Abbott Laboratories

Good morning and thank you for standing by. Welcome to Abbott's second quarter 2025 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. 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 2025. 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, 2024. Mike Valdes, 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. Mike Valdes, On today's conference call, as in the past non gap financial measures will be used to help investors understand at its 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 related GAAP financial measures on a forward-looking basis for the non-GAAP financial measures for which it is providing guidance because the company is unable to predict with reasonable certainty and without unreasonable effort, the timing and impact of certain items, which could significantly impact Abbott's results in accordance with GAAP. 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. At the halfway point of the year, we are on track with our key priorities and objectives. In the first half, we delivered high single digit sales growth, over 100 basis points of margin expansion in both gross margin and operating margin, double digit earnings per share, and we achieved a number of important milestones related to advancing key programs in our new product pipeline. Our sales growth excluded COVID testing sales with 7.5% second quarter and 8% in the first half of the year. Our second quarter adjusted earnings per share of $1.26, exceeded the consensus estimate and reflects 11% growth versus the prior year and 16% growth on a sequential basis compared to the first quarter. I'll now summarize our second quarter results in more detail before I turn the call over to Phil. I'll start with nutrition, where sales increased 3.5% in the quarter. Growth in the quarter was driven by 6.5% growth. In adult nutrition, where Abbott is the global market leader, we continue to see strong demand for Ensure and Glucerna brands in the markets around the world. And this growing demand is driven by consumers seeking a source of complete and balanced nutrition, especially for those focused on protein-rich diets and meeting the dietary requirements for managing diabetes. Moving to diagnostics, sales declined 1.5% in the quarter, predominantly due to the year-over-year decline in COVID testing sales and the impact of volume-based procurement programs in China. These represent a projected headwind of around $700 million or 750 basis points on the full year 2025 sales growth in diagnostics. Excluding China, core lab diagnostics grew 8% reflecting strong underlying demand in the markets around the world. Turning to EPD, our sales increased nearly 8% in the quarter. driven by strong performance in our key 15 markets, which surpassed $1 billion in quarterly sales for the first time. Key 15 markets include India, China, and other markets across Asia, Latin America, and Middle East. These markets represent the most attractive areas of growth for branded generic medicines. The growth in these markets is supported by favorable long-term health care, economic, and demographic trends, including higher birth rates and expanding middle class aging populations and growing demand for access to high-quality healthcare solutions. We serve this growing demand by offering a broad portfolio of branded generic medicines tailored to local conditions with a focus on key therapeutic areas. And additionally, we continue to make good progress toward building a best-in-class portfolio of biosimilars, having completed 10 regulatory approval submissions across a range of emerging markets with launches projected to begin in 2026. And I'll wrap up with medical devices, where sales grew 12% driven by double-digit growth in diabetes care, heart failure, structural heart, electrophysiology, and cardiac rhythm management. In diabetes care, sales of continuous glucose monitors were $1.9 billion in the quarter and grew 19.5%. In April, we announced a first-of-its-kind collaboration with Epic. enabling direct integration of Libre sensor data into the leading electronic health record system. This seamless integration allows healthcare providers to easily view their patients' glucose data before, during, and after meeting with patients, supporting our goal of simplifying care to help deliver better outcomes for both healthcare providers and patients. In electrophysiology, we had several key accomplishments in the quarter, including delivering a number delivering another quarter of double-digit sales growth, initiating the launch of our new Volt PFA catheter, and completing enrollment ahead of schedule in our PactiFlex Duo U.S. pivotal trial. In structural heart, growth of 12% was led by a combination of continued share gains in TAVR, strong adoption of TriClip, and contributions from Amulet and MitraClip. During the quarter, we achieved several important milestones that demonstrate our commitment and progress toward expanding our portfolio of solutions to treat mitral valve disease. As the market leader in mitral valve repair, we continue to invest in the success of MitraClip. So in addition to currently pursuing a label expansion to increase the addressable market, we recently launched a next generation version of MitraClip that further enhances the procedure with improved deployment and deliverability. To accompany our leading position in mitral valve repair, we expanded our focus several years ago to include the development of mitral valve replacement technologies. In May, we announced FDA approval of our Tendine Mitral Replacement Valve, which offers a new treatment option for those who are not candidates for open heart surgery or mitral valve repair procedure. New York Valves Conference a few weeks ago, we provided an encouraging update on the development of our new transfemoral mitral valve replacement product. We acquired this innovative technology as part of our venture investments program, which led to the acquisition of Cephia Valve Technologies in 2019. And following that acquisition, we continued to iterate and enhance the technology, and the FDA recently granted breakthrough designation We plan to start the pivotal trial next year and look forward to creating a new solution to help treat the world's most common heart valve disease, which impacts the lives of millions of people around the world. In rhythm management, our strong performance is a result of our strategy to build a comprehensive portfolio capable of significantly outperforming the market on our own historical growth rates. Our growth this quarter of 10% was led by strong uptake of AVERE, our innovative leadless pacemaker, which is driving growing adoption of leadless pacemakers in both the single and dual chamber pacing segments of the market. In April, we announced late breaking data from the AVERE conduction system pacing feasibility study. This was the first study to evaluate using a leadless pacemaker to deliver a conduction system pacing, which is a novel approach to pacing that closely mimics the heart's natural electrical rhythm. And following the successful outcome of this study, we are targeting to start the pivotal trial next year. In our heart failure business, often overshadowed by other high growth businesses in our medical device portfolio, sales grew 14% in the quarter. This was driven by balance growth across the portfolio, which included double digit growth in ventricular assist devices used to treat both chronic and acute conditions. and double-digit growth in cardiomems, our implantable sensor for the early detection of heart failure. And vascular growth of 3.5% was led by double-digit growth in vascular imaging and vessel closure products and increasing contributions from ESPRIT, our below-the-knee resorbable stent. And lastly, in neuromodulation, growth of 4% was led by strong performance of our A-Turner rechargeable spinal cord stimulation device in international markets, reflecting both continued uptake in existing markets and launches in new markets. So in summary, our diversified model continues to provide a strong foundation that is both resilient and designed to sustainably deliver top-tier results now and in the future. And that's evident in our performance in the first half of the year, which, along with our outlook for the remainder of the year and the momentum heading into next year, aligns with our long-term sustainable growth objectives of delivering high single-digit growth, healthy margin expansion, and double-digit EPS growth. I'll now 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 second quarter results, sales increased 6.9% or 7.5% when excluding the COVID testing-related sales. Adjusted earnings per share of $1.26 increased 11% compared to the prior year and was above the consensus estimate. Foreign exchange had a favorable year-over-year impact of 0.5% on second quarter sales. During the quarter, we saw the U.S. dollar weaken, which resulted in a favorable impact on sales compared to exchange rates at the time of our earnings call in April. Regarding other aspects of the P&L, the adjusted gross margin profile was 57% of sales, which reflects an increase of 100 basis points compared to the prior year. Adjusted R&D was 6.3% of sales, and adjusted SG&A was 27.7% of sales. Adjusted operating margin was 22.9% of sales, which also reflects an increase of 100 basis points compared to the prior year. Based on current rates, we now expect exchange to have a relatively neutral impact on our full year reported sales, which includes an expected favorable impact of approximately 2% on our third quarter reported sales. Lastly, for the third quarter, we forecast adjusted earnings per share to be in the range of $1.28 to $1.32. With that, we'll now 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 our Q&A roster. And our first question will come from David Roman from Goldman Sachs. Your line is open.

Thank you, and good morning. I appreciate your taking the question here. Maybe, Robert, you could start by just putting 2025 performance into context for us. As I listen to the walk from the prior guidance to the updated guidance, I think it's pretty clear that it comes from some factors outside the U.S. in diagnostics plus COVID diagnostic headwinds. But maybe you could help us think through the headwinds you're seeing this year, the extent to which those are transient versus more permanent changes in the growth rate and what that looks like next year?

Sure, David. I guess I'll just start off with like our goal is to always ensure that every one of our businesses is meeting and beating, right? The reality is in the portfolio of Abbott and the David Stahl- complexity and the broadness that were you know geographically across the different types of products you're going to have some businesses that will force full short time to time. David Stahl- and others, you know do better and we've seen that time and again the goal here, David is always to really take all of that. David Stahl- All that complexity and just translate into reliable and sustainable growth and that's what we've been doing this year, so when you say characterize. your growth this year. Listen, we've got a device business that for the first half of the year has grown over 12 percent, double-digit growth in a lot of our businesses. Our pharma business has done very well, 8 percent growth in the first half, building the biosimilar portfolio. Nutrition, first half, about 5 percent, which is in the range that we've always expected them now that we've you know, lacked a lot of the market share kind of recovery process here. So, really, the challenge that we've had is twofold here. It's really a drop off on our COVID testing sales and some challenges in the China core lab market together with some changes that we've seen in the U.S. foreign aid funding for HIV testing. You look at that and say, okay, I'm not sure these are impacts that are 100% definite in the second half of the year, but I'm not going to sit here and try and kind of forecast what COVID testing is going to do. We had expected to see a China recovery in volume. We knew the price impact in China core lab, David, and we rolled that into our guidance. We had expected a market volume recovery to start happening in, quite frankly, starting in Q2. We haven't seen that, so we've moved that out into Q4. But you put all that together, together with the funding for HIV testing, that's over $1 billion of, I guess, of headwind. And even with that $1 billion, we're still forecasting high single-digit growth and absorbing the impact of tariffs, which we now expect to be just under $200 million of impact. FX, as Phil said in his comments, is still a headwind versus prior year on the EPS side, but much less of a headwind than what we had originally anticipated back in January and, quite frankly, people too. That helps offset some of the tariff impact. Yeah, I put this all together, and it'll be nice, David, to lap these or to see these headwinds behind us next year. And then as you look to next year, you've got all this great launch activity across all the businesses, whether it's Volt in the U.S., TactiFlex Duo internationally, the dual analyte sensor, the launch of the new Alinity system. the biosimilar kind of rollout. So I look at all of that and I say, okay, you've got this headwind that we're facing here. Still, we're committed to high single-digit growth and double-digit EPS growth. And then as you look into 2026, those headwinds aren't going to be there. And then you've got all this kind of great momentum, which I'm sure we'll talk about in other parts of the business. So I look at 2026, I look at I know what the consensus are. They look very reasonable to me in that range of high single-digits, double-digit EPS. It's in line with our historical growth. It's in line with the guidance we're giving this year, and it's in line with what our long-term sustainable growth targets are. It'll be good to see these elements here that I've just highlighted in that are specifically to diagnostics. And I'll just take it a step further here. I mean, if you look at our, and I mentioned this in the opening comments here, our core lab business outside, and I hate doing this, but I think it gives context. If you look at the U.S. was up seven, eight percent. The European region was up eight percent. Our Latin America region was high teen. So our core lab business is doing very well. Alinity is doing very well. We just got this issue that we're going to have to go through this year as it relates to VBP and the disruption that happened in our core lab business in China. But we're still very bullish on this segment. We still believe it's a very important part of the healthcare system. So like I said, looking forward for these headwinds to be behind us and we're well set up for next year.

That's very helpful. Maybe I just push a little bit harder on one point there. If I look at the guidance for this year, it's really kind of 8.5% when you take out some of those one-time headwinds. One thing you didn't mention was Obviously, in EP, you face a little bit of a portfolio gap this year, and that looks to fully resolve as you head into the back half of the year and into next year. So is there a scenario in which we could see some of these one-time headwinds reverse and see the growth rate accelerate into 2026 and correspondingly see that fall through to the bottom line, recognizing it's early to talk about 26, but just conceptually some of these headwinds fading and some of those pipeline drivers starting to kick in more significantly?

Yeah, listen, there's definitely a scenario where you could see that growth rate accelerate, right? I mean, it's a little bit early to kind of put a, put a, you know, put a full stop on that, but there's definitely opportunities across the portfolio, which we'll talk about, uh, likely that said, Hey, this, you know, uh, you mentioned electrophysiology. I mean, that's been one, that's been one part of our portfolio that, uh, has consistently, um, you know, kind of exceeded the expectations, both expectations, quite frankly, that you guys have had and the expectations that we've had. So, yeah, I mean, there's definitely opportunity as these reverse out to see that acceleration. Maybe a little bit early to say that, but right now in terms of where we're sitting for 26, I feel very comfortable with that.

Excellent. I appreciate you taking the questions and bearing with me here as I have a cold today. Thank you.

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

Oh, great. Good morning. Thanks for taking the questions. Two for me. I'll ask them both up front, both product questions. Diabetes and EP, both performed really well in the quarter, particularly U.S. Libre. It was good to see U.S. double-digit EP. Maybe just walk through some of the trends you're seeing in each of those product lines. Especially in diabetes, there was a lot of buzz around ketone integration and that product coming from Abbott. So what are you seeing in diabetes and then also EP, especially now with Volt launching outside the US? Thanks.

Sure, Robbie. Yeah, another great quarter of Libre. almost 26% in the U.S., an acceleration internationally. Also, I think all three segments, we're seeing great momentum. So, if you look at the intensive insulin user segment, you know, obviously that's been a key growth driver for the market, but there's still, you know, there's still segments there that are under-penetrated, and we're seeing nice growth in there. You know, the new sensor you referenced I think is going to definitely accelerate there. The basal segment is doing very well, a big growth driver for us still. market leader here. Our view globally is we've got about a 70 share. You know some of the markets that have kind of began reimbursing for Basel, Robbie, we're starting to see more markets go down this path and start reimbursing Basel, whether it's like specific tenders and regions or different parts of healthcare systems. So that's good and we see like sustainability to that growth rate. and our position in those international markets. And then, you know, the non-insulin user segment is doing very well, very nicely, too. I mean, I think right now you've seen commercial coverage here in the United States, I'd say around about 30 percent is what we're seeing, and that's doubled over the last three years. So I think the trends are doing very nicely there. can see that continuing for the foreseeable future as part of our road to $10 billion in revenue. Your question on, or at least your comment on the dual analyte sensor, I think this is going to be, I think, a real next level kind of, I'd say, significant change in the CGM market, specifically for the intensive users. You know, ketone monitoring helps prevent diabetic ketoacidosis. We have a legacy of being in that. You know, we were the first company to develop a blood test, a rapid blood test for that, you know, many decades ago. So we know how important it is. It could be life-threatening. You know, the ADA conference you referenced, I thought there was some interesting clinical data that showed 30% of pediatric patients and 40% of adult participants saw like in this trial saw like increased ketone levels that put them at risk if there was an interruption on insulin delivery. So there's clearly a need for this patient segment. I think you saw that all the announcements that came out during the conference with all the pump integration. So there's clearly a need there. It's understood. And an opportunity to expand even further. We know that ketone monitoring here is going to create a path for doctors to prescribe SGLT2s for type 1s. These are great drugs that offer a lot of cardiovascular benefits, but they come with a DKA risk. So we think that's going to have a huge opportunity, too. So good trends in the existing segments right now, Robbie. And I think that our position is just going to be strengthened even more as we bring out, you know, the innovation. And so looking forward to that. I think on your question on EP, yeah, we saw good double-digit growth in EP this quarter, double-digit growth last quarter. Saw an acceleration in the U.S. growth rate this quarter versus last quarter. And a lot of attention now shifting towards rolling out of Volt to the international markets. We tend to like, we like to launch our products in a more kind of limited fashion. So when you move, when you move from, you know, clinical trials to full out launch, we like to have this little period in between here, Robbie, where we get to just to put it out in a little bit more of an environment that we can just make sure that, you know, we're clearly understanding and getting all the feedback in a more direct fashion and, when you go a little bit more focused, you get a great opportunity to do that. So really focusing right now on the sites that we're enrolled in in our trials, and the feedback's been excellent. I think that it stacks up very well versus competitors. I think the balloon design is perfect for PVI. I think it optimizes a lot of the process, and if you think about where Though prior balloon-based systems were used in Europe, I think this fits very nicely there. But its efficacy is great. Parasyximal data is best in class. As we said during the period we were talking about, the development of Volt We believed in mapping and contact and visualization of contact, and I think that's what we're seeing from these early cases here, just providing really real-time feedback on tissue contact. That leads to fewer applications, leads to less fluoro time, leads to less muscle contraction. which I think is really important if you think about some of the segments globally that are going to start to really, you know, advance, um, in terms of market segments, segments that will, um, you know, benefit by having a procedure that could be done without general anesthesia and just with general sedation. Um, and I think that, uh, I think Volt fits very nicely into those segments there too. So, um, so, so far so good. The team's doing a great job. They've been doing a great job over the last couple of years and, uh, I think they're excited now to transition to this phase of the strategy now, which is now that we've gained a lot of market share with mapping, and it's now to bring in the PFA catheter that we think is very competitive.

Appreciate it. Thanks, Robert.

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

Good morning. Thanks for taking the question. Robert, I just wanted to ask one follow-up question or multi-part follow-up question on Libre. So first, I'd love to get your reaction to the proposed competitive bidding for CGM and what that could mean for you. Second, the RFK Jr. comments on wearables. Do you think that could accelerate type 2 non-insulin CMS coverage? And just lastly, on the dual ketone sensor, Do you think that could drive share gains for you in intensive insulin patients where your share is lower? Thank you.

Sure. So three-parter. So on competitive bidding, Larry, listen, there was nothing unexpected in the CMS proposal document here. I don't think there's any major changes as it relates to CGM. If CMS chooses to do competitive, you know, to go down the competitive bidding routes, It's really going to be the DMEs that are going to be the ones doing the bidding, not the CGM manufacturers. I think this is probably going to take a couple of years to fully implement the process. I don't expect there to be an impact on Abbott, but we're going to continue to monitor. As I've said in other situations, one of the things that we've got to keep on doing here is to be the leader of scale, leader of cost. And so, you know, we'll continue to monitor and we'll be ready. Your other question was regarding the comments from the Secretary of HHS regarding wearables. Listen, wearables are powerful. We've known this since we've launched Libre. They're very powerful behavior modification tools. and behavior modification has really proven to really drive significant impact on one's health. And so I think you can keep your glucose levels in a healthy range. It offers a lot of benefits. There's lower risk of diabetes, heart disease, it helps with weight loss, we've seen that, improves productivity, et cetera. So I appreciate the Secretary's efforts here to promote improving the health and wellness of all Americans, and I think that's in line with our company's mission and certainly supportive of this initiative. We would hope that it would be Americans wearing CGMs that were made in the United States. We have two manufacturing sites. But anyways, we support that initiative. And then I think your question was regarding the continuous glucose ketone sensor, do we think that that can accelerate our share gain? 100% yes.

Very clear. Thank you.

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

Hi, Robert. Good morning and thanks for taking my question. I had one product-related and one P&L question. On the product side, Avere CRM is doing really, really well. How, I guess, are there any metrics you could share on what percentage of your installed base has been updated or converted to Avere? Where are we in the conversion cycle? And is this now like a double-digit or team score for the foreseeable future? What do you think is the ultimate time for this kind of product is?

I think it's fundamentally changed the growth trajectory of our CRM business. And now you're trying to ask yourself, okay, is this a one-off thing or can we bank on this? If you look at the trajectory of our CRM business, 2023, when we launched single chamber, our growth rate was 7%. 2024, it was 7%. First half this year, it's 8%. Shown 10% growth this quarter. I think that achieving this is very sustainable. You know, I've talked about what we wanted to do with Avera in the past. You've got a $4 billion global pacing market that really hasn't seen much innovation, Vijay. And what we wanted to do was to really make sure that as we rolled this out, weren't just looking for a kind of a a niche uh kind of you know jump in sales and and then and then that's it so team has done a really good job here in terms of coordinating between marketing and clinical and sales and i think these teams have now really gotten full you know are really aligned i think they're really hitting their stride here to be able to look at expanding the, not just in the U.S., but also internationally. So I think it's the work that they're doing here to be able to get physicians trained and hospitals set up, and it's a little bit of a different implant procedure, so you do need to go through that. But we took our time to do this and do this right, and I think we're seeing the benefits here of taking that time to do it right. I think it's really driving uptake, not just in the not just in single, but without a doubt in dual chambers. So we're seeing an increase in the number of accounts from a year ago. We've seen an increase in the amount of physicians that have been trained. That's increased like by 50%. I think it was the last time I saw it. The implants per day have doubled as a result of that. So I think it's going very well. And I think I expect to see this outer performance continue here in the next kind of several years. One of the things that we're also doing to kind of be able to support that, and I said that in my prepared comments, was, you know, we've got to continue to innovate here if we want to be able to kind of support that growth, right? So we'll launch a next generation of air that's got a 25% longer battery life. That's going to add another two years. And we're developing this conduction system pacing product here, which, We're targeting to start up Pivotal Crawl in 2026. And I think given the excitement that we have with the product, I think we're going to see kind of good enrollment there too. And then on top of that, we're rolling it out internationally too, right? So right now it's launched in 50 countries. Some of them have been launched for a year or two years. Some of them were just in the process of launching. So I think there's a lot of good momentum. here with this portfolio, not just in terms of execution out in the market, but also in terms of R&D and clinical work.

That's helpful. And maybe one P&L on the EPS guidance here. The top end was lowered by $0.05, and midpoint was maintained despite, I think, operating margins tweaked down, organic coming down. What are the offsets here? Maybe some comments on what is underlying operational versus perhaps change in FX and tariff assumptions?

I'll let Phil take that one. Yeah, thanks, Vijay. Very quickly here, Robert touched on some of the sales drivers and kind of de-risking elements there. And we also touched on kind of the FX impact going forward at current rates, at least, and kind of that relationship that's not a one-for-one fault through just kind of the mechanics of how inventory moves through the system and the like. So while there's a neutral top-line impact, there's still a headwind both year over year, as Robert touched on in his opening comments, that's still a headwind on the bottom line here. along with kind of tariffs kind of rolling in second half of the year as those work their way through inventory as well. So those are the elements of de-risk and kind of normal headwinds.

Sorry, could you quantify what was tariff contribution versus operational FX?

Yes, I think Robert mentioned tariffs are a little less than $200 million impact here, so down from previous estimates, and then the FX impact here. I think over the last several years, if you look at it on average, we face on average about a 4% EPS headwind on the bottom line, and that kind of moves as currencies will and do, along with factors on inflation and interest rates and the like, but we're in that same realm of impact a little less than that historical 4%, but certainly your negative impact from FX is roughly a nickel.

Got it.

Thank you.

Thank you. Our next question will come from Travis Steed from B of A Securities. Your line is open.

Hey, thanks for taking the question. First question was on M&A. Just kind of curious how you're seeing the pipeline shake up in diagnostics and medtech, and if we could see Abbott do a more sizable transaction this year on the M&A side. And then it sounds like on EPS, like you're comfortable with the street consensus double-digit EPS growth next year. Is that assuming tariffs at the current rates, or do you have a lot of some P&L flexibility next year as well if tariff rates move a bit from here?

Sure. What was the first question again? Oh, M&A. Yeah, it's a good environment for M&A. Good opportunities out there. Got a strong organic pipeline, so that allows us to be a lot more selective here. We're seeking the opportunities that will fit us strategically and going to generate an attractive return. Not looking just to acquire a business to, you know, to make our top line larger here. You know, profitability, as I've said, the earnings, the ROIC, that all matters to us. So, and then your question on EPS for next year, does that include FX? Well, listen, it includes what we know right now, Travis. And, you know, those, you know, as we're all going through, they can change. They can kind of move around. But as I said in the call in April, our goal here is not to use, focus on mitigating items that would cause a year-over-year kind of impact. So we didn't go out and build a bunch of inventory over the last couple of months. We did do some of that where we thought it was important to do, but using that as the way to mitigate tariffs this year is going to cause, I think, headwinds if you just rely exclusively on that. As we've said, we have a whole team that's been working on this. There are six different work streams that we're looking at. And we've got a very strong manufacturing network around the world, around 90 manufacturing sites. We're going to build another cardiovascular manufacturing site here in the US and begin that process also. So we're thinking about it. Once tariffs get set in place, they're very difficult to walk away from. So we have to think also medium term, but also long term.

Great. Thanks a lot.

Yeah.

Thank you. Our next question will come from Danielle from UBS. Your line is open.

Hey, good morning, guys. Thanks so much for taking the question. Robert, I actually just have, I'll keep it to one product question, and that's within MedTech specifically structural heart. I mean, you guys have been launching AMULET for a while now, and we have a pretty potentially a big game-changing trial readout coming for your competitor early next year, which to me feels like a rising tide splits all boats situation potentially. So I'm just curious, looking at the structural heart consensus estimates for next year, modeling deceleration, I mean, I just have to imagine that that could actually accelerate amulet growth. And I would just love to hear your thoughts on while you're thinking about that and the potential TAM expansion that I think would be a class effect for both devices that are on the market today and sort of how you're factoring that into the long-term outlook here for the structural heart business. Thanks so much.

Sure. Well, I mean, so, yes, I concur with all the things you've been talking about there. This is a very important kind of growth opportunity that we see Also, a competitor has been investing in a trial that could potentially expand the market. So are we. So we have our own trial here. I think it's going to be important to have the data to be able to kind of support your product. So we've made that investment. We should complete enrollment in our trial this year and then, you know, Like I said, if these are all great trials and positive trials, I think it's going to have a big impact here in terms of our ability to expand the market. Our job also, you know, we're not the market leader, so we have things that we also have to address. So we've spent a good amount of R&D money, Danielle, to make sure that we can, you know, accelerate here our second generation device market. And, you know, we're enrolling in that pivotal trial. I'd say what we were trying to resolve there was or improve upon is we've got great, we've got a superior sealing capability and we've got this much broader range of, you know, ability to hit a lot of different types of anatomies. But one of the feedbacks that we got is like, can you make it easier for deployment and delivery? So, teams have done a really good job with that. The feedback that I have gotten, not only from my team, but also from the physicians that are enrolling in our trial for this next generation product has been spectacular. very positive on those issues that we were trying to improve upon. So we look, we think this is a very strong opportunity for us, you know, tying in with our, you know, with our EP and AFib procedure. We know there's a growth in concomitant procedures here, too. So I think that this is an important growth driver for us. And I share your view. And I think that our product here is very competitive and it's going to become very, very competitive as we launch the second generation.

Thanks for that.

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

Hi, good morning. Thanks for taking the question. I wanted to just ask about your TAVR franchise. And maybe, Robert, if you could help or share your expectations for market growth here. The commercial effort for Navitour and then the addition of this pipeline, Bloom Expandable and Cantor platform. I mean, how does Abbott view the market and how do you see the franchise taking share and what will drive that? Thanks for taking the question. Oh, and just a quick nuance. If you can talk about anything that you're seeing in Europe with the Boston exit and Navitour uptake or share gains from that competitor event, that would be great. Thanks for taking the questions.

Sure. Well, listen, we wanted to be – our vision here is to be the leading structural heart company, global structural heart company, and the only way you can actually do that is to really – have a full portfolio of products here. And obviously I've talked a little bit in my comments about Mitral. We've made the investments in the tricuspid area and making the investments in the TAVR side too. So specifically on TAVR, Navriter continues to get a lot of positive feedback from the physicians. It's a very It's a very compelling offering. It's an excellent valve design, easy to implant, got great clinical data. Our sales have doubled over the past two years. The big driver of that, I would say, over these past two years has been international, has really been the driving factor here of success, and I expect that to continue. There's an opportunity here to accelerate that growth internationally with a competitor market exit. I know the team's all over that. And with the upcoming CE mark that we have planned for Navator to have low and intermediate risk label expansion, it could come at a perfect time, to be quite honest with you. So I expect that to continue and accelerate for us, Josh. And then we're building our position here in the United States. Right now we're in about 20% of the centers in the United States. And the way to expand our position here is we've got to be in more centers. And the way to do that is you need more clinical people. You need more feet on the street. And that's what we're doing. So we've actually, we will be doubling the size of our team. And I'd say putting ourselves in the realm of being more competitive in terms of access to sites By the end of this year, we'll have doubled it versus last year. And there's a normal ramp up in terms of productivity that we know in this space. So all the people that we've been adding, I expect that to now start to really have a nice impact as we go into 2026. It's definitely a competitive space, there's no doubt. But I think here between the commercial investments we've made in the United States, the opportunity we have, the label expansion, and just market disruption in international markets. I think that is a tailwind for us too there. And then once you commit yourself to developing next generation kind of balloon expandable TAVR, that also opens up a nice opportunity for us, even though that'll probably be more towards the end of this decade in terms of full launch, but it does help as you're rolling out, you know, all these strategies that I've talked about. So we feel good about the TAVR teams doing a good job, like them to do better. But, you know, so far, so good. And there's a lot of good momentum for us on this business.

Appreciate it. Thank you.

Thank you. Our next question will come from Adam Mader from Piper Sandler. Your line is open.

Hi, good morning. Thank you for taking the questions. Two quick ones for me. I'll ask them both up front. Robert, first was hoping for an update on incentive formula litigation and the MDL process and how you think about potential pathway to resolution from here. And for the second question, wanted just to go a little bit deeper on the dual analyte sensor, you know, specifically around expected approval and launch timing. Is that first half 26? pricing strategy and how quickly you'll integrate with the different pumps. Thank you for taking the questions.

Yeah, sure. Listen, I'm not going to comment specifically on any kind of upcoming case regarding the NEC litigation. I'm going to commit to what I've always said, which is, you know, this is a product that has been supported by the medical community. by the regulatory community, by the scientific community. It's been in the market for a long time. It does not represent much to our revenues, and we stand behind the product. It's safety. The regulators have stood behind it and kind of issued statements about the product. and we're going to stand behind it. If we need to take action on the product and that, like I've said in the past, it's a small part of our revenue and if we have to take action on the availability of that product, we will. The science is not respected. If the regulatory process is not respected, if the medical community is not respected, then it's going to be difficult to keep that product on the market. But so far, I think there's been a lot of support from the physicians and from the regulators, a lot of support from a variety of different stakeholders. to want to see this resolved and this product remain on the market. Ultimately, those making the decisions on how to feed the most vulnerable of the American citizens here should be physicians and neonatologists and not lawyers and courtrooms. Sorry, what was your second question?

Sure. The second question was just a couple follow-ups on the dual analyte sensor. wanted to just better understand expected launch timing in the United States, if you're getting, you know, any color around pricing strategy and just how quickly you'll integrate with the different pump players. Thank you.

Okay, so three questions there. On timing, I'm not going to talk about timing of that. I'm not going to talk about, you know, when we've submitted, how we've submitted. All I'll say is that this is a first time that you'll have a sensor that will measure continuously two different analytes. So we've done a lot of clinical work, approximately five different trials to be able to support its submission. We've already completed those trials. So I'm not going to give timelines as to when the product's out. Neither am I going to give any details on pricing and how we will think about pricing. But as it relates to integration, you know, one of the reasons we wanted to, you know, line up, you know, have the conversations with, you know, with the different insulin delivery pump companies is to make sure that, you know, when we do have it approved, that it will be available as quick as possible for the population. So, as you saw during the ADA, there were some announcements over there, and I think That's a little bit of the strategy behind that.

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

Hey, thanks so much for taking the questions. I know we've covered a lot of the products and some of the key elements of the quarter and the guides. Maybe just a couple of quick follow-ups. One on M&A. I know you remain an important part of your strategy. Love it if you could share any color as to kind of where you see the next most likely kind of investments or where you think there are kind of gaps in the portfolio you'd like to fill, whether it's tricuspid or or in diagnostics or across the board be super helpful. Thanks.

Yeah, I get that people always like to triangulate. I'm not going to tell you. I'm not going to telegraph where we're going, but I mean, I've been pretty clear. It's diagnostics. It is devices. Those are the areas that are of interest to us. Like I said, there's a lot of opportunity in both those areas. And we'll just continue to apply the framework that we've always applied to when we do M&A, which is a belief that can we make these assets better? Can we bring them to more people? Can we bring care to more people as a result of them? So I don't think I've got more to add on that, Matt. On top of that, like I said, we've got great growth rates here right now across the businesses. And so, again, that puts us in a space where we can be a little bit more selective.

Great. We'll leave it there. Thanks.

Okay.

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

Thank you. And our last question will come from Marie Thibault from BTIG. Your line is now open.

Hi, thank you for taking the questions. Wanted to follow up here. You've mentioned that we'll see biosimilars on the market soon. Wanted to get a little more detail on how to think about kind of the reach of those products, the investments needed on your end, maybe an SG&A and things, and the size of some of those markets that you're trying to reach. Thanks for taking the questions.

Sure. This is an opportunity for us to really look at how do you sustain that growth rate in this business. This is a business that has been growing between 8-10%. It's learned through a very strong management team how to manage through kind of FX cycles and inflation in markets. So they've been able to expand margins. So this is about how do we do this in a capital efficient way to bring more assets to an existing infrastructure that's pretty well set up, Marie, between the sales force that calls on the doctors, that calls on retail distribution, the teams that we have in place that work with government agencies and regulators. So the infrastructure in place is there. Do I think that there will be some need to add some SG&A to be able to you know educate the market because this is a very under penetrated market when it comes to biologics so there is some there is some SG&A involved in that but it's not like this you know you're really taking advantage of the infrastructure and the and the scale that you have in these markets across different channels and regulators to be able to add in add in this so so I think we'll leverage our existing presence in these emerging markets. We're going to bring these cutting-edge medicines into these countries that I say that historically lack the access. The predominance of the diseases are just as large, you know, from a percent perspective than they are in the developed markets. And, you know, if you look at the portfolio, it will look, you know, we've looked at where the areas that we think will be of interest. So autoimmune disease, women's health, oncology, access to GLP-1s. So the team has really done a good job here laying in here a real nice pipeline of products. And as I said, we're going to start launching in a small market this year, and then we'll start rolling them out. Obviously, as they become, from a regulatory perspective, available to us, we'll be rolling them out next year. And I think this could be a nice contributor here to our growth in this business in the next few years. Okay. Well, listen, I'll just a few comments here to close. I'm pleased with what we've accomplished in the first half. We've delivered high single-digit sales growth and double-digit EPS. We've expanded our gross margin and operating margin, which is something that we've committed to and we've talked about and we've done it by about 100 basis points. The second half sales growth guidance is de-risked to account for some Some of these items here that I consider to be a little bit more transitory that are specific in the diagnostic space, and we're going to be lapping these next year. That still leaves, you know, 11 plus billion dollar revenue, quarterly revenue, growing high single digits throughout the rest of the year. And on top of that, we've reaffirmed our guidance despite some of these headwinds and the impact of tariffs. So I think this is another great example of how our diversified model continues to provide that strong foundation, it's resilient, and it's well-positioned to deliver top-tier results. So we've got good underlying momentum here that I'm very confident we'll carry into next year. So with that, I'm going to wrap up. Thank 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 all for joining us today.

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