Abbott(ABT) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Organic sales growth of more than 8% excluding COVID testing sales, with adjusted earnings per share of $1.21 [8] - Sales increased 7.6% on an organic basis and 8.2% excluding COVID testing sales, with foreign exchange having an unfavorable impact of 2.5% [17] - Adjusted gross margin ratio was 56.3%, adjusted R&D was 6.5% of sales, and adjusted SG&A was 27.2% of sales [17] - Adjusted tax rate for the quarter was 15% [17] - Forecasted adjusted earnings per share guidance for Q4 is$ 1.31 to $1.37, with exchange expected to have an unfavorable impact of less than 1% on reported sales [18] Business Line Performance Nutrition - Sales increased 3.5%, driven by double-digit growth in the U.S., including 12% growth in U.S. Pediatric Nutrition and 11.5% growth in U.S. Adult Nutrition [9] - International pediatric business faced challenges due to commercial execution issues, but corrective actions were taken [22][23] Diagnostics - Core Laboratory Diagnostics sales increased 4.5% excluding COVID testing sales, driven by global demand for routine diagnostic testing [9] - Rapid and point-of-care diagnostics businesses expanded test menus, particularly for respiratory tests [10] - Core Lab business in China was impacted by VBP implementation, but international Core Lab business excluding China grew double digits [24][25] Established Pharmaceutical Products (EPE) - Sales increased 7%, with double-digit growth in Latin America, Southeast Asia, and the Middle East [11] - Strong growth in gastroenterology, cardiometabolic, central nervous system, and pain management therapeutic areas [11] - Biosimilars portfolio is advancing, with the first biosimilar expected to launch in emerging markets in late 2025 [11] Medical Devices - Sales grew more than 13%, with Diabetes Care sales of continuous glucose monitors exceeding$ 1.6 billion, up 21% [12] - Electrophysiology growth of 14% was driven by double-digit growth in the U.S. and international markets [13] - Structural Heart growth of more than 16% was driven by market-leading products like TAVR, Amulet, and TriClip [14][15] - Heart Failure growth of 14% was driven by heart assist devices, and Vascular growth of 5% was led by vessel closure and coronary imaging [15] - Neuromodulation sales grew 5%, driven by strong demand in international markets [15] Market Performance - U.S. market showed strong performance in Nutrition and Diabetes Care, with 26% growth in Libre sales [28][70] - International markets, particularly in Latin America, Southeast Asia, and the Middle East, contributed to EPE growth [11] - China's Core Lab business was impacted by VBP implementation, but other international markets performed well [24] Strategic Direction and Industry Competition - The company entered new strategic partnerships, launched new products, and made advancements in its R&D pipeline [8] - In Diabetes Care, partnerships with Medtronic and other companies aim to connect FreeStyle Libre CGM with automated insulin delivery systems [12] - The company is focusing on expanding its gross margin profile, aiming for a 75 basis point improvement for the full year [16] - The company is well-positioned for strong growth in 2025, with a focus on high-growth markets like TAVR, LAA, and new diagnostic systems [37][38] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's diversified portfolio, which allows for strong performance even if some business units underperform [21] - The company expects double-digit EPS growth in Q4 as COVID-related comparisons diminish [22] - Management remains bullish on the CGM market, with a goal of $10 billion in sales by 2028 and a focus on technology, scale, and cost leadership [28][29] - The company is optimistic about structural heart markets, with no concerns about capacity constraints in the U.S. [50][51] Other Important Information - The company announced a new$ 7 billion share repurchase program, reflecting confidence in its financial performance and outlook [46][47] - The company is investing in R&D and SG&A to support growth in high-potential areas like med tech and diagnostics [43][44] - The company is focused on resolving legal challenges related to infant formula and NEC, with a strong stance on the regulatory process and scientific evidence [55][56][61] Q&A Session Summary Travis Steed (BofA Securities) - Asked about underperformance in Nutrition and Diagnostics and confidence in Q4 guidance [20] - Management attributed underperformance to one-time challenges and expressed confidence in Q4 growth, driven by strong device performance [21][22][23][24][25] Larry Biegelsen (Wells Fargo) - Asked about the state of the CGM market and the outlook for Libre and Lingo [27] - Management remains bullish on the CGM market, with strong growth in Libre and positive early feedback on Lingo [28][29][30][31][32] Robbie Marcus (JPMorgan) - Asked about the outlook for 2025 and top-line growth expectations [34] - Management sees high single-digit growth and 10% EPS growth as reasonable starting points for 2025, with strong momentum in key markets [35][36][37][38][39] David Roman (Goldman Sachs) - Asked about investment spending and the trajectory of operating expenses [42] - Management highlighted disciplined investment in R&D and SG&A, with a focus on high-growth areas and gross margin expansion [43][44][45][46][47] Joshua Jennings (TD Cowen) - Asked about capacity constraints in structural heart markets [49] - Management sees no bottlenecks and expects continued growth in structural heart, supported by investments in R&D and field presence [50][51][52][53] Vijay Kumar (Evercore ISI) - Asked about the impact of the FDA, CDC, and NIH joint statement on NEC lawsuits [55] - Management views the statement as supportive of their position and is focused on resolving legal challenges quickly [56][57][58][59][60][61][62] Joanne Wuensch (Citi) - Asked about the state of the electrophysiology market and PFA uptake [64] - Management sees strong growth in procedures and is leveraging its open mapping system to support growth in PFA and RF ablation [65][66][67] Matt Miksic (Barclays) - Asked about Libre share trends, Rio timing, and gross margin expansion [69] - Management highlighted strong execution in the U.S., with plans to scale Libre and expand gross margins through manufacturing efficiencies [70][71][72][73][74] Danielle Antalffy (UBS) - Asked about sustainable growth in structural heart markets, particularly LAA closure and tricuspid [76] - Management is optimistic about growth in structural heart, with strong performance in Amulet and TriClip, and expects more clinical data to support adoption [77][78][79][80][81]