Abbott Laboratories (ABT) — Q1 2022 Earnings Call Transcript

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we will take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2022. 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, 2021. 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. 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. Note that Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis, because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. 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 results of another strong quarter. Earnings per share were $1.73, reflecting more than 30% growth compared to the prior year. Sales increased 17.5% on an organic basis in the quarter, led by double-digit growth in Medical Devices, Established Pharmaceuticals as well as Diagnostics, both with and without COVID testing-related sales. In addition to these strong results during the quarter, we continue to strengthen our strategic position and long-term growth opportunities with regulatory approvals of new products and expanded indications of use along with continued market uptake of several recently launched products in attractive growth areas. I'll now summarize our first quarter results in more detail before turning the call over to Bob. And I'll start with Established Pharmaceuticals, or EPD, where sales increased 13.5% in the quarter. EPD has now achieved double-digit organic sales growth in 3 of the last 4 quarters. Strong performance this quarter was led by double-digit growth across several countries and core therapeutic areas, including gastroenterology, respiratory and CNS pain management. Turning to Nutrition, where our performance was mixed. Our Adult Nutrition business continues to perform at a high level with global organic sales growth of 11.5%, led by our Ensure and Glucerna brands. And we also achieved double-digit growth globally in our combined toddler nutrition products, which includes our market-leading PediaSure and Pedialyte brands. As you know, however, we initiated a voluntary recall in February of certain infant formula products manufactured at one of our U.S. facilities. It's important to highlight as part of our quality system, we retain in-house samples of products that we ship to customers. Testing of retained samples related to this recall action by both Abbott and the FDA have all come back negative for the presence of the bacteria that cause the reported illnesses. Importantly, the FDA and CDC found that there is no genetic match between the strains of the bacteria identified in non-product contact areas of our facility and available samples obtained from customer complaints, suggesting a different source of contamination. And lastly, no salmonella was found in our factory or product and, therefore, the FDA ruled out any link to our facility. We hope these findings will give parents, caregivers and other stakeholders renewed confidence in our products. We know the situation has further exacerbated industry-wide infant formula supply shortages. That's why we're doing everything possible to mitigate supply constraints by bringing in product from our FDA registered facility in Europe and ramping up production at our other U.S. plants. And of course, we're working very closely with the FDA on proactive actions and enhancements so that we can restart operations at the facility. Moving to Diagnostics, where sales grew 35%. COVID test sales were $3.3 billion in the quarter, more than 90% of which came from our rapid tests, including BinaxNOW in the U.S., Panbio internationally and ID NOW globally. Excluding COVID-related testing sales, our Global Diagnostics sales grew 12% in the quarter, driven by the continued rollout of Alinity, our innovative suite of diagnostic instruments and expanding menus across our testing platforms. And I'll wrap up with Medical Devices, where sales grew 11.5% in the quarter. This strong performance was led by double-digit growth in Diabetes Care, Structural Heart, Heart Failure and Electrophysiology. In Diabetes Care, sales of FreeStyle Libre grew more than 25% on an organic basis in the quarter and the user base has now reached approximately 4 million users globally. In Cardiovascular Devices, while procedure volumes were negatively impacted by elevated COVID case rates early in the year, we saw a steady improvement in procedure trends as the case rates came down in the second half of the quarter, which has continued into April. In addition to improving market trends and our strong results, this was also another highly productive quarter for our pipeline. In the U.S., we received FDA approval for Aveir, our leadless pacemaker to treat patients with slow heart rhythms. In Japan, expanded reimbursement for Libre will now cover all people with diabetes who use insulin at least once a day. CardioMEMS received an expanded indication in the U.S. to treat more patients suffering from earlier stages of heart failure. And we received U.S. FDA clearance for the latest generation of our EnSite X system, which provides a 360-degree view of the heart for improved cardiac mapping. So in summary, we're achieving strong growth overall and across several areas of our business. As the first quarter progressed and COVID levels decreased, we saw a steady improvement in the hospital-based procedure trends, which has continued into April. And we continue to advance our pipeline with new products, indications and reimbursement coverage in several attractive growth areas. I'll now turn over the call to Bob. 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 excludes the impact of foreign exchange. Turning to our results. Sales for the first quarter increased 17.5% on an organic basis, which was led by double-digit growth in Diagnostics, Medical Devices and Established Pharmaceuticals along with global COVID testing-related sales of $3.3 billion in the quarter. Excluding COVID testing-related sales, organic sales growth was 7.7% versus the prior year. Foreign exchange had an unfavorable year-over-year impact of 3.7% on first quarter sales. During the quarter, we saw the U.S. dollar continue to strengthen versus several currencies, which resulted in a more unfavorable impact on sales compared to exchange rates at the time of our earnings call in January. Regarding other aspects of the P&L, the adjusted gross margin ratio was 59.1% of sales, which reflects higher than normal fall-through on COVID testing sales as a result of significant production volumes during the first quarter, partially offset by the impacts of the nutrition recall and somewhat higher-than-expected inflation on certain manufacturing and distribution costs in the quarter. Adjusted research and development investment was 5.6% of sales and adjusted SG&A investment was 23.1% of sales in the first quarter. Lastly, our first quarter adjusted tax rate was 14.5%. Before discussing our outlook for the full year, I want to provide an update on our strategic capital deployment initiatives completed in the first quarter, which included approximately $2.3 billion of share repurchases, $800 million of dividends, scheduled debt repayment of $750 million and $300 million of capital expenditures, which support future organic growth opportunities. We continue to generate strong cash flow, which provides the flexibility required to execute a well-balanced capital allocation strategy. Turning to our outlook for the full year 2022. Our adjusted earnings per share guidance of at least $4.70 remains unchanged. We now forecast total company organic sales growth, excluding the impact of COVID testing-related sales, to be in the mid- to high single digits, which is somewhat lower than our prior forecast of high single digits due to the recent recall event in Nutrition. It is important to note, excluding sales impacted by the recall, we continue to forecast total organic sales growth in the high single digits for the remainder of our combined businesses, which includes Medical Devices, Established Pharmaceuticals, Diagnostics, excluding the impact of testing-related sales and areas of nutrition not impacted by the recall. We forecast COVID testing-related sales of approximately $4.5 billion, with a significant portion of these sales expected to occur in the first half of the year. We will continue to update our COVID testing-related sales forecast one quarter at a time throughout the year as appropriate. Lastly, based on current rates, we would now expect exchange to have an unfavorable impact of a little more than 3% on our full-year reported sales.

Congrats on a good quarter. Maybe to start for Robert or Bob, you guys put up a good first quarter being on COVID testing sales had double-digit growth in most of the businesses. I was hoping maybe you can reconcile the strong Q1 and the reiterated guidance and walk us through some of the puts and takes and how to think about bridging the difference?

Sure, Robbie. You've been part of these calls for a while, and we typically do not raise in Q1. However, we've had a strong start to the year, as noted. There are many positive developments within the company. We mentioned a recovery in procedures, particularly observing a good rebound in our device portfolio, especially in cardiovascular. Routine diagnostic testing is improving, although at a slightly slower pace than devices, but there is definitely a recovery trend. Our EPD execution is going well, with three out of four quarters showing double-digit growth, and we continue to see robust COVID sales both domestically and internationally. Our international presence is an important aspect as well. We discussed our pipeline and approvals, not only recent ones but also the performance of recently launched products. Bob mentioned our cash flow generation and how we are deploying that cash flow. We share part of that with our shareholders while also continuing to invest in the business. There are many positives in the business, but we are also managing a couple of challenges. One is handling the recall on the nutrition side, where we are collaborating with the FDA. We've considered various scenarios regarding restart dates and recovery curves in our reiterated guidance; it's difficult to provide an exact date for the restart now. We are working closely with the FDA but view this as a short-term challenge. Once we align with the FDA on restarting, we will begin executing our strategy to re-enter the market, resupply, and regain market share. The second challenge, which isn't unique to Abbott, is the changing macro environment which has become more challenging compared to January. We anticipate that this macro environment, including supply chain issues, will be somewhat persistent throughout this year. Given that, we'll need to see how these two points develop over the next few months to better assess our guidance going forward after Q2. Regardless, there is significant momentum in the business. Our devices and diagnostics are performing very well, and the nutrition segments not affected by the recall are also doing well. While I'm not typically a fan of excluding parts of our business, in this context, if we exclude the significant COVID impact and focus on the core business without the affected nutrition products, our growth rate was about 11%. This reflects the portfolio's strength, our investments, and our execution. In our guidance, the reiterated figure of $470 million accounts for the FX headwinds, supply chain challenges, and some impacts from the nutrition recall. Therefore, I believe this EPS guidance is appropriate given where we stand after Q1.

Great. And maybe as a follow-up, I think a lot of investors are focused on the go forward, realizing that January and February weren't the strongest months due to some of the elevated Omicron levels. So we heard Johnson & Johnson yesterday talk about reaching pre-COVID volume levels in April. It sounds like you exited and continue to see strong growth coming out of the quarter and into second quarter. I was hoping maybe you could give us a little more color on just the volume trends you're seeing, particularly in devices and diabetes, which was one that missed the street a little bit in the quarter? And how you're seeing the geographic spread and any differences there?

Sure. The overall story here has been quite similar to what I've mentioned before. The beginning of the year was a bit slower than we expected in January due to Omicron and the pressure it put on hospital staff. However, we experienced steady improvement in dollar performance each month throughout the quarter, with March being particularly strong. I've always emphasized comparing our business to pre-pandemic levels to mitigate some of the existing comparison issues. Looking at our Q1 '22 growth rate compared to 2019, we were up about 7.3%, significantly ahead of our 2019 performance. This growth was widespread, with the U.S. increasing by 6% and international markets growing over 8% compared to 2019. Our device business has shown strong performance, particularly in the cardiovascular sector, which also showed robust results in March. There's a combination of recovery as COVID cases decrease, along with the positive impact of recently launched products that we began introducing last year. Launching new technologies during the COVID environment is always challenging, but it was the right choice, and we're seeing good momentum with products like Amulet, Navitor in Europe, CardioMEMS, the rollout of EnSite X, and TriClip. Overall, we're witnessing strong growth in our cardio portfolio, and we're ahead of where we stood in 2019.

Robert, maybe back on the guidance question, right. The testing guidance was raised by $2 billion, right? That's perhaps $0.40 of upside and reiteration of the EPS, like what is offsetting the incremental tailwind from COVID rate? Like how much of this is FX, was this macro Russia versus the recall or inflationary pressures, I think a little bit more granularity will be helpful.

Sure. I think you highlighted the main points. Additional inflation pressures are affecting some of this. We've accounted for a couple of hundred million dollars in supply chain costs, input costs, freight, and distribution for the remainder of the year. Regarding the foreign exchange, it's likely adding around $0.05 as we've noticed the dollar strengthening, while the rest is primarily tied to nutrition, although it's currently challenging to pinpoint exactly. We have various scenarios concerning the restart and the curve. We are observing an increase in COVID tests and sales, which is helping to mitigate some of these issues.

And then one on Libre. Sequentially, your revenue has declined. And I guess my question is you've been adding, I think, a couple of hundred thousand new patients starts. Is that new patient starts changing at all? How should we think about the incremental reimbursement in Japan? And was the seasonality or what drove the sequential Libre revenue trends?

Yes. I mean I think we see some of that from time to time here, especially as you go from Q4 to Q1, Vijay. We've seen that a couple of times. I'd say internationally, the biggest driver of that is actually FX that created that. We've seen good growth internationally from Libre getting close to 20% on a very large base. And in the U.S., you're going to see some timing patterns there in terms of wholesaler ordering. I like to look at scripts, both new-to-brand scripts and total Rx scripts here in the U.S. and the sequential Q1 to Q4, there's definitely growth there. So I think we've done a really good job in the U.S. We've grown our business in this quarter by 50%. Users now well over 1 million users. We've made the investments in the U.S., whether it's Salesforce, DTC advertising. I think the team is beginning to hit its stride over there. They know that I'm not satisfied. We always want to see more and believe that we can do more. But I think the U.S. is starting to kind of really hit its stride with those investments as the sales force gets deployed and establishes the relationships with what is new physicians that are getting introduced to CGM. So I think that's worked out very well.

Congratulations on a strong start to the year. Rob and Bob, I wanted to ask about the gross margins. The Q1 performance was the highest since 2019, and I'm curious about the sustainability of this level, which was 59.1% despite the challenges in Q1. Should investors expect a return to 2019 gross margin levels in the 59% range or higher in the coming years?

Okay. Josh, I'll take the kind of the gross margin question. In the first quarter, our gross margin certainly benefited from the very high COVID testing sales. As I mentioned in my remarks, that actually, the fall-through on that was higher than we've seen in the past because of the production volumes that we had going through our plant, we're basically running full out on that. So our first quarter definitely benefited from that. As we look at the rest of the year, obviously, we're going to have the impact of the nutrition recall and the inflation, the increased inflation that Robert mentioned. Obviously, inflation is not unique to us. As we said back in January, we incorporated a sizable amount in our guidance at that point in time. And what we've seen, and I think a lot of other companies have seen is kind of an increase in some of those headwinds. And so we've captured that in our guidance for the rest of the year. When I think out beyond this year and where gross margin goes, I mean, gross margin is something we focus on in the company constantly. We've got dedicated teams within each business that are focused on driving gross margin improvements. I mean, a lot's going to depend, I think, as we think out in the future, the evolution of inflation and supply chain dynamics and how those evolve over time, that will be a key component. And then obviously, as we grow the top line in our medical device business, that's accretive to the overall profile of the company. And so that's kind of where we see gross margin right now and potentially in the future.

Regarding your question about MitraClip and Amulet, I want to touch on MitraClip first. The progress of MitraClip this quarter was quite similar to what I mentioned about our cardiovascular procedures. We faced challenges due to high COVID cases, but we started to see significant growth towards the end of February and into March as those cases decreased. While the growth rate has been strong for some time, we haven't fully utilized the FMR indication, which we received during the peak of COVID. To capitalize on the substantial market expansion opportunity we identified, supported by robust data from COAPT, it's crucial to engage with patient referrals and networks. We initiated this process when COVID situations improved, but it was paused due to the Delta and Omicron variants. I'm eager to see our team reengage those patient referral networks so we can fully leverage this unique indication, which we hold exclusively for now. Concerning competition, we must stay ahead by investing in our product, which we have been doing with MitraClip, continually enhancing its performance. We've also committed resources to new trials, particularly for moderate risk surgery patients, presenting a significant opportunity. We have a strong team, solid relationships, and a dominant position in mitral procedures. Although competition is a reality—we have faced it in Europe for a couple of years, and Germany, being the second-largest market globally, reflects our strong 80% market share—I am confident in our leadership position in mitral procedures, which we plan to maintain through our continued investments. I believe the best is yet to come as we have not fully tapped into the potential of the FMR indication. Regarding Amulet, I think the team has performed well, but we faced some challenges at the start of the quarter. This was mainly due to our decision to have every initial case proctored, which made it difficult to manage proctors across the U.S. and internationally. This did slow our progress a bit early in the year. However, the team has put in significant effort and focus since February and March, leading to a strong finish to Q1 and catching up on the contract closes we had aimed for. The commercial execution is going well, supported by the product's performance. Once physicians have performed a few implants, they become comfortable with the different technique and realize the benefits of our product, which offers superior closure due to our unique dual sealing mechanism. Recent late-breaking data from the AACC emphasized the significance of leaks, noting that even minor leaks were linked to an increase in thromboembolic events. Overall, I am optimistic about our position with Amulet, and I have confidence in both our commercial and clinical teams as we see opportunities for growth. Momentum is definitely building with Amulet.

So Robert, 2 high-level questions for me. One, I'll push my luck a little bit and see if we can get any preliminary thoughts on 2023. You're getting a meaningful testing benefit this year, which may not materialize next year. So how do you feel about your ability to grow margins and earnings next year as testing demand drops? And I have one follow-up.

Sure. We experienced a very strong quarter in testing. To address your question, we need to consider the current situation in the U.S. and globally. In the U.S., there was a notable decline in cases in February. However, many reported cases are not capturing the full picture due to the prevalence of at-home testing systems. This shift is part of our transition into an endemic state. Vaccines have been highly effective in preventing severe illness and protecting hospitals, but testing plays a crucial role in this transition, enabling us to manage our daily lives through surveillance and screening. Our product continues to perform well and has maintained a preferred status in the U.S., even with increased competition. Factors such as ease of use, shelf life, and reliability contribute to this standing. Looking into 2023, I am confident that testing will persist even in an endemic phase. Notably, our international testing business generated 50% of COVID test sales in March from global markets, with many governments choosing Abbott as a preferred supplier. While there are challenges, I believe our testing business will evolve towards a model similar to flu and respiratory testing in the coming year, which is key for our earnings growth. Additionally, our medical device business has seen significant investments, enhancing our diagnostic systems and expanding our test offerings. As we plan for next year, we anticipate some continuity in COVID testing, positioning us strongly to lead in that market. Moreover, our core business is set to grow significantly next year thanks to our investments and new product developments.

And Robert, you're in a unique position with your strong balance sheet. I saw you mentioned on the call, you bought back, I think, $2.5 billion in stock this quarter. What are your updated thoughts on M&A? And if you can't find attractive assets, are you going to continue to return cash to shareholders like we saw this past quarter?

Certainly. On the M&A front, we are consistently exploring opportunities to enhance the company and our business. However, any potential acquisitions must be strategic and not hinder our growth rate or profile. It's crucial for us to focus on assets that will contribute positively to our growth, particularly at the top line. We're committed to maintaining this approach. In terms of balance, we are generating strong cash flow and have significant financial flexibility. We plan to return $3 billion in dividends this year, and we've also made substantial buybacks. We continue to take a balanced approach, while also investing in our organic growth opportunities, such as Libre, MitraClip, and our medical devices and diagnostics expansion, which yield excellent returns for our shareholders. If additional opportunities arise, we will pursue them.

I'd like to circle back a little bit to the nutritional business. A lot of the feedback that I get from investors is some level of concern regarding brand name, brand damage, if you will. And I'm curious your thoughts on what it would take to sort of revamp this business up?

Sorry, you're referring to Nutrition business?

Yes.

We have a strong manufacturing network and a solid quality system in place. There is currently a product shortage in the market, and I've mentioned several steps we're taking to help replenish supplies. A crucial part of this effort is the restart process that we're undertaking. Our brand, Similac, remains strong, and we've managed to uphold many contracts despite the ongoing shortage. I'm confident in our team’s ability to resupply the market once we restart and regain our market share. We launched a new product at the end of last year that includes a blend of five HMOs, which we believe will be a significant growth driver and enhance our brand. As we return to the market, we will need to make some investments. Historically, when similar issues have occurred in the past, whether with Abbott or other manufacturers, market shares have recovered. The main consideration is the timing and trajectory of that recovery. Past situations with competitors and our own experiences support this recovery trend.

And as a follow-up, forgive me for asking it this way. What's next? I mean, I don't think we're going to be talking about COVID testing in a year. I hope we're not going to be talking about it. But how do you see the sort of forward momentum of the company? Big picture?

Yes, I don't think we'll discuss COVID testing in the same way in the future as we have over the past year. However, I believe there will still be opportunities for COVID testing to be relevant in this endemic phase. COVID has allowed us to speed up a significant trend in diagnostics, particularly point-of-care testing, which includes moving testing from labs to pharmacies and homes while keeping it interconnected. We are enhancing our ID NOW instrument with additional panels and tests. At the start of the pandemic, we had around 20,000 instruments, which has since increased fivefold, providing us with substantial opportunities to expand our offerings in decentralized testing. Regarding our device portfolio, we have many new products in the pipeline that are still in their early stages. One exciting product we received approval for this quarter is Aveir, our leadless pacemaker. I believe this will help revive growth in our CRM business, which has already seen a 4% growth this quarter. Aveir represents a significant advancement for our CRM range, particularly because we can learn from the first-generation products to better meet market needs. Although the single chamber segment comprises only about 15% of the market, our product stands out with features like improved retrievability and a longer battery life, twice that of existing products. Additionally, its capability to be upgraded to a dual chamber device has garnered considerable interest from physicians, which presents a great opportunity for us as we advance our trials for dual chambers and gather data on that front. CardioMEMS is another promising opportunity that we have just started to explore. The expanded indications for this product are expected to open up the market significantly, and the positive trends we’ve observed in implants since the expansion excite me about its potential. We are also investing in Amulet and the TAVR segment, and I see our Navitor product as highly competitive, particularly in its six months on the European market. Libre 3 not only represents an opportunity in the U.S. but also in Europe as we continue to grow our market presence. Furthermore, Lingo is a great prospect that’s still in its early stages, as we're looking to use our biowearable sensors beyond just diabetes. Overall, I am very excited about the future products we are working on and the new opportunities they present.

Curious on the inflation supply chain, sounds like it's gotten about $200 million worse than the $500 million you had built into the P&L, just to confirm that. I'm curious what you're seeing the biggest pain points? Is it wages, raw materials, shipping costs and expectations on when that could start to ease to some degree? Or how you're thinking for a potential offset with price?

Yes, this is Bob. As we mentioned in January, we factored in a significant impact of about $500 million on our gross margin for 2022. We've now added another $200 million in gross margin impact in our current guidance. The main areas affecting us are logistics, commodities, and some manufacturing inputs, rather than labor, which constitutes a smaller percentage of our total product cost. Regarding when this situation might improve, it’s complicated and depends on various factors, including inflation trends. Historically, commodity prices have cyclical patterns; they can increase, but they also tend to decrease. At some point, we anticipate that the inflationary pressures will ease, although it's challenging to predict exactly when that will happen.

And then given your presence in China, I would just kind of love to hear your thoughts on both China from a procedure standpoint and also a supply chain standpoint, just given how much of the business you have there? And any thoughts on the progress you're making with Libre 3 and the FDA would be great, too.

Sure. Regarding China, we initially saw strong performance in the quarter, but as lockdowns began, particularly in Shanghai towards the end of February and into March, we started to notice the effects on our procedures. Our testing platforms serve as early indicators, and we observed a decline in those during March. However, over the last two weeks of April, we began to see a recovery in diagnostic testing. The major cities shifted much of their testing to PCR and rapid testing, which affected routine hospital testing. Yet, we have seen about two solid weeks of positive trends moving in the right direction. Although we are not yet back to pre-lockdown levels, we are definitely seeing improvement.

Yes, Libre 3. Any update on how the progress is working with the FDA or what the label might look like? Just any additional color would be great.

Sure. As I mentioned earlier, we filed as an ICGM. There's not much to update on that front. However, I can share that we have transitioned Libre 3 in Europe from a limited rollout in Germany to a more accelerated switch from Libre 2 to Libre 3. The initial feedback from physicians has been very positive, and we also received encouraging feedback from the reimbursement system. This has given us the confidence to expedite the market transition for Libre 3. We experienced a similar process with Libre 2 when we transitioned from Libre 1 to Libre 2 in Germany, which took about a year. I believe the transition for Libre 3 will happen faster. We currently have over 90% reimbursement coverage for Libre 3 in Germany. This transition is now moving quickly, not only in Germany but for the rest of the year. I am focusing on what we can achieve with Libre in the countries where it is approved. So far, everything indicates that it is a very compelling product.

Okay. Operator, we'll take one more question.

Just in the context of some of these new products, I did want to maybe follow up with just a level set expectations, for example, the Avidity rollout and menu expansion, very strong growth in the quarter. Robert, if you could maybe talk about what's the duration of this rollout? I know it started into the pandemic. And what does that look like through this year and potentially through next year? And then I know you touched this a few times here about Amulet. Just love to get your updated thoughts on where you think share could go in the next year, 18 months? You've made some comments in Q4. I know the pace is picking up here in the U.S.? Any numbers you could put around your thoughts there would be super helpful.

Sure. Alinity is a long-term strategy for us, and we're implementing it across various areas, including immunoassay, clinical chemistry, hematology, and transfusion. This is a substantial undertaking as we aim to refresh all our systems. The market dynamics indicate that contracts typically last between 7 to 10 years, which means around 15% of the market becomes available for request for proposals (RFPs) each year. I believe we have many years of potential ahead. The COVID pandemic did slow down renewal cycles since hospitals were focused on pandemic-related issues, but there’s still a lot more on the horizon. The important factor is finding the right balance in the 15% of contracts up for renewal, determining which are renewals versus opportunities for gaining market share. Our team has done exceptionally well in defending our existing accounts, maintaining about 90% of them. For new business opportunities, we have a win rate of over 50%. This combination of retaining 90% of existing clients and winning over half of the new business is a key driver of our growth. Once our instruments are in place, expanding their usage is crucial, as it adds value both at the top and bottom line. The R&D team is focused on expanding the range of tests we can offer alongside our placement strategies for these systems. Regarding Amulet, we are successfully gaining market share and estimate that we have a double-digit market share in the U.S. Our goal is to achieve a strong presence in this space. The European market is smaller, where we currently hold a 50% share. As a new player with unique technology, it's essential to ensure that physicians learn how to effectively use our product and system as we expand into new and existing accounts. I am excited about the progress we’re making. Since September and October, we've observed positive shifts in our market share. To conclude, we have had a solid start to the year and have reaffirmed our guidance from January, even with the challenges we've faced from a nutrition recall, which we are working diligently to address. Other segments are performing well, and I anticipate that trend will continue. We are managing the impacts of inflation and supply chain issues, alongside some headwinds from foreign exchange. However, there are many positive developments at Abbott, and I expect this momentum to carry forward. Excluding COVID impacts and some recalled products, our core business grew by 11% last quarter, and our team is dedicated to sustaining that growth. Thank you.

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.