Abbott Laboratories (ABT) — Q4 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. 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 2020. 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, 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.

Okay. Thanks, Scott. Good morning. 2019 was another highly successful year for Abbott. Our focused execution resulted in strong financial performance, including ongoing earnings per share of $3.24, reflecting 12.5% growth on an absolute basis and even higher growth when excluding the impact of currency. All four of our businesses performed well, contributing to full year organic sales growth of more than 7.5%, which is above the guidance range we set at the beginning of last year. The successful year was capped off by a strong fourth quarter with organic sales growth of 8.5%, including double-digit sales growth in Medical Devices, Established Pharmaceuticals, and Core Laboratory Diagnostics, along with ongoing EPS growth of more than 17%. Our consistent strong performance demonstrates that our business model is working exactly as intended. We've built the company very deliberately through a multi-year process to deliver superior results for years to come. We've shaped our businesses to align with important trends to make sure we're in the right places with the right products. And we've targeted businesses that are focused on some of the world's greatest health care concerns. For example, diabetes and cardiovascular disease are two of the most significant health care challenges of our lifetime. They are chronic, long-lasting, and dramatically increasing in prevalence around the world. Nearly every health care decision begins with a diagnostic test. And this testing not only occurs in the traditional hospital setting but also increasingly at alternate sites such as physicians' offices, pharmacies, and even at home. Proper nutrition is a foundational element of good health across every stage of life, whether you're a newborn baby, a child striving to grow, or an aging adult working to overcome a health condition. And access to health care continues to expand rapidly in emerging markets where 85% of the world's population resides. We've shaped our company to achieve scale and leadership positions in all of these areas. The investments we've made and our focus on execution are working. Our product pipelines are strong. Our operating culture is strong, and we're well positioned to achieve sustainable strong growth for years to come. For 2020, we're forecasting another year of top-tier financial performance. As we announced this morning, we forecast organic sales growth of 7% to 8% and adjusted earnings per share of $3.55 to $3.65, reflecting double-digit growth. I'll now provide a brief overview of our 2019 results and 2020 outlook for each business. And I'll start with Diagnostics where sales grew 6.5% in the fourth quarter, led by double-digit growth in Core Laboratory Testing. The rollout of Alinity continues to go well in Europe where we're winning new business at a high rate and successfully renewing existing contracts that come up for bid. We continue to expand our rollout of Alinity systems across multiple key markets, including the U.S., where last year we obtained FDA approval of Alinity for blood and plasma screening and have made significant progress obtaining regulatory approvals for a critical mass of our immunoassay and clinical chemistry test menu. I'll turn now to Nutrition where sales increased 6% in the quarter, led by strong growth across several countries and segments of our business, including Southeast Asia and Latin America, across both Pediatric and Adult Nutrition as well as above-market growth in the U.S. In Pediatric Nutrition, growth was driven by PediaSure, our nutrition solution to help kids grow and thrive; and Pedialyte, our oral rehydration product, which continues to see unprecedented uptake with both children and adults. In Adult Nutrition, global growth of 10% in the fourth quarter was led by Ensure, our leading complete and balanced nutrition brand; and Glucerna, our leading brand for people with diabetes. Moving now to Medical Devices where sales increased nearly 11.5% in the fourth quarter led by double-digit growth in Structural Heart, Diabetes Care, Electrophysiology, and Heart Failure. In Structural Heart, sales increased 17% in the fourth quarter. Over the last couple of years, our portfolio and long-term growth opportunities in this area have strengthened considerably. We've been building our position organically in this area for quite some time when in 2017, the combination with St. Jude created what I'd now consider a best-in-class Structural Heart portfolio. MitraClip, our market-leading device for the minimally invasive treatment of mitral regurgitation or leaky heart valve, is the cornerstone of our portfolio with annual sales this past year of nearly $700 million, growing 30%. Last year, we obtained an important new indication in the U.S. that significantly expands the number of people that can be treated with MitraClip. And just last week, we announced that we're initiating a clinical trial that offers the potential to expand the treatable patient population even further. Beyond MitraClip, several exciting technologies are expected to emerge from our Structural Heart pipeline in 2020, including CE Mark approvals for TriClip, a first-of-its-kind technology to repair leaky tricuspid heart valves; and for Tendyne, which targets replacement of the mitral valve as well as U.S. approval of Portico for transcatheter aortic valve replacement. Turning now to Diabetes Care where sales increased nearly 35% in the quarter led by FreeStyle Libre, our revolutionary continuous glucose monitoring system. Several years back, we saw an opportunity to approach continuous glucose monitoring or CGM in a fundamentally different manner compared to others in the space. We challenged ourselves to rethink existing paradigms as we sought to develop a solution that would truly benefit the mass population of people living with diabetes around the world. That aspiration influenced every aspect of Libre: highly accurate, simple to use, particularly affordable, and easy for patients to access. The results of our unique approach have been remarkable by any measure. Libre has quickly become the global market-leading wearable CGM. Its user base has roughly doubled each year to its current level of approximately 2 million users globally, including the highest user base among CGMs in the U.S. Reimbursement coverage has ramped up quickly around the world as payers increasingly recognize its highly differentiated value proposition. And it's the only CGM that's widely available through the pharmacy channel, which is a significant benefit for patients as it simplifies the process of acquiring the product. In 2019, Libre achieved full year sales approaching $2 billion, an increase of 70% versus the prior year. And importantly, as we plan for the substantial growth opportunity to come, we significantly expanded our manufacturing capacity to keep up with anticipated demand for this life-changing technology. Now I'll wrap up with Established Pharmaceuticals or EPD where sales increased 10% in the quarter, led by growth across several geographies in Latin America and Asia. For the full year, sales increased 7% for the second year in a row as this business continues to execute its unique branded generic strategy in emerging markets. These markets are growing rapidly; their populations are aging, their middle classes are expanding, and health care spending is increasing due to improving access to health care. Our strategy to build significant presence and scale in these markets is unique and continues to result in strong growth. So in summary, this was another highly successful year with strong performance across our businesses. We continue to strengthen our leadership positions in some of the largest and fastest-growing areas in health care, and we're entering 2020 with great momentum across our businesses and targeting another year of strong organic sales growth and double-digit EPS growth. I'll now turn the call over to Brian to discuss our 2019 results and 2020 outlook in more detail. Brian?

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 fourth quarter increased 8.5%. Exchange had an unfavorable year-over-year impact of 1.4% on fourth quarter sales. Regarding other aspects of the P&L, the adjusted gross margin ratio was 59.4% of sales, adjusted R&D investment was 6.7% of sales, and adjusted SG&A expense was 28.3% of sales. The fourth quarter adjusted tax rate was 12.8%, lower than our previous full year guidance of around 14.5% due to continued implementation of and adaptation to the U.S. tax reform regulations. Our fourth quarter tax rate reflects the aggregate adjustment to achieve our full year revised effective tax rate of 14%. Turning to our outlook for the full year 2020. Today, we issued guidance for adjusted earnings per share of $3.55 to $3.65. For the full year, we forecast organic sales growth of 7% to 8%. And based on current rates, we would expect exchange to have a negative impact of around 0.5% on our full year reported sales. We forecast an adjusted gross margin ratio of around 59% of sales for the full year, which reflects underlying gross margin improvement across our businesses, offset by the impacts of investments to support the rapid market adoption of our Alinity diagnostic systems, investments in Libre and MitraClip manufacturing capacity expansions and the impact of currency mix. We forecast adjusted R&D investment of approximately 7% of sales and adjusted SG&A expense of around 29.5% of sales. We forecast net interest expense of around $515 million and non-operating income of around $200 million. Lastly, we forecast an adjusted tax rate of 13.5% to 14% for the full year 2020. Turning to our outlook for the first quarter. We forecast adjusted EPS of $0.69 to $0.71, which reflects double-digit growth. We forecast organic sales growth of around 7% and, at current rates, would expect exchange to have a negative impact of a little more than 1% on our first quarter reported sales. We forecast an adjusted gross margin ratio of somewhat above 58.5% of sales, adjusted R&D investment of somewhat above 7% of sales and adjusted SG&A expense of around 32% of sales. Lastly, we forecast net interest expense of around $130 million in the first quarter. Before we open the call for questions, I'll now provide a quick overview of our first quarter and full year organic sales growth outlook by business. For Established Pharmaceuticals, we forecast mid- to high single-digit growth for both the first quarter and the full year. In Nutrition, we forecast growth of around 4% for the full year and growth of 3% to 4% for the first quarter. In Diagnostics, we forecast mid- to high single-digit growth for both the first quarter and full year. And in Medical Devices, we forecast double-digit growth, similar to last year, for both the first quarter and full year.

Oh, great. So I guess first, Miles, congratulations on such an incredible run of 20-plus years of value creation. Obviously, an incredibly impressive track record. And in light of that, now the first question, I'd love to ask both you and Robert to comment on a topic that I know is on the minds of most investors from a big-picture perspective. And that is the durability of the incredible 7% revenue growth outlook that you guys have expressed for 2020 and beyond. And the main reason I want to ask that question is that when you take a step back, there is no other company in med tech modeling anything close to that kind of growth off of that large of a base especially for multiple years. So Miles, for you, I guess just if you wouldn't mind providing some big-picture thoughts on that durability topic. And then for Robert, maybe getting a little bit more specific on the product areas that give you the confidence long term and whether or not M&A or divestitures could play a slightly bigger role going forward to help you maintain that level of growth.

Bob, this is Miles. I feel a strong urge to set my successor up with ambitious goals for the future, so I'll go first. We've been building what we have here for a long time; it didn't happen overnight and isn't reliant on just one product or business. Our foundation is actually quite broad across all our areas. While many have pointed out that larger companies often struggle to grow, we don’t perceive ourselves as overly large. Despite our strong positions in many areas, we don't feel that being a sizable company is hindering our growth potential. We see ample opportunities for growth in markets that are naturally expanding due to demographics or innovation. If we were a tech firm, such concerns about size wouldn’t even be raised because we’d be considered too small. Looking at our opportunities, where we have positioned our business, and the variety of products and regions, there’s a tremendous unexplored market opportunity. There’s significant potential for penetration in our offerings, and we have clear examples of this. Thankfully, all our businesses are innovating, developing new products, and replacing older ones like never before, ensuring that our growth rates can be sustainable. I am not sure how far into the future this sustainability will last, but I am confident it will be for several years. There will be challenges along the way—some will be our own making, while others will stem from trade or currency fluctuations, as all companies face. However, we are currently navigating these challenges successfully while still experiencing strong growth. This success is due to our innovative pipeline, well-timed acquisitions, smart strategies, and the organization’s effective execution and culture. I have complete confidence in my successor. People often suggest that when you retire, you should diversify your investments since you're too focused on one area, but I actually wish I had more holdings. I’ll remind him often that I am a shareholder, which he knows. I believe in our pipeline, management, products, strategies, and the new leader who will take over. I have immense faith in Robert and his abilities. We can discuss concerns about growth relative to our size, but we don’t see ourselves as hindered by it. We believe we have great opportunities to continue our growth rates.

Yes, Bob, this is Robert. As you know, under Miles' leadership over the last 20 years, Abbott has undergone several transformations. I was closely involved with him and the Board during this latest reshaping of the company to better position and align our businesses with high-growth markets and geographies. As Miles mentioned, this transformation was not solely about acquisitions; it also involved our internal R&D and innovation strategies. With my transition to CEO, naturally, there are questions about whether the incoming leadership will think differently or if there will be changes in strategy. I assure you that I am very much aligned with Miles. Our perspectives on strategy, operations, the company's philosophy, and our vision for Abbott are very similar. Over the past 18 months, being close to Miles during this transition has allowed me to learn from his mentorship about how to create value. My primary focus now is to effectively capitalize on the organic growth opportunities we have. There are multiple growth drivers in early stages, such as Libre, the Alinity rollouts, our enhanced cardiovascular portfolio, our adult international nutrition business, and our branded generic pharmaceuticals in emerging markets, which is a unique strategy. Regarding the sustainability of these opportunities, I believe we are just beginning to tap into them, and it will be up to me and my team to ensure we maximize these chances. Our portfolio is well-aligned with significant medical needs and attractive geographies. As Miles mentioned, we have a very rich pipeline that has evolved, and we haven't seen such a robust pipeline at Abbott in years. We're not just looking at a one-time launch; we have multiple rollouts planned. Our operational strength is solid. We set high expectations and maintain a culture of accountability and execution. Additionally, we have 100,000 passionate colleagues around the world who care deeply about what they do and believe in our strategy. I feel confident that we have all the elements needed to sustain our growth rate going forward.

Great. That's super helpful. Just one super short follow-up on diabetes. Robert, if you wouldn't mind, just give us a quick update on Libre 2 timelines and your thoughts there. And then if you're willing to give us a sense for, in your 2020 guidance, what sort of growth assumption are you making for Libre in 2020?

On Libre 2, specifically last October, I mentioned that we were addressing several issues. Honestly, we faced similar challenges in other areas of our business as well, so it's not surprising to us and is quite normal. I won't go into the specifics, but since October, I’m very pleased with the progress we've made. I remain confident in both Libre 2 and its performance, including its iCGM label. Regarding guidance, we anticipate significant growth for Libre. Our outlook includes robust growth without differentiating between Libre 1 and 2. Our Q4 results were strong for Libre, even without Libre 2 available in the U.S., which set us up well for the new year. As Miles noted, we lead the CGM market in revenue and patient numbers, and we're growing at twice the rate of others. Our strategy is to approach this as a consumer retail, online-driven model. Thus, our Q4 growth was steady and sequential, not a typical spike followed by a drop commonly seen in medical benefit DME products. The U.S. performed well last year, and while we always aim for improvement, we ended the year with over 500,000 patients in the U.S. We reached our 2019 goals for distribution and payer coverage, setting a favorable position for Libre. In 2020, our focus will be on leveraging our established infrastructure to boost demand. Expect to see increased TV advertising, sales force expansion, and enhanced partnerships. The same momentum we experienced in the U.S. is also reflected in our international markets, where we saw significant progress in Q4. Our 2020 plan centers on expanding Libre into new geographies where we had not launched due to capacity constraints in 2019. We are now preparing to introduce Libre to those areas and roll out Libre 2 in some of the existing Libre 1 markets. It's important to highlight that Libre is the most studied CGM available. Data from various sources consistently shows that users of Libre achieve better health outcomes, including lower A1c levels, reduced hypoglycemia, and fewer hospitalizations. The value proposition of Libre is not only intact but actually expanding. It is a user-friendly product that delivers measurable outcomes and is priced for broad adoption. We have always recognized the therapy benefit for both type 1 diabetes patients and those on once-daily insulin or oral medications. We estimate the potential market to be between 80 million and 100 million people. While it may be overly ambitious to reach all 100 million, we firmly believe we can exceed 2 million, 3 million, 5 million, or 10 million users. Our strategy is focused on investing in the product, increasing awareness, and ensuring scalability to seize this opportunity.

I'll echo Bob's sentiment. Miles, sorry to see you go, but we're very happy to have someone so confident as Robert step in. Maybe if we could turn to Structural Heart. I was wondering if you could give an update on where we are with reimbursement and MitraClip. And then also, a bit more broadly, Miles, you talked about some of the new product launches we're going to see in 2020. Maybe you could just walk us through those and the expectations throughout the year.

So Robbie, I'll take that. On MitraClip, we had a great quarter and a great year. As Miles mentioned, we achieved around $700 million in product sales, growing at 30%. It's worth noting that the penetration of this therapy is only about 5%, indicating there’s significant opportunity ahead. I have discussed how MitraClip represents a multi-year, multi-billion-dollar opportunity, which involves several key elements. An important building block is CMS reimbursement, which we expect sometime in Q2. However, I’ve always emphasized that it's not just about CMS reimbursement for the indication expansion. We need to enhance our penetration of this therapy, which requires opening new centers and making it more accessible, hiring more representatives, and investing in field clinical teams. We've also committed resources to building clinical evidence, including the recent announcement of our study investigating MitraClip in moderate-risk surgical patients. This investment aims to solidify this market. MitraClip garners a lot of attention in our Structural Heart portfolio, but it's essential to view valvular heart disease as a significant opportunity for Abbott due to demographic trends and medical needs. The St. Jude acquisition allowed us to integrate our MitraClip capabilities with St. Jude’s portfolio, creating a best-in-class independent business unit for Structural Heart, which we accomplished about two years ago. We are now witnessing the impact of having a dedicated team focused on R&D and clinical efforts. We have a strong lineup of products launching this year, including two new CE approvals. Miles mentioned TriClip, a modified version of MitraClip designed to treat leaky heart valves, which presents a substantial opportunity because the treatment for tricuspid leaky valves is even less prevalent than mitral therapy. We understand how to develop this market, having effectively done so with mitral treatments. Another promising opportunity is Tendyne, which will introduce the first minimally invasive mitral replacement valve. Our team has developed considerable expertise in mitral repair, and now we are providing the chance for minimally invasive replacement solutions as well. Both products are currently enrolling patients in the U.S. and we plan to introduce them domestically. Regarding the aortic side, we have made investments in Portico, knowing we needed to enhance its competitiveness through clinical and R&D improvements. We are pleased with the data and believe we can competently target a segment of the population. It's under FDA review, and we anticipate approval soon. Lastly, regarding our structural interventions, this segment, which constitutes about a quarter of our Structural Heart business, is growing at double digits with excellent products. We’ve experienced significant progress with our stroke prevention technology in PFO and our congenital business. Amulet is currently under clinical evaluation in the U.S. for LAA treatment. So, while MitraClip is a major growth driver with numerous positive developments, I'm excited about the entire portfolio we have built. It's comprehensive, unique, and we have a solid schedule for upcoming product launches.

Great. Appreciate that. And maybe just a quick follow-up. Alinity still hasn't really started to launch in the U.S., yet you put up 13% growth in core lab in the fourth quarter. How should we be thinking about the impact in 2020 from Alinity both in the U.S. and outside the U.S.?

Yes. I believe we will continue to see the rollout of the Alinity platform. We faced some challenges in the U.S., though Miles mentioned our progress. When we launched in Europe, we had a more extensive assay menu, which allowed us to approach the market—including existing and new accounts—with greater purpose. Now in the U.S., we have reached a significant level of assay offerings and test panels that enable us to carry out that same focused approach we had in Europe. In Q4, we experienced some capital sales, which slightly boosted our growth rate. I expect to see a similar growth trajectory in the U.S. as we did in Europe.

I don't want to sound like a broken record, but I'll reiterate, Miles, there's some fairly significant and unique value creation over these last 20 years, so congratulations again on behalf of shareholders. Robert and Miles, just starting off with a couple of businesses that have lagged in 2019 that are actually showing some improvement here in the back half of '19, which were neuromodulation and CRM, some pretty decent improvement specifically in the fourth quarter. Wondering, Robert, if you can just talk through what specific changes have been made in those two businesses and how you're thinking about the outlook or sustainability of those franchises into 2020. And then I had a quick follow-up.

Sure. Let's begin with our neuro business. We faced a challenging year overall in this segment. At the start of the year, we acknowledged the difficulties ahead, particularly regarding our expanded sales force, which caused some disruption. Despite that, we felt it was necessary to proceed with this expansion. Additionally, we encountered some market declines. Initially, we experienced double-digit growth, but that level off to flat and even negative growth. We managed to move past the disruption from the sales force expansion by mid-year. Our selling model is unique, with about 30% to 35% of our U.S. sales team being new, all with less than a year of experience. We dedicated significant time to training them on their territories and the selling process. This challenge is mostly behind us now. Experienced sales representatives, with 7 to 10 years in the field, show much higher productivity compared to those with just 12 months. However, we are observing a steady increase in productivity from the newer sales reps. We previously discussed how innovation and new product launches could drive market growth. This was evident in Q4, not only for us but also for others in the market releasing new products, as indicated by recent pre-announcements. We launched our Proclaim XR product early in Q4, which positively contributed, albeit modestly. We aim to see more impact moving forward. A significant focus for us this year is to ensure our new sales team has innovative products to promote. We are expanding our MRI portfolio, recognizing the need for competitive offerings. We're also launching a new radiofrequency ablation generator, which is vital for our customers. Additionally, we consider programming and connectivity to consumer devices crucial for patient adoption of therapy. We plan to enhance how the implanted device connects with these consumer products. Our rollout strategy is progressing well. On the CRM side, we faced some challenges last year and determined that it required more focus and attention from our management team. In Q1, we reorganized by separating the CRM business from the EP business, which was completed in Q2. This separation was thorough, affecting all functions, and now we have a dedicated CRM business unit with its own leader and R&D team. We’ve begun seeing results from this renewed focus in the latter half of the year. I look forward to seeing consecutive positive quarters. The field's performance is important, but I am particularly excited about the renewed emphasis on R&D. We had previously slowed innovation, but with this dedicated unit, I anticipate significant output in 2020, including product launches in the U.S. and new products in Europe. We have a solid plan for ongoing innovation in 2021 and 2022, which I find promising. It’s still early for this business unit, but I am encouraged by the progress we are making.

Okay. And just two quick follow-ups for me. Just, Robert, on MitraClip, is there a specific embedded assumption in the guidance for MitraClip? And how acutely do you think we see that recovery in the back half? And then your margin guidance, about 50 basis points is a little lower than 2019, consistent with our numbers. But if you could just highlight two or three of the examples of significant reinvestment for growth in 2020, that would be super helpful.

In response to your question about MitraClip and its growth recovery, I believe our growth rate has been quite strong. The U.S. performance has been impressive. Regarding the international market that you mentioned, we did experience some impact from studies released in Europe during the first quarter. However, we've observed improvements in each subsequent quarter, and I believe we've effectively communicated that progress. As for our guidance, we're anticipating significant growth, particularly with Libre. We are also considering CMS approval in our outlook. I want to emphasize that CMS approval is a critical factor, but it's not the only one. We've been demonstrating robust growth in the U.S. even in the absence of reimbursement, which can be attributed to the strategic investments we've made from both a field and clinical standpoint. What was your other question?

It is on margin expansion. I'll start off by saying just margin improvement is an ongoing focus for us, David, has been and will continue to be, whether that's gross margin, whether that's the leverage we continue to get in SG&A. And yes, notably, we did see that this year. You may be off just a little bit from our model in the foreign currency mix. We have a little bit of a headwind next year. But we have a gross margin expansion plan underlying. But keep in mind, as Robert said, with these investments that we're doing for growth, whether that's continued Libre expansion, whether it's the most recent MitraClip expansion we announced as well as the unprecedented uptake of Alinity, that's presenting a little bit of a headwind. But that's a good news item in the short term. And longer term, you'll continue to see those gross margins expand as we look out over the years.

Congrats on a really nice print here. One, maybe on Nutrition, the adult side is coming really strong. I know China has been a bit of a bother with some regulatory changes a couple of years ago. Could you comment on what you're seeing in China? Is Adult Nutrition back? Has something changed in China for you guys?

We experienced a strong growth rate in Q4, even with some softness in China. We discussed this in Q3, and while there's been some improvement, issues like the birth rate and competitive intensity remain. We have developed a plan for Q4 and 2020 that focuses on innovation and product launches to tackle these competitive challenges. We've established a consistent stream of product launches in China, which highlights the strength of our Nutrition business, as we've managed to achieve this growth despite ongoing softness in the Chinese market. Additionally, we had significant growth in Southeast Asia and Latin America in both Pediatric and Adult segments. While China is an important market for us and does receive our attention, we are not overly dependent on it.

That's helpful, Robert. I have a question regarding Diagnostics. Flu has been a significant topic lately, and I'm interested in understanding its implications for Diagnostics. On the core lab front, Alinity is showing very strong trends, and you mentioned ongoing share gains in Europe. I'm curious about our position in the U.S. market. Is our win rate in the U.S. similar to that in Europe, or should we anticipate a different outcome for the latter half of 2021?

Yes. As I mentioned, we've experienced good success in Europe, winning new businesses at a rate of 50% and retaining nearly all of our existing business. In the U.S., it may be a bit early to assess because we didn't have the same intentional launch as we did in Europe. Now that we have a more comprehensive offering, I believe our competitiveness in the U.S. will be on par with what we've achieved in Europe.

Congratulations on another impressive quarter. Miles, I want to echo the earlier sentiments and say that I'll miss our interactions on these calls. They are always insightful and enjoyable. I have two quick questions. First, for Robert regarding capital allocation. I know I've asked about this in previous calls, but you all have significantly reduced your debt recently. Are you contemplating M&A differently now, Robert? Should we anticipate more tuck-in acquisitions in 2020? Lastly, I have one quick follow-up.

Sure. You'll see that we maintain the same philosophy and framework we've had for many years, which is a balanced approach. As mentioned, our primary focus over the past couple of years has been on paying down debt, having reduced nearly $10 billion in that time. Our net debt-to-EBITDA ratio is about 1.5 now, and we have payments due in the coming years that are factored into our capital plan. We also prioritize returning a portion of capital to our shareholders, with our dividend being a significant part of our identity. We've increased our dividend for 47 consecutive years, and this year we announced a 13% increase. Additionally, we revealed a share repurchase program of around $3 billion to offset dilution. We will consider growth opportunities, such as the rollout of Alinity and the expansion of Libre manufacturing. Recently, we announced a second manufacturing site for MitraClip, which offers great returns for our shareholders. Regarding M&A, we are not pursuing any deals at this time. As Miles has emphasized, any potential deals must be strategic and opportunistic. We're continuously evaluating opportunities, but nothing has emerged that aligns with those criteria. Nonetheless, we will keep searching as we always have.

Perfect. And then just one housekeeping. For Brian, and Brian, congratulations on your retirement, and I'll miss you as well. Just FX on EPS impact in 2020.

The impact of what?

EPS FX.

Oh, FX. It's around $0.05, Larry.

Maybe I'll start off with EPD. EPD, Robert, is always a little bit of a black box to us medical device analysts or I'll just say to me. Currently doing exceptionally well, strong fourth quarter, and you're saying mid- to high single digits for 2020. But maybe just give us a little update on some of the key drivers. What could get you to the upper end of your range? And maybe some of the challenges, just give us some perspective about what you're thinking about for 2020.

I've heard comments about the EPD or pharma business being a bit of a mystery or lacking transparency. The main focus of this business is to capitalize on geographic dynamics. We can either operate a proprietary pharmaceutical business, which is more expensive, or a pure generic business, which is very inexpensive. Our branded generic business falls between these two extremes. Coming from an emerging market, I know that medications are often purchased out of pocket, and consumers are willing to pay a premium for high-quality products. This business has been built on leveraging that dynamic, as people in these markets are increasingly allocating part of their growing disposable income to trustworthy healthcare brands. A critical aspect of this strategy is to have a robust presence across therapy classes. We maintain comprehensive portfolios in the regions where we compete, with depth in each therapy class. Being omnichannel is essential; we need to be present in doctors' offices, pharmacies, and engage directly with consumers. Local presence is also necessary, with local research and development and manufacturing capabilities to quickly adapt to emerging opportunities. One challenge in this business has always been the foreign exchange aspect. However, we anticipate performance growth to be in the high single-digit range, primarily driven by being in the right markets, equipped with the appropriate infrastructure, products, and a strong focus on execution.

Great. And turning to two other areas. Heart Failure business has done a great job. How sustainable is the robust growth we've seen? And maybe talk a little bit about the implications of the less invasive surgical approach for HeartMate 3, what that might mean. And just last, maybe touch a little bit on Alere. It's been a little bit of a disappointment. What are the next steps? Help us understand what's going on and where we go from here with Alere.

Sure. In 2019, we had significant success in our Heart Failure segment, particularly with the HeartMate 3, which received the destination therapy indication at the end of 2018. This led to a growth rate of about 20% in 2019, mainly driven by market share gains, especially in the U.S., where we estimate our share to be over 80% as we closed out the year. However, as we enter 2020, we anticipate that growth will more closely align with the overall market, falling into the mid-single-digit range. Nonetheless, I see ample opportunities ahead. Our CardioMEMS product has been performing well, reaching nearly $100 million in sales with a growth rate of 30%. We are also actively enrolling in our GUIDE-HF trial, which will support an NCD application and is showing promising results in reducing hospitalizations. This should serve as a key growth driver in Heart Failure, and I am very pleased with our team's progress. Regarding Alere, it has been a mixed experience for us. Some of the businesses we've integrated into Abbott have performed well, particularly in the infectious disease portfolio within developed markets, where we've seen solid growth, although there are opportunities related to the flu season. Our cardiometabolics business is also doing well, experiencing high single-digit to low double-digit growth. The team has made good strides on the cost side by realizing synergies. However, we do acknowledge that some areas of the business have not met our expectations. Our emerging markets infectious disease segment faced challenges in 2019 due in part to NGO purchasing cycles. We recognize the need to improve here and are focusing our strategy on other emerging markets beyond Africa to enhance the value proposition of our tests. In our toxicology business, we believe we haven't fully tapped into its potential either, and we're giving that the necessary attention. We had a promising fourth quarter, with notable growth in the U.S., aided somewhat by the flu. If we can execute our plans effectively for both our emerging markets and toxicology segments, I believe we can achieve mid-single-digit growth in these areas as well. Overall, the trends and opportunities within our product lines and strategic approaches remain strong. We've also observed an ongoing shift toward alternative testing channels, which we expect will lead to continued improvement and long-term growth potential.

Congratulations, Miles, on your retirement, and Brian, I hope your next chapter is a positive one as well. Just I guess a couple of cleanup questions. In terms of the, I guess, PHP product, I was just wondering if you can maybe update us on just the timelines there for expected launch. And then also for Amulet as well, just kind of expectations for launch, just to get some timelines. And then also, I think you, Robert, had also mentioned just some products within the CRM business launching there. Could you just maybe update us on expectations for that franchise? I think you mentioned a new ICD platform and some other milestones you expect within the CRM portfolio.

On PHP and Amulet, those are still a couple of years away as we are currently in the clinical evaluation phase. Once we gather the necessary information, we will submit it to the FDA. You can expect a timeline of about two years for that. Regarding the CRM side, our primary opportunity arose when we changed the structure to foster innovation. We are planning two product launches this year: an update to our implantable cardiac monitor and a new ICD for both the U.S. and Europe. We have set our growth expectations to improve steadily. While we have faced some challenges, we believe these new products will help us maintain that upward trajectory.

Okay. This is Miles again. I'll wrap up and close for us. So first of all, thank you all very much for your very kind comments. And on behalf of both Brian and I, well, I'll speak and tell you that it's been a great honor and a great pleasure for us to lead our company. It's been a tremendous experience. I feel like I've had 2 or 3 careers here in the last 21 years and probably have. Brian was estimating this morning, this was our 85th or 86th earnings call. And therefore, I can't tell you that I know yet whether I'm going to miss them, but I sure have a lot of them. And they're always challenging. They're always interesting opportunities to converse with you about the prospects of the company and so forth. I feel like I'll leave the company in perhaps its best position ever in terms of products and growth, future opportunities, et cetera. As I said at the beginning, I'm very pleased with the succession and the management team that's here. It's not just the CEO that's changing. The CFO is changing, and Bob Funck, who's a longtime Abbott employee and he's been our controller for a number of years and been in some of the most challenging jobs at Abbott and so forth, will be an absolutely superb successor to Brian. You know that a lot of our management team has changed over the last couple of years as we move to a next generation of leaders and managers in the company. And I think it's a great mix of people that are homegrown and also have come to us either through St. Jude or other outside places. And we're just really happy with the team we've got, the pipelines we've got, the positions we've got. We think our success is sustainable. And I think the track record that we've laid down over the last years has been recognized that way, and we're appreciative of the recognition that all of you have given it. As I commented tongue-in-cheek, as a significant shareholder of the company, I'll obviously be watching closely and especially in the immediate future as the Chairman. So with that, we'll close the call. Thank you all very much, and thanks for all your support.

Very good. 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.