Q3 2026 Abbott Laboratories Earnings Call

October 21, 2026

Operator: Good morning, and thank you for standing by. Welcome to Abbott's Q3 2026 earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question by pressing the star one one keys on your touchtone phone. This call is being recorded by Abbott. With the exception of any participant's 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 express written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Speaker #1: Good morning, and thank you for standing by. Welcome to ABBOTT's third quarter 2026 earnings conference call. All participants will be able to listen only until the question-and-answer portion of this call.

Speaker #1: During the question-and-answer session, you will be able to ask your question, by pressing the star 11 keys on your touchstone phone. This call is being recorded by ABBOTT.

Speaker #1: With the exception of any participant's 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 express written permission.

Speaker #1: I would now like to introduce Mr. Mike Camilla, Vice President of Investor Relations.

Mike Comilla: Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer, and Phil Boudreau, Executive 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 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended 31 December 2025.

Speaker #2: Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Phil Boudreau, Executive Vice President, Finance and Chief Financial Officer.

Speaker #2: 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 1995.

Speaker #2: 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 #2: 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 10-K for the year ended December 31st, 2025.

Mike Comilla: 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.com. Note that Abbott has not provided the related GAAP financial measures on a forward-looking basis for the non-GAAP financial measures for which it is 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 with GAAP. Unless otherwise noted, our commentary on sales growth refers to comparable sales growth.

Speaker #2: 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 #2: On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand ABBOTT's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at ABBOTT.com.

Speaker #2: Note that ABBOTT has not provided the related GAAP financial measures on a forward-looking basis for the non-GAAP financial measures for which it is 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 with GAAP.

Speaker #2: Unless otherwise noted, our commentary on sales growth refers to comparable sales growth. Our definition of comparable sales growth can be found on page 2 of our press release issued earlier today.

Mike Comilla: Our definition of comparable sales growth can be found on page 2 of our press release issued earlier today, and a reconciliation table containing the data needed to calculate comparable sales growth can be found on pages 16 and 17. With that, I will now turn the call over to Robert.

Speaker #2: And a reconciliation table containing the data needed to calculate comparable sales growth can be found on pages 16 and 17. With that, I will now turn the call over to Robert.

Robert Ford: Thanks, Mike. Today marks an important milestone in Abbott's history. Along with reporting our Q3 results, we announced our intention to separate our nutrition business into an independent, publicly traded company. This decision follows a comprehensive strategic review and reflects our strong belief that both Abbott and the nutrition business can create greater value and achieve their maximum potential as independent organizations. Abbott entered the nutrition business more than 60 years ago. Since that time, we built a strong foundation anchored by a talented global organization, iconic brands, and established market leadership positions across the pediatric and adult nutrition categories. The nutrition market has evolved over time, with the pace of change accelerating significantly in recent years. What was once predominantly viewed as a healthcare market, almost exclusively shaped by healthcare professionals, has increasingly become a market shaped by changing consumer preferences, wellness trends, and retail execution.

Speaker #3: Thanks, Mike. Today marks an important milestone in Abbott's history. Along with reporting our third quarter results, we announced our intention to separate our nutrition business into an independent, publicly traded company.

Speaker #3: This decision follows a comprehensive strategic review and reflects our strong belief that both Abbott and the nutrition business can create greater value and achieve their maximum potential as independent organizations.

Speaker #3: ABBOTT entered the nutrition business more than 60 years ago. Since that time, we built a strong foundation anchored by a talented global organization, iconic brands, and established market leadership positions across the pediatric and adult nutrition categories.

Speaker #3: The nutrition market has evolved over time, with the pace of change accelerating significantly in recent years. What was once predominantly viewed as a healthcare market almost exclusively shaped by healthcare professionals has increasingly become a market shaped by changing consumer preferences, wellness trends, and retail execution.

Robert Ford: While this market evolution is not inherently positive or negative, it has fundamentally changed the environment in which we operate. To best position our nutrition business for maximum long-term success, we must evolve and adapt accordingly. At the same time, Abbott has strategically repositioned its portfolio over the past decade into attractive high-growth markets that require sustained investment to drive innovation and support long-term growth. We believe both businesses will be better positioned for the future as independent organizations, each with a distinct identity reflecting their different customer bases, growth profiles, investment requirements, and innovation cycles. This separation will enable both companies to sharpen strategic and operational focus, direct resources more effectively, and enhance commercial and R&D effectiveness.

Speaker #3: While this market evolution is not inherently positive or negative, it has fundamentally changed the environment in which we operate. To best position our nutrition business for maximum long-term success, we must evolve and adapt accordingly.

Speaker #3: At the same time, Abbott has strategically repositioned its portfolio over the past decade into attractive, high-growth markets that require sustained investment to drive innovation and support long-term growth.

Speaker #3: So we believe both businesses will be better positioned for the future as independent organizations, each with a distinct identity reflecting their different customer bases, growth profiles, investment requirements, and innovation cycles.

Speaker #3: And this separation will enable both companies to sharpen strategic and operational focus, direct resources more effectively, and enhance commercial and R&D effectiveness. As an independent company, Nutrition will be uniquely positioned to capitalize on the growing demand for healthy nutrition, as consumers increasingly recognize the importance of metabolic health and the role healthy nutrition plays in disease prevention and overall wellness.

Robert Ford: As an independent company, nutrition will be uniquely positioned to capitalize on the growing demand for healthy nutrition as consumers increasingly recognize the importance of metabolic health and the role healthy nutrition plays in disease prevention and overall wellness. The new nutrition company will be created from a position of strength. The team has done an exceptional job building a balanced growth model supported by a sustainable mix of volume and price. The portfolio includes several iconic brands, including Similac, PediaSure, Ensure, Glucerna, and Pedialyte, which have market-leading positions across the pediatric and adult nutrition categories. With approximately $8.5 billion in annual sales, 16,000 employees, and 14 manufacturing sites, this will be the largest globally scaled pure-play company in the healthy nutrition market. Given its scale and financial profile, we would expect this new company to qualify for inclusion in the S&P 500.

Speaker #3: The new nutrition company will be created from a position of strength. The team has done an exceptional job building a balanced growth model, supported by a sustainable mix of volume and price.

Speaker #3: The portfolio includes several iconic brands, including Similac, Pediasure, Ensure, Glucerna, and Pedialyte, which have market-leading positions across the pediatric and adult nutrition categories. With approximately 8.5 billion in annual sales, 16,000 employees, and 14 manufacturing sites, this will be the largest globally scaled pure-play company in the healthy nutrition market.

Speaker #3: Given its scale and financial profile, we would expect this new company to qualify for inclusion in the S&P 500. I'm pleased to share that Daniel Salvadori, Executive Vice President and Group President of Established Pharmaceuticals and Nutrition Products, will become Chief Executive Officer of the new nutrition company.

Robert Ford: I am pleased to share that Daniel Salvadori, Executive Vice President and Group President of Established Pharmaceuticals and Nutrition Products, will become Chief Executive Officer of the new nutrition company. Daniel joined Abbott in 2014 as Senior Vice President in our Established Pharmaceuticals business for Latin America and also served as Executive Vice President of Nutrition Products for four years before being appointed to his current position in 2021. Throughout his career at Abbott, Daniel has demonstrated outstanding strategic insight and operational excellence. His broad international experience and proven track record of delivering results as a business operator make him exceptionally well-suited for this role, and I am confident he will be a tremendous success. Daniel will be joined by an experienced leadership team with deep industry experience. This is a battle-tested team that has demonstrated exceptional resilience and dedication while navigating a dynamic and evolving operating environment.

Speaker #3: Daniel joined Abbott in 2014 as Senior Vice President in our Established Pharmaceuticals business for Latin America, and also served as Executive Vice President of Nutrition Products for four years before being appointed to his current position in 2021.

Speaker #3: Throughout his career at Abbott, Daniel has demonstrated outstanding strategic insight and operational excellence. His broad international experience and proven track record of delivering results as a business operator make him exceptionally well-suited for this role, and I'm confident he will be a tremendous success.

Speaker #3: Daniel will be joined by an experienced leadership team with deep industry experience. And this is a battle-tested team. That has demonstrated exceptional resilience and dedication while navigating a dynamic and evolving operating environment.

Robert Ford: Following the separation, Abbott will remain one of the largest, most diversified, and fastest-growing healthcare companies in the world. The Abbott portfolio will consist of even stronger mix of higher growth, higher margin businesses powered by technology and innovation. As a result, we expect Abbott's sales growth to accelerate and margin profiles to expand. While the Abbott portfolio will evolve, maintaining balance across products, payers, and geographies will remain a key strength and source of resilience for the company. We built this portfolio to hold market-leading positions in three of the most attractive areas of healthcare: med tech, diagnostics, and Established Pharmaceuticals. The portfolio was also intentionally built to align with durable healthcare trends, including an aging population, increasing prevalence of chronic disease, and a growing demand for earlier diagnosis and more personalized treatment.

Speaker #3: Following the separation, Abbott will remain one of the largest, most diversified, and fastest-growing healthcare companies in the world. The Abbott portfolio will consist of an even stronger mix of higher-growth, higher-margin businesses, powered by technology and innovation.

Speaker #3: As a result, we expect ABBOTT's sales growth to accelerate and margin profiles to expand. While the ABBOTT portfolio will evolve, maintaining balance across products, payers, and geographies will remain a key strength and source of resilience for the company.

Speaker #3: We built this portfolio to hold market-leading positions in 3 of the most attractive areas of healthcare, medtech, diagnostics, and established pharmaceuticals. The portfolio was also intentionally built to align with durable healthcare trends, including an aging population increasing prevalence of chronic disease, and a growing demand for earlier diagnosis and more personalized treatment.

Robert Ford: With market-leading positions, an industry-leading pipeline, and a proven ability to consistently generate strong earnings growth and cash flow, Abbott is exceptionally well-positioned to deliver sustainable growth and create long-term shareholder value in the years ahead. Could not be more excited about this future. I have tremendous confidence in Abbott's future as an innovation-driven healthcare company, and I am also confident in the opportunities that lie ahead for the new nutrition company. Most importantly, this creates two stronger organizations that will both continue to fulfill our mission of helping people live better lives. We look forward to sharing updates on our progress as we move through the separation process. I will now review the Q3 results before I turn the call over to Phil.

Speaker #3: With market-leading positions, an industry-leading pipeline, and a proven ability to consistently generate strong earnings growth and cash flow, Abbott is exceptionally well-positioned to deliver sustainable growth and create long-term shareholder value in the years ahead.

Speaker #3: It cannot be more excited about this future. I have tremendous confidence in ABBOTT's future as an innovation-driven healthcare company. And I'm also confident in the opportunities that lie ahead for the new nutrition company.

Speaker #3: Most importantly, this creates 2 stronger organizations that will both continue to fulfill our mission of helping people live better lives. We look forward to sharing updates on our progress as we move through the separation process.

Speaker #3: I'll now review the third quarter results before I turn the call over to Phil. Sales grew 7% in the third quarter and earnings per share grew 9%, representing an acceleration in growth on both top and bottom lines compared to our results in the first half of the year.

Robert Ford: Sales grew 7% in the Q3, and earnings per share grew 9%, representing an acceleration in growth on both top and bottom lines compared to our results in the H1 of the year. Turning to diagnostics, where sales grew 6.5%, driven by performance in our Core Laboratory and Cancer Diagnostic businesses. Core Lab sales grew 5.5%, driven by strong performance in the US, Europe, Japan, and Latin America. On our earnings call in July, I highlighted that test volume data, sourced directly from thousands of instruments located across the US and around the world, showed a pattern of strong and stable demand. We view this as a positive indicator of the underlying demand for healthcare more broadly. During the Q3, our testing data continued to support that view, with testing demand remaining healthy and at durable levels.

Speaker #3: Turning to diagnostics, sales grew 6.5%, driven by performance in our core laboratory and cancer diagnostic businesses. Core lab sales grew 5.5%, supported by strong performance in the US, Europe, Japan, and Latin America.

Speaker #3: On our earnings call in July, I highlighted that test volume data, sourced directly from thousands of instruments located across the U.S. and around the world, showed a pattern of strong and stable demand.

Speaker #3: We viewed this as a positive indicator of the underlying demand for a healthcare more broadly. During the third quarter, our testing data continued to support that view, with testing demand remaining healthy and at durable levels.

Robert Ford: In Cancer Diagnostics, sales growth of 14% was driven by Cologuard and contributions to growth from our precision oncology and international businesses. In September, we launched our first blood-based colorectal cancer screening test. As the only company to offer both stool-based and blood-based screening options, we are expanding the options available to healthcare providers and patients to help achieve the goal of getting more people screened. Turning to nutrition, sales grew 5%, reflecting broad-based growth across all four categories: US Pediatric, International Pediatric, US Adult, and International Adult. As I mentioned earlier, the team has done an exceptional job executing a more balanced growth strategy, achieving a more sustainable mix of volume and price-driven growth. In Pediatric Nutrition, sales grew 9%, led by growth of 11% in the US.

Speaker #3: In cancer diagnostics, sales growth of 14% was driven by Cologuard and contributions to growth from our precision oncology and international businesses. In September, we launched our first blood-based colorectal cancer screening test.

Speaker #3: As the only company to offer both stool-based and blood-based screening options, we are expanding the options available to healthcare providers and patients to help achieve the goal of getting more people screened.

Speaker #3: Turning to nutrition, sales grew 5%, reflecting broad-based growth across all 4 categories: US pediatric, international pediatric, US adult, and international adult. As I mentioned earlier, the team has done an exceptional job executing a more balanced growth strategy, achieving a more sustainable mix of volume and price-driven growth.

Speaker #3: In pediatric nutrition, sales grew 9%, led by growth of 11% in the U.S. As I noted last quarter, the strong performance in the U.S. includes the benefit from WIC contract wins secured earlier this year, which helped Abbott regain its market leadership position in both the WIC and non-WIC segments.

Robert Ford: As I noted last quarter, the strong performance in the US includes the benefit from WIC contract wins secured earlier this year, which helped Abbott regain its market leadership position in both the WIC and non-WIC segments. In adult nutrition, sales increased 2%, driven by growth of 3.5% in the US as retail consumption data continues to trend in a positive direction. We also continue to deliver strong growth on a sequential basis, with worldwide nutrition sales increasing more than $100 million compared to Q2. Finally, we continue to make good progress advancing our innovation pipeline. During the quarter, we launched a new version of our Similac infant formula made with whole milk. This new product is the first and only commercially sterile, ready-to-feed liquid infant formula made with whole milk available in the United States. Turning to EPD, where sales increased 8.5% in the quarter.

Speaker #3: In adult nutrition, sales increased 2%, driven by growth of 3.5% in the US as retail consumption data continues to trend in a positive direction.

Speaker #3: We also continue to live strong growth on a sequential basis with worldwide nutrition sales increasing more than $100 million compared to the second quarter.

Speaker #3: And finally, we continue to make good progress advancing our innovation pipeline during the quarter. We launched a new version of our Similac informed formula made with whole milk.

Speaker #3: This new product is the first and only commercially sterile, ready-to-feed liquid infant formula made with whole milk available in the United States. Turning to EPD, where sales increased 8.5% in the quarter.

Robert Ford: Our broad portfolio of prescription and over-the-counter medicines, tailored to address local healthcare needs, continues to drive strong growth across emerging markets. Growth in the quarter was broad-based across geographies and therapeutic areas, and this included double-digit growth in several countries across Asia, Latin America, and the Middle East, highlighting the strong and durable demand that has long been a hallmark of this business. I will wrap up with medical devices, where sales grew 8%. Growth was well-balanced across a portfolio led by double-digit growth in electrophysiology and rhythm management. In electrophysiology, our Q3 results reflect the early beginning of our growth acceleration phase. Growth in the quarter was mid-teens or high teens when excluding LAA. In the US, growth was in the high teens and exceeded 20%, excluding LAA.

Speaker #3: Our broad portfolio of prescription and over-the-counter medicines, tailored to address local healthcare needs, continues to drive strong growth across emerging markets. Growth in the quarter was broad-based across geographies and therapeutic areas, and this included double-digit growth in several countries, across Asia, Latin America, and the Middle East.

Speaker #3: Highlighting the strong and durable demand that has long been a hallmark of this business. And I'll wrap up with medical devices, where sales grew 8%.

Speaker #3: Growth was well-balanced across the portfolio led by double-digit growth in electrophysiology and rhythm management. In electrophysiology, our third quarter results reflect the early beginning of our growth acceleration phase.

Speaker #3: Growth in the quarter was mid-teens, or high-teens when excluding LAA. In the US, growth was in the high-teens and exceeded 20% excluding LAA. This performance was driven by increasing adoption of our new Volt PFA catheter, with momentum accelerating in September following the transition to a full US market release in mid-August.

Robert Ford: This performance was driven by increasing adoption of our new Volt PFA catheter, with momentum accelerating in September following the transition to a full US market release in mid-August. International growth also accelerated as we continue to capture market share in Europe, driven by increasing uptake of our new PFA catheters and growth in other categories across our broad portfolio. In September, we received FDA approval earlier than expected for our TactiFlex Duo catheter. This catheter enables physicians to seamlessly switch between using RF and PFA energy during a procedure. Given physicians' familiarity with the TactiFlex platform, we expect to execute a broad US launch starting in Q4. In Q3, we also received CE mark for our new Amulet 360 left atrial appendage device, designed to help reduce the risk of stroke in patients with AFib.

Speaker #3: International growth also accelerated as we continue to capture market share in Europe, driven by increasing uptake of our new PFA catheters and growth in other categories across our broad portfolio.

Speaker #3: In September, we received FDA approval earlier than expected, for our Tactiflex Duo catheter. This catheter enables physicians to seamlessly switch between using RF and PFA energy during a procedure, giving physicians familiarity with the Tactiflex platform.

Speaker #3: We expect to execute a broad US launch starting in the fourth quarter. In the third quarter, we also received CE mark for our new Amulet 360 left atrial appendage device, designed to help reduce the risk of stroke in patients with AFib.

Robert Ford: We look forward to bringing this new technology to the US. In rhythm management, sales grew 10%, driven by increased adoption of AVEIR across both single and dual-chamber segments of the pacemaker market. This expanding use of AVEIR is occurring in both the US and international markets. In diabetes care, continuous glucose monitoring sales grew 8% in the quarter. In August, we received FDA approval for Libre Duo, the world's first dual-glucose ketone bio-wearable sensor. This marks the first time that people with diabetes will be able to monitor ketones without the need for traditional blood or urine tests, and we expect to launch this new sensor in the US in December. In summary, we delivered an acceleration in growth on both top and bottom lines.

Speaker #3: We look forward to bringing this new technology to the U.S. In rhythm management, sales grew 10%, driven by increased adoption of AIR across both single- and dual-chamber segments of the pacemaker market.

Speaker #3: This expanding use of AVAIR is occurring in both the US and international markets. And in diabetes care, continuous glucose monitoring sales grew 8% in the quarter.

Speaker #3: In August, we received FDA approval for Libre Duo, the world's first dual glucose-ketone biosensor. This marks the first time that people with diabetes will be able to monitor ketones without the need for traditional blood or urine tests.

Speaker #3: And we expect to launch this new sensor in the US in December. So in summary, we delivered an acceleration in growth on both top and bottom lines, innovation continues to be a key differentiator for ABBOTT, highlighted by multiple new product approvals and launches that further strengthen our ability to deliver sustainable growth in the years ahead.

Robert Ford: Innovation continues to be a key differentiator for Abbott, highlighted by multiple new product approvals and launches that further strengthen our ability to deliver sustainable growth in the years ahead. We took an important strategic step towards shaping our future through the planned creation of a new market-leading nutrition company. I will now turn over the call to Phil.

Speaker #3: And we took an important strategic step toward shaping our future through the planned creation of a new market-leading nutrition company. I'll now turn over the call to Phil.

Phil Boudreau: Thanks, Robert. Let me begin my remarks with an overview of some of the key aspects of our planning process for the separation. The new nutrition company will become a publicly traded company through a planned tax-free distribution to Abbott shareholders. Upon completion of the separation, Abbott shareholders will own shares of both Abbott and the new nutrition company, enabling our shareholders to participate in the value creation opportunities of both businesses. The final share distribution ratio will be communicated prior to the separation, which we anticipate completing by the end of next year, subject to the required approvals. We expect to incur separation-related costs as we progress through the separation process. These costs will be treated as specified items and excluded from adjusted earnings. As a result, we do not expect the separation to have an impact on we plan to provide in January.

Speaker #2: Thanks, Robert. Let me begin my remarks with an overview of some of the key aspects of our planning process for the separation. The new nutrition company will become a publicly traded company through a planned tax-free distribution to ABBOTT shareholders.

Speaker #2: Upon completion of the separation, ABBOTT shareholders will own shares of both ABBOTT and the new nutrition company enabling our shareholders to participate in the value creation opportunities of both businesses.

Speaker #2: The final share distribution ratio will be communicated prior to the separation, which we anticipate completing by the end of next year, subject to the required approvals.

Speaker #2: We expect to incur separation-related costs as we progress through the separation process. These costs will be treated as specified items and excluded from adjusted earnings.

Speaker #2: As a result, we do not expect the separation to happen impact on. We plan to provide in January. As we prepare for the separation, we intend to establish capital structures that ensure both companies have a strong financial foundation.

Phil Boudreau: As we prepare for the separation, we intend to establish capital structures that ensure both companies have a strong financial foundation. This includes ensuring adequate capital to support long-term growth objectives and capital allocation priorities while maintaining strong investment-grade credit ratings for both companies. As part of that process, we are planning for the new company to raise debt, with a portion of the proceeds to be distributed to Abbott. The amount of debt to be raised and the amount to be distributed to Abbott will be determined at a later date. Finally, we expect that both Abbott and the new nutrition company will pay a dividend, that when combined, will equal Abbott's dividend at the time of the separation. Following the separation, we expect Abbott's financial profile to reflect an acceleration in the sales growth and increased profitability.

Speaker #2: This includes ensuring adequate capital to support long-term growth objectives and capital allocation priorities while maintaining strong investment-grade credit ratings for both companies. As part of that process, we are planning for the new company to raise debt with a portion of the proceeds to be distributed to ABBOTT, the amount of debt to be raised and the amount to be distributed to ABBOTT will be determined at a later date.

Speaker #2: Finally, we expect that both Abbott and the new nutrition company will pay a dividend that, when combined, will equal Abbott's dividend at the time of the separation.

Speaker #2: Following the separation, we expect ABBOTT's financial profile to reflect an acceleration in the sales growth and increased profitability. Excluding the current profile of the nutrition business from the current profile of the ABBOTT portfolio, we would expect sales growth to accelerate by 50 to 100 basis points, gross margin as a percent of sales to increase by more than 200 basis points, and an operating margin as a percent of sales to increase by approximately 100 basis points.

Phil Boudreau: Excluding the current profile of the nutrition business from the current profile of the Abbott portfolio, we would expect sales growth to accelerate by 50 to 100 basis points, gross margin as a percent of sales to increase by more than 200 basis points, and an operating margin as a percent of sales to increase by approximately 100 basis points. Now, turning to our Q3 results. Sales increased 7% on a comparable basis, and adjusted earnings per share of $1.42 was in line with our guidance and the consensus estimate. Foreign exchange had an unfavorable year-over-year impact of 0.4% on Q3 sales, which was a slight improvement compared to our expectations at the time of our earnings call in July. Regarding other aspects of the P&L, the adjusted gross margin profile was 57.2% of sales, representing an increase of 140 basis points compared to the prior year.

Speaker #2: Now, turning to our third-quarter results. Sales increased 7% on a comparable basis, and adjusted earnings per share of $1.42 were in line with our guidance and the consensus estimate.

Speaker #2: Foreign exchange had an unfavorable year-over-year impact of 0.4% on third quarter sales, which was a slight improvement compared to our expectations at the time of our earnings call in July.

Speaker #2: Regarding other aspects of the P&L, the adjusted gross margin profile was 57.2% of sales, representing an increase of 140 basis points compared to the prior year.

Phil Boudreau: The improvement in gross margin was broad-based, reflecting favorable business mix within the legacy Abbott portfolio and from the addition of Exact Sciences, as well as the continued operational improvements and disciplined execution of our margin expansion initiatives. Adjusted R&D was 6.9% of sales and adjusted SG&A was 26.9% of sales. Our operating margin of 23.4% expanded by 40 basis points compared to the prior year. Based on current rates, we expect exchange to have a negative impact of approximately 1% on Q4 sales. For the Q4, we forecast adjusted earnings per share of $1.62 to $1.67. With that, we will now open the call for questions.

Speaker #2: The improvement in gross margin was broad-based, reflecting favorable business mix within the legacy Abbott portfolio and from the addition of Exact Sciences, as well as continued operational improvements in disciplined execution of our margin expansion initiatives.

Speaker #2: Adjusted R&D was 6.9% of sales, and adjusted SG&A was 26.9% of sales. Our operating margin of 23.4% expanded by 40 basis points compared to the prior year.

Speaker #2: And based on current rates, we expect exchange to have a negative impact of approximately 1% on fourth-quarter sales. For the fourth quarter, we forecast adjusted earnings per share of $1.62 to $1.67.

Speaker #2: With that, we'll now open the call for questions.

Operator: 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 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 speakerphone when asking your question. Again, that is star one one to ask a question. Please stand by while we compile our Q&A roster. Our first question will come from Robert Marcus from J.P. Morgan. Your line is open.

Speaker #1: 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 1-1 on your telephone.

Speaker #1: You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. For optimal sound quality, we kindly ask that you use your handset instead of your speakerphone when asking your question.

Speaker #1: Again, that's star 11 to ask a question. Please stand by while we compile our Q&A roster. And our first question will come from Robert Marcus from JPMorgan.

Speaker #1: Your line is open.

Robert Marcus: Great. Good morning, and thanks for taking the questions. I am sure others will ask on the business and the guide, but Robert, given the news this morning on nutrition, I wanted to start with that to make sure we address it. Maybe you could run through the strategic rationale, why now, why spin versus sell, and any other important points you want to highlight for us. Thanks a lot.

Speaker #3: Great. Good morning, and thanks for taking the questions. I'm sure others will ask about the business and the guidance, but Robert, given the news this morning on Nutrition, I wanted to start with that to make sure we address it.

Speaker #3: Maybe you could run through the strategic rationale: why now, why spin versus sell, and any other important points you want to highlight for us.

Speaker #3: Thanks a lot.

Robert Ford: Sure, Robbie. I actually think that is the right call to start off, the right question to start off with, to be quite honest. It is a pretty big announcement for us, and we have gone through a lot of work to be able to make this announcement today. I have seen a lot of notes being written about the portfolio, and all of those notes are from sum of the parts and kind of growth rates and impact to growth rates and margin profiles, and I think Phil mentioned some of those. Those are all, I would say, good outputs of a decision like this. But I think it really starts with a very simple, as I laid it out, which is there is a huge opportunity that I think is building in this market, in this segment.

Speaker #2: Sure, Robbie. I actually think that's the right call to start off, the right question to start off with, to be quite honest. It's a pretty big announcement for us, and we've gone through a lot of work to be able to make this announcement today.

Speaker #2: I've seen a lot of notes be written about kind of the portfolio and all of those notes are from a some of the parts and kind of growth rates and impact of growth rates and margin profiles, and I think Phil mentioned some of those.

Speaker #2: And those are all, I would say, good outputs of a decision like this, but I think it's really starts with a very simple as I laid it out, which is there's a huge opportunity that I think is building in this market, in this segment.

Robert Ford: We are seeing a shift towards a much more healthy nutrition behavior from consumers, not just in this country, but around the world. You are seeing a lot of traditional food companies try to reposition their portfolios, moving away from ultra-processed to try and look at their portfolios and ultimately try and build portfolios that try to mimic actually the portfolio that we actually have today. I just think that strategically over the next decade, there is going to be a lot of segments in this nutrition business that we built.

Speaker #2: And we're seeing a shift towards a much more healthy nutrition behavior from consumers, not just in this country, but around the world. You're seeing a lot of traditional food companies try to reposition their portfolios moving away from ultra-processed to try and look at their portfolios, and ultimately try and build portfolios that try to mimic actually the portfolio that we actually have today.

Speaker #2: So I just think that, strategically, over the next decade, there are going to be a lot of segments in this nutrition business that we've built that are going to be very differentiated and kind of high-growth.

Robert Ford: That are going to be very differentiated and kind of high growth. If you look at Nutrition's portfolio, its position today, the capabilities that it has, it is destined to be a market leader and a market shaper of that entire segment that is going to have this accelerating growth here. But they are going to need to adapt, as I said in my comment, they are going to need to evolve. Ultimately they are going to need to invest in sales and marketing, even maybe look at tuck-in M&A from their perspective to accelerate their growth rates and all of that. We just came to the conclusion that this was too exciting of an opportunity, and we just believe that all the things that they would need to do, they would probably be able to do it faster and more efficiently and effectively, as an independent company.

Speaker #2: And if you look at nutrition's portfolio, its position today, the capabilities that it has, it is destined to be a market leader and a market shaper of that entire segment that's going to have this accelerating growth here.

Speaker #2: But they are going to need to adapt. As I said in my comment, they are going to need to evolve. And ultimately, they are going to need to invest.

Speaker #2: Invest in kind of sales and marketing, even maybe look at tucking M&A from their perspective to accelerate their growth rates and all of that.

Speaker #2: And I just we just came to the conclusion that this was too exciting of an opportunity and we just believe that all the things that they would need to do, they'd probably be able to do it faster and more efficiently and effectively as an independent company.

Robert Ford: It really just comes down to that. Yes, there is, I would say, the ancillary effects of those decisions. Robbie, I think you have done a good analysis on that in terms of what that does for our growth rates and all of that. But I think it really comes down to really the driver of the decision is this is going to be an exciting space, and as a result, we think that the nutrition business is going to be able to capitalize better on that by being an independent company. From a financial asset perspective, I think this is going to be a very, as we look at the spin, I think this is going to be a very, very unique asset.

Speaker #2: So it really just comes down to that. Yeah, there's the, I would say, the ancillary effects of those decisions Robbie. I think you've written good done a good analysis on that in terms of what that does to for a growth rates and all of that.

Speaker #2: But I think it really comes down to, really, the driver of the decision is: this is going to be an exciting space, and as a result, we think that the Nutrition business is going to be able to capitalize better on that by being an independent company.

Speaker #2: From a financial asset perspective, I think this is going to be a very, as we look at the spin, I think this is going to be a very, very unique asset if you benchmark it versus its category peers.

Robert Ford: If you benchmark it versus its category peers, and not necessarily versus kind of the med tech peers that they are currently part of right now, it will be a very differentiated asset, whether you think about growth, mix, the scientific capabilities it has, its growth prospects. It is going to be, as I said, the only truly global scaled pure play in this kind of healthy nutrition. So I think this is going to be a very distinct asset. To your question on why now, listen, we have got a history of shaping the company. I think that is one of the hallmarks of Abbott, and that is I think why we are still relevant today after 138 years, is that we will look at shaping the portfolio to align to where we see the market trending and where we see clinical needs and problems to be solved occurring.

Speaker #2: And not necessarily versus kind of the medtech peers that they're currently part of right now. It'll have a very it'll be a very differentiated asset whether you think about growth, mix, the scientific capabilities it has, its growth prospects, it's going to be, as I said, the only scaled truly global scaled pure play in this kind of healthy in this kind of healthy nutrition.

Speaker #2: So I think this is going to be a very, very distinct asset to your question on why now. Listen, we've got a history of shaping the company.

Speaker #2: I think that's one of the hallmarks of Abbott, and that's, I think, why we're still relevant today after 138 years: we look at shaping the portfolio to align with where we see the market trending and where we see clinical needs and problems to be solved occurring.

Robert Ford: But as you do that, you also need to be thinking about sequencing, and I think sequencing here is a key element as you think about shaping the portfolio. And there are very different elements of shaping. But for me, from an operational standpoint, I just think you need to be mindful of organizational bandwidth and ability for the organization here to absorb the moves. We have an order of events in mind of how we're thinking about things. I think we identified, for example, if you go back a couple of years, we identified precision diagnostics as the next area that we wanted to be a part of. So we announced our acquisition of Exact Sciences last year. The integration is going great. Actually, I think we've done a lot of heavy lifting in these first 6 months, we've got a lot done.

Speaker #2: But as you do that, you also need to be thinking about sequencing. And I think sequencing is a key element as you think about shaping the portfolio.

Speaker #2: And there are very different elements of shaping, but for me, from an operational standpoint, I just think you need to be mindful of kind of organizational bandwidth and ability for the organization here to absorb the moves so we have an order of events in mind of how we're thinking about things.

Speaker #2: I think we identified, for example, if you go back a couple of years, we identified precision diagnostics as the next area that we wanted to we wanted to be a part of.

Speaker #2: So we announced our acquisition of Exact Sciences last year. The integration has gone great. Actually, I think we've done a lot of heavy lifting in these first six months.

Speaker #2: We've got a lot done. I'm sure we'll talk about that, too. So, I just think that now is the right time to start that process of creating the new company.

Robert Ford: I'm sure we'll talk about that too. So I just think that now is the right time to start that process of creating the new company. It's coming from a position of strength, as I said in my comment. I think I read a story that just came out, a headline that just came out on Barron's, who got it totally wrong, I'm just going to say it. It's coming out of a position of strength, and we've got a very sustainable growth model. If you look at the volume growth that Nutrition had this quarter and what we're projecting to have in the next few quarters, it is significantly higher than what its peer set is, given the portfolio that we've built and the segments that we're in. So the business has returned to growth. The pipeline is very healthy. We're bringing innovations to the market.

Speaker #2: It's coming from a position of strength, as I said in my comment. I think I read a story that just came out—a headline that just came out on Barron's—who got it totally wrong.

Speaker #2: I'm just going to say it. I mean, it's coming out of a position of strength. And we've got a very sustainable growth model. If you look at the volume growth that Nutrition had this quarter and what we're projecting to have in the next few quarters, it is significantly higher than what its peers said, given the portfolio that we built and the segments that we're in.

Speaker #2: So, the business has returned to growth. The pipeline is very healthy. We're bringing innovations to the market. There's going to be a lot of interesting innovation over the next 12 months here.

Robert Ford: There's going to be a lot of interesting innovation over the next kind of 12 months here. Got strong brands, experienced and very capable team. As I said in my comment, I specifically chose the term battle-tested because that's kind of what it felt like over the last 4 or 5 years. And if I had to pick a team to go into battle with in this nutrition space, I'd pick that team. I think they've navigated very well, everything that they've done, and all the environment that they've operated in. So I think this is just a unique opportunity for us and for the nutrition business. And I think you had a question on spin versus sell.

Speaker #2: Got strong brands, experienced and very capable team. As I said in my comment, I specifically chose the term battle tested because that's kind of what it felt like over the last four or five years.

Speaker #2: And if I had to pick a team to go into battle with in this nutrition space, I'd pick that team. I think they've navigated it very well.

Speaker #2: Everything that they've done and all the environment that they've operated in. So I think this is just a unique opportunity for us and for the nutrition business.

Speaker #2: And I think you had a question on spin versus sell. Yeah, I mean, we just thought that we just thought that this was after we went through the analysis, after you make a decision that it's probably going to operate better as an independent company, what's the right mechanism there to be able to position it to be a leading company and ultimately to drive shareholder value?

Robert Ford: Yeah, we just thought that this was, after we went through the analysis, after you make a decision that it's probably going to operate better as an independent company, what's the right mechanism there to be able to position it to be a leading company and ultimately to drive shareholder value? And we just concluded that the spin-off here was absolutely the right approach. A sale of a business like this, as I said, we've been in this business since the 1960s. So you think about the sale, the sale's going to come with an obvious tax implication there. And then a timeline that is not necessarily entirely within our control here. So I think these two factors might be a little bit prohibitive here for anybody that's got any interest.

Speaker #2: And we just concluded that the spin-off here was absolutely the right approach. A sale of a business like this, as I said, we've been in this business since the 1960s.

Speaker #2: So, you think about the sale—the sale is going to come with an obvious tax implication there. And then, a timeline that is not necessarily entirely within our control here.

Speaker #2: So I think these two I think these two factors might be a little bit prohibitive here for anybody that's got any interest. So we have no interest in selling the business, have no intention to selling, not even looking at selling it, and just think that the spin-off is the better value creation for shareholders here.

Robert Ford: We have no interest in selling the business, have no intention to selling, not even looking at selling it, and just think that spin-off is the better value creation for shareholders here. Obviously, we have done a couple of spin-offs in our history. Those have gone very well. Obviously different circumstances, different times, different management teams. But I think one of the things that is clear to us in these processes is I think one of the big indications here of a successful spin, I think a lot is attributed, I think, to a very highly group of Abbott people that become founders, so to say, of the new company, and they instill a lot of the Abbott culture and the Abbott way of doing things into that business. And I think that helps set a strong foundation here. Like I said, I think this is a unique opportunity.

Speaker #2: We've done a couple, obviously. We've done a couple of spin-offs in our history; those have gone very well. Obviously, different circumstances, different times, different management teams.

Speaker #2: But I think one of the things that is clear to us in these processes is I think one of the big indicatives indications here of a successful spin, I think a lot is attributed, I think, to a very highly group of ABBOTT people that become founders so to say of the new company.

Speaker #2: And they instill a lot of kind of the ABBOTT kind of culture and the ABBOTT way of doing things. Into that business. And I think that helps set a strong foundation here.

Speaker #2: So like I said, I think this is a unique opportunity. Growing demand for healthy nutrition. This will be a very differentiated asset here. And that's why I thought the spin was the better move here.

Robert Ford: Growing demand for healthy nutrition. This will be a very differentiated asset here, and that is why I thought the spin was the better move here. And obviously, we are going to be working over the next 12 months here to be able to get ready for that. And as we do with these, I think, Robbie, is we are obviously going to prepare to set up the nutrition company for success. But it is also an opportunity for us to re-look also at existing Abbott and looking at our cost profiles and things like that. It is going to be a great opportunity for us to re-look at everything from that perspective. So I think I am excited about this. I think this was a good process. I think we came to the right long-term strategic decision here. And now it is all about execution.

Speaker #2: So and obviously, we're going to be working over the next kind of 12 months here to be able to get ready for that. And as we do with these, I think Robbie is we obviously are going to prepare to set up the nutrition company for success.

Speaker #2: But it's also an opportunity for us to really look also at existing ABBOTT and looking at our cost profiles and things like that. It's going to be a great opportunity for us to relook at everything from that perspective.

Speaker #2: So, I think I'm excited about this. I think this was a good process. I think we came to the right long-term strategic decision here.

Speaker #2: And now it's all about execution.

Robert Marcus: Thanks a lot.

Speaker #1: Thanks a lot.

Operator: Thank you. Our next question will come from Larry Biegelsen from Wells Fargo. Your line is open.

Speaker #3: Thank you. Our next question will come from Larry Beagleson from Wells Fargo. Your light is open.

Larry Biegelsen: Good morning. Thanks for taking the question. Robert, congrats on the nutrition spin. Just confirm, please, that the NEC liability will remain with Abbott. That seems logical from what we have seen from other spins. Secondly, can you please talk about the drivers of the revenue guidance reduction this year? It looks like it implies about 8% growth in Q4, and what are the implications for 2027? Thank you.

Speaker #4: Good morning. Thanks for taking the question. Robert, congrats on the Nutrition spin. Just confirm, please, that the NEX liability will remain with Abbott. That seems logical from what we've seen from other spins.

Speaker #4: And secondly, can you please talk about the drivers of the revenue guidance reduction this year? It looks like it implies about 8% growth in Q4.

Speaker #4: And what are the implications for 2027? Thank you.

Robert Ford: Sure. I figured this question would come up, Larry. I thought it would come up a little bit down in the list here. Well, I think like you said, as it pertains to the announcement that we just made, how to deal with litigation matters is a common topic when it comes to business separations. We are not the first company that has had to deal with this, like you said. Actually, pretty clear that we do not need to fully resolve the litigation matters. It is not a prerequisite for completing the separation. I would say both Abbott and the new company are going to be well-capitalized. Well-capitalized to pursue their respective growth opportunities, well-capitalized to execute the respective capital allocation priorities that they might have, and also well-capitalized to continue to defend the legal positions here.

Speaker #2: Sure. I figured this question would come up, Larry. I thought it would come up a little bit down in the list here. But well, I mean, I think like you said, as it pertains to the announcement that we just made, how to deal with litigation matters is it's a common topic when it comes to business separations.

Speaker #2: We're not the first company that's had to deal with this, like you said. I don't think actually. Pretty clear that we don't need to fully resolve the litigation matters it's not a prerequisite for completing the separation.

Speaker #2: I'd say both ABBOTT and the new company are going to be well capitalized. Well capitalized to pursue their respective growth opportunities, well capitalized to execute the respective capital allocation priorities that they might have.

Speaker #2: And also, we're well capitalized to continue to defend the legal positions here. I'll provide more details on this as we progress, in terms of exactly where the liability will sit.

Robert Ford: I will provide more details of that as we progress in terms of exactly where the liability will sit. But for me, both companies are going to be super well-capitalized to be able to deal with that. At the same time, I think we continue to focus on achieving what we want to be a logical and sensible kind of resolution. You saw we took a meaningful step back in August when we settled 2,000 claimants. But that settlement in no way reflects any change to the position that I have made here about these products, which is continue to stand behind their efficacy and safety. They remain essential component to neonatal care. They are a standard of care. I think if these products were not available, I think you would see a little bit of a public health crisis there.

Speaker #2: But for me, both companies are going to be super well capitalized to be able to deal with that. At the same time, I think we continue to focus on achieving what would what we would want to be a logical and sensible kind of resolution.

Speaker #2: You saw we took meaningful step back in August when we settled 2,000 claimants. But that settlement in no way reflects any change to the position that I've made here about these products, which is continue to stand behind their efficacy and safety.

Speaker #2: They remain essential components to neonatal care. They are a standard of care. I think if these products weren't available, I think you would see a little bit of a public health crisis there.

Robert Ford: I think that view is supported by regulators and medical societies, including the FDA, NIH, CDC, and the American Academy of Pediatrics. I think the litigation environment now is shifting a little bit, I would say, a little bit to our favor. We prevailed a lot in federal MDL cases, and there is going to be important decisions in both federal and state courts that have helped increase our position. So we will provide updates as we go through the process in terms of a little bit more specificity and details. All I can say is it is not a prerequisite to resolve it before the separation, and both companies will be well-capitalized to be able to deal with this. What was your second question, Larry?

Speaker #2: And I think that view is supported by regulators and medical societies, including the FDA and IHCDC. And the American Academy of Pediatrics. So I think the litigation environment now is shifting a little bit.

Speaker #2: I would say a little bit to our favor. We prevailed a lot in federal MDL cases. And there's going to be an important decisions in both federal and state courts that have helped increase our position.

Speaker #2: So we'll provide updates as we go through the process in terms of a little bit more specificity and details. But all I can say is not a prerequisite to resolve it before the separation.

Speaker #2: And both companies will be well-capitalized to be able to deal with this. So, and then—sorry, what was your second question, Larry?

Larry Biegelsen: Yeah, sorry. The revenue guidance reduction, I think to 6% this year implies about 8% for Q4. What was the driver or drivers of the revenue reduction and implications for next year? Thank you.

Speaker #4: Yeah, sorry. The revenue guidance reduction, I think, to 6%. This year implies about 8 for Q4. What was the driver or drivers of the revenue reduction and implications for next year?

Robert Ford: Sure. Yeah, listen, our Q3 growth was in line with the expectation of 7%. We had the normal puts and takes, Larry, that you have when it comes to managing a large portfolio like us. We had two businesses that beat expectations, one business that met expectations, and then one business that missed expectations. The reduction in Q4 for the full year, around 6%, like you said, implies just north of 8%, which is at least accelerating versus where we were in Q3. I mean, it is really driven by two businesses here. I would characterize these as, they are not kind of permanent changes to the growth rate. It is just adjusting based on kind of what we are seeing right now, which is EP and diabetes. Let me unpack that a little bit for you.

Speaker #4: Thank you.

Speaker #2: Sure, sure. Yeah, listen, our Q3 growth was in line with the expectation of 7%. We had the normal puts and takes, Larry, that you have when it comes to managing a large portfolio like us.

Speaker #2: We had two businesses that via expectations, one business that met expectations and then one business that missed expectations. So the reduction in Q4 to for the full year around 6%, like you said, implies just north of 8%, which is at least accelerating versus where we were in Q3.

Speaker #2: I mean, it's really driven by two businesses here. And I would characterize these as, they're not kind of permanent changes to the growth rate.

Speaker #2: It's just adjusting based on what we're seeing right now, which is EP and diabetes. So let me unpack that a little bit for you.

Robert Ford: In EP, we are facing some short-term headwind from the dynamics related to the LAA market. It has become an increasingly headwind to our EP growth, not only due to the market challenges that I think a competitor has discussed pretty ample. I would say for us, so we saw that maybe with a quarter or two delayed versus where they were seeing it. Maybe that is just because of our size and market share position. What was interesting is as soon as we got CE mark for the new LAA device, there was almost like an immediate slowdown in orders here in the US as I think accounts are waiting for the new product. That is probably a little bit different for us.

Speaker #2: NEP we're facing some short-term headwind from the dynamics related to the LEA market. It's become an increasingly headwind to our EP growth, not only due to the market challenges that I think competitor has discussed pretty ample.

Speaker #2: But I'd say for us, we saw that maybe with a quarter or two delay versus where they were seeing it. And maybe that's just because of our size and market share position.

Speaker #2: But what was interesting is as soon as we got CE mark for the new LEA device, there was almost like an immediate slowdown in orders here in the US.

Speaker #2: As I think accounts are waiting for the new product. So that's probably a little bit different for us. And so when I got that, I was like, really?

Robert Ford: So when I got that, I was like, "Really?" They were able to show me clearly trends that we were seeing, even with the slowdown and the impact of that CE mark. So I expect that dynamic to be there in Q4, and I think that is going to be the last quarter where we are going to see this dynamic of accelerating kind of ablation business being offset a little bit by this headwind here. I think as we bring in Amulet 360 to the market, I think we will start to kind of reignite that growth and capture share. At least that is my goal. But listen, despite the headwind, as I said in the prepared comments, I think the quarter we exited with a lot of great momentum. Continued to capture share in Europe. Europe growth was up 25%, and you have both platforms there, Volt and TactiFlex Duo.

Speaker #2: And they were able to show me clearly kind of trends that we were seeing even with the slowdown. And the impact of that CE mark.

Speaker #2: So I expect that dynamic to be there in Q4. And I think that's going to be the last quarter where we're going to see this dynamic of accelerating kind of ablation business being offset a little bit by this headwind here.

Speaker #2: I think as we bring in 360 to the market, I think we'll start to kind of reignite that growth and capture share. At least that's my that's my goal.

Robert Ford: At least that is my goal. But listen, despite the headwind, as I said in the prepared comments, I think the quarter we exited with a lot of great momentum. Continued to capture share in Europe. Europe growth was up 25%, and you have both platforms there, Volt and TactiFlex Duo.

Speaker #2: But listen, despite the headwind, as I said in the prepared comments, I think the quarter we acted with a lot of great momentum. Continue to capture share in Europe.

Speaker #2: Europe growth was up 25%. And you have both combination you have both platforms there, Bolt and Pactiflex Duo. We're going to launch Bolt in Japan.

Robert Ford: We're going to launch Volt in Japan sometime in Q4. That's going to turn Japan from a headwind to a tailwind for us. Japan kind of followed very much a US-type model where there was very rapid adoption of PFA. We're excited about coming to the market in Q4 in Japan. I think Volt transitioned from limited market release to full market release in the US in mid-August. Q4, you'll have this kind of full quarter of the impact over there. The product's doing very well. I think people might not have understood kind of the dynamics of what a limited market release is, and then how you transition to full market release, and I explained why we do that for all of our products. TactiFlex Duo got approval in September.

Speaker #2: Sometime in the Q4. That's going to turn Japan from a headwind to a tailwind for us. Japan kind of followed very much a US-type model where there was very rapid adoption of PFA.

Speaker #2: So we're excited about coming to the market in the fourth quarter in Japan. And I think both transitioned from limited market release to full market release in the US in mid-August.

Speaker #2: So Q4, you'll have this kind of full quarter of the impact over there. And the product's doing very well. And I think that yeah, I think people might or not have understood kind of the dynamics of what a limited market release is and then how you transition to farm market release.

Speaker #2: And I explained why we do that for all of our products. So Pactiflex Duo got approval in September. That came a little bit earlier than I expected.

Robert Ford: That came a little bit earlier than I expected, and as I said in the comments, this is one where the TactiFlex chassis, I'll say, is widely used already. We'll probably do a very short limited market release here, very short, and then go to full launch already in Q4. I think that's going to provide a lot of momentum here. We've got a lot of catalysts lined up for our EP business. I think the impact of that is about 5 points of growth versus where we were previously around 25%. I think we'll be around 20% in Q4. I still believe even with that number, we're going to be taking market share. That's one of the drivers. The other driver is diabetes.

Speaker #2: And as I said in the comments, this is one where the Pactiflex chassis, like I like I'll say, is widely used already. So we'll probably do a very short limited market release here, very short, and then go to full launch already in Q4.

Speaker #2: So I think that's going to provide a lot of momentum here. So we got a lot of catalysts lined up for our EP business.

Speaker #2: So I think the impact of that is about 5 points of growth versus where we were previously around 25%. I think we'll be around 20% in Q4.

Speaker #2: But I still believe, even with that number, we're going to be taking market share. So that's one of the drivers.

Speaker #2: The other driver is diabetes. I think in the July call, Larry, I talked about how the CGM market had not seen a significant new reimbursement expansion for quite some time.

Robert Ford: I think in the July call, Larry, I talked about that the CGM market had not seen a significant new reimbursement expansion for quite some time, and that led us to revise our diabetes growth outlook to high single. If I look into Q4 right now, and probably for the next few quarters, I expect that growth rate to be in kind of that low to mid-single range. That change really reflects, I think, two things. One of them is a little bit of a harder challenge in penetrating the Type 2 population in absence of the reimbursement expansion. That's probably one kind of key driver. Like I said, that's going to be when we see the reimbursement expansion occur at CMS, then like I said, I think we'll see a very strong kind of reimbursement growth. That's one element there, Larry.

Speaker #2: And that led us to revise our diabetes growth outlook to high single digits. If I look into Q4 right now, and probably for the next few quarters, I expect that growth rate to be in kind of that low to mid single-digit range, and that change really reflects, I think, two things.

Speaker #2: One of them is a little bit of a harder challenge in penetrating the type 2 population in absence of the reimbursement expansion. So that's probably one kind of key driver.

Speaker #2: And, like I said, that's going to be when we see the reimbursement expansion occur at CMS. Then, like I said, I think we'll see a very strong kind of reimbursement growth.

Speaker #2: So that's one element there, Larry. And I think the other element that we're seeing is a little bit more pricing pressure in the international markets.

Robert Ford: I think the other element that we're seeing is a little bit more pricing pressure in the international markets. As you might know, we have significant market share in the international markets. If you look at all the major countries, we'll range between 50% to 70% market share. We've always expected there to be some pricing pressure, especially with the growth of the category and the excitement. Internationally, I think you see a lot more competition, and we've been very good. I think the team's done an excellent job through marketing, through clinical, through all the superiority of the product over the last couple of years to be able to defend that. I actually expected to be a little bit more price pressure internationally, a little bit earlier. I think the team did a really good job there.

Speaker #2: And as you might know, we have significant market share in the international markets. If you look at all the major countries, we'll range between 50 to 70 percent market share.

Speaker #2: And we've always expected there to be some pricing pressure, especially with the growth of the category and the excitement. Internationally, I think you see a lot more competition.

Speaker #2: And we've been very good. I think the team's done an excellent job through marketing, through clinical, and through all the superiority of the product over the last couple of years to be able to defend that.

Speaker #2: So I actually expect it to be a little bit more price pressure internationally a little bit earlier. So I think the team did a really good job there.

Robert Ford: But I think our pricing actions here that we're going to have to take internationally are going to kind of mute a little bit of the volume growth that we're seeing. I think it would be a strategic mistake for us to lose market share based on price in these international markets. We're not having to match the pricing, Larry, but I think we're having to adjust a little bit here as we go through this. I think that's what I'm forecasting here over the next kind of few quarters, is we'll make some pricing adjustments. As we do those, we're going to secure longer term contracts, and then also have language there regarding kind of expansions of patient populations also.

Speaker #2: But I think our pricing actions here that we're going to have to take internationally are going to kind of mute a little bit of the volume growth that we're seeing.

Speaker #2: And I think it would be a strategic mistake for us to lose market share based on price in these international markets. And we're not having to match the pricing, Larry, but I think we're having to adjust a little bit here as we go through this.

Speaker #2: And I think that's what I'm forecasting here over the next kind of few quarters, is we'll make some pricing adjustments as we do those.

Speaker #2: We're going to secure longer-term contracts and then also have language there regarding it kind of expansions of patient populations also. So I think you have this dynamic here for a couple of quarters in our diabetes business.

Robert Ford: I think you have this dynamic here for a couple of quarters in our diabetes business, so that we can make sure that we can defend our market share position. Then I think what you'll see then is kind of similar to kind of decisions we made in other parts of the portfolio where you have a little bit of an impact for a couple of quarters, and then you kind of reignite. I don't think this is at all any issue with the market. I've been pretty adamant about the ability still for there to be lots of market penetration. But we're not going to have our heads in the sand here and just think that you've got this great market and not expect there to be some price competition.

Speaker #2: So that we can make sure that we can defend our market share position. And then I think then I think what you'll see then is kind of similar to kind of decisions we made in other parts of the portfolio where you have a little bit of an impact for a couple of quarters.

Speaker #2: And then you kind of reignite. I don't think this is at all any issue with the market. I've been pretty adamant about the ability still for there to be lots of market penetration but I mean, we're not going to have our heads in the sand here and just think that you've got this great market and not expect there to be some price competition.

Robert Ford: The good thing for us, though, I would say is because of the scale that we built and because we've been planning for this and being ready for this, we're going to be able to offset the margin impact of that through our COGS programs and the things that we've been doing in our manufacturing setup. I think that's really the driver. But I would say, we got plenty of growth opportunities also, Larry. So when I set that target as low to mid, if I look at what we've got ahead of us, Libre Duo is going to launch. We really haven't launched that product yet, and I think that's going to be a nice growth driver for us next year.

Speaker #2: The good thing for us, though, I would say, is because of the scale that we've built and because we've been planning for this and being ready for this, we're going to be able to offset the margin impact of that through our COGS programs and the things that we've been doing in our manufacturing setup.

Speaker #2: So I think that's really the driver. But I would say if you look at we got plenty of growth opportunities also, Larry. So when I kind of set that target, it kind of low to mid.

Speaker #2: If I look at what we've got ahead of us, Libre Duo is going to launch. We're really having to launch that product yet. And I think that's going to be a nice growth driver for us next year.

Robert Ford: We're going to have a benefit here in the US from a pretty significant payer formulary coverage that flipped in our favor, and that's going to go into effect 1 January. So there's a lot of growth opportunities that we've got in our diabetes business. Would I be surprised that we would do much better than that next year? It would not surprise me at all that we would do better. But at this point, I'd say we got to make sure we get the pricing aspect right, and then as we go through the year, we'll be factoring in some of these growth drivers and the implications that they have. So, if you think about 2027, then I think as you're looking at, okay, how does that translate into 2027? I expect to see acceleration in our total company growth rate.

Speaker #2: We're going to have a benefit here in the US from a pretty significant payer formulary. Coverage that flipped in our favor. And that's going to go into effect January 1st.

Speaker #2: So, there's a lot of growth opportunities that we've got in our diabetes business. Would I be surprised if we did much better than that next year?

Speaker #2: It would not surprise me at all that we would do better. But at this point, I'd say we've got to make sure we get the pricing aspect right.

Speaker #2: And then we'll, as we go through the year, we'll be factoring in some of these growth drivers and the implications that they have. So if you think about 2027, then I think as you're looking at, okay, how does that how does that translate into 2027?

Speaker #2: I expect to see acceleration in our total company growth rate. And there's a lot of reasons why we would expect that. But I would say we're probably going to take a little bit more of a conservative approach here in terms of how we've guided historically, at least on the top line.

Robert Ford: There is a lot of reasons why we would expect that. I would say we are probably going to take a little bit more of a conservative approach here in terms of how we have guided historically, at least on the top line. We have maintained, I would say, a pretty impressive track record for delivering on our EPS targets. I think if you go back for the last 6 years, we have met or beat our EPS targets every single quarter. If you look at the annual growth rate of what we have been doing to our EPS, it has been around 9% EPS growth. I think we have been really good and strong over there.

Speaker #2: We've maintained, I'd say, a pretty impressive track record for delivering on our EPS targets. I think if you go back for the last six years, we've met or beat our EPS targets every single quarter.

Speaker #2: And if you look at the annual growth rate of those of what we've been doing for our EPS, it's been around 9% EPS growth.

Speaker #2: So I think we've been really good and strong over there. As it relates to our top line, I think we've been very good. But I'd say the track record here in the last couple of quarters or especially during this year has been a little bit more a little bit more inconsistent.

Robert Ford: As it relates to our top line, I think we have been very good, but I would say the track record here in the last couple of quarters, or especially during this year, has been a little bit more inconsistent, let us call it like that, and we have fallen short from some of the expectations. I think for 2027, I think we will set our guidance that is going to create opportunity for us to move up from there in January. I am not going to give an official guidance here before our January's call, but high level, I would say forecasting sales to be, as we come out of the gate, pretty similar to this year. I think that just probably feels like the right place to start. Larry, I say that while I acknowledge that we have a lot of new product launches this year.

Speaker #2: Let's call it that. And then we fell short of some of the expectations. So, I think for 2027, we'll set our guidance that will create an opportunity for us to move up from there in January.

Speaker #2: I'm not going to give an official guidance here before our January call, but at a high level, I'd say forecasting sales to be, as we come out of the gate, pretty similar to this year.

Speaker #2: And I think that's just probably feels like the right place to start. And Larry, I say that while I acknowledge that we have a lot of new product launches this year.

Robert Ford: There is a lot of carryover from the products we launched this year into next year. There is a lot of new products we are launching in 2027. I get that there is probably some comps also, especially in the first half. I get all that, and all of that would obviously say, "Hey, you probably can accelerate your 2027 growth versus your 2026." I strongly feel that that is going to be the case, but I said to start off, I think we will take a little bit more of a different approach than what we have done in the past. We will be able to go up and move up from there. That being said, we are still going to have great opportunity for gross margin and gross margin expansion. We are still going to have earnings growth. We are still going to be investing in our near and long-term product pipelines.

Speaker #2: There's a lot of carryover from the products we launched this year into next year. There's a lot of new products we're launching in 2027.

Speaker #2: I get that there's probably some comps also especially in the first half so I get all that. And all of that would obviously say, hey, you're probably going to accelerate your 2027 growth versus your 2026.

Speaker #2: I strongly feel that that's going to be the case. But I said to start off, I think we'll take a little bit more of a different approach than what we've done in the past.

Speaker #2: And then we'll be able to kind of go up and move up from there. That being said, we're still going to have great opportunity for gross margin and gross margin expansion.

Robert Ford: That being said, we are still going to have great opportunity for gross margin and gross margin expansion. We are still going to have earnings growth. We are still going to be investing in our near and long-term product pipelines.

Speaker #2: We're still going to have earnings growth. We're still going to be investing in our near and long-term product pipelines. We're still going to be able to generate real strong cash flows.

Robert Ford: We are still going to be able to generate real strong cash flows. We will grow our dividend. All the stuff that you would expect from Abbott, we are going to be doing all of that. I think that is probably the prudent way to start the year, and that is going to give us the opportunity to move up through as the year progresses.

Speaker #2: We'll grow our dividend. All the things that you would expect from Abbott—we're going to be doing all of that. But I think that's probably the prudent way to start the year.

Speaker #2: And that's going to give us the opportunity to kind of move up through the as the year progresses.

Larry Biegelsen: All right. Super helpful. Thank you.

Speaker #1: All right, super helpful. Thank you.

Operator: Thank you. Our next question will come from Patrick Wood from UBS. Your line is open.

Speaker #3: Thank you. Our next question will come from Patrick Wood from UBS, your line is open.

Patrick Wood: Beautiful. Thank you so much for the question. I really appreciate it. I would love to start on the pipeline and really just dig into that, because obviously, you have conduction system pacing midterm, Amulet 360, probably 200 billion of biologic drugs going through LOE. There is obviously a lot midterm that is going on. So I guess my question is in two parts. A, how do you feel about the forward pipeline today compared to the forward pipeline in the past? How would you rate it? B, as you are thinking about it, not asking you to pick your favorite children, but what do you feel like either gets missed by the market or less attention, but something that is really on your radar and very personally a big focus area for you? Thanks.

Speaker #4: Beautiful. Thank you so much for the question. I really appreciate it. I'd love to start on the pipeline and really just dig into that.

Speaker #4: Because obviously, you've got conduction system pacing midterm. I'm in the 360. Probably 200 billion of biologic drugs going through LOE. There's obviously a lot midterm that's going on.

Speaker #4: And so, I guess my question is in two parts. A) How do you feel about the forward pipeline today compared to the forward pipeline in the past?

Speaker #4: How would you rate it? And B, as you're thinking about it, not asking you to pick your favorite children, but what do you feel like either gets missed by the market or less attention, but something that's really on your radar and very personally a big sort of focus area for you?

Speaker #4: Thanks.

Robert Ford: Sure. I love all of our innovations, Pat, so I do not think you are going to get me to go there. But I would say, listen, I think the market recognizes the pipeline that Abbott has built. I do not think that there is a misunderstanding of what we are assembling over here. So we can talk about those, but I do not think there is some misunderstanding. I think it is clearly visible to investors that we have got multiple shots we are developing across all of our businesses. Yeah, and some of them will do better than others, but I think all of them will have great contributions to our growth rate. Yeah, all we need is one or two to completely blow it out, and it changes the entire trajectory. But we are building a pipeline of products organically here that we are anticipating what our customers need, and we are making those investments.

Speaker #2: Sure. I mean, I love all of our innovations, Pat. So I don't think you're going to get me to go there. But I would say, listen, I think the market recognizes the pipeline that Abbott's built.

Speaker #2: I don't think that there is a misunderstanding of what we're assembling over here. So we can talk about those, but I don't think there's some misunderstanding.

Speaker #2: I think it's clearly visible to investors that we've got multiple shots. We're developing across all of our businesses. Yeah, and some of them will do better than others.

Speaker #2: But I think all of them will have great contributions to our growth rate. And yeah, all we need is one or two to kind of completely blow it out.

Speaker #2: And it kind of changes the entire trajectory. But we're building a pipeline of products organically here that we're anticipating what our customers need and we're making those investments.

Robert Ford: But we are building a pipeline of products organically here that we are anticipating what our customers need, and we are making those investments.

Robert Ford: If you look at the R&D spend for Abbott pre-COVID, we were averaging around $1.7 billion, $1.8 billion. We are crossing $3 billion this year. We will be increasing that into next year, which was to my comment in 2027. We are going to continue to make our investments. We are going to continue to expand margins, and we can do all that because of how the portfolio is positioned into these very high growth, high margin, and quite frank, a lot of clinical problems to solve. I think you mentioned a couple of them there. I talked about some of them. I am excited about, you mentioned right off the get-go, the AVEIR CSP that is going into trial right now, the conduction system pacing leadless product. I am excited about that because our goal is to completely change how pacemakers have been used in the past.

Speaker #2: If you look at the R&D spend for Abbott pre-COVID, I mean, we were averaging around $1.7, $1.8 billion. We're crossing $3 billion this year.

Speaker #2: And we'll be increasing that into next year, which was kind of to my comment in 2027. We're going to continue to make our investments.

Speaker #2: We're going to continue to expand margins. And we can do all that because of how the portfolio is positioned into these very high growth, high margin and quite frank, a lot of clinical problems to solve.

Speaker #2: So I think you mentioned a couple of them there. I've talked about some of them. I'm excited about the you mentioned right off the get-go the Avera CSP that's going into trial right now, the conduction system pacing leadless product.

Speaker #2: I'm excited about that because our goal is to completely change how pacemakers have been used in the past. And I think our leadless technology shows that that is possible.

Robert Ford: I think our leadless technology shows that that is possible. We are looking about really building a kind of sustained growth rate here. Many people didn't think that CRM was a growth business, but we are showing that with good innovation, good insights, good relationships with accounts, we can drive that. I am excited about the mitral replacement valve. I have spent some time close to that program, probably a little bit more closer than others, and had opportunity to interact with the KOLs. I know, because I have seen how these things play out, I can read people in terms of how they talk about innovations. You can tell sometimes when an innovation is good, and it will compete well, and you can tell when a KOL tells you that this is really going to be a game changer, and it is going to change the standard.

Speaker #2: And we’re looking at really building a sustained growth rate here. Many people didn’t think that CRM was a growth business. Well, we’re showing that with good innovation, good insights, and good relationships with OKLs, we can drive that.

Speaker #2: I'm excited about the mitral replacement valve. I've spent some time close to that program, probably a little bit more closely than others, and had the opportunity to interact with the KOLs.

Speaker #2: And I know because I've seen how these things play out. I can read people in terms of how they talk about it in innovations.

Speaker #2: And you can tell sometimes when an innovation is good and it'll compete well. And you can tell when a KOL tells you that this is really going to be a game changer.

Speaker #2: And it's going to change kind of the standard. And I think our CEFIA program is going to do that. We've got a balloon-expandable TAVR valve going in.

Robert Ford: I think our Cephea program is going to do that. We have got a balloon expandable TAVR valve going in. We have got IVL programs on the MedTech. We have got neuromodulation kind of investments that we are making also. We are making investments in our Libre platform, not just on a new diabetes sensor, but also looking at how to use the platform that we have built, the manufacturing, the technology platform, to expand into other analytes. We are going to go into trial with a lactate sensor. I can tell you there are at least five or six that the team is really excited that we are funding and that we are working on. Will all of them hit? Probably not, but if two or three hit, it will be incredible, I think, to be able to leverage that. I think you mentioned the biosimilars in our EPD business.

Speaker #2: We've got IVL programs on the med tech. We've got neuromodulation kind of investments that we're making also. We're making investments in our Libre platform, not just on a new diabetes sensor, but also looking at how to use the platform that we've built the manufacturing, the technology platform to expand into other analytes.

Speaker #2: And we're going to go into trial with a lactate sensor. But I can tell you there's at least five or six that the team is really excited that we're funding and that we're working on.

Robert Ford: I can tell you there are at least five or six that the team is really excited that we are funding and that we are working on. Will all of them hit? Probably not, but if two or three hit, it will be incredible, I think, to be able to leverage that. I think you mentioned the biosimilars in our EPD business.

Speaker #2: Will all of them hit? Probably not. But if two or three hit, it'll be incredible, I think, to be able to kind of leverage that.

Speaker #2: So I think you mentioned the biosimilars. In our EPD business, I mean, yeah, there's a significant amount of LOE that's happening in the biologic space.

Robert Ford: I mean, there is a significant amount of LOE that is happening in the biologic space, and a lot of these products aren't available in these emerging markets by decisions from the originator. This is going to be a huge opportunity for us to leverage the regulatory, the government, the physician, the distribution relations that we have to bring these products on. You have got this business that has been growing, at least for the last five years, between 7.5% and 8% pretty consistently every single quarter. I think that that is going to be very exciting also. Then on top of that, we are going to get into a bunch of new tests, new personalized diagnostic tests with our cancer diagnostic business. We are going to be reporting data on our MRD test at ESMO. I am extremely excited about that test.

Speaker #2: And a lot of these products aren't available in these emerging markets. By decisions from the originators. So this is going to be a huge opportunity for us to leverage the regulatory, the government, the physician, the distribution relations that we'll have to bring these products on.

Speaker #2: And you've got this business that's been growing, at least for the last five years, between 7.5% and 8% pretty consistently every single quarter.

Speaker #2: I think that is going to be very exciting also. And then, on top of that, we're going to get into a bunch of new tests—new personalized diagnostic tests—with our cancer diagnostic business.

Speaker #2: Extremely, we're going to be reporting data on our MRD test at ESMO I'm extremely excited about that test. And I think that's going to provide us an opportunity also to start to be a player or at least to compete effectively in that segment of the market.

Robert Ford: And I think it is going to provide us an opportunity also to start to be a player, or at least to compete effectively in that segment of the market. I am sure I am missing a bunch out already too, but I would say there is a deliberate effort on behalf of the entire management team here to make sure that as we find sometimes challenges and we have to look at our operational expenses, that R&D is really never an area that we are going to touch because we feel that our productivity in that, even with a 7% profile, we are getting a lot of productivity out of the pipeline. I think that that is ultimately the lifeline that is going to be the growth driver for us. I am sure that somebody in my team has got a map.

Speaker #2: So I'm sure I'm missing a bunch out already, too. But I'd say there is a deliberate effort on behalf of the entire management team here to make sure that as we find challenges and we have to look at our operational expenses, that R&D is really never an area that we're going to touch. We feel that our productivity in that, even with a 7% profile, we're getting a lot of productivity out of the pipeline.

Speaker #2: So I think that that is ultimately the lifeline that is going to be the growth driver for us. I'm sure that somebody in my team has got a map.

Robert Ford: I am sure that my IR team has a map that lists out all the products between 2028, 2029, 2030, 2031, and those are all projects that we are constantly looking at, looking at ways to accelerate them, looking at ways to make them better. So we feel very good about our pipeline. At the same time, we do not suffer from the syndrome of "not invented here." We never have. Do I prefer to have more of our innovation being organic? I do, but we have got plenty of capacity also to be able to add to the portfolio, and if we see opportunities to do that, we will do that. I have talked about probably going forward, at least for the foreseeable future here in the short term, there will probably be more tuck-in deals. But we can do all that. We can have organic innovation, and we can also look externally.

Speaker #2: I'm sure that my IR team has a map that lists out all the products between '28, '29, '30, and '31. And those are all projects that we're constantly looking at—looking at ways to accelerate them, looking at ways to make them better.

Speaker #2: So, we feel very good about our pipeline. At the same time, we don't suffer from the "not invented here" syndrome. We never have.

Speaker #2: Do I prefer to have more of our innovation being organic? I do. But we've got plenty of capacity also to be able to kind of add to the portfolio.

Speaker #2: And if we see opportunities to do that, we'll do that. I've talked about probably going forward at least for the foreseeable future here in the short term, we'll probably be more tucking deals but we can do all that.

Robert Ford: I have talked about probably going forward, at least for the foreseeable future here in the short term, there will probably be more tuck-in deals. But we can do all that. We can have organic innovation, and we can also look externally.

Speaker #2: We can have organic innovation and we can also look externally. And I think external partners look at Abbott as like, "Okay, this is a company that can actually make these innovations really impactful and global in the market." So I think we have a good position there, too.

Robert Ford: And I think external partners look at Abbott as like, "Okay, this is a company that can actually make these innovations really impactful and global in the market." So I think we have a good position there, too. So pipeline is super healthy. And if my R&D team is listening to this, they will probably say, "Yes, but we could probably use more." They probably have a bunch of projects under the line, and that is good, too. But I think we are investing in all the right areas to be able to sustain our growth.

Speaker #2: So, the pipeline is super healthy. And if my R&D team is listening to this, they'll probably say, "Yes, but we could probably use more." They probably have a bunch of projects under the line.

Speaker #2: And that's good, too. But I think we're investing in all the right areas to be able to sustain our growth.

Patrick Wood: Love the color. Thanks so much.

Speaker #1: Love the color. Thanks so much.

Operator: Thank you. Our next question will come from Matt Taylor from Jefferies. Your line is open.

Speaker #3: Thank you. Our next question will come from Matt Taylor from Jefferies. Your line is open.

Matt Taylor: Hi, good morning. Thanks for taking the question. I was hoping we could spend a minute or two on diagnostics and focus on cancer diagnostics and the trends there. It looks like you did a little bit better this quarter, but I know you are hoping for a step up into the mid-teens. Could you just touch on the dynamics with Cologuard, the rest of the business, and maybe give us some thoughts on Freenome?

Speaker #4: Hi, good morning. Thanks for taking the question. I was hoping we could spend a minute or two on diagnostics and focus on cancer diagnostics and the trends there.

Speaker #4: Looks like you did a little bit better this quarter, but I know you're hoping for a step up into the mid-teens. Could you just touch on the dynamics with Cologuard, the rest of the business, and maybe give us some thoughts on Freeno?

Robert Ford: Sure. Yeah, so we grew 14%. I think consensus was just north of that, like 15%, 15.5%, so came a little bit short. Was I expecting to do higher than both those numbers? You bet I was. I would say the biggest driver of that delta versus expectation there was the cybersecurity event that we had in July. That caused us to lose a little bit of momentum. I think you see a lot of companies, including a few of our healthcare peers, have had to deal with that. Some of them with, I would say, worse outcomes than what we went through. I think the team did a really good job. If you think about an integration process, dealing with a cyber attack is not on the menu. I think that the guys did an incredible job to be able to mitigate that.

Speaker #2: Sure. Yeah. So we were we grew 14%. I think consensus was just north of that, like 15, 15 and a half percent. So came a little bit short.

Speaker #2: Was I expecting to do higher than both those numbers? You bet I was. I'd say the biggest driver of that delta versus expectation there was the cybersecurity event that we had in July.

Speaker #2: That caused us to lose a little bit of momentum. I think you see a lot of companies including a few in our healthcare peers have had to deal with that.

Speaker #2: Some of them had, I'd say, worse outcomes than what we went through. I think the team did a really good job. I mean, if you think about an integration process, dealing with a cyber attack is not on the menu, and I think that the guys did an incredible job to be able to mitigate that.

Robert Ford: When they did bring me the forecast and they talked about, well, the cyber had an impact, as you would expect, I had to double-click on that. We saw a couple of accounts, Matt. Because of the connectivity in the system, the way we are connected to the system, we saw a couple systems shut the connectivity down until we could bring them evidence that, hey, everything was up to speed. Then when you do that, you are reverting back to faxes and emails and stuff like that. There were notable kind of drops, but then as soon as the systems were turned right back on, you saw that they pop right back up. Those blips, which lasted about seven to 10 days, that cost us about a point of growth.

Speaker #2: When they did bring me the forecast and they talked about, well, the cyber had an impact, as you would expect, I had to double-click on that. And we saw a couple of accounts, Matt, because of the connectivity in the system—the way we're connected to the system—we saw a couple of systems shut the connectivity down until we could bring them evidence that, "Hey, everything was up to speed." So then, when you do that, you're reverting back to faxes and emails and stuff like that.

Speaker #2: So there were notable kind of drops. But then as soon as the systems were turned right back on, you saw that they popped right back up.

Speaker #2: So that those blips which lasted about 7 to 10 days, that caused us about a point of growth. So yeah, I expected to do better than what we delivered.

Robert Ford: Yeah, I expected to do better than what we delivered, but still, and I know the team did also, but I think they did a really good job managing that. I think that the growth is great. I am really pleased with the integration and how things are going. Cologuard grew mid-teens and continues to accelerate. We are seeing growth in new users, which is really important to be able to show that growth in new users. Obviously, the rescreen business is doing very well. The international growth rate is happening. The care gap program is growing also. It is definitely a growth segment for us. It is just probably a little bit harder to forecast. I am learning a little bit more about the difficulties in that forecasting right now. We obviously build a plan as to when we are going to send these orders out.

Speaker #2: But still, and I know the team did also, but I think they did a really good job managing that. But I think the growth is great.

Speaker #2: I think we're seeing—I’m really pleased with the integration and how things are going. Cologuard grew mid-teens and continues to accelerate. We're seeing growth in new users.

Speaker #2: Which is really important to be able to show that growth in new users. Obviously, the re-screen business is doing very well. The international growth rate is happening.

Speaker #2: The care gap program is growing, also. It's definitely a growth segment for us. It's just probably a little bit harder to forecast, and I'm learning a little bit more about the difficulties in that forecasting right now.

Speaker #2: We obviously build a plan as to when we're going to send these orders out. Obviously, the insurance companies and the health systems will determine when they want that out.

Robert Ford: Obviously, the insurance companies and the health systems will determine when they want that out, and sometimes they are managing their expenses. It is very clear to me that the need for these programs in place so that it feeds into their star ratings and into all of their Medicare CMS rebates is super important, and they value this hugely. It is really a question of timing. We had good growth in our care gap programs, too. I would say, from a top-line perspective, I feel very good about where this business is going, and it is doing everything that we expected it to do. I am excited about the pipeline also. You mentioned the CRC blood test. It literally was, Matt, I think it was 30 September that they started kind of sending out the emails and starting to promote and all of that. So really did not have much impact in Q3.

Speaker #2: And sometimes, they're managing their expenses, but it's very clear to me that the need for these programs in place, so that it feeds into their star ratings and into all of their Medicare CMS rebate, is super important.

Speaker #2: And they value this hugely. It's really a question of timing. But we had good growth in our care gap programs, too. So I'd say, from a top-line perspective, I feel very good about where this business is going, and it's doing everything that we expected it to do.

Robert Ford: I am excited about the pipeline also. You mentioned the CRC blood test. It literally was, Matt, I think it was 30 September that they started kind of sending out the emails and starting to promote and all of that. So really did not have much impact in Q3.

Speaker #2: I'm excited about the pipeline also. You mentioned the CRC blood test. I mean, we just—it literally was, Matt, I think it was September 30th that they started kind of sending out the emails and starting to promote and all of that.

Speaker #2: So it really didn't have much impact in Q3. Do I think it's going to have a contribution to our growth rate? Yeah, it will. Obviously, the ASP for that product is higher than the ASP that we have for Cologuard.

Robert Ford: Do I think it is going to have a contribution to our growth rate? Yeah, it will. Obviously, the ASP to that product is higher than the ASP that we have for Cologuard. So that is going to be a growth driver for us also. It is obviously got a different margin profile as we are working with a partner, but we have factored all that in, not only in our deal model, but as we are going forward. I think it is going to play an important role. Do I think it is the preferred test? No, I do not. Nor does the medical societies, the Cancer Society, and a lot of the standard of care recommendations to go with stool first for a lot of reasons, but predominantly because you have got a better performance in earlier detection, and ultimately, that is what screening is all about. You are trying to detect early.

Speaker #2: So that's going to be a growth driver for us also. It's obviously got a different margin profile as we're working with a partner. But we factored all that in, not only in our deal model but as we're going forward.

Speaker #2: I think it's going to I think it's going to play an important role. Do I think it's do I think it's the preferred test?

Speaker #2: No, I don't. And nor does the medical societies, the cancer society, and a lot of the standard of care recommendations to go with stool first for a lot of reasons.

Robert Ford: Nor does the medical societies, the Cancer Society, and a lot of the standard of care recommendations to go with stool first for a lot of reasons, but predominantly because you have got a better performance in earlier detection, and ultimately, that is what screening is all about. You are trying to detect early.

Speaker #2: But predominantly because your you've got a better performance in earlier detection and ultimately that's what screening is all about. You're trying to detect early.

Speaker #2: So, it does play a role in the portfolio. And I think that gives us the opportunity, as I said in my comments, we're really positioning ourselves here as the only company that has the broadest portfolio with both blood-based and stool-based testing.

Robert Ford: It does play a role in the portfolio, and I think that gives us the opportunity, as I said on my comments, we are really positioning ourselves here as the only company that has the broadest portfolio with both blood-based and stool-based testing. I think that puts us in an advantage as we talk to all the different value players, all the different stakeholders in the value chain. I think that puts us in the position of, okay, we have got all the different technologies here to be able to do that. So I feel good about the test. I think it is going to be an important test to have in the bag, especially for those that are not doing anything. So maybe this could be used as a way to get them to start to think about it since it is pretty convenient.

Speaker #2: And I think that puts us at an advantage as we talk to all the different value players, all the different stakeholders in the value chain.

Speaker #2: I think that puts us in the position of, "Okay, we've got all the different technologies here to be able to do that." So, I feel good about the test.

Speaker #2: I think it's going to be an important test to have in the bag, especially for those who aren't doing anything. So maybe this could be used as a way to get them to start thinking about it, since it's pretty convenient.

Robert Ford: We just got to be careful about how these things are promoted and how the accuracy of the information that's being portrayed to the consumer is complete and transparent. Some of the deficiencies that the blood still has, I think it's going to get better. It's got to get better. It will get better. It's just right now, the detection on the precancerous lesion side is not as good as what Cologuard is. As I said, also, I think the MRD test that we're going to be presenting at ESMO, I think that's going to be a great opportunity. So pipeline's doing good. The international business, the opportunity to bring this technology international, we've been doing a lot of great work over there. We've already selected the markets that we're going to go after.

Speaker #2: But I'm we just got to be careful about how these things are promoted. And how the accuracy of the information that's being portrayed to the consumer is complete and transparent.

Speaker #2: And some of the deficiencies that the blood still has—I mean, I think it's going to get better. It's got to get better. It will get better.

Speaker #2: It's just right now the detection on the precancerous lesion side is not as good as what Cologuard is. So and then as I said also, I think the MRD test that we're going to be presenting at ESMO, I think that's going to be a great opportunity.

Speaker #2: So, pipeline's doing good. The international business, the opportunity to bring this technology international—we've been doing a lot of great work over there. We've already selected the markets that we're going to go after.

Robert Ford: They wouldn't be what you would typically expect those markets to be, but they're the markets that we feel will have the biggest impact. I'll tell you what I'm really impressed is kind of the progress we're making from a margin perspective. We're able to do all this, grow the business, invest in the pipeline, and really kind of also change the trajectory of the profitability there. So if you looked at this business and its operating margin profile before we acquired it had just turned slightly positive. We're exiting Q3 with an operating margin profile in the high teens already with this business. So I think that's very positive also that we can drive the top line and also drive the bottom line. As I've always said, EPS for us does matter.

Speaker #2: And they wouldn't be what you would typically expect those markets to be. But the markets that we feel will have the biggest impact. But I'll tell you what, I'm really impressed is kind of the progress we're making from a margin perspective.

Speaker #2: We're able to do all this—grow the business, invest in the pipeline, and really kind of also change the trajectory of the profitability there.

Speaker #2: So if you looked at this business and it's operating margin profile before we acquired it, it had just turned slightly positive. We're excelling in the Q3 with an operating margin profile in the high teens already with this business.

Speaker #2: So I think that's very positive, also, that we can drive the top line and also drive the bottom line, as I've always said.

Speaker #2: EPS for us does matter. Yes, we do care about the top line, but EPS also matters. And I think the teams have been able to do both of those.

Robert Ford: Yes, we do care about the top line, but EPS also matters, and I think the teams have been able to do both of those. So overall, I think the business is going well. We've got a lot of growth opportunities ahead of us, whether it's with existing products, expanding to different areas, segments, countries, or bringing new products to the market also.

Speaker #2: So, overall, I think the business is going well, and we've got a lot of growth opportunities ahead of us—whether it's with existing products, expanding to different areas, segments, countries, or bringing new products to the market as well.

Matt Taylor: Great. Thanks so much for that answer. Appreciate it.

Speaker #1: Great. Thanks so much for that answer. Appreciate it.

Operator: Thank you. Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.

Speaker #3: Thank you. Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.

Vijay Kumar: Hi, Robert. Good morning, and thank you for taking my question. I have two questions. I will ask both of them upfront. One, a follow-up on this Exact. Did Cologuard 2.0, the next-gen Cologuard, get the reimbursement cut, Robert, and what is the ASP for this blood test? It feels like Exact should accelerate. My second question was, fiscal 2027, thanks for the color on top line, should we still be aiming for double-digit EPS growth? Thank you.

Speaker #1: Hi, Robert. Good morning. And thank you for taking my question. I have two questions, maybe I'll ask both of them upfront. One on follow-up on this exact.

Speaker #1: Did Cologuard 2.0, the next-gen Cologuard, did the reimbursement get cut? Robert, and what's the ASP for this blood test rate? It feels like Exact should accelerate.

Speaker #1: And then my second question was about fiscal '27. Thanks for the color on the top line, but should we still be aiming for double-digit EPS growth?

Speaker #1: Thank you.

Robert Ford: Yeah, sure. Let us talk about your first question regarding Cologuard Plus and getting a reimbursement cut. Listen, Cologuard Plus is a new test, so the process for setting CMS reimbursement is a little bit different versus tests that have been on the market for a while. We have been in active discussions with CMS. Conversation has been very productive. I will just say the following. I find it very hard to imagine that when the process is done, that the reimbursement rate for Cologuard Plus would go down, and I am just going to leave it at that. It is an interesting process. Very different, I would say, from NCDs and some of the med tech kind of process. So it is a little bit of a new process for us. But like I said, I would be very surprised if that were to happen. I think you asked about the price of our blood test.

Speaker #2: Yeah, sure. Let's talk about your first question regarding Cologuard Plus and getting a reimbursement cut. Listen, Cologuard Plus is a new test.

Speaker #2: So, the process for setting CMS reimbursement is a little bit different compared to tests that have been on the market for a while. We've been in active discussions with CMS, and the conversations have been very productive.

Speaker #2: I'll just say the following: I find it very hard to imagine that, when the process is done, the reimbursement rate for Cologuard Plus would go down.

Speaker #2: And I'm just going to I'm just going to leave it at that. It is an interesting process, very different, I would say, from kind of NCDs and some of the med tech kind of process.

Robert Ford: So it is a little bit of a new process for us. But like I said, I would be very surprised if that were to happen. I think you asked about the price of our blood test.

Speaker #2: So it is a new it's a little bit of a new process for us. But like I said, I'd be very surprised if that were to happen.

Speaker #2: I think you asked about the price of our blood test. Yeah, I'm not going to divulge that. Because for obvious competitive reasons, there is a there's somewhat of a kind of price that's been set by the market right now.

Robert Ford: Yeah, I am not going to divulge that, for obvious competitive reasons. There is somewhat of a price that has been set by the market right now. We have an opportunity here to think about broad adoption of the technology. I find it difficult to believe that you will get the kind of uptake in any kind of blood type test at these rates. Yeah, they will show good growth rates and you will penetrate a very small part of the market and you would be able to show. But I think that for this market to really expand, and now I am going beyond just simple screen, I am just talking about it just more holistically.

Speaker #2: We have an opportunity here to think about broad adoption of the technology. I find it difficult to believe that you'll get kind of the kind of uptake in any kind of blood type test at these rates.

Speaker #2: Yeah, they'll show good growth rates and you'll penetrate a very small part of the market and you'll be able to show but I think that for this market to really expand and now I'm going beyond just kind of simple screen.

Speaker #2: I'm just talking about it more holistically. If we're going to want to see this type of testing become kind of standard of care, and there's going to be a very large amount—in this country, the forecast is that 40% of adults are going to have some level of cancer.

Robert Ford: If we are going to want to see this type of testing become standard of care, and there is going to be a very large amount of, at least in this country, the forecast is that 40% of adults are going to have some level of cancer. If you are going to have an impact and using diagnostics as a way to help eradicate and bring down these rates and increase survivorship, there needs to be a much broader adoption, and you are not going to be able to get that broader adoption with the kind of pricing strategies that are being applied today. We are being mindful of that. We are thinking about that. We are in discussions with payers, and we are really looking at how do we compose a full portfolio of cancer diagnostic solutions for those that are paying for it. So that is what I will say about pricing right now.

Speaker #2: If you're going to have an impact and using diagnostics as a way to kind of help eradicate and bring down these rates and increase survival there needs to be a much broader adoption.

Speaker #2: And you're not going to be able to get that broader adoption with the kind of pricing strategies that are being applied today. So we're being mindful of that.

Robert Ford: We are being mindful of that. We are thinking about that. We are in discussions with payers, and we are really looking at how do we compose a full portfolio of cancer diagnostic solutions for those that are paying for it. So that is what I will say about pricing right now.

Speaker #2: And we're thinking about that. We're in discussions with payers and we're really looking at how do we compose a full portfolio of cancer diagnostic solutions for those that are paying for it.

Speaker #2: So that's what I'll say about pricing. Right now, and then what was your other question?

Robert Ford: What was your other question?

Vijay Kumar: Double-digit EPS for fiscal 2027. Is that still the right number?

Speaker #1: Double-digit EPS for fiscal '27. Is that still the best number?

Robert Ford: Yeah. I get that you guys are going to start to try and triangulate as much as you can there. Like I said, I am not going to give total guidance on this call. We are probably going to do that in January. All I will say is, I gave a little bit in terms of how we are thinking about our top line. But like I said, we are going to have EPS growth, we are going to have gross margin expansion. We are going to have all the things that you would expect, and to probably leave the actual specific guidance range for EPS and all other elements, cash flow, all that, we will leave that to January.

Speaker #2: Yeah. Yeah. I get that you guys are going to start to try and triangulate as much as you can there. Like I said, I'm not going to give kind of total guidance.

Speaker #2: From on this call, we're probably going to do that in January. All I'll say is I mean, I gave you a little bit in terms of how we're thinking about our top line.

Speaker #2: But like I said, we’re going to have EPS growth. We’re going to have gross margin expansion. We’re going to have all the things that you would expect.

Speaker #2: And it probably leave the actual specific guidance range for EPS and all other elements, cash flow, all that. We'll leave that to January.

Vijay Kumar: Thank you.

Speaker #1: Thank you.

Operator: Thank you. Our next question will come from Travis Steed from BofA Securities. Your line is open.

Speaker #3: Thank you. Our next question will come from Travis Steed from B of A Securities. Your line is open.

Travis Steed: Hey, everybody. At TCT in a couple of weeks, we have Amulet 360 pivotal data and coronary IVL pivotal data. Just curious anything you would say on that, and then how quickly those products can launch. It seems like doctors are already waiting on Amulet 360 today. Want to comment on how much share you can take or view on when the left atrial appendage closure market stabilizes?

Speaker #4: Hey, everybody. At TCT in a couple of weeks, we've got Amulet 360 pivotal data and coronary IVL pivotal data. Just curious anything you'd say on that.

Speaker #4: And then, how quickly those products can launch—it seems like doctors are already waiting for Amulet 360 today. Can you comment on how much share you could take, or give a view on when the left atrial appendage closure market stabilizes?

Robert Ford: Yeah. So you got two important readouts for us at TCT this year. I think we will have more, but yeah, I know those will gain a lot of attention. I am not going to preface what the data is going to say. We will wait for the investigators to lay out that information. But I think we showed 45-day data at the Boston meeting back in January, Travis, for our LAA device, and I think that is a good benchmark to have there. Regarding the market, yeah, we started to feel some of these challenges, I would say, maybe one or two quarters after the market leader. I think that the way to counter that is, there is definitely an opportunity here still to educate, there is opportunity to make continued clinical investments, to be able to show the technology, obviously the market leader has been doing that, but so have we.

Speaker #2: Yeah. So you got two important readouts for us at TCT this year. I think we'll have more. But yeah, I know those will gain a lot of attention.

Speaker #2: I mean, I'm not going to preface what the data is going to say. We'll wait for, we'll wait for, we'll wait for the investigators to kind of lay out that information.

Speaker #2: But I think these are I think we showed 45 data 45-day data at the Boston meeting back in January, Travis. For our LAA device and I think that's a I think that's a kind of good benchmark to have there.

Robert Ford: Regarding the market, yeah, we started to feel some of these challenges, I would say, maybe one or two quarters after the market leader. I think that the way to counter that is, there is definitely an opportunity here still to educate, there is opportunity to make continued clinical investments, to be able to show the technology, obviously the market leader has been doing that, but so have we.

Speaker #2: Regarding the market, yeah, I mean, I we started to feel some of these challenges. I'd say maybe one or two quarters after the market leader.

Speaker #2: I think that the way to counter that is there's definitely an opportunity here still to educate. There's opportunity to make continued clinical investments to be able to show the technology.

Speaker #2: Obviously, the market leader has been doing that. But so have we. I mean, we're going to have a readout of our trial not next year, but probably the year after that on our trial versus NOACs.

Robert Ford: We are going to have a readout of our trial, not next year, but probably the year after that, on our trial versus NOACs. I just think you got to keep on investing. It is clearly a benefit here for the patients and the health systems. They want this. We are investing in a lot of stroke prevention technologies. This is one. It is obviously the one that gets a lot of attention. But we probably have another two or three products that are in early stage in our venture arms that we are also working on, because I think this is just going to be a continued need. So I think the market is going to continue to grow, and that is why we are going to continue to invest in it. In terms of our ability to forecast how much, sure. You will probably do your checks with physicians and try and triangulate that.

Speaker #2: And I just think you got to keep on investing as clearly a benefit here for the patients and the health systems. They want this.

Speaker #2: We are investing in a lot of stroke prevention technologies. This is one. It's obviously the one that gets a lot of attention. But we probably have another two or three products that are in early stage in our venture arms that we're also kind of working on.

Speaker #2: Because I think this is just going to be a continued need, so I think the market is going to continue to grow, and that's why we're going to continue to invest in it.

Robert Ford: So I think the market is going to continue to grow, and that is why we are going to continue to invest in it. In terms of our ability to forecast how much, sure. You will probably do your checks with physicians and try and triangulate that.

Speaker #2: In terms of our ability to forecast how much share I'll let you guys you'll probably do your checks with physicians and try and triangulate that.

Robert Ford: I will let you guys decide what that is going to be. But we think we have got a very competitive product that not only has added some ease of use to its implant, but it also maintains what we believe is a superior seal technology there. So yeah, we feel good about it. I think on the IVL, yeah, I think this is an interesting category. It is a $1 billion-plus market that is growing. We did not have to spend over $10 billion to get an asset like this. We did it through our acquisition of CSI. Team took over the project, did some modifications, really good work by the team and our partner. We filed, at least for the coronary side, we filed for approval. I do not know exactly when, but I know we are expecting it sometime in the H1, and maybe we might surprise on the earlier side there.

Speaker #2: I'll let you guys kind of decide what that's going to be. But we think we've got a very competitive product that not only is added some ease of use to its implant, but it also maintains what we believe is a superior seal technology there.

Speaker #2: So yeah, we feel good about it. And I think on I think yet on the IVL, yeah, I think this is an interesting category.

Speaker #2: It's a billion-dollar-plus market that's growing. We didn't have to spend over $10 billion to get an asset like this. We did it through our acquisition of CSI.

Speaker #2: Team took over the project. Did some modifications. Really good work by the team and our partner. And yeah, we filed for at least for the coronary side we filed for approval.

Robert Ford: We filed, at least for the coronary side, we filed for approval. I do not know exactly when, but I know we are expecting it sometime in the H1, and maybe we might surprise on the earlier side there.

Speaker #2: I don't know exactly when, but I know we're expecting it sometime in the sometime in the first half and maybe we might surprise on the earlier side there.

Robert Ford: But I think we feel good about it, adding that to the portfolio. I think the vascular team is really looking forward to this. I think you have seen that we have been able to accelerate our growth from a negative flat business to now consistently delivering mid-single digits. I think this just adds to the ability to accelerate growth in our vascular business too. I think we will start our peripheral IVL trial at the end of the year. So those two products will add to the growth rate in our vascular business.

Speaker #2: But I think we feel good about it, adding that to the portfolio. I think the vascular team is really looking forward to this. I think you've seen that we've been able to accelerate our growth from kind of a negative flat business to like now consistently delivering mid-single digits.

Speaker #2: And I think this just adds to the ability to kind of accelerate growth in our vascular business, too. So, and I think we'll start our peripheral IVL trial at the end of the year.

Speaker #2: So those two products we'll add to the growth rate in our vascular business.

Travis Steed: Great. Thanks a lot.

Speaker #4: Great. Thanks a lot.

Mike Comilla: Crystal, we'll take one more question, please.

Speaker #5: Crystal will take one more question, please.

Operator: Thank you. Our last question will come from Joanne Wuensch from Citi. Your line is open.

Speaker #3: Thank you. Our last question will come from Joanne Wunch from Citi. Your line is open.

Joanne Wuensch: Good morning, and thank you so much for taking the question, and congrats on the nutrition spin. Briefly, can you comment on potential reimbursement from CMS for non-intensive Type 2 for CGM use? A quick follow-up. Does anything in your pending spin of nutrition impact any of your other strategic plans, such as future M&A? Thanks.

Speaker #6: Good morning, and thank you so much for taking the question, and congrats on the nutrition spend. Briefly, can you comment on potential reimbursement from CMS for non-intensive Type 2 CGM use?

Speaker #6: And a quick follow-up. Does anything in your pending spin of Nutrition impact any of your other strategic plans, such as future M&A? Thanks.

Robert Ford: Sure. I know this is the, I do not know what type of question, how we would characterize it, but I know it is a big question, which is, when do we expect the Type 2 non-insulin user CMS reimbursement to kick in? I am just going to be consistent here, Joanne. I am not going to try and forecast that. What I can say is that the clinical data is significant. It is very real. I know that there are many in those that are making those decisions that believe in the value of predictive data, of using continuous data to be able to shape behavior. I have said this multiple times. CGMs, they are a behavior modification tool. They are not doing anything to your body. They are not changing any of the biology, anything in there. They are just giving you information.

Speaker #2: Sure. I know this is the I don't know what kind of what type of question how we would characterize, but I know it's a big question which is when do we expect the type 2 non-insulin user reimbursement?

Speaker #2: CMS reimburses again. I'm just going to be consistent here, Joanne. I'm not going to try and forecast that. What I can say is that the clinical data is significant.

Speaker #2: It is very real. I know that there are many in those that are making those decisions that believe in the value of data of predictive data, of using continuous data to be able to kind of shape behavior.

Speaker #2: I've said this multiple times. CGMs, they are a behavior modification tool. They're not doing anything to your body. They're not changing any of the biology, anything in there.

Speaker #2: They're just giving you information. And there's a lot of people that believe that that information is valuable to change behavior, especially with type 2 non-insulin using patients.

Robert Ford: And there's a lot of people that believe that that information is valuable to change behavior, especially with Type 2 non-insulin-using patients. The clinical data that has been presented has shown that. The same way the clinical data with basal patients has shown that, too. So there is definitely support for it. There's a clinical support. But trying to forecast exactly when that's going to happen, I am not going to do that. I am not going to say that it is embedded in a forecast for next year. Right now, what I can say is I'm not really factoring it in. But I know that when it does kick in, like we've seen this in the past, acceleration happens. And when that happens, I think that what we're doing is preparing ourselves to be in the best possible position. It is a different channel, right?

Speaker #2: And the clinical data that has been presented has shown that. The same way the clinical data with basal patients has shown that too. So there is definitely support for it.

Speaker #2: There's a clinical support. And but trying to forecast exactly when that's going to happen I am not going to do that. I am not going to say that it is embedded in a forecast for next year or right now what I can say is I'm not really factoring it in.

Speaker #2: But I know that when it does kick in, like we've seen this in the past, acceleration happens. And when that happens, I think that what we're doing is preparing ourselves to be in the best possible position.

Speaker #2: It is a different channel, right? You're not in the diabetes endo clinics; you're in primary care. This is a different—it's a different field to play.

Robert Ford: You're not in the diabetes endo clinics. You're in primary care. It's a different field of play. And we've been investing in that field for quite some time now, so I think we'll be in a good position to be able to capitalize on that. But trying to forecast it, I'm not going to try and do that, Joanne. But I can say that the momentum to be able to do it, the clinical support, all of that is all in place. It's really a question as to when that's going to happen. I'm sure you've maybe have read the comments, the open comment period. There's plenty of support. It's just really an opportunity here as to when that's going to happen. And then what was your second question again?

Speaker #2: And we've been investing in that field for quite some time now, so I think we'll be in a good position to be able to capitalize on that.

Speaker #2: But trying to forecast it—I'm not going to try and do that, Joanne. But I can say that the momentum to be able to do it, the clinical support, all of that, is all in place.

Speaker #2: It's really a question as to when that's going to happen. I'm sure you've maybe have read the comments, the open comment period. There's plenty of support.

Speaker #2: It's just really an opportunity here as to when that's going to happen. And then what was your second question again?

Joanne Wuensch: It had to do with this nutrition spin and if it impacts any of the other changes-

Speaker #6: It had to do with the nutrition spend and if it impacts any of the other changes in M&A, etc.

Robert Ford: Oh, yeah

Joanne Wuensch: M&A, et cetera.

Robert Ford: Yeah. Thanks.

Joanne Wuensch: It is an M&A question.

Speaker #2: Yeah. Thanks.

Speaker #6: This M&A question.

Robert Ford: It is an M&A question. That is fine. Listen, the answer to that is a big no. It has no impact. If anything, I would say once we go through that, I think it even strengthens it even more. Our balance sheet is in very good, great shape. We got a lot of flexibility. You know our philosophy here of taking more of a balanced approach. I am not going to give you percentages of how much goes there, but we take a balanced approach. We will grow the dividend next year, right? We have got probably the last big tower of debt paydown related to the St. Jude and Alere acquisitions will occur this year. And then we have very few kind of debt payments in the couple of years following that. So I think we will be in a good position there. We will have opportunity for buyback. We have got plenty of dry powder there.

Speaker #2: It's the M&A question. That's fine. Listen, the answer to that is a big 'no.' It has no kind of impact. If anything, I'd say once we go through that, I think it even strengthens it even more.

Speaker #2: Our balance sheet is in very good great shape. We've got a lot of flexibility. You know our philosophy here of taking more of a balanced approach.

Speaker #2: I'm not going to give you percentages of how much goes there, how much goes where, but we take a balanced approach. We'll grow the dividend next year, right?

Speaker #2: We've got probably the last big tower of debt paydown related to the St. Jude and Alere acquisitions that will occur this year. And then we have very few debt payments in the couple of years following that.

Speaker #2: So I think we'll be in a good position there. We'll have opportunity for buyback. We've got plenty of dry powder there. On the M&A side, yeah.

Robert Ford: On the M&A side, I said this last time, we are obviously focusing on the Exact integration. I think the team has done an amazing job. The speed at which they have done this is really good. Our net debt to EBITDA is going to be around 2x. So we still have plenty of capacity. But I would say, as we look around, it is probably more in the tuck-in range, than it is on kind of more transformative, I would say, just because I am not sure I see anything that is terribly exciting out there right now, at least in that kind of startup mode.

Speaker #2: I mean, I said this last time. We're obviously focusing on the exact integration. I think the team has done an amazing job at the speed at which they've accomplished this.

Speaker #2: It's really good. Our net debt to EBITDA is going to be around two times, so we still have plenty of capacity. But I would say, as we look around, it's probably more in the 'tucking' range than it is on, kind of, more transformative—I would say—just because I'm not sure I see anything that's terribly exciting out there.

Speaker #2: Right now, at least kind of in kind of in that kind of startup kind of mode, I think there's some really early stage stuff that we're very excited about.

Robert Ford: I think there is some really early-stage stuff that we are very excited about, and that we are investing in from a venture perspective, but we have got plenty of opportunity, and if the opportunity aligns with the right moment and sequencing, like I said, we have got capacity to do that. But I would say they are probably more tuck-in than anything else. No, that does not affect our ability to continue to grow the dividend, invest in our organic opportunities, and do M&A too. So, I think we are in good shape. So I know I have gone over here, and I expected to go over, so appreciate everybody kind of hanging in there. I would say, listen, we had a very good quarter, delivered an acceleration on the top and the bottom line.

Speaker #2: And that we're investing in from a venture perspective. But we've got plenty of opportunity. And if there's going to be and if the opportunity aligns with the right moment and sequencing like I said, we've got capacity to do that.

Speaker #2: But I'd say there are probably more tucking than anything else. So no, that doesn't affect our ability to continue to grow the dividend. Invest in our organic opportunities and do an M&A too.

Speaker #2: So I think we're in good shape. So I know I've gone over here and I expect it to go over. So appreciate everybody kind of hanging in there.

Speaker #2: I'd say listen, we had a very good quarter. Delivered an acceleration on the top and the bottom line. I think one of the questions that was asked there, as I've said, innovation is the key differentiator at Abbott.

Robert Ford: I think to one of the questions that was asked there, as I have said, innovation is the key differentiator at Abbott, and we do not want to be overly reliant on one or two products. We have got opportunities across all of our businesses. And we have got multiple new product approvals that are going to carry into next year. We are going to have product launches that are going to occur in next year and will ramp up in next year. So I think that is probably our biggest driver of sustainability here is our pipeline is very healthy. Teams are doing a great job at navigating what I would say is a pretty volatile environment right now around the globe.

Speaker #2: And we don't want to be overly reliant on one or two products we've got opportunities across all of our businesses. And we've got multiple new product approvals that are going to carry into next year.

Speaker #2: We're going to have product launches that are going to go into it, that are going to occur in next year, and we'll ramp up in next year.

Speaker #2: So I think that that is probably our biggest driver of sustainability here is our pipeline is very healthy. Teams are doing a great job at navigating what I would say is a pretty volatile environment right now around the globe.

Robert Ford: Teams have done an incredible job there, and I think they are going to continue to do that job as they continue to be motivated and inspired by the work that we are doing. And we took this pretty big, important step here towards shaping the future. And I think that is how one needs to look at this is, we are not making quarterly decisions here. We are looking ahead the next 5, 10 years and what is the right portfolio to assemble. And I think the opportunity that is going to be ahead of this nutrition company is going to be pretty significant. And I am excited for them, but I am also excited for the Abbott portfolio. So thanks for being on the call.

Speaker #2: And teams have done an incredible job there, and I think they're going to continue to do that job as they remain motivated and inspired by the work that we're doing.

Speaker #2: And we took this pretty big, important step here toward shaping the future. And I think that's how one needs to look at this—we're not making quarterly decisions here.

Speaker #2: We're looking ahead to the next 5, 10 years. And what's the right portfolio to assemble? And I think the opportunity that's going to be ahead of this nutrition company is going to be pretty significant and I'm excited for them.

Speaker #2: But I'm also excited for the Abbott portfolio, so thanks for being on the call.

Mike Comilla: Thank you all for your questions. This now concludes Abbott's conference call. The webcast replay of this call will be available after 11:00 AM Central Time today on our website at abbott.com. Thank you all for joining us.

Speaker #1: Thank you all for your questions. This now concludes Abbott's conference call. The webcast replay of this call will be available after 11:00 AM Central Time today on our website at abbott.com.

Speaker #1: Thank you all for joining us.

Operator: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.