Abbott Laboratories

Good morning and thank you for standing by. Welcome to Abbott's second quarter 2024 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 1 keys on your touchtone 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. Mike Camilla, Vice President, Investor Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer, and Phil Boudreau, Executive Vice President, Finance and Chief Financial Officer. Robert and Phil 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 2024. Adam Petrea, ABBOT 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. Adam Petrea, Economic competitive governmental technological and other factors that may affect at its operations are discussed in item one a risk factors to our annual report on form 10 K for the year ended December 31 2023. 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 GAAP financial measure for organic sales growth on a forward-looking basis because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. 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, and thank you for joining us. Today, we reported organic sales growth of more than 9% excluding COVID testing sales. We also reported adjusted earnings per share of $1.14, which exceeded analysts' consensus estimates and represents a 16% sequential increase from the first quarter. Based on our performance in the quarter and confidence in our outlook for the remainder of the year, we raised our guidance and now forecast full-year organic sales growth, excluding COVID testing sales, to be 9.5% to 10% and adjusted earnings per share in the range of $4.61 to $4.71. Our performance continues to be driven by broad-based growth across the portfolio, with growth this quarter led by double-digit growth in medical devices and high single-digit growth in established pharmaceuticals and nutrition. In addition to benefiting from outperforming expectations on the top line, we are also seeing positive contribution from gross margin expansion coming from continued execution from our supply chain teams, lower commodity costs, and favorable sales mix. I'll now summarize our second quarter results in more detail before turning the call over to Phil. And I'll start with nutrition, where sales increased 7.5% in the quarter. Strong growth in the quarter was led by double-digit growth in international adult nutrition and US pediatric nutrition. International Adult Nutrition continues to perform at a very high level. The five-year compound annual growth rate of this business is more than 10%, which, in addition to our market-leading position and commercial execution, reflects the impact from positive demographic trends that drive increasing demand for our Ensure and Glucerna brands. Through the investments we've made to expand capacity we are well positioned to continue to capitalize on these secular demand trends. On the topic of litigation regarding preterm infant formula and human milk fortifier, Abbott stands by our products and the information provided to the neonatologist specialists who have used them for decades. Necrotizing enterocolitis, or NEC, is a terrible gastrointestinal disease that primarily affects premature infants, and it is devastating to families. However, plaintiff lawyers are advancing a theory that is without merit or scientific support. These products, which are sold for hospital use, are incorporated into a feeding regimen along with human milk by experienced specialists and are an important part of the standard of care for the majority of preterm infants. Their use is supported by medical associations in the United States and other countries around the world. The products and their ingredients have been reviewed and are deemed safe for use by regulators who have also reviewed their labels. There has been no increase in the rate of NEC meaning these cases have not emerged in response to a trend or any new information. Yet we're seeing plaintiff's lawyers investing millions of dollars in misleading TV advertising in an attempt to move physician decisions from the hospital to the courtroom. Total revenues for these products are about $9 million annually, and have remained at that level for the past several years. If these products were no longer available, physicians would be deprived of the vital food that is needed in the NICU. This would create a public health crisis affecting every state across this country. And we believe it's important for all who have an interest in health of preterm infants to recognize the need for these products and to take action accordingly. Moving to diagnostics, where sales increased 6% excluded COVID testing sales. Growth in the quarter was driven by high single digit growth in core laboratory diagnostics and double digit growth in point of care diagnostics. In core lab diagnostics, we continue to drive growth through increased adoption and utilization of our market leading systems and global demand for our extensive testing menus across the areas of immunoassay, clinical chemistry, hematology, and blood screening. While our Alinity family of diagnostic systems first launched more than six years ago, given the long contract cycles common in the diagnostics industry, we continue to see a benefit in our contract renewal and competitive win rates, with several recent large account wins expected to increasingly contribute to growth in the second half of the year. Turning to EPD, where sales increased 8% in the quarter. EPD continues to deliver at a high level as this business executes its unique branded generic strategy in emerging markets, where growth is supported by favorable demographic trends, including increasing populations, growing middle classes, and an increasing focus on expanding access to healthcare. As you recall, we identified biosimilars as a new strategic growth pillar for this business. With our extensive presence in emerging markets, we have a unique opportunity to scale a licensing model that is capital efficient and can bring access to these life-changing medicines to millions of people in emerging markets. We began implementing this strategy last year when we announced an agreement to commercialize several biosimilars in the areas of oncology and women's health, with the first of these expected to launch in 2025. We recently completed additional agreements that provide Abbott access to biosimilar versions of market-leading autoimmune disease and GLP-1 medications. Biosimilars represents the highest growth segment in the branded generic pharmaceutical market. And we look forward to continue to build one of the most complete portfolios in the industry. And I'll wrap up with medical devices, where sales grew 12%. In diabetes care, Freestyle Libre sales were $1.6 billion in the quarter and grew 20%. And we announced in June that we received FDA approval for new over-the-counter continuous glucose monitoring systems called Lingo and Libre Rio, which are based on Libre's glucose technology that is now used by more than 6 million people around the world. While over-the-counter availability is a new option in the United States, we've been selling over-the-counter in international markets since Libre launched 10 years ago. Given our clear leadership position in these markets, we have demonstrated our ability to tailor solutions, approach, and communication to the various types of users who compose the CGM customer base. Lingo is designed for consumers who are willing to improve their overall health and wellness. The Lingo wearable sensor and app will track glucose, provide personalized data, insights, and coaching to help create and maintain healthy habits. Libre Rio is designed for adults with type 2 diabetes who do not use insulin and typically manage their diabetes through lifestyle modifications. In electrophysiology, growth of 17% was driven by double-digit growth in all major geographic regions, including 17% growth in the U.S., which represents an acceleration compared to the growth in the first quarter. Growth was broad-based across the portfolio and included 20% growth in ablation catheters. In structural heart, growth of more than 15% reflects an acceleration in growth compared to the first quarter and was led by several recently launched products that are driving new adoption and share capture in attractive high growth areas, including TAVR, LAA, and tricuspid repair. This quarter, we launched our tricuspid repair device, Triclip, in the United States and continued our trend of capturing market share in the global TAVR market. In rhythm management, growth of 6% was led by Avere, our highly innovative leadless pacemaker. And in June, we announced that we received CE mark in Europe for Avere to be used in dual chamber pacing procedures, which is the largest segment of the pacing market. In heart failure, growth of 9% was driven by our market-leading portfolio of heart assist devices that offer treatment for both chronic and temporary conditions. In neuromodulation, growth of 8% was driven by strong demand in international markets for our Eterna rechargeable spinal cord stimulation device, which obtained CE mark in Europe last year. In vascular, we received FDA approval in late April for our Esprit dissolvable stent a breakthrough innovation for people who suffer from blocked arteries located below the knee. Aspreet is designed to keep the arteries open, deliver a drug to support vessel healing prior to completely dissolving over time. New products like Aspreet, combined with the investments that we made in our vascular business, both organically and inorganically, have expanded our presence in faster growing areas and increased the future growth outlook for this business. So in summary, we exceeded the expectations on both the top and bottom lines. And as a result, we raised our financial outlook for the year. We continue to make good progress on our gross margin initiatives. And more importantly, our pipeline continues to be highly productive. And thus, we're well positioned to deliver strong results for the remainder of the year.