Abbott Laboratories (ABT) — Q1 2018 Earnings Call Transcript

Good morning and thank you for joining us. With me today are Miles White, Chairman of the Board and Chief Executive Officer; and Brian Yoor, Executive Vice President, Finance and Chief Financial Officer. Miles will provide opening remarks and Brian will discuss our performance and outlook in more detail. Following their comments, Miles, Brian, and I will 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 2018. 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, through our Annual Report on Securities and Exchange Commission Form 10-K for the year ended December 31, 2017. 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. Please note that first quarter financial results and guidance provided on the call today for sales, EPS, and line items of the P&L will be for continuing operations only. 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. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which adjusts the 2017 basis of comparison to exclude the impact of exchange and historical results for Abbott's Medical Optics and St. Jude's vascular closure businesses, which were divested during the first quarter of 2017, as well as the current and prior years' sales for Alere, which was acquired on October 3, 2017. With that, I will now turn the call over to Miles.

Okay. Thanks, Scott, and good morning. Today, we reported the results of a very strong quarter. Ongoing earnings per share were $0.59 at the high end of our guidance range and reflecting 23% growth. Sales increased 7% on an organic basis in the quarter, led by continued strong growth in Medical Devices and improving performance in our Nutrition business. Our full year 2018 adjusted earnings per share guidance of $2.80 to $2.90 remains unchanged and reflects mid-teens growth at the midpoint. Back in January, I commented that we were entering the year with strong momentum, which has continued as we forecasted. Strong growth we're achieving is a direct result of the steps we've taken to position the company in the most attractive areas of health care as well as the outstanding productivity of our new product pipeline. I'll now summarize our first quarter results before turning the call over to Brian, and I'll start with diagnostics where we achieved sales growth of 5.5% in the quarter. We remain focused on accelerating the launch of our new Alinity systems in Europe where we've made good progress on test menu expansion and where we're seeing increasing competitive win rates. Diagnostics has been our most consistent growth business over the past several years, and Alinity is a highly differentiated platform which will build upon that strong track record for years to come. In Rapid Diagnostics, which we created in the fourth quarter of last year with the acquisition of Alere, we achieved sales of nearly $560 million, somewhat ahead of our expectations and partially due to the strong flu season in the United States. This is a very attractive area of diagnostics testing and our integration of this business into Abbott continues to go well as we put in place the building blocks to drive sustainable growth and margin expansion. In Nutrition, sales increased more than 4.5% in the quarter, marking the fifth consecutive quarter of improving performance. Sales growth this quarter was balanced across our Pediatric and Adult Nutrition businesses. In Pediatric Nutrition, above-market growth in the U.S. was led by Similac, our leading infant formula brand. Internationally, performance improved across several countries and we continued to see stable market conditions in China following the implementation of new food safety regulations in that country at the beginning of this year. In Adult Nutrition, sales growth was led by our market-leading Ensure and Glucerna brands in both the U.S. and internationally. In Established Pharmaceuticals, or EPD, sales growth of 7% was led by double-digit growth in India, China and Brazil. Our unique branded generics model was built to focus specifically on key emerging countries with socioeconomic and competitive conditions that provide a favorable environment for long-term growth. We serve each of these markets with a broad product offering tailored to address local needs. This unique and successful approach positions EPD to continue delivering superior performance in the fastest-growing pharmaceutical markets in the world. And lastly, I'll cover Medical Devices where sales grew nearly 10%, led by strong growth in Electrophysiology, Structural Heart, Neuromodulation and Diabetes Care. In Electrophysiology, growth of 19% was led by market uptake of several recently launched products, including our EnSite Precision cardiac mapping system and Confirm, the world's first and only smartphone compatible insertable cardiac monitor which helps physicians remotely identify cardiac arrhythmias. The first quarter was buoyed by our market-leading portfolio, which includes several recently launched products that offer improved relief for patients suffering from chronic pain and movement disorders. I'll wrap up with Diabetes Care where sales grew over 30% in the quarter, driven by FreeStyle Libre, our highly differentiated sensor-based glucose monitoring system. Libre now has over 650,000 users across the globe which represents an unprecedented level of patient adoption in the industry. As we've discussed previously, we're investing significant capital to expand manufacturing capacity which will allow us to meet anticipated demand over the coming years. Libre offers a true mass-market opportunity with its unique combination of affordability, accessibility and ease-of-use, and we're positioning ourselves to maximize its impact. So in summary, as expected, the momentum we carried into the year has continued as reflected by our strong first quarter results. We continue to see significant growth contributions from a number of recently launched products across our portfolio and we're well positioned to achieve our financial objectives for the year, including top-tier sales growth and mid-teens EPS growth, as we continue to make investments to sustain our growth momentum into the future. I'll now turn the call over to Brian to discuss our results and outlook for the year in more detail. Brian?

Okay. Thanks, Miles. And as Scott mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis, which is consistent with the guidance we provided back in January. Turning to our results. Sales for the first quarter increased 6.9% on an organic basis and exchange had a positive impact of 4.2% on sales. The favorable impact of exchange rates on sales this quarter was driven primarily by strengthening of the euro and other developed market currencies which, considering our cost base and hedging program, has minimal fall-through on impact on our earnings. Regarding other aspects of the P&L, the adjusted gross margin ratio was 59.3% of sales, adjusted R&D investment was 7.4% of sales and adjusted SG&A expense was 33.2% of sales, all in line with our previous guidance. Turning to our outlook. For the full year 2018, we continue to forecast organic sales growth of 6% to 7%. And based on current rates, we expect exchange to have a favorable impact of a little more than 2% on full year reported sales with more than half of this impact driven by strengthening of the euro. In addition, we continue to expect Rapid Diagnostics to contribute sales of a little more than $2 billion. We continue to forecast an adjusted gross margin ratio of somewhat above 59% of sales, reflecting underlying gross margin improvement across our businesses. Adjusted R&D investment of around 7.5% of sales and adjusted SG&A expense of somewhat above 30.5% of sales. Turning to our outlook for the second quarter of 2018. We forecast an adjusted EPS of $0.70 to $0.72. We forecast organic sales growth of 6% to 7% and at current rates, would expect exchange to have a positive impact of a little below 3% on reported sales. In addition, we expect Rapid Diagnostics to contribute sales of approximately $500 million in the second quarter. We forecast an adjusted gross margin ratio of around 59% of sales, adjusted R&D investment of around 7.5% of sales and adjusted SG&A expense of somewhat above 30.5% of sales. Before we open the call for questions, I'll now provide an overview of our second quarter organic sales growth outlook by business. For Established Pharmaceuticals, we forecast double-digit sales growth. In Nutrition, we forecast low to mid-single-digit sales growth. In Diagnostics, we forecast a modest sequential improvement in sales growth of around 6%. And in Medical Devices, we forecast sales to increase mid to upper single digits, which reflects continued double-digit growth in several areas of the business.

I would like to begin by discussing a couple of product launches. Can you provide more details on how the launches of Libre and Confirm are progressing in the U.S.? Additionally, the EPD business experienced a slightly weaker quarter than anticipated. Brian mentioned that he expects the business to recover to double-digit growth in the second quarter. Could you highlight any specific factors that may have affected the first quarter that you consider to be one-time events?

Okay. Thanks for the question, Mike. And before I go into those answers, I'd like to take a minute and just acknowledge you as an analyst in our space for just the terrific job you've done over the years and acknowledge your change of career. We won't have you on these calls anymore, but you've always had great questions and you always hit the right points. And good luck to you in whatever you're going to do and we'll miss you here.

Thank you, Miles.

Let's start with Libre. The launch has gone exceptionally well and continues to do so. We anticipated this positive trend to continue worldwide. Currently, we have over 650,000 patients, adding more than 50,000 patients each month, with about 150,000 added in the last quarter. We expect to surpass 1 million patients by year-end and the growth is promising. The global patient mix is strong, and we are now getting reimbursed for approximately two-thirds of our international sales, which is encouraging. We're consistently receiving reimbursement approvals in various countries. Libre offers an appealing value proposition due to its affordability and performance, and we receive ample positive feedback. Two-thirds of our patients are type 1 diabetics, and one-third are type 2, validating the product's appeal in both segments. We're making significant investments in capacity expansion, as we expect sustained long-term growth due to its mass-market appeal. With millions of diabetics worldwide, most of our patients are international, though we are also seeing strong initial growth in the U.S., with over 50,000 patients. Overall, the reception has been excellent, and the growth potential in this category is substantial, making it a key future growth driver for us. The good news is that we're not overly investing in sales and marketing because our customers effectively promote the product through social media. Everything is progressing well, and we anticipate that this will continue to be a major growth driver for the company for an extended period. Regarding Confirm, it has also started strong, capturing market share and receiving positive feedback from physicians. Its key advantage is being the only smartphone-compatible device, presenting a solid market opportunity and contributing to an increased growth rate. While there is competition in every market we are in, it drives us to innovate and improve. We have performed well in the meantime. Lastly, regarding EPD, we're facing challenges due to market dynamics, particularly in Russia, where market growth has been slowing—this is reflected in our IMS data. We operate two businesses in EPD there: the EPD brand and the Veropharm brand. The Veropharm brand has fared better in the slowing market, as it is more hospital-based, while the EPD brand is more pharmacy-focused. Although pharmacies have expanded, this hasn't necessarily led to an increase in prescriptions. The current situation is a temporary disruption in the market dynamics, particularly in Russia, which has impacted our business performance. Without Russia, we would be seeing growth in the 8.5% to 9% range, reflecting a healthier picture. We also noticed a minor disruption in Mexico due to distributor consolidation, which has provided them with more negotiating power. However, this is not significantly affecting the overall global growth of EPD. The most pressing concern is the situation in Russia, which we expect will continue to influence our numbers next quarter, leading to similar results as what we have seen. However, we anticipate improvement moving forward.

That's good to hear, Miles. Let me ask a follow-up question. You achieved 6.9% organic growth this quarter, and your annual guidance is between 6% and 7%. A broader question that might arise is about sustainability. Could you share your thoughts on your ability to maintain this level of revenue growth, even though it's still early in 2018?

I believe we can maintain this range of revenue growth. I mentioned in the previous call that I expect to be towards the higher end of this range. Market expectations can shift due to various factors, but I'm less worried about minor fluctuations in growth percentages or the specifics of each quarter. My main focus is on the long-term sustainability of our overall growth trajectory, and I'm confident about that. While I can't predict every quarter precisely, I feel good about our sustainable growth this year and in the future, especially given the number of new product launches we have. The introductions of the Alinity analyzers and the new offerings from our Medical Device groups represent significant opportunities. We aimed to ensure a healthy R&D pipeline and a steady pace of new product releases to sustain organic growth. Any potential M&A activities would be opportunistic and strategic. Overall, I'm confident in our sales trajectory, and we have solid validation from the performance of our new products, which are clear indicators of our growth potential. Variations in growth percentages might occur from quarter to quarter, but I believe we can achieve this growth range.

David is experiencing some technical difficulties.

I wanted to start with Nutrition and then ask a couple of follow-up questions on Libre. Obviously, the bright spot here in the quarter was the acceleration in Nutrition. So Miles, can you talk about the sustainability of that? The International Pediatric Nutrition improved and also the Adult Nutrition business in the U.S. also improved. Those are areas that saw some challenges last year. And I was just curious as to why you're guiding to low to mid-single digits for Q2. And then I had a follow-up on Libre.

Okay. Let me deal with Nutrition first. I think for the long term, I'd be cautious about setting expectations much higher than low to mid-single digits in this business because markets around the world have slowed to a degree. They're not growing at as high a growth rate as they have historically. There are still healthy markets and I think particularly some international, call it, emerging markets and so forth still have some hefty growth opportunity. But I think overall, when you put it all together, it's probably a low to mid-single-digit business from a growth standpoint. It is profitable. It does generate a lot of cash and it is a fundamentally very strong and valuable business. So I'm happy about that. I would say that we've seen some sequential improvement because we've been attending to what I think have been adjustments to how we market, how we sell, adjusting to digital, digital channels or online channels and so forth in some markets where there's been a tremendous amount of distribution channel shift and change. China sticks out. But it's been true in a lot of places. So I think that it's a highly competitive business in a branded space. We've reacted to that pretty well. I give our U.S. team a lot of credit for how well they've done in the pediatric and adult space. It's extremely competitive and it's competitive in both pediatric and adults, not just pediatric in the U.S. And we will see from time to time a competitor try to pulse advertising or other things to take momentary share. But I think overall, we've not only sustained our position, but steadily grown it from a share standpoint. We certainly see that in the U.S. So I'm feeling pretty good about how the U.S. is doing overall. And in some markets where we've had some either competitive issues or just disruption like the disruption in China for the last 2 years over this change in food safety and so forth, the law, I think we've responded to that pretty well. And I think we're seeing that stabilize. As I said, we're making adjustments in how we market, what channels we go to, where the emphasis is. I think we've got some stability in China. But I would tell you, we also have a lot of ambition to do better competitively in China which we're getting our hands around. So right now, I think if we're able to see steady, stable growth in this business at the rate we're at or even sequential improvement going forward, that'd be pretty good. I wouldn't want to get out over the tips of my skis on that and predict a whole lot faster or higher. Right now, I'm happy that it's stable and headed north.

That's very helpful. And then on Libre, clearly, the launch is off to a good start in the U.S. and the international numbers have been spectacular. But I think investors want to get some confidence about the sustainability of that. So I guess my question is, first, earlier in the year, you seemed comfortable with $50 million to $100 million for the U.S. in 2018. Is that still the case? And second, what can you say on the pipeline? I know you don't want to disclose much, but investors obviously want some visibility beyond 2018. Is there anything you can tell us to give investors confidence that there's more to come here?

Sure. Yes, I would like to address your first question regarding our earlier estimate of $50 million to $100 million in sales for year one. We are indeed leaning towards the higher end of that range and currently tracking in that direction. While it's still early in the year, I have no concerns about this projection, and in fact, we're exceeding our expectations so far. This is evident in our growth rates, patient acquisition numbers, and related metrics. I anticipate that by the end of this year, we will surpass a run rate of $1 billion and have over 1 million patients, likely significantly more due to our consistent and increasing patient acquisition rate. Regarding our pipeline, we have ongoing product enhancements, including a pediatric claim in Europe which we will also file in the U.S. this year. We have additional improvements and features on the way, with plenty in development from R&D. Expect announcements this year and next, as we have a solid stream of enhancements and variations planned for our products to ensure sustained growth.

Okay. Can you hear me?

We can now.

Perfect. Glad we got that fixed. So Miles, wanted to start with Diagnostics. Two things to focus on there and maybe a follow-up on the balance sheet. Two things, Alere to our model kind of recovered faster than, I guess, we expected. So can you talk about Alere recovery and how the integration is going? And then secondarily, Alinity and how you see the pipeline building there, U.S., ex U.S. throughout the balance of the year?

I'm taking notes to keep everything in mind. Alere has made significant progress. I'm quite pleased with our management team. The integration of Alere and St. Jude is mostly complete. There are still areas we will continue to improve in both businesses over time, and we have investments planned. Overall, the process of incorporating Alere into the company and establishing a solid management team along with strategies has gone exceptionally well. We are on track with our synergies. This year, we experienced a notably strong flu season, which positively impacted Alere's business, as about 15% of its sales are seasonal and influenced by factors like the flu season. We saw a noticeable increase in flu-related and strep-related testing from late fall into winter, which is reflected in our numbers. This fluctuates from year to year based on morbidity and the flu season. While some years may be less intense, this year was particularly strong and was a significant advantage for us. Additionally, as we've mentioned, Alere has several strong product lines that were not marketed effectively. We are seeing growing success with those product lines and strategies. We are focusing on increasing our investment in R&D, product refreshes, and improvements in the long term. This is a multiyear initiative, so we may not see immediate results next quarter. However, we are identifying commercial opportunities and areas needing improvement. The management team is stable, and the company is financially sound. The increase in sales, while largely influenced by the flu season this period, also reflects underlying advancements in key product lines that are performing well.

Okay. It is...

Yes. Go ahead.

No, sorry. Just Alinity, yes.

We've taken intentional steps to significantly enhance our launch activities. For large systems with multitest menus, it's crucial to have comprehensive menus available at launch. This allows customers, when transitioning to new labs or instruments, to switch all tests efficiently without the need to operate multiple systems. We're currently achieving progress in expanding our menu offerings, especially in Europe, with the U.S. also advancing. Our Alinity s blood screening system now has a complete menu available. We have ambitious plans for converting our existing customer base as well as capturing new accounts. Approximately 15% of accounts renew or contract annually, leading to a consistent multiyear rollout. I've noticed our prospect list has grown significantly, and our win rates with existing accounts are very high, over 90%, which is expected because we have satisfied customers. We also have a strong win rate with new accounts, which is encouraging. We are investing in expanding our sales force, installation, service teams, and support, and this is progressing well, so we are pleased with the developments.

Okay. Miles, very clear. And then just a quick one from me. I think a lot of commentary this morning on growth drivers, but one of the big successes for us this year is debt pay down. It looks like you could be at 1.5, 2 turns net debt to EBITDA by the end of the year. I just wonder how capital priorities could change towards the end of the year. And do you have capacity for sort of growth-oriented M&A towards the back half of the year?

Yes. We have already paid down $6 billion in debt this year and expect to pay down another $2 billion before the end of the year. Our cash flows are strong, and we are focused on reducing our debt. After our two acquisitions, we had approximately $28 billion in gross debt, and we are currently at $22 billion, expecting to reach around $20 billion by year-end. This will give us a net debt-to-EBITDA ratio of about 2, which I consider quite healthy, showing a rapid paydown of debt. Regarding capital priorities, while we believe the dividend is important for many of our investors, targeting it between 40% to 45% of EPS, we are committed to maintaining that range and have been consistently increasing the dividend. Debt reduction continues to be a priority for us, and we are nearing a healthy balance. We will keep paying down debt, and though we have the capacity for growth-oriented M&A if we choose, it is not our current priority. We aim to focus on paying down debt and maintaining a healthy dividend. Internally, we also see significant organic growth opportunities, especially with the launch of Alinity and the capacity expansion with Libre, which we believe will not constrain us. Going into 2019, we see clear flexibility but, for now, I do not feel constrained and do not have any pending acquisitions on my radar, as we have ample organic growth opportunities. I feel confident about our debt balance and our ability to meet our internal needs and maintain our dividend—we are in a good position.

Miles, just a big question to start off with. Maybe you could talk a little bit about your internal investing priorities. It seems SG&A stepped up a little higher than I might have thought. You're clearly investing in R&D, and you've highlighted some topics, Libre, Diagnostics. But maybe where are your priorities more broadly? And do you see that extra investment or that extra opportunity to invest as sustaining or accelerating the kind of 6% to 7% organic growth outlook you're talking about?

I believe every investment at Abbott is focused on expanding capacity. This is actually a positive situation, as everyone thinks that with increased sales and marketing resources, we can grow more quickly. Of course, there must be a sensible limit to that approach. We're fortunate because we have many new products launching and opportunities for market expansion in areas such as EPD. This involves adding more sales representatives and enhancing our support, which increases our market presence in several areas. Particularly with Libre, I'm pleased that it doesn't require as much marketing spend as one might expect, thanks to effective use of digital and social media channels, which can yield significant returns. However, it’s essential to ensure our products are market-ready. Overall, we have a strong pipeline and I would like to allocate more funds to it. Nutrition investments, however, vary depending on the specific markets and channels involved, requiring a more selective approach. I do think we could enhance our spending in some Nutrition areas and in EPD. In terms of Libre, while its growth is currently strong, I remain cautious about increasing investment there. We need to strike a balance between how much we exceed earnings expectations and how much we reinvest in the business. Over my tenure, I have sought to find this equilibrium for both investors and the business to ensure ongoing sustainability. We closely monitor sales percentages to identify opportunities. Presently, I intend to invest significantly in Alinity, as it is labor-intensive and can benefit from increased support. While maintaining this balance is challenging, I’m confident we can sustain growth; the key issue is determining how aggressively to invest.

Got you. And just last from me, could you share your thoughts on the current dynamics in cardiac rhythm management? The business was flat this quarter when we had anticipated low single-digit growth. Your portfolio is well-rounded, and it seems you performed better with new products than with replacements. What is the outlook moving forward? Do you expect this business to grow? How are you considering this in the long term?

Yes, thank you for the question. The business has potential for growth. There are two different situations at play: de novo and replacement. We're performing quite well in the de novo segment, which is encouraging. However, the replacement side is growing more slowly due to some sales being pulled forward because of a battery issue a couple of years ago. This has disrupted the usual sales cycle for replacements compared to de novo sales. I believe this is a temporary situation as we transition out of that phase. The de novo side remains strong, and I am optimistic about that. Looking ahead, I do believe the business can grow more than 1% or 2%, and we are observing signs of this potential. Additionally, there are many opportunities in Electrophysiology. Some segments, like stents and CRM, have lower growth rates because they are in mature markets. However, I do believe we can achieve healthier growth rates than 1% or 2% in these areas. Our Vascular business experienced slower performance this quarter, and we lost some market share in the United States recently. Nevertheless, with the approval and launch of XIENCE SIERRA in the U.S., I think we can turn this around. We have plans in place for managing our established businesses differently from our new product launches, while still recognizing the significant positions we hold in CRM and stents. The performance does fluctuate with varying competitive launches and improvements. However, we believe we can drive our CRM and vascular stent business at better rates than currently observed. The CRM figures you noted highlight the anomaly between de novo and replacement sales.

One question on Libre and then one on the Neuro business. First, can you give us any color on who's using Libre in the U.S. today? And I'm thinking in particular about how the patients you onboarded so far break down in terms of type 1 versus type 2 and then CGM naive versus competitive wins.

Yes. Okay. I'm going to have Scott take that question for you. Go ahead, Scott.

In terms of the mix, it's somewhat more challenging to gather data in the U.S. compared to what we observe in Europe, where we have significant sales through our online shop. However, we estimate that the distribution is approximately two-thirds type 1 and one-third type 2 in the U.S., similar to our international figures, which we believe will remain consistent. Additionally, we're seeing a good balance of competitive wins and new users trying continuous glucose monitoring for the first time, contributing to growth in the overall category.

Okay. And then Neuro continues to be a really strong segment for you. Last year, you actually became the market share leader in the SCS space in the U.S. I'm curious with all the focus on the opioid epidemic in the country right now and pain management in general, do you see an opportunity to move spinal cord stimulation up the treatment continuum to reduce the dependence on drug therapy for those patients?

Yes. I would say that has been a great area for us and we're now the number one player in chronic pain. We have a strong portfolio, and it's yielding positive outcomes for both physicians and patients, who are experiencing great results in real-world settings. I believe this category will continue to grow, but it will require some market development regarding reimbursement and guidelines. This growth is likely to happen gradually rather than in a sudden surge. Overall, we see this as a promising area for the long term.

Miles, I have two questions on China. The first is relating to all this tariff noise that we're hearing. Abbott has a major presence in China, but I don't believe you manufacture a lot in China and then send manufactured product back to the U.S. So maybe can you discuss the impact of any of these tariff threats between the U.S. and China on your sales and EPS? And then the second question is on China nutritionals which did perform better than our expectations. Is China recovering sooner than you expected and why?

Let me take that one first. No, it's not recovering sooner than I expected. I expected it to stabilize much sooner than this. But I'm glad that it is now. I think we've got a reasonably stable predictable market. Are we doing as well as we'd like? Well, we'll see that over time here. We're doing better, but I'd like to do better than better. So there's still room to go to improve performance and improve share gain, improve channel shift and so on. But yes, I wouldn't tell you that this is ahead of my expectations because mine may have been running a little ahead of where we are. Then with regard to production in China, I hate to disabuse you of this notion, but we do produce in China. And we do bring product to the U.S. from China. And that happened because Alere produced a lot in China or at least a reasonable amount. So what we manufacture in China that is exported from China or imported to the U.S. is almost entirely diagnostic products in the Alere acquisition. And so there could be some impact financially on that if something were to happen from a tariff standpoint. We have done that analysis. And ironically, we've got a lot of business in China. We export a lot to China. We do manufacture infant nutrition in China as it is. So we've got a balance. We've got a balance of things that we manufacture, import, export, et cetera. When we net out the impact of potential tariffs, the tariffs we might experience exporting to China or into China are minimal. The tariffs we would experience coming back to the U.S. from products manufactured in China are where the impact would be. And I would say that based on everything I've seen so far, the total magnitude of impact on us if it were to happen at all, about $0.01. And so we think we've got a highly manageable circumstance if what we've seen and estimated and the degree of tariff, tariff rates, products they apply it to and so forth, about $0.01. And so I put that in the category of I'm always solving for $0.01 somewhere. So that's a manageable outcome.

Very good. Well, thank you, operator. And thank you for all of 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.