Abbott Laboratories

Good morning, and thank you for standing by. Welcome to Abbott's fourth 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 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 2021. Abbott cautions that these forward-looking statements are subject to risks and uncertainties, including the impact of 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 10Q for the quarter ended March 31st, 2020. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or development 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. Today, we reported another highly successful year for Abbott during what's been the single most disruptive healthcare event in our lifetimes. For the full year, we reported organic sales growth of nearly 10% and ongoing earnings per share of $3.65, which reflects double-digit growth and is at the upper end of our guidance range we set last January when we were expecting a normal economy. Performance like this after the pandemic struck is a real achievement and demonstrates the strength of our diversified business model. In normal times, it maximizes our growth opportunities, and during the pandemic, it's been tested by a global crisis and proven to be highly resilient. It should come as no surprise that our performance was led by our diagnostics business. COVID-19 dominated the year for us and the world, and our primary response came in the form of diagnostic tests to identify the virus. In total, we delivered more than 400 million COVID tests since the start of the pandemic, including more than 300 million tests in the fourth quarter alone. But as we discussed before, the year was not all diagnostics and COVID. Our more consumer facing businesses, nutrition, diabetes care, and established pharmaceuticals all contribute growth for the year. And we continue to launch an impressive stream of innovations across our businesses. I'll touch on some of these new products in more detail in just a moment. We exited 2020 with tremendous momentum, including total sales growth of more than 28% and ongoing earnings per share growth of more than 50% in the fourth quarter. Turning to 2021, we're forecasting another year of top-tier performance. As we announced this morning, we forecast ongoing earnings per share of at least $5 in 2021, reflecting growth of more than 35% compared to last year. And because we're building on top of our strong 2020 performance, our forecasted 2021 earnings per share is more than 50% higher than our pre-pandemic EPS in 2019, which is highly unique and differentiated in this environment. I'll now provide more details on our 2020 results before turning over the call to Bob. And I'll start with nutrition. where sales increased around 4.5% for both the fourth quarter and full year. Strong growth of Ensure, our market-leading complete and balanced nutrition brand, and Glucerna, our leading diabetes nutrition brand, led to double-digit growth in adult nutrition for both the quarter and full year. In pediatric nutrition, U.S. sales growth of more than 5% last year was led by increased market share of Similac, our market-leading infant formula brand. International pediatric nutrition sales continue to be impacted by challenging market conditions in greater China. During the past year, we continued to expand our nutrition portfolio with several new product and line extensions, including the continued rollout of infant formula products across our Similac brand family that contain human oligosaccharide, or HMO, which supports a healthy immune system. Global expansion of our PediaSure, Glucerna, and Ensure brands, including the continued rollout of Ensure high-protein products. And the launch of four new Pedialyte rehydration products, Pedialyte Zero Sugar, Sport, Organic, and Immune Support. For 2021, we're forecasting similar sales growth for our global nutrition business and a continued strong cadence of new product introductions. turning to medical devices where sales were relatively flat in the fourth quarter. Strong double-digit growth in diabetes care was offset by lower sales in our cardiovascular and neuromodulation businesses due to challenging conditions as COVID case rates surge in certain geographies towards the end of the quarter. As we saw throughout last summer and fall, we expect procedure volumes to improve in these businesses as COVID case rates subside. In diabetes care, sales grew nearly 30% for the fourth quarter and full year, led by Freestyle Libre, our market-leading continuous glucose monitoring system. In the U.S., Libre sales grew 50% last year, and outside the U.S., Libre sales grew 40%, surpassing $2 billion of international sales for the full year 2020. This past year was possibly our most productive ever in terms of new product approvals and launches across our medical device portfolio. Let me touch on a handful. First, the approval of MitraClip Gen 4, the latest generation of our market-leading system to repair a leaky mitral heart valve. Just last week in the U.S., Medicare expanded reimbursement coverage for MitraClip, which significantly expands the eligible patient population that can benefit from this life-changing technology. CE Mark of Tendine, a first-of-its-kind minimally invasive device to replace a faulty mitral valve, and the CE Mark of TriClip are minimally invasive clip technology to repair a leaky tricuspid heart valve. Long considered the forgotten valve, TriClip brings an important new solution to patients that have previously had very few treatment options. Abbott now offers minimally invasive device therapies for three valves in the heart, the aortic, the mitral, and the tricuspid valves. We also launched two cardiac rhythm defibrillation products under our Gallant brand that include Bluetooth capabilities to align with our strategy in remote monitoring and digitally connected care. Also saw the approval of InsightX, our next generation 3D cardiac mapping technology. And U.S. approval of Freestyle Libre 2 and CE Mark for Libre 3, the latest generations of our market-leading continuous glucose monitoring systems. And CE Mark of Libre Sense Glucose Sport, the first product in our strategy to expand use of our wearable biosensor technology into mass market opportunities beyond diabetes. As you can see, It was a highly productive year for our pipeline, and quite frankly, there's even more I could highlight. In 2021, we're forecasting continued strong double-digit growth in our diabetes care business, led by Freestyle Libre, and steady improvements in our cardiovascular and neuromodulation businesses, fueled by the continued business recovery the society works its way through COVID-19, and on the strength of our recent and upcoming new product launches. Moving to established pharmaceuticals, or EPD, where sales increased 3.5% in the fourth quarter, reflecting sequential improvement versus the prior quarter. Despite COVID, EPD sales increased 2% overall in 2020, demonstrating the resilience of our business model, even in this challenging environment. Growth this past year was led by sales in India, Russia, China, and Brazil. During the year, EPD continued to strengthen its portfolio with more than 50 new product launches across our key emerging markets. As we've discussed before, new product introductions in EPD are more incremental in nature, and the steady cadence of portfolio expansion and refreshment we're achieving is an important element of our sustainable growth strategy. We forecast demand and growth rate improvements in EPD during 2021, as well as a continued steady cadence of new product introductions that will contribute to growth. And I'll wrap up with our diagnostic business, where sales grew nearly 110% in the quarter, driven by $2.4 billion of COVID testing-related sales. We realized very early that a variety of different testing solutions would be required to tackle the pandemic. With that understanding, starting last March, we developed and launched an entire portfolio of tests to target the virus. The biggest contribution in the fourth quarter came from our rapid lateral flow test to detect the virus, which includes BinaxNOW in the U.S. and PanBio internationally. These are highly portable, reliable, and affordable tests, and in just 15 minutes can detect if someone is infectious without the use of an instrument, which means the test can be performed in virtually any setting, such as physician office, pharmacies, urgent care centers, workplace settings, and even at home. As part of our pandemic response efforts, we also developed and launched a digital solution that pairs with these tests called Navica, which allows people to receive and display test results on their mobile devices. But our efforts didn't stop at developing these tests. We also ramped up manufacturing capacity on a massive scale and now producing more than 100 million of these two tests combined per month. While our COVID testing efforts have clearly received a lot of attention, we've also remained focused on the launch and rollout of Alinity, our suite of innovative diagnostic instruments. We continue to retain existing businesses and capture share at strong rates. And we continue to build on our test menus for these instruments. Last year, we initiated the U.S. launch of Alinity M for molecular testing. This launch included a COVID test, which helped jumpstart demand for this innovative, highly automated, and differentiated molecular testing platform. And earlier this month, we announced U.S. FDA clearance for the first rapid handheld blood test for concussions. This test measures certain biomarkers found in blood after a head trauma event and produces a result within 15 minutes after a plasma sample is inserted in our iStatalinity handheld device. Building on this initial clearance, we're also working on a whole blood point of care test under FDA breakthrough designation. And our vision is to develop a 15-minute portable test that can be used in any settings where people might experience head injuries that require quick evaluation. So in summary, Despite the challenging environment, we achieved the upper end of the EPS range we set last January before anyone knew the extent of the COVID pandemic, demonstrating the strength resilience of our diversified business model and our superior execution. Our new product pipeline continues to be incredibly productive, delivering groundbreaking innovations and a steady cadence of important new products with more on the horizon. We continue to lead in the area of diagnostic testing for COVID, which is helping to fight the virus and accelerating our long-term decentralized testing strategy. And we're forecasting more than 35% adjusted EPS growth in 2021, which is truly unique in this environment. I'll now turn over the call to Bob.

Bob. Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our results, sales for the fourth quarter increased 28.4%, which was led by strong performance in nutrition and diabetes care, along with global COVID testing-related sales of $2.4 billion in the quarter. Foreign exchange had a favorable impact of 0.3% on sales, which was somewhat favorable compared to expectations had exchange rates held steady since the time of our earnings call in October. Reported sales increased 28.7 percent in the quarter. Regarding other aspects of the P&L, the adjusted gross margin ratio was 58.5 percent of sales, R&D investment was 6 percent of sales, and SG&A expense was 23.5 percent of sales. Our fourth quarter adjusted tax rate of 14.1% reflects the adjustment required to align our tax expense with our revised full-year effective tax rate of 15%. This is somewhat lower than the estimate we provided in October due to a shift in the mix of our geographic and business income. Turning to our outlook for the full year 2021, Today, we issued guidance for full-year adjusted earnings per share of at least $5. Based on current rates, we would expect exchange to have a favorable impact of approximately 3.5 percent on our reported sales, which includes an expected favorable impact of approximately 3 percent on our first quarter reported sales. We forecast full-year net interest expense of around $515 million, non-operating income of around $230 million, and a four-year adjusted tax rate of 15%. With that, we'll now open the call for questions.

Thank you. Ladies and gentlemen, if you have a question at this time, please press the star and the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. And again, ladies and gentlemen, that's star and then one to ask a question. And our first question comes from Bob Hopkins from Bank of America. Your line is open.

Oh, great, and thank you. And good morning and, you know, congrats on all the success and progress you guys are having. So, Robert, so much that I could ask about here, but I'll go high level with my question and ask if you wouldn't mind putting that $5 earnings or at least $5 in earnings for 2021, a guidance number in perspective for us, given that that $5 is above even what the street was modeling for 2022. And, you know, specifically, I guess the way I'd ask the question is I'm sure Investors would love some perspective on how COVID testing impacts that guidance, how you're thinking about the base business, and maybe most importantly, given how much higher $5 is compared to expectations, I'm sure investors would love to hear your early thoughts on whether or not Abbott can grow at its sort of traditional rate off of that $5 number next year. So sorry for the long-winded question, but I would love any perspective. Thank you.

Sure, Bob. You hit on all the points there, I guess. We've been looking at 2021 for several months right now. I think one of the things as we're going into it is that we knew, I mean, a lot of companies were going to be forecasting double-digit growth going into 2021, a lot of that probably based on comps where we saw a decrease in EPS and That's not the case for Abbott. We're not coming out of a hole. And as I said in my remarks, the $5, the at least $5 target for 2021 is about 50% higher than where we were in 2019. And what I can say is that we are, Bob and myself, as we manage the business, especially over these last couple of months and going into this year, we've been looking at two-year keggers across our businesses. And I think that's the right way to look at it is to kind of look at what happened in 2020. And it's easy for some of the businesses to come up and post double-digit kind of growth for us. So, we're really looking on a two-year kegger basis. The points that you touched on are all the points that we've looked at, and we've been modeling several different scenarios. So, I'll touch on those because they're all elements of how we build to our at least $5. First of all, obviously, COVID testing, it's been a big driver for us, and it'll continue to be a big driver. I expect testing demand is still going to remain high even as the vaccines roll out. I don't think we've even seen testing demand peak yet. So, we built a lot of capacity. We talked about that over last year, the capacity that we built, but we didn't put it all in. We didn't put it all in into that $5. But we don't all see it going away either. But there's enough capacity there, testing capacity, sufficient testing capacity for us to be able to meet this kind of growing demand right now. The other part of our forecast here, without a doubt, is looking at our base business and the recovery of our base business, specifically the ones that were hit probably more heavily by the COVID, which was some of our device businesses and our routine testing and routine lab testing. You know, these are important procedures and life-saving procedures. They're important routine tests to do, so you can't just keep pushing them out indefinitely. And what we saw in Q3 of last year, you know, as those rates, hospitalization rates started to come down, we started to see the pickup of our procedures and of our core testing, and we actually saw growth in several months in Q3 and going into Q4, and obviously that got impacted probably around Thanksgiving. So we've seen that these can recover, and we do have that modeled into that five, which is a recover of these businesses at a similar rate of what we saw in Q3 and summer and the fall. I'd say the third kind of key element in there is our consumer businesses. that probably weren't as impacted and did pretty well during the pandemic. We expect those businesses to either continue their trajectory or get better. I mean, I think Nutrition had a really great year last year. I expect them to have a very similar year this year with a lot of new product launches. EPD should get sequentially better. We saw that in Q4. Early indications in January show that recovery continuing. And quite frankly, Libre, I expect to do better with all the innovation and investment we're making there. So those businesses will do well. And then the fourth element that we've modeled a lot is spending and ability to reinvest in the businesses in areas that we thought that we could do with more investment, whether it's SG&A and more specifically in R&D and accelerate some of our programs. I think you saw some of that in our Q4 results where we beat consensus while at the same time investing more in R&D and SG&A. So we looked at these four elements here, Bob, and we modeled it, you know, a variety of different ways, and just feel really good that this was a good floor, a good starting point at $5. Quite frankly, if anything, we could have significant upside over here, and it's just really going to depend a little bit on how we think about COVID testing going forward. So I kind of saw the $5 here as, okay, it's a 37% increase versus 2020, which grew 13%, and we've got probable upside to that, while at the same time, an opportunity to invest in the business, invest in SG&A, more specifically in R&D. We've got a leading COVID test portfolio here with a variety of different tests and capacity that we haven't dialed all in. Quite frankly, if I had put all that capacity in, I think maybe you would have had a little bit of time believing that, but it's there. And I think we've got an exciting base business, like you mentioned here, that is poised for recovery. I mean, we've got great portfolios, real strong brands. Rich pipelines, you know, strong leadership positions. So I think the $5 here was definitely a good starting point, factoring all those elements in here, and we'll be able to kind of build from there as the year progresses.

Well, thank you for that. That's a thorough overview. And then just the one follow-up would be, you know, obviously it's the beginning of 2021, but, you know, does that high level of earnings for this year, does that mean you might not be able to grow off of that in 2022 because there's so much testing in 2021? Or just give us some thoughts on Abbott's ability to continue on a double-digit growth trajectory off of that $5 number, if okay.

Sure. It's a little premature to just skip across all the way to 2022, but we have – But listen, we didn't do 2021 in isolation. So yeah, we looked at 2022 and looked at all those different scenarios that I talked about. So I can probably give you some general comments over here. I mean, I think we're forecasting a lot of growth this year, and we're going to be looking to build on it. Prior to the pandemic, the street consensus for 2023 EPS was was just under $5. So, you know, we're targeting that EPS this level this year. So in essence, we've pulled forward at least two full years of EPS growth. And our mindset here, Bob, is going to be that we're going to maintain that pull forward indefinitely. We always start our process with a double-digit target every year. That's been our identity. And I have no intention of changing that identity. Of course, there's a couple factors here that we need to you know, contemplate. But, you know, even looking at those factors, we feel good that we've got the different elements here to be able to deliver on that double digit. You know, one of those is obviously COVID and COVID testing. And even if COVID testing starts to mature a little bit in 2022, we believe there's a significant portion that's still very sustainable. Can we predict it perfectly today? No, I can't. not to the level that you're accustomed to get from us. But I also think that the ability to do testing in a decentralized manner, you know, people talk a lot about how the pandemic has accelerated digital transformation in businesses, accelerated transformation in the business models. You know, the pandemic has accelerated our decentralized testing strategy. And I think I talked about this in the last call. I think a lot of the testing channels that we're building here that have emerged, I don't see them going away. On top of that, as I said, we've got investment and investment spending into SG&A, but more specifically into R&D. We believe R&D is the more sustainable spend. It's the spend that allows us to sustain our top-line growth rate. So I would expect that these investments that we've made in Q4 and definitely into 2021, that that would have an impact on our base business growth rate. We've always talked about our base business being sustainable at seven to eight. And I would expect these investments to be able to accelerate on that. And I guess the third part to that question of yours about confidence on delivering double digits in 2022 is we've got a great balance sheet and we've got strong financial health and a lot of strategic flexibility there. So I lay all of these elements out here, sustained COVID testing, the investment in the business and the strong balance sheet just gives me confidence that even with all these different models here that we will be able to kind of continue to deliver that identity of double-digit growth.

Thank you very much.

Thank you. Our next question comes from Matt Taylor from UBS. Your line is open.

Hi. Thanks a lot for taking the question. So maybe I'll just ask you to drill down a little bit on testing and the assumptions that you have for testing in the year. You came in really strong here in Q4 with a big step up sequentially. What are you assuming in the $5 for testing throughout the year if you could discuss some of the different product lines? And then maybe if you could provide some high-level thoughts on how much of a tail of testing we might see into 22 and beyond.

Sure. So let me talk about kind of numbers and ranges here then, and then I'll spend time talking a little bit about sustainability of the testing. As I said, I don't see, you know, the demand just kind of dropping off, even with the vaccine rollout. We achieved 2.4 billion in Q4. So if you annualize that, you know, it'll go, it'll analyze around, you know, 10 billion. So I can expect probably Q1 is going to be at that range of about 2.5 or so. And if you'd say, okay, what does a full year range look like? I probably can't go beyond Q1 in terms of exactly how it's going to look like, but you can be in that six and a half to seven range, I would think. But we've got, as I said, plenty of capacity to go above that. So that's probably what's incorporated here. Matt, in the $5. But I think the big point here is the sustainability of this. And to your question there, I think a good portion is sustainable. I think a substantial portion is sustainable, which is why we were a first mover and a leader here. We started with our lab-based systems. Those were probably the obvious part in the strategy since we knew we had a lot of capital equipment out in the labs. We started with that strategy to take advantage of the systems out there, and you saw that rollout happen. But we also knew that in a pandemic, you were going to need to add people On top of that testing infrastructure, you'd have to add faster testing and testing that could be done at a much significant scale, and that was more affordable, which is why we developed those two lateral flow tests. There's been a lot of visibility to Binax here in the U.S. We haven't talked a lot about PanBio, but PanBio uses the same technology, the same kind of antibodies, And we've got a whole supply chain that's been built outside of the United States that supplies all of the markets that we're supporting with PanBio. So both those products, they've been the bulk of our sales. We saw that in Q4. There's a lot of capacity that we've built around them and that we continue to build around them. And the clinical utility of them is really strong. I mean, they've been, you know, a lot of studies are showing their reliability here at finding people that are infectious. And I think that's a key distinction here is your ability to use these tests in a way for being able to find those people that are infectious and not necessarily those that, you know, were infectious and that might have some remnants of, you know, of DNA of the virus in their system. So I think it's sustainable testing. And I think you need to take two kind of views here on that. At least this is how we're looking at it. First of all, we need to think globally about this. Sometimes we get very focused on the U.S. and what's going on here in the U.S., but you've got, you know, 8 billion plus people around the world. You've got a variety of different countries that are experiencing different cycles in the disease, different cycles in their vaccination strategies. So once you really take a bigger view here, this is not going to be something that will just be done in the next couple of quarters here if you take a real global perspective. And the second thing that I think is just reframing the testing. I think we think about the sustainability of testing when we think about Q2 and Q3 of last year. Long lines, not enough volume, long turnaround times, $150, $200 tests. That might be not sustainable, not as sustainable. But if you position yourself into a 2021, 2022 world where you now have, you know, fast, easier, you know, much more scalable tests, digital tests that are priced for more accessibility and affordability, I think that's the sustained kind of business here that we see. So when you think about that maturing of the COVID testing market, we kind of see PCR as kind of maturing first, and then we see the rapid part of the business being sustained. And listen, we built a lot of capacity. As I said, probably, you know, 12, 13, 14 billion of capacity that we built in there. We haven't put it all in, but it's there. And then the other part that I talked about was just the sustainability of it past 22 and into 2023 as we've accelerated our point of care testing strategy. And, you know, everything we're doing in fighting the virus has not only a direct impact of helping reopen the economy, et cetera, but it's also seeding the market, and it's building these new testing channels. You know, we've got testing going on at airports, hotels, urgent care, retail, universities, et cetera. So we believe that's pretty sustainable, too.

Great. Thanks for that very detailed answer. Maybe I'll just ask a quick follow-up on PanBio. That's a big new piece of the story here, I think. You rightly pointed out it may take longer in some countries for things to improve, so maybe testing lasts longer there. Could you talk specifically about PanBio and what you're able to do capacity-wise or any way to frame that opportunity?

Sure. So from a technology perspective, it's using the same kind of lateral flow technology that Binax has. It's just in a different format, in a cassette format. We've got capacity to do over 50 million tests per month. And we've used our infectious disease emerging market organization, so the manufacturing, the regulatory, the R&D, and more importantly, the commercial infrastructure to be able to look across the world and support governments, workplaces, et cetera, on rolling out antigen testing internationally. So I think it's done very well. We've been able to kind of leverage some of the, you know, kind of joint development of Binax and PanBio. But the demand that we're seeing internationally I would characterize also as probably just starting. It hasn't even peaked either. So I think we've got a lot of opportunity with PanBio internationally too, and I think the teams have done a really good job there.

Thank you so much.

Thank you. Our next question comes from Robbie Marcus from JP Morgan. Your line is open.

Oh, great. I'll add my congratulations on the quarter. Maybe I'll ask both my questions as one up front. You know, this is a significant windfall of cash you're getting from the COVID testing in 2020 and 2021 and hopefully beyond. So maybe you could just talk about you know, where you're going to put all that cash to use. I know you've mentioned in the past some of it's going to fund new product launches. If you could just also, as part of the answer, highlight the key product launches in 2021 and beyond to look for. Thanks.

Sure. I'll probably say the following. A lot of it is going towards R&D, Robbie. And as I said, I think that's the more sustainable spend option. It's the one that allows us to build more sustainability in our top line and building R&D programs. Yeah, there's opportunity to accelerate SG&A and putting some of that cash to use in SG&A, and there are some businesses that could definitely benefit with more SG&A, and there's a pretty strong return as we put those in there, whether it's Libre or Nutrition. But a lot of the focus of this reinvestment here is going into R&D, and Quite frankly, I think our pipeline has been highly productive and maybe a little bit underappreciated, I think. There's a lot of focus that goes into key three products. You guys like to write about them as the big three, and they get a lot of attention. Quite frankly, they should, whether it's Libre, MitraClip, and Alinity. They're large, multi-billion dollar segments that are underpenetrated. We've been making clear and intentional investments in those businesses. I'm not going to spend a lot of time going through those, but you kind of know them, right? So Libre, with Libre 3, we've got Libre 4 in development. We've been making investments in new applications for the Libre platform outside of diabetes. In MitraClip, obviously, we've got this opportunity with the CMS reimbursement. We have a fifth generation MitraClip that's also in development, and we're investing in a significant amount of clinical trials here to expand the market for us, and we'll continue to do that. Probably the one I'm more excited about here is the moderate risk for DMR that we've announced also. And then in Linity, you also know the story. I mean, we've got six new systems where we're increasing the menu and expanding that geographically. So that has a lot of attention, continues to have a lot of attention. And we do resource those opportunities because they're that big. But I think it's misleading here to think that that's the sum of our innovation strategy. It's so much more than that. On the EPD and the nutrition side, you know, we're going to continue to invest in line extensions and portfolio refreshment. This is the model that we know drives the returns we need for these businesses. And I think the team has now hit their stride in terms of how to do this. and how to effectively roll this out with local portfolios. EPDs rolled out over 50 products. I expect that to continue. Nutrition has done over 20, and I expect that to continue also. In diagnostics, outside of Alinity, outside of COVID, we've been investing a lot in expanding our rapid testing portfolio. I've been talking about this, about the opportunity we have to uh, take advantage of these new channels that we built and, and, and, and, uh, increase, uh, the penetration with different assays. So, uh, whether it's going beyond, uh, COVID or flu with RSV strep, uh, we've got a sexual transmitted disease platform for, for ID now, which we're excited about also, which I think has got a great opportunity. And then, you know, this rapid concussion test, uh, Ravi, I think is a great opportunity for us, um, Probably the biggest opportunity we have is if once we work through to have a whole blood test, I can envision here an opportunity across the 25,000 high schools in the U.S., the 5,000 colleges, all the sporting leagues, and that's going to take us another year and a half or a bit or so to get there, but I think it's a great opportunity. And then the device portfolio is going to continue to get a lot of investment the way we have. Obviously, Tendine and Cephia, we want to be a leader in mitral. We've launched Tendine in Europe. We're funding our Cephia program so that we can have a trans-semoral, trans-septal program for the replacement of the mitral valve. I'm very pleased with the progress we've seen on Tendine. Triclip, I've talked about the opportunity with Triclip. It's not going to be as large as Mitral, but it'll be 30, 35 percent the size of the Mitral market, and we're still in the early innings here of development of clinical evidence development, and we're going to be leading there. We've made investments in increasing the competitiveness of our CRM portfolio. We've just started to roll out now more global basis, our two new defibrillator products under the Gallant. And, you know, we've been working hard at our leadless program and making the investments in the leadless program so that not only can we come out with a single chamber product and then be able to upgrade it to a dual chamber product. I like the program. I like what we've done with it. I think we have a value proposition, a differentiated value proposition versus the competition. Cardio MEMS is another study that we've been funding, and there's probably going to be required some build-out of the commercial infrastructure to be able to support the rollout of that product. If you think about the opportunity we have with Cardio MEMS, you know, even at a 10 to 15 percent penetration on that population, you're looking at a billion dollar opportunity for us. So that is obviously getting a lot of attention. And then I'm very excited to come into the U.S. with the LAA and the TAVR product, you know, sometime this year. I think these are great opportunities. I like the product that we have, especially on the LAA side with AMULET. It does very well in Europe. And we'll be funding those programs, too. So So it's more than the big three. There's a lot here, and quite frankly, Bob and I are already going to the businesses and saying, okay, what was below the line that you didn't show us in the planning process, and can we get going on those too? So that's where a lot of the investment goes, into R&D.

That's really helpful. Thanks so much.

Thank you. Our next question comes from David Lewis from Morgan Stanley. Your line is open.

Good morning, and thanks for taking the questions. Robert, I just want to follow back up on investment. I'm just sort of thinking about your balance sheet here relative to peers. You're already more than a turn better than all your large-cap peers. And frankly, I can see a scenario by 2024, this is a net cash business and a $200 billion market cap company. So you have kind of unprecedented levels of financial leverage on the balance sheet. In recent weeks, we've actually seen some of your competitors get more aggressive on growth-oriented M&A, and we haven't heard much of that conversation this morning. So What are your thoughts on kind of growth-oriented M&A this year to supplement that pipeline? And should investors be thinking about tucking growth-oriented M&A? Because you certainly have the capacity to do something more transformative. Then I'd have a quick follow-up.

Sure. On the M&A side, listen, we're always looking. As I've always said, we're always looking. We're always studying. So, you know, while we might not be announcing or doing something, we're still studying. We're still looking. As I said in the previous question, though, David, I mean, I think we've got a lot of organic opportunities to invest in, and I like those organic opportunities. So they obviously do get a lot of our attention right now. But, you know, if you think about M&A, yeah, it's got to be a good fit strategically, and it's got to align with our growth orientation here. I mean, I'm not going to look at something that's going to dilute our top-line growth rate. and obviously is able to generate a return for a shareholder. So there's a lot of activity. There's a lot of, I'd say, high valuations right now also. But to the extent that we do something this year, it would be more like tuck-in in nature to be able to kind of augment some of these portfolios. So that's probably the better way to put it to you.

Okay, very helpful. And then, you know, what a difference a year makes. We're deep in the call. We haven't talked about Libra yet, but I'm kind of curious on two fronts on Libra. One, what, you know, the full commercial rollout of Libra 3 in Europe, when can we think about the right quarter to think about sort of stepping on the gas with Libra 3? Is it this quarter? Is it next quarter? And just more broadly, Robert, I mean, given the investment spending this year on direct-to-consumer and where that platform could go over time, just maybe help us understand what investors may not be appreciating about where that platform can go over a multi-year basis. So when's the push in Europe, and where can that platform go with investment? Thanks so much.

Sure, sure. So Libby gets pushed down to, like, fourth or fifth question. But it's still top of our priorities here because it's such a huge opportunity for us to We had a real strong quarter in Q4. We exited with a lot of momentum going into this year, especially in the U.S. I think global sales were $3.25 billion, up 35%. And I expect the absolute dollar amount to get bigger. And usually when that happens, we think, well, gee, law of big numbers, right? You know, the percentages are going to go down. And I don't think so. I think that we're going to see continuing growth rate expansion on our Libre business here. So I kind of look at Libre as a 2021 growth that should start at 40% and go from there. A lot of focus on the U.S., on the rollout, on Libre 2 rollout. We're seeing a lot of the trend shifts, whether it's revenue, whether it's new users. I think the superior accuracy messaging here is is definitely coming through and it's got all the other advantages of our value proposition. I think one of the good things about the pharmacy channel is that there's a lot of available data. There's a lot of available, you know, third-party audited data. And, you know, when I do the reviews with the team, you know, we spend a lot of time looking at them and, you know, I tell them you can't hide behind these, you know, you can't hide, you know, when you're in the pharmacy, like all this data is available. And, I think it's done really well in the U.S. Obviously, I want it to do better, but I can't look at it and not be objective that there's obviously been a trend shift here, whether it's NBRXs, TRXs, refill rates, etc. One of them that I'm extremely happy to see is the RX fulfillment rate. So when a consumer goes to the pharmacy with a prescription, swipes the card, do they get that prescription filled? And there's factors that drive somebody to not get it filled. It's usually a copay. What we've seen with the Libre RX fulfillment rate is about a 9 out of 10 get filled. and you compare that to our competitor at about 6 out of 10, you know, I think the value proposition here is really strong, meaning that we can invest in DTC advertising. We can invest more in this platform, and we're seeing the value proposition come through as it relates to RX fulfillment rates. So, I'd say the focus on