Abbott Laboratories (ABT) — Q1 2021 Earnings Call Transcript

Good morning, and thank you for joining us. With me today are Robert Ford, President and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance, and Chief Financial Officer. Robert and Bob will provide opening remarks. 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 2021. 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 Form 10-K for the year ended December 31, 2020. 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 information 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 excludes the impact of foreign exchange. With that, I will now turn the call over to Robert.

Thanks, Scott. Good morning, everyone, and thank you for joining us. Today, we reported the results of a very strong quarter. Ongoing earnings per share were $1.32, reflecting more than 100% growth compared to the prior year. Sales increased 33% on an organic basis in the quarter. At the start of the year, we issued full year guidance that reflected another year of strong performance, and through the first quarter, we're right on track with those expectations. Our full year 2021 adjusted earnings per share guidance of at least $5 remains unchanged and reflects over 35% growth compared to last year. Our strong first quarter was comprised of several factors, including global COVID testing-related sales of $2.2 billion, with rapid tests comprising roughly 85% of those sales; strong sales growth across all four of our major business areas, which resulted in base business organic sales growth, excluding COVID testing-related sales, of nearly 6%; growth contributions and momentum from several recently launched products across all of our businesses; and the impact of significant investments we're making across our portfolio in R&D and commercial initiatives that will further strengthen our sustainable growth profile. I'll now summarize our first quarter results before turning the call over to Bob. And I'll start with Nutrition, where sales increased nearly 6.5% in the quarter. Performance was led by our Adult Nutrition business, with sales growth of more than 18% in the quarter. The pandemic has brought a lot of awareness to the value of good nutrition, including immune support, which is helping to bring new users into the category and more specifically to our market-leading Ensure and Glucerna brands. Pediatric Nutrition sales declined 2.5% in the quarter. Recall, during the first quarter of last year, this business experienced significant pantry stocking ahead of the shelter-in-place restrictions in several countries at the start of the global pandemic. Our sales growth this quarter in Pediatric Nutrition reflects that difficult year-over-year comparison. In the U.S. and several international markets, we continue to capture share with our leading portfolio of infant formula and toddler brands. In Diagnostics, sales increased 115%, which was led by significant demand for our portfolio of COVID-19 tests as well as improvement in the base business. As I mentioned earlier, strong COVID testing-related sales were led by our rapid point-of-care platforms, ID NOW, BinaxNOW and Panbio, as we continue to see demand shift towards rapid testing worldwide. During the quarter, BinaxNOW received U.S. Emergency Use Authorization for over-the-counter, nonprescription, self-use for people with or without symptoms. We began shipping test kits to major retailers yesterday. Just as importantly, our underlying base business continues to improve, driven by improving routine diagnostic testing levels and the continued rollout of our Alinity platforms. Excluding COVID testing-related sales, our Core Lab and Molecular Diagnostic businesses both achieved double-digit sales growth in the quarter. Turning to Established Pharmaceuticals, where sales grew over 6% in the quarter, which is particularly strong given the comparison versus a strong first quarter last year. Performance in the quarter was led by double-digit sales growth in India, China and Brazil. And while we continue to see elevated COVID case levels across several emerging markets, the business is executing at a high level to ensure patients have access to our branded generic medicines. And lastly, I'll cover Medical Devices, where sales grew nearly 9% in the quarter, led by strong growth in Structural Heart, Rhythm Management, Electrophysiology and Diabetes Care. Although procedure volumes across our cardiovascular and neuromodulation businesses were impacted early in the year by elevated COVID case rates in certain countries including the U.S., we saw growth improve throughout the quarter and exited with good momentum. On average in March, U.S. procedure levels were up mid-single digits compared to pre-COVID baselines across our cardiovascular business with some areas even higher. In Structural Heart, sales were up mid-teens overall with growth contributions coming from several products within our innovative portfolio, including MitraClip, TriClip, Portico and others. MitraClip sales grew more than 15% in the U.S., where we achieved our highest number of monthly procedures ever in the month of March. In January, CMS expanded reimbursement coverage for MitraClip, which significantly increases the number of people who can benefit from this market-leading device. And I'll wrap up with Diabetes Care, where growth was led by Freestyle Libre sales of nearly $830 million. The global user base for Libre has now surpassed 3 million users, driven by market expansion and awareness efforts as well as ongoing new product launch activity in every major market around the world. So in summary, we're off to a very strong start and right on track with our expectations for the year. All four of our major businesses are achieving strong growth. We're particularly pleased with the growth contributions and momentum of several recently launched products. And we're well positioned to achieve more than 35% EPS growth, as we have forecasted at the beginning of the year. I'll now turn over the call to Bob to discuss our results and outlook for the year in more detail. Bob?

Thanks, Robert. 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 first quarter increased 32.9%, which was led by strong performance across all of our businesses, along with strong global COVID testing-related sales. Organic sales growth was balanced, with 34% growth in the U.S. and 32% growth internationally. COVID testing-related sales were also balanced geographically, with a little more than half of those sales coming from international markets. Foreign exchange had a favorable year-over-year impact of 2.5% on first quarter sales. During the quarter, we saw the U.S. dollar strengthen somewhat versus several currencies, which resulted in a slightly less favorable impact on sales compared to exchange rates at the time of our earnings call in January. Based on current rates, we would expect exchange to have a favorable impact of approximately 4% on our second quarter reported sales and would now expect exchange to have a favorable impact of nearly 2% on our full year 2021 sales. Regarding other aspects of the P&L for the first quarter, the adjusted gross margin ratio was 58.3% of sales, adjusted R&D investment was 6% of sales, and adjusted SG&A expense was 25.1% of sales. As Robert mentioned, the strength of our business performance has created an opportunity to significantly increase our investments in R&D and SG&A to further strengthen our pipeline and growth initiatives. During the first quarter, our combined investments in these areas increased approximately $200 million compared to the same quarter last year and was at the highest level since our separation with AbbVie. For the first quarter, net interest expense was $124 million. Nonoperating income was $73 million. And our adjusted tax rate was 15%, which is consistent with our full year effective tax rate from last year.

Congratulations on the strong Q1 revenue and profit growth. I don't think I can recall the last time the company put up 100% earnings growth, so impressive there. I guess I'd love to hear your thoughts on 2 important topics, Robert, if you don't mind, and that the first topic is BinaxNOW OTC. I was wondering if you could just talk a little bit about capacity and your early thoughts on how you think demand will play out for that product. So that's the first topic. And then I'll just go ahead and list the second one in the interest of time. The second topic is a little bit longer-term oriented, because last quarter you expressed some confidence in Abbott's ability to drive double-digit earnings growth in 2022 off of that $5 number for this year. And the question I would have is, based on what you're seeing today, has anything changed with your views? And then I think investors would also love to hear, if you assume a more conservative testing scenario, how does that impact that goal of double-digit earnings growth next year? So I just wanted to list this all upfront there.

Thank you for your question about the U.S. Binax OTC launch. We're really excited about this opportunity as it reflects a trend we've observed abroad that's now emerging in the U.S. This trend involves a shift from hospital lab testing to quicker testing outside those environments, allowing consumers to receive results faster and with less hassle. We believe this presents a significant opportunity because it's both easy and affordable. An important aspect of surveillance and serial testing is affordability, as doing serial testing with PCR can be challenging due to the costs exceeding $100 and the time it takes to receive results. We are well-positioned to take advantage of this new approach, and I believe many consumers will want to keep these tests on hand, similar to how they stock up on medicine. We noticed this shift beginning late last year and continuing strongly into this quarter. In the U.S., our opportunities in OTC testing require a solid understanding of the retail environment, and our experience through our Nutrition and Diabetes businesses enables us to navigate this space effectively. We're excited about eliminating barriers to frequent testing, and a critical factor here is scale. We need to have the capacity to meet demand, and we are likely the front-runners in production. Currently, our capacity allows us to produce approximately 150 million rapid tests each month across various platforms, which positions us well for ongoing demand. Regarding your question about 2022, we reiterated our confidence in January, and I assure you that nothing has changed in the last 90 days. We begin our annual planning process targeting double-digit growth, supported by the recovery of our base business, COVID testing, new product launches, and ongoing investments. The pace of recovery for our base business is strong, with double-digit growth in Core Lab and Molecular Diagnostics, excluding COVID. Libre is experiencing rapid growth, while our Nutrition and Established Pharmaceuticals segments are accelerating. We have strong momentum with recent product launches, including MitraClip G4 and TriClip, and we expect four key product launches next year that we believe will be advantageous. These include entering the LAA market in the U.S., potential expansion of CardioMEMS indications, introducing a single-chamber leadless pacemaker followed by a dual-chamber version, and entering the U.S. TAVR market. Each of these opportunities represents a multibillion-dollar segment, and we've been diligently preparing over the past 18 months to capitalize on them in 2022. Overall, the foundational aspects of our business and product pipeline are progressing favorably, with no anticipated changes. If anything, we see acceleration in our momentum since our last call. We maintain that a significant portion of COVID testing will be sustainable, and the trend is shifting towards rapid test formats. As the dominant producer of these rapid tests, we are confident we will hold the leading market share. Given all these factors, we remain optimistic about achieving double-digit growth.

That's great. And then just if it was a more conservative testing environment, how does that impact the way you think about things?

I guess that's the approach we're taking, where we analyze various aspects of the elements I've discussed. It's going to be challenging, and I'm not making any assumptions about the level of COVID testing needed. However, I believe a significant part of it will be sustainable, and we'll capture a large share of the remaining COVID testing.

Great. And I'll echo Bob's congratulations on a very nice quarter. Maybe just to follow up, Robert, I'd love to get a sense. One of the key investor topics, as you just touched on, is the double-digit target for EPS growth next year. And part of that, it looks like you're front-loading a lot of expenses into 2021 here. You grew OpEx about $300 million versus last year. So I'd love to see if I could just get a little more meat on the bones in terms of the road map to that double-digit EPS, more down the P&L versus the top line, which you just talked about? And does it imply sort of high 20s operating margins to get there?

On the high 20s operating margin, yes, that does appear to be the case. Regarding the areas of investment, I mean I talked a lot about these in terms of the investments we're making. I'd say from a bigger picture perspective, we want to make sure that we're spending and investing a good portion of these COVID testing profits into the R&D portion of the P&L. We believe that is a very sustainable investment. And if I look across all of the businesses, in devices, in diagnostics, in rapid diagnostics, in nutrition, all of these businesses have opportunities to invest in R&D. And we've got clear programs across all of them to build the R&D programs that will sustain our growth beyond '22, '23, '24. A lot of the products that I just mentioned, whether it's the ones we've just launched over the last kind of quarter, 2 or 3 quarters, plus the four key areas that we're looking at entering in 2022, those are going to drive a lot of our revenue growth. And those have already been funded, but I would say the investments here are really looking into next-generation products in Diagnostics, expansion in our portfolio and devices that will lead to new product launches in '23 and '24. On the SG&A side, we're making sure that we're supporting our big growth products. I'd say probably a lot of the SG&A is going towards Libre and driving Libre awareness and growth, both in the U.S. and international markets. And you'll start to see that ramp up even more as we go throughout the year, both in terms of spend and the return on the top line. We're making investments also in Nutrition to strengthen our brand and capitalize on the expansion, especially in the adult nutrition side of the market. And expanding footprint in several of our device businesses where we know that clinical specialists and sales force, et cetera, is important to be able to support not only the expansion of our current products, but the launch of new products.

Great, really helpful. And maybe just a quick follow-up. We're all really interested to hear not just about how the devices business did in the first quarter, but really the forward commentary on what you're seeing exiting March into April here. So if you have any early feedback on the exit rates and what you're expecting in terms of catch-up, that would be really helpful.

Yes, as I mentioned in my earlier comments and in response to the first question, we experienced a significant recovery. There was a slight slowdown in January; however, we saw a notable pickup in October and November, where procedure growth rates returned. In December and January, we experienced a decline as case numbers increased, but February showed real progress, followed by strong growth in March. March can be a tricky month since the previous year saw significant shutdowns for a couple of weeks. Therefore, we compare March not only to last year but also to March 2019, as well as looking at the entire quarter against 2019. We are actually seeing growth rates in this quarter that exceed our pre-pandemic levels from Q1 of 2019, which indicates a solid growth trend. In Core Lab, it was encouraging to see double-digit growth, reflecting the return of routine testing to hospitals. Our Molecular Diagnostic business, not including COVID and PCR COVID testing, increased by 30%, which is a positive indication that our strategy of launching the Alinity M with COVID testing and expanding the menu is effective. The exit rate looks very promising. As we analyze the first two weeks of April on a weekly basis, we see consistent improvement in Structural Heart, EP, and even in CRM. This trend is encouraging as we move into the second quarter. Additionally, we anticipate some easing in Europe, although it has been somewhat slower due to shutdowns. Nonetheless, the early weeks in Europe look promising.

Robert, one for me on capital allocation; and one on your favorite topic, I think, Libre. So a lot of questions around 2022. And my question is, how important is it to hit that double-digit EPS growth target in 2022? And your thoughts around capital allocation helping you achieve the $5.50 in EPS, is it a buyback or an accretive deal, something you would consider to get there? And I have one follow-up on Libre.

Sure, we begin each year with a goal of achieving double-digit growth. Comparing our performance in 2021 to 2019, we have increased by 53%. Our objective remains to target double-digit growth in 2022 as well. There are various strategies we can employ to reach that target, including adjustments in our business mix. Our strong balance sheet gives us significant strategic flexibility. We aim to strike a balance between short-term and long-term investments in the business while also returning value to our shareholders. We are committed to maintaining a strong and growing dividend, which is a core aspect of our identity. Historically, we have primarily engaged in share repurchases to counteract dilution, but we may consider doing a bit more in the coming year. Regarding mergers and acquisitions, we are continually evaluating opportunities. While I won't disclose any specific details, we are interested in attractive options that promote growth without compromising our top-line growth profile. Our approach will always be cautious with cash deployment, ensuring shareholder satisfaction by balancing long-term and short-term goals, as well as internal and external factors. This philosophy has always been part of our approach, regardless of changes in leadership. We strive to be responsible stewards of our capital and to find the right balance I just described.

That's very helpful. And then Libre, how should we think about the growth for the remainder of the year? The comps get a little easier. You talked about 40% as an aspirational goal on the last call. And just what's the latest on the Libre 3 launch in Europe? And if you'll give us any color on the U.S., it would be certainly appreciated, but I'm not sure we'll get it today.

Sure. I set a goal of achieving 40% growth in 2021. In terms of comparison, there is a slight balance between Q1 and Q2. Last year in Q1, we experienced some stockpiling both internationally and in the U.S. So, seeing our current 30% growth on top of a strong quarter last year is a very positive sign. We expect some impact on the other side in Q2. The focus now shifts to the second half of the year, where we aim to sustain mid-30s growth and potentially accelerate to the 40s. We are confident in this due to our strong portfolio and momentum, along with our investments in areas like field force and direct-to-consumer advertising globally. We've surpassed 3 million users worldwide, which places us significantly ahead of our closest competitor, though there is still ample opportunity for further growth and investment. Regarding Libre 3, we launched it in Europe at the end of this quarter, and we're where we want to be. We typically start small and focused, learning from consumers, healthcare professionals, and manufacturing processes. There is a learning curve since it's a new platform, and we continue to adapt to changes in insurance and coverage. Once we align everything, we can accelerate our efforts. We have a lot of strategic flexibility with both Libre 2 and Libre 3. The feedback from launch has been very positive; we’ve engaged with over 1,000 healthcare professionals and received great reactions from a few hundred patients testing the products. There's considerable social media buzz, and the excitement is palpable from the feedback we’ve seen. This sets a new standard for us in terms of size, ease of use, accuracy, alarm performance, and wear experience. I am really excited about Libre 3 and the combination with our existing portfolio, as it provides us with significant strategic flexibility.

Congrats on the strong performance. Robert, I did want to ask you on fiscal '21. If I look at Q1, excluding contribution from COVID, right, the base business looks like it was up 10% organic versus pre-pandemic in the '19 levels. One, is that math correct? And if we're starting off at 10%, I guess, are we looking at perhaps teens kind of growth for fiscal '21 on the top line on the base business?

Vijay, this is Bob. Yes, your math is spot-on. Our first quarter was up over 2019 and by around 10%. So we had really good performance in the quarter in the base business, and you really saw that across kind of the portfolio of businesses. And then we would expect to continue to see strong growth during the course of the rest of the year, in particular as medical device procedures continue to improve. And we would expect to see kind of that base business growth in the mid-teens.

That's helpful, guys. Regarding the antigen testing, I noticed the press release yesterday about the launch of the asymptomatic consumer version of the product. How is revenue recognized? Is it recognized upon shipment? What does early demand look like from retailers like CVS, Walgreens, and Walmart? Is the expectation for $6.5 billion to $7 billion for fiscal '21 still the same?

Yes. So on the $6.5 billion to $7 billion, yes, that remains unchanged. It's difficult to forecast here in that tight range that you'd expect from Abbott. But yes, we continue to forecast sales at around that level. Regarding your question, I think it was regarding the Binax OTC in the U.S., correct? Is that what you're referring to?

Correct.

Yes, we received approval for the product several weeks ago and immediately began our manufacturing process. This product is different from the previous Binax test, as it provides two tests and the necessary consumables to run them. We started manufacturing and began shipping to retailers just yesterday, starting with CVS, Walgreens, and Walmart. We expect all other retailers and food merchants to follow as we expand and ramp up manufacturing. The product is shipped, and revenue is booked when the asset is transferred to the retailer. I believe this represents a significant opportunity for us. Few diagnostic companies have the capacity, manufacturing scale, and channel experience to compete effectively in this space. We're confident in our position as we begin with initial stocking orders and then expand distribution. Given the price point, we anticipate that many households in the U.S. will have testing available at home, leading to repeat purchases.

Yes, I'm planning on stocking up, Robert.

Just a quick question for me, if I could, is just on some of the pipeline opportunities around Amulet and CardioMEMS in Portugal, if you could provide us with maybe an update on those programs. And secondly, on just the progression of MitraClip, this has been a device and procedure that was a little bit more impacted by the slowdown over the winter. And just love to get a sense of what the trajectory looks like now heading into Q2.

On the Amulet side, we have experience in this category outside of the United States, and the product performs well internationally. We filed with the FDA late last year and believe this market is very attractive, approaching $1 billion and growing at double-digit rates. Amulet is competitive in its current form, and we will be investing in research and development for future generations of the product. Our experience in Europe supports our belief in this segment. We also initiated our CATALYST trial to compare Amulet to NOAC drugs, the current standard treatment for those with AF or at risk of stroke. This trial will be a significant growth driver post-launch, with results expected in the 2023 timeframe, reinforcing our commitment to this segment. Regarding MitraClip, it performed well in the quarter but was impacted by COVID-19 last year. Despite the slowdown, we saw strong growth in the first quarter, with mid-teen growth in the U.S. We achieved our highest number of procedures in March, and the positive trend continued into early April. We're making investments not only in new versions of MitraClip but also in market development to expand our patient referral networks with cardiologists and implanting centers. The approval of the NCD in January opens significant opportunities for MitraClip, as we are currently only around 5% to 7% penetrated in the total available market, indicating strong potential for growth in the mitral space. For CardioMEMS, we expect to file for a label expansion soon, which would broaden our U.S. market opportunity significantly. We plan to pursue CMS reimbursement after obtaining this label expansion. CardioMEMS is growing, with over 20% growth in Q1, and the market is recovering from the pandemic, positioning us well in this area.

So I wanted to go back to the idea of the double-digit growth and the investments that you're making this year. You called out R&D, and we've seen DTC has been stepping up. I think there's a lot of Libre commercials there now. I guess my question is, when you think about these investments and the sustainability, historically, we've thought about Abbott driving 7% growth. That was your algorithm pre-COVID. Do you think that the investments could lead to more sustainable, higher post-COVID organic growth? And then how quickly can you toggle them up and down if the environment changes quickly to manage earnings?

Sure. So I'd say on the base business side, our identity, our target was really sustaining a 7% to 8% growth rate pre-COVID. And I'd say with these investments that we're making, excluding any kind of year-over-year comp, we'd probably be at the higher end of that 7% to 8% range, I mean, once you factor in maybe a Q1 comparison on the base business. Next year, you're probably growing a little bit higher than that, Matt. But at the high end of that 7% to 8% is what we're looking at, with all these investments and product development and portfolio development. As I said, a big portion of our COVID cash flows and profits, part of it goes to our shareholders, but part of it goes back into the business. And we've got a lot of flexibility here to toggle that investment up or down if we need to. I mean I'd probably say that each business has their list of go-to areas that we've all agreed to are kind of next steps. If we have more opportunity to invest in the business, we know exactly where to go. As it relates to toggling down, yes, I mean, I wouldn't be toggling down R&D. I think that's more of a sustainable kind of investment that sustains our growth rate. It's easier to toggle on SG&A, and we've got that capabilities also if we need to.

Great. And I just had a follow-up on Diagnostics. The underlying growth, as you called out in Core Lab and Molecular, was impressive. And I'm wondering if we're going to see you get increased momentum in the underlying business because of your success with COVID diagnostics. Do you think you can leverage that larger installed base and drive to higher growth in the core diagnostic business over time now?

Yes, I think the answer to that is yes. We've definitely been elevated to a kind of higher level of partnership here with a lot of hospitals and IDNs and institutions as it relates to their kind of COVID testing. There's been a large set of accounts that we've historically been out of and now had the opportunity to place our instruments and show what we can do. So the answer to that is yes on the core lab for sure. You're seeing a little bit of that strategy play out in the molecular side of the business, where we haven't seen these kinds of growth rates in our molecular business, excluding COVID, in a very long time. And we were up close to 30%, excluding COVID testing. A lot of that has to do with the instruments that we're placing and getting the test pull-through on the other assays on the other tests. So on the rapid side, too, I wouldn't just look at it from a Core Lab perspective. The sustainability of COVID is one portion of it is the actual COVID test. The other portion of it is the installed base that we're placing as a result of that. I've talked a little bit about this building sustainability of a rapid testing channel beyond just COVID, and COVID is allowing us to do that. But if you think about, for example, our ID NOW instrument, where we basically ceded the market here for an opportunity to do much more in the world outside of COVID by placing these instruments, we had roughly about 19,000 boxes in the U.S. in 2019, and we're currently at 75,000 boxes. So we almost quadrupled our installed base there. And will they all be as productive from a COVID testing perspective at the highest level of the pandemic 1, 2 years out? No, probably not, but they'll be very productive with all of our other assays. And that installed base will continue to grow and will continue to produce for us. So to answer your question, yes, I do think this is a great opportunity here for us to continue to roll out our Alinity platform on the Core Lab, on the molecular side and continue to build our rapid testing channel in the rapids business.

I'll just put them both upfront. Can you give us an idea of how you're thinking about revenue for the remainder of the year? Particularly I'm going to ask questions about COVID-19 diagnostic revenue in 2021. And then my second question has to do with the other areas of med tech that are starting to support or continue to support that high single-digit growth rate. Anything you can add color on a neuromod, vascular or CRM would be helpful.

Sure. Regarding the growth rate in our diagnostic business, we anticipate our non-COVID diagnostic segment will keep accelerating and growing. In Q2 and Q3, we expect to see mid-teens growth numbers, taking into account the comparisons from the previous year. Our perspective here is to evaluate our performance based on a two-year compound annual growth rate (CAGR). Our target is to reach a growth rate of around 10% to 12% in our Core Lab business over that two-year period. Predicting COVID testing trends remains challenging. I can’t provide a precise quarterly projection, but I will continue to reiterate the range we mentioned last time. There will be variability in timing, mix, and geography regarding COVID testing. However, I believe the shift from lab-based PCR testing will remain significant, with rapid testing becoming increasingly important for surveillance, and we feel well-positioned in that area. As for your second question regarding other devices, I'm quite pleased with the progress in our cardiac rhythm management (CRM) segment. While we haven't fully turned things around, we can see marked improvement. The launch of our ICDs and CRT-Ds under the Gallant brand, equipped with Bluetooth capabilities in Europe and the U.S., is showing that we are gaining market share, which is the key outcome. I'm also excited about our entry into the leadless segment next year with a product that offers strong capabilities and a competitive value proposition. In heart failure, recovery has been slower, primarily due to the nature of the procedures, which often require ICU stays. Despite this, we have a solid market share starting around the mid-80s percent range, and I expect that market conditions will recover. Additionally, our CardioMEMS technology has shown a strong growth of 26% this quarter, presenting another great opportunity for us. I'm not sure if I addressed all the device areas you were interested in.

If you can hit on neuromod, that would be great.

Yes. So we did see a little bit of a slowdown in trials towards the end of the year and the beginning of the year, and we saw that start to pick up a little bit now. We think that we like our position. We recently launched our remote programming and monitoring system, the NeuroSphere. I think that's going to create a whole new opportunity for us in terms of business model, in terms of our ability to service the patients and the physicians better with that. So we started to roll it out in the U.S. I think it applies to both SCS and DBS, too. We've gotten great feedback on that. So I think that we'll see sequential improvement on our performance in neuromod not only as we lap the comps but also as the NeuroSphere gets widely used. And then we've got a nice pipeline of products to be launching towards the end of the year here.

Congratulations on the quarter. Rob, I wanted to ask about your comments on the potential for pursuing mergers and acquisitions to support double-digit earnings growth in 2022. Can you share any insights for investors or analysts regarding the areas of focus? Should we consider that each business unit might receive some support through acquisitions? Specifically for Medical Devices, in relation to Joanne's question, should we consider the possibility of strengthening heart failure, vascular, and neuromodulation areas, especially since some sectors are performing softer? You have a strong pipeline and have seen success with internal development initiatives; is Medical Devices an area where you can enhance growth? Lastly, regarding the Structural Heart business, you will be adding Amulet and Portico soon in the U.S. How are you approaching this? You mentioned a specialized sales force; should we expect dedicated sales teams for MitraClip, TAVR, and left atrial appendage occlusion? How might all of this come together?

Yes, I believe on the M&A front, it always begins with a strategic perspective. We assess whether the business we're considering aligns with Abbott's strategic goals, both in terms of market position and financial metrics. We avoid pursuing opportunities that do not align strategically just to enhance our EPS. Our focus is on acquiring businesses that we can grow and effectively integrate into our company. It always starts with this strategic fit. If an opportunity is appealing and the timing is right, we will explore it. We examine all the areas you mentioned, including diagnostics, and we consistently monitor new technologies and companies. However, I won't disclose specific details about our competitive strategy. Regarding your second question about sales forces, it really varies. Generally, we believe that focused and dedicated teams have proven to be the most effective. This approach has been our practice for many years. We do not combine teams just for synergies unless it makes sense. If we identify growth opportunities in certain sectors, we treat and fund them accordingly. All the divisions you've mentioned in Structural Heart are seen as high potential growth areas, and we will allocate resources to them as such. To sum up, we have provided guidance of at least $5, which equates to a 35% year-over-year growth after experiencing 13% growth in 2020. We are optimistic about our first quarter performance, which we believe positions us well to meet or exceed that $5 target. We have various strategies to achieve this. The COVID testing market is increasingly shifting towards rapid tests, and our capabilities and scale in this segment are unparalleled. We expect a significant portion of the COVID testing market to persist into 2022. Additionally, I'm very encouraged by the recovery of our core Abbott business, excluding COVID. We are making investments this year to accelerate our growth in 2022 and beyond, and we have discussed this previously. We feel very confident about our current position and outlook for this year and next.

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.