Abbott Laboratories

Good morning, and thank you for standing by. Welcome to Abbott's second 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 Leinenweber, 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 of 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. Abbott cautions that these forward-looking statements are subject to risk and uncertainties, including the impact of the COVID-19 pandemic, on Abbott's operations and financial results 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 December 31st, 2019, and in Item 1A, Risk Factors, in our quarterly report on Form 10-Q for the quarter ended March 31st, 2020. ABIT 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 excludes the impact of foreign exchange. With that, I will now turn the call over to Robert.

Thanks, Scott. Good morning, everyone, and thank you for joining us. I hope you and your families are staying healthy and safe during these challenging times. Today, we reported ongoing earnings per share of 57 cents. just significantly above analysts' expectations. Based on our performance and momentum for the first six months, along with our expectations for the remainder of the year, we now forecast adjusted earnings per share of at least $3.25 for the full year 2020. As I stated on our last earnings call, we anticipated this past quarter would be our most challenging of the year. At the start of the quarter, many areas of the world were under shelter in place restrictions, which led to the postponement of elective medical procedures and sharp declines in routine diagnostic testing. Encouragingly, as we progressed through the quarter, we saw steady improvements in both testing and procedure volumes across our hospital-based businesses. At the same time, our more consumer-facing businesses, which include diabetes care, nutrition, and established pharmaceuticals, continue to be resilient in this environment, collectively growing more than 9% in the first half of the year. Throughout this time, our supply chain has remained resilient, our financial health has remained strong, and we've continued to advance our pipeline and strengthen our long-term growth platforms with several recent regulatory approvals, including U.S. approval of Libre II as an ICGM, which sets a new standard for accuracy and performance and includes a new pediatric use indication. C-mark approval of Triclit, the world's first minimally invasive device for repairing a leaky tricuspid heart valve. This is a new market opportunity for our structural heart business that has the potential to be a significant area of growth over the next several years. and U.S. approval of Gallant, our next generation heart rhythm devices that feature Bluetooth connectivity for continuous remote monitoring, which is a capability we've been integrating across our device portfolio over the past several years, including Freestyle Libre, our continuous glucose monitor, Confirm, our implantable cardiac monitoring device, CardioMEMS, our leading heart failure monitoring system, and several other cardiovascular and neuromodulation devices across our portfolio. These connected care capabilities allow for better ongoing engagement between patients and their healthcare providers. And this benefit has never been more evident than in today's pandemic, where virtual care has become necessary to safeguard against exposure between physicians and patients while continuing to manage and implement medical interventions when they're needed. I'll now summarize our second quarter results in more detail before turning over the call to Bob. And I'll start with nutrition, where sales increased 3% in the quarter. Strong U.S. and international growth of Ensure, our market-leading complete and balanced nutrition brand, led to global adult nutrition growth of around 7.5%. In pediatric nutrition, Sales were led by global growth of PediaSure and Pedialyte, our market-leading oral rehydration brand, which was offset by challenging conditions in greater China. Moving to established pharmaceuticals, or EPD, sales were relatively flat following strong growth in the first quarter when we saw increased demand in late March during the early phase of the pandemic. Over the last couple of months, we've seen the virus spread and impact market demand in certain emerging countries, such as Russia, Brazil, and Colombia. Through the first half of the year, EPD achieved mid-single-digit sales growth, and we anticipate a similar growth profile for the second half of the year. Turning now to medical devices, as I mentioned earlier, over the course of the second quarter, we saw steady improvements in procedure volumes across our cardiovascular and neuromodulation portfolio. For example, at the end of June, our procedure volumes had rebounded to approximately 90% of pre-COVID levels on average in the U.S., which represents a significant recovery compared to procedure activity at the beginning of the second quarter. In diabetes care, sales grew nearly 30% in the quarter, led by Freestyle Libre growth of 40%. As I mentioned earlier, we obtained U.S. FDA approval for Libre 2 during the quarter. Now approved for both kids and adults, Libre 2 sets a new standard for accuracy, including when glucose levels are in the lowest range, which is critically important in order to avoid going into hypoglycemia. This leading accuracy profile results in superior alarm performance with fewer false alarms than other systems, which can be frustrating, but more importantly, significantly fewer missed alarms, which can be critical to avoiding dangerous glucose levels. Libre 2 maintains all the market-leading features that Libre brand is known for. It's smaller, easier to use, and longer-lasting than other glucose monitors, and its value proposition is unparalleled with a cost profile that is not a burden to healthcare systems. We'll launch Freestyle Libre 2 in the next few weeks at the same price as the current available Freestyle Libre 14-day system, continuing our commitment to make Libre affordable and accessible to as many people as possible. I'll wrap up with our diagnostic business, where sales grew 7% in the quarter. Similar to what we saw in medical device procedures, testing volumes in our underlying diagnostic business which excludes COVID-19 tests, rebounded to approximately 90% of pre-COVID levels by the end of the second quarter. Over the first half of the year, we've developed and launched several COVID-19 tests across our testing platform for both laboratory and rapid point-of-care settings. To date, we've sold about 40 million tests across all our platforms in countries around the globe. As we think about the continuum of diagnostic testing for COVID-19 going forward, we see the environment unfolding across a few phases. To date, we've largely experienced the pandemic phase, where testing has been prioritized for essential professionals such as healthcare workers, as well as symptomatic patients. Molecular testing, which detects if someone currently has the virus, has been in high demand during this period. With the phased easing of shelter-in-place restrictions, we're entering a new phase where continued testing of symptomatic patients will start to overlap with broader surveillance testing of asymptomatic patients in order to better track, understand, and contain the spread of the virus until we have broad vaccine availability. So in addition to molecular testing during this period, we would anticipate increased demand for other types of tests, including both antigen and antibody. As vaccines become available, we would anticipate continued surveillance testing to monitor and assess for both natural and vaccine-related immune response, which would be followed by a steady state of ongoing monitoring and tracking of vaccine protection. So looking across the spectrum, it's clear that the need for testing is large and it isn't going away. I'm incredibly proud of the work of our scientists, as well as our manufacturing, supply chain and business teams are doing to lead in this area as we fight this pandemic. So in summary, while as we had expected this quarter was a challenging from a growth perspective, we significantly exceeded expectations and more importantly, exited the quarter in a much stronger position than we entered it. We continue to advance our pipeline and achieve several important new product approvals during the quarter, and we've continued to lead in the area of diagnostic testing for COVID-19, which is significant and expected to carry forward beyond this year. I'll now turn the call over to Bob. Bob?