Abbott Laboratories

Good morning, and thank you for standing by. Welcome to Abbott's first quarter 2020 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 1 keys on your touchtone phone. Should you become disconnected throughout this conference call, please redial the number provided to you and reference the Abbott earnings call. This call is being recorded by Abbott. With the exception of any participants' questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's express written permission. I would now like to introduce Mr. Scott Leineweber, Vice President, Investor Relations, Licensing, and Acquisitions.

Good morning, and thank you for joining us. With me today are Robert Ford, President and Chief Executive Officer, and Bob Funk, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we'll take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2020. AVID cautions that these forward-looking statements are subject to risk and uncertainties, including the impact of the COVID-19 pandemic on AVID's operations results and financial results. This 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 AVID's operations are discussed in Item 1A, Risk Factors, to our annual report on Securities and Exchange Commission Form 10-K for the year ended December 31st, 2019. 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. Please note that financial information provided on the call today for sales, EPS, and line items of the P&L will be for continuing operations only. 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. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in our earnings news release issued earlier today. With that, I will now turn the call over to Robert.

Thanks, Scott. Good morning, everyone, and thank you for joining us. As everyone here knows, we haven't seen a quarter or any time quite like this before. This global environment is unprecedented in our lifetimes. Before we get into the details of the quarter, I want to take a moment to thank our employees, our customers, and our suppliers. all of whom are making extraordinary efforts to keep systems working and to maintain supply of our critically important products to the people who need them. This moment has strongly underscored two fundamental things to me. The first is the biggest and most important, and that's the essential nature of health and health care. Times like these make very clear what truly matters the most. The second, to bring it closer to home, has to do with the nature of Abbott, We've been in the business of improving people's health through medical innovation for more than 130 years. And it's in moments like these that the importance of our mission becomes even more critical, delivering for the people that depend on us. I've been extremely impressed, though not at all surprised, by the way my colleagues around the world have stepped up to this moment. As you know, we've quickly developed and launched three diagnostic tests for COVID-19. two for the laboratory setting, and one for rapid point-of-care testing. At the same time, our teams in every business and around the world have been making extraordinary efforts to keep our operations running and our supply chains moving and to undertake the thousands of processes to make our vital products and get them to the people who need them. And we're also donating both funding and products to support frontline healthcare workers, families, and communities to meet the challenges of this pandemic. I think this speaks to a well-known attribute of Abbott's culture. We're execution-oriented, and we can be relied on to deliver when it matters the most. Because we know how important our work is, that lives depend on us, and we take that very seriously. Our diversified business model is a true strength in times like these. It's a model that has served our shareholders and the company very well. Under normal circumstances, it provides more opportunities for growth. And in situations like this, it helps dampen the impact by ensuring we're not overly reliant on a given business, product, or geography. Overall, our sales grew nearly 4.5% on an organic basis in the first quarter. Looking across our portfolio, some parts of the business face challenges, others have been relatively stable, and still others are performing at high levels to meet new demands. Beginning in February, as China implemented quarantine restrictions and non-emergency healthcare activities were postponed, we saw sharp declines in both cardiovascular device procedures and routine core laboratory diagnostic testing volumes in that country. Encouragingly, over the course of March and the first two weeks of April, we've seen a steady improvement in procedures and testing volumes in China from the lows we saw in February. As the virus spread geographically, the impact initially expanded to pockets of Asia and Europe beginning in late February and more broadly across Europe and the U.S. during the last few weeks of March. As the healthcare industry shifted its focus to fighting the virus, we saw similar impacts to our business as those we had seen in China. Based on our most recent data points, while we haven't seen a rebound, we're starting to see some signs of stabilization. Importantly, while we're navigating the demands of the current environment, we've continued to advance our pipeline and strengthen our long-term growth platforms. Over the last few months, we've announced C-mark approvals of new products in important cardiovascular device areas, including TriClip, the world's first minimally invasive device for repairing a leaky tricuspid heart valve. Tendine, a first-of-its-kind device for mitral heart valve replacement. And Galant, our next-generation implantable cardiac defibrillator. In EPD and nutrition, underlying market growth and share dynamics remained in line with historical trends during the quarter. with the exception of increased demand during late March in advance of shelter-in-place restrictions in certain markets, most notably in US pediatric nutrition. In diabetes care, Freestyle Libre continued to add new users at a strong and steady rate throughout the quarter, as reflected by sales growth of more than 60%. We also continued to expand reimbursement coverage for Libre around the world, including recently becoming the only continuous glucose monitoring system to obtain reimbursement in Japan for people with type 2 diabetes. And just last week, we announced the availability of Freestyle Libre for hospitalized patients with COVID-19. The Libre system allows frontline healthcare workers in hospitals to remotely monitor glucose levels in patients with diabetes in order to minimize exposure to COVID-19 and preserve the use of personal protective equipment. In partnership with the American Diabetes Association, Abbott has donated 25,000 Freestyle Libre sensors to U.S. hospitals and medical centers in outbreak hotspots to help accelerate access to the technology. Before I wrap up, I'd like to take a moment to discuss our ongoing efforts in the area of diagnostic testing for COVID-19. Abbott has long been a global leader in infectious disease testing, so leading in this area is a role we can and should play. In late March, we launched two molecular diagnostic tests to detect COVID-19, one for our IDNow Rapid Point of Care platform and one for our M2000 laboratory platform. Over the past few weeks, we've been actively working with government authorities and health systems to deploy these tests to places of greatest need. And just yesterday, we announced the launch of a lab-based serology test for the detection of the antibody IgG. While molecular testing detects whether someone currently has the virus, antibody tests determine if someone was previously infected. We already began shipping these antibody tests and intend to ship 4 million tests in April and ramping up capacity to 20 million tests per month in June and beyond. But our efforts don't stop there. We're moving as fast as we can to develop additional tests, including a lab-based serology test to detect another important antibody, IgM, which we expect to launch in the near future. I'd like to thank our outstanding scientists, as well as our manufacturing, supply chain, and business teams. They've really stepped up to the challenge and are doing extraordinary work to increase availability of diagnostic testing as we fight this pandemic. So in summary, This unprecedented situation underscores our purpose and the strength of our diversified business model. The underlying fundamentals of our business remain strong, and our manufacturing and supply chain have been highly resilient. We've long planned for how to maintain business continuity in the face of a global crisis, and our employees and suppliers have risen to the challenge. And lastly, AVID is contributing in a significant and meaningful way by providing new test solutions across diagnostic platforms to help screen as many people as possible.