The paragraph is an introduction to Abbott's Fourth Quarter 2024 Earnings Conference Call. The operator explains the format of the call, which includes a listen-only mode for participants until the Q&A session. The content of the call is copyrighted, and neither recording nor rebroadcasting is permitted without Abbott's permission. Mike Comilla, the Vice President of Investor Relations, introduces Robert Ford, the Chairman and CEO, and Phil Boudreau, the Executive Vice President, Finance, and CFO, who will give opening remarks. The discussion will include forward-looking statements subject to risks and uncertainties, with details available in Abbott's annual report. Non-GAAP financial measures will be used to assess the company's performance.

The paragraph provides an overview of Abbott's financial performance and accomplishments. It highlights the reconciliation of non-GAAP financial measures with GAAP figures, noting that forward-looking GAAP measures are not provided due to unpredictability. It reports a 9.5% sales growth excluding COVID testing, an improvement in gross margin, and accelerated earnings per share growth. Additionally, Abbott generated $8.5 billion in operating cash flow, which was used for reinvestment, capacity expansion, debt repayment, and returning $5 billion to shareholders through dividends and share repurchases. These achievements helped the company meet its financial commitments and achieve results at the high end of its 2024 guidance ranges.

In the fourth quarter, the company experienced strong momentum, with a 10% increase in sales excluding COVID testing and a 13% rise in adjusted earnings per share compared to the previous year. For 2025, they predict organic sales growth between 7.5% and 8.5% and adjusted earnings per share between $5.05 and $5.25. The Nutrition sector saw a 7% sales increase, driven by double-digit growth in adult nutrition products like Ensure and Glucerna, with Ensure surpassing $3 billion in annual sales. Adult nutrition reflected a 9% annual growth rate over five years due to strong brands, demographic trends, and manufacturing investments. In Diagnostics, sales rose 6%, excluding COVID testing, with rapid diagnostics sales up 16%, aided by strong demand for respiratory disease tests. Core Laboratory Diagnostics also grew by 4% due to high demand for various testing panels.

The paragraph discusses the robust growth observed across various sectors of a company, excluding challenges in the Chinese market. Highlights include double-digit growth in multiple international markets for the Established Pharmaceuticals Division (EPD), particularly in Latin America, Southeast Asia, and the Middle East, with a consistent growth rate of 8% over five years. Medical Devices showed strong performance, with a 14% increase in sales. Diabetes Care reported significant growth in continuous glucose monitors, especially in the U.S. Electrophysiology experienced a solid 9% growth, though affected by tough comparisons from the previous year. Structural Heart devices saw a remarkable 23% growth, driven by demand for surgical valves and repair/replacement products.

The paragraph discusses the company's strong investment results in various medical device sectors. Significant sales growth was seen in Structural Heart and Rhythm Management, with the latter achieving a 7% growth driven by innovative products like the AVEIR leadless pacemaker and the Assert cardiac monitor. The company also completed the first-in-human implant of an advanced AVEIR device for the heart's natural conduction system, noted as a breakthrough by the FDA. Heart Failure and Vascular divisions experienced growth of 9.5% and 7%, respectively, with notable success in heart-assist devices and vessel closure products. Neuromodulation sales increased by 8% due to international demand. Overall, the company achieved substantial earnings and sales growth, meeting the upper end of guidance for 2024 and is positioned for continued success in 2025.

In the fourth quarter, the company experienced an 8.8% increase in organic sales and a 10.1% increase excluding COVID testing sales, with foreign exchange negatively impacting sales by 1.4%. The adjusted gross margin was 56.9%, adjusted R&D was 6.3%, and adjusted SG&A was 26.3% of sales, with an adjusted tax rate of 15%. For 2025, the company forecasts full-year organic sales growth of 7.5% to 8.5% and adjusted earnings per share of $5.05 to $5.25, despite a projected 2.5% unfavorable impact from foreign exchange. The adjusted gross margin is expected to improve to around 57%, and the adjusted operating margin to be 23.5% to 24% of sales. COVID testing sales will no longer be separately reported due to their reduced impact.

In the paragraph, during a Q&A session, Robbie Marcus from JPMorgan asks Robert Ford about the 2025 guidance, highlighting expected high single-digit organic sales growth, healthy operating margin expansion, and a return to 10% EPS growth. Robert Ford responds by emphasizing the return to double-digit EPS growth due to strong growth drivers and the lessened impact of declining COVID-related sales. He notes that the company showed 13% EPS growth in the previous quarter and mentions that although there will be some COVID sales in 2025, they will constitute a significantly smaller portion of total revenue. Ford highlights the importance of top-line growth and attractive market conditions, noting acceleration in several markets.

The article discusses the diversified nature of a healthcare company, highlighting its ability to benefit from various healthcare market dynamics, such as increased consumer focus on health and wellness, a growing demand for diagnostic tests, and the acceleration of pharmaceutical and med tech markets. The company boasts strong product portfolios, either matching or outperforming these high-growth areas, with products like Libre, TriClip, Aveir, Navitor, and Amulet leading in the cardiovascular space. The company anticipates further growth with upcoming innovations and clinical trials. They are focused on expanding their gross margins, having achieved a 70-basis-point improvement in 2024 and aiming for an additional 80-basis-point improvement in 2025 through continuous improvement programs and product mix strategies.

The paragraph discusses Abbott's financial strategy and outlook for 2025, highlighting the company's ability to leverage business spending and improve gross margins for margin expansion. Despite challenges like currency exchange (FX) fluctuations and increased tax rates, Abbott anticipates achieving 16% growth in EPS through top-line growth, margin improvements, and spending leverage, ultimately delivering double-digit EPS growth. The company is confident in managing FX and higher tax rates while maintaining strong operating cash flow, aligning its performance with pre-COVID results. The speaker affirms Abbott's continued identity and performance goals, and a question from Larry Biegelsen of Wells Fargo follows.

In the paragraph, Robert Ford discusses the outlook for Libre 3 supply and the company's growth expectations for 2025. He addresses previous supply issues caused by a mismatch between manufacturing output and high demand in the US, but notes that with the addition of a new manufacturing site, supply should improve over the next few quarters. He emphasizes that while certain metrics like NBRxs and TRxs are important, they are not the only indicators of business performance. Ford highlights the strong growth in the US market and identifies under-penetration in the intensive insulin using segment, both domestically and internationally, as a significant growth opportunity for continuous glucose monitoring (CGM) systems.

The paragraph discusses three main areas of growth opportunities for the company in 2025. First, the expansion of basal coverage, with particular success in markets like Japan and Canada, represents a significant growth opportunity. Second, the company's connectivity strategies with insulin delivery systems aim to capture market share through partnerships with insulin pump companies, promising further penetration in different geographies. Lastly, the launch of the OTC non-diabetes product, Lingo, shows promising trends, with potential for national and international expansion. The success of Lingo, especially in terms of reorder rates, has exceeded expectations.

In the paragraph, Robert Ford discusses the company's growth strategy for the electrophysiology (EP) market, noting their success despite a challenging competitive environment. He highlights their strong performance in the last quarter of 2023, mainly driven by their open mapping system, which helped them bridge toward future advancements expected in 2026. Ford emphasizes that their growth strategy's execution, particularly in offering a truly open mapping system, has led to significant market success, outperforming expectations with double-digit growth both in the U.S. and internationally.

The paragraph discusses the team's impressive performance and growth opportunities for 2025, driven by increasing procedure trends and new product launches like the GridX mapping catheter and Agilis Introducer Sheath. While competition in 2024 was tough and expected to intensify, the team is confident in maintaining a strong position in the mapping segment. A strong pipeline, ongoing trials, and integration with advanced technology support continued engagement with key opinion leaders (KOLs) and users. The speaker anticipates bridging to PFA internationally as early as 2025 and foresees a faster growth rate in the second half of the year, aiming for high single-digit growth overall. Despite recent competitive dynamics, the speaker remains optimistic about the business and the team's capabilities.

In this paragraph, Vijay Kumar from Evercore ISI asks about the sustainability of the company's strong operating margins, noting that gross margins are still below pre-pandemic levels. He also inquires about the company's approach to recent M&A activity in the MedTech sector, specifically regarding devices versus diagnostics and cancer screening. In response, Robert Ford delegates the gross margin question to Phil Boudreau, who explains that recent margin erosion was due to significant inflation in commodity prices, which have now normalized. The company is focused on expanding gross margins and returning to historical levels. Robert Ford then begins to address Vijay's question about the balance sheet strategy.

The paragraph discusses a company's strategic financial approach, emphasizing a balanced allocation of resources without providing specific formulas. It highlights opportunities in mergers and acquisitions, driven by current regulatory conditions, and asserts a strong organic growth pipeline that allows for selective investment decisions. The company prioritizes both strategic alignment and attractive returns on investment (ROIC). Despite a $1.5 billion debt to pay down this year, the company feels confident in its financial position, particularly in med-tech and diagnostics sectors. The paragraph ends with a question from Josh Jennings congratulating the company on its strong year-end performance and inquiring about operating margin guidance for 2025, noting positive shifts due to strong macro device performance and growth.

The paragraph discusses the margin expansion opportunities for EPD (Established Pharmaceuticals Division), Nutrition, and Diagnostics. Robert Ford highlights the company's aim to return to pre-pandemic gross margins and notes that their operating margin for 2025 is already ahead of that target. The company has achieved this through spending efficiencies and continuously improving gross margins despite challenges like inflation and tariffs. In the Nutrition segment, gross margins have been improving quarterly, though there's still work needed to reach 2022 levels, influenced by factors like commodities and freight. Strategies for improvement include cost management and selective pricing. The pharmaceutical teams have successfully maintained gross margins amid significant foreign exchange challenges.

The paragraph discusses a company's successful offsetting of foreign exchange impacts and improvement in margin profiles within its business. The company has increased its margins by hundreds of basis points over the past few years, primarily through enhanced gross margins in its med tech business units. The target is to achieve an increase of 50 to 100 basis points annually, with a commitment to reach 80 basis points by 2025, bringing it closer to pre-pandemic levels. The firm's management strategy involves making careful decisions with oversight. David Roman from Goldman Sachs then asks Robert for more details about the Structural Heart business, which includes both legacy and emerging components. He wants to understand the business's evolution and outlook for 2025 amid potential one-time challenges, such as VBP dynamics in China and transient competition in EP.

In the paragraph, Robert Ford discusses the growth and strategic expansion of the Structural Heart division in the med tech sector, noting a recent 23% growth rate. He emphasizes the development of a comprehensive product portfolio rather than relying on a single platform, highlighting successes with various products like the Epic valve for surgical replacements and the Amulet for stroke prevention, which grew by 25% in Q4. Ford also mentions their efforts in the aortic segment, the positive feedback for Navitor cases in the US, and significant investments in clinical trials to expand indications, including the development of a balloon expandable TAVR valve to complete their aortic portfolio.

The paragraph discusses advancements and successes in the field of Structural Heart treatments, particularly with the TriClip device for transcatheter repair and replacement. The company has effectively leveraged existing infrastructure and expertise from its MitraClip product, resulting in a growing Structural Heart portfolio valued at $2.5 billion and experiencing mid-teens growth. This success is attributed to diverse and competitive products, investment commitments, and strong team execution. The conversation then shifts to address growth rate challenges, specifically mentioning headwinds such as Value-Based Purchasing (VBP) in China's diagnostics and transient dynamics in electrophysiology (EP). Despite these challenges, the diagnostics business is performing well, and the company aims to increase tailwinds over headwinds in the future.

The paragraph discusses the strong growth in Q4 across various regions, including the US, Latin America, Europe, and Japan, which surpassed the overall annual growth rates. Despite challenges, companies, particularly in the MedTech sector, are managing these issues effectively. Robert Ford highlights that the MedTech market is robust, emphasizing the company's strong portfolio which provides insights across the healthcare system. Addressing inquiries about MedTech growth, he notes that the reported data from companies reflects the healthy state of the market, which is not driven by pre-COVID pent-up demand. Instead, they are experiencing genuine growth with mid-teens revenue increases.

The paragraph discusses the growing trend in the MedTech industry, driven by consumer interest and technological innovations making procedures faster and less invasive. This trend is leading to increased utilization as these procedures become a viable first-line treatment option compared to traditional medical therapy. The industry is seeing stable pricing alongside this growth, despite historical price erosion, with expectations of continued stable pricing due to strong portfolio positioning. The growth is also reflected in hospital-based diagnostics, experiencing significant utilization increases. Overall, MedTech is benefiting from higher utilization as consumers seek to manage their health more proactively.

In the paragraph, Danielle Antalffy congratulates Robert Ford on a successful quarter and asks about the growth strategies for Abbott's legacy businesses like CRM (Cardiac Rhythm Management) and heart failure. Robert Ford explains that a few years ago, Abbott aimed to elevate its MedTech business growth from 8-9% to 12-14% by boosting the growth of slower-growing segments like Vascular and CRM. The goal was to achieve a 5% growth in these historically flat markets, thereby raising the overall MedTech portfolio's growth to the mid-teens. To do this, the company has employed both organic and inorganic strategies, particularly in the peripheral areas of the Vascular business.

The article discusses the growth and strategic initiatives of a company's Vascular and CRM (Cardiac Rhythm Management) businesses. The Vascular business met its 5% growth target by strengthening its pipeline and portfolio in the Peripheral space. The CRM side has focused on organic growth and becoming a leader in leadless technology, achieving 7% growth over two years. The company believes its Aveir product is an underappreciated opportunity within its portfolio. They are optimistic about sustaining mid-single-digit growth through innovation and strong execution. The paragraph concludes with Danielle Antalffy and Mike Comilla addressing a final question from Matt Miksic regarding tech guidance, US and overseas dynamics, and tax policy.

In the paragraph, Phil Boudreau and Robert Ford discuss the impact of current tax laws, specifically the implementation of Pillar 2, on their business. They explain that this has contributed to a 150-basis-point increase in their guidance midpoint. Ford adds that corporate tax rates are often politicized, especially during election years, but for businesses, taxes are just another expense to manage. He notes that while some companies might have low tax rates, the majority, including Abbott, pay their fair share, with cash taxes being more relevant than the often-highlighted GAAP rates.

In this paragraph, the speaker highlights the significant contributions of US companies, specifically mentioning Abbott, to the US economy through substantial R&D efforts and capital investment. Over recent years, these companies have increased capital expenditure by over 60% and expanded their workforce by 20%, also investing heavily in employee benefits. However, the new Pillar 2 legislation is imposing an additional $200 million expense, two-thirds of which are overseas taxes, challenging US companies' competitiveness. Despite these financial burdens, the company reported strong Q4 growth in 2024 and is optimistic about its strategic flexibility and growth opportunities moving into 2025.

The paragraph is a conclusion to Abbott's conference call, with Mike Comilla thanking participants and informing them that a webcast replay will be available on Abbott's Investor Relations website after 11 a.m. Central Time. The operator also thanks participants and signals the end of the call, wishing everyone a good day.

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