Abbott Laboratories

the conference will begin shortly to raise and lower your hand during q a you can dial star one one good morning and thank you for standing by welcome to abbott's fourth quarter 2022 earnings conference call all participants will be able to listen only until the question and answer portion of this call during the question and answer session you will be able to ask your question by pressing the star one one keys on your touch tone phone. 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, Chairman 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 2023. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended December 31st, 2021. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at Abbott.com. Note that Abbott has not provided the GAAP financial measure for organic sales growth, excluding COVID testing sales, on a forward-looking basis because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. And less 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, I'll discuss our 2022 results as well as our outlook for this year. For the full year 2022, we achieved ongoing earnings per share of $5.34, which is well above the original EPS guidance we set at the beginning of the year. As you know, macro business conditions have been highly dynamic and challenging over the last few years, particularly for US-based multinational companies. COVID-19 pandemic played a big role in this, of course. We saw the US dollar strengthen significantly and inflation reached new heights last year. Supply chains continue to face challenges, and our healthcare customers have been navigating staffing challenges that are negatively impacting certain medical device procedure trends and routine diagnostic testing volumes. As we start the new year, however, while these factors remain headwinds, I'm cautiously optimistic that we're starting to see them peak and in some cases ease a bit. Over the past few months, the impact of COVID-19 on society has lessened and economies around the world are increasingly reopening. In the U.S., the U.S. dollar weakened a bit and inflation has eased somewhat. And hospital-based procedures and routine testing trends continue to steadily improve in many areas. As you know, COVID testing has been a big part of our story these past couple of years and I'm proud of what our team has built. A full suite of tests across several platforms and the intentionality and how we established a leading role in the world's response to the pandemic. In total, we've delivered nearly 3 billion COVID tests globally since the start of the pandemic. Going forward, we expect COVID-19 to transition to more of an endemic, seasonal type of respiratory virus. And with that, COVID testing, while still important, is expected to decline significantly. We expect variants will continue to emerge, and therefore our tests will remain an important part of our leading respiratory testing portfolio, along with flu, RSV, and strep, which we offer across multiple testing platforms, including lab-based systems in hospitals, small desktop devices in urgent care centers and physician offices, as well as at-home tests. As we reflect back on the impact of COVID testing efforts over the last few years, it's clear that our success in this area will have a positive, long-lasting impact for the company. It strengthened our strategic position in diagnostics through the expansion of our installed base of instruments, including IDNow, our rapid point-of-care molecular testing platform, and through the opening of new testing channels, such as physician offices and at-home testing. It enabled us to increase investments in priority growth areas across the company, including R&D and commercial initiatives, in support of several recent and upcoming new product launches. while at the same time increasing returns to our shareholders in the forms of dividend growth and share repurchasing. And lastly, it further strengthened our overall financial health and balance sheet, which will provide significant strategic flexibility as we look to build and grow the company even further. I'm proud of the role we played in fighting COVID the last few years. It reinforced our purpose. had a meaningful impact on society and enhanced our long-term strategic position going forward. Turning now to our outlook for 2023, as we announced this morning, we forecast ongoing earnings per share of $4.30 to $4.50. We forecast organic sales growth, excluding COVID testing sales, in the high single digits. And we forecast around $2 billion of COVID testing sales for the full year 2023. I'll now provide more details on our results by business area before turning the call over to Bob. I'll start with nutrition, where sales declined around 6% in both the fourth quarter and full year as a result of manufacturing disruptions at one of our U.S. infant formula facilities last year. Production at the facility is up and running. And as we've mentioned previously, our initial supply priority was to the WIC, Women, Infant, and Children Federal Food Assistance Program to ensure underserved participants have access to infant formula. As our manufacturing capacity has continued to recover, we've been able to increase production of our non-WIC brands with a focus on serving the broader infant formula market and building back inventory levels on retail shelves. turning to diagnostics, where, as expected, sales growth in the fourth quarter was negatively impacted by year-over-year decline in COVID-19 test sales. COVID testing sales were $1.1 billion in the fourth quarter, with rapid testing platforms including BinaxNOW in the U.S., PanBio internationally, and IDNOW globally compromising approximately 95% of these sales. Excluding COVID testing sales, worldwide diagnostics grew over 11% in the fourth quarter. Growth in the quarter was led by rapid diagnostics where excluded COVID-19 tests, sales increased 30% compared to the prior year. As I mentioned earlier, during the pandemic, we significantly expanded the installed base of IDNow and opened new testing channels. This expanded footprint drove strong growth and supported testing needs when flu and other respiratory infection surged late last year. During this past year, we continued the rollout of Alinity, our innovative suite of diagnostic instruments, and expand test menus across our platforms for immunoassay, clinical chemistry, and molecular testing. Moving to established pharmaceuticals, or EPD, where sales increased 8% in the fourth quarter and over 10% for the full year. EPD continues to perform at a high level, having carved out an attractive growth space in the global pharmaceutical market. Specifically, our geographic focus on fast-growing emerging markets with a broad portfolio targeting attractive therapeutic areas. Strong performance in the quarter was led by double digit growth across several geographies, including India, China, Brazil, and Mexico. And I'll wrap up with medical devices, where sales grew 7.5% in the fourth quarter and 8% for the full year. Growth in both the quarter and full year was led by double digit growth in electrophysiology, structural heart, and diabetes care in the US. Internationally, sales growth was negatively impacted by COVID surges in China during the fourth quarter, as well as lingering supply challenges in a couple areas. In diabetes care, fourth quarter sales of Freestyle Libre, our market-leading continuous glucose monitoring system, grew over 40% in the US, and global Libre sales reached $4.3 billion for the full year 2022. We continue to strengthen our medical device portfolio with numerous pipeline advancements and launches, including recent U.S. regulatory approvals of Avere, our highly innovative leadless pacemaker used to treating people with slow heart rhythms. Eterna, the smallest implantable rechargeable spinal cord stimulation system currently available in the market for the treatment of chronic pain. Freestyle Libre 3, which provides continuous glucose readings in the world's smallest and most accurate wearable sensor. Libre was recently named the best medical technology of the last 50 years by Galen Foundation. And finally, Navitor, our latest generation transcatheter aortic heart valve replacement system. So in summary, 2022 was another highly successful year for Abbott. We're optimistic about the early signs we're seeing of an improving operating environment and excited about the growth opportunities that lie ahead for all of our businesses. And we continue to strengthen our overall strategic position with a steady cadence of innovative technologies that are either in the early stages of launching or expected to launch over the course of this year. I'll now turn over the call to Bob.