Q3 2023 Abbott Laboratories Earnings Call
Yeah.
Good morning.
And thank you for standing by welcome to Abbott's third quarter 2023 earnings Conference call.
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During the question and answer session, you'll be able to ask your question by pressing the star one one keys on your Touchtone phone.
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It cannot be recorded or rebroadcast without abbott's expressed written permission.
I would now like to introduce Mr. Michael Miller, Vice President Investor Relations.
Good morning, and thank you for joining US with me today are Robert Ford, Chairman and Chief Executive Officer.
Bob Funck Executive Vice President Finance.
Phil Boudreaux, Senior Vice President Finance, and Chief Financial Officer.
Robert and Phil will provide opening remarks following their comments, we'll take your questions.
Before we get started some statements made today may be forward looking for purposes of the private Securities Litigation Reform Act of $19 95, 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 one a risk factors to our annual report on Form 10-K for the year ended December 31 2022.
Abbott undertakes no obligation to release publicly any revisions to forward looking statements as a result of subsequent events or developments, except as required by law.
On today's conference call as in the past non-GAAP financial measures will be used to help investors understand abbott's ongoing business performance.
These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at Abbott Dot com.
Note that Abbott has not provided the GAAP financial measure for our organic sales growth on a forward looking basis because of the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth.
Unless otherwise noted our commentary on sales growth refers to organic sales growth, which is defined in our quarterly results press release issued earlier today.
With that I will now turn the call over to Robert.
Thanks, Mike.
Morning, everyone and thank you for joining us.
Today, we reported third quarter adjusted earnings per share of $1 14.
Based on our performance through the first nine months of the year, we raised the mid point.
Our full year adjusted earnings per share guidance and narrowed the range.
To $4 42.
To $4 46.
Organic sales growth on the base business, which excludes COVID-19 testing.
<unk> double digits for the third consecutive quarter.
And was led by double digit growth in all four of our major businesses.
This acceleration in sales growth.
As a result of our strong position in attractive growth markets in conjunction with the additional investments we made across the company during the pandemic.
In addition to the strong top line performance, we continued to deliver accelerating earnings power on our base business.
And remain on track to deliver on the financial commitments, we set at beginning of the year.
With a positive growth outlook for the businesses and the momentum we're building across the portfolio.
We are well positioned for a strong finish to the year and heading into 2024.
Michael Comilla: Good morning, and thank you for standing by. Welcome to Abbott's third quarter, 2023, earnings conference call. All participants will be able to listen only until the question and answer portion of this call.
I will now review our performance in more detail before turning the call over to Phil.
I'll start with nutrition.
Where sales increased 18% in the quarter.
Michael Comilla: During the question and answer session, you will be able to ask your question by pressing the star one one keys on your touchstone 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 and including the question and answer session is material copyrighted by Abbott. It cannot be recorded or reproached without Abbott's express written permission.
In pediatric nutrition growth of 25% was led by continued market share capture in the U S infant formula business.
Where we have now reclaimed the leadership position.
Internationally, we continue to deliver well balanced growth coming from both infant formula products and our Pds short toddler brand.
In adult nutrition growth of 12% was driven by strong demand for abbott's market, leading and shore and Lucerne, our brands across the U S and international markets.
Michael Comilla: I would now like to introduce Mr. Mike Comilla, Vice President and Vester Relations. Good morning and thank you for joining us with me today are Robert Ford, Chairman and Chief Executive Officer, Bob Funk, Executive Vice President Finance, and Phil Boudreau, Senior Vice President Finance and Chief Financial Officer. Robert and Phil will provide opening remarks, following their comments will take your questions.
Turning to established pharmaceuticals sales increased 11% in the quarter.
This strong performance was broad based and led by double digit growth in several markets and therapeutic areas, including cardio metabolic women's health and CNS pain management.
Michael Comilla: Before we get started, some statements made today may be forward looking for purposes of the Private Security's Litigation Reform Act of 1995, including the expected financial results for 2023. Abbott cautions that these forward looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those indicated in the forward looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in item 1A risk factors to our annual report on form 10K for the year ended December 35. 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.
In September we announced an agreement with global biotech leader Mab science to commercialized several biosimilars and emerging markets.
This collaboration will help introduce cutting edge medicines in the areas of oncology.
Women's health and respiratory diseases.
For people in countries that have historically lacked access to these treatment options.
Moving to diagnostics, excluding COVID-19 testing organic sales grew 10%.
Led by core lab diagnostics, where sales grew double digits driven by above market performance in the U S and internationally.
Growth was driven by a continued increase in global demand for routine diagnostic testing.
And a strong recovery of our blood transfusion testing business.
Michael Comilla: On today's conference call, as in the past, non-GAF financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAF financial measures are reconciled with the comparable GAF 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 GAF financial measure for organic sales growth on a forward looking basis because the company is unable to predict future changes and foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the quarterly results press release issued earlier today.
Following a period of lower plasma donations that occurred during the COVID-19 pandemic.
In rapid diagnostics double digit organic sales growth on the base business benefited from increased demand for respiratory tests in anticipation of an earlier than normal start to the flu season in the northern hemisphere.
And I'll wrap up with medical devices.
Sales grew nearly 15%, including double digit growth in both the U S and internationally.
In diabetes care freestyle Libre sales were $1 4 billion in the quarter and grew 28%.
The global Libre user base now exceeds 5 million people with nearly $2 million of those in the U S where the Libra user base has nearly doubled in the last two years.
Michael Comilla: With that, I will now turn the call over to Robert. Thanks, Mike.
Robert Ford: Good morning, everyone, and thank you for joining us. Today, we reported third quarter adjusted earnings per share of a dollar and 14 cents. Based on our performance through the first nine months of the year, we raised the midpoint of our full year adjusted earnings per share guidance and narrowed the range to $4.42 to $4.46. Center. Organic sales growth on the base business, which excludes COVID testing, increased double digits for the third consecutive quarter and was led by double digit growth in all four of our major businesses.
A recent analysis of our U S user base showed that a growing number of libre users are using libre in combination with <unk> medications.
As part of a companion therapy approach for managing their diabetes.
On average though.
<unk> is using both libre and AGL P. One exhibited a higher rate of use for both products.
Wearing libre sensors, more often and taking <unk> medications more frequently compared to other users.
This increase in use or better compliance is a positive sign that these users are taking an even more active role in managing their diabetes.
Robert Ford: This acceleration in sales growth is a result of our strong position and attractive growth markets. In conjunction with the additional investments we made across the company during the pandemic. In addition to the strong top line performance, we continue to deliver accelerating earnings power on our base business and remain on track to deliver on the financial commitments we set at the beginning of the year. With a positive growth outlook for the businesses and the momentum we're building across the portfolio, we are well positioned for a strong finish to the year and heading into 2024.
While we traditionally think of therapy choices as having to compete against one. Another this is a good example of a complementary relationship between two products.
That both help optimize the treatment of diabetes.
And cardiovascular devices sales grew 10% overall in the quarter led by double digit growth in electrophysiology and structural heart.
In electrophysiology sales growth of 17% was driven by double digit growth across all major international geographic regions and high teens growth of ablation catheters in the U S.
Robert Ford: I will now review our performance in more detail before turning the call over to Phil. I'll start with nutrition where sales increased 18% in the quarter. In pediatric nutrition, growth of 25% was led by continued market share capture in the U.S, infant formula business where we have now reclaimed the leadership position. Internationally, we continue to deliver well balanced growth coming from both infant formula products and our pediatric short toddler brand. In adult nutrition, growth of 12% was driven by strong demand for Abbott's market leading and short and blue-curned brands across the U.S, and international markets.
In structural heart performance was driven by double digit growth of Mitraclip and strong growth from several recently launched new products, most notably <unk>, our latest generation <unk> valve.
In rhythm management growth was led by double digit growth in pacemakers sales led by <unk>. Our recently launched <unk> pacemaker that can be used for both single chamber and dual chamber pacing.
And lastly in Neuromodulation sales grew 19% driven.
Driven by the recent launch of Aeterna, our first rechargeable neurostimulation device for pain management, which targets a large segment of the market, where we previously did not compete.
Robert Ford: Turning to establish pharmaceuticals, sales increased 11% in the quarter. This strong performance was broad-based and led by double-digit growth in several markets and therapeutic areas including cardiometabolic women's health and CNS pain management. In September, we announced an agreement with global biotech leader Mab Science to commercialize several biosimilars in emerging markets. This collaboration will help introduce cunning edge medicines in the areas of oncology, women's health and respiratory diseases to people in countries that have historically lacked access to these treatment options.
So in summary, this was a very strong quarter with all four major businesses delivering double digit organic sales growth, excluding COVID-19 testing related sales.
Growth rates in the base business have improved every quarter. This year on both the top and bottom lines.
And the momentum we are building positions.
<unk> positions us well positions us well for a strong finish to the year and heading into 2024.
I'll now turn over the call to Phil Phil.
Thanks, Robert as Mike mentioned earlier. Please note that all references to sales growth rates unless otherwise noted are on an organic basis.
Turning to our third quarter results sales decreased one 5% on an organic basis due to as expected our year over year decline in Covid testing related sales.
Robert Ford: Moving to diagnostics, excluding COVID testing, organic sales grew 10% led by core lab diagnostics where sales grew double digits driven by above market performance in the U.S, and internationally. Growth was driven by a continued increase in global demand for routine diagnostic testing and a strong recovery of our blood transfusion testing business following a period of lower plasma donations that occurred during the COVID-19 pandemic. In rapid diagnostics, double-digit organic sales growth on the base business benefited from increased demand for respiratory tests in anticipation of an earlier than normal start to the flu season in the northern hemisphere, here.
Excluding COVID-19 tested sales underlying base business organic sales growth was 13, 8% in the quarter.
Foreign exchange had an unfavorable year over year impact of one 4% on third quarter sales.
During the quarter, we saw the U S dollar strengthened somewhat versus several currencies, which resulted in a slightly more unfavorable impact on sales compared to exchange rates at the time of our earnings call in July .
Regarding other aspects of the P&L the adjusted gross margin ratio was 55% of sales.
On a year to date basis, our adjusted gross margin ratio was 55, 4% of sales, which is below our original full year guidance of approximately 56% that we provided back in January .
Robert Ford: And I'll wrap up with medical devices. We're sales grew nearly 15% including double digit growth in both the US and internationally. In diabetes care, freestyle, Libre sales were $1.4 billion in the quarter and grew 28%. The global Libre user base now exceeds 5 million people with nearly 2 million of those in the US where the Libre user base has nearly doubled in the last two years. A recent analysis of our US user base showed that a growing number of Libre users are using Libre in combination with GLP1 medications as part of a companion Libre and a GLP1 exhibited a higher rate of use for both products, wearing Libre sensors more often and taking GLP1 medications more frequently compared to other users.
The difference is primarily due to lower gross margins on Covid test due to lower volumes and price compared to our original forecast assumptions and the impact of higher inventory obsolescence as a result of maintaining higher inventory levels throughout the pandemic to help ensure product supplied during a time when global supply chains were less predictable.
As the global supply chain environment continues to improve we are adjusting our inventory levels to align with that trend.
Adjusted R&D was six 2% of sales and adjusted SG&A was 26, 4% of sales in the third quarter.
Lastly, our third quarter adjusted tax rate was 14%.
Turning to our 2023 outlook.
For the full year, we now forecast ongoing earnings per share of $4 42.
To $4 46.
Which is comprised of our year to date results plus ongoing earnings per share guidance of $1 17 to $1 21 for the fourth quarter.
For the fourth quarter, we forecast total underlying base business organic sales growth, excluding COVID-19 testing sales to be in the low double digits and exchange to have an unfavorable impact of a little more than 1% on fourth quarter reported sales.
Robert Ford: This increase in use or better compliance is a positive sign that these users are taking an even more active role in managing their diabetes. And while we traditionally think of therapy choices that's having to compete against one another, this is a good example of a complementary relationship between two products that both help optimize the treatment of diabetes. In cardiovascular devices, sales grew 10% overall in the quarter, led by double digit growth in electrophysiology and structural heart.
With that we'll now open the call for questions.
Thank you.
At this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone you Levin here an automated message advising you that your hand is raised to withdraw your question. Please press star one again.
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Robert Ford: In electrophysiology, sales growth of 17% was driven by double digit growth across all major international geographic regions and high teams growth of ablation catheters in the US. In structural heart, performance was driven by double digit growth of microclip and strong growth from several recently launched new products. Most notably, Navator, our latest generation TavaValve. In rhythm management, growth was led by double digit growth in pacemaker sales, led by Avera, a recently launched leaeless pacemaker that can be used for both single chamber and dual chamber pacing. And lastly, in neuromodulation, sales grew 19% driven by the recent launch of Eterna, our first rechargeable neural stimulation device for pain management, which targets a large segment of the market where we previously did not compete.
And again Thats star one to ask a question. Please standby we compile the Q&A roster.
And our first question will come from Josh Jennings from TD Cowen Your line is open.
Hi, good morning, Thanks for taking the questions and congratulations on another strong quarter.
Robert Great Nick revenue growth nearly touched the mid teens range for the core business in <unk>.
We recently talked about the sustainability of the momentum generated this year, but I think investors would like to hear about.
Your confidence level in our core business delivering high single digit organic revenue growth and solid margin expansion in 2024. After 2023 comp it's only with tighter over the course of this year. Thanks for taking the question.
Sure Josh.
I mean, the confidence level is very high, especially with this kind of momentum that we're seeing.
Robert Ford: So in summary, this was a very strong quarter, with all four major businesses delivering double digit organic sales growth, excluding COVID testing related sales. Growth rates in the base business have improved every quarter this year on both the top and bottom lines. And the momentum we are building, positions us well, positions us well for a strong finish of the year and heading into 2024.
Clearly, there's going to be some macro environment challenges as companies head into 2024.
I'd say our portfolio has really been built to withstand this type of environment and we tend to do pretty well in there.
This type of environment and as I said in my comments also we further strengthened.
The portfolio in the position that we had with the investments that we made during the pandemic and that's helped lead to step up here in our growth rate this year the base businesses as <unk>.
Philip Boudreau: I'll now turn over the call to Phil. Phil. Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates unless otherwise noted are on an organic basis, on the basis. Turning to our third quarter results, sales decreased 1.5% on an organic basis due to, as expected, a year-over-year decline in COVID testing-related sales. Excluded COVID-tested sales, underlying base business organic sales growth was 13.8% in the quarter. It was ranked in somewhat versus several currencies, which resulted in a slightly more unfavorable impact on sales compared to exchange rates at the time of our earnings call in July.
One double digits three quarters in a row.
I expect to be doing that again in Q4, and if you look at the EPS contribution.
As I said in the comments.
Having a positive impact.
And a lot of power coming through on the base business.
As we've continued to grow that and it's sequentially gotten better every quarter.
So we're forecasting another step up in the fourth quarter. So if you look at that EPS.
For the fourth quarter.
And put it altogether the base business here is going to contribute about four.
$4.10 of EPS.
And we've raised that twice this year. So there is clearly momentum that's building here both on the top and the bottom lines and I believe that momentum is going to sustain and continue as we go into 2024 I think it starts Josh always with the top line.
Philip Boudreau: Regarding other aspects of the P&L, the adjusted gross margin ratio was 55% of sales. On a year-to-day basis, our adjusted gross margin ratio is 55.4% of sales, which is below our original, full-year guidance of approximately 56% that we provided back in January. The difference is primarily due to lower gross margins on COVID tests due to lower volumes and price compared to our original forecast assumptions. And the impact of higher inventory obsolescence as a result of maintaining higher inventory levels throughout the pandemic to help ensure product supply during a time when global supply chains were less predictable.
And if you can drive.
Higher top line growth I think thats really the building block and if you look at our let's say our pre pandemic.
Kind of growth.
Formula here, we were growing around 7%, so I expect I expect that to accelerate.
And next year.
Without a doubt.
And thats off of a much larger sales base than we were pre pandemic and like I said, that's based off the momentum that we're seeing.
Philip Boudreau: At the global supply chain environment, continues to improve for adjusting our inventory levels to align with that trend. Adjusted R&D was 6.2% of sales, and adjusted SGNA was 26.4% of sales in the third quarter. Lastly, our third quarter adjusted tax rate was 14%.
And increased contributions that we'll be seeing from a lot of our growth drivers and I'm sure we'll be talking about.
Throughout the call.
The street models double digit EPS on the base business right now and I feel real good about our ability to deliver that obviously a lot of focus.
Is going to come from gross margin and gross margin expansion and I think we've got momentum on tail wind here as we as we can go into into 2024. So.
Philip Boudreau: Turning to our 2023 outlook. For the full year, we now forecast ongoing earnings per share of $4.42 to $4.46, which is comprised of our year-to-date results plus ongoing earnings per share guidance of $1.17 to $1.21 for the fourth quarter. For the fourth quarter, we forecast total underlying base business organic sales growth, excluding COVID testing sales to be in the low-double digits and exchange to have an unfavorable impact of a little more than 1% on fourth quarter reported sales.
When we go when we go to our our call. It January I'll be able to kind of quantify that and give you better ranges on all of that but I'd say.
It really it's really about reiterating and reinforcing.
Our our growth model, our growth framework, which is high single digit revenue growth double digit bottom line growth margin expansion strong free cash flow generation and our balance capital allocation strategy. So.
Michael Comilla: With that, we'll now open the call for questions. Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star 1 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 on again. For optimal sound quality, we kindly ask that you please use your handset instead of your speaker phone when asking your question. Again, that's star 1 on to ask a question. Please stand by.
I feel very good about sustaining this momentum going into going into next year.
Michael Comilla: We compiled a Q&A roster.
Understood. Thanks, a lot.
Thank you.
And our next question will come from Larry <unk> from Jpmorgan. Your line is open.
Thanks for taking the question just just to be clear its wells.
Wells Fargo.
Good morning, Robert.
Larry quarter, yes, Okay got it.
So Robert China has been in the news a lot.
Love to hear your thoughts on how Youre thinking about China Big picture, how is Q3 and what are you expecting from the BP impact in the EP business and from the anti corruption initiatives. We've been hearing about there. Thanks for taking the question.
Joshua Jennings: Our first question will come from Josh Jennings from TD Cowlin. Your line is open. Hi, good morning.
Robert Ford: Thanks for taking the questions and congratulations on another strong quarter. Robert Granick-Rabbitgrove nearly touched the mid-teens range for the core business in 3Q. We recently talked about the sustainability of the momentum generated this year, but I think investors would like to hear about your confidence level in the core business delivering high single-digit organic revenue growth and solid margin expansion of 2024 off the 2023 comp. It's only the tire of the course of this year.
Sure well, China has been and will continue to be an important market for us.
As it relates to I think the steam on on this anticorruption.
Discussion points, there listen we've been operating in China for 35 years, we follow our compliance standards.
Hello, all applicable laws I didn't see.
Any kind of meaningful impact in Q3, Larry I was actually there last week and had a chance to meet with the teams and go through the businesses and I didn't really see any.
Robert Ford: Thanks for taking the question. George. I mean, the conference level is very high, especially with this kind of momentum that we're seeing. Clearly, there's going to be some macro environment challenges as companies head into 2024, but I'd say our portfolio has really been built to withstand this type of environment, and we tend to do pretty well in this type of environment. And as I said in my comments, also, we've further strengthened the portfolio and position that we had with the investments that we made during the pandemic.
Any meaningful impact devices grew 20% in the quarter. So I think.
That's.
We'll just have to keep on monitoring that situation, but I didnt see I didn't see any real impact in the quarter.
As it relates as it relates to <unk> and this is.
This is a term that's used for for China, but I think it is.
It's just a common theme that we see across across the world governments trying to trying to provide the care to their populations and manage their budgets. So I don't think this has anything.
Robert Ford: And that's helped lead to step up here in our growth rate this year. The base business is growing double digits, three quarters in a row. And I expect to be doing that again in Q4. And if you look at the EPS contribution, as I said in the comments, it's really having a positive impact and a lot of power coming through on the base business, as we continue to grow that. And it's sequentially gotten better every quarter.
Clearly extra ordinary than what we've seen.
There was a VP on the EP business.
That process started earlier earlier this year in April I would say about 80% of the market.
<unk> has now been implemented.
And I expect the remainder of that to be implemented.
By year end, yes, theres, a little bit of a price impact that we felt but net net it was a positive for our EP business.
Robert Ford: So we're forecasting other step up in the fourth quarters. If you look at that EPS for the fourth quarter and put it all together, the base business here is going to contribute to about $4 and 10 cents of EPS. And we've raised that twice this year. So there's clearly momentum that's building here both in the top and the bottom lines. And I believe that momentum is going to sustain and continue as we go into 2024.
In.
And in China, because we were able to pick up share and pick up volume So I think thats.
That's the status there.
I think it has announced a GBP on diagnostics, that's not unexpected either.
I think the process will start.
Some time in the first half of next year.
Right now from the list of products that we've seen it involves about 20% of our core lab business.
Robert Ford: I think it starts, Josh, always with a top line. And if you can drive a higher top line growth, I think that's really the building block. If you look at our pre-pandemic growth formula here, we were growing around 7%. So I expect that to accelerate in next year without a doubt. And that's off a much larger sales base than we were pre-pandemic. And like I said, that's faced off the momentum that we're seeing and increased contributions that we'll be seeing from a lot of our growth drivers that I'm sure we'll be talking about throughout the call.
And then as we've seen with businesses that have <unk>.
Capital and serve as tied to it the rollout a little bit different.
From the rollout that you see on what I would call more pure consumables.
So it's more of a kind of a phased approach like we saw in EP each problem each province will go and do their implementation. So it will take a few quarters, a few quarters to implement here but.
Like I said I don't think these are different than what we see in other markets in terms of how we manage the balance of our technology.
Our access.
But I would say China is still a.
A big opportunity of growth.
Robert Ford: The three models, double digit EPS on the base business right now. And I feel real good about our ability to deliver that. Obviously, a lot of focus is going to come from gross margin and gross margin expansion. And I think we've got momentum until when here as we're going to go into 2024.
Not just in devices and diagnostics, but an adult nutrition and pharma business. So it's an important market for us and the team is doing a really good job at operating there.
Thanks, so much.
Thank you.
Our next question will come from Robbie Marcus from Jpmorgan. Your line is open.
Robert Ford: So when we go to our college January, I'll be able to quantify that and give you better ranges on all of that. But I'd say it's really about reiterating and reinforcing our growth model, our growth framework, which is high single digit revenue growth, double digit bottom line growth, margin expansion, strong free cash flow generation, and a balanced capital allocation strategy. So again, I feel very good about sustained this momentum going into going into into next year. Understood. Thanks a lot. Thank you.
Oh, great. Thanks for taking the question congrats on a really nice quarter.
Robert I wanted to ask you.
The the overwhelming.
Topic of discussion in the past few months has been <unk> and the possible impact on the future Med Tech market growth you talked about it with respect to diabetes, but I'd love to just get your thoughts on a broader basis signed DLP wines and do you see it as a next.
Dave neutral or positive.
Your different end markets you participate in over the next 510 years. Thanks, a lot sure.
Ravi obviously this has been.
Lawrence Biegelsen: And our next question will come from Larry Beegelsen from JP Morgan. Your line is open. Thanks for taking the question just to be clear.
This has been a hot topic over the last couple of months and let me just start off by saying with with 20 plus years of experience in diabetes.
Robert Ford: It's Wells Fargo, but good morning, Robert. We know Larry's quarter go. Okay, good. So Robert, China has been in the news a lot. We'll have to hear your thoughts on how you're thinking about China, big picture. How is Q3 and what are you expecting from the VBP impact in the EP business and from the anti corruption initiatives we've been hearing about there. Thanks for taking the question. Sure. Well, China has been and will continue to be an important market for us.
I think every time, new therapies, new technologies come to address this disease in this in this population I think it's all great.
These are great new medications that are going to have very positive effect on the treatment of diabetes Theres, obviously, a lot of investor angst Robbie about the potential impact of these drugs and what the what's going to happen to different industries and different companies I feel that the investor angst.
It's probably driven more by those that have a little bit less domain knowledge in med Tech I would say seem to be moving a lot with like headlines or any new study or publishment, there or publishing of any kind of study headlines et cetera, So you've seen valuations in med tech.
Robert Ford: As it relates to, you know, I think this theme on this anti corruption discussion points there. Listen, we've been operating in China for 35 years. We follow our compliance standards, follow all applicable laws. I didn't see any kind of meaningful impact in Q3. Larry was actually there last week and had a chance to meet with the teams and go through the businesses and didn't really see any meaningful impact devices grew 20% in the quarter.
Significantly be impacted by the fear like you said about the reduction in these market sizes, whether it's going to happen in the next few years or it's going to happen in decades from now and I guess my view there is that I understand that new technologies will.
We will naturally cause us to think differently about the future and I think early on those initial thoughts about the future are generally impacted more by emotion and facts and data.
Robert Ford: So I think that's, you know, we'll just have to keep on monitoring that situation, but, you know, I didn't see any real impact in the quarter. As it relates to VBPless and this is a term that's used for China, but I think it's just a common theme that we see across the world with governments trying to provide the care to their populations and manage their budgets. So I don't think this is anything completely extraordinary than what we've seen.
And I think Thats, what youre seeing right now today as it relates to <unk> and Med Tech markets.
I think there is a if you think about it long term here on the bigger picture I think there's a fundamental mismatch here.
On.
Revenue and revenue forecasts that we're seeing versus potential impact to patient in patient in terms.
Robert Ford: There was a VBP on the EP business. That process started earlier this year in April. I'd say about 80% of the market has now been implemented, and I expect a remainder of that to be implemented by here. And yeah, there's a little bit of a price impact that we felt, but net net it was positive for our EP business in China, because we're able to pick up share and pick up volume.
I've looked at the consensus forecast for this class of drugs and are looking out four to five years here they seem to be in that $60 billion to $70 billion range, which is pretty significant as a category is probably one of the largest categories I think we've ever.
Never seen but then if you take the pricing at least the public pricing that we've seen whether it's the U S pricing or the or the lower international pricing.
And you convert that into user bases and back into the numbers I mean were looking at 10 to 15 million people in the next four to five years of that will be on this drug.
Robert Ford: So I think that's the status there. I think it's announced a VBP on diagnostics. That's not unexpected either. I think the process will start some time in the first half of next year. Right now, from the list of products that we've seen, it involves about 20% of our core lab business. And then as we've seen with businesses that have capital and service pie to it, the rollout is a little bit different from the rollout that you see on what I would call more pure consumables.
That's a real small fraction of the size of these medical device markets that we're talking about right that's about half a billion people with diabetes.
Another half a billion people that got cardiovascular disease, and maybe there is a maybe there is an overlap of people with diabetes and cardiovascular but still you are talking tens of millions of people with Ido.
Maybe $1 billion or under 1 billion people.
There's a little bit of a mismatch there in terms of how we're seeing this impact equating the revenue.
And the potential <unk>.
Robert Ford: So it's more of a phased approach like we saw in EP. Each province will go do their implementation. It'll take a few quarters to implement here. But like I said, I don't think these are different than what we see in other markets in terms of how we manage the balance of our technology and our access. But I think China's still a big opportunity of growth, not just in devices and diagnostics, but in adult nutrition and in a farm of business. So it's an important market for us and teams doing a really good job at operating, here.
Both of the revenue with the patient pool Tam so.
So that's one big area I would say I think there is another question here just about the question of coverage and obviously these drugs have great outcomes and great outcomes impact and then the question is what's the appropriate cost to achieve that.
<unk>.
That outcome.
I've seen a lot of discussions in new stories about.
Payers and what the payers are going to do in.
Insurance companies and Pbms and pharmacy chains.
Robert Ford: Thanks so much. Thank you.
Our payors.
The real payers are the employees the employers.
Robert Marcus: Our next question will come from Robbie Marcus from JP Morgan. Your line is open. Oh great. Thanks for taking the question and congrats on a really nice quarter. Robert, I want to ask you the overwhelming topic of discussion in the past few months has been GLP ones and the possible impact on the future mid-tech market growth. You talked about it with respect to diabetes, but I'd love to just get your thoughts on a broader basis on GLP ones. And you see it as a negative neutral or positive to your different end markets you participate in over the next five, 10 years. Thanks a lot. Sure, Robbie.
And the companies that pay for these and I think as you look at companies.
And at a higher.
Higher medical expense cost inflation.
That's going to be a factor as we go into next year also so.
So I think thats those are those are I'd say the bigger aspect here on the long term on the short term, though as you mentioned.
The diabetes actually see it as a positive impact on the diabetes business as I mentioned in the opening remarks.
We completed an analysis recently that showed a significant number of libre users were on these drugs and the data showed that those that are using both products are actually using more of.
Those both products when you compare then too.
Robert Ford: Obviously this has been a hot topic over the last couple of months and let me just start off by saying with 20 plus years of experience in diabetes. I think every time new therapies, new technologies come to address this disease and this population, I think it's all great. And these are great new medications that are going to have very positive effect on the treatment of diabetes. There's obviously a lot of investor angst to Robbie about the potential impact of these drugs and what's going to happen to different industries and different companies.
The other to other users they tend to wear libre sensors, more often and they tend to take their <unk> medication more frequently and I think thats a great thing.
Because higher therapy compliance ultimately is going to.
Improve health outcomes and that's not different Ravi this complementary relationship.
Very well, it's not uncommon to see that.
Medical device procedures, you have patients that are taking medications either before and after their procedure and you see it in diabetes like I said I've seen this in my 20 years, where.
Robert Ford: I feel that the investor angst is probably driven more by those that have a little bit less domain knowledge in Medtech, I would say, seem to be moving a lot with headlines or any new study or publishments there or publishing of any kind of study headlines, etc. So you've seen valuations in Medtech, you know, significantly be impacted by the fear, like you said, about the reduction in these market sizes, whether it's going to happen in the next few years or it's going to happen in decades from now.
It's very common to use multiple tools in combination, whether it's insulin and oral meds, whether it was fast acting insulin and long acting insulin and.
So I think more treatment options here is a good thing for patients.
And I think these drugs are a real nice addition to the mix I think as you go forward, though I think there are some.
But definitely some other areas of interest related to this topic that we're exploring I think one thing that is clear to us as we've gone through this process is to really use the data.
Robert Ford: And I guess my view there is that, you know, I understand that new technologies will naturally cost us to think differently about the future. And I think early on those initial thoughts about the future are generally impacted more by emotion than facts and data. And I think that's what you're seeing right now today as it relates to GLP1 and Medtech markets. I think there's a, if you think about it long term here on the bigger picture, I think there's a fundamental mismatch here on, you know, revenue and revenue forecast that we're seeing versus, you know, potential impact, the patient and patient camps, you know.
A little bit more to our advantage since the launch of Libre we've collected.
De identified data from the user base I'd, probably go as far as to say that we probably have the most robust glucose data set in the world I think the last time I looked at it we've got close to 50 billion hours of glucose monitoring data. So I think libre is a perfect platform here to actually evaluate the effectiveness outs.
Outside of a more controlled trial.
Look at it more on a real real world setting and Theres just so many different ways. You can look at the data look at how the drugs work over time, just one drug work better than the other.
Robert Ford: I've looked at the consensus forecast for this class of drugs and I'm looking out four to five years here, you know, they seem to be in that 60 to 70 billion dollar range, which is pretty significant as a category. It's probably one of the largest categories I think we've ever seen. But then if you take the pricing, at least the public pricing that we've seen, whether it's the US pricing or the lower international pricing, and you convert that into user bases and back into the numbers, I mean, we're looking at 10 to 15 million people in the next four to five years that will be on this drug.
What kind of jobs, they do in terms of our profile.
In terms of timing range. So again I think we can do this on a population level. We can do this on an individual level. So I think that's going to be.
Say, an important thing going forward for us here is to use that data set to be able to kind of explore that.
And I would just finally say.
With the portfolio with a diverse portfolio that Abbott has where we look at health care across the full spectrum from nutrition to diagnostics to then treatment I think that this then provides the company.
Robert Ford: That's a real small fraction of the size of these medical device markets that we're talking about, right? There's about half a billion people with diabetes, maybe another half a billion people that's got cardiovascular disease and maybe there's an overlap of, you know, people with diabetes and cardiovascular, but still you're talking tens of millions of people with, you know, maybe a billion or under a billion people. So I think there's a little bit of a mismatch there in terms of how we're seeing this impact, equating the revenue and the potential growth of the revenue with, you know, the patient pool temp.
With an opportunity to further explore where we can bring value to patients that are using these drugs and I think it's common knowledge here that there are side effects is there are side effects.
Robert Ford: So that's one big area, I would say. I think there's another question here of just about, you know, the question of coverage and obviously these drugs have great outcomes and great outcomes impact. And then the question is, what's the appropriate cost to achieve that outcome? I've seen a lot of discussions and news stories about, you know, payers and what the payers are going to do and, you know, insurance companies and PBMs and pharmacy chains.
Most drugs.
And one of those being increase loss of muscle mass.
Say.
We have experience here in the area of nutrition.
And losing that amount of muscle mass as a ratio as it can be problematic. So.
We've got an opportunity here to be able to develop whether its in nutritional products or other products that can help address.
One of these side effects, which is which is muscle mass loss. So.
So theres good opportunities for their for US also in the portfolio. So.
Bottom line I think it's fantastic science, it's fantastic biology.
This is great for public health in the short term I think the concerns are overblown and I think in the long term. If we want to look out 15 20 years I mean I think it's.
I think theres still a lot of question marks there given some of the facts that I've raised so.
Robert Ford: Those aren't payers. The real payers are the employees and the companies that pay for these. And I think as you look at companies and, you know, higher medical expense costs, inflation, I think that's going to be a factor as we go into next year also.
Really appreciate that Robert maybe if I could sneak one more in on CGM something that I think is really flown under the radar with the G. L. P. One noise is you've recently gotten based type two basal coverage in France, you have it in the U S and Japan as well just thinking about future opportunities.
Robert Ford: So I think those are, those are, I'd say, the, you know, the bigger aspect here on the long term, on the short term though, as you mentioned on the diabetes, I actually see a positive impact on the diabetes business. As I mentioned in the opening remarks, we completed an analysis recently that showed a significant number of, of Libre users were on these drugs. And the data showed that those that are using both products are actually using more of those both products when you compare them to, you know, to other, to other users.
In countries to approve type two basal which could materially expand youre reimbursed.
Coverage opportunity around the world, how should we think about that and how do you size that opportunity over the next few years rabbit. Thanks a lot.
Sure.
Well, we had a really good quarter.
Up 28% International was up 26% U S. We continue to do pretty well in the plus 30.
Percent range, there and to your point we.
We saw.
Robert Ford: They tend to wear Libre sensors more often and they tend to take their GLP1 medication more frequently. And I think that's a great thing because higher therapy compliance ultimately is going to, you know, improve health outcomes. And that's not different, Robbie, you know, this, this complementary relationship, you know, it's very well. It's not uncommon to see that, you know, medical device procedures, you have patients that are taking medications either before and after their procedure.
Nice impact from that basal coverage, especially in the international markets right and it's nice to see the international growth accelerate again I remember last year. The question marks about our international growth and a lot of our focus was on our upgrade strategy for Libre III. So getting the sales team now reworking the demand generation.
And a lot of that growth is as you pointed out we're seeing nice growth from.
From that diesel segment.
Especially in France, and Japan, where we got <unk>.
Robert Ford: And you see it in diabetes, like I said, I've seen this in my 20 years where it's very common to use multiple tools in combination, whether it's insulin and oral meds, whether it's, you know, fast acting insulin and long acting insulin. And so I think more treatment options here is a good thing for patients, and I think these drugs are a real nice addition to the mix.
Reimbursement differentiated reimbursement right. We've added about 150000, I think that was the day that we reviewed over the last 12 months.
Diesel users onto the user base and if you look at that last 12 months, a larger portion of that 150000 was happening towards the second half of that so so there is definitely acceleration ongoing there.
Robert Ford: I think as you go forward though I think there are some, but definitely some other areas of interest related to this topic that we're exploring. I think one thing that is clear to us as we've gone through this process is to really use the data a little bit more to our advantage. Since the launch of Libre, we've collected the identified data from the user base. I'd probably go as far as to say that we probably have the most robust glucose data set in the world.
Actually surprised to see the speed at the U S coverage, so right now about I would say.
90% of commercial payers have now adopted some level of basal basal coverage so thats very positive.
So both those three markets U S, Japan, and France are doing very well.
In terms of basal and basal coverage and providing that kind of tailwind of growth and again theres a lot of good data to be able to support while that it benefits.
Robert Ford: I think the last time I looked at it, we've got close to 50 billion hours of glucose monitoring data. So I think Libre is a perfect platform here to actually evaluate the effectiveness outside of a more controlled trial. Look at it more in a real, real world setting. And there's just so many different ways we can look at the data, look at how the drugs work over time, does one drug work better than the other.
These these types of patients also we saw that in the in the data that we presented with the French with the French.
With the French claims data so.
So I'd say, yes, it's a great opportunity, it's not something that's happened we've been focusing on this generating the clinical evidence building the sales forces to be.
Yet with a reach of primary care team investing in direct to consumer advertising, where we're allowed to do that and that's that's.
Robert Ford: What kind of job they do in terms of a profile, in terms of time and range. So again, I think we can do this on a population level, we can do this on an individual level. So I think that's going to be an important thing going forward for us here is to use that data set to be able to kind of explore that.
That's a key growth driver here of this target we have to reach $10 billion by 2028, I'd say, that's an important growth driver, it's not the only growth driver, but it's an important growth driver and we've got a lot of good momentum there Ravi.
Robert Ford: And then I just finally say with the portfolio, with a diverse portfolio that Abbott has where we look at healthcare across the full spectrum from nutrition to diagnostics to then treatment. I think that this then provides the company with an opportunity to further explore where we can bring value to patients that are using these drugs. I think it's common knowledge here that there are side effects that there are side effects with most drugs.
I appreciate it thanks a lot.
Thank you.
Our next question will come from Danielle <unk> from UBS. Your line is open.
Hey, good morning, everyone. Thanks, so much for taking the question.
Robert I'll just follow up on Josh question earlier, and I appreciate youre not going to give 2020 for guidance, but just at a high level you know there is there.
Robert Ford: And one of those being increased loss of muscle mass. I'd say we have experience here in the area of nutrition. And losing that amount of muscle mass as a ratio is it can be problematic. So we've got an opportunity here to be able to develop whether it's a nutritional product or other products that can help address one of these side effects, which is muscle mass loss. So there's good opportunities for us also in the portfolio.
There's a few puts and takes that I can think of Robert I appreciate that momentum in the underlying business, but you will have competition coming on the EP side, which has been a strong double digit grower looking at Mitraclip and a quarter of double digit growth that was great to see like how sustainable is that and comps are just inherently potential.
A little bit tougher. So if you could maybe walk through in a little bit more detail. Some of the puts and takes at a high level that we should consider nutrition tough comp there.
Should consider as we think about 2024 that would be awesome.
Robert Ford: So bottom line, I think it's fantastic science, it's fantastic biology. This is great for public health in the short term. I think the concerns are overblown. And I think in the long term, if we want to look out 15, 20 years, I think there's still a lot of question marks there. Given some of the facts that I've raised. So really appreciate that Robert.
Yes.
I'm not sure it'll do a plan review here, but I mean, theres a lot there.
Try and touch on some of the topics there I mean I'll just go back to we have a growth model and our growth forecast that I'd say during the last two years has been masked a little bit by by Covid and the ups and downs of Covid testing.
But being able to sustain high single digit growth double digit growth in the bottom line.
Robert Marcus: Maybe if I could sneak one more in on CGM, something that I think is really flown under the radar with the GLP1 noise, is you've recently gotten Type 2 Basel coverage in France, you have it in the US and Japan as well. Just thinking about future opportunities and countries to approve Type 2 Basel, which could materially expand your reimbursed coverage opportunity around the world.
It's what we've been doing this year.
Pretty significant double digit bottom line because we forward invested back in 2022. So you look at our top line growth right now we haven't had to put as much SG&A to be able to kind of support that growth this year or so but the growth model of that high single digit growth.
And and double digit bottom line growth has been happening throughout this pandemic with COVID-19 testing and as the as the Covid testing numbers come down you get to see that a little bit more now.
Robert Ford: How should we think about that and how do you size that opportunity over the next few years, Robert? Thanks a lot. Sure. Well, we had a really good quarter. Up 28% international is up 26% US. We continue to do pretty well in the, you know, plus 30% range there. And to your point, we saw a nice impact from that Basel coverage, especially in the international markets. And it's nice to see the international growth.
So I feel good about delivering that.
In 2024, Yeah. There is there is there is a macro environment that's out there, but as it relates to all the elements that are that are directly in our control I feel very good about it.
Comment on electrophysiology, yet we'll have competition, we have competition today.
We grew in.
Robert Ford: Accelerate again. I remember last year there was question marks about our international growth and a lot of our focus was on our upgrade strategy for Libre III. So getting the sales team now, reworking the demand generation. And a lot of that growth is, as you pointed out, we're seeing nice growth from that Basel segment, especially in France and Japan where we got reimbursement differentiated reimbursement. Right. We've added about 150,000. I think that was the day that we reviewed over the last 12 months of Basel users on to the user base.
Europe , we grew mid teens and we've been growing mid teens for the first nine months with the competition that you referred to so.
So we feel good about our position there.
On Mitraclip.
See double digit growth in Mitraclip for the last three quarters.
A big driver of that has been international and growth International and we're starting to see a little bit now of a rebound.
U S U S was up 5% in Mitraclip.
Robert Ford: And if you look at that last 12 months, a larger portion of that 150,000 was happening towards the second half of that. So, so this definitely acceleration on going there, I was actually surprised to see the speed at the US coverage. So right now about, I'd say, 90% of commercial payers have now adopted some level of Basel coverage. So that's very positive. So both those three markets, US, Japan and France are doing very well in terms of Basel and Basel coverage and providing that kind of tailwind of growth.
This quarter and again, that's sequentially better from the previous quarter and sequentially better from the one before that so and we've had competition.
That space also we've had competition internationally and we've had competition in the U S too so.
So again.
You referred to comps yes.
Im not going to deny there's some comps obviously the probably the biggest one there is nutrition this year.
But every year, there's comps every year companies got comps and I'd say, if you were to remove some of those comps from our Q3 would still be growing double digits also so.
So again I feel good about our high single digit growth forecast I feel good about our double digit EPS growth.
Robert Ford: And again, there's a lot of good data to be able to support while that it benefits these types of patients also and saw that in the data that we presented with the French with the French claims data. So I'd say, yeah, it's a great opportunity. It's not something that's happened. We've been focusing on this generating the clinical evidence, building the sales forces to be able to reach a primary care team, investing in direct consumer advertising, where we're allowed to do that.
We've got a lot to work with yes, there's challenges, but we have a lot to work with we've got a great pipeline of products that we're going to be that we've not only just launched but we're going to be launching also so.
So yes, there is always puts and takes.
Denny out, but I think on the aggregate if you look at the aggregate of our positions in these markets I think we're in a real strong position.
That was super helpful. Thank you so much Robert.
Thank you.
Our next question will come from Joanne Wuensch from Citibank. Your line is open.
Robert Ford: And that's a key growth driver here of this target we have to reach $10 billion by 2028. I'd say that's an important growth driver. It's not the only growth driver, but it's an important growth driver. And we've got a lot of good momentum there. Appreciate it. Thanks a lot.
Good morning, and thank you for your question.
Nutrition.
Comments, if I remember them correctly or that you are back in a leadership position and interest in that business are you back on a 100% or you humming along do you feel like Theres anything thats lagging or maybe ahead of the game.
Danielle Antalffy: Thank you. Our next question will come from Danielle Antalffy, from UBS. Your line is open.
I'm going to squeeze and your current thoughts on M&A, particularly given a lot of pullback from valuation. Thank you.
Robert Ford: Okay. Good morning, everyone. Thanks so much for taking the question. Robert Phil, just wanted to follow up on Josh's question earlier and appreciate you're not going to give 2024 guidance, but just at a high level. There's a few puts and takes I can think of, you mentioned in the underlying thesis, but you will have competition coming on the EP side, which has been a strong double digit grower, you know, looking at Mitre Cliff and a quarter of double digit growth.
Sure.
Hum.
I mean.
We never believed that we were going to recover all the share in <unk>.
Quarter right. So the way the way this market works and the way we've kind of modeled it out is that we will showing.
Month by month kind of sequential sequential increases in our market share. So if you look at the volume.
Robert Ford: That was great to see like how sustainable is that? And, you know, comps are just inherently potentially a little bit tougher. So if you could maybe walk through in a little bit more detail, some of the puts and takes at a high level, that we should consider nutrition tough comps there. You know, should consider, as we think about 2024, that would be awesome.
Right now as measured by third party, we've now crossed over that that leadership position in the month of September were not 100% back to where we were before the recall.
But I always said that we would be there towards the end of the year. So we're probably at about 90% back to that initial.
Robert Ford: Yeah, I mean, you're not sure we'll do a plan review here, but I mean, there's a lot there. I'll try and touch on some of the topics there. I mean, I just go back to, we have a growth model and a growth forecast that, you know, I'd say during the last two years has been masked a little bit by COVID and the ups and downs of COVID testing, but being able to sustain a high single digit growth, double digit growth in the bottom line, that's what we've been doing this year.
To that pre recall market share, but it's nice to see.
Across all the segments here real nice sustained growth in our market share and even if when you look at different segments of the IMF. So if you look at the channels work in non WIC.
We've been a market leader.
Since the beginning of the year and that was a result of our strategy.
In the second half of last year to stay focused on that underserved population.
Robert Ford: Pretty significant double digit bottom line because we forward invested back in 2022. So you look at our top line growth right now, we haven't had to put as much as Gen. A.D. Bill, but kind of support that growth this year. But the growth model of that high single digit growth and double digit bottom line growth has been happening throughout this pandemic with COVID testing. And as the COVID testing numbers come down, you get to see that a little bit more now.
And the non WIC channel, we're seeing nice continuous month by month gains of market share and I think the teams are doing a real good job I think we can all see that the shelves are pretty well replenish right now.
And now it's just about continuing to execute on our demand generation.
And I feel good about what the team's doing and recovering that market share. So.
So that's gone pretty much pretty much to pretty much to plan there.
Robert Ford: So I feel good about delivering that in 2024. Yeah, there's there's a macro environment that's out there, but as it relates to all the elements that are that are directly in our control, I feel very good about it. You know, your common electrophysiology, yeah, we'll have competition. We have competition today. We grew in Europe, we grew mid-teens, and we've been growing mid-teens for the first nine months with the competition that you refer to.
Then what was your other what was your other question.
M&A, we take it all.
Given the pullback in valuations.
Oh, yes.
Yes, well listen we've completed three transactions over the last six months.
We acquired CSI and in the process of integrating that business I think it's going to be a nice addition to our vascular business and start to reposition that business to kind of more higher growth markets.
Robert Ford: So we feel good about our position there. On my triclip, we've seen double digit growth in my triclip to the last three quarters. Big driver of that has been international and growth international. And we're starting to see a little bit now of a rebound in US. US was up 5% in my triclip this quarter. And again, that's sequentially better from the previous quarter and sequentially better from the one before that. So, and we've had competition in that space also, we've had competition internationally, and we've had competition in the US too.
This quarter, we announced the acquisition of big foot.
And this is just going to be able to allow us to broaden our offerings with libre and provides a nice opportunity from a global perspective.
And then also an announcement on the PD side to expand access to Biosimilar. So so we've been active.
And we continue to be active.
Yes, I think.
Valuations have come down.
The same way they came down let's say post post pandemic in that 2022 timeframe. It's a good opportunity like Ive said I think sometimes companies need to understand if it's a short term or if theres something more fundamental in that valuation.
Robert Ford: So, so I again, you refer to comps. Yeah, there's I'm not going to deny there's some comps. Obviously, the probably the biggest one there is nutrition this year. But, you know, every year there's comps. Every year, companies got comps. And I'd say if you were to lose some of those comps from our Q3 would still be growing double digits also. So, so again, I feel good about our high single digit growth forecast. I feel good about our double digit EPS growth. We've got a lot to work with.
But we're in a great strategic position to be able to execute on our M&A strategy, which is really focused on can we add value to the asset.
And.
And is it.
Fall into our strategic framework of areas that we want to invest in growth and the ones. The ones that are highlighted here.
Robert Ford: Yeah, there's challenges. But we have a lot to work with. We've got a great pipeline or products that we're going to be that we've not only just launched, but that we're going to be launching also. So, so yeah, there's always puts in takes.
Our strategic.
And we believe that we can add a lot of value to them. So we've got plenty of capacity to to engage in.
Robert Ford: Then yeah, but I think on the aggregate, if you look at the aggregate of our positions in these markets, I think we're in a real strong position.
If there is the right opportunity that comes along in this period, we will be ready.
We will be ready.
Robert Ford: That was super helpful. Thank you so much, Robert.
Thank you very much.
Thank you.
Joanne Wuensch: Thank you. Our next question will come from Joanne Wuensch from Citibank. Your line is open.
Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.
Robert Ford: Good morning and thank you for the question. If your comments, if I remember them correctly, are that you are back in a leadership position in the nutrition of business, are you back in a hundred percent or are you humming along? Do you feel like there's anything that's lagging or maybe ahead of the game? And I'm going to squeeze in your current thoughts on M&A, particularly given a lot of pullbacks and valuations.
Hi, Robert Thanks for taking my question and congrats on a good print here I had.
Two questions. My first one is could you just elaborate.
To elaborate on this China EVP for diagnostics, how big is that core lab in China for you guys. At this point in time, and I think I heard 20% would be impacted next year is your assumption for the rest of core lab would be impacted in fiscal 'twenty five like how do these contracts slow out because my understanding is you will see.
Robert Ford: Thank you. I mean, we never believe that we were going to recover all the share in a quarter. Right? So the way this market works and the way we've kind of modeled it out is that we'll showing month by month kind of sequential increases in our market share. So if you look at the volume right now is measured by third party, we've now crossed over that leadership position in the month of September.
<unk> gains are those volumes and our prospects.
Headwinds.
Yeah.
So so the way this is kind of working out right. This was announced recently.
I think proposals are due within the within the provinces that are going to be bidding.
Jay I would say in the next 30 days right and then there's like another 30 days 30 to 60 days to evaluate all of the proposals.
Robert Ford: We're not a hundred percent back to where we were before the recall. But I always said that we would be there towards the end of the year. So we're probably at about 90 percent back to that initial, to that free recall market share. But it's nice to see across all the segments here, a real nice sustained growth in our market share. And even if when you look at different segments of the IMF, so if you look at the channels, WIC and non-WIC, WIC, we've been a market leader since the beginning of the year.
So I think that this is going to probably start.
I'd say late Q1 and into Q2.
Right now the list of assays that are on VB P equate to about 20% of the 20% of the market.
So our annual sales are in.
In China are about $1 billion so.
And then if you look at the specific assays, it's infectious disease Theres. Some theres some fertility assays, there et cetera. So.
That's where.
Robert Ford: And that was a result of our strategy in the second half of last year to stay focused on that underserved population. And the non-WIC channel, we're seeing nice, continuous, month by month gains of market share. I think the teams are doing a real good job. I think we can all see that the shelves are pretty well replenished right now. And now it's just about continuing to execute on our demand generation. And I feel good about what the team's doing and recovering that market share.
The.
That's where the Pvp is kind of focused on I haven't heard an team hasnt heard about expanding that to other areas of.
Other areas.
Testing, such as oncology or hormones or other areas like that so.
So right now I'd say.
This is going to be our focus in 2024, if theres volume upside to begin yes, there could be volume upside to be gained I mean, we do have good good market share.
In some of these segments and others, we have lower market share. So it presents us an opportunity.
Robert Ford: So that's gone pretty much to pretty much to plan there. And then what was your other question? M&A, particularly given pullbacks and valuations. Thank you. Oh, yeah, well, listen, we've completed three transactions over the last six months. You know, we acquired CSI and an process of integrating that business. I think this is going to be a nice addition to our vascular business and start to reposition that business to kind of more high growth markets.
So I think in areas, where <unk> got higher market share you'll feel more price.
And then if you can offset that price by gaining volume and segments that you've got lower share.
So I don't think Thats rocket science there.
And we'll just have to see how that all plays out, but we've had experience going BBB and in China, We've gone through with stance, we've gone through it with.
With EP certain parts of our pharma business.
Robert Ford: This quarter, we announced the acquisition of Bigfoot. And this is just going to be able to allow us to broaden our offerings with Libre and provide a nice opportunity from a global perspective. And then also an announcement on the EPD side to expand access to biosimilars. So we've been active. And we continue to be active. Yeah, I think valuations have come down. You know, the same way they came down, I'd say, post post pandemic in that 2022 timeframe.
Sure.
Certain parts in CRM also so team knows how to do this they know to kind of think about it.
And manage it pretty well, we adjust some of our.
Cost structure is also as a result of that so I think the team has got a good formula here how to manage it and we'll just have to see how this plays out.
That's helpful. Robert and my second one I know you touched upon PFS I think abbott's launching their own PFA at some point in fiscal 'twenty five 'twenty six.
How should we think in the interim rate I think your peer had some pretty robust assumptions for what percentage of your procedures would be PFA.
Robert Ford: It's a good opportunity. Like I've said, I think sometimes companies need to understand if it's a short term or if there's something more fundamental in that valuation. But we're in a great strategic position to be able to execute on our M&A strategy, which is really focused on, you know, can we add value to the asset? And, you know, and as it as it fall into our strategic framework of areas that we want to invest in and growth in.
Is abbott concerned about share loss.
When you think about the medium term.
Frame.
Are there offsets to it right.
Haven't touched upon lingo I think previously you had said lingo it could be.
That's the biggest.
Libra.
Beyond the legal launch.
Yes.
So.
We'll have to see how what other companies report to go to see if were gaining or losing share right now, but I would say.
Robert Ford: The ones that I highlighted here are strategic, and we believe that we can add a lot of value to them. So, we've got pointed capacity to engage, and if there's the right opportunity that comes along in this period, we'll be ready. We'll be ready.
We still have got good robust growth.
Say as we look into 2024.
I would expect us to grow generally in line with market, which has historically been double digits. We've got some good innovation, that's rolling out on the RF side.
Robert Ford: Thank you very much. Thank you.
And as as we've spoken about our EP business.
Vijay Kumar: Our next question will come from Vijay Kumar from Evercore ISI. Your line is open. Hi, Robert. Thanks for taking my question and congrats on the good print here. I had two questions. My first one is, could you elaborate on this China VVP for diagnostics? How big is that core lab in China for you guys at this point in time? And I think I heard 20% would be impacted next year. Is the assumption the rest of core lab would be impacted in fiscal 25?
We talk about PFA, that's going to be a product that's going to be really geared towards AF ablation, you still have BT in SVT oblations, where we do have good positions over there.
A good portion of our sales are also on the mapping side and the mapping and the diagnostics in those consumables.
So I see those being less impacted also so.
I'd say for 2024, we've got a good opportunity.
With with our IP portfolio to be growing there in line with the market.
Vijay Kumar: How do these contracts slow up? Because my understanding is that you will see volume gains, all of those volumes, and up to offset price headwinds. Yeah. So, the way this is kind of working out, right? This was announced recently. I think proposals are due within the provinces that are going to be bidding Vijay. I'd say in the next 30 days, right? And then there's another 30 days, 30 to 60 days to evaluate all the proposals.
And I think to the previous question, Yes, we've got plenty of different shots on goal here to be able to deliver our high single digit growth rates.
And we've got a very rich portfolio and we're in exciting markets.
Yes lingo.
Didn't touch on it because it wasn't asked but now that you have.
It is a great great growth opportunity for us where.
<unk> launching it in UK, I'd say I'd call. It more of a controlled launch Vijay to understand kind of the marketing mix the marketing messaging the positioning the inner positioning with libre.
Vijay Kumar: So, I think that this is going to probably start, I'd say, late Q1 and into Q2. Right now, the list of assays that are on VVP equate to about 20% of the market. So, our annual sales are in China or about a billion dollars. So, and then if you look at the specific assays, it's infectious disease, there's some fertility assays there, et cetera. So, that's where the VVP is kind of focused on.
And the learnings we've got are fantastic.
And I am excited about a full on launch in the U K starting next year and then the opportunity to be able to bring that here to the U S have been public about our intention to file lingo here in the us by the end of the year and I think that's going to provide another great opportunity for growth for US also so.
Understood. Thanks, guys.
Thank you.
Our next question will come from Matt <unk> from Barclays. Your line is open.
Hey, thanks, so much for taking the questions.
Vijay Kumar: I haven't heard and team hasn't heard about expanding that to other areas of other areas of testing such as oncology or hormones or other areas like that. So, right now, I'd say this is going to be our focus in 2024. If there's volume upside to begin, yeah, there could be volume upside to begin. I mean, we do have good market share in some of these segments. And others, we have lower market share, so it presents us an opportunity.
For all the great color today, so I just thought maybe follow up on a couple of.
Yes pipeline opportunities and growth drivers, one being try and eliminate in Troy clip.
Sort of if you could maybe walk us through the <unk>.
Expected pathway for commercialization in the U S.
On that front.
Then.
Back to diabetes.
The PLP once dominated the.
The discussion there but.
Tandem rolling out an integration with their.
Vijay Kumar: So, I think in areas where you've got higher market share, you'll feel more price. And then, if you can offset that price by gaining volume in segments that you've got lower share. So, I don't think that's rocket science there. And we'll just have to see how that all plays out. But, you know, we've had experience going VVP in China. We've gone through the stents, we've gone through it with EP, certain parts of our pharma business, certain parts in CRM also.
And kind of making wider availability here of closed loop integration in Q4.
Just be great to hear your thoughts on what.
What that ramp looks like what additional support or efforts you expect will be required on yearend.
Just as what we can expect over the next 12 to 18 months is that.
Is that's out there and available to patients.
Sure.
On Tri clip.
Yes, so we submitted to the FDA for review earlier this year. It's my understanding that CMS is going to review this in parallel also.
Vijay Kumar: So, team knows how to do this, they know how to kind of think about it and manage it pretty well. We adjust some of our cost structures also as a result of that. So, I think the team's got a good formula here, how to manage it. And we'll just have to see how this kind of plays out, and that's Health of Robert.
I think I think I made comment to this last time.
We'll likely see a panel review here and I don't think its unexpected to be quite honest with you a lot of the novel therapies.
Robert Ford: In my second one, I knew you touched upon PFA, I think Abbott's launching their own PFA at some point in 5.25, 26. Joshua would think in the interim, right? I think your peer had some pretty robust assumptions for what percentage procedures would be PFA. Jay, is Abbott concerned about share loss? You know, when you think about that medium-term claim frame, and are there offsets to it, right? You know, you haven't touched upon Lingo, I think previously it said, Lingo could be as big as Libre, where are we on Lingo launch?
Go through an advisory panel process with tavern salt with Mitraclip.
So I expect that to be the case here for four.
For Tri clip right now the expectation of that panel is.
No.
The date that we think we have right now is January .
But we'll have to see how that that occurs.
But again I don't.
The fact that we'll probably go through panel.
I still feel very enthusiastic and confident about.
The opportunity that we have with Tri clip not only this is these are patients that are in real rough shape.
Robert Ford: Yeah, so we'll have to see what other companies report to go to see if we're gaining or losing share right now. But I'd say, you know, we still have got good robust growth. I'd say as we look into 2024, you know, I'd expect us to grow generally in line with market, which has historically been double digits. We've got some good innovation that's rolling out on the RF side. And, you know, as we've spoken about our EP business, you know, we talk about PFA, you know, that's going to be a product that's going to be really geared towards AF oblations.
And it's not a lot of treatment options and.
We've shown in the trial illuminate study that we can.
Reduce.
TR and our understanding and our belief is that.
Reduction of TR is important.
And.
We will be going through that and then I'd say the safety profile of the <unk> product is very important as you think about <unk>.
Building, a new category in a new area, but you've got 5 million people here.
Matt that suffered from TR globally I believe this is a $1 billion plus opportunity for sure and we're committed to we're committed to building.
Robert Ford: You still have VT and SVT oblations where we do have good positions over there. A good portion of our sales are also on the mapping side and the mapping and the diagnostics and those consumables. So I see those being less impacted also. So I'd say for 2024, we've got a good opportunity with our AP portfolio to, you know, to be growing there in line with the market. And, you know, I think to the previous question, yeah, we've got plenty of different shots on goal here to be able to deliver our high single digit growth rate.
A real strong position on here with innovation on the product and strong clinical evidence to support it.
What was your other question sorry.
Sure.
Clothes with integration with tandem and maybe the ramp or expectations for that process.
Yes, it's my understanding here that we will see a launch.
Some time by the end of this year with tandem.
Robert Ford: And we've got a very rich portfolio and we're in exciting markets. Yeah, Lingo didn't touch on it because it wasn't asked, but now that you have asked, yeah, it is a great, great growth opportunity for us. We're launching it in UK. I'd say I'd call it more of a controlled launch VJ to understand kind of the marketing mix, the marketing messaging, the positioning, the interpositioning, the Libre. And the learnings we've got are fantastic.
And we're excited about that Theres about 150 to 200000, new new pump users globally. So I think this is an area that we've.
Robert Ford: And I'm excited about a full on launch in the UK starting next year. And then the opportunity to be able to bring that here to the U.S. I've been public about our intention to file Lingo here in the U.S, by the end of the year. And I think that's going to provide another great opportunity for growth for us also. Thanks, guys.
Historically haven't been a player in and now and now we will be a player and we've launched a.
Robert Ford: Thank you.
Sure.
And AI system in Europe .
Let's say more towards end of last year into this year and I was reviewing the results with the results of the team that pump company has had tremendous growth partnering with us.
And so that's a proof point there that when you bring in the choice in the option and you put it together with libre that Theres, a real strong value proposition to connecting the pump with with Libre.
And then as I've said, we want to be a leader in this space not just be a competitor.
Matthew Miksic: Our next question will come from Matt Mixick from Barclays. Your line is open. Hey, thanks so much for taking the questions and for all the great color today. So I just thought maybe follow up on a couple of pipeline opportunities and growth drivers.
There's a lot of work ongoing right now with our dual tool analyte glucose ketones sensor, which we believe theres a lot of applications, there, Matt, but I think one of the.
Robert Ford: One being try and eliminate and try clip sort of if you could maybe walk us through the expected pathway for commercialization in the U.S. On that front. And then back to diabetes, I know the, you know, if you want to dominate it, the discussion there, but with tandem rolling out integration with their pump and kind of making wider availability here of closed loop integration. Thank you for just the great to hear your thoughts on, you know, what that ramp looks like, what additional support or efforts you expect will be required on your end. And just just what we can expect over the next 12 to 18 months is that that that's out there and available to patients. Thanks. Sure.
Clear applications and value propositions is be able to kind of pair that with.
With an insulin pump and have a much more richer algorithm and safety algorithm and the and.
In the insulin delivery system. So so we feel good about that.
Operator, we'll take one more question please.
Thank you.
And our last question will come from Jayson Bedford from Raymond James Your line is open.
Hi, good morning. Thanks.
Leasing me in just a couple of quick ones.
First what is the updated expectation for Covid testing revenue here in 'twenty three and then.
Second one Robert you alluded to gross margin expansion in 2004 can you just frame the sources of gross margin I assume nutrition is a key driver there and then maybe just bigger picture and I appreciate that everyone. In the industry is facing these challenges, but is there visibility into clawing back to pre <unk>.
Robert Ford: On your question on Tri-Clip. Yeah, so we submitted to the FDA for review earlier this year. It's my understanding that CMS is going to review this in parallel also.
<unk> gross margin levels.
Sure.
Michael Comilla: I think I think I made comment to this last time. [inaudible] I'm, I'm, I'm, I'm, I'm, Thank you. Thank you.
Yes, there is visibility I mean, it's.
The visibility is in the first half of 2024, then then I would say no, but we do have a plan to.
To be able to kind of drive gross margin and gross margin expansion I would say as you look at it into next year, Jason There's really a couple of elements here that.
We will be we'll be tailwind for us I'd say lower commodity costs that for sure and those were pretty big headwinds for us.
In.
I'd say in 2022 and 2023.
On one end, you've got commodity costs and nutrition, but you also got other commodity costs that are impacting the entire company and what we have seen and I think a lot of companies have seen this as those those commodity costs start to bend and move down the other way so in.
That will be particularly important for us as we think about nutrition.
Which is highly dependent on.
On a large number of commodity and commodity inputs.
Seeing a lower freight and distribution and again I think a lot of companies are seeing that but we're seeing that not only just in terms of rates, but also with more normalized supply chains.
We can use different modalities of freight that can also lower cost and not using air all the time.
So that's going to help we've got a I think a pretty robust process and teams in place that work on gross margin and gross margin improvement plans had been very busy I'd say over the last 12 months to 18 months I expect those teams to continue to deliver on their strategies to deliver cost reductions and then favorable product.
Product and portfolio mix right, so as our as our faster growing higher margin businesses and new products become a large portion of our overall sales and sales mix I think that also contributes to that so.
Yes, we understand that gross margin is key to be able to deliver on that double digit bottom line EPS growth and.
This is something that we work on every year and I think we've got a little bit more of a better environment for our teams for our teams to work on so on your on your Covid question I'll ask Phil to give you. The details there thanks, Jason relative to 2023, Covid testing sales forecast full year.
About $1 $5 billion here.
Okay. So I'll just I'll just wrap up here.
With a few comments its clear that we are seeing broad base growth across the entire company.
As I said in my comments, we've now delivered double digit <unk>.
Organic sales growth here for the past three quarters and forecasting that type of growth again. This next quarter EPS contributions and the growth in the base business has increased every quarter and we've exceeded the expectations. We set for the initial guidance of the year.
The pipeline to some of the points that were made there are big kind of opportunity for us going into 2024 is our pipeline and it continues to be productive with several new product approvals indications reimbursement and geographic expansions. There. So momentum is clearly building and.
Well positioned for a strong end of the year and going into 2024, so with that I'll, let wrap up and thank you for joining us.
Thank you operator, and thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available. After 11 am central time today on Abbott's Investor Relations website at Abbott Investor Dot com. Thank.
Jason Bedford: Our last question will come from Jason Bedford from Raymond James. Your line is open. Good morning. Thanks for squeezing me in just a couple quick ones. First, what is the updated expectation for COVID testing revenue here in 23 and then second one, Robert, you alluded to gross margin expansion in 24. Can you just frame the sources of gross margin? I assume nutrition is a key driver there. And then maybe just bigger picture and appreciate that everyone in the industry is facing the challenges. But is there visibility into clawing back to pre COVID gross margin levels?
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.
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Robert Ford: Thanks. Sure. Yeah, there's visibility. I mean, the visibility is in the first half of 2024. Then, then I'd say no, but we do have a plan to be able to kind of drive gross margin and gross margin expansion. I'd say, as you look at it into next year, Jason, there's really a couple elements here that will be will be tailwinds for us. I'd say lower commodity costs, that for sure. And those were pretty big headwinds for us in, I'd say in 2022 and 2023.
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Robert Ford: On one end, you've got commodity costs in nutrition. But you also got other commodity costs that are impacting the entire company. And what we have seen, I think a lot of companies have seen this, is those commodity costs start to bend and move down the other way. And that will be particularly important for us as we think about nutrition, which is highly dependent on a large number of commodity and commodity inputs.
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Robert Ford: Seeing a lower freight and distribution, and again, I think a lot of companies are seeing that, but we're seeing that not only just in terms of rates, but also with more normalized supply chains. We can use different modalities of freight that can also lower costs and not using air all the time. So that's going to help. We've got a, I think a pretty robust process and teens in place that work on gross margin and gross margin improvement plans.
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Robert Ford: They've been very busy. I'd say over the last 12, 18 months, I expect those teams to continue to deliver on their strategies to deliver cost reductions. And then favorable product and portfolio mix, right? So as our faster growing, higher margin businesses and new products become a large portion of our overall sales and sales mix. I think that also contributes to that. So yeah, we understand that gross margin is key to be able to deliver on that double-digit bottom line EPS growth. And, you know, we're, this is something that we work on every year. And I think we've got a little bit more of a better environment for our teams to work on.
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Robert Ford: So on your COVID question, I'll ask Phil to give you the details there. Thanks Jason, relative to 2023 COVID testing sales forecast, full years about 1.5 billion, and Dollar Store. Okay, so I'll just wrap up here with a few comments. It's clear that we're seeing broad-based growth across the entire company. As I said in my comments, we've now delivered double-digit organic sales growth here for the past three-quarters and forecasting that type of growth.
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Robert Ford: Again, this next quarter, EPS contributions and the growth in the expectations we set for the initial guidance of the year. The pipeline, to some of the points that were made there, a big kind of opportunity for us going into 2024 as our pipeline, and it continues to be productive with several new product approvals, indications, reimbursement, and geographic expansions there. So momentum is clearly building, and well positioned for a strong end of the year and going into 2024.
Michael Comilla: So with that, I'll wrap up and thank you for joining us. Thank you, operator, and thank you all for your questions.
Michael Comilla: 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.
Michael Comilla: This concludes today's conference call. Thank you for your participation.
Michael Comilla: You may now disconnect. Everyone, have a wonderful day. Thank you.
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Michael Comilla: Thank you for your time, and I'll see you in the next video, you you you you you you you Thank you for your time, and I'll see you in the next video. , and Phil Boudreau, Senior Vice-President Finance and Chief Financial Officer. Robert and Phil will provide opening remarks. Following their comments, we'll take your questions.
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Good morning, and thank you for standing by welcome to Abbott's third quarter 2023 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'll be able to ask your question by pressing the star one one Keith on your Touchtone phone.
This call is being recorded by Abbott.
With the exception of any participants questions asked.
During the question and answer session the entire call, including the question and answer session is material copyrighted by Abbott.
It cannot be recorded or rebroadcast without abbott's expressed written permission.
I would now like to introduce Mr. Michael Kneller, Vice President Investor Relations.
Good morning, and thank you for joining US with me today are Robert Ford, Chairman and Chief Executive Officer.
Bob Funck Executive Vice President Finance, and fill Boudreaux, Senior Vice President Finance and Chief Financial Officer.
Robert and Phil will provide opening remarks following their comments, we'll take your questions before.
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 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 one a risk factors to our annual report on Form 10-K for the year ended December 31 2022.
Abbott undertakes no obligation to release publicly any revisions to forward looking statements as a result of subsequent events or developments, except as required by law.
On today's conference call as in the past non-GAAP financial measures will be used to help investors understand abbott's ongoing business performance.
These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at Abbott Dot com.
Note that Abbott has not provided the GAAP financial measure for organic sales growth on a forward looking basis, because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth.
Unless otherwise noted our commentary on sales growth refers to organic sales growth, which is defined in our quarterly results press release issued earlier today.
With that I will now turn the call over to Robert.
Thanks, Mike.
Morning, everyone and thank you for joining us.
Today, we reported third quarter adjusted earnings per share of $1 14.
Based on our performance through the first nine months of the year, we raised the midpoint of our full year adjusted earnings per share guidance and narrowed the range.
To $4 42.
To $4 46.
Organic sales growth on the base business, which excludes COVID-19 testing.
Increased double digits for the third consecutive quarter.
Was led by double digit growth in all four of our major businesses.
This acceleration in sales growth as.
As a result of our strong position in attractive growth markets in conjunction with the additional investments we made across the company during the pandemic.
In addition to the strong top line performance, we continued to deliver accelerating earnings power on our base business.
And remain on track to deliver on the financial commitments, we set at the beginning of the year.
With a positive growth outlook for the businesses and the momentum we're building across the portfolio.
We are well positioned for a strong finish to the year and heading into 2024.
I will now review our performance in more detail before turning the call over to Phil.
I'll start with nutrition.
Where sales increased 18% in the quarter.
In pediatric nutrition growth of 25% was led by continued market share capture in the U S infant formula business.
Where we have now reclaimed the leadership position.
Internationally, we continued to deliver well balanced growth coming from both infant formula products and our PD short toddler brand.
In adult nutrition growth of 12% was driven by strong demand for abbott's market, leading and shore and Lucerne of brands across the U S and international markets.
Turning to established pharmaceuticals sales increased 11% in the quarter.
This strong performance was broad based and led by double digit growth in several markets and therapeutic areas, including cardio metabolic women's health and CNS pain management.
Michael Comilla: Before we get started, some statements made today may be forward-looking for purposes of the Private Security's Litigation Reform Act of 1995, including the expected financial results for 2023. Abbott cautions that these forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in item 1A risk factors to our annual report on Form 10K for the year ended December 31st, 2022. 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.
In September we announced an agreement with global biotech leader map science to commercialized several biosimilars and emerging markets.
This collaboration will help introduce cutting edge medicines in the areas of oncology.
Women's health and respiratory diseases.
The people in countries that have historically lacked access to these treatment options.
Moving to diagnostics, excluding COVID-19 testing organic sales grew 10%.
Led by core lab diagnostics, where sales grew double digits driven by above market performance in the U S and internationally.
Growth was driven by a continued increase in global demand for routine diagnostic testing.
And a strong recovery of our blood transfusion testing business.
Michael Comilla: On today's conference call, as in the past, non-gap financial measures will be used to help investors understand Abbott's ongoing business performance. These non-gap financial measures are reconciled with the comparable gap 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 gap financial measure for organic sales growth on a forward-looking basis because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the quarterly results press release issued earlier today.
Following a period of lower plasma donations that occurred during the COVID-19 pandemic.
In rapid diagnostics double digit organic sales growth on the base business benefited from increased demand for respiratory tests in anticipation of an earlier than normal start to the flu season in the northern hemisphere.
And I'll wrap up with medical devices.
Where sales grew nearly 15%, including double digit growth in both the U S and internationally.
In diabetes care freestyle Libre sales were $1 4 billion in the quarter and grew 28%.
The global lead right user base now exceeds 5 million people with nearly $2 million of those in the U S where the Libra user base has nearly doubled in the last two years.
Michael Comilla: With that, I will now turn the call over to Robert. Thanks, Mike.
Robert Ford: Good morning, everyone, and thank you for joining us. Today, we reported third quarter adjusted earnings per share of a dollar in 14 cents. Based on our performance through the first nine months of the year, we raised the midpoint of our full year adjusted earnings per share guidance and narrowed the range to $4.42 to $4.46. Organic sales growth on the base business, which excludes COVID testing, increased double digits for the third consecutive quarter and was led by double digit growth in all four of our major businesses.
A recent analysis of our U S user base showed that a growing number of libre users are using libre in combination with <unk> medications.
As part of a companion therapy approach for managing their diabetes.
On average though.
Those using both libre and AGL P. One exhibited a higher rate of use for both products.
Wearing libre sensors, more often and taking <unk> medications more frequently compared to other users.
Robert Ford: This acceleration in sales growth is a result of our strong position in attractive growth markets. In conjunction with the additional investments we made across the company during the pandemic. In addition to the strong top line performance, we continue to deliver accelerating earnings power on our base business and remain on track to deliver on the financial commitments we set at the beginning of the year. With a positive growth outlook for the businesses and the momentum we're building across the portfolio, we are well positioned for a strong finish to the year and heading into 2024.
This increase in use or better compliance is a positive sign that these users are taking an even more active role in managing their diabetes.
While we traditionally think of therapy choices as having to compete against one. Another this is a good example of a complementary relationship between two products.
That both help optimize the treatment of diabetes.
And cardiovascular devices sales grew 10% overall in the quarter led by double digit growth in electrophysiology and structural heart.
In electrophysiology sales growth of 17% was driven by double digit growth across all major international geographic regions and high teens growth of ablation catheters in the U S.
Robert Ford: I will now review our performance in more detail before turning the call over to Phil. I'll start with nutrition, where sales increased 18% in the quarter. In pediatric nutrition, growth of 25% was led by continued market share capture in the US and from form of business, where we have now reclaimed the leadership position. Internationally, we continue to deliver well-balanced growth coming from both infant form of products and our pediatric or taller brand. In adult nutrition, growth of 12% was driven by strong demand for Abbott's market leading and sure and blue-cerned brands across the US and international markets.
In structural heart performance was driven by double digit growth of Mitraclip and strong growth from several recently launched new products, most notably <unk>, our latest generation <unk> valve.
And rhythm management growth was led by double digit growth in pacemakers sales led by <unk>. Our recently launched <unk> pacemaker that can be used for both single chamber and dual chamber pacing.
And lastly in Neuromodulation sales grew 19% driven.
Driven by the recent launch of Aeterna, our first rechargeable neurostimulation device for pain management, which targets a large segment of the market, where we previously did not compete.
Robert Ford: Turning to establish pharmaceuticals, sales increased 11% in the quarter. This strong performance was broad-based and led by double-digit growth in several markets and therapeutic areas, including cardiometabolic women's health and CNS pain management.
So in summary, this was a very strong quarter with all four major businesses delivering double digit organic sales growth, excluding COVID-19 testing related sales.
Growth rates in the base business have improved every quarter. This year on both the top and bottom lines.
Robert Ford: In September, we announced an agreement with global biotech leader, Mab Science, to commercialize several biosimilars in emerging markets. This collaboration will help introduce cunning edge medicines in the areas of oncology, women's health and respiratory diseases to people in countries that have historically lacked access to these treatment options.
And the momentum we are building positions.
<unk> positions us well positions us well for a strong finish to the year and heading into 2024.
I'll now turn over the call to Phil Phil.
Thanks Robert.
As Mike mentioned earlier. Please note that all references to sales growth rates unless otherwise noted are on an organic basis.
Turning to our third quarter results sales decreased one 5% on an organic basis due to as expected our year over year decline in Covid testing related sales.
Robert Ford: Moving to diagnostics, excluding COVID testing, organic sales grew 10% led by core lab diagnostics, where sales grew double-digits, driven by above-market performance in the US and internationally. Growth was driven by a continued increase in global demand for routine diagnostic testing and a strong recovery of our blood transfusion testing business following a period of lower plasma donations that occurred during the COVID-19 pandemic. In rapid diagnostics, double-digit organic sales growth on the base business benefited from increased demand for respiratory tests in anticipation of an earlier than normal start to the flu season in the northern hemisphere.
Excluded Colby tested sales underlying base business organic sales growth was 13, 8% in the quarter.
Foreign exchange had an unfavorable year over year impact of one 4% on third quarter sales.
During the quarter, we saw the U S dollar strengthened somewhat versus several currencies, which resulted in a slightly more unfavorable impact on sales compared to exchange rates at the time of our earnings call in July .
Regarding other aspects of the P&L the adjusted gross margin ratio was 55% of sales.
On a year to date basis, our adjusted gross margin ratio was 55, 4% of sales, which is below our original full year guidance of approximately 56% that we provided back in January .
Robert Ford: I'll wrap up with medical devices where sales grew nearly 15% including double-digit growth in both the US and internationally. In diabetes care, freestyle Libre sales were $1.4 billion in the quarter and grew 28%. The global Libre user base now exceeds 5 million people with nearly 2 million of those in the US where the Libre user base has nearly doubled in the last two years. A recent analysis of our US user base showed that a growing number of Libre users are using Libre in combination with GLP1 medications as part of a companion therapy approach for managing their diet, on average, those using both Libre and a GLP-1 exhibited a higher rate of use for both products, wearing Libre sensors more often and taking GLP-1 medications more frequently compared to other users.
The difference is primarily due to lower gross margins on Covid test due to lower volumes and price compared to our original forecast assumptions and the impact of higher inventory obsolescence as a result of maintaining higher inventory levels throughout the pandemic to help ensure product supplied during a time when global supply chains were less predictable.
As the global supply chain environment continues to improve we are adjusting our inventory levels to align with that trend.
Adjusted R&D was six 2% of sales and adjusted SG&A was 26, 4% of sales in the third quarter.
Robert Ford: This increase in use, or better compliance, is a positive sign that these users are taking an even more active role in managing their diabetes. And while we traditionally think of therapy choices as having to compete against one another, this is a good example of a complementary relationship between two products that both help optimize the treatment of diabetes.
Lastly, our third quarter adjusted tax rate was 14%.
Turning to our 2023 outlook.
For the full year, we now forecast ongoing earnings per share of $4 42.
To $4 46.
Which is comprised of our year to date results plus ongoing earnings per share guidance of $1 17 to $1 21 for the fourth quarter.
For the fourth quarter, we forecast total underlying base business organic sales growth, excluding COVID-19 testing sales to be in the low double digits and exchange to have an unfavorable impact of a little more than 1% from fourth quarter reported sales.
With that we'll now open the call for questions.
Thank you.
At this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone you Levin here an automated message advising you that your hand is raised to withdraw your question. Please press star one again.
Robert Ford: In Cardiovascular devices, sales grew 10% overall in the quarter, led by double-digit growth in electrophysiology and structural heart. In electrophysiology, sales growth of 17% was driven by double-digit growth across all major international geographic regions and high-teens growth of ablation catheters in the US. In structural heart, performance was driven by double-digit growth of Mitroclip and strong growth from several recently launched new products, most notably Navator, our latest generation Tavrapalph. In ribbon management, growth was led by double-digit growth in pacemaker sales, led by Avair, our recently launched Leelus pacemaker that can be used for both single chamber and dual chamber pacing. And lastly, a neuromodulation sales grew 19% driven by the recent launch of Eterna, our first rechargeable neural stimulation device for pain management, which targets a large segment of the market where we previously did not compete.
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And again Thats star one to ask a question. Please standby we compile the Q&A roster.
And our first question will come from Josh Jennings from TD Cowen Your line is open.
Hi, good morning, Thanks for taking the questions and congratulations on another strong quarter Robert.
Revenue growth nearly touched the mid teens range for the core business in <unk>.
We recently talked about the sustainability of the momentum generated this year, but I think investors would like to hear about.
Your confidence level in our core business delivering high single digit organic revenue growth and solid margin expansion in 2024. After 2023 comp it's only with tighter over the course of this year. Thanks for taking the question.
Sure Josh.
I mean, the confidence level is very high, especially with this kind of momentum that we're seeing.
Robert Ford: So in summary, this was a very strong quarter with all four major businesses delivering double-digit organic sales growth, excluding COVID testing-related sales. Growth rates in the base business have improved every quarter this year on both the top and bottom lines. And the momentum we are building positions us well, positions us well for a strong finish of the year and heading into 2024.
Clearly, there's going to be some macro environment challenges as companies head into 2024.
I'd say our portfolio has really been built to withstand this type of environment and we tend to do pretty well in this type of environment and as I said in my comments also we further strengthened.
Our portfolio in the position that we had with the investments that we made during the pandemic and Thats helped lead to a step up here in our growth rate. This year. They are the base businesses has grown double digits three quarters in a row.
Philip Boudreau: I'll now turn over the call to Phil. Phil. Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our third quarter results, sales decreased 1.5% on an organic basis due to, as expected, a year over year decline in COVID testing-related sales. Excluded COVID tested sales, underlying base business organic sales growth was 13.8% in the quarter. For an exchange, it had an unfavorable year over year impact of 1.4% on third quarter sales.
I expect to be doing that again in Q4, and if you look at the EPS contribution.
As I said in the comments, it's really having a positive impact and a lot of power coming through on the base business.
As we've continued to grow that and it's sequentially gotten better every quarter.
So we're forecasting another step up in the fourth quarter. So if you look at that EPS.
Philip Boudreau: During the quarter, we saw the US dollar strengthen somewhat versus several currencies, which resulted in a slightly more unfavorable impact on sales compared to exchange rates at the time of our earnings call in July. Regarding other aspects of the P&L, the adjusted gross margin ratio was 55% of.., sales. On a year-to-day basis, our adjusted gross margin ratio is 55.4% of sales, which is below our original, full-year guidance of approximately 56% that we provided back in January.
For the fourth quarter.
And put it altogether the base business here is going to contribute about.
$4.10 of EPS.
And we've raised that twice this year so.
There is clearly momentum that's building here both on the top and the bottom lines and I believe that momentum is going to sustain and continue as we go into 2024 I think it starts.
Josh always with the top line and.
And if you can drive.
Higher top line growth I think thats really the building block and if you look at our let's.
Philip Boudreau: The difference is primarily due to lower gross margins on COVID tests due to lower volumes and price compared to our original forecast assumptions. And the impact of higher inventory obsolescence as a result of maintaining higher inventory levels throughout the pandemic to help ensure product supply during a time when global supply chains were less predictable.
Lets say our pre pandemic.
Kind of growth.
<unk> Formula here, we were growing around 7%, so I expect I expect that to accelerate.
And next year.
Without a doubt.
And thats off of a much larger sales base than we were pre pandemic and like I said, that's based off the momentum that we're seeing.
Philip Boudreau: At the global supply chain environment continues to improve for adjusting our inventory levels to align with that trend. Adjusted R&D was 6.2% of sales and adjusted STA was 26.4% of sales in the third quarter. Lastly, our third quarter adjusted tax rate was 14%.
And increased contributions that we'll be seeing from a lot of our growth drivers and I'm sure we'll be talking about.
Throughout the call.
The street models double digit EPS on the base business right now and I feel real good about our ability to deliver that obviously a lot of focus.
Philip Boudreau: Turning to our 2023 outlook. For the full year, we now forecast ongoing earnings per share of $4.42 to $4.46, which is comprised of our year-to-date results plus ongoing earnings per share guidance of $1.17 to $1.21 for the fourth quarter. For the fourth quarter, we forecast total underlying base business organic sales growth excluding COVID testing sales to be in the low-double digits and exchange to have an unfavorable impact of a little more than 1% on fourth quarter reported sales.
Is going to come from gross margin and gross margin expansion.
And I think we've got momentum in tail wind here as we as we can go into into 2024. So.
When we go when we go to our call in January I'll be able to kind of quantify that and give you better ranges on all of that but I would say.
It really it's really about reiterating and reinforcing.
Our our growth model, our growth framework, which is high high single digit revenue growth double digit bottom line growth margin expansion strong free cash flow generation and our balance capital allocation strategy. So again I feel very good about sustaining this momentum going into going into <unk>.
Michael Comilla: 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 one on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star one one again. For optimal sound quality, we kindly ask that you please use your handset instead of your speaker phone when asking your question. And again, that's star one one to ask a question.
Michael Comilla: Please question.
Next year.
Understood. Thanks, a lot.
Thank you.
And our next question will come from Larry <unk> from Jpmorgan. Your line is open.
Thanks for taking the question just just to be clear.
Wells Fargo.
Good morning, Robert.
Larry quarter, yes, Okay got it.
So Robert China has been in the news a lot.
Love to hear your thoughts on how Youre thinking about China Big picture, how is Q3 and what are you expecting from the GBP impact in the EP business and from the anti corruption initiatives. We've been hearing about there. Thanks for taking the question.
Joshua Jennings: We'll come from Josh Jennings from PD Cowlin. Your line is open. Hi, good morning.
Robert Ford: Thanks for taking the questions and congratulations on another strong quarter. Robert Granick revenue growth nearly touched the mid-teens range for the core business in 3Q. And I realize we recently talked about the sustainability of the momentum generated this year, but I think investors would like to hear about your confidence level in the core business delivering high single digit organic revenue growth and solid margin expansion in 2024 off the 2023 comp that's only the tire of the course of this year.
Sure well, China has been and will continue to be an important market for us.
As it relates to I think the steam on on this anticorruption.
Discussion points, there listen we've been operating in China for 435 years, we follow our compliance standards.
Following all applicable laws I didn't see.
Any kind of meaningful impact in Q3, Larry I was actually there last week and had a chance to meet with the teams and go through the businesses and I didn't really see.
Robert Ford: Thanks for taking the question. For Josh, I mean the confidence level is very high, especially with this kind of momentum that we're seeing. Clearly, there's going to be some macro environment challenges as companies had into 2024. But I'd say our portfolio has really been built to withstand this type of environment and we tend to do pretty well in this type of environment. And as I said in my comments, also, we've further strengthened the portfolio and position that we had with the investments that we made during the pandemic.
Any meaningful impact devices grew 20% in the quarter. So I think.
That's.
We'll just have to keep on monitoring that situation, but I didn't see I didn't see any real impact in the quarter.
As it relates as it relates to VP listen this is.
This is a term that's used for for China, but I think it's a.
It's just a common theme that we see across across the world governments trying to trying to provide the care to their populations and manage their budget. So I don't think this has anything.
Robert Ford: And that's helped lead to step up here in our growth rate this year. They are the base business, was growing double digits, three quarters in a row, and I expect to be doing that again in Q4. And if you look at the EPS contribution, as I said in the comments, it's really having a positive impact and a lot of power coming through on the base business as we continue to grow that.
Completely extra ordinary than what we've seen.
There was a GBP on the EP business that.
That process started earlier earlier this year in April I would say about 80% of the market.
It has now been implemented.
And I expect the remainder of that to be implemented.
By year end, yes, theres, a little bit of a price impact that we felt but net net it was a positive for our business.
Robert Ford: And it's sequentially gotten better every quarter. So we're forecasting other step up in the fourth quarters. If you look at that EPS for the fourth quarter and put it all together, the base business here is going to contribute about $4.10 of EPS. And we've raised that twice this year. So there's clearly momentum that's building here both on the top and the bottom lines. And I believe that momentum is going to sustain and continue as we go into 2024.
In.
And in China, because we were able to pick up share and pick up volume So I think thats.
That's the status there.
I think it has announced a GBP on diagnostics, that's not unexpected either.
I think the process will start.
Sometime in the first half of next year.
Right now from the list of products that we've seen it involves about 20% of our core lab business.
Robert Ford: I think it starts, Josh, always with a top line. And if you can drive a higher top line growth, I think that's really the building block. If you look at our, let's say our free pandemic growth formula here, we were growing around 7%. So I expect that to accelerate in next year without a doubt. And that's off a much larger sales based than we were pre-pandemic. And like I said, that's faced off the momentum that we're seeing and increased contributions that we'll be seeing from a lot of our growth drivers.
And then as we've seen with businesses that have <unk>.
Capital and serve as tied to it the rollout a little bit different.
From the rollout that you see on what I would call more pure consumables.
So it's more of a kind of a phased approach like we saw in EP each problem each province will go and do their implementation. So it will take a few quarters, a few quarters to implement here but.
Like I said I don't think these are different than what we see in other markets in terms of how we manage the balance of our technology.
Our access.
Robert Ford: I'm sure we'll be talking about throughout the call. The three models, double digit EPS on the base business right now. And I feel real good about our ability to deliver that. Obviously, a lot of focus is going to come from growth margin and growth margin expansion. And I think we've got momentum until when here as we're going to go into 2024. So when we go to our call in January, I'll be able to kind of quantify that and give you better ranges on all of that.
But I'd say, China is still a big opportunity of growth.
Not just in devices and diagnostics, but an adult nutrition and pharma business. So it's an important market for us and the team is doing a really good job at operating there.
Thanks, so much.
Thank you.
Our next question will come from Robbie Marcus from Jpmorgan. Your line is open.
Oh, great. Thanks for taking the question congrats on a really nice quarter.
Robert I wanted to ask you.
Robert Ford: But I'd say it's really about reiterating and reinforcing our growth model, our growth framework, which is high single digit revenue growth, double digit bottom line growth, margin expansion, strong free cash flow generation, and a balanced capital allocation strategy. So again, I feel very good about sustain this momentum going into next year. Understood. Thanks a lot. Thank you.
The overwhelming.
Topic of discussion in the past few months has been DLP widens in the possible.
Packed on the future Med Tech market growth you talked about it with respect to diabetes, but I'd love to just get your thoughts on a broader basis signed DLP wines and do you see it as a negative neutral or positive.
To your different end markets you participate in over the next 510 years. Thanks, a lot sure.
Ravi obviously this is Ben.
Lawrence Biegelsen: And our next question will come from Larry Beegelson from JP Morgan. Your line is open. Thanks for taking the question just to be clear.
This has been a hot topic over the last couple of months and let me just start off by saying with with 20 plus years of experience in diabetes.
Robert Ford: It's Wells Fargo, but good morning, Robert. We know Larry's quarter here. Okay, good. So Robert, China has been in the news a lot. I'd love to hear your thoughts on how you're thinking about China big picture. How is Q3 and what are you expecting from the VBP impact in the EP business and from the anti corruption initiatives we've been hearing about there? Thanks for taking the question. Sure. Well, China has been and will continue to be an important market for us as it relates to, you know, I think this theme on on this anti corruption.
I think every time, new therapies, new technologies come to address this this disease in this in this population I think it's all great and these are great new medications that are going to have very positive effect.
The treatment of diabetes, Theres, obviously, a lot of investor angst Ravi about the potential impact of these drugs and what the what's going to happen to different industries and different companies I feel that the investor angst.
It's probably driven more by those that have a little bit less domain knowledge in med Tech I would say seem to be moving a lot with like headlines or any new study or publishment there.
Robert Ford: Discussion points there. Listen, we've been operating in China for 35 years. We follow our compliance standards, follow all applicable laws. I didn't see any kind of meaningful impact in Q3. Larry, I was actually there last week and I had a chance to meet with the teams and go through the businesses and I didn't really see any meaningful impact devices grew 20% in the quarter. So I think that we'll just have to keep on monitoring.
Our publishing of any kind of study headlines et cetera, so you've seen valuations in med tech.
Significantly be impacted by the fear like you said about the reduction in these market sizes, whether it's going to happen in the next few years or it is going to happen in decades from now and I guess my view there is that I understand that new technologies will.
Well naturally caused us to think differently about the future and I think early on those initial thoughts about the future are generally impacted more by emotion and facts and data and I think thats, what youre seeing right now today as it relates to <unk> and Med Tech markets.
Robert Ford: We're in that situation, but I didn't see any real impact in the quarter. As it relates to VBPless and this is a term that's used for China, but I think it's just a common theme that we see across the world who governments are trying to provide the care to their populations and manage their budgets. So I don't think this is anything completely extraordinary than what we've seen. There was a VBP on the EP business.
I think there is a if you think about it long term here on the bigger picture I think there's a fundamental mismatch here.
On.
Revenue and revenue forecasts that we're seeing versus potential impact to patient and patient <unk>.
I've looked at the consensus forecast for this class of drugs.
Robert Ford: That process started earlier this year in April. I'd say about 80% of the market has now been implemented and I expect the remainder of that to be implemented by here. There's a little bit of a price impact that we felt, but NetNet was positive for our EP business in China because we're able to pick up share and pick up volume. So I think that's the status there. I think it's announced a VBP on diagnostics that's not unexpected either.
Looking out four to five years here they seem to be in that 60% to $70 billion range, which is pretty significant as a category is probably one of the largest categories. I think we've ever we've ever seen but then if you take the pricing at least the public pricing that we've seen.
Whether it's the U S pricing or the or the lower international pricing.
And you convert that into user bases and back into the numbers I mean were looking at 10 to 15 million people in the next four to five years of that will be on this drug.
That's a real small fraction of the size of these medical device markets that we're talking about right that's about half a billion people with diabetes.
Robert Ford: I think the process will start some time in the first half of next year. Right now, from the list of products that we've seen, it evolved about 20% of our core lab business. And then as we've seen with businesses that have capital and service pie to it, the rollout is a little bit different from the rollout that you see on what I would call more pure consumables. So it's more of a kind of phase approach like we saw in EP.
Maybe another half a billion people that got cardiovascular disease and maybe there is a maybe there is an overlap of people with diabetes and cardiovascular but still you are talking tens of millions of people with maybe.
Maybe $1 billion or under 1 billion people.
So I think there is a little bit of a mismatch there in terms of how we're seeing this impact equating the revenue.
And the potential growth of the revenue with.
Robert Ford: Each province will go and do their implementation. It'll take a few quarters to implement here. But like I said, I don't think these are different than what we see in other markets in terms of how we manage the balance of our technology and our access. But I'd say China's still a big opportunity of growth, not just in devices and diagnostics, but in adult nutrition and not farm a business. So it's an important market for us and teams doing a really good job at operating there.
The patient pool Tam so.
So that's one big area I would say I think there is another question here just about the question of coverage and obviously these drugs have great outcomes and great outcomes impact and then the question is what's the appropriate cost to achieve that that.
Robert Ford: Thanks so much. Thank you.
That outcome.
I've seen a lot of discussions in new stories about payers and what the payers are going to do and.
Insurance companies and Pbms and pharmacy chains.
These aren't payors.
The real payers are the employees employers.
Robert Marcus: Our next question will come from Robbie Marcus from JP Morgan. Your line is open. Oh, great.
Companies that pay for these and I think as you look at companies.
And at a higher.
Robert Ford: Thanks for taking the question and congrats on a really nice quarter. Robert, I want to ask you the overwhelming topic of discussion in the past few months has been GLP ones and the possible impact on the future mid-tech market growth. You talked about it with respect to diabetes, but I'd love to just get your thoughts on a broader basis on GLP ones and you see it as a negative neutral or positive to your different end markets you participate in over the next five.
Higher medical expense cost inflation.
That's going to be a factor as we go into next year also so.
So I think thats those are those are I'd say the bigger aspect here on the long term on the short term, though as you mentioned.
And the diabetes actually see it as a positive impact on the diabetes business as I mentioned in the opening remarks.
We completed an analysis recently that showed a significant number of libre users were on these drugs and the data showed that those that are using both products are actually using more of.
Those both products when you compare then too.
Robert Ford: 10 years. Thanks a lot. Sure, Robbie. Obviously, this has been a hot topic over the last couple of months. Let me just start off by saying with 20 plus years of experience in diabetes. I think every time new therapies, new technologies come to address this disease and this population, I think it's all great. And these are great new medications that are going to have very positive effect on the treatment of diabetes.
Other to other users they tend to wear libre sensors, more often and they tend to take their <unk> medication more frequently and I think thats a great thing.
Because higher therapy compliance ultimately is going to.
Improve health outcomes and that's not different Ravi this complementary relationship.
Very well, it's not uncommon to see that.
Medical device procedures, you have patients that are taking medications either before and after their procedure and you see it in diabetes like I said I've seen this in my 20 years, where.
Robert Ford: There's obviously a lot of investor angst here, Robbie, about the potential impact of these drugs and what's going to happen to different industries and different companies. I feel that the investor angst is probably driven more by those that have a little bit less domain knowledge in Medtech, I would say. It seemed to be moving a lot with headlines or any new study or publishments there or publishing of any kind of study headlines, etc.
Robert Ford: So you've seen valuations in Medtech, you know, significantly be impacted by the fear, like you said, about the reduction in these market sizes, whether it's going to happen in the next few years or it's going to happen in decades from now. And I guess my view there is that, you know, I understand that new technologies will naturally cause us to think differently about the future. And I think early on those initial thoughts about the future are generally impacted more by emotion than facts and data.
It's very common to use multiple tools in combination, whether it's insulin and oral meds, whether it was fast acting insulin and long acting insulin and so I think more treatment options here is a good thing for patients.
And I think these drugs are a real nice addition to the mix I think as you go forward, though I think there are some.
But definitely some other areas of interest related to this topic that we're exploring I think one thing that is clear to us as we've gone through this process is to really use the data.
A little bit more to our advantage.
Since the launch of Libre.
We've collected.
D identify data from the user base I'd, probably go as far as to say that we probably have the most robust glucose data set in the world.
Robert Ford: And I think that's what you're seeing right now today, as it relates to GLP1 and Medtech markets. I think there's a, if you think about it long term here on the bigger picture, I think there's a fundamental mismatch here on, you know, revenue and revenue forecast that we're seeing versus, you know, potential impact, the patient and patient pamps. You know, I've looked at the consensus forecast for this class of drugs and I'm looking out four to five years here, you know, they seem to be in that 60 to 70 billion dollar range, which is pretty significant as a category.
The last time I looked at it we've got close to 50 billion hours of glucose monitoring data. So I think libre is a perfect platform here to actually evaluate the effectiveness outside.
Outside of a more controlled trial.
Look at it more on a real real world setting and Theres just so many different ways. You can look at the data look at how the drugs work over time does <unk> <unk> better than the other.
What kind of jobs, they do in terms of our profile.
In terms of timing range. So again I think we can do this on a population level. We can do this on an individual level. So I think that's going to be.
Robert Ford: It's probably one of the largest categories I think we've ever seen. But then if you take the pricing, at least the public pricing that we've seen, whether it's the US pricing or the lower international pricing, and you convert that into user bases and back into the numbers, I mean, we're looking at 10 to 15 million people in the next four to five years of that will be on this drug. That's a real small fraction of the size of these medical device markets that we're talking about, right?
An important thing going forward for us here is to use that data set to be able to kind of explore that.
And I would just finally say.
With the portfolio with a diverse portfolio that Abbott has where we look at health care across the full spectrum from nutrition to diagnostics to then treatment I think that this then provides the company.
With an opportunity to further explore where we can bring value to patients that are using these drugs and I think it's common knowledge here that there are side effects is there are side effects.
Robert Ford: There's about half a billion people with diabetes, maybe another half a billion people that got cardiovascular disease and maybe there's an overlap of people with diabetes and cardiovascular, but still you're talking tens of millions of people with maybe a billion or under a billion people. So I think there's a little bit of a mismatch there in terms of how we're seeing this impact equating the revenue and the potential growth of the revenue with the patient pool time.
Most drugs.
And one of those being increase loss of muscle mass.
We have experienced here in the area of nutrition.
And losing that amount of muscle mass as a ratio as it can be problematic. So.
We've got an opportunity here to be able to develop whether its in nutritional products or other products that can help address.
Robert Ford: So that's one big area I would say. I think there's another question here of just about the question of coverage and obviously these drugs have great outcomes and great outcomes impact. And then the question is, what's the appropriate cost to achieve that outcome? I've seen a lot of discussions and news stories about payers and what the payers are going to do and insurance companies and PBMs and pharmacy chains. Those aren't payers.
One of the side effects, which is which is muscle mass loss. So.
So there is good opportunities for their for US also in the portfolio. So.
Bottom line I think it's fantastic science, it's fantastic biology.
This is great for public health in the short term I think the concerns are overblown and I think in the long term. If we want to look out 15 20 years I mean, I think it's I.
I think theres still a lot of question marks there given some of the facts that I've raised so.
Really appreciate that Robert maybe if I could sneak one more in on CGM something that I think is really flown under the radar with the <unk>. One noise is you've recently gotten based type two basal coverage in France, you have it in the U S and Japan as well just thinking about future opportunities.
Robert Ford: The real payers are the employee, the employers and the companies that pay for these. And I think as you look at companies and higher medical expense costs, inflation, I think that's going to be a factor as we go into next year also. So I think those are, I'd say, the bigger aspect here on the long term, on the short term though, as you mentioned on the diabetes, I actually see a positive impact on the diabetes business.
Countries to approve type two basal which could materially expand you're reimbursed.
Coverage opportunity around the world, how should we think about that and how do you size that opportunity over the next few years for Abbott. Thanks, a lot.
Robert Ford: As I mentioned in the opening remarks, we completed an analysis recently that showed a significant number of Libre users were on these drugs. And the data showed that those that are using both products are actually using more of those both products when you compare them to other users. They tend to wear Libre sensors more often and they tend to take their GLP1 medication more frequently. And I think that's a great thing because higher therapy compliance ultimately is going to improve health outcomes.
Sure.
Well, we had a really good quarter.
Up 28% international was up 26%.
We continue to do pretty well in the.
Plus 30% range, there and to your point we saw.
Sorry.
Nice impact from that basal coverage, especially in the international markets right and it's nice to see the international growth accelerate again I remember last year. The question marks about our international growth and a lot of our focus was on our upgrade strategy for Libre III. So getting the sales team now reworking the demand generation.
Robert Ford: And that's not different Robby, this complementary relationship, it's not uncommon to see that. Medical device procedures, you have patients that are taking medications either before and after their procedure. And you see it in diabetes like I said, I've seen this in my 20 years where it's very common to use multiple tools in combination, whether it's insulin and oral meds, whether it was fast acting insulin and long acting insulin. And so I think more treatment options here is a good thing for patients, and I think these drugs are a real nice addition to the mix.
And a lot of that growth is as you pointed out we're seeing nice growth from <unk>.
From that basal segment.
Especially in France, and Japan, where we got.
Reimbursement differentiated reimbursement right. We've added about 150000, I think that was the data that we reviewed over the last 12 months.
Basil users onto the user base and if you look at that last 12 months, a larger portion of that 150000 was happening towards the second half of that so so there is definitely acceleration ongoing there.
Robert Ford: I think as you go forward though, I think there are some, but definitely some other areas of interest related to this topic that we're exploring. I think one thing that is clear to us as we've gone through this process is to really use the data a little bit more to our advantage. Since the launch of Libre, we've collected the identified data from the user base. I'd probably go as far as to say that we probably have the most robust glucose data set in the world.
Was actually surprised to see the speed at the U S coverage. So right now about I would say.
90% of commercial payers have now adopted some level of basal basal coverage so thats very positive.
So both those three markets U S, Japan, and France are doing very well.
In terms of basal and basal coverage and providing that kind of tailwind of growth and again theres a lot of good data to be able to support while that benefits.
Robert Ford: I think the last time I looked at it, we've got close to 50 billion hours of glucose monitoring data. So I think Libre is a perfect platform here to actually evaluate the effectiveness outside of a more controlled trial. Look at it more in a real, real world setting. And there's just so many different ways we can look at the data, look at how the drugs work over time. Does one drug work better than the other?
These types of patients also we saw that in the in the data that we presented with the French with the French.
With the French claims data so.
I'd say, yes, its a great opportunity, it's not something that's happened we've been focusing on this generating the clinical evidence building sales forces to be able to reach a primary care team investing in direct to consumer advertising, where we're allowed to do that and that's that's a key growth driver here of this target.
Robert Ford: What kind of job do they do in terms of a profile in terms of time and range? So again, I think we can do this on a population level. We can do this on an individual level. So I think that's going to be an important thing going forward for us here is to use that data set to be able to kind of explore that. And I just finally say with the portfolio with a diverse portfolio that Abbott has where we look at healthcare across the full spectrum from nutrition to diagnostic to then treatment.
We had to reach $10 billion by by 2028, I'd say, that's an important growth driver, it's not the only growth driver, but it's an important growth driver and we've got a lot of good momentum there Ravi.
I appreciate it thanks a lot.
Thank you.
Our next question will come from Danielle <unk> from UBS. Your line is open.
Hey, good morning, everyone. Thanks, so much for taking the question.
Robert Ford: I think that this then provides the company with an opportunity to further explore where we can bring value to patients that are using these drugs. I think it's common knowledge here that there are side effects that there are side effects with most drugs. And one of those being increased loss of muscle mass. I'd say we have experience here in the area of nutrition and losing that amount of muscle mass as a ratio is it can be problematic.
Robert.
A follow up on Josh asked the question earlier and I appreciate youre not going to give 2020 guidance, but just at a high level.
Robert Ford: So we've got an opportunity here to be able to develop whether it's a nutritional product or other products that can help address one of these side effects which is muscle mass loss. So there's good opportunities for us also in the portfolio. So bottom line, I think it's fantastic science, it's fantastic biology. This is great for public health in the short term. I think the concerns are overblown and I think in the long term if we want to look out 15, 20 years I think there's still a lot of question marks there giving some of the facts that I've raised.
There's a few puts and takes that I can think of Robert I appreciate that momentum in the underlying business, but you will have competition coming on the EP side, which has been a strong double digit grower looking at Mitraclip and a quarter of double digit growth that was great to see like how sustainable is that and comps are just inherent.
Potentially a little bit tougher. So if you could maybe walk through in a little bit more detail. Some of the puts and takes at a high level that we should consider nutrition tough comp there.
Should consider as we think about 2024 that would be awesome.
Yeah, I mean, you're not sure it'll do a plan review here, but I mean theres a lot there.
I'll try and touch on some of the topics there I mean I'll just go back to.
Have a growth model and our growth forecast that I'd say during the last two years has been masked a little bit by by Covid and the ups and downs of Covid testing.
Robert Ford: So really appreciate that Robert. Maybe if I could sneak one more in on CGM something that I think is really flown under the radar with the GLP1 noise is you've recently gotten type 2 basal coverage in France. You have it in the US and Japan as well. Just thinking about future opportunities and countries to approve type 2 basal which could materially expand your reimbursement coverage opportunity around the world. How should we think about that and how do you size that opportunity over the next few years, Robert?
But being able to sustain high single digit growth double digit growth in the bottom line.
What we've been doing this year.
Pretty significant double digit bottom line because we forward invested back in 2022. So you look at our top line growth right now.
We havent had to put as much SG&A to be able to kind of support that growth this year or so but the growth model of that high single digit growth.
And and double digit bottom line growth has been happening throughout this pandemic with COVID-19 testing and as the as the Covid testing numbers come down you get to see that a little bit more now.
Robert Ford: Thanks a lot. Sure. Well, we had a really good quarter of 28% international is up 26% US. We continue to do pretty well in the plus 30% range there. And to your point, we saw a nice impact from that basal coverage, especially in the international markets. And it's nice to see the international growth. Accelerate again I remember last year the question marks about an international growth and a lot of our focus was on our upgrade strategy for Libre 3.
So I feel good about delivering that.
In 2024, yes. There is there is there is a macro environment that's out there, but as it relates to all the elements that are that are directly in our control I feel very good about it.
Comment on electrophysiology, yet we'll have competition, we have competition today.
We grew.
Europe , we grew mid teens and we've been growing mid teens for the first nine months with the competition that you referred to so.
Robert Ford: So getting the sales team now reworking the demand generation and a lot of that growth is as you pointed out we're seeing nice growth from that basal segment, especially in France and Japan where we got reimbursement differentiated reimbursement right. We've added about 150,000. I think that was the day that we reviewed over the last 12 months of basal users onto the user base. And if you look at that last 12 months, a larger portion of that 150,000 was happening towards the second half of that.
So we feel good about our position there.
On Mitraclip.
Seeing double digit growth in Mitraclip for the last three quarters.
A big driver of that has been international and growth International and we're starting to see a little bit now of a rebound.
U S U S was up 5% in Mitraclip.
This quarter and again, that's sequentially better from the previous quarter and sequentially better from the one before that so and we've had competition.
That space also we've had competition internationally and we've had competition in the U S too so.
Robert Ford: So there's definitely acceleration on going there. I was actually surprised to see the speed at the US coverage. So right now about 90% of commercial payers have now adopted some level of basal coverage. So that's very positive. So both those three markets, US, Japan and France are doing very well in terms of basal and basal coverage and providing that kind of tailwind of growth. And again, there's a lot of good data to be able to support while that it benefits these types of patients also and saw that and the data that we presented with the French with the French claims data.
So again.
You referred to comps, yes, im not going to deny there's some comps obviously the probably the biggest one there is nutrition.
This year.
But every year, there's comps every year our company has got comps and I'd say, if you were to remove some of those comps from our Q3 would still be growing double digits also so.
So again I feel good about our high single digit growth forecast I feel good about our double digit EPS growth.
We've got a lot to work with yes, there's challenges, but we have a lot to work with we've got a great pipeline of products that we're going to be that we've not only just launched but we're going to be launching also so.
Robert Ford: So I'd say, yeah, it's a great opportunity. It's not something that's happened. We've been focusing on this, generating the clinical evidence, building the sales forces to be able to reach a primary care team, investing in direct consumer advertising, where we're allowed to do that. And that's a key growth driver here of this target we have to reach $10 billion by 2028. I'd say that's an important growth driver. It's not the only growth driver, but it's an important growth driver. And we've got a lot of good momentum there.
So yes, there is always puts and takes.
Denny out, but I think on the aggregate if you look at the aggregate of our positions in these markets I think we're in a real strong position.
That's super helpful. Thank you so much Robert.
Thank you.
Our next question will come from Joanne Wuensch from Citibank. Your line is open.
Good morning, and thank you for your question.
Nutrition.
Comments, if I remember them correctly or that you are back in a leadership position in the nutrition business are you back on a 100% or you having along do you feel like Theres anything thats lagging or maybe ahead of the game.
Robert Ford: Appreciate it, thanks a lot. Thank you. Our next question will come from Danielle Antalffy from UBS. Your line is open. Okay, good morning, everyone. Thanks so much for taking the question. Robert Phil just wanted to follow up on Josh's question earlier and appreciate you're not going to give 2024 guidance, but just at a high level. You know, there's a few puts and takes I can think of, you know, Robert, I appreciate the momentum in the underlying business, but you will have competition coming on the EP side, which has been a strong double digit grower.
I'm going to squeeze and your current thoughts on M&A, particularly given a lot of pullback from valuation. Thank you.
Sure.
Yeah.
I mean.
We never believed that we were going to recover all the share in <unk> in a quarter right. So the way the way this market works and the way we've kind of modeled it out is that we will showing.
Month by month kind of sequential.
Robert Ford: You know, looking at my clip and a quarter of double digit growth, that was great to see like how sustainable is that. And you know, comps are just inherently potentially a little bit tougher. So if you could maybe walk through in a little bit more detail, some of the puts and takes at a high level that we should consider nutrition tough comps there. You know, should consider as we think about 2024, that would be awesome.
Sequential increases in our market share. So if you look at the volume.
Right now as measured by third party, we've now crossed over that that leadership position in the month of September were not 100% back to where we were before the recall.
But I always said that we would be there towards the end of the year. So we're probably at about 90% back to that initial.
Robert Ford: Yeah, I mean, you're not sure we'll do a plan review here, but I mean, there's a lot there. I'll try and touch on some of the topics there. I mean, I just go back to we have a growth model and a growth forecast that, you know, I'd say during the last two years has been masked a little bit by by COVID and the ups and downs of COVID testing. But being able to sustain a high single digit growth, double digit growth in the bottom line, that's what we've been doing this year, a pretty significant double digit bottom line because we forward invested back in 2022.
To that pre recall market share, but it's nice to see.
Robert Ford: So you look at our top line growth right now, we haven't had to put as much as she needed, but it kind of support that growth this year or so. But the growth model of that high single digit growth and double digit bottom line growth is been happening throughout this pandemic with COVID testing. And as the COVID testing numbers come down, you get to see that a little bit more now. So I feel good about delivering that in 2024.
Across all the segments here real nice sustained growth in our market share and even if when you look at different segments of the IMF. So if you look at the channels work in non WIC.
We've been a market leader since the beginning of the year and that was a result of our strategy.
In the second half of last year to stay focused on that underserved population.
And the non WIC channel, we're seeing nice continuous month by month gains of market share and I think the teams are doing a real good job I think we can all see that the shelves are pretty well replenish right now.
And now it's just about continuing to execute on our demand generation.
<unk>.
I feel good about what the team's doing and recovering that market share. So.
So that's gone pretty much pretty much to pretty much to plan there.
Robert Ford: Yeah, there's there's a there's a macro environment that's out there, but as relates to all the elements that are that are directly in our control, I feel very good about it. You know, your common electrophysiology, yeah, we'll have competition, we have competition today. We grew in Europe, we grew mid teens, and we've been growing mid teens for the first nine months with the competition that you refer to. So, so we feel good about our position there.
And then what was your other what was your other question.
M&A, particularly given the pullback in valuations.
Oh, yes.
Yes, well listen we've completed three transactions over the last six months.
We acquired CSI and in the process of integrating that business I think it's going to be a nice addition to our vascular business and start to reposition that business to kind of more higher growth markets.
This quarter, we announced the acquisition of big foot.
Robert Ford: On my trip clip, we've seen double digit growth in my trip clip to the last three quarters. Big driver of that has been international and growth international, and we're starting to see a little bit now of a rebound in US, US was up 5% in my trip clip this quarter. And again, that's sequentially better from the previous quarter and sequentially better from the one before that. So, and we've had competition in that space also, we've had competition internationally, and we've had competition in the US too.
And this is just going to be able to allow us to broaden our offerings with libre and provide a nice opportunity from a global perspective.
And then also an announcement on the PD side to expand access to Biosimilar. So so we've been active.
And we continue to be active.
Yes, I think.
Valuations have come down.
The same way they came down let's say post post pandemic in that 2022 timeframe. It's a good opportunity like Ive said I think sometimes companies need to understand if it's a short term or if theres something more fundamental in that valuation.
Robert Ford: So, so again, you refer to comps, yeah, I'm not going to deny there's some comps obviously the probably the biggest one there is nutrition this year. But, you know, every year there's comps, every year a company's got comps, and I'd say if you remove some of those comps from our Q3 would still be growing double digits also. So, so again, I feel good about our high single digit growth forecast, I feel good about our double digit EPS growth.
But we're in a great strategic position to be able to execute on our M&A strategy, which is really focused on can we add value to the asset.
And.
And is it.
Fall into our strategic framework of areas that we want to invest in growth and in the ones that the ones that are highlighted here.
Robert Ford: We've got a lot to work with, yeah, there's challenges, but we have a lot to work with, we've got a great pipeline of products that we're going to be, that we've not only just launched, but that we're going to be launching also. So, so yeah, there's always puts in takes, then he out, but I think on the aggregate, if you look at the aggregate of our positions in these markets, I think we're in a real strong, position.
Our strategic.
And we believe that we can add a lot of value to them. So we've got plenty of capacity to to engage in.
If there is the right opportunity that comes along in this period, we will be ready.
We'll be ready.
Robert Ford: That was super helpful. Thank you so much, Robert. Thank you. Our next question will come from Joanne Wuensch, from City Bank. Your line is open. Good morning and thank you for the question. If your comments, if I remember them correctly, are that you are back in a leadership position in the nutrition of business, are you back at 100 percent or are you humming along? Do you feel like there's anything that's lagging or maybe ahead of the game?
Thank you very much.
Thank you.
Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.
Hi, Robert Thanks for taking my question and congrats on a good print here I had.
Two questions. My first one is that could you stop elaborate on this China EVP for diagnostics, how big is that core lab in China for you guys. At this point in time, and I think I heard <unk>.
Robert Ford: And I'm going to squeeze in your current thoughts on M&A, particularly given a lot of pullbacks and valuations. Thank you. Sure. I mean, we never believe that we were going to recover all the share in a quarter, right? So the way this market works and the way we've kind of modeled it out is that we'll showing, you know, month by month kind of sequential increases in our market share. So if you look at the volume right now is measured by, you know, third party, we've now crossed over that leadership position in the month of September.
80% would be impacting next year is your assumption for the rest of core lab would be impacted in fiscal 'twenty five.
These contracts slow out because my understanding is that you will see volume gains are those volumes enough to offset price headwinds.
Yeah.
So so the way this is kind of working out right. This was announced recently.
I think proposals are due within the within the provinces that are going to be bidding.
VJ I'd say in the next 30 days right and then there's like another 30 days 30 to 60 days to evaluate all of the proposals.
Robert Ford: We're not 100 percent back to where we were before the recall, but I always said that we would be there, you know, toward the end of the year. So we're probably at about 90 percent back to that initial, to that pre-recall market share, but it's nice to see across all the segments here a real nice, sustained growth in our market share. And even if you look at different segments of the IMF, so if you look at the channels, WIC and non-WIC, WIC, we've been a market leader since the beginning of the year and that was a result of our strategy in the second half of last year to stay focused on that underserved population.
So I think that this is going to probably start I'd say late Q1 and into Q2.
Right now the list of assays that are on VB P equate to about 20% of the 20% of the market.
So our annual sales are.
And in China are about $1 billion. So.
And then if you look at the specific assays, it's infectious disease Theres. Some theres some fertility assays, there et cetera. So.
That's where.
The.
That's where the Pvp is kind of focused on I haven't heard an team hasnt heard about expanding that to other areas of.
Robert Ford: And the non-WIC channel we're seeing, you know, nice, continuous, month by month gains of market share. I think the teams have done a real good job. I think we can all see that the shelves are pretty well replenished right now. And now it's just about continuing to execute on our demand generation. And I feel good about what the team's doing and recovering that market share. So that's gone pretty much to, pretty much to, pretty much to plan there.
Other areas.
Testing, such as oncology or hormones or other areas like that so so.
So right now I'd say.
This is going to be.
Our focus in 2024, if theres volume upside to begin yes, there could be volume upside to be gained I mean, we do have good good market share.
Some of these segments and others, we have lower market share. So it presents us an opportunity.
So I think in areas, where you've got higher market share you'll feel more price.
Robert Ford: And then what was your other, what was your other question? And the day, particularly given pullbacks and valuations. Thank you. Oh, yeah. Well, listen, we've completed three transactions over the last six months. You know, we acquired CSI and an process of integrating that business. I think it's going to be a nice addition to our vascular business and start to reposition that business to kind of more high-end growth markets. This quarter, we announced the acquisition of Bigfoot.
And then if you can offset that price by gaining volume segments that you've got lower share.
So I don't think Thats rocket science there.
And we'll just have to see how that all plays out, but we've had experience Goin' VP and in China, We've gone through with stance, we've gone through it with.
With EP certain parts of our pharma business.
Certain parts in CRM also so team knows how to do this they know to kind of think about it.
Robert Ford: And this is just going to be able to allow us to broaden our offerings with Libre and provide a nice opportunity from a global perspective. And then also an announcement on the EPD side to expand access to biosimilar. So we've been active. And we continue to be active. Yeah, I think valuations have come down. You know, the same way they came down, I'd say, post-pandemic in that 2022 time frame. It's a good opportunity.
And manage it pretty well we adjust some of our cost structure is also as a result of that so I think the team has got a good formula here how to manage it and we'll just have to see how this plays out.
That's helpful Robert and my second one.
You touched upon PFA I think abbott's launching their own PFA at some point in fiscal 'twenty five 'twenty six.
How should we think in the interim rate I think your peer had some pretty robust assumptions for what percentage of your procedures would be PFA.
Robert Ford: Like I've said, I think sometimes companies need to understand if it's a short term or if there's something more fundamental in that valuation. But we're in a great strategic position to be able to execute on our AM&A strategy, which is really focused on, can we add value to the asset? And, you know, and is it? as it falls into our strategic framework of areas that we want to invest in and growth in.
Is abbott concerned about share loss.
When you think about the medium term.
Timeframe.
Are there offsets to airfreight you haven't touched upon lingo I think previously you had said lingo could be asked.
Vegas.
Libra well beyond the legal launch.
Yes.
So well.
We will have to see how what other companies report to go to <unk>.
Robert Ford: The ones that I highlighted here are strategic, and we believe that we can add a lot of value to them. So we've got point of capacity to engage, and if there's the right opportunity that comes along in this period, we'll be ready. We'll be ready.
See if were gaining or losing share right now, but I'd say we.
<unk> got good robust growth I'd say as we look into 2024.
Yes, I would expect us to grow generally in line with market, which has historically been double digits. We've got some good innovation, that's rolling out on the RF side.
Robert Ford: Thank you very much. Thank you.
And as as we've spoken about our EP business.
Vijay Kumar: Our next question will come from Vijay Kumar from Evercore ISI. Your line is open. Hi, Robert. Thanks for taking my question and congrats on the good print here. I have two questions. My first one is, could you elaborate on this China VVP for diagnostics? How big is that core lab in China for you guys at this point in time? And I think I heard 20% would be impacted next year. Is the assumption the rest of core lab would be impacted in fiscal 25?
We talk about PFA, that's going to be a product that's going to be really geared towards.
AF ablation, you still have BT in SVT oblations, where we do have good positions over there.
A good portion of our sales are also on the mapping side and the mapping and the diagnostics in those consumables. So.
I see those being less impacted.
Also so I.
I would say for 2024, we've got a good opportunity.
With with our IP portfolio to be growing there in line with the market.
Vijay Kumar: How do these contracts slow up? Because my understanding is that you will see volume gains or those volumes in a profit price headwinds. Yeah. So the way this is kind of working out, right? This was announced recently. I think proposals are due within the, within the provinces that are going to be bidding VJ. I'd say in the next 30 days, right? And then there's like another 30 days, 30 to 60 days to evaluate all the proposals.
And I think to the previous question, Yes, we've got plenty of different shots on goal here to be able to deliver our high single digit growth rates.
And we've got a very rich portfolio and we're in exciting markets.
Yes lingo.
Didn't touch on it because it wasn't asked but now that you have as it.
It is a great great growth opportunity for us.
Launching it in UK, I'd say I'd call. It more of a controlled launch Vijay to understand kind of the marketing mix the marketing messaging the positioning the inner positioning with libre.
Vijay Kumar: So I think that this is going to probably start, I'd say, late Q1 and into Q2. Right now, the list of assays that are on VVP equate to about 20% of the market. So our annual sales are in China or about a billion dollars. And then if you look at the specific assays, it's infectious disease, there's some fertility assays there, et cetera. So that's where the, that's where the VVP is kind of focused on.
And the learnings we've got are fantastic.
Im excited about a full on launch in the U K, starting next year and then the opportunity to be able to bring that here to the U S have been public about our intention to file lingo here in the U S. By the end of the year and I think that's going to provide another great opportunity for growth for US also so.
Understood. Thanks, guys.
Thank you.
Our next question will come from Matt <unk> from Barclays. Your line is open.
Hey, thanks, so much for taking the questions and for all the great color.
Vijay Kumar: I haven't heard and team hasn't heard about expanding that to other areas of other areas of testing such as oncology or hormones or other areas like that. So, so right now, I'd say this is going to be our focus in 2024. If there's volume upside to begin, yeah, there could be volume upside to begin. I mean, we do have good, good market share in some of these segments. In others, we have lower market share, so it presents us an opportunity.
So I just thought maybe follow up on a couple of.
Yes pipeline opportunities and growth drivers.
<unk> try and eliminate in Troy clip.
Sort of if you could maybe walk us through the <unk>.
That did pathway for commercialization in the U S.
On that front and then.
Back to diabetes.
GOP once dominated.
The discussion there but.
Tandem rolling out integration with there.
Vijay Kumar: So I think in areas where you've got higher market share, you'll feel more price. And then if you can offset that price by gaining volume in segments that you've got lower share. So I don't think that's rocket science there. And we'll just have to see how that all plays out. But, you know, we've had experience going VVP in China. We've gone through stents, we've gone through it with EP, certain parts of our pharma business, certain parts in CRM also.
And kind of making wider availability here of closed loop integration in Q4.
Just be great to hear your thoughts on what.
What that ramp looks like what additional support or efforts you expect will be required on year end.
Just as what we can expect over the next 12 to 18 months is that.
Is that's out there and available to patients.
Sure.
On Tri clip.
Yes, so we submitted to the FDA for review earlier this year. It's my understanding that CMS is going to review this in parallel also.
Vijay Kumar: So, team knows how to do this, they know how to kind of think about it and manage it pretty well. We can get just some of our cost structures also as a result of that. So, I think the team's got a good formula here, how to manage it.
I think I think I made comment to this last time.
We'll likely see a panel review here and I don't think its unexpected to be quite honest with you a lot of the novel therapies.
Robert Ford: And we'll just have to see how this kind of plays out, that's helpful, Robert. In my second one, I know you touched upon PFA, I think Abbott's launching their own PFA at some point in 5.25, 26. How should we think in the interim, right? I think your peer had some pretty robust assumptions for what percentage of procedures would be PFA. These Abbott concerned about share loss, you know, when you think about that medium-term claim and are there offsets to it, right?
Go through an advisory panel process with tavern salt with Mitraclip.
So I expect that to be the case here for four.
For Tri clip right now the expectation of that panel is.
The date that we think we have right now is January .
But we'll have to see how that that occurs but again I don't.
Robert Ford: When I'm, you know, you haven't touched upon Lingo, I think previously it said Lingo could be as big as Libre, where are we on Lingo launch? Yeah, so we'll have to see how what other companies report to go to see if we're gaining or losing share right now, but I'd say, you know, we still have got good robust growth. I'd say as we look into 2024, you know, I'd expect us to grow generally in line with market, which has historically been double digits.
The fact that we'll probably go through panel.
I still feel very enthusiastic and confident about.
The opportunity that we have with <unk> not only this is these are patients that are in real rough shape.
And it's not a lot of treatment options and we've shown in the trial Luminet study that we can.
Reduce.
TR and our understanding and our belief is that.
Reduction of TR is important.
And we will be going through that and then I'd say the safety profile of the <unk> product.
Robert Ford: We've got some good innovation that's rolling out on the RF side. And, you know, as we've spoken about our EP business, you know, we talk about PFA, you know, that's going to be a product that's going to be really geared towards AF ablations. You still have VT and SVT ablations where we do have good positions over there. A good portion of our sales are also on the mapping side and the mapping and the diagnostics and those consumables.
Very important as you think about building a new category in a new area.
But you've got 5 million people here.
Matt that suffered from TR globally I believe this is a $1 billion plus opportunity for sure and we're committed to we're committed to building.
A real strong position on here with innovation on the product and strong clinical evidence to support it.
Robert Ford: So I see those being less impacted also. So I'd say for 2024, we've got a good opportunity with our AP portfolio to, you know, to be growing there in line with the market. And, you know, I think to the previous question, yeah, we've got plenty of different shots on goal here to be able to deliver our high single-digit growth rates. And we've got a very rich portfolio and we're in exciting markets.
What was your other question sorry.
Sure.
Clothes with integration with tandem and maybe the ramp or expectations because of that.
That process.
Yes, it's my understanding here that we will see a launch.
Some time by the end of this year with tandem.
And we're excited about that Theres about 150 to 200000, new new pump users globally. So I think this is an area that we've.
Robert Ford: Yeah, Lingo didn't touch on it because it wasn't asked, but now that you have asked, yeah, it is a great great growth opportunity for us. We're launching it in UK. I'd say I'd call it more of a controlled launch VJ to understand kind of the marketing mix, the marketing messaging, the positioning, the interpositioning, the Libre. And the learnings we've got are fantastic. And I'm excited about a full-on launch in the UK starting next year.
Historically haven't been a player in and now and now we will be a player and we've launched a.
Sure.
And AI system in Europe .
Let's say more towards end of last year into this year and I was reviewing the results with the results of the team that pump company has had tremendous kind of growth partnering with us.
And so that's a proof point there that when you bring in the choice in the option and you put it together with libre that Theres, a real strong value proposition to connecting the pump with with Libre.
Robert Ford: And then the opportunity to be able to bring that here to the US. I've been public about our intention to file Lingo here in the US by the end of the year. And I think that's going to provide another great opportunity for growth for us also.
Robert Ford: Thanks, guys.
And then as I've said, we want to be a leader in this space not just be a competitor.
Matthew Miksic: Thank you.
Robert Ford: Our next question will come from Matt Mixick from Barclays. Your line is open. Hey, thanks so much for taking the questions and for all the great color today. So I just thought maybe follow up on a couple of pipeline opportunities and growth drivers. One being try and eliminate and try clip, sort of if you could maybe walk us through the expected pathway for commercialization in the US on that front. And then back to diabetes.
So there's a lot of work ongoing right now with our dual dual analyte glucose ketones sensor, which we believe theres a lot of applications, there, Matt, but I think one of the.
Clear applications and value propositions is be able to kind of pair that with.
With an insulin pump and have a much more richer algorithm and safety algorithm and the and.
In the insulin delivery system. So so we feel good about that.
Operator, we'll take one more.
Question. Please.
Robert Ford: I know the field if you want to dominate it. The discussion there. But with tandem rolling out integration with their pump and kind of making wider availability here of closed loop integration in Q4. Just the great to hear your thoughts on what that ramp looks like, what additional support or efforts you expect will be required on your end. And just just what we can expect over the next 12 months is that that that's out there and available to patients.
Thank you.
And our last question will come from Jayson Bedford from Raymond James Your line is open.
Hi, Good morning, Thanks for squeezing me in just a couple quick ones.
First what is the updated expectation for Covid testing revenue here in 'twenty three and then.
Second one Robert you alluded to gross margin expansion in 'twenty four.
Just frame the sources of gross margin I assume nutrition is a key driver there and then maybe just bigger picture and I appreciate that everyone. In the industry is facing these challenges, but is there visibility into clawing back to pre COVID-19 gross margin levels.
Robert Ford: Thanks. Sure. On your question on Tri-Clip, yes, we submitted to the FDA for review earlier this year. It's my understanding that CMS is going to review this in parallel also. I think I made comment to this last time. I'm likely see a panel review here and I don't think it's unexpected to be quite honest with you. A lot of the novel therapies go through an advisory panel process with Taver, Salt with Michael Clip.
Sure.
Yes, there is visibility I mean, it's.
The visibility is in the first half of 2024, then then I would say no, but we do have a plan to.
To be able to kind of drive gross margin and gross margin expansion I would say as you look at it into next year, Jason There's really a couple of elements here that.
Robert Ford: So I expect that to be the case here for Tri-Clip. Right now, the expectation of that panel is the date that we think we have right now is January but we'll have to see how that occurs. But again, the fact that we'll probably go through a panel, I still feel very enthusiastic and confident about the opportunity that we have with Tri-Clip. Not only this is these are patients that are in real rough shape and it's not a lot of treatment options and we've shown in the Tri-Luminant study that we can reduce TR and our understanding and our belief is that reduction of TR is important and we'll be going through that.
We'll be we'll be tailwind for us I'd say lower commodity costs that for sure and those were pretty big headwinds for us.
In.
I'd say in 2022 and 2023.
On one end, you've got commodity costs and nutrition, but you also got other commodity costs that are impacting the entire company and what we have seen and I think a lot of companies have seen this as those those commodity costs start to bend and move down the other way so and.
That will be particularly important for us as we think about nutrition.
Which is highly dependent on.
On a large number of commodity and commodity inputs.
Seeing a lower freight and distribution and again I think a lot of companies are seeing that but we're seeing that not only just in terms of rates, but also with more normalized supply chains.
Robert Ford: And then I'd say the safety profile of the Tri-Clip product is very important as you think about building a new category and a new area. But you know, you've got five million people here, Matt that suffered from TR globally. I believe this is a billion plus opportunity for sure and we're committed to building a real strong position on here with innovation on the product and strong clinical evidence to support it. What was your other question? All right.
We can use different modalities of freight that all can also lower costs and not using air all the time.
So that's going to help we've got a I think a pretty robust process and teams in place that work on gross margin and gross margin improvement plans have been very busy I'd say over the last 12 to 18 months I expect those teams to continue to deliver.
On their strategies to deliver cost reductions and then favorable product product and portfolio mix right. So as our as our faster growing higher margin businesses and new products become a large portion of our overall sales and sales mix I think that also contributes to that so.
Robert Ford: Sure, close with integration with tandem and maybe the ramp or expectations for that process. Yeah, it's my understanding here that we'll see a launch some time by the end of this year with tandem. And you know, we're excited about that. There's about 150 to 200,000 new pump users globally. So I think this is an area that we've historically haven't been a player in and now we will be a player in. We've launched an AID system in Europe.
Yes, we understand that gross margin is key to be able to deliver on that double digit bottom line EPS growth and.
This is something that we work on every year and I think we've got a little bit more of a better environment for our teams for our teams to work on so on your on your Covid question I'll ask Phil to give you. The details there thanks, Jason relative to 2023, Covid testing sales forecast full year.
Robert Ford: Let's say more awards end of last year into this year and reviewing the results of the team. I mean that pump company has had tremendous kind of growth, partnering with us. And so that's a proof point there that when you bring in the choice and the option and you put it together with Libre that there's a real strong value proposition to connecting the pump with Libre. And then, you know, as I've said, we want to be a leader in this space, not just be a competitor.
About $1 $5 billion here.
Okay. So I'll just I'll just wrap up here.
With a few comments its clear that we are seeing broad based growth across the entire company.
As I said in my comments, we've now delivered double digit <unk>.
Organic sales growth here for the past three quarters and forecasting that type of growth again. This next quarter EPS contributions and the growth in the base business has increased every quarter and we've exceeded the expectations. We set for the initial guidance of the year.
Robert Ford: So there's a lot of work ongoing right now with our dual analyte glucose ketone sensor, which we believe. There's a lot of applications there, Matt, but I think one of the clear applications in value propositions is to be able to kind of pair that with an insulin pump and have a much more richer algorithm and save the algorithm in the insulin delivery system. So we feel good about that. Thank you.
The pipeline to some of the points that were made there are big kind of opportunity for us going into 2024 is our pipeline and it continues to be productive with several new product approvals indications.
<unk> and geographic expansions there so momentum is clearly building and.
Well positioned for a strong end of the year and going into 2024, so with that I'll, let wrap up and thank you for joining us.
Thank you operator, and thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available. After 11 am central time today on Abbott's Investor Relations website at Abbott Investor Dot Com. Thank you for joining us today.
Robert Ford: And our last question will come from Jason Bedford from Raymond James. Your line is open. Good morning. Thanks for squeezing me in just a couple quick ones. First, what is the updated expectation for COVID testing revenue here in 23 and then second one, Robert, you alluded to gross margin expansion in 23. 24. Can you just frame the sources of gross margin? I assume nutrition is a key driver there, and then maybe just bigger picture and appreciate that everyone in the industry is facing these challenges.
Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Robert Ford: But is there visibility into clawing back to pre COVID gross margin levels? Thanks. Sure. Yeah, there's visibility. I mean, the visibility is in the first half of 2024 than I'd say no, but we do have a plan to be able to kind of drive gross margin and gross margin expansion. I'd say as you look at it into next year, Jason, there's really a couple elements here that will be will be tailwinds for us.
Robert Ford: I'd say lower commodity costs that for sure. And those were pretty big headwinds for us in, I'd say in 2022 and 2023. On one end, you've got commodity costs in nutrition, but you also got other commodity costs that are impacting the entire company. And what we have seen, and I think a lot of companies have seen this is those commodity costs start to bend and move down the other way. And that will be particularly important for us as we think about nutrition, which is highly dependent on a large number of commodity and commodity inputs.
Robert Ford: Seeing a lower freight and distribution, and again, I think a lot of companies are seeing that, but we're seeing that not only just in terms of rates, but also with more normalized supply chains. We can use different modalities of freight that can also lower costs and not using air all the time. So that's going to help. We've got a, I think a pretty robust process and teens in place that work on gross margin and gross margin improvement plans.
Robert Ford: They've been very busy. I'd say it'll last 12, 18 months. I expect those teams to continue to deliver on their strategies to deliver cost reductions. And then favorable product and portfolio mix, right? So as our faster growing, higher margin businesses and new products become a large portion of our overall sales and sales mix. I think that also contributes to that. So yeah, we understand that gross margin is key to be able to deliver on that double-digit bottom line EPS growth. And, you know, we're, this is something that we work on every year. And I think we've got a little bit more of a better environment for our teams to work on.
Philip Boudreau: So on your COVID question, I'll ask Phil to give you the details there. Jason, relative to 2023 COVID testing sales forecast, full years about 1.5 billion, and Dollar Store. Okay, so I'll just wrap up here with a few comments. It's clear that we're seeing broad-based growth across the entire company. As I said in my comments, we've now delivered double-digit organic sales growth here for the past three-quarters and forecasting that type of growth.
Philip Boudreau: Again, this next quarter, EPS contributions in the growth in the base business has increased every quarter and we've exceeded the expectations we've set for the initial guidance of the year. The pipeline, to some of the points that were made there, a big kind of opportunity for us going into 2024 as our pipeline and it continues to be productive with several new product approvals, indications, reimbursement and geographic expansions there. So momentum is clearly building and well positioned for a strong end of the year and going into 2024.
Robert Ford: So with that, I'll wrap up and thank you for joining us. Thank you operator and thank you all for your questions.
Michael Comilla: 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.
Michael Comilla: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Michael Comilla: Everyone, have a wonderful day.