Abbott Laboratories Price & Performance (ABT)

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 ks for the year ended 12/31/2024. 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 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 organic sales growth, which is defined in the press release issued earlier today. With that, I will now turn the call over to Robert.

Thanks, Mike. Good morning, everyone. Thank you for joining us. As we progress through 2025, it is clear that we are operating in an increasingly dynamic environment. Abbott was built not just to operate, but to succeed in rapidly evolving environments like this. We have consistently demonstrated our ability to navigate the complexities arising from a range of global circumstances including the repercussions of a global pandemic. Global financial crisis, numerous geopolitical events, just to name a few. And the current evolving economic environment influenced by new tariff policies represents another global development that we are prepared to adeptly manage. The proven benefits of our diversified business model are evident now.

The result of the strategic framework that drives our global manufacturing and supply chain operations. While tariffs will have a financial impact, with 90 manufacturing sites around the world and decades of experience executing our global network strategy. We're well positioned to implement mitigations to help manage the impact. Of the tariffs. I'll now shift our focus to discussing our results for the quarter. Overall, we achieved our target growth objective delivering high single digit sales growth and double digit earnings per share growth.

First quarter sales grew 7% or more than 8% when excluded COVID testing sales. First quarter adjusted earnings per share of $1.09 grew 11% versus the prior year, and finished at the high end of our guidance range. I'll now summarize our first quarter results in more detail before turning the call over to Phil. And I'll start with Nutrition. Deer sales increased 7% in the quarter. Growth in the quarter was driven by high single digit growth in adult nutrition and double digit growth in U. S. Pediatric nutrition. In pediatric nutrition, our relentless focus on research innovation, and product quality continues to make our Similac family of products the number one choice for parents in The United States. In adult nutrition, growth of 8.5% was driven by growing demand for Abbott's Ensure family of products, that serves as a source of complete and balanced nutrition for people with a ride wide range of nutritional needs. Moving to diagnostics, sales declined 5% in the quarter due to the year over year decline in COVID-nineteen testing sales resulting from a much weaker COVID season. Which primarily impacted growth in our rapid diagnostics business. In core laboratory diagnostics, low single digit growth in the quarter reflects the impact of volume based procurement programs in China.

Excluding China, Core Laboratory sales grew 6.5%. And wrapping up in Diagnostics, we remain on track to go live by the end of the year with two new manufacturing and R and D investments in Illinois and Texas totaling $05,000,000,000 related to expanding our U. S. Transfusion diagnostic business. Our diagnostic business, our transfusion business is responsible for screening The US blood supply. Our current blood screening system Alinity S, runs diagnostic tests to identify various antibodies and antigens that may be present in donated blood. We have developed a new system called Alinity N that will allow Abbott to enter the molecular nucleic acid testing segment of the blood screening market. This advanced technology is capable of detecting DNA and RNA of several diseases that could potentially contaminate blood donations. The nucleic acid testing market opportunity is estimated to be around $1,000,000,000 and represents an attractive new growth opportunity for our business.

Turning to EPD, sales increased 8% in the quarter, Growth was broad based, across the markets we serve. Led by double digit growth and more than half of our key 15 markets. We continue to make great progress on building a best in class portfolio of biosimilars that spans across several large and attractive therapeutic areas.

In January, entered into an agreement that provides Abbott commercialization rights to four additional biosimilars across emerging markets in Asia, Latin America, The Middle East and Africa. Through the various collaboration agreements we have executed we have now added a total of 15 biosimilar products. Projected to contribute to sales over the next three years. And I'll wrap up with medical devices. Where sales grew 12.5%. In diabetes care, sales of continuous glucose monitors were $1,700,000,000 in the quarter and grew more than 20% including growth of 30% in The United States. In electrophysiology, sales grew 10% which included double digit growth in The US and high single digit growth in international markets. In March, we announced that Abbott obtained CE Mark earlier than expected for our Volt PFA system to help treat patients battling atrial fibrillation. We have already initiated the launch of Vault, and will further expand the roll up across European markets over the course of the year. In structural heart, growth of 15% was driven by strong performance across our market leading portfolio of surgical valves, structural interventions, and transcatheter repair and replacement products. Growth in the quarter was led by continued share gains in TAVR, and growing adoption of Triclip.

In March, new two year data from the TriLuminant clinical trial was presented at the American College of Cardiology Conference. The data showed that patients receiving Triclip had a statistically significant reduction in the occurrence of heart failure related hospitalizations along with sustained reductions tricuspid regurgitation and life changing improvements in quality of life. In Rhythm Management, growth of 6% was led by consistent and sustained market penetration of Affair our innovative leadless pacemaker and ACERT our newest implantable cardiac monitor. In heart failure, growth of 12% was driven by our market leading portfolio of heart assist devices, which offers treatment for chronic and temporary conditions. In January CMS issued national coverage decision to cover CardioMEMS. A small implantable sensor that provides early warning indications that help doctors treat heart failure. This expanded coverage will broaden access to CardioMEMS for those with Medicare Advantage plans and help further expand coverage to those with commercial insurance plans. In 6% was led by double digit growth in vascular imaging and vessel closure products and growth from ESPRIT are below the knee resorbable stent. In March, we announced the start of our US pivotal trial to evaluate our coronary intravascular lithotripsy system in treating severe calcifications in the coronary arteries prior to implanting a stent.

We expect to complete enrollment in this trial next year and file for FDA approval shortly thereafter. We look forward to entering this large fast growing segment of the coronary intervention market and expect this to become a meaningful growth driver for our vascular business. And lastly, in neuromodulation, we began treating patients in our TRANSCEND clinical trial a first of its kind trial designed to evaluate using deep brain stimulation to address treatment resistant depression which represents a market opportunity exceeding $1,000,000,000 So, summary, we delivered another quarter of top tier performance. Sales grew high single digits and earnings per share grew double digits. We expanded gross margin by 140 basis points and operating margin by 130 basis points compared to the prior year. The pipeline continues to provide a steady cadence of new growth opportunities. More than 25 key new products forecasted to launch over the next three years. And we remain on track to deliver on the financial commitments we set at the beginning of the year. I'll now turn up the call to Phil. Phil? Thanks Robert. As Mike mentioned earlier, please note that all references to sales growth rates unless otherwise noted, are on an organic basis.

Turning to our first quarter results. Sales increased 6.9% or 8.3% when excluding COVID testing related sales. Adjusted earnings per share of $1.09 increased 11% compared to the prior year and finished at the high end of our guidance range and above the consensus estimate.

Foreign exchange had an unfavorable year over year impact of 2.8% on the first quarter sales During the quarter, we saw the U. S. Dollar weaken which resulted in a favorable impact on sales compared to exchange rates at the time of our earnings call in January. Regarding other aspects of the P and L, the adjusted gross margin profile was 57.1% of sales which increased 140 basis points compared to the prior year. This increase was driven by delivering on the underlying organic margin expansion we forecasted and also included an added benefit of more favorable fall through from foreign exchange. Gross margin expansion has always been a significant element of Abbott's company culture At any point in time, a substantial number of margin improvement initiatives are underway that span across our businesses as well as our functional areas. Including supply chain, marketing and other administrative groups.

I'd like to take a moment to acknowledge the valuable contributions from our Abbott employees around the world who are driving these exceptional margin expansion results. Turning our focus back to the first quarter results, Adjusted R and D was 6.7% of sales, and adjusted SG and A was 29.5% of sales in the first quarter.

Adjusted operating margin was 21% of sales, which reflects an increase of 130 basis points compared to prior year. Based on current rates, we now expect exchange to have an unfavorable impact of around 1% on the full year reported sales. Which includes an expected unfavorable impact around 05% on the second quarter reported sales. Lastly, for the second quarter, we forecast adjusted earnings per share to be in the range of $1.23 $1.27 With that, we'll now open the call for questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press 11 again. For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. Question. And our first question will come from Robert Marcus from JPMorgan. Your line is open.

Great. Good morning. Congrats on a good quarter and thanks for taking the questions. Robert, I'll just ask them both together since they're sort of related. First on the full year guidance update, it looks like it it moves a little lower when you back out the or stays same when you back out COVID testing, but moves a little lower including that But you were able to hold EPS for the full year even including the recently announced tariffs. And I guess that's the elephant in the room is tariffs. So maybe you could walk us through the impact of that, how it hits the balance sheet and P and L? Timing. We're all trying to figure out what does it look like on a full year. So maybe some of the offsets, you talked about the flexibility in the manufacturing footprint, how you're using that to your advantage? And I'll leave it there. Thanks a lot. Sure Robbie. Yeah, I mean, listen, I think the maintaining of our guidance range we've had a great first quarter here and achieved what what we wanted to achieve from a target growth perspective. High single digit sales growth, double digit EPS growth.

Talked about getting back to that to that formula and excluded COVID testing sales which I can tell you right now are lowest gross margin product. We grew over 8%. So I think on the top line, everything that we've kind of put in place we feel very good about. As evidenced in our first quarter. Gross margin expansion is a key element of of our plan to get back to double digit EPS to your question on tariffs, it's going to be an important definitely an important muscle to exercise here and really strong performance here. I think we guided 70 basis points of improvement and we saw about 140 in the first quarter. So, really strong performance of the team there. And then the pipeline to kind of sustain the growth around it. I think you saw a lot of activity this this first quarter, whether it's the Volt CE mark, beginning of our IVL trial, the NCD for CardioMEMS, the new data on TriClip. So there's a lot of great activity there when you think about kind of how we guided at the beginning of the year. Everything is everything is pretty certain for us in terms of how we're executing and the expectations we have from the products.

I guess the aspect there of maybe some uncertainty that you raise is the tariff piece. And I'd say prior to tariffs, prior to the whole tariffs, were even considering given momentum that we were seeing in the base business, we're even considering raising our EPS guidance. But tariffs are here, so we felt reaffirming our guidance is already, I think, pretty strong statement. We've completed a pretty strong assessment of every possible different type of scenario not just in what it could how it could impact us, but more importantly, Robbie, what are the different scenarios to be able to mitigate it? So, the team has been working very diligently. I think we only took a break over the weekend to watch the playoff hole and then we went right back to it. And I can tell you, we feel very comfortable right now with information that we've got and obviously looking at potential scenarios that could arise down the road that we can cover an impact of tariff, which I'd say really two geographies, The United States and China. So right now, we estimate the tariff impact in 2025 to be a few hundred million dollars. That's a half year impact because I don't I don't see I don't see any impact in Q2.

And and then we start to kind of see the impact happening in Q3. But there are other items here that I'd say are variables related to the tariffs that help offset I can tell you there's not lot of R and D slowing down or SG and A slowing down in those mitigation plans. But there are other variables to consider here. FX, we could see what's going on. With the dollar, as [indiscernible] this discussion of tariff is ongoing. Interest rates, tax, I mean, there are a lot of let's call it levers that we we've got at our disposal, put it this way, to be able mitigate. Our job here is to manage this in the aggregate and contemplate here trade offs of the decisions. We're working on I think the key thing here that as we're going through it over the last ten days is there are definitely short term things that can be done. To mitigate and close gap. And we will be looking at those and delivering on those. But I think more importantly, Robbie, is how can you actually look at these on an ongoing basis. One thing we have learned from tariffs is they don't go away.

So whatever comes, it stays and it stays for a while. Look at the the tariffs that went in place in 2017, they're still there. So we need to think about how do you mitigate this more in a long term sustainable way. So yes, you could use a balance sheet and you can build some inventory and we'll probably do some of that. But your entire strategy is building inventory, guess what's going to happen in 2020 or whenever that inventory runs out. So we're really looking at the manufacturing network and optimizing it. As I said in my prepared we've got 90 manufacturing sites across the world. We have the manufacturing strategy and framework that's been in place for decades, Robbie.

And it's a framework that hasn't been put in place because of tariffs. But it's going to serve us well, that same framework, when we think about more long term planning for tariffs. Hey, I understand the temptation that many of you will have just to take this number that I've given a few hundred million dollars and then just double it as an annualized impact, I think it's a little bit too early to do that. And like I said, our manufacturing network has got the has got the ability on a more long term basis to mitigate this considerably. And you just got to have intent, you got to have a balance sheet obviously to be able to make the CapEx investments. Some of them take longer, of them you can do pretty fast. I mean, think about what we did during COVID, where we built three ISO certified GM cleanroom manufacturing. We did it in three months. So there is opportunity do that also. But I think the key thing here is how do you balance the short term the medium term and the long term. And we're not putting everything in short term, even though we are going to leverage some of those variables that I talked about, FX, interest, tax, etcetera.

But we're really focusing on how to mitigate this going forward.

Thanks a lot.

Thank you.

And our next question will come from Larry Biegelsen from Wells Fargo. Your line is open.

Good morning. Thanks for taking the question. Hey, Robert. Just wanted to focus on the EP franchise. We're headed into the Heart Rhythm Society meeting, next week. You just got approval for Volt, in in Europe. You put up a a nice balanced quarter here. So maybe just kind of give us a kind of a state of the union and your you know, how you're feeling about that business in in in 2025. And beyond? Just remind us of kind of The U. S. Approval timeline for Vault. Thanks for taking the question. Sure. Well, listen, I've always felt bullish about our strategy. I think many of you in your reports a couple of years ago probably have anticipated that last year with all the PSA that we would have been the second fastest growing competitor. And that's basically the strategy that the team delivered, but more importantly, the execution of it. So, I think we had great success and you saw that success continue into into Q1 without without Voalte.

So, I think the announcement of Vault was a little earlier than we expected. And that's a good thing, obviously. And the initial feedback that my team has shared with me has been very, very positive. Obviously, we're gonna to start with a rollout where we'll focus a little bit on the on the on the users that were part of our clinical trial, and then we'll start to kind of ramp up that as we go into we go into the second half of the year. I think the data that was presented at the European Heart Rhythm Meeting was very strong. It stacked up very well against the other products. Obviously, it's always difficult to compare trial to trial. There's different patients, there is different kind of protocols. But, I think in general the data that presented was very strong. I think the integration here is key. I think we continue to be the market leader in the mapping of PFA cases. At least that's what we saw in Q1. And so we've got it built in scale and capability here to drive the adoption. I think that some of the advantages that I think our product has, we talked about not just the integration but I think the balloon feature is perfect for PVI.

A lot of stability, optimizes contact. As I think we've said, not only in conferences, but I also said, I think we think contact matters and visualization of contact matters. I think there's less muscle contraction, especially with lower anesthesia or the use of just sedation. So anyways, I think the product is going to do really well. It's going to do what we intended it to do related timelines here in The U. S. We'll be reporting data out and we'll be submitting it this year. And I'm I'm very optimistic that we should see an approval I'm cautioning here, Larry, because I hate giving predictions, but I say right now, our timeline is probably beginning of next year. Might be surprised on that, but I think that's a good kind of base case to have. And then the investments in the business is going very well too. I think teams have done a really good job, not only with the mapping and the infrastructure we have out in the field, but also the D, the R focus there, We've completed enrollment of our FocalFlex trial for CE Mark and you know that's combining RF and the PSA on the Tactiflex catheter.

So I feel good. I feel good about where we are. Feel good about what the team's doing.

Doing. And as we accelerate the launch of Voalte, into international markets in the second half of the year, think I said in the beginning of this year, I think the second half of the year will be better than the first half.

Go ahead.

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

Hey, thanks for taking the question. Just a few follow ups on the tariff side. For the few hundred million half year impact, just want to make sure that assumes kind of current rates as they are today. And curious if assume China is probably the bigger portion of that. I don't if there's any color you could kind of give on how you got to that that impact. And it sounds like you really don't want us kind of to run rate down into 26 yet. Because you think there's a lot of offsets And when you think about the offsets, curious [indiscernible] the Nairobi protocol included in that? Do you think kind of the diabetes business fits under that protocol? How much of this can you offset with pricing? Or do you think a lot of the offsets are really going to be around kind of moving around manufacturing and and changing around the supply chain. Yeah, sure. I think your question FX rates, yes, we're making an assumption that on on that mitigation as rates are as of today. You can make an argument that some of them have kind of gotten even has gotten even weaker versus some of them.

So, So, yeah, we're making that assumption. Regarding US and China, I'd say right now on that initial forecast, I'd say there's I'd say that's pretty evenly split But I think as we think about mitigations more long term, I think we've got our opportunities across both of them. I think one thing that I think is important to keep in mind is we always had a view with our manufacturing framework And like I said, this has been in place for decades. Two key tenants here, Travis. One, align the manufacturing as close as possible to the customer. And then have an appropriate amount of redundancy. So the advantages of being close to your customer, I mean, you can get efficiency and a lot of cost advantages there. It allows you to tap into local talent. But more importantly for us, it's always when you match your your infrastructure costs with your revenue, that serves as a natural hedge against FX. So it doesn't do much for to protect the top line, but it definitely helps protect the EPS And so a very large percent of our sales here in The U. S. Are sourced from U. S. Products.

And then we try and mitigate risk by spreading that network out. So a good example of that is Libre, for example, where we've got we've got six manufacturing sites for Libre, six, a total of six. And of those six, two are in The United States. And obviously those in The United States serve The U. S. Demand. And then the other sites outside The United States service OUS demand. We did that with COVID too, where buying was made in The U. S. For The U. S. And PanBio was made outside The U. S. For international markets. So that's going to allow us to kind of mitigate a lot of this. If we had put all of our manufacturing in Southeast Asia or put all of our manufacturing in Europe, then that might be a little bit more complicated. But we've always had a view of kind of be able to spread it out and mitigate the risks that way. Tariff wasn't on the list of risks, but it provides it provides a lot of maneuverability on this. So, yes, I think you mentioned different opportunities to be able to offset impacts Yes, you mentioned one, but there are lots of other opportunities to do that.

And we're looking at all of those. Those Those help to be more sustainable, but somebody could decide to not not want to be part of those agreements. So, we've got to really leverage the manufacturing network that we have if you really want to make it sustainable. And I think those are the two areas that we're going to be looking at and focusing on those two markets. Great. Thanks a lot.

Thank you. Our next question will come from David Roman from Goldman Sachs. Your line is open.

Good morning. Thank you for all the color here on tariffs, obviously a topic we're watching very closely. Maybe you could switch over to the some of the business performance metrics here. And could you maybe talk to us a little bit about the broader diagnostic strategy here, certainly understanding the unique dynamics of VBP influencing the business in China. As you think about where you're positioned and how you accelerate this business back toward end market growth, What are the key products that can help you do that? And how are you thinking about M and A in this category to support to support a turn in the growth rate?

Yeah, sure. Listen, yeah, a little disappointing on the diagnostic side. Yeah, part of it was COVID, but we've also got some improvements to be made here. I'd say specifically in China, David, to your point, I mean, we're seeing growth in our business in our diagnostic business everywhere except China. Outside of China this quarter, we grew around 7%, which has been in line with our Core Lab overall growth rate. U. S. Grew 7% And if you remove kind of the capital piece and just focus on the consumables, was over 8%. EMEA grew seven Latin America grew mid teens. Our trend grew 7%. So I think we're seeing good performance here. It's really been a challenge here as I mentioned and as you mentioned, which is China. It's really price driven on VBPs. I think if you look at what's happened in other VBPs, at least the ones that we've been part of, when you bid on those businesses, yeah, you have a price hit but you have an offset because you're part of a smaller group of competitors who are picking up volume. This one here was very different that everybody, all manufacturers stayed on the market, maintain their contracts.

But we took these price hits. So we're really here faced with the price hit and no volume offset. So the team is doing a good job right now, I'd say, at at navigating this. We're going to have to do better in some of the other geographies and I know the teams are looking at how to accelerate even more our growth rate in the other markets. It's a delicate balance here also David as you probably know. You can get more growth, but you're going to to place a lot more capital and that's going to hit your gross margin. So we've kind of looked at this being a kind of between a 7% to 9% growth where we can grow above the market and still expand margins. The team is looking carefully at how to do that, but offset some of that challenge coming out of China. We're just going have to go through this. And it's still an important market. It's still got good profitability, but you're just going through this cycle here. Of VBP that is a little bit different from what we've seen in the past, where you don't have the volume off offset.

Your question on M and A, yes, is we believe diagnostics is critical to healthcare. 70% of healthcare decisions involve a diagnostic test. Which is why we've been investing in this business. Talking about expanding our portfolio in the blood bank business with the nucleic acid test testing system. I think that's going to be a great opportunity for our business. We're excited about showing the product to our customers this year and start working on really composing a an offering here that you can have both serology and nucleic acid testing with Abbott combined with all the automation, all the other digital service we provide, we think it's a real strong offering there. Are there opportunities in diagnostics? Yes, sure there are. I've been public about the areas that we would be looking at in M and A world being medical devices and diagnostics. But we've got got opportunities to do that, but we've also got opportunities to do it organically.

And maybe just a related follow-up on that last point. I think on the last call, sounded like M and A might become a more important part of your capital allocation strategy. Maybe just update us on how you're thinking about that and any comments on on how NEC might be influencing capital deployment priorities?

Absolutely no impact whatsoever on allocation priorities. And update on commentary on M and A. I mean, David, there is no update in the sense that the mindset hasn't shifted, right, which is yes, we're looking at opportunities in devices and diagnostics, Yes, we have opportunities to add to our business. We've got a strong balance sheet to be able to do that. We're going to look at things strategically. We're going to look at things also from a financial lens lens. We can be selective in the sense that we feel that we've got a growth model here that allows us to sustain this organic growth rate, this high single digit organic growth rate. So it allows us to ensure that we're not only being strategic about it, but we're also being disciplined about how we're thinking about it. As I said, our ROIC matters to us. Profitability matters for us. I think even more important in today's environment protecting your EPS, protecting your profitability I think is an important an important least for us, it's going to be important. Regarding an update on M and A thoughts, there's no update on on our thinking, our framework.

Great, thanks so much.

Yeah.

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

Hey, guys. Congrats on the nice sprint here, and thanks for taking my question. Robert, just on maybe the top line here, The 7.5% to 8.5% organic, which is that's pretty impressive considering the macro What drives the back half acceleration rate when we look at Q1 starting point of of 7%? Are we looking at Volt as stepping up or is this China, which is assuming China improves in the back half, maybe walk us through it from Q1?

Yes, mean, think it's when we guided back in January, Vijay, we kind of guided to this second half better than first half. And there's a couple of things there. First of all, I think you've got the impact of new kind of product launches kind of ramping up and that obviously contributes to the growth rate in the second half. You mentioned one product, that's one. But as you're familiar with our pipeline, we've got a lot of recently launched products that as you go scaling up, that scale goes building and then it goes accelerating. So I think that's that's a key driver. And then the second part, I'd say, is comps. If you remember, the VBP really started to really impact us kind of last year Q3, Q4. So I expect that lapping some of those kind of VBP components in diagnostics will be a contributor. And then if you remember also last year in Q3, had some challenges on our nutrition business, just some commercial execution challenges that we had pretty big significant kind of drop in our in our nutrition, in our international nutrition business. And team has been making good progress there in terms of regaining the share in some of those markets.

And so that's the other component I would say is like these are two pretty big comps. If you look at Q3, that was a pretty kind of low point, I'd say, for an nutrition business in the year. So that's kind of high level how the math works.

Understood. And maybe one on the gross margins here. I think the prior guide, you assume perhaps 60 basis to 80 basis points step up Is the, I guess, the tariff, is that hitting gross margin? Is that a COGS impact? How should we think about gross margins here for the back half?

Yes, Vijay, it's Phil. And yes, exactly what you highlighted here. We guided a strong gross margin into the year after nice sequential growth each quarter last year and very pleased with Q1. Delivering on that actually being a little bit better than what we had modeled or forecasted here. Along with the benefit of the FX movement. Here. So that those help serve as some of the offsets to the tariffs, which would largely be felt in the gross margin.

Got it. Thank you, guys.

And our next question will come from Joanne Wuensch from Citi. Your line is open. Good morning and thanks for taking the question and all of the information.

I'd like to pivot a little bit to some of the products and particularly the IVL product, you announced you've begun clinical trials for And on a second question, some of your structural heart products, this is another quarter of double digit revenue growth in that segment. That would be great. Thank you so much.

Sure.

It's great to talk about products a little bit, Joanne, so thanks.

Thanks about that. Yes, so your first question on IVL, listen, this isn't we're excited to enter category. This is a $1,000,000,000 opportunity right now. We think we see there's a lot of growth. If you remember, this asset came to us through the CSI acquisition that we did few years ago. So So we saw this as like a really interesting that was in there that we could kind of add value. Team has been working on it it's great to see that we started to enroll patients in the trial. It's too early to think about kind of timelines here. Like precise timelines from a quarterly perspective. But I expect to complete enrollment of this trial next year. And file for approval next year. I think the catheter that we put into the trial is being viewed as very easy to deliver. And seems like a great tool here to treat severe calcifications. So I've gotten early early data on the first cases. They seem to all go very well. Praise from the interventionalists on the deliverability of it. And I think I think always an important part given our experience in in the world of stents. Deliverability is super important So that seems like it's hitting the mark there.

And And then we also know that there's obviously peripheral market for this. If you think about our portfolio in our vascular business, this would complement it also very well. So I know the is working on a peripheral program there too and we'll we'll provide updates on that as as we progress. But yes, excited about the opportunity. I think it's going to be a meaningful growth driver here for our vascular business. Which we've already started to see an improvement on the growth rate. And this will obviously help sustain it. Yes, on your question on your question on Structural Heart, yes, 15% growth. We've always talked about, Joanne, this being like moving away from being a single product company in MitraClip to be a full portfolio product. And the investments that we made in R and D during those years. Post integration of St. Jude and really kind of building a best in class portfolio here, I think is going to pay off. It's paying off now, and I think it's going to pay off long term also. Navitor is doing really well. We've talked about the opportunities that we have in TAVR. Good share gains in Europe looking forward to see this investment that we've been making in The U. S. In terms of building our commercial presence expanding it, looking forward to see that team be able to start to really really gain momentum as we progress throughout the year.

Keep in mind, we're only in 25% of cases, 25% of the implanting hospitals here in The US. So, I think there's a great opportunity for us there. And then Triclip is another one that been doing very well. The launch continues to go super In terms of market share, I think Tricliv here is now clearly the preferred option. Safety plays a a major role in deciding what to choose and the safety record here is is pretty excellent, not just in the clinical trials but also in the real world. So I expect this to annualize at around a quarter of a billion dollars, but but really gaining a lot of momentum as we exit the year a couple of things. One, we were launched a next generation of the clip, and this is going to further enhance the ease of use. It's simplifies all of the prep work. I've been to a couple of cases and it's not a pain point, but it's just a nice thing to have. Be able to reduce some that device prep work before something team's done a really good job there. We obviously saw the CMS published their NCD I expect that to hit midyear and that's another great opportunity.

But the two year data, I think was pretty significant at ACC and really showed I know there's a lot of question marks about the endpoint a year ago, but that really wasn't powered for one year. And you're starting to see now the benefits that hard data come out. I think that plays a huge role when you've got the safety and you've got the hard endpoint. So all in all, I think the Structural Heart business is going to continue to be in these teen growth rates. And we got opportunities for international expansion too. So and then plus all the R and D work that's ongoing, whether it's balloon expandable, next generation MitraClip, next generation TriClip, next generation Angulith. Mean, it's just really stacked up and the team is doing a good job. So looking forward for that business to continue to be a contributor in the next few years.

Excellent. Thank you so much.

Thank you. Our next question comes from Josh Jennings from TD Your line is open.

Hi, good morning. Thanks for taking the questions. Robert, I was hoping to maybe a little bit early for this, but I was hoping you could share either what Abbott is doing individually or plans to do along with conjunction with Avamed and the industry to pit potentially seek exemptions in The U. S, China, Europe, And should investors hold out hope that exemptions for the medical devices industry specifically could be secured.

Hey Josh, I mean, you know Abbott, hope is not a for us. So I would stick away from that. But are we talking with industry association, sharing data, sharing information. I think the key thing here is always just getting some of the facts and the data is always important. And I think that that's that's obviously an opportunity that exists to least make sure that everybody who's making decisions are aware of the facts and the data and the implications. So, are we actively involved with Abbott Med? Yes, we are. And, but I also think that we have to understand what the data is and have to understand what the implications. I'd say at the highest level, the medtech industry and you guys know this is is whatever $6,750,000,000,000 kind of industry, U. S. Companies, a very high share of that global industry around at least over 50%. So I think it is in the interest of The U. S. To make sure that we protect the innovation, that we protect the investment investment in R and D. And of the manufacturing in medtech is is done, I would say mostly in The US already. So yes, there's opportunities to have conversations and that's part of our strategy.

But hope is not one of them. So, we're we're working through weekends and thinking about we're going to do this on a long term basis here.

Understood. Thanks for that. And then just one follow-up. Macro conditions are evolving rapidly. There have been some events Abbott specifically with the neck litigation over the past twelve months Just was hoping for an update on on how you and your team are thinking about the diversified model at Abbott. It served the company well for decades, but any updates just on the potential to unlock value number of other competitors are have been either divesting or spinning out business units. But I was hoping to get your thoughts here in early twenty twenty five.

Sure. I mean, threw a couple of things in there. The fact that we have this ongoing litigation on neck doesn't necessarily kind of lead us down a path of whether businesses are here to drive are driving value or not. So, I'm going to move the litigation piece aside here to be quite honest with you. Listen, we've always looked at the value of our diversity and what it does. It provides a lot of shots on goal as you're in the right places, it provides a lot of shots on goal. And then it allows us to manage through moments of of uncertainty in the global market. And I made reference to that in my opening statements. And we've shown plenty of examples of how that model has actually helped us. The key thing here is are these businesses operating at the highest level?

And are we are we driving the value through them? I mean, you guys can do some of the parts I think that we're pretty fairly valued, I guess, if you were to kind of do that analysis. There's always going to be a bit of a disconnect there. But I think we're operating these businesses each at the highest level. [indiscernible] I think they provide us with a strategic advantage that very few healthcare companies have. We have a unique perch where we get to see the entire spectrum of healthcare. Through nutrition, through diagnostics, through pharmaceuticals, through medical technologies, And we think that's a competitive advantage. But we look at our portfolio always on an ongoing basis. We continue to evaluate whether there's opportunities to create value. I talked about these questions we ask ourselves as there an opportunity to create value and is there somebody else that could be a better owner of our business? And for me right now, two questions are no.

They're not. And we just got to keep driving and executing. And But I think you've seen us as a company [indiscernible] We've engaged in these probably long before these were the portfolio moves, I'd say, that we're seeing right now. You've to ask yourself some of these moves have they created value to shareholders? So I think that's always a fundamental question.

Thanks a lot, Robert.

Operator, we'll take one more question, please.

Thank you. And our last question will come from Marie Thibault from BTIG. Your line is open.

Good morning. Thanks for squeezing me in. I want to ask a question here on Rhythm Management. I think this is the second or third quarter that we've seen really strong results, particularly in The U. S. And I assume some of this is because of Avera. Can you catch us up to date on where we are in terms of the rollout, some of the new data we might be seeing at HRF on left bundle branch? Some of the other opportunities we should be seeing there in a year. Thanks.

Yeah, thanks Marie. Yeah, listen, I think Avera remains one of the probably one of the most underappreciated opportunities here in our portfolio. I think rarely do you have an opportunity to completely change the standard of care. And I predict that going to see that standard of care change, at least in the the pacing market. Next five years, I think that the majority of this market is going to be is gonna be, leadless. And I'd say that the key thing for us was to think about, okay, if we think that this is going to be a complete change and change in paradigm in standard of care, We've got to make sure that we build a strong enough foundation for that to happen. It is a different implant technique that physicians have been accustomed to, have been trained for, for decades. So, as I've said, we were gonna go, I guess you could say we're gonna go a little slower to go fast. You can argue what we've been doing, I mean, I think this will probably exit the year at about $05,000,000,000 So I think the teams have done a really good job at establishing that foundation. 've seen an increase in accounts.

So we've increased our accounts by about 50%. The amount of physicians that have been trained trained have been increased by 50%. We've more than doubled the amount of implants per day we're doing now. That not just the expansion of new accounts, but we've actually seen a 30% increase in the monthly implants of the early adopters. So not only are we increasing the penetration to new accounts, but we're also seeing deeper penetration and usage in the accounts we've already opened. So that gives me confidence that on statement that I made that I think this is going to be a complete change in category. And so much so that that we've been obviously investing from an R and D perspective on next generation leadless products. We're going to have a next generation version come out that we're working on that's going to increase the battery life by about 25%. So that's gonna be good and important as we think about more increased penetration younger implants, younger population implants And then we also talked about developing a leadless conduction system pacing product.

This has got a breakthrough designation by the FDA. I'm not going to get too ahead of me in terms of HRS. What you'll see. But our goal is to start the pivotal trial for this product 2026. So, the point here is we believe this is going to fundamentally change. We've made the investments to, prepare the market, train the market, condition the market and we're also making investments in the in the pipeline also, because we believe that's where the standard is going to go. I think if you looked at our CRM business, you're seeing the impact of that strategy, which is this has been a business that historically has been flat from our perspective in a single digit kind of growth market over the last couple of years. Thank you for pointing that out, we've been growing around 7% And I think it's really part of the strategy. So we look forward look forward to HRS. We look forward to what we're going to be presenting across the entire EP portfolio, not just on the CRM side. On the structural side and also on the side. So I think we're going to have a real good HRS and good data there too.

Listen, I'll just I get that there's a lot of questions on tariffs. We've been doing a lot of work, a lot of modeling, but more important, a lot of ways to think about how to mitigate the impacts Part of my push to the team and push to myself quite frankly, is we need to figure out how to do this in a way that sustainable and not just and not just using gap closers, which we will use for sure but how do we make this more sustainable do I found it interesting we did not get a single Libre question. You guys are very concerned on tariffs and macro, but but all good there. We've had a good start to the year and I anticipate that that momentum is going to continue. The gross margin and the operating margin expansion is very important and think it's even more important now with the dynamics that we're in.

But we're not doing that at the expense of a pipeline. Pipeline continues to provide great new growth opportunities. And like I said, I think diversified model here, I think to Josh's question, I think it serves us very well. There's a lot of moving pieces, maybe to Robbie's point, but our job here is to make all that translate all that complexity and all those moving pieces sustained and reliable growth and performance, which was what we been doing and what we're going to continue to do. So, is why we've reaffirmed our guidance here. So, we forward to updating you guys as we go through the year. So, with that, I'll wrap up, thank you for joining us.

Thank you, operator, and thank you all for your questions. Now concludes Abbott's conference call. A webcast replay of this call will be available after 11AM Central Time today. On Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

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