The operator introduces the conference call for Abbott's second quarter 2024 earnings. Participants can listen but not record the call without permission. Mike Comilla, Vice President of Investor Relations, introduces Robert Ford, Chairman and CEO, and Phil Boudreau, Executive Vice President and CFO. Forward-looking statements will be discussed and non-GAAP financial measures will be used to understand Abbott's performance.

In the second quarter, Abbott reported strong organic sales growth of over 9%, excluding COVID testing sales. This exceeded analyst expectations and led to a 16% sequential increase in adjusted earnings per share. The company raised its guidance for the full year based on its performance and confidence in the future. Growth was driven by double-digit growth in medical devices and high single-digit growth in established pharmaceuticals and nutrition. Positive contributions also came from gross margin expansion due to supply chain execution, lower commodity costs, and favorable sales mix. Nutrition sales increased by 7.5% in the quarter.

Abbott had a strong quarter with double-digit growth in international adult and U.S. pediatric nutrition. This is due to positive demographic trends and investments in expanding capacity. Abbott stands by their products and the information provided to neonatologist specialists, despite litigation surrounding their pre-term infant formula and human milk fortifier. These products are an important part of standard care for premature infants and have been deemed safe by regulators. There has been no increase in the rate of NEC, but plaintiffs' lawyers are investing in misleading advertising to move physician decisions from the hospital to the courtroom. These products bring in about $9 million annually and have remained at that level for several years.

The availability of vital food products in the NICU is crucial for the health of preterm infants and any shortage would lead to a public health crisis. In the diagnostics sector, sales increased due to growth in core laboratory and point-of-care diagnostics, driven by increased adoption and utilization of their systems and testing menus. The EPD business also saw growth, particularly in emerging markets, where their branded generic strategy and focus on biosimilars is proving successful in expanding access to healthcare.

Abbott has been implementing a strategy to commercialize biosimilars in the areas of oncology, women's health, autoimmune diseases, and GLP1 medications. They have recently completed agreements to access biosimilar versions of these medications, making them one of the most complete portfolios in the industry. In the medical devices sector, sales grew by 12%, with the diabetes care division seeing a 20% increase. Abbott has received FDA approval for two new over-the-counter continuous glucose monitoring systems, Lingo and Libre Rio, which have been successful in international markets for the past 10 years. Lingo is designed for consumers looking to improve their overall health and wellness, while Libre Rio is for adults with Type 2 diabetes who do not use insulin. In electro-physiology, Abbott saw 17% growth in all major regions, including 17% in the U.S.

The company experienced strong growth across its portfolio, with notable increases in ablation catheters, structural heart, rhythm management, heart failure, and neuromodulation. The launch of new products, such as the TriClip tricuspid repair device and Esprit dissolvable stent, contributed to this growth and expanded the company's presence in high-growth areas. As a result, the company raised its financial outlook for the year.

The company has made progress on increasing gross margins and has a highly productive pipeline, indicating strong results for the rest of the year. Sales increased by 7.4% on an organic basis and 9.3% when excluding COVID testing sales. Foreign exchange had a negative impact on sales. Adjusted gross margin, R&D, and SG&A were all within expected ranges. The adjusted tax rate was 15%. The company has raised its guidance for full-year earnings per share and organic sales growth. Exchange rates are expected to have a negative impact on reported sales. For the third quarter, adjusted earnings per share are forecasted to be $1.18 to $1.22. The call is now open for questions from analysts.

During a conference call, Larry Biegelsen congratulates Robert Ford on a successful quarter and asks for any updates on the NEC litigation. Ford believes the situation is overblown and they are working to defend their position. Biegelsen also asks about the growth of the EPD business, which Ford attributes to an increase in the market and more procedures being performed. It is too early to tell if this growth will continue.

The market for ablation procedures has grown significantly, driven by the introduction of a new product. However, this product is mainly used in certain types of procedures, while radiofrequency (RF) catheters are still preferred for others. The market is expected to continue growing and the company has a strong position, with opportunities for growth in consumables and new products. The company has invested in its portfolio for PFA procedures and plans to release it next year.

The speaker praises the team's execution of their strategy and thanks them. The next question is about the success of the structural heart division, particularly the growth of TriClip and other products like Navitor and Amulet. The speaker attributes the division's success to a combination of factors, including the company's built-in advantages and positive feedback from customers. They also mention positive growth in the US market.

The Amulet product has seen a 45% increase in sales this quarter and the company plans to focus on expanding its reach to new accounts. MitraClip has also shown growth internationally, but competitive activity has slowed it down in the US. The company's structural heart portfolio has seen accelerated growth, with all products gaining market share and adoption. In terms of the sensor business, the company is considering segmenting the market with Lingo and Rio and sees potential for growth in the Libre business.

The company has seen great progress in the basal opportunity and there is still room for growth in the MDI segment, particularly in the U.S. and international markets. The company's strategy with Lingo and Libre Rio is to expand the use of sensor technology across different diabetes populations and potentially even reach people without diabetes. The company has invested heavily in this opportunity and estimates a potential multi-billion dollar market in the U.S. and Western Europe alone. However, it may take some time to educate and communicate with patients about the use of these tools.

The speaker discusses their experience launching internationally and bringing that knowledge to the US. They also mention the potential for advertising and word of mouth for their new products, particularly in the non-diabetic market. They do not expect insurance coverage for these products, but believe the data shows their benefits for behavior modification. The focus is on communicating directly with consumers.

The speaker believes that both patient and physician communication are important for the uptake of continuous glucose monitoring (CGM) in the diabetes space. They also believe that some people without diabetes may benefit from CGM use, and generating data on its use is important for communicating its value to physicians and consumers. The speaker's company has a separate team focused on executing a strategy for CGM use in non-diabetes patients, which includes a combination of TV advertising and on-the-ground marketing. They believe that the growth of CGM use in this market will follow an S-curve rather than being immediate.

The speaker believes that the opportunity for leadless pacing is significant and has the potential to sustain itself and become a standard practice. They also mention the success of the launch so far and the potential for growth in the dual chamber market. They acknowledge the need for training and getting physicians comfortable with the new procedure, but have already captured a significant market share in the single chamber market. The focus now is on accelerating growth in the dual chamber market and ensuring well-trained physicians across the US.

The speaker discusses the potential for a unique and differentiated product to drive growth in a $3 billion global segment. They express confidence in the capabilities and training of physicians and plan to increase direct consumer communications to further promote the product. The company has been delivering strong organic revenue growth and expects to outpace pre-pandemic levels, potentially driven by both internal development programs and M&A.

The speaker believes that the company's investments during COVID have led to impressive growth in the past six quarters. They are confident that this top tier performance will continue throughout the year and into next year due to the company's strong position in attractive markets. They also mention the potential for market share gains and the possibility of M&A opportunities, but emphasize that their focus is on organic growth.

The interviewer asks about the company's portfolio and potential for business combinations and spins. The CEO explains that they regularly evaluate their portfolio and are open to creating value through addition or subtraction. They are currently performing well in all four segments and are focused on fulfilling their mission to help people live healthier lives.

The speaker discusses how the company's diversity provides both defense and offense capabilities, and how they manage their segments and allocate capital accordingly. They also address a question about the P&L and capital allocation, with the speaker mentioning that they have already seen margin expansion and are back to pre-pandemic levels. They also mention that the guidance for the year includes continued progress and trajectory in terms of margin expansion and gross margin.

The company is focused on executing and controlling their sales top line performance, with dedicated teams working on improving gross margins and reducing costs. They anticipate continued expansion throughout the year, with factors such as stabilization and normalization of commodities and freight markets contributing to tailwinds for gross margins. The company is confident in their ability to drive top tier sales performance and expand margins. On the topic of capital allocation, the company is seeing an increase in M&A activity in the sector, with transaction multiples trending towards lower levels. They are continuing to build their cash balance and will consider potential opportunities for M&A.

Robert Ford discusses the company's balanced approach to capital allocation, with a focus on achieving a high return on invested capital (ROIC). They have been successful in this regard, outperforming their peers in the med tech industry. The company also prioritizes internal investments for future growth, paying down debt, and increasing dividends. They also have the flexibility to pursue M&A opportunities, but only if they align with the company's overall strategy and are not solely driven by the need to sustain growth.

Robert Ford, CEO of Medtronic, discusses the company's strategy for acquiring businesses that have a strategic fit, generate attractive returns, and can be improved upon. He also addresses questions about the sustainability of slower growing businesses, specifically in the CRM and vascular areas. The company's approach has been to focus on Aveir leadless pacemakers in order to achieve double digit growth in the med tech portfolio.

The speaker discusses the potential for innovation in the market for Aveir DR and ICD products, as well as the growth potential in the diabetes and vascular markets. They also mention the success of the Amulet product in the structural heart market and their plans for further expansion in the market.

The speaker discusses encouraging data on patient registry data and the high success rates of their Amulet product. They plan to continue investing in this market, including a next-generation Amulet and clinical trials. The goal is to provide a comprehensive portfolio for electrophysiologists, including pacemakers, ICDs, stroke prevention, and AF treatment. The speaker also mentions their biosimilars strategy and whether they plan to manufacture these products.

Abbott's strategy in emerging markets involves bringing biologics to these markets where there is a high prevalence of disease. This is an opportunity that has not been a priority for the originators of these biologics. Abbott plans to understand the uptake of these products in emerging markets before considering manufacturing. They have relationships with governments, physicians, and distribution channels in these markets.

The speaker discusses the company's strategy to enter emerging markets and maintain a high gross margin. They credit their team for positioning the company as an advantage to players who focus on developed markets. The company plans to launch new products in 2025 and expects major growth in 2026 and 2027. The speaker also mentions that the company has returned $20 billion to shareholders through dividends and buybacks in the past four years and may continue to do so in the future.

Robert Ford, CEO of Abbott, states that the company has done a good job of returning cash to shareholders over the past couple of years and will continue to do so. He also mentions the company's strong performance in the past five quarters and their raised sales and EPS outlook. Ford is confident that the company will see growth in the second half of the year as COVID testing sales comps start to dwindle. He ends the call by thanking participants and directing them to the webcast replay on Abbott's Investor Relations website.

This summary was generated with AI and may contain some inaccuracies.