Abbott Laboratories (ABT) — Q3 2019 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; Robert Ford, President and Chief Operating 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, 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 2019. 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 items 1A, Risk Factors, to our annual report on Securities and Exchange Commission Form 10-K for the year ended December 31, 2018. 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 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 is defined in our earnings news release issued earlier today. With that, I will now turn the call over to Miles.

Okay. Thanks, Scott. Good morning. Today, we reported results of another strong quarter with ongoing earnings per share of $0.84, reflecting 12% growth on an absolute basis and even higher growth when excluding the impact of currency. Sales increased more than 7.5% on an organic basis in the quarter led by double-digit growth in Medical Devices and sequential improvements in Established Pharmaceuticals and Diagnostics. We also narrowed off our full year adjusted earnings per share guidance range to $3.23 to $3.25, which, at current rates, would reflect high-teens growth, excluding the impact of currency and is at the upper end of the range we set at the beginning of the year. As we've discussed previously, following our recent strategic shaping and acquisitions, we've been completely focused on running the company we built. This focus on organic execution is delivering strong performance on a remarkably consistent basis. Over the last 8 quarters, we've averaged 7.5% organic sales growth worldwide with very little variation. We've also continued to strengthen our portfolio with new products, expanded access on reimbursement coverage and generated new clinical data that further enhances the sustainability of our strong growth outlook going forward. I'm particularly pleased with the continued exceptional performance across several of our key growth platforms, including FreeStyle Libre, MitraClip and Alinity, which I'll highlight as I summarize our third quarter results in more detail. And I'll start in our Medical Devices business where sales increased double digits for the second quarter in a row. In Structural Heart, we achieved 16% sales growth led by MitraClip, our market-leading device for the treatment of mitral regurgitation or leaking heart valve. MitraClip sales increased more than 30% in the quarter, including U.S. growth of nearly 50%. During the quarter, we received U.S. FDA approval for our next-generation MitraClip device, and we initiated the first-ever U.S. pivotal trial for the minimally invasive treatment of tricuspid regurgitation, which will evaluate the safety and efficacy of our TriClip repair system. Turning now to FreeStyle Libre, our market-leading continuous glucose monitoring system that eliminates the need for routine fingersticks. We achieved sales of $0.5 billion in the quarter and continued to add significantly to our global user base, as reflected by organic sales growth of nearly 70%. During the quarter, FreeStyle Libre obtained public reimbursement coverage in Ontario and Quebec, becoming the first and only sensor-based glucose monitoring system to be listed by any provincial health plan in Canada. We also continued to advance our strategy to develop integrated solutions where people with diabetes can seamlessly manage their condition across devices, including recent announcements that we're seeking to integrate Libre with the insulin delivery technologies of Sanofi and Tandem as well as the digital care platform of Omada Health. This easy-to-use, affordable device is changing the way millions of people manage their diabetes. And our ongoing efforts to expand awareness, adoption and access for Libre around the world will drive tremendous growth for years to come. Turning now to Diagnostics where sales grew 6.5% in the quarter led by double-digit growth in Core Laboratory Diagnostics. The rollout of Alinity in Europe and other international markets continues to drive strong growth in our Core Laboratory business outside the U.S. In the U.S. where we continue to outperform the market with our legacy ARCHITECT system, we've made good progress achieving regulatory approvals of immunoassay and clinical chemistry test for Alinity and are beginning to ramp up our launch efforts in these areas. With highly differentiated instruments and a matrix rollout across multiple geographies and diagnostic testing areas over time, Alinity is well positioned to be a multiyear growth platform for our Diagnostics business. In Nutrition, sales increased nearly 4% in the quarter led by double-digit growth in international Adult Nutrition for the third quarter in a row. In Pediatric Nutrition, above-market growth in the U.S. and several other countries was partially offset by challenging market dynamics in Greater China, which comprises a little less than 10% of our overall nutrition sales. While consumers continue to trade up for premium brands, which is the segment where we compete, we've seen volume in the market decline due to historically low birth rates. We remain focused on strengthening our portfolio and competitiveness across the various segments and purchasing channels in China and given our broad portfolio and global footprint, anticipate continued strong performance across other geographies and long-term growth opportunities such as Adult Nutrition. I'll wrap up with Established Pharmaceuticals, or EPD, where sales increased 8% in the quarter led by strong growth in several geographies including India, China and Brazil. Sales growth in EPD has now improved sequentially for each of the last 3 quarters. With leading market positions in several international growth geographies, EPD is well positioned for sustained above-market growth in some of the largest and fastest growing pharmaceutical markets in the world. So in summary, we're performing extremely well across several areas of the portfolio, resulting in another quarter of strong sales and earnings growth. We continue to strengthen our product portfolios and key product platforms with a steady cadence of new product approvals, reimbursement coverage and clinical data. And we're well on track to deliver ongoing EPS and organic sales growth at the upper ends of the ranges we set at the beginning of the year. 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. 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 our previous guidance. Turning to our results. Sales for the third quarter increased 7.6% on an organic basis. During the quarter, we saw the U.S. dollar strengthen modestly, resulting in an unfavorable impact on sales of 1.9% from exchange or 50 basis points higher than if rates held steady since the time of our call in July. Reported sales increased 5.5% in the quarter. Regarding other aspects of the P&L, the adjusted gross margin ratio was 59.2% of sales, adjusted R&D investment was 7% of sales and adjusted SG&A expense was 29.1% of sales. Turning to our outlook for the fourth quarter. We forecast adjusted EPS of $0.94 to $0.96, which reflects nearly 17.5% growth at the midpoint. We forecast organic sales growth of around 8% and at current rates, would expect exchange to have a negative impact of somewhat above 1.5% on fourth quarter reported sales. We forecast an adjusted gross margin ratio of approximately 59.5% of sales, adjusted R&D investment of around 7% of sales and adjusted SG&A expense approaching 27.5% of sales. Before we open the call for questions, I'll now provide a quick overview of our fourth quarter organic sales growth outlook by business. For Established Pharmaceuticals, we forecast high single-digit growth. In Nutrition, we forecast low to mid-single-digit growth. In Diagnostics, we forecast mid- to high single-digit growth. And in Medical Devices, we forecast growth similar to the third quarter, which reflects continued double-digit growth in several areas of this business.

Just a couple of questions for me. Miles, just want to start off on growth. So I mean this time of year, investors are very focused on sustainability. And you obviously said you've been averaging 7.5% for 7 to 8 quarters. So a couple of questions. One, your guidance for the fourth quarter implies a little bit of momentum deceleration in the business. Anything specific to call out there? And then more specifically, as you think about 2020, what are those drivers that get you confident that you can deliver your growth in that 7%, 7.5% range that you've been doing the last couple of years? And then one quick follow-up.

Okay, David. I'll begin with your point. We have maintained eight consecutive quarters with an average growth of 7.5%. As we approach the fourth quarter, we anticipate being close to 8%. Looking ahead to next year, I believe we remain within the range we provided at the start of this last quarter, which was between 7% and 8%. I have not seen any changes to that outlook. The momentum continues to be positive. In fact, we are experiencing strong growth across various areas where we expected improvements. Key drivers like EPD, Libre, MitraClip, the Alinity systems, and others are all performing well; Structural Heart is also doing very well. As I've mentioned previously, this trend is sustainable and robust moving forward. I see no alterations in momentum, progress, or growth rates; if anything, they are improving. The fourth quarter is expected to be strong, and earnings will reflect that. While we won't provide any specific forecasts or guidance, I believe all the fundamentals for us are solid.

Okay. Very helpful. I have a quick product question, Miles. Libre 2 is clearly an important driver for next year. I would like your thoughts on this. The longer the product remains unapproved, the more concern arises regarding the product and the regulatory timeline. Your partnership with Tandem suggests that you are still confident in Libre 2 iCGM. Can you confirm your confidence in Libre 2 iCGM? Additionally, how do you view the timing potential for that product?

I'd say I'm going to comment myself and then I'm going to hand it to Robert Ford here to comment as well. But first, are we confident? Absolutely. The product is performing wonderfully. The growth is strong. The expansion is strong. There's a lot to be pretty encouraged about. And while I recognize a lot of people, including us, are feeling impatience, impatience doesn't translate to concern. We're all impatient and we'd all like everything yesterday. But it's not quite working out as yesterday. And Robert can comment on that here, but there is nothing but good here looking forward with Libre. And we anticipate a lot of expansion with this product, including with some of these partnerships that we've announced and working with the interoperability with various partners for what I think will be the future of glucose monitoring and diabetes management. I think all of this is not just on plan, but spectacular, particularly for diabetes patients. And I have nothing but confidence in it. So let me turn over to Robert to expand on that a little bit.

Sure, David. It's taking longer than we expected, and we realize we misjudged that. We're currently addressing a few outstanding items with the agency. I share Miles' confidence in the data and the product. Looking at Libre in Q3, we achieved remarkable sales just under $0.5 billion, putting us on a $2 billion run rate with over 70% growth. Our international business grew by 50% from a large base, and U.S. sales nearly tripled due to a steady increase in new patients. One of the challenges we've faced over the last nine months has been balancing our demand generation with our supply, which we've discussed regarding some supply constraints. We have now released additional manufacturing capacity towards the end of Q3, on plan and schedule. The commercial team is excited to be unrestricted and is ready to ramp up promotional efforts, including advertising and sampling, both domestically and internationally. This gives us great optimism as we transition into next year. The value proposition remains robust for patients, physicians, and payers. We achieved public reimbursement for our sensor system in Canada, the only one to do so, which is crucial since Canada is among the largest glucose monitoring markets globally. We have seen rapid growth in other major markets after securing national reimbursement, and we expect a similar trajectory in Canada. Early signs indicate we might see the same growth curve, which is also promising for our Q4 outlook. As Miles mentioned, we're pleased with our strategic partnerships that we've undertaken methodically, starting with Bigfoot and moving to agreements with insulin manufacturers like Novo and Sanofi. The next step involves insulin pumps, as we recently announced a collaboration with Tandem to develop an integrated system, recognizing its importance in connecting to pumps. We are also at a point where we can begin to roll out our partnership strategy. Overall, the momentum for Libre is exceptional as we approach Q4, with many positive elements aligning in our commercial, operational, and R&D efforts. I am confident about the sustainability and future of Libre.

So 2 for me, 1 on capital allocation, 1 on MitraClip. Let me start, Miles, with capital allocation. Now that you have more financial flexibility, how are you thinking about capital allocation and the importance of reloading the pipeline? I think on the Q2 call, you seemed to deprioritize buybacks. But yesterday, you announced a $3 billion share repurchase authorization. So has your view changed? And I just have one follow-up on MitraClip.

We've recently gone through a phase where we've reduced a significant amount of debt, and as a result, our capital balance is in a strong position. Our net debt to EBITDA ratio has improved more quickly than we anticipated, thanks to our aggressive debt repayment strategy. Our business is performing well, and our cash flows are robust. We are capable of continuing to pay down debt and refinancing it as needed, while also managing our balance sheet wisely. Additionally, we are generating more than enough cash to invest in manufacturing expansions for our new products, including a major initiative that is fully funded and on track. Regarding dividends, we increased the dividend by 14% last December and maintain a target range for the dividend relative to our earnings per share. Returning cash to shareholders is a favorable move if the circumstances are right and the returns are satisfactory. We have refrained from significant share repurchases in recent years while focusing on debt reduction, but we are looking to regain the flexibility to do so now. Overall, we are in a strong cash position with good performance and a solid balance sheet. We can continue to pay down debt but also have the flexibility to pursue a variety of opportunities that make sense for returns to shareholders. Currently, we do not have any major mergers and acquisitions in the pipeline, aside from potential smaller additions to bolster our existing businesses. We are pleased with our current pipeline and our research and development efforts, maintaining high standards for what we consider attractive opportunities. However, I am not expecting any significant developments in the M&A space. We aim to keep our options open as we manage cash for our shareholders.

Very helpful. Regarding MitraClip, U.S. reimbursement will increase in October, and you expect to have coverage for the functional MR indication by next spring. You view 2020 as a pivotal year for MitraClip. In Europe, it seems that sales and growth have improved this quarter. How do you feel about MitraClip in markets outside the U.S.?

Larry, I'm going to toss that one to Rob Ford.

Larry, thanks for the question. So we filed our MitraClip NCD. It was opened in August. That timeline there usually takes about 9 months. I mean that's the statutory maximum, as we'll say. When we did FMR in MitraClip, that took about 7 months. So I think we'll be in the December-January timeframe to kind of get exactly what quarter that's going to land in. But in the meantime, you see kind of our growth rate. The reimbursement is going to be important, but Structural Heart was up mid-teens and the big driver of that was MitraClip, up 30%, up 50% in the U.S. So, reimbursement is going to be important. There will definitely be an inflection point when we get it. But as I said in the previous call, that is a component. It's a building block here that we're focusing on. So opening new centers is another kind of key building block. We have about 400 today, and I do want to get to about 550 over time. And we've been supporting that with investments, investments in our sales force, our clinical specialists, our therapy development specialists, so that we can not only train the centers, train the implanters to keep up with that demand that we see, but also to support the demand generation through the development of this patient referral network. So that investment is ongoing, on target, on plan in terms of how we're ramping up the field team. And as Miles said in his opening comments, we continue to invest also in the innovation side, on the product development side. So in July, we obtained approval for our fourth-generation MitraClip, which has independent graspers, more sizes, et cetera, that basically give more options to the position. And so I think that MitraClip here is in its really early innings, although I think this is a multiyear, multibillion-dollar growth opportunity that we've got. And it is going to continue to ramp over time, and we're making the investments to make sure we're going to lead in that. So as I look into 2020, I think we've got the right momentum. And once we have NCD coverage, yes, I think there'll be an inflection to growth.

Just 2 quick product-related questions. First, a follow-up on the Libre 2 commentary. Just to kind of set expectations, just curious, has there been any new data request from the agency? And is approval of Libre 2 in the U.S. you think possible in the next couple of months? Or could it take a little longer?

We've probably misjudged the situation. I'm not going to specify the exact timeline for approval. We've been actively working on several open items with the agency, and that's our current status.

Okay, fair enough. I would also like to ask about Pediatric Nutritionals in China. Could you elaborate on the slowdown there? Additionally, could you share your thoughts on China more broadly and your confidence in continued growth in that market? Please comment on Pediatric Nutritionals in China.

Sure. Let me start off then with the nutritional question here then. So you saw our Nutrition business was just under 4%. We had really good growth in the U.S. in pediatrics up 4%, double-digit growth in international adult for the second quarter in a row. So our challenge here really was the international pediatric performance. This was really driven by Greater China. And I would say there were some challenging market dynamics here. As Miles mentioned, we're seeing the consumer trade up into the premium brand segment, but the volume has been declining partly because of this low birth rate. So this has led to, what I would say, a much more competitive environment, competitive in terms of pricing, competitive in terms of promotional activities. And this has now got our full attention, full attention from the management team here. And our key thing is really focusing. And the market dynamics are the market dynamics, but we've got to really focus on improving our competitive fitness, our competitive position here in the pediatric segment. We're launching a series of new strategies here in the coming weeks regarding our media campaigns, strengthening our consumer relationship platforms. We've got some plans to launch some new products over the next several quarters. So I'd say that the key focus of us right now in nutrition really has been, at this point here, to focus on improving our competitive fitness in China.

I will provide an update on our other businesses in China. As a CEO, I can share that multinational leaders operating in China naturally have concerns about trade and the situation in the country. It's hard not to feel uneasy about it. However, what's noteworthy is that while certain segments of the U.S. economy are directly impacted, we have not seen such effects on our business. Our challenges in nutrition are unrelated to trade or economic issues, aside from birth rates. The performance of our Device and Diagnostics businesses remains strong, with growth in the double digits. There are many theories about potential interventions from the Chinese government that could complicate matters for U.S. multinationals, but we haven't experienced that. Product approvals are arriving on schedule, and the China FDA is supporting our products as expected. We haven't encountered any friction, and demand for our products in China is solid. Aside from our challenge with Pediatric Nutrition, all other businesses are performing well and show no signs of difficulties. While I acknowledge that some industries, such as automobiles, oil, and agriculture, might face challenges, we are not experiencing those issues, and our business in China is doing well.

Two for me. Maybe Miles, starting off with that last question on the macro of China. I know there are a number of moving parts, China, 4X7 on the drug side. Some questions around maybe CapEx slowdown, Diagnostics slowdown. Just to be clear, what is your exposure either on the drug or diagnostics side to China? And maybe broadly comment on emerging markets in general. It looks like some of those markets are slowing down. And how is Abbott positioned to handle some of the macro slowdown, if you will?

We are working to determine who will address specific aspects of that question. I can say that the underlying growth in emerging markets remains strong. Has it slowed somewhat? Yes, it has, but it's still positive overall. The growth we observe in India, Latin America, China, and similar regions is encouraging. Of course, we have specific challenges, like in Argentina, which is a unique situation. However, there are notable advancements in healthcare systems and a strong demand for health products and pharmaceuticals. Our pharmaceutical business in China, in particular, is performing well. We have minimal exposure to certain risks, which Robert will elaborate on shortly. Generally, the conditions in those markets continue to be favorable for us. As we have often mentioned, the most challenging aspect we face is currency volatility. While we typically grow at a healthy rate, currency fluctuations can diminish some of that growth. Robert?

Yes. Vijay, regarding the generic pharmaceutical sector in China, I believe you're talking about the 4+7 tendering process. We haven't observed any impact from it, and we don't foresee any significant effect moving forward. Our product portfolio is quite concentrated, consisting of about 15 products, most of which belong to more specialized segments that are challenging to manufacture. Therefore, our generic pharma business is less vulnerable to these changes. We will, of course, keep an eye on the situation as we are involved in this process and have a good understanding of the tendering mechanics. However, considering our portfolio of products in China, the overall impact on us is minimal.

That's helpful, guys. And just one quick one on guidance maybe for Brian. Brian, looks like the Q4 guidance is implying really strong margin expansion, 200 basis points plus. Just given some of the comments on FX, maybe clarify the FX hit to Q4 on the margin side. And in general, when you look at 2020, what kind of headwinds are we looking at from an FX perspective?

Yes. From a top line next year, I'm not prepared to talk about next year. But I think there would be naturally some flow through on the top line next year, Vijay. Perhaps Scott can get back to you on that, but let me circle back. If you look at Q3, you saw we had gross margins of 59.2%. You were absolutely correct. Foreign exchange had an impact on us of about 50 basis points. Otherwise, it would be at 59.7%. So I feel good about where we're guiding Q4. Q4 tends to be that quarter where we get a little bit more natural leverage as well. And you'll see that play out through the bottom line. Pretty consistent with how we thought about this at the beginning of the year. As you know, I mean, gross margin improvement is just part of our DNA. It's part of what we do and how we think about in addition to cash flow and is something we're going to continue to improve upon across all of our businesses. And I think you could expect that to continue in the next year. That's how we get to double-digit growth that we usually start with and continue to invest back into our SG&A and R&D for our growth.

Miles, I was hoping you could touch on the Diagnostics business. This is one you've called out for many quarters now as a durable, multiyear growth driver for the company. We saw fantastic growth in Core Lab this quarter, even without really benefit from Alinity hitting U.S. Maybe you could just update us on the status of where you are in Europe in terms of the rollout, what you're seeing in terms of competition because we're seeing some negative results from competitors and then the latest and thoughts on the U.S. launch and how we think that uptake there.

Okay, thanks, Robbie. I'm going to have Robert do that.

So Robbie, we've discussed how this is a multiyear opportunity, and we're actively executing on it with a strong focus. The rollout of the Core Lab and Alinity program is going very well, which is reflected in our top line. In Europe, the rollout has been particularly strong, as we've captured over 50% of the business from our targeted competitors. Regarding the renewal process, we're retaining nearly all of our existing contracts. We have placed over 3,700 instruments, which are actively running tests and generating revenue. Additionally, in this quarter, we received approval in the U.S. for the Alinity blood and plasma screening, and the team is already initiating that commercial launch. Last year, we had significant success with the blood plasma systems in Europe and Asia, so it's encouraging to see progress ahead of schedule in the U.S. Our focus on the immunoassay side is increasing, particularly in ramping up R&D and expanding our assay menu. We're nearing 100% completion on the necessary assays to be fully competitive in Europe, while the U.S. is slightly behind, but we are dedicated to getting those assays approved and implemented. This will positively influence our growth rate in the U.S. as we move into next year. Internationally, we are performing well, and there is significant opportunity in the U.S. as more assays become available to accelerate our growth. I'm very pleased with the team's momentum, and while we believe we can always improve, we are committed to making that happen.

Great. And maybe just one quick follow-up in Neuromodulation. Numbers came in a little softer than The Street was looking for. I'm assuming a big chunk of that was in the spinal cord stim market. Maybe you could just update us as to what exactly you're seeing on the ground with Abbott and what you think is driving the deceleration in the market here in the U.S.?

Yes, it’s still a work in progress and has taken longer than we anticipated. Over the last few quarters, we've discussed the hiring and productivity of the sales force. The selling process for devices is very specific, and new representatives need time to understand it. This progress has been positive, with some stabilization in the sales force and improvements in the monthly KPIs we track. However, we’ve noticed a slight market decline, particularly in the first half of this year, following a period of double-digit growth. Our main focus needs to be on the execution and productivity of the sales force. The approval of Proclaim XR this quarter adds to our portfolio and gives the sales team a new technology to promote. While it’s only been a couple of weeks since the launch, the early signs are encouraging. We typically monitor our trials across the U.S. in spinal as a leading indicator, and the initial feedback has been positive, though we will continue to monitor the situation closely. Regarding market data, we lack a third-party source like we have for stents or pacemakers, making it challenging to determine the growth rate. We generally wait for all the reports to come in so we can assess the overall situation. I expect the growth rate for Q3 to be similar to the decline we saw in the first half of this year, which is in the low to mid-single-digit range.

Miles, I'm always embarrassed to ask questions about the EPD business because I always feel like I don't really understand it. But I understand enough to see that you actually, x currency, had another solid quarter in many of the emerging markets that you're targeting. Maybe just help us understand some of your high-level thoughts there or the outlook. Is it going as you would have expected? Growth has slowed a little bit relative to the last few years. But again, seems like on track and sustainably on track. Is that the right way to think about it?

I'm always seeking greater satisfaction, that's for sure. Over the past 7 or 8 years, as we've focused on emerging markets and their expanding economies, we learned that the volatility of currency, heavily influenced by the strength of the U.S. dollar, was more significant than we anticipated. While we can't predict these fluctuations, operating entirely in emerging markets presents its challenges. Nevertheless, the underlying growth in these markets remains consistently strong. An indicator of their attractiveness is reflected in the valuations and prices that pharmaceutical companies believe their businesses are worth. We've observed some of the highest multiples in the world in these profitable markets. The branded and generic pharmaceuticals industry in these regions offers excellent profit margins, outperforming similar sectors in Europe or the U.S. This is why we strategically targeted this business. There is genuine growth potential. Brands, quality, and breadth are critical factors, and all the fundamental aspects seem stable, durable, and appealing. While some economies haven't progressed as smoothly or strongly as we hoped, the growth is still robust. Our main challenge lies in R&D investments, which we decentralize by region—India has its own initiatives, as does Latin America. We're constantly striving for higher productivity and more frequent product launches. However, we do face occasional challenges, such as issues in countries like Argentina or Venezuela, or tax complications like the one we encountered in India a few years ago, which can impact growth for a year. Despite that, the core fundamentals remain solid. This past year, we've seen consistent sequential improvements in our performance, excluding currency effects, showcasing an 8% growth rate, which is quite encouraging. It indicates that we can make necessary adjustments to enhance and drive the business effectively. The pharmaceutical divisions achieving up to 8% growth, with an outlook for further improvements, reinforces our confidence in this business.

Great. I would like to follow up on two quick things. At TCT, we observed some solid Portico data. I assume we are still on track for a mid-2020 U.S. launch. Any updates on Portico would be appreciated. Also, the U.S. Vascular business seems to be under pressure and not showing signs of improvement. What are the issues, and what are you doing to address them? I know you are focused on execution. Is it competition, and how can you turn that part of the business around?

Robert here. Regarding your question about Portico, we submitted at the end of Q3 and expect midyear approval and launch. We are preparing for that. As for Vascular, there are a few non-commercial factors that have affected the growth rate. These include third-party royalties and manufacturing agreements related to the St. Jude divestiture. As those agreements wind down, the royalties decrease, which impacts the growth rate. We have categorized those agreements in the U.S. line, even though they are global. If we exclude those declining items tied to the transition of manufacturing to the new owners, our Vascular business was flat. The situation involves some pricing pressure on stents, but we’ve managed to grow our market share in the U.S. and maintain leadership internationally. The pricing pressure has been balanced by double-digit growth in our Endo and peripheral as well as our imaging and diagnostic businesses. Our strategy acknowledges the expected pricing pressure on drug-eluting stents, and we are committed to investing in order to keep our competitive edge. We are also investing significantly in our Endo and imaging strategies to ensure these businesses grow sufficiently to help Vascular return to healthy growth.

I was hoping that you might just expound a little bit on the Libre dynamics given the continued strength that you've seen outside the U.S. Could you comment on anything like installed base, mix of type 1 versus type 2? Are payers getting involved? Do they see value there? Anything like that, that could help us understand the sustainability of the growth, especially outside the U.S. where you continue to have a larger and larger base?

Yes. So let's talk about that base. I mean, the one way to describe it here that it's pretty large and it's growing. We focus a lot on the sales side. But if you look at the user base where you're at the 1.5 million, close to 1.6 million users at the end of this quarter, as we talked a little bit, there's a little bit of constraint on that user base given our manufacturing capacity. So as we've now unleashed it, I think we've got the potential here to kind of grow that user base even faster. One of the things that is important here that we've seen as payers and contract start to look at this is that they're very convinced on the outcomes of using sensor-based technology. There's a lot of clinical data that proves that. We actually have RCT trials that show that Libre reduces hypo, reduces time out of range, reduces the time that patients are in hypoglycemia. And we backed it up with some fairly large real-world evidence trials showing that. And competitors also have that, too. The value proposition here is how do you get that outcome at a cost that makes sense for the payer where they can actually expand the use of the product and the technology into a much larger user base versus kind of niching it to kind of very small segments. And that's been the value proposition that we've adopted. And as I said in the beginning of the call, that value proposition is not only very intact, but it is growing. And we see that in the negotiations we've had with Canadian reimbursement authorities. We see that expansion of the technology beyond just type 1 or insulin users in other markets. We start seeing it expand into type 2. So we think the value proposition here is very strong, and it's a real opportunity to provide the benefits of the outcomes that are proven at a cost profile that makes sense for the payers. And it's ultimately about having the impact on outcomes for patients. And we're seeing that through our trials and through our real-world evidence. If you think about the composition of the patients, we're looking at 50-50. We're getting a lot of type 1s and insulin users, but we're also getting a lot of type 2s, type 2s that are on single injections or type 2s that are on oral medication. There are different utilization rates, but we're getting all those patients.

One quick follow-up. Are you now completely unconstrained on manufacturing?

Yes.

Okay. I'm going to wrap up where we started. We had a strong quarter, exceptionally strong quarter. Our momentum continues. We've got some great growth drivers in Libre, MitraClip, the Alinity platforms, other businesses. They're all growing, many of them double digits and across the board. So the balance of that performance across all businesses and across all geographies is heartening. It is sustainable. Our top line growth rate was 7.6% this quarter. We think it will be close to 8% in the fourth quarter. And as we look into 2020, I see no reason to change any expectations about the strength of our top line sales growth rate, which is, I think, all of you know, for a fairly large company, unusual to find. The other people that are able to do this are tech companies. And so we've got some great strengths here owing to the strength of our pipeline, our new product launches, the improvements to access and/or reimbursements and further capabilities of those products. So we've got a good sustainable road ahead of us. Obviously, there are surprises or things that don't meet our expectations from time to time or the speed with which we want to accomplish things. But overall, I think this is good evidence to you all, a good performance, super performance, really, and sustainably so. We look at 2020 with great optimism and great expectations, in spite of a lot of the uncertainties in the world and in the economies around the world. We're feeling pretty strong and pretty bullish about where we sit. So with that, we'll see you in 90 days.

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 11:00 a.m. Central time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.