Abbott Laboratories

And thank you for standing by. Welcome to Abbott's third 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 11 keys on your touch on 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. 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, 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 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 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. Thank you for joining us. Today, we reported organic sales growth of more than 8%, excluded COVID testing sales and adjusted earnings per share of $1.21. In addition to delivering another quarter of strong financial performance, we accomplished several key objectives this quarter, which included entering new strategic partnerships, launching new products, and making several key advancements in our R&D pipeline. And I'll elaborate further on these accomplishments when discussing the performance of our businesses and summarize our third quarter results in more detail before turning the call over to Phil. And I'll start with nutrition, where sales increased 3.5% in the quarter. Growth in the quarter was led by double-digit growth in the U.S., and this included growth of 12%. in U.S. pediatric nutrition, driven by market share gains in the income form of business, and growth of 11.5% in U.S. adult nutrition, led by our market-leading Ensure and Glucerna brands. As the market leader in adult nutrition, we continue to expand our portfolio to meet the growing global demand for products that offer a combination of high protein, low sugar to help people optimize their health and wellness. Moving to diagnostics, our sales in Core Laboratory Diagnostics increased 4.5% excluding COVID testing sales. Growth in Core Lab was driven by global demand for routine diagnostic testing and continued adoption of our market-leading diagnostic systems and testing platforms, including recent large account wins that will help continue to sustain our growth into 2025. In our rapid and point-of-care diagnostic businesses, we continue to expand our test menus and capitalize on the growing demand for respiratory tests that can be performed at home or in more traditional healthcare settings. In September, we announced an exciting new partnership with the Big Ten Conference to help boost the U.S. blood supply through a blood donation competition. Students, alumni, and fans can donate blood for any of the 18 member universities at blood centers located across the country. And our goal with this competition is to help rebuild the nation's blood supply, which is currently at an extremely low level, while also helping to create a new generation of blood donors. Turning to EPD, where sales increased 7% in the quarter. Growth was well balanced across the markets and therapeutic areas in which we participate. Our performance this quarter was driven by double digit growth in several countries across Latin America, Southeast Asia, and the Middle East, where our broad product portfolios focused on addressing local market needs continues to enhance our unique position in these markets. From a portfolio perspective, we continue to deliver broad-based growth across our key therapeutic areas of focus, including strong growth in the quarter in the areas of gastroenterology, cardiometabolic, central nervous system, and pain management. We also achieved several milestones this quarter as it relates to advancing our portfolio of biosimilars, which we built and continue to expand through collaboration agreements. The first of these biosimilars is on track to launch in emerging markets in late 2025. And I'll wrap up with our MedTech portfolio, where sales grew more than 13%. In diabetes care, sales of continuous glucose monitors exceeded $1.6 billion in the quarter and grew 21%. In August, we announced that we had entered into a unique global partnership with Medtronic to connect Abbott's world-leading Freestyle Libre CGM sensor with their automated insulin delivery systems. Abbott now has partnerships with five of the largest companies that offer automated insulin dosing pumps, allowing more people around the world to benefit from the connectivity with the Libre technology. In September, we announced the US launch of Lingo, Our new glucose monitoring sensor, available for purchase without a prescription, the LingoWearable sensor and app track real-time glucose data and provide personal insights and coaching based on your body's reaction to nutrition, exercise, and other lifestyle choices to help create healthier habits and improve overall well-being. In electrophysiology, growth of 14%. was driven by double-digit growth in both the US and international markets, and similar to previous quarters, the growth was broad-based across the portfolio, including double-digit growth in catheters and cardiac mapping-related products. We also achieved several important milestones as it relates to our electrophysiology new product pipeline, and this includes completing enrollment ahead of schedule in our Volt AF US IDE trial, And after we complete the required patient follow-up phase, we expect a file for FDA approval next year. Earlier this month, we announced that we began enrolling patients in our Focal Flex clinical trial. This is designed to assess our new TactiFlex Duo catheter, which offers physicians the option of using PFA and radiofrequency energy to treat atrial fibrillation. And finally, we received FDA approval and launched our new advisor HD GridX mapping catheter, which further enhances the cardiac mapping process when using PFA or RF ablation catheters to treat AFIT. In structural heart, growth of more than 16% was driven by growth across our market-leading comprehensive portfolio of surgical valves, structural interventions, and transcatheter repair and replacement products. This quarter, we continue to capture market share in Tavern and saw accelerating adoption of Amulet and Triclip, which we launched in the US earlier this year. And earlier this month, CMS began the process of evaluating Triclip for a national coverage determination, which if approved, would help expand the addressable market through broader access in the US for this first of its kind technology. In rhythm management, growth of 7% was led by Avere, our highly innovative leadless pacemaker, and Assert, our newest implantable cardiac monitor, which launched in the US last year. In heart failure, growth of 14% was driven by our market-leading portfolio of heart assist devices, which offer treatment for chronic and temporary conditions. In vascular growth of 5%, was led by double-digit growth in vessel closure and coronary imaging, along with a spree or below-the-knee resorbable stent that launched in the U.S. in the second quarter. And lastly, in neuromodulation, sales grew 5%, driven by strong demand in international markets for our Eterna rechargeable spinal cord stimulation device. So in summary, we delivered another quarter of strong top-line growth with sales growth with sales growing more than 8%. We continue to make good progress expanding our gross margin profile and remain on track to improve our profile by 75 basis points in a full year basis compared to last year. And as you saw, we achieved several important new product pipeline milestones this quarter, and we're well positioned for a strong finish to the year and have great momentum heading into 2025. And I'll turn over the call to Phil.

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our third quarter results, sales increased 7.6% on an organic basis and increased 8.2% when excluding COVID testing sales. Foreign exchange had an unfavorable year-over-year impact of 2.5% on third quarter sales. During the quarter, we saw the U.S. dollar weaken versus several currencies, which resulted in a favorable impact on sales compared to exchange rates at the time of our call in July. Regarding other aspects of the P&L, the adjusted gross margin ratio was 56.3% of sales, adjusted R&D was 6.5% of sales, and adjusted SG&A was 27.2% of sales in the third quarter. Lastly, our third quarter adjusted tax rate was 15%. Turning to our outlook for the fourth quarter, we forecast adjusted earnings per share guidance of $1.31 to $1.37. And based on current rates, we expect exchange to have an unfavorable impact of less than 1% on fourth quarter reported sales. With that, we'll open the call for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. And again, that's star 11 to ask a question. Please stand by. We compile the Q&A roster. And our first question will come from Travis Steed from B of A Securities. Your line is now open.

Hi, good morning, everybody. So in Q3, devices were really strong, but nutrition and diagnostics came in below expectations, but you still maintain the full-year guidance, which is implying a step up of, you know, nine and a half or more growth in Q4. So just want to understand, you know, what happened in those divisions in Q3 and what's giving you the confidence to still relate the full-year revenue guidance?

Sure, Travis. Listen, we've got multiple business units here. By my count, it's close to like 17. We always want all 17 to beat and top your estimates here. The reality is sometimes some of them fall short. And then the question is, is there something more long-term? Is it more of a kind of a one-time kind of challenge? I put that more in the second bucket over here. I think one of the benefits that we do have in having a broad, diversified portfolio is that when you do have situations like that, Travis, other businesses can overperform and kind of make up for that. And I think that's what you saw in this quarter. I mean, you opened your question with devices did really good, and that's what helped us deliver on our quarter. And as you look forward to Q4, yeah, we do have still very high confidence in the businesses. If I was at all concerned about it, I wouldn't have raised our guidance now for the third time this year. So, yeah, we're still very confident in both the EPS forecast that we've got I think this is a great quarter now as we're into Q4 and this last COVID cons. We'll see our EPS grow double digits back to the growth model that we had during pre-COVID. And, yeah, revenue, you know, at that, you know, 9.5% to 10% still feel very good about that. You know, the issues that you raised there are, you know, kind of one time in nature, you know, on nutrition. You know, the entire business did really well with the exception of our international pediatric business. U.S. was up 12% pediatric. U.S. adult was up almost 12%. International adult was up high single digits. So what ended up happening there is we saw some softness in the beginning of the quarter in some of our, you know, Team quickly determined that it wasn't market. It was actually us. It was our commercial execution or lack thereof that was leading to some share loss. So team took action pretty quickly in the quarter. We made some personnel changes. We calibrated our demand generation. And what ends up happening in the quarter there as a result of that share loss is we didn't want to build excess inventory. So we shorted our sales to the distributors just to align that. But I feel good about What the team has put together, early indications show that that was the right move to do and seen good progress there. So, yeah, disappointed. But the team knows that, and they acted quickly. So I expect to see international pediatric and overall nutrition growth step up in the quarter. It doesn't change my thinking about nutrition for the quarter, for next year, for the long-term aspect of it. Just something that we had to address. And then I think you mentioned CoreLab also came a little bit shorter than expectations. I'd say they are really the driver of that was just the VBP implementation in China. If you look at our CoreLab business, our international CoreLab business, excluding China, you know, the international business was up double digits. So, you know, the teams in those markets are doing really well. And, you know, I've mentioned this in January, we're going to see the VBP impact the Coralab business. We had originally forecasted in April, it got delayed and pushed out to Q3. If you look at our growth rate in the first half of this year, it was over 7%. And some of that favorability that we saw in the business and that we rolled into, you know, higher guidance as a result of a little bit of that delay here. So, you know, we'll go through the VVP transition. We've done it in a lot of our businesses. You know, there's the, you know, pricing impact going forward. There's some, you know, transition-related items that happen, whether you're, you know, making pricing accommodations for the inventory that's already in the channel, et cetera. So, I still feel very good about the business we've got there. I feel good about China continues to be a very attractive market for us. So we'll just work our way through this. But to your question on the quarter, yeah, we feel good about the quarter. I wouldn't have kept the guidance if we didn't. We've got great momentum in the business. We were meeting with the management team yesterday. They're very committed and feel good about the momentum. So I think we'll have a very good year with a good, strong close in Q4.

Great. Appreciate the cuts for color. Thanks a lot.

Thank you. And our next question will come from Larry Beagleson from Wells Fargo. Your line is open.

Good morning. Thanks for taking the question. Robert, I wanted to ask about Libre and just the big picture, you know, You had 21% growth in Libre in Q3, which was good, but your competitors obviously having some issues. So it would be helpful to hear your view of the state of the CGM market. Talk about your confidence in the overall CGM market outlook and your goal of $10 billion in sales by 2028. And maybe just give us some color on what you're seeing so far with Lingo. Thanks for taking the question.

Yeah, sure. Larry, I've always been very, very bullish about this market and talked about this market a little bit differently than when we talk about general medtech markets, right? You know, this is a mass market opportunity that we have. And, yeah, we grew 21%. U.S. was actually up 26%. And, yeah. You know, we feel good about the market. The fundamentals are still very much there and they're still very much intact. You know, this is – you've got, you know, about 10 million CGM users globally, I think, right now. And you've got over 100 million diabetics in the developed world, over – Over half a billion globally. So yeah, I think this is a market that's got mass market potential to it. As long as you stay ahead from a technology perspective, as long as you stay ahead from a scale perspective, as long as you stay ahead from a cost perspective, for me, those are the three elements here that allow us and have guided our strategy from day one. And, you know, I don't think that, you know, you're going to have some, you know, some changes in a market, you know, when you've got a market that's, you know, whatever, $12, $13 billion, growing 15%. There'll be more players, for sure. There'll be more competition, for sure. But we feel good about our position and the strategy that we've built. We've thought about this. not just for the next year. We've been thinking about this. What is it going to look like a decade from now and how we built our portfolio and our position? I feel very good about this market. I don't think there's anything fundamentally here that's significantly changed, at least from our internal way of thinking about it. I think this is a great opportunity for us. Libre is It'll be a $6 billion plus product. It'll grow 20% this year. When we put out the $10 billion target, Larry, we talked about a compound annual growth rate of 15%. So, you know, we're ahead of that. And, you know, we're going to have we're going to work hard to make sure that we stay ahead of that and we continue to gain share. We'll add a billion dollars of revenue this year, add a million users. You've got opportunities in Type 1s on the pump side, on the connectivity side with pens. You've got opportunities with Type 2s and Bazel. I mean, I think that's just really still so much opportunity in those markets. So, I feel very good about it. As we talked about Libre, we always viewed it as a platform. You mentioned Lingo. Glad to see that launch. Just as a reminder, we're really focusing on a very different population with this technology. We're targeting people that don't have diabetes. It's a little bit of a different business model, sell model. But so far, I've seen really, really good early interest, great, great feedback from the users so far. The app, the data, the website, the HelloLingo website, the delivery, the whole non-prescription stuff, that's working out very well. You know, the two-sensor pack. is the most popular version right now. And I think that's a good, it's a great way to start. I was looking at some of the initial reorder rates that came in last night. And while was I surprised that, you know, really, really much higher reorder rates than what we saw in the UK. And I thought that I think the team did a really good job at adapting some of the learnings from the UK into that. So I think overall, over time, this is going to be a great opportunity to be able to add, you know, to that $10 billion target, you know, as we build this user base out. So overall, back to your question on Libre, I feel very good about our position, what we're doing, and Lingo is also a very good start.

All right, great. Thanks so much.

Thank you. And our next question will come from Robbie Marcus from JP Morgan. Your line is open.

Oh, good morning. Thanks for taking the questions. Congrats on a nice quarter. Robert, wanted to ask, you know, this time of year we all, we're looking for fourth quarter, but we're also turning our focus to 2025. I see the streets sitting at about 7% on the top line, 10% on the bottom line. Wanted to see if you had any comments about how you feel about that, or your view into next year, realizing it's still on the early side. Thanks.

Yeah, it's a little early to give real specific guidance there, Robbie, but similar to you, you know, we're also looking at 25, and we're looking at 25 also as part of our strategic planning process here, too. So, yeah, this is the time of the season, right? I'd say, yes, similar to last year, I look at the analyst estimates going into 2025, high single-digit growth, 10% EPS. And like I said last year, that feels like a very reasonable starting point, you know. I think the difference going into 2025 versus when we were coming into 2024 is, As we go into 2025, one of the things that we don't have is what I would call kind of like the COVID cloud, at least for a couple of the quarters ahead of us. And that kind of masked a little bit of our underlying kind of base EPS kind of business growth. So I am looking forward to, in a way, not having that be kind of this kind of comp issue. But I think the high single-digit – 10% EPS, yeah, that sounds like a very kind of, you know, I'd say reasonable starting point. But, you know, if I take a step back also, I look at that and say, okay, here we have a company that's $40 billion in revenue, and we've been driving, you know, high single-digit top-line growth. I think that's pretty unique for us. And I think one of the reasons for that is a combination of two factors. you know, first of all, the markets that we're participating, they're very attractive, Roddy, whether it's their size, their growth outlook, whether, you know, their alignment to favorable demographic trends, the positions we have in them. And then there's, you know, there's a couple different types of markets that we, you know, that we're in, right? Markets that are probably a little bit lower from a growth rate perspective, but we've got tremendous scale, tremendous positions in them, and that scale and that position disproportionates us. And they provide great financial stability to our business. We've got other markets that are very exciting, high growth markets that our goal there is to enter and capture share. whether it's TAVR, LAA, new diagnostic systems that we'll be launching. And then other markets we're building, right? And we're building them and creating them with first-of-the-kind types of products, whether it's lingo that we talked about, TBI testing, leadless, biosimilars in emerging markets, et cetera. So it's a nice collection of markets that really allow us to, you know, set these high single-digit target growth rates for us. And then the other part is pipeline, which is fundamental, right? And I think it's been highly productive. Recently launched products this year are going to contribute about a billion dollars of revenue this year, and that's double to what it was in 2023. And I expect that to be the case again. next year, right? So I think it starts at the top line. We've made a lot of effort right now in expanding gross margin and delivering. That was a topic that we talked about last year, expanding margins, and gross margin is a key focus of ours. But I also think we've been a pretty a pretty proficient allocator of investment. You know, we've invested, we've done increased investments in areas that we know are high growth areas, and we've still been able to generate over a billion dollars of spending leverage over the last five years. So, as we go down the P&L, I think that's another Opportunity for us as we go down into 2025 is our discipline in terms of how we make the investments and our focus on gross margin. So I think the combination of that will allow us to have that off-margin expansion and then balance sheets in a great year. Sorry, battery's in a great shape here. So, you know, I think we've got all the elements that we need to go into 2025 with great momentum, markets, positions, and financial flexibility there.

Great. Thanks a lot.

Thank you. Our next question will come from David Roman from Goldman Sachs. Your line is open.

Thank you, and good morning, everybody. Robert, maybe if I could push a little bit more on the investment spending and help us think a little bit about the shape of the P&L on a go-forward basis. During the quarter, you did accelerate R&D and SG&A spending on a year-over-year growth basis, and maybe you could help us think through where are some of those incremental dollars going? How should we think about the trajectory of operating expenses in the With the announced share repurchase program, should we think about that as an effort to keep the share count flat or a view that this is an opportunity to return incremental capital to shareholders and reduce the share count?

Sure. Yeah, I guess on the investment side – Let's see, if you look at what we've done with our expenses here, you know, they've gone from 37% in 2019 down to about 34% this year. So that's where that $1 billion of spending leverage comes right. If you look at our five-year CAGR, it's high single digits, and our operating expense CAGR is about, you know, 4%. But, you know, it's not a cookie-cutter approach. You know, we look at the businesses and look at their opportunities and make those decisions. You know, R&D investments, they're a little bit more longer term, right? So once you commit to R&D programs, you know, they tend to be a little bit more longer term than, you know, than making some SG&A decisions where you can you can toggle up and down a little bit easier. But I think you can see where some of the growth is coming from, and that's being supported by those investments. Obviously, our MedTech portfolio has been getting investments, I'd say in EP, in structural heart, in diabetes care, you know, in neuromodulation. I mean, all of the businesses, you know, they come with a strategic plan, and, you know, we look at where it makes more sense, whether it's to put more investment in the field with Salesforce and clinical people, whether it's to make the investment in a clinical trial, So, you know, we tend to have a pretty good process about how to do that. We've been making investments in diagnostics. Soon we'll probably be talking about a new system that we're going to be launching for a whole new segment of the diagnostic industry. You know, that's a longer-term program that's been a couple years. So I think we've got a good process about how to, you know, how to make the investments knowing that R&D investments are a little bit more longer than SG&A. So, and I think that's what we've been able to show. And I think that's one of the reasons we've been able to get to our off-margin profile back to pre-pandemic levels, which, you know, I'm not sure a lot of companies would be able to kind of say that. So, and we haven't, you know, we haven't dropped, we haven't driven our op margin by expenses. I mean, we've been driving our top line pretty effectively too. So I think that's probably the best proof point that we know how to do this allocation and the cycles of the allocation, et cetera. And then I think you had a question regarding share count and buybacks. Listen, as I've said, we've got a... pretty balanced approach about how we allocate our capital. I talked about the importance of the dividend and supporting that growing dividend. And we'll continue to do that. The buybacks is just another element in that capital allocation strategy. We just announced that the board recently approved a new $7 billion buyback program. The previous one that we had approved in in 2021 was running down and we thought it was a good time to put that in place. We've deployed around $8 billion towards buyback over the last five years. We took a little bit of a step up during a couple of years after the acquisitions that we did, we had stepped that down a little bit. So we've stepped that up. Q3, we did about 750 million. I thought given our strong performance outlook here that we saw a disconnect between what we were doing and our P ratio. In fact, I still do. So it made sense to buy shares. And the buyback announcement is just part of our balanced approach to allocating capital. And we've got better authorization set. So if we feel that there's a disconnect, going forward, we've got that opportunity to try and correct that. And if that reduces the share count, yeah, then it'll reduce the share count. But we're not trying to drive our APS through a lower share count. We're ultimately trying to drive our APS through top-line growth, David.

Excellent. I appreciate all the comments. Thanks, Robert.

Yep.

Thank you. Our next question will come from Joshua Jennings from TD Cowan. Your line is open.

Hi, good morning. Thanks for taking the question. Robert, I wanted to ask about just the structural heart markets, the TAVR markets slowing down or decelerating. There's been some investor concerns about U.S. provider capacity and whether there's a bottleneck. I think Abbott's uniquely positioned because you do have offerings in transcatheter aortic, mitral, and tricuspid solutions and left atrial appendage occlusion. We've got interventional heart failure interventions coming down the pike. Are you seeing any capacity constraints, limiting growth? You've got a strong structural heart quarter that's in 3Q. Or are you concerned about that? Is that on the horizon? Or should we just think that hospitals are seeing this growth opportunity as well and building out capacity, adding cath labs, hybrid ORs, etc.? ? I'd love to get your view on the current situation and whether you're worried in the next 12, 24, 36 months that we could run into a bottleneck in the U.S. Thanks.

Not seeing the bottleneck, not forecasting the bottleneck, not concerned about, you know, the capacity here. You know, obviously this is a – You know, this is a very growing area, not only for, you know, those that are developing the technologies, but also for the healthcare systems that are, you know, are delivering them and deploying them. You know, I've been to, you know, some large centers over the quarter. I've been to some smaller centers over the quarter. There's always challenges, but I put it as a challenge not specific to a given technology or challenge. It's just whether it's ramping up a new technology, getting more people to train. But I'm not hearing that the centers that we've been working with, that capacity is a big rate-limiting factor today. I think if it started to become one and the demand is there, I think history has shown that you make the right investments, the investments will be made here to accommodate that demand. This is obviously what's happened in Structural Heart over the last decade. Investments will be made to accommodate that demand. I'm not hearing that and we continue to be Very excited about the prospects that we have in our structural heart portfolio. I think the team has kind of hit its stride right now. Got new management, new products launching, and I'm very optimistic right now with, you know, what the teams are putting together across the entire portfolio. I think, like you said, we're one of the few companies here that, you know, we can see the full spectrum, right, from all the way from surgical structural interventions on all the occlusion and appendages, and then, you you know, looking at being able to see mitral, tricuspid, aortic, whether it's repair, whether it's replacement. I think the team is hitting its stride right now. And our focus here is going to be on both sides, making the investments on the R&D side. I think we've got a lot of new product investments, structural heart, new clinical trial, new indications, investments over there. And I think the different part of our investment profile – and we've been doing that for many years in Structural Heart, and I think that's why we have the portfolio we have. I think the piece that we're adding on now is like, okay, we've got the products. Now we've got to increase our field presence. to support either the market share gain that we aspire to or to support these growing new fields, whether it's tricuspid. So our focus now is really to start to add more on the field side in these businesses to be able to kind of support that growth. But no, I think this is a tremendous area of growth, of opportunity, of underpenetration, of R&D, of clinical work. So we're really excited about it.

Appreciate it. Thanks.

Thank you. Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.

Hi, Robert. Good morning, and thanks for taking my question. I had one on, I guess, NEC and infant formula, the FDA, CDC, and NIH. I put out a joint statement. It's a pretty strong statement saying noting that there's perhaps no causative relationship between infant formula and NEC. So I guess my question is, how does this change Abbott's position in these lawsuits? Does it matter? What else can we expect from the government? Could we expect more announcements similar to this? What shape or form could it be? What can Abbott do to perhaps strengthen liabilities related to these cases?

Yeah, sure. Well, listen, as it relates to our position, it's great to see the statement, and I agree with you. I think it was a very strong statement. It doesn't change what I have been saying, which is – and the statement seems to be aligned and support what I hear from the market and what I hear from neonatologists, which is these products are medically necessary – they are considered the standard of care, and they're a valuable tool. They're a valuable tool for the neonatologist in their decisions, in their decisions, in their discussions with parents on how to feed premature. And, you know, the labels, which is a component in all of this, you know, they've been reviewed by the regulators and never called for a net warning. So, This is a consensus statement made by these three agencies, three regulators here in the U.S. And they're basically, Vijay, they're actually endorsing an expert panel with dozens of researchers that were conveyed by the Secretary of HHS. And I think the researchers issued a 100-page document or so. I think they looked at thousands of publications. I think it was 600 specific to the relationship between NEC and feeding. And in that joint statement, the agencies, you know, they've reiterated the importance of preterm formula as the standard of care. And they also clearly state there's no conclusive evidence that the formula causes NEC. I think this is only one of a handful of times where the three agencies, the most prominent and significant health agencies and regulators in the U.S. have come together and put out a joint statement. Obviously, we saw that during the COVID pandemic, but I think before that, I think it was during the HIV pandemic. So I think the statement says a lot, DJ. At this point, though, at this point, the judge – in our trial right now has not allowed the joint statement or the underlying report to be entered into evidence. I don't know the reasons there, but I think it would be, we believe that it's the joint statement, the report, the expert testimony. I think those are important pieces of information for a jury to consider. as they're making their decisions. So I don't know how to cap that, but I would say beyond this case, and as the cases move to more of the federal side, my expectation here is that the juries in these cases would be allowed to consider the criticality of that important evidence. So to your question on the liability portion and kind of what to do, Now, if I take a step back on this one, I've been thinking about this quite a bit. But as healthcare innovators, we develop healthcare products based on problems that we see. We run the clinical trials. We gather the data. We review the data with the regulators. You guys know this process pretty well. And ultimately, the regulator decides if the products are safe and they're fit for purpose, and they decide how they've got to be labeled. And that's the That's the country, that's the market that I want to be in where the products, the labels, they're evaluated through a well-established regulatory process by expert regulators that have unfettered access to the best scientific evidence rather than trying to do this, regulate products through uncertainty and unpredictability of jury trials. So ultimately, to your question, if the regulatory process is disregarded, If the science is disregarded, it's going to be very difficult for any company to remain on the market with these products. You know, taking on that indefinite liability here, at least in the United States, that would be an issue that the United States would confront. It wouldn't be an issue for premature babies in international countries because this issue, this is not an issue and the products are still available there. So, yeah, I do think there needs to be some fortitude here by those that can make decisions, you know, prioritize the babies, prioritize preterm babies, all 370,000 every single year that rely on these products, over, you know, those that seem to kind of distort and abuse this tort system that we have in our country here for financial gains. I'm hoping it doesn't come to that. But I've been pretty clear that, you know, this is, we stand behind the products, but if the process won't be, won't be, you know, it's gonna be disregarded, then this is something that we will not, you know, we will not continue adding to the liability here. So, yeah, there's a playbook, it seems, for these things to happen. You know, you take a decade, you know, 10 plus years litigate this and come to some resolution I don't intend to follow that playbook and I intend to resolve this faster and yeah there are different ways to resolve this and different ways to look at this and we are having conversations at all levels to be able to express the concern that this could cause to families here in the United States That's helpful, thank you

Thank you. Our next question will come from Joanne Wunsch from Citi. Your line is open.

Good morning, and thank you for taking the question. Congratulations on earlier than expected completion of enrollment in your PFA catheter clinical trial, but I would really love to get your view on the state of the electrophysiology market, what you're seeing in terms of PFA uptake, and how that is impacting your mapping and navigation systems. Thank you again.

Sure, Joanne. I mean, I think this quarter was a continuation of the trend that we've been seeing since the arrival of PFA. You know, we're growing a little bit lower than the market. The market has kind of grown pretty significantly here. But if you look at our growth rate, prior to PFA, we're actually growing faster now with PFA. And I think there's a couple of factors there. I think you mentioned one of those, which is cardiac mapping. Right now, we're seeing about 90 plus percent of the cases of these two in the US being mapped. If you look at where we were before, Joanne, we were mapping about maybe between 25 and 30% of RF cases. We're now mapping 50 plus. So that is a little bit of a tailwind for us. We're seeing a pretty strong growth in procedures. So, and I think that's probably what's helped drive some of the market growth that we're seeing. But I also think that the volume increase is actually due to, you know, improved treatment guidelines that we're seeing, and quite frankly, new technologies that are helping to identify AFib patients too. So I think it's a combination of factors there that are helping to drive more procedures. You know, and then for us, you know, the RF portion of it is still a growth piece for us. As I said in my comments, you know, we grew ablation catheters double digits too. So we're seeing about 20% of the PFA cases, at least the ones that we're mapping, use RF catheters, and we're in those cases. I think the key thing here is just to, at least right now, right now, PFA is really being used for de novo procedures. So if you kind of break that out, it's about a third of all ablation procedures are de novo. The other two-thirds are you know, VT ablation, SVT ablation, redos. And in those cases, you know, they're using, you know, we're still using RF, and RF plays an important role there, which is why we've, you know, initiated our focal flex trial to be able to have the optionality to be able to toggle between PFA and RF. So, we still think that's an important part there. So, But, you know, I think the team has done a really good job here at leveraging our open mapping system. You know, I made comments. We use the open mapping system as a design input for R&D programs to start off with. And now that open system is allowing us to be in more cases and partner more with the electrophysiologists. So I think that is, you know, that's what we're seeing. And we're very committed to be able to bring PFA to the market. We've completed enrollment, like you said, and we completed the CE mark enrollment beginning of this year, so we're committed to the space, but we do feel that it's a full-portfolio approach. You need good mapping, which is why we invested in our next-generation HD grid. You need to have a PFA portfolio that's pretty complete. You need to have RF. And I think that's what the team's been building, you know, I'd say very, very successfully.

Wonderful. Thank you.

Thank you. Our next question will come from Matt Mixick from Barclays. Your line is open.

Hey, thanks so much for taking the question. a follow-up on V-Ray and the diabetes business and, you know, just a couple of topics that come up quite a bit, particularly in the last few months around the market and competition. The first being kind of, you know, anything you can comment on regarding your share trends, particularly in the DME channel, anything you're doing there differently, you know, what you're seeing. As a user of Lingo for the last couple of months, I compliment the team on putting together a great product. Question, just curious about the timing and the plan for Rio and thoughts on potential reimbursement for that sort of non-insulin intensive type 2 community. And then lastly, just zooming out for a second and getting back to your comments and plans for gross margin. you know, how, if you could, you know, to scale the expansion into OTC of Libre and this platform kind of, you know, plays a role in hitting your 24 gross margin plans and your plans for expansion going forward as you scale this business. Thanks.

You lined up a lot there, Matt. I'm going to make sure that Mike here helps me stay with all the questions that you laid out there. I mean, I think regarding your Libre question on competitiveness, yeah, I think the team has done a really good job here in the U.S., not just in the DME channel, but at the, you know, at the endos offices, at the primary care channel with the basal population. I think it's kind of an all-out, all-channel, real strong execution there. U.S., we grew 26% in the U.S., this quarter, and that was having some of the, you know, some of the challenges we had there regarding, you know, regarding some kind of temporary supply challenges with Libre 3. So, we haven't really unleashed Libre 3 fully yet, and a lot of the share gains that we're getting are with Libre 2, but that piece is behind us. We've invested in a new manufacturing line. We have a new manufacturing, a whole brand-new manufacturing facility come up towards the end of the year. So that'll – as we go into next year, that'll all be kind of behind us. So I think our position here in the U.S. and globally, quite frankly, is strengthened by, you know, the product portfolio, the cost position that we had. You're mentioning gross margins in Libre. That's a key aspect here we've always talked about. You gotta have cost leadership here because as the market expands to basal and oral meds GLP-1 users, and as that population grows, you're going to have a much larger TAN to operate in. But, yeah, you are going to see you're going to have to make some pricing adjustments to be able to get that reimbursement. So you've got to have your cost structure in place to be able to benefit, you know, have the top line growth and not have that come at the expense of gross margin. And our gross margins, as we've grown Libre, have actually expanded significantly. As our manufacturing scale continues to ramp up, you know, some of the costs associated with these products, because there's a lot of automation, and we've been doing this, you know, from day one, some of the costs are depreciation in the equipment. So, you know, as a lot of our facilities are, you know, running through their depreciation schedules, those will help our gross margins, too. So I feel good about our opportunity to – to drive the market, to be competitive, to lead in technology, to lead in scale and cost, and take advantage of what we believe is a mass market opportunity for us. I did get a question on Rio. Listen, the initial focus is on lingo right now. You know, we've got that. Think of Rio as another arrow here in the quiver that we can pull out if we need to ahead of schedule. We do have a schedule. I'm not going to lay out what that schedule is, but for some reason we need to do that. We'll be able to do that. But the focus is on lingo right now, and we've got a nice opportunity here to build a completely new segment of bio-wearables with consumers.

That's great.

Thanks so much.

Operator, we'll take one more question, please.

Thank you. And our last question will come from Danielle Antolfi from UBS. Your line is open. Okay.

Good morning, guys. Thank you so much for squeezing me in. Congrats on a really good quarter here. I just want to follow up on the structural heart component of the business. Robert, you talked about this earlier in response to Josh's question. But just digging a little bit deeper, as we look into 2025, I mean, you've got potential indication expansion for LAA closure. But you do have some competitive data coming on the tricuspid side of things that TCT and whether or not that shows a mortality benefit. So just curious about how you think about those two markets specifically and sustainable growth in those franchises. There's some puts and takes there. So just wanted to get your sense of how to think about that as we head into next year. Thanks so much.

Sure. Just to remind me again, Danielle, tricuspid and what was the other one?

Sorry, left atrial appendage closure. Oh, okay.

Yeah, okay, good. Yeah, these are great areas of investment for us, and the investment of money, time, effort, thinking, power, all of that. So, you know, I think, as I said on, you know, business hitting its stride, I definitely would say that about the Amulet team. They're definitely hitting their stride. We saw nice growth this quarter, 25% globally, 40% growth in the U.S. here. So, And we're making the investments. I mean, I think you saw our registry data shows really good positive results from Amulet. 95% of the closure rates achieved and sustained after 45 days. I think that's pretty good. 90% closure rate when using Amulet for those that have failed proper closure with a competitor product. So, But we're investing in there. We've got our catalyst trial that's looking at comparing amyloid to anticoagulants with people that have a risk of AFib. Expect to complete that trial next year. And then the team's been working on an amyloid 2.0. And I expect that we will be beginning or entering to trial in that business with that product towards the end of this year. So really nice progress on the appendage side. And quite frankly, PFO2 is doing really well, and that's a great growth driver for us too. On the tricuspid side, Yeah, there's going to be a lot of data coming out over the next 12, 24 months. I expect that. I think with any new category here, Danielle, you're going to have to make the investments. I mean, nobody was doing anything from an interventional perspective on the tricuspid, right? So as companies are developing technologies, I think you are going to see a lot of clinical readouts and clinical data, more to be able to kind of support the use of these technologies. I think we saw one recently at ESC, specifically to Triclip, a European study. And this is the second RCT that's basically confirming what the triluminate RCTs showed, which is much superior to medical therapy. and extremely effective at reducing TR. So I think that's an area of investment for us, without a doubt. I think that there's an opportunity here that the team's been working on regarding our full portfolio approach with our structural products. And I think TriClip plays an important role there. You know, we're excited about the NCD that was opened and looking forward to that. So that's another opportunity for us in 2025. But quite frankly, I just think there's a great opportunity here with our team. We've got, I would say, some built-in advantages as it comes to the Triclip product. You know, we've got manufacturing scale, the sales force. and all of that, and there's definitely demand, and we're seeing that, and the launch is going very well, so I think that, yeah, you're going to see more data, and that's good, and it's a growth opportunity for us. I think this is a billion-dollar business for us here over time, but you're going to have to make the investments on the clinical side to be able to kind of support the adoption of it, so... So very excited about Structural Heart overall. And ultimately excited about the entire company and business. We've had a really pleased with the performance in the first three quarters. We're on track to finish the year at the high end of the initial guidance that we provided back in January. Sales growth has been strong. Gross margin profile continues to expand. EPS growth is now accelerating throughout the year as we are lapping some of those COVID comps. The pipeline is richer than ever. So I think we've got great momentum heading into next year. And with that, I'm going to wrap up and thank all of you for joining us.

Thank you, Operator. Thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.