Q1 2025 Abbott Laboratories Earnings Call
Good morning, and thank you for standing by welcome to Abbott's first quarter 2025 earnings Conference call.
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Speaker Change: I'd now like to introduce Mr. Michael Miller, Vice President Investor Relations.
Speaker Change: Good morning, everyone and thank you for joining US with me today are Robert Ford, Chairman, and Chief Executive Officer, and Phil Boudreaux, Executive Vice President Finance and Chief Financial Officer.
Speaker Change: Robert and Phil will provide opening remarks following their comments, we'll take your questions.
Speaker Change: 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 2025.
Abbott cautions that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward looking statements.
Speaker Change: 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 2024.
Speaker Change: Abbott undertakes no obligation to release publicly any revisions to forward looking statements as a result of subsequent events or developments, except as required by law.
Speaker Change: Yes.
Speaker Change: 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.
Speaker Change: These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at Abbott Dot com.
Speaker Change: Note that Abbott has not provided the related GAAP financial measures on a forward looking basis for the non-GAAP financial measures for which you just providing guidance because the company is unable to predict with reasonable certainty and without unreasonable effort, the timing and impact of certain items, which could significantly impact abbott's results in accordance.
Speaker Change: With GAAP.
Speaker Change: Unless otherwise noted our commentary on sales growth refers to organic sales growth, which is defined in the press release issued earlier today.
Robert Ford: With that I will now turn the call over to Robert.
Robert Ford: Thanks, Mike.
Robert Ford: Good morning, everyone and thank you for joining us.
Robert Ford: As we progress through 2025. It is clear that we are operating in an increasingly dynamic environment.
Robert Ford: I will pause built not just to operate but to succeed and rapidly evolving environment like this we.
Robert Ford: We have consistently demonstrated our ability.
Robert Ford: To navigate the complexities arising from a range of global circumstances, including the repercussions of a global pandemic global financial crisis, numerous geopolitical events just to name a few.
Robert Ford: And the current evolving economic environment influenced by new tariff policies represents another global development that we are prepared to have definitely manage.
Robert Ford: The proven benefits of our diversified business model are evident now a result of the strategic framework that drives our global manufacturing and supply chain operations.
Robert Ford: Tariffs will have a financial impact.
With 90 manufacturing sites around the world and decades of experience executing our global network strategy, we are well positioned to implement mitigation to help manage the impact of the tariffs.
Robert Ford: I will now shift our focus to discussing our results for the quarter overall.
Robert Ford: We achieved our target growth objective.
Robert Ford: <unk> high single digit sales growth and double digit earnings per share growth.
Robert Ford: First quarter sales grew 7% or more than 8% when excluding COVID-19 testing sales.
Robert Ford: First quarter adjusted earnings per share of $1.09 grew 11.
Robert Ford: 11% versus the prior year and finished at the high end of our guidance range.
Robert Ford: I will now summarize our first quarter results in more detail before turning the call over to Phil and I'll start with nutrition.
Phil Boudreaux: <unk> sales increased 7% in the quarter.
Phil Boudreaux: Growth in the quarter was driven by high single digit growth in adult nutrition and double digit growth in U S pediatric nutrition and pediatric nutrition, our relentless focus on research innovation and product quality continues to make our similac family of products. The number one choice for.
Phil Boudreaux: Parents in the United States.
Phil Boudreaux: In adult nutrition growth of eight 5% was driven by growing demand for abbott's <unk> family of products that serve as a source of complete and balanced nutrition for people with a wide wide range of nutritional needs.
Phil Boudreaux: Moving to diagnostics sales declined 5% in the quarter due to the year over year decline in COVID-19 testing sales.
Phil Boudreaux: <unk> from a much weaker COVID-19 season, which primarily impacted growth in our rapid diagnostics business.
Phil Boudreaux: In core laboratory diagnostics low single digit growth in the quarter reflects the impact of volume based procurement programs in China.
Phil Boudreaux: Excluding China core laboratory sales grew six 5%.
Phil Boudreaux: And wrapping up in diagnostics, we remain on track to go live by the end of the year with two new manufacturing and R&D investments in Illinois, and Texas totaling half a billion dollars related to expanding our U S transfusion diagnostics business.
Phil Boudreaux: Our diagnostic business are transfusion business is responsible for screening the U S blood supply.
Phil Boudreaux: Our current blood screening system <unk> S runs diagnostic test to identify various antibodies and antigens that may be present and donated blood.
Phil Boudreaux: We have developed a new system.
Phil Boudreaux: <unk> Ed.
Phil Boudreaux: That will allow abbott to enter the molecular nucleic acid testing segment of the blood screening market.
Phil Boudreaux: This advanced technology is capable of detecting DNA and RNA of several diseases that could potentially contaminate blood donations.
Phil Boudreaux: The nucleic acid testing market opportunity is estimated to be around $1 billion.
Phil Boudreaux: And represents an attractive new growth opportunity for our business.
Phil Boudreaux: Turning to <unk>.
Phil Boudreaux: Where sales increased 8% in the quarter.
Phil Boudreaux: Growth was broad based across the markets, we serve led by double digit growth and more than half of our key 15 markets.
Phil Boudreaux: We continue to make great progress on building a best in class portfolio of Biosimilars that spans across several large and attractive therapeutic areas.
Phil Boudreaux: In January we entered into an agreement that provides abbott commercialization rights to four additional biosimilars across emerging markets in Asia Latin America, the Middle East Africa.
Phil Boudreaux: Through the various collaboration agreements we have executed we have now added a total of 15 biosimilar products projected to contribute to sales over the next three years.
Phil Boudreaux: And I'll wrap up with medical devices.
Phil Boudreaux: Our sales grew 12, 5%.
Phil Boudreaux: In diabetes care sales of continuous glucose monitors were $1 7 billion in the quarter and grew more than 20% including growth of 30% in the United States.
Phil Boudreaux: In electrophysiology sales grew 10%, which included double digit growth in the U S and high single digit growth in international markets.
Phil Boudreaux: In March we announced that Abbott obtained CE mark earlier than expected for our volt PFA system to help treat patients battling atrial fibrillation.
Phil Boudreaux: We have already initiated the launch of volt and will further expand the rollout across European markets over the course of the year.
Phil Boudreaux: In structural heart.
Phil Boudreaux: Growth of 15% was driven by strong performance across our market, leading portfolio of surgical valves structural interventions and transcatheter repair and replacement products growth in the quarter was led by continued share gains in <unk> and growing adoption of Tri clip.
Phil Boudreaux: In March new two year data from the Tri illuminate clinical trial was presented at the American College of Cardiology conference the <unk>.
Phil Boudreaux: Data showed that patients receiving <unk> had a statistically significant reduction in the occurrence of heart failure related hospitalizations, along with sustained reductions in tricuspid regurgitation and life changing improvements in quality of life.
Phil Boudreaux: In rhythm management growth of 6% was led by consistent and sustained market penetration of a fair our innovative leaves us pacemaker and assert our newest implantable cardiac monitor.
Phil Boudreaux: In heart failure growth of 12% was driven by our market leading portfolio of heart assist devices, which offers treatment for chronic <unk>.
Phil Boudreaux: And temporary conditions.
Phil Boudreaux: In January CMS issued national coverage decision to cover Cardiome Ms. A small implantable sensor that provides early warning indications that help doctors treat heart failure.
This expanded coverage will broaden access to Cardiome Ms for those with Medicare advantage plans and help further expand coverage to those with commercial insurance plans.
In vascular growth of 6% was led by double digit growth in vascular imaging.
Phil Boudreaux: And vessel closure products.
Phil Boudreaux: And growth in the spree, our below the knee resorbable stent.
Phil Boudreaux: In March we announced the start of our U S pivotal trial to evaluate our coronary intravascular lithotripsy system in treating severe calcification in the coronary arteries prior to implanting a stent.
Phil Boudreaux: We expect to complete enrollment in this trial next year and file for FDA approval shortly thereafter.
Phil Boudreaux: We look forward to entering this large and fast growing segment of the coronary intervention market and expect this to become a meaningful growth driver for our vascular business.
Phil Boudreaux: And lastly in Neuromodulation, we began treating patients in our transcend clinical trial, a first of its kind trial designed to evaluate using deep brain stimulation to address treatment resistant depression, which represents a market.
Phil Boudreaux: Our market opportunity exceeding $1 billion.
Phil Boudreaux: So in summary, we delivered another quarter of top tier performance.
Phil Boudreaux: Sales grew high single digits and earnings per share grew double digits with.
Phil Boudreaux: We expanded gross margin by 140 basis points and operating margin by 130 basis points compared to the prior year.
Phil Boudreaux: Pipeline continues to provide a steady cadence of new growth opportunities with more than 25 key new products forecasted to launch over the next three years and we remain on track to deliver on the financial commitments, we set at the beginning of the year.
Phil Boudreaux: I'll now turn it the call to Phil Phil.
Phil Boudreaux: Thanks Robert.
Speaker Change: As Mike mentioned earlier. Please note that all references to sales growth rates unless otherwise noted are on an organic basis.
Turning to our first quarter results sales increased six 9% or eight 3% when excluding COVID-19 testing related sales.
Speaker Change: Adjusted earnings per share of $1 nine increased 11% compared to the prior year and finished at the high end of our guidance range and above the consensus estimate.
Speaker Change: Foreign exchange had an unfavorable year over year impact of two 8% on the first quarter sales.
Speaker Change: During the quarter, we saw the U S dollar weakened which resulted in a favorable impact on sales compared to exchange rates at the time of our earnings call in January.
Speaker Change: Regarding other aspects of the P&L. The adjusted gross margin profile was 57, 1% of sales, which increased 140 basis points compared to the prior year.
Speaker Change: This increase was driven by delivering on the underlying organic margin expansion. We forecasted and also included an added benefit of more favorable fall through from foreign exchange.
Speaker Change: Gross margin expansion has always been a significant element of Abbott's company culture at any point in time, a substantial number of margin improvement initiatives are underway that span across our businesses as well as our functional areas, including supply chain marketing and other administrative groups I'd.
Speaker Change: I'd like to take a moment to acknowledge the valuable contributions from our employees around the world who are driving these exceptional margin expansion results.
Speaker Change: Turning our focus back to the first quarter results adjusted R&D was six 7% of sales and adjusted SG&A was 29, 5% of sales in the first quarter.
Speaker Change: Adjusted <unk> adjusted operating margin was 21% of sales, which reflects an increase of 130 basis points compared to prior year.
Speaker Change: Based on current rates, we now expect exchange to have an unfavorable impact of around 1% on the full year reported sales, which includes an expected unfavorable impact around half of a percent on the second quarter reported sales.
Speaker Change: Lastly for the second quarter, we forecast adjusted earnings per share to be in the range of $1 23 to $1 27.
Speaker Change: With that we'll now open the call for questions.
Speaker Change: Thank you.
Speaker Change: At this time, we will conduct a question and answer session.
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Speaker Change: Thats Star one to ask a question. Please standby, we compile our Q&A roster.
Speaker Change: And our first question will come from Robert Marcus from Jpmorgan. Your line is open.
Robert Marcus: Oh, great. Good morning, Congrats on a good quarter and thanks for taking my questions.
Speaker Change: Robert I'll, just ask them, both together since they're sort of related.
Robert Marcus: First on the full.
Speaker Change: Our full year guidance update it looks like it.
Robert Marcus: It moves a little lower when you back out the.
Robert Marcus: Stays the same when you back out COVID-19 testing, but most of the little lower including that but you were able to hold EPS for the full year, even including the recently announced tariffs.
Robert Marcus: That's the.
Robert Marcus: The elephant in the room is tariffs. So maybe you can walk us through the impact of that how it hits the balance sheet and P&L timing, we're all trying to figure out what does it look like on a full year. So maybe some of the offsets you talked about the flexibility in the manufacturing.
Robert Marcus: Print, how youre using that to your advantage.
Robert Marcus: <unk>.
Robert Marcus: I'll leave it there thanks a lot.
Sure Ravi.
Speaker Change: Yes, I mean listen I think the maintaining of our guidance range.
Speaker Change: We've had a we had a great first quarter here and achieve what we wanted to achieve.
Speaker Change: From target growth perspective, a high single digit sales growth double digit EPS growth, we've talked about getting back to that.
Speaker Change: That formula and <unk>.
Speaker Change: Excluding COVID-19 testing sales, which I can tell you right now our lowest gross margin product.
We grew over over 8%. So so I think on the topline.
Speaker Change: That we've kind of put in place.
Speaker Change: Feel very good about as evidenced in our first quarter.
Speaker Change: Gross margin expansion is a key element of our plan to get back to double digit EPS into your question on tariffs, it's going to be an important definitely an important muscle to exercise here.
Speaker Change: Really strong performance here I think we guided to 70 basis points of improvement and we saw about 140 in the first quarter. So a really strong.
Speaker Change: Performance of the team there and then the pipeline to kind of sustain the growth of around I think you saw a lot of activity. This.
Speaker Change: First quarter, whether it's.
Speaker Change: The bolt CE Mark at the beginning of our IV I'll try all the NCD for cardioversion.
Speaker Change: The new data on Tri clip. So there's a lot of there's a lot of great activity. There. When you think about kind of how we guided at the beginning of the year.
Speaker Change: Everything is.
Speaker Change: Not everything is pretty certain for us in terms of how we're executing and the expectations. We have new products I guess, the only the only aspect there may be some uncertainty that you raise is the tariff piece.
Speaker Change: <unk>.
Speaker Change: Yes, I would say prior to tariffs prior to the whole tariffs we were even considering given the given the momentum that we're seeing in the base business.
Speaker Change: We are not considering raising raising our EPS guidance.
Speaker Change: Sorry here so.
Speaker Change: Reaffirming our guidance is already I think a pretty pretty strong statement, we've completed a pretty strong assessment.
Speaker Change: Every possible different type of scenario not just in what it could how it could impact us, but more importantly Ravi.
Speaker Change: What are the different scenarios to be able to mitigate it so.
The team has been working very diligently I think I think we only took a break over the weekend to watch the playoff hole and then we went right back to it.
Speaker Change: I can tell you we feel very comfortable right now with the information that we've got and and obviously looking at potential scenarios that could arise if down the road that we can cover.
Speaker Change: An impact of tariff, which I would say really two geographies, the United States and in China. So right now we estimate the tariff impact.
Speaker Change: In 2005 to be a few hundred million dollars.
Speaker Change: That's a half year impact because I don't I don't see I don't.
Speaker Change: Not see any impact in Q2.
Speaker Change: And then we start to kind of see the see the impact happening in Q3.
Speaker Change: But there are other items here that.
Speaker Change: I'd say our variables related to the tariffs that help offset I can tell you there's not a lot of there's not a lot of R&D slowing down our SG&A slowing down in those mitigation plans, but there are other variables to consider here FX, we can see what's going on with the dollar.
Speaker Change: As.
Speaker Change: As this discussion of <unk> is ongoing.
Speaker Change: Interest rates tax.
Speaker Change: A lot of let's call it levers that.
Speaker Change: <unk>.
Speaker Change: We've got at our disposal put it this way to be able to mitigate our job here is to manage this in the aggregate and income and contemplate and contemplate here.
Speaker Change: Tradeoffs of of the decisions. We are working on I think the key thing here that as we've gone through it over the last 10 days as there are definitely short term things that can be done.
Speaker Change: To mitigate and closed gap and we will be.
Speaker Change: We'll be looking at those and delivering on those but.
Speaker Change: I think more importantly, Ravi is how can you how can we actually look at these on an ongoing basis. One thing we have learned from tariffs as they don't go away. So whatever comes it stays and it stays for a while I look at the the tariffs that went into place in 2017, there is still there so.
Speaker Change: So we need to think about how do you mitigate this.
Speaker Change: More on a long term sustainable way. So yes, you can use our balance sheet and you can build some inventory and we'll probably do some of that but if your entire strategy is building inventory or what's going to happen in 2026.
Speaker Change: Or whenever that inventory runs out so so we're really looking at the manufacturing network.
Speaker Change: And optimizing it as I said in my comments prepared comments, we've got 90 manufacturing sites across the across the world. We have a manufacturing strategy and framework that's been in place for decades Ravi.
Speaker Change: And they.
Speaker Change: They werent, it's a framework that hasnt been put in place because of tariffs, but it's going to serve us well that same framework. When we think about more long term planning for tariffs.
Speaker Change: I understand the temptation that many of you will have just take this this number that I've given a few hundred million dollars and then just double double it is a annualized impact I think it's a little bit too early to do that.
Speaker Change: I said our manufacturing network.
Scott: As Scott has got the ability.
Scott: On a more long term basis to to mitigate this considerably and you just got to have intent you got to have a balance sheet, obviously to be able to make the capex investments some of them take longer some of them you can do pretty fast I mean think about what we did during COVID-19, where we built three ISO certified <unk>.
Scott: Clean room manufacturing, we did it in <unk>.
Scott: Three months.
Scott: So there is there is opportunity to do that also but I think the key thing here is how do you balance the short term the medium term and the long term and we're not putting everything in short term, even though we are going to leverage some of those variables that I talked about FX interest tax et cetera.
Scott: But we're really focusing on how to mitigate this going forward.
Speaker Change: Thanks, a lot.
Speaker Change: Thank you and our next question will come from Larry <unk> from Wells Fargo. Your line is open.
Larry: Good morning, Thanks for taking the question Robert.
Speaker Change: Just wanted to focus on the EP franchise, we're headed into the heart Rhythm Society meeting.
Speaker Change: Next week, you just got approval for bolt.
Speaker Change: In Europe, you put up a nice balanced quarter here.
Speaker Change: So maybe just kind of give us a kind of a state of the union in and Youre, how youre feeling about that business in 2025.
Speaker Change: And beyond and just remind us of kind of the U S approval timeline.
Speaker Change: Thanks for taking the question.
Speaker Change: Sure.
Speaker Change: Well listen.
Speaker Change: This felt bullish about our strategy I think many of you in Europe.
Speaker Change: In your reports a couple of years ago, probably would've anticipated that.
Speaker Change: Last year with all the PSA that we would have been the second fastest growing competitor.
Speaker Change: And Thats basically the.
Speaker Change: The strategy that the team delivered but more importantly, the execution of it so.
Speaker Change: We had great success and you saw that success continue into into Q1 without without volt.
Speaker Change: So.
Speaker Change: I think the announcement of bolt was was a little earlier than we expected and that's a good thing.
Speaker Change: Obviously.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: The initial feedback that my team has shared with me has been very very positive.
Speaker Change: Obviously, we're going to start with a with a rollout where we'll focus a little bit on.
Speaker Change: On the.
Speaker Change: On the.
Speaker Change: On the users.
Speaker Change: Were part of our clinical trial, and then we will start to kind of ramp up that as we as we go into <unk>.
Speaker Change: As we go into the second half of the year I think the data that was presented at.
Speaker Change: At the European Heart Rhythm meeting was.
Speaker Change: Very strong it stacked up very well against the other products, obviously, it's always difficult to compare trial to trial, there's different pay.
Speaker Change: <unk> serves different kind of protocols, but I think in general.
Speaker Change: The data presented was was very strong and then I think the integration is.
Speaker Change: <unk> is key.
Speaker Change: We continue to be.
Speaker Change: The market leader and the mapping of PFA cases at least that's what we saw in Q1 and so we've got a built in built and scale and capability here.
Speaker Change: To drive.
Speaker Change: To drive the adoption.
Speaker Change: Think that.
Speaker Change: Some of the some of the advantages that I think our product as we talked about not just the integration, but I think the balloon feature is perfect for PDI.
Speaker Change: A lot of stability.
Speaker Change: Optimizing contact.
Speaker Change: As I think we've said not only in conferences, but I also said I think we think contact matters and visualization of contact matters, I think theres less less muscle contraction, especially with lower anesthesia or the use of just sedation. So anyways I think I think the product is going to do really well I think it's going to do what what we intended it to do related to.
Speaker Change: Timelines here.
Speaker Change: In the U S.
Speaker Change: We'll be reporting data out and.
Speaker Change: We will be submitting it this year and.
Speaker Change: I'm very optimistic.
Speaker Change: Domestic that we shouldn't see an approval.
Speaker Change: <unk>.
Speaker Change: As.
Speaker Change: Yes.
Speaker Change: I am caution here, Larry because I hate, giving predictions, but I would say right now our timeline is probably beginning of next year.
Speaker Change: Might be surprised on that but I think thats a good kind of base case base case to half and then the investments in the business has gone very well too I think the teams have done a really good job not only with the mapping and the infrastructure we have out in the field.
Speaker Change: But also the R&D the R&D focus there.
Speaker Change: We've completed enrollment of our <unk> flex trial for CE, Mark and you know thats combining there.
Speaker Change: RF in the PFA on attack to flex on the Tac to flex.
Speaker Change: Catheter. So so I feel good I feel good about where we are feel good about the team's doing.
Speaker Change: And as as we accelerate the launch of volt into international markets in the second half of the year I think I said in the beginning of this year I think the second half of the year will be better than the first half.
Speaker Change: Thanks, so much.
Speaker Change: Thank you. Our next question will come from Travis Steed from Bofa Securities. Your line is open.
Travis Steed: Hey, Thanks for taking the question just a few follow ups on the on the tariff side.
Travis Steed: A few hundred million passenger impact just wanted to make sure that assumes kind of current rates as they are today.
Travis Steed: Yes.
Travis Steed: China is probably the bigger portion of that there was any color you can kind of give on how you got to that that impact and it sounds like you really don't want just kind of run rate into 2006, yet because I think theres a lot of off net and when you think about the offsets.
Travis Steed: <unk> is the Nairobi protocol included in that do you think kind of the diabetes business. That's under that protocol, how much can you offset with pricing or do you think a lot of the offsets are really going to be around kind of moving around manufacturing.
Travis Steed: And changing around the supply chain.
Travis Steed: Yes sure.
Travis Steed: I think a question on FX rates, yes, we're making an assumption that on.
Travis Steed: On that mitigation as rates are as of today.
You could make an argument that some of them have kind of gotten even.
Travis Steed: It has gotten even weaker versus some of them. So.
Travis Steed: So, yes, we're making that assumption.
Regarding U S and China.
Travis Steed: <unk>.
Travis Steed: I'd say right now on that on that initial forecast I'd say there is.
Travis Steed: Thats pretty evenly split, but I think as we think about mitigation is more long term.
Travis Steed: I think we've got I think we've got opportunities across across both of them I think there's one thing one thing that is important to keep in mind is we've always had a view with our manufacturing framework and like I said this has been in place for decades, two key tenants here Travis one align the manner.
Travis Steed: Factoring as close as possible to the customer and then have an appropriate amount of redundancy. So.
Travis Steed: The advantages of being close to your customer I mean, you can get efficiencies and a lot of cost advantages. There allows you to tap into local talent, but more importantly for us. It's always when you match. Your your infrastructure cost with your revenue that serves as a natural hedge.
Travis Steed: Against FX.
Travis Steed: It doesn't do much for us to protect the top line, but it definitely helps protect the EPS and so.
Travis Steed: A large percent of our sales here in the U S are sourced from U S products.
Travis Steed: And then we try and mitigate risk.
Travis Steed: Bye bye spreading that manufacturing network out. So a good example of that is Libre for example, where we've got we've got six manufacturing sites for Libre six a total of six and of those six two are in the United States and obviously those manufacturing in the United States serve the U S demand.
Travis Steed: And then the other sites outside of the United States Service O U S demand, we did that with Covid to where buying X was made in the U S for the U S and <unk> was made outside the U S for international markets.
Travis Steed: <unk>.
Travis Steed: So that's going to allow us to kind of mitigate a lot of this.
Travis Steed: If we had put all of our manufacturing in Southeast Asia will put all of our manufacturing in Europe, then that might be a little bit more complicated, but we've always had a view of kind of be able to spread it out and mitigate the risks that way.
Travis Steed: Tariff wasn't on the list of risks but.
Travis Steed: It provides it provides a lot of maneuverability on this so yes.
Travis Steed: Yes, I think you mentioned.
Travis Steed: Different opportunities to be able to.
Offset impacts yes, you mentioned, one but there are lots of other opportunities to do that.
Travis Steed: And.
Travis Steed: And we're looking at all of those those.
Travis Steed: Help those those help to be more sustainable, but somebody can decide to not want to be part of those agreements.
Travis Steed: So we've got a really leveraged the manufacturer and the manufacturing network that we have if you really want to make it sustainable.
Travis Steed: And I think those are the two areas that we're going to be looking at and focusing on those two markets.
Travis Steed: Alright, Thanks, a lot.
Speaker Change: Thank you. Our next question will come from David Roman from Goldman Sachs. Your line is open.
Travis Steed: Yes.
David Roman: Good morning, Thank you for all the color here on <unk>.
Travis Steed: Tariffs, obviously, a topic, we're watching very closely maybe you could switch over to.
Travis Steed: Some of the business performance metrics here and could you maybe talk to us a little bit about the broader diagnostic strategy here certainly understanding the unique dynamics of GBP influencing the business in China, but as you think about where you're positioned and how you accelerate this business back toward end market.
Travis Steed: Both.
Travis Steed: What are the key products that can help you do that and how are you thinking about M&A in this category to support.
Travis Steed: To support a turn and a growth rate.
Speaker Change: Yes sure listen.
Speaker Change: Yeah, a little disappointing on the diagnostic side, yes.
Speaker Change: Yes part of it was COVID-19, but we've also got some improvements to be made here I'd say specifically in China.
David Roman: Yes, David.
David Roman: I mean, we're seeing growth in our business and our diagnostic business everywhere, except China.
David Roman: Side of China. This quarter, we grew around 7%, which has been in line with our with our core lab overall growth rate.
David Roman: <unk> grew 7%.
David Roman: And if you remove kind of the capital piece and just focus on the consumables. It was over 8% EMEA grew 7% Latin America grew mid teens are transfusion business grew 7%. So I think we're seeing good performance here.
David Roman: It's really been.
David Roman: It's really been a challenge here as I mentioned and as you mentioned, which is China, and it's really price driven.
David Roman: <unk> I think if you look at what's happened in other <unk> at least the ones that we've been part of when you bid.
David Roman: On on those businesses, yes, you have a price hit but you have an offset because you are part of a smaller group of competitors, who are picking up volume. This one here was very different and that everybody. All manufacturers stayed on the market maintain their contracts, but we took these we took these price it so so.
David Roman: We are really here faced with the price hit in no no volume offset.
David Roman: No.
David Roman: The team is doing a good job right now I'd say.
David Roman: At navigating this we're going to have to do better in some of the other geographies and I know the teams are looking at how to accelerate even more our growth rate.
David Roman: In the other markets. It's a delicate balance here also David as you probably know you can get more growth, but you're going to have to place a lot more capital and thats going to hit your gross margins. So we've kind of looked at this being a kind of between 7% to 9% growth, where we can grow above the market and still expand margins. So the team is looking at.
David Roman: Carefully at how to do that but offset some of that some of that challenge coming out of China, which is going to have to go through this.
David Roman: And it's still an important market.
David Roman: Still got good profitability, but you're just going through the cycle here of GBP that is a little bit different from what we've seen in the past where you don't have the volume offset.
David Roman: Your question on M&A, Yes. This is this is.
David Roman: We believe diagnostics is critical to health care.
David Roman: 70% of health care decisions involved the diagnostic test, which is why we which is why we've been investing in this business.
David Roman: Talking about expanding our portfolio in the blood bank business with the nucleic acid testing system I think that's going to be a great opportunity for our business.
David Roman: We're excited about.
David Roman: Showing the product to our customers this year and start working on really composing.
David Roman: An offering here that you can have both serology and nucleic acid testing.
David Roman: With Abbott combined with all the automation and all the other digital service. We provide we think it's a real strong offering there are there opportunities in diagnostics, yes sure. There are I've been public about areas that we would be looking at in.
David Roman: M&A world being medical devices and diagnostics.
David Roman: But we've got we've got opportunities to do that but we've also got opportunities to do it organically. So.
Speaker Change: And maybe just a related follow up on that last point I think on the last call. It sounded like M&A might be might become a more important part of your capital allocation strategy. Maybe you can just update us on how youre thinking about that and any comments on.
David Roman: Hi.
David Roman: He might be influencing capital deployment priorities.
David Roman: Absolutely no impact whatsoever on capital allocation priorities and update on commentary on M&A I mean.
David Roman: David There is no update in the sense that the mindset hasn't shifted right, which is yes, we're looking at opportunities in devices and diagnostics, yes, we have opportunities to.
David Roman: <unk>.
David Roman: To add to our business <unk> got a strong balance sheet to be able to do that we're going to look at things strategically we're going to look at things, but also from a financial lens.
David Roman: We can be selective in the sense that we feel that we've got a growth model here.
David Roman: That allows us to sustain this organic growth rate this high single digit organic growth rate.
David Roman: So it allows us to ensure that we are not only being strategic about it but we're also being disciplined about how we're thinking about it as I said, our ROIC matters to us.
David Roman: Profitability matters for us I think even more important in today's environment.
David Roman: Protecting your EPS protecting your profitability I think is an important.
David Roman: As an important at least for us it's going to be important. So so regarding an update on our M&A thoughts there's no. There's no update on on our thinking on our framework.
David Roman: Great. Thanks, so much.
David Roman: Thank you.
Speaker Change: Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.
Vijay Kumar: Hey, guys congrats on a nice print here and thanks for taking my question.
Vijay Kumar: Robert just on maybe the top line here.
Vijay Kumar: The seven five to eight and half organic.
Vijay Kumar: That's pretty impressive considering the macro what drives the back half acceleration right. When we look at Q1, starting point of seven or are we looking at.
Vijay Kumar: All of us.
Vijay Kumar: Stepping up or is this China, which are which.
Vijay Kumar: As.
Vijay Kumar: Assuming assuming China improves in the back half maybe walk us through from Q1.
Vijay Kumar: Yes, I mean, I think it's I think it's.
Vijay Kumar: When we guided back in January Vijay, we kind of guided to this.
Vijay Kumar: Second half better than first half.
Vijay Kumar: Theres a couple of things there first of all I think you've got the the.
Vijay Kumar: The impact of new product launches kind of ramping up.
Vijay Kumar: And that obviously contributes to the growth rate in the second half you mentioned one product that's one but.
Vijay Kumar: As you are familiar with our pipeline, we've got a lot of a lot of.
Vijay Kumar: Recently launched products that as you go scaling up that scale goes building and then it goes accelerating so I think thats.
Vijay Kumar: That's a key driver and then the second part I'd say comps if you remember.
Vijay Kumar: The <unk> really started to really impact us.
Vijay Kumar: Kind of last last year Q3, Q4, so I expect that lapping some of those some of those kind of GBP components and diagnostics will be a contributor and then if you remember also last year in Q3, we had some challenges in our nutrition business just some commercial execute.
Vijay Kumar: <unk> challenges that we had a we had a pretty big significant kind of drop in our in our in our nutrition and our international nutrition business and team has been making good progress there in terms of.
Vijay Kumar: Regaining share in some of those markets.
Vijay Kumar: So that's the other component I would say is like these are two pretty big comps. So if you look at Q3 that was that was a pretty kind of low point I would say for our nutrition business in the year.
Vijay Kumar: So.
Vijay Kumar: Yes.
Vijay Kumar: At a high level.
Vijay Kumar: How the math works.
Vijay Kumar: Understood.
Vijay Kumar: One on the gross margins here I think the prior guidance.
Vijay Kumar: Perhaps 60 to 80 basis point step up.
Vijay Kumar: Is the I guess the tariff is that hitting gross margin is that a cogs impact.
Vijay Kumar: How should we think about gross margins here for the back half.
Phil Boudreaux: Yes, Vijay it's Phil.
Vijay Kumar: Yes, exactly what you highlighted here, we guided a strong gross margin.
Vijay Kumar: Into the year after nice sequential growth each quarter last year, and very pleased with Q1, delivering on that actually being a little bit better than what we had.
Vijay Kumar: Modeled or forecasted here.
Vijay Kumar: Long with the benefit of the FX movement here. So those help serve as some of the offsets to the tariffs, which will largely be felt in the gross margin.
Vijay Kumar: Got it thank you guys.
Vijay Kumar: Thank you.
Vijay Kumar: And our next question will come from Joanne Wuensch from Citi. Your line is open.
Speaker Change: Good morning, and thanks for taking the question and all of the information.
Speaker Change: Thank you pivot a little bit to some of the products and particularly the.
Speaker Change: Product, which you announced you began.
Speaker Change: Nickel trials for and on the second question some of your structural heart products another quarter of double digit revenue growth in that segment that would be great. Thank you so much.
Speaker Change: Sure.
Speaker Change: To talk about products little bit Joanna. Thanks, So thanks about that.
Rick: Yeah. So your first question on an IV Allison this is Rick.
Rick: Excited to enter this category. This is a $1 billion opportunity right now we think we see theres a lot of growth if you remember this.
Rick: This asset came to us through.
Rick: Through the CSI acquisition that we did.
Rick: A few years ago so.
Rick: So we saw this is like a really interesting asset that was in there that we could kind of add value team has been working on it and it's great to see that we started to enroll patients in the trial.
Rick: It's too early to think about kind of timelines here.
Rick: Like precise timelines from a quarterly perspective, but I expect to complete enrollment of this trial next year and and file for file for approval next year I think the catheter that's been.
Rick: That we put into the trial as is being viewed as very easy to deliver.
Rick: And it seems like a great tool here to treat severe calcification. So.
I've gotten I've gotten like early early.
Rick: Early data on kind of the first cases, they seem to all go very well.
Rick: <unk>.
Rick: Praise from the from the interventional is on on the deliverability of it and I think thats.
Rick: That's always an important part given our experience in the.
Rick: And the world of Stents Deliverability is super important so that's it seems like it's hitting the mark there and.
Rick: And then we also know that there is.
Rick: Obviously peripheral market for this if you think about our portfolio in our vascular business.
Rick: Would complement that also very well so I know the teams working on a peripheral program their tool and will and we will provide updates on that as we progress, but yes excited about the opportunity I think it's going to be.
Rick: A meaningful growth driver here for our vascular business, which we've already started to see an improvement an improvement on the growth rate.
Rick: And and.
Rick: This will obviously help sustain it.
Rick: On your question on.
Rick: On your question on structural heart.
Rick: 15% growth.
Rick: We've always talked about Joanne this being like.
Moving away from being a single product company and Mitraclip to be a full portfolio of product and the investments that we've made in R&D.
Rick: During those during those years post integration.
Rick: St Jude and really kind of building a best in class portfolio. Here I think is I think is going to pay off and it's paying off now and I think it is going to pay off long term also.
Rick: Net avatar is doing really well and we've talked about the opportunities that we have <unk> good share gains in Europe and looking forward to see this this investment that we've been making in the U S. In terms of building our commercial presence.
Rick: Expanding it looking forward to see that team be able to start to really.
Rick: Really gained momentum.
Rick: We progressed as we progress throughout the year keep in mind, we're only in 25% of the cases at 25% of the implanting hospitals here in the U S. So I think there is.
Rick: Great opportunity for US there and then try clip is another one that's been doing very well the launch continues to go Super.
Rick: Terms of market share I think try clip here is now clearly the preferred option safety plays a major role in deciding what to choose and.
Rick: The safety record here.
Rick: It's pretty excellent not just in the clinical trials, but also in the real world. So.
Rick: I expect this to annualize at around a quarter of a $1 billion, but but really gaining a lot of momentum as we exit the year for a couple of things one.
Rick: We are launching a next generation of the clip and it's just going to further enhance the ease of use it simplifies on all of the prep work.
Rick: So a couple of cases.
Rick: It's not a pain point, but it's just it's just a nice thing to have to be able to reduce some of that some of that device prep work before so I think the team has done a really good job. There. We obviously saw the CMS is.
Rick: Published their their NCD.
Rick: That the hit mid year, and that's another great opportunity, but the two year data I think it was pretty significant at ACC and really showed.
Rick: I know Theres a lot of question marks about.
Rick: The endpoint a year ago, but that really wasn't powered for one year.
Rick: And you're starting to see now the benefits on that hard data come out I think that plays a huge role when you've got the safety and you've got the hard endpoint. So all in all I think the structural heart business is going to continue to be in this in these in these teen growth rates.
Rick: And we've got opportunities for international expansion too So and then plus all the R&D work thats ongoing whether its balloon expandable.
Rick: Next generation Mitraclip next generation try clip next generation annual it I mean, it's just really stacked up and the team is doing a good job. So looking forward for that business to continue to be a contributor.
Rick: And the next few years.
Rick: Excellent. Thank you so much.
Speaker Change: Thank you. Our next question comes from Josh Jennings from TD Cowen Your line is open.
Josh Jennings: Hi, good morning, Thanks for taking the questions Robert I was hoping to get.
Josh Jennings: Maybe a little bit early for this but but I was hoping you could share either what abbott is doing individually or plans to do.
Josh Jennings: Along with conjunction with have the mid and the industry to potentially seek.
Josh Jennings: Exemptions in the U S China Europe.
Josh Jennings: And should investors.
Josh Jennings: Hope that.
Josh Jennings: Exemptions for the medical devices industry specifically.
Josh Jennings: Be secured.
Josh Jennings: Hey, Josh.
Josh Jennings: Abbott hope is not a strategy for us so.
Josh Jennings: Would stick away from that but.
Josh Jennings: But are we.
Josh Jennings: Are we talking with industry Association sharing data sharing information I think the key thing here is always just getting some of the facts and the data is always important and I think that that's that's obviously an opportunity that exists.
Josh Jennings: At least to make sure that everybody, who is making decisions are aware of the facts and the data and the implications.
Josh Jennings: So.
Josh Jennings: Row actively involved.
With at the Med.
Yes, we are and.
Josh Jennings: But I also think that.
Josh Jennings: We have to understand what the data is an app to understand what the implications I would say at a high at the highest level the.
Josh Jennings: The med Tech industry, you guys notice is whatever $650 $700 billion.
Josh Jennings: Kind of industry U S companies.
Josh Jennings: Have a have a very high share of that global industry around at least over 50%. So so.
Josh Jennings: So I think it is in the interest of.
Josh Jennings: The U S to make sure that we protect the innovation that we protect the investment in R&D.
Josh Jennings: And a.
Josh Jennings: A lot of the manufacturing in Med Tech has done I would say mostly in the U S already.
Josh Jennings: So, yes, theres opportunities to have conversations.
Josh Jennings: And Thats part of our strategy, but hope is not one of them. So we're working through weekends and thinking about how are we going to do this on a long term basis here.
Speaker Change: Understood. Thanks for that and then just one follow up.
Josh Jennings: The.
Josh Jennings: The.
Josh Jennings: Macro conditions are evolving rapidly.
Josh Jennings: Events, specifically with the <unk> litigation over the past 12 months, just was hoping for an update on.
Josh Jennings: On how your you and your team are thinking about the diversified model, but it's served the company well for decades, but any updates just on the potential to unlock value number of other competitors.
Josh Jennings: There have been either divesting or spending our business units, but was hoping to get your thoughts here.
Josh Jennings: In early 2025.
Josh Jennings: Sure I mean, you threw a couple of things in there.
Josh Jennings:
Josh Jennings: The fact that we have this ongoing litigation on neck doesn't necessarily kind of lead us down a path of whether businesses are here to drive are driving value or not so.
Josh Jennings: So I'm going to I'm going to move the.
Josh Jennings: The litigation piece aside here to be quite honest with you.
Josh Jennings: Listen.
Josh Jennings: We've always looked at the value of our diversification and what it does it provides a lot of shots on goal as long as you are in the right places.
Josh Jennings: A lot of shots on goal and then it allows us to.
Josh Jennings: <unk> managed through moments of uncertainty in the global and the global and the global market and I made reference to that in my opening statements.
Josh Jennings: We've shown plenty of examples of how that model has actually helped us.
Josh Jennings: The key thing here is are these businesses operating at the highest level.
Josh Jennings: And are we.
Speaker Change: Are we driving the value through them I mean, you guys can do some of the parts.
Josh Jennings: I think that we.
Josh Jennings: We are.
Josh Jennings: Pretty fairly valued I guess, if you were to kind of do that analysis.
Josh Jennings: There is always going to be a little bit of a little bit of a disconnect. There, but I think we're operating these businesses each at the highest level.
Josh Jennings: And.
Josh Jennings: And.
Josh Jennings: I think they provide us with a strategic advantage that very few healthcare companies have.
Josh Jennings: We have a unique perch, where we get to see the entire spectrum of health care.
Josh Jennings: Through nutrition through diagnostics to pharmaceuticals through medical technologies, and we think Thats a competitive advantage, but we look at our portfolio always on an ongoing basis, we continue to evaluate where there's opportunities to create value.
Josh Jennings: I talked about these questions. We ask ourselves is there an opportunity to create value and is there somebody else that could be a better owner of our business and for me right now those two questions.
Josh Jennings: They're not.
Josh Jennings: And we just got to keep driving and executing on.
Josh Jennings: But I think you've seen it you've seen us as a company.
Sure.
We've engaged the knees probably long before.
Josh Jennings: These were these were.
Josh Jennings: The portfolio moves <unk> I'd say that were seeing right now I've got to ask yourself. Some of these moves have they have they created value to shareholders.
Josh Jennings: So.
Josh Jennings: That's always a fundamental question.
Josh Jennings: Thanks, a lot Robert.
Josh Jennings: Operator, we'll take one more question please.
Speaker Change: Thank you and our last question will come from Marie Thibault from BTG. Your line is open.
Marie Thibault: Good morning, Thanks for squeezing me in I wanted to ask a question here on rhythm management I think this is the second or third quarter that we've seen really strong results, particularly in the U S and I assume some of this is is because there can you catch us up to date on where we are in terms of the rollout some of the new data we might be seeing at HRS on left bundle branch.
Marie Thibault: And some of the other opportunities we should be seeing their end of year.
Marie Thibault: Thanks.
Marie Thibault: Thanks Marie.
Speaker Change: Yes, I think listen I think I think a very remains one of the probably one of the most underappreciated opportunities here in our portfolio I think rarely do you have an opportunity to completely.
Marie Thibault: We change the standard of care and.
Speaker Change: I predict that we're going to see that standard of care change.
Marie Thibault: At least in the pacing and the pacing market.
Marie Thibault: Next five years I think that the majority of this market is going to be is going to be.
Marie Thibault: It's going to be needless.
Marie Thibault: <unk>.
Marie Thibault: And I'd say the key thing for US was to think about okay. If we think that this is going to be a complete change and change in paradigm and standard of care.
Marie Thibault: Got to make sure that we build a strong enough foundation for that to happen.
Marie Thibault: It is a different implant technique that physicians have been accustomed we've been trained for four decades.
Marie Thibault: So as I've said, we were going to go I guess, you can say, we're going to go a little slower to go fast.
Marie Thibault: If you can argue what we've been doing I mean I think.
Marie Thibault: This will probably be exit the year at about $5 billion.
Marie Thibault: So I think the teams have done a really good job at establishing that foundation.
Marie Thibault: We've seen an increase in accounts. So we've increased our accounts by about 50%.
Marie Thibault: The amount of physicians that have been trained have been increased by 50% with more than double the amount of <unk>.
Marie Thibault: Implants per day, we're doing now that that's not just the expansion of new accounts, but we've actually seen a 30% increase in the monthly implants of the early adopters. So not only are we increasing the penetration to new accounts, but we're also seeing deeper penetration and usage in the accounts that we have already opened so that gives me.
Marie Thibault: Confidence that.
Marie Thibault: On the statement that I made that I think this is going to be a complete change in category.
Marie Thibault: So much so that.
Marie Thibault: That we've been obviously investing from an R&D perspective.
Marie Thibault: On next generation leaves us products.
Marie Thibault: Have a next generation version come out.
Marie Thibault: We're working on that's going to increase the battery life.
By about two by about 25%, so that's going to be good and important as we think about more increased penetration.
Speaker Change: <unk> younger implants younger population implants, and then we also talked about developing a leaves us conduction system pacing product. This has got a breakthrough designation by the FDA.
Speaker Change: I'm not going to get too ahead of me in terms of in terms of HRS, what youll see but our goal is to start the pivotal trial for this product in 2026 so.
Speaker Change: The point here is we believe this is going to fundamentally change we've made the investments to prepare the market train the market condition the market and we're also making investments in the.
Speaker Change: And the pipeline also because we believe that's where the standard is going to go. So I think if you looked at our CRM business Youre seeing the impact of that strategy, which is okay.
Speaker Change: This has been a business that historically has been flat from our perspective.
Speaker Change: A single digit kind of growth market over the last couple of years. Thank you for pointing that out we've been growing around 7%.
Speaker Change: And I think it's really part of the strategy. So we look forward to.
Speaker Change: We look forward to HRS, we look forward to.
Speaker Change: What we're going to be presenting across the entire portfolio not just on the CRM side.
Speaker Change: On the structural side and also on the on the ablation side. So I think we're going to have I think when I have a real good HRS and good data there too so.
Speaker Change: Listen I'll, just I get that I get that there's a lot of questions on tariffs.
Speaker Change: We've been doing a lot of work a lot of modeling, but more importantly, a lot of ways to think about how to mitigate the impacts part of my my pushed to the team and pushed up to myself quite frankly, as we need to figure out how to do this in a way that's sustainable or not just.
Speaker Change: And not just using GAAP closures, which we will use for sure.
Speaker Change: But how do we make this more sustainable.
Speaker Change: I found it interesting we did not get a single Libre question. So.
Speaker Change: A very concerned.
Speaker Change: Chris and macro but.
Speaker Change: But all good there.
Speaker Change: We've had a good start to the year.
Speaker Change: <unk>.
Speaker Change: I anticipate that that momentum is going to continue.
Speaker Change: The gross margin on the operating margin expansion is very important and I think it's even more important now with the dynamics that we're in but we're not doing that at the expense of the pipeline pipeline continues to provide great new growth opportunities and like I said I think the I think the diversified model here I think the <unk> question I think it serves as a.
Speaker Change: Very well.
Robin: There's a lot of moving pieces, maybe to Robin's point, but our job here is to to.
Robin: <unk> all that translate all of that complexity and all those moving pieces into sustained and reliable growth in performance, which is which was what we've been doing and what we're going to continue to do so.
Robin: Is why we've reaffirmed our guidance here.
Robin: And so we look forward to updating you guys as we go through the year, so with that I'll wrap up and thank you for joining us.
Speaker Change: 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.
Robin: Thank you for joining us today.
Speaker Change: 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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