of growth catalysts getting more share of those existing accounts as physicians become more and more accustomed to using our product and see the benefits of using our product versus.
Versus other systems.
I think that'll be a growth catalyst.
And then expanding we do want to start to expand more as our sales force has increased the competency of our sales team has increased and our clinical team has increased we feel more confident now to be able to kind of expand to more accounts.
And that's what we'll be focused on another key catalyst of growth here is obviously the trial that we've been investing in and catalysts.
Just to compare annual it too.
Novel oral.
Anti coagulant so that's another.
Another opportunity, it's not one and 2023.
But continuing that enrollment in that trial is an important driver for kind of a long term growth strategy here of amulet.
Cardiome has done very good.
We.
We saw.
And indication expansion last year in the U S. <unk> seen a nice step up in sales I think it's a great long term opportunity.
I think it's part of those five products that are driving a lot of growth and I'd say, probably the next big area. I mean, we've been investing in sales force and rolling this out.
Big area here is working on that <unk> I think that will remove.
Some of the maybe some regional hang ups in terms of reimbursement. So the NCD is something that we're going to be working on this year with the with the data that we've collected as part of all of our trials. So.
So I think they look they look very strong as part of that group of five products.
I'd like to close.
Close up the call here just a few a few remarks.
<unk>.
The operating environment still remains challenging.
But.
It's not as challenging.
As we saw back in Q3 of 2022 and October there is definitely signs here of stability. There are signs of improvement whether it's on the macroeconomic side or whether it's specifically in the segments that we are competing in.
And Abbott is well positioned we are well positioned to both capitalize on this improving environment or to navigate if there is if there is any unforeseen volatility over here that's what our that's what our portfolio has been built for Thats, what our balance sheet is set up for it set up for these kind of situations.
These kind of scenarios, we always knew that pandemic level testing.
It was not our base case, we knew that eventually.
This would move down to an endemic like testing.
In our view here is that in 2023, we will start this process of moving to that.
And so as a result of that we did do this forward investing.
Into our growth areas, whether it's devices diagnostics certain certain areas in PD or nutrition, and Thats allowed us to grow at the pre pandemic level. This high single digit top tier growth without having to make the opex investment that you would expect to be able to sustain that growth.
Getting that flow through on the P&L and net leverage on on our investments I do recognize cost pressures company recognize those cost pressures we've talked about this now.
Bj's question.
We're going to be working relentlessly on getting our gross margin back to that pre pandemic level and thats a combination of working at our cost profiles in our GMI programs, but also as we accelerate the growth in our device business that mix shift contributes to that so.
And finally, our balance sheet is strong.
And provides us the strategic flexibility, we need to navigate and we take this balanced approach where we are.
Can provide returns to our shareholders while at the same time investing for the long term so.
Thank you for being on the call overall, I think Abbott is very well positioned as we as we kind of exit this kind of pandemic state.
And moving to more of an endemic state I think we're well positioned and now it's all about execution.
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 on Abbott's Investor Relations website at Abbott Investor Dot Com.
Thank you for joining us today.
Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.