Abbott Laboratories (ABT) — Q3 2023 Earnings Call Transcript

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; Bob Funck, Executive Vice President Finance, and Phil Boudreau, Chief Financial Officer. Robert and Phil will provide opening remarks. 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 2023. 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, 2022. 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 is defined in the quarterly results press release issued earlier today. With that, I will now turn the call over to Robert.

Thanks, Mike. Good morning, everyone, and thank you for joining us. Today, we reported third quarter adjusted earnings per share of $1.14. Based on our performance through the first 9 months of the year, we raised the midpoint of our full year adjusted earnings per share guidance and narrowed the range to $4.42 to $4.46. Organic sales growth on the base business, which excludes COVID testing, increased double digits for the third consecutive quarter and was led by double-digit growth in all 4 of our major businesses. This acceleration in sales growth is a result of our strong position in attractive growth markets, in conjunction with the additional investments we made across the company during the pandemic. In addition to the strong top line performance, we continue to deliver accelerating earnings power on our base business and remain on track to deliver on the financial commitments we set at the beginning of the year. With a positive growth outlook for the businesses and the momentum we're building across the portfolio, we are well positioned for a strong finish to the year and heading into 2024. I will now review our performance in more detail before turning the call over to Phil. I'll start with Nutrition, where sales increased 18% in the quarter. In Pediatric Nutrition, growth of 25% was led by continued market share capture in the U.S. infant formula business, where we have now reclaimed the leadership position. Internationally, we continue to deliver well-balanced growth coming from both infant formula products and our PediaSure taller brand. In Adult Nutrition, growth of 12% was driven by strong demand for Abbott's market-leading Ensure and Glucerna brands across the U.S. and international markets. Turning to Established Pharmaceuticals, sales increased 11% in the quarter. This strong performance was broad-based and led by double-digit growth in several markets and therapeutic areas, including cardiometabolic, women's health and CNS pain management. In September, we announced an agreement with global biotech leader, mAb science to commercialize several biosimilars in emerging markets. This collaboration will help introduce cutting-edge medicines in the areas of oncology, women's health and respiratory diseases, to people in countries that have historically lacked access to these treatment options. Moving to Diagnostics, excluding COVID testing, organic sales grew 10%, led by Core Lab Diagnostics, where sales grew double digits driven by above-market performance in the U.S. and internationally. Growth was driven by a continued increase in global demand for routine diagnostic testing and a strong recovery of our blood transfusion testing business following a period of lower plasma donations that occurred during the COVID-19 pandemic. In Rapid Diagnostics, double-digit organic sales growth on the base business benefited from increased demand for respiratory tests in anticipation of an earlier-than-normal start to the flu season in the Northern Hemisphere. And I'll wrap up with Medical Devices, where sales grew nearly 15%, including double-digit growth in both the U.S. and internationally. In Diabetes Care, FreeStyle Libre sales were $1.4 billion in the quarter and grew 28%. The global Libre user base now exceeds 5 million people, with nearly 2 million of those in the U.S., where the Libre user base has nearly doubled in the last 2 years. A recent analysis of our U.S. user base showed that a growing number of Libre users are using Libre in combination with GLP-1 medications as part of a companion therapy approach for managing their diabetes. On average, those using both Libre and GLP-1 exhibited a higher rate of use for both products, wearing Libre sensors more often and taking GLP-1 medication more frequently compared to other users. This increase in use or better compliance is a positive sign that these users are taking an even more active role in managing their diabetes. And while we traditionally think of therapy choices as having to compete against one another, this is a good example of a complementary relationship between 2 products that both help optimize the treatment of diabetes. In cardiovascular devices, sales grew 10% overall in the quarter, led by double-digit growth in Electrophysiology and Structural Heart. In Electrophysiology, sales growth of 17% was driven by double-digit growth across all major international geographic regions and high teens growth of ablation catheters in the U.S. In Structural Heart, performance was driven by double-digit growth of MitraClip and strong growth from several recently launched new products, most notably Navitor, our latest generation TAVR valve. In Rhythm Management, growth was led by double-digit growth in pacemaker sales led by Aveir, our recently launched leadless pacemaker that can be used for both single chamber and dual-chamber pacing. And lastly, in Neuromodulation, sales grew 19%, driven by the recent launch of Eterna, our first rechargeable neurostimulation device for pain management which targets a large segment of the market where we previously did not compete. So in summary, this was a very strong quarter. With all 4 major businesses delivering double-digit organic sales growth, excluding COVID testing-related sales. Growth rates in the base business have improved every quarter this year on both the top and bottom lines. And the momentum we are building positions us well for a strong finish to the year and heading into 2024. I'll now turn over the call to Phil.

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our third quarter results. Sales decreased 1.5% on an organic basis due to, as expected, a year-over-year decline in COVID testing-related sales. Excluding COVID-tested sales, underlying base business organic sales growth was 13.8% in the quarter. Foreign exchange had an unfavorable year-over-year impact of 1.4% on third quarter sales. During the quarter, we saw the U.S. dollar strengthen somewhat versus several currencies, which resulted in a slightly more unfavorable impact on sales compared to exchange rates at the time of our earnings call in July. Regarding other aspects of the P&L, the adjusted gross margin ratio was 55% of sales. On a year-to-date basis, our adjusted gross margin ratio was 55.4% of sales which is below our original full year guidance of approximately 56% that we provided back in January. The difference is primarily due to lower gross margins on COVID tests due to lower volumes and price compared to our original forecast assumptions and the impact of higher inventory obsolescence as a result of maintaining higher inventory levels throughout the pandemic to help ensure product supply during a time when global supply chains were less predictable. As the global supply chain environment continues to improve, we're adjusting our inventory levels to align with that trend. Adjusted R&D was 6.2% of sales and adjusted SG&A was 26.4% of sales in the third quarter. Lastly, our third quarter adjusted tax rate was 14%. Turning to our 2023 outlook. For the full year, we now forecast ongoing earnings per share of $4.42 to $4.46, which is comprised of our year-to-date results plus ongoing earnings per share guidance of $1.17 to $1.21 for the fourth quarter. For the fourth quarter, we forecast total underlying base business organic sales growth, excluding COVID testing sales to be in the low double digits and exchange to have an unfavorable impact of a little more than 1% on fourth quarter reported sales.

Congratulations on another strong quarter. Robert, organic revenue growth nearly touched the mid-teens range for the core business in 3Q, and realize we've recently talked about the sustainability of the momentum generated this year. But I think investors would like to hear about your confidence level in the core business, delivering high single-digit organic revenue growth and solid margin expansion in 2024 off the 2023 comp that's only retire over the course of this year.

I appreciate it, Josh. I'm very confident, especially with the momentum we are experiencing. There will be some macroeconomic challenges as we approach 2024, but I believe our portfolio is well-prepared for this type of environment, and we typically perform well under these conditions. As I mentioned earlier, we've strengthened our portfolio with the investments made during the pandemic, which has contributed to our growth this year. Our base business has experienced double-digit growth for three consecutive quarters, and I anticipate continuing that trend in Q4. The earnings per share from our core operations are positively impacted, and we have seen consistent improvement each quarter. We expect another growth boost in the fourth quarter, projecting that the base business will contribute approximately $4.10 to EPS, which we've increased twice this year. There is clear momentum building on both revenue and earnings sides, and I believe this will carry into 2024. It all begins with top-line growth, which is the fundamental element. Pre-pandemic, we were growing at around 7%, and I expect that pace to accelerate next year, supported by a much larger sales base than before. This is driven by the momentum we're witnessing and additional contributions from our growth drivers that we will discuss during the call. The market currently anticipates double-digit EPS growth for the core business, and I am confident in our ability to achieve that. There will be a significant focus on gross margin and its expansion, and I believe we have favorable momentum as we enter 2024. In our January call, I will provide more details and specific forecasts. Ultimately, we aim to reinforce our growth model, which includes high single-digit revenue growth, double-digit earnings growth, margin expansion, strong free cash flow generation, and a balanced capital allocation approach. Overall, I am optimistic about maintaining this momentum as we head into next year.

Just to be clear, it's Wells Fargo. So Robert, China has been in the news a lot. Love to hear your thoughts on how you're thinking about China, big picture. How is Q3? And what are you expecting from the VBP impact in the EP business and from the anticorruption initiatives we've been hearing about there.

China has always been and will remain a significant market for us. Regarding the anticorruption discussions, we've been operating in China for 35 years and adhere to our compliance standards and all relevant laws. I didn't notice any significant impact in Q3. I was there last week, met with the teams, and reviewed our businesses without observing any meaningful effects. Our Devices segment grew by 20% this quarter. We will continue to monitor the situation, but I did not see any real impact during the quarter. Concerning the Volume-based Procurement (VBP), while it's a term specific to China, it reflects a global trend where governments strive to provide care to their populations while managing their budgets. This situation is not extraordinary compared to what we have experienced before. The VBP for our Electrophysiology (EP) business began earlier this year in April, and approximately 80% of the market has already implemented it, with the rest expected to follow by year-end. There has been a slight price impact, but overall, it has been beneficial for our EP business in China, helping us increase market share and volume. As for the VBP on diagnostics, that is also anticipated and should commence in the first half of next year. Currently, it affects about 20% of our Core Lab business. Given the nature of these businesses, where capital and services are involved, the rollout will differ from the more straightforward consumables and will be phased in as provinces implement it. While it may take a few quarters to fully implement, this approach parallels what we've seen in other markets in balancing technology with access. Nevertheless, China continues to present substantial growth opportunities, not just in Devices and Diagnostics, but also in Adult Nutrition within our Pharma sector. It's a vital market for us, and our team is managing operations effectively there.

Congrats on a really nice quarter. Robert, I want to ask you the overwhelming topic of discussion in the past few months has been GLP-1s and the possible impact on the future med tech market growth. You talked about it with respect to diabetes, but I'd love to just get your thoughts on a broader basis on GLP-1s? And do you see it as a negative, neutral or positive to your different end markets you participate in over the next 5, 10 years?

Sure, Robbie. This has certainly been a significant topic recently. With over 20 years of experience in diabetes, I believe any new therapies and technologies that emerge to address this disease are beneficial. These new medications will positively influence diabetes treatment. There's a lot of concern among investors about how these drugs will impact various industries and companies. I think some of the investor anxiety comes from those with less understanding of the Medtech field, who tend to react more to headlines or new studies. Valuations in Medtech have been notably affected by fears surrounding potential reductions in market sizes, whether those changes will occur in the coming years or decades. I recognize that new technologies naturally lead us to rethink the future, but often, initial reactions are shaped more by emotion than by factual data. This is evident today regarding GLP-1 and Medtech markets. From a long-term perspective, there seems to be a disconnect between revenue forecasts and the actual potential impact on patients. The consensus forecasts for this class of drugs over the next 4 to 5 years are projected around $60 billion to $70 billion, representing one of the largest categories we've seen. However, when we look at the pricing, both public and international, and relate it to user bases, we find that only about 10 million to 15 million patients will be on these drugs in the next few years. This is a small portion of the medical device market considering there are approximately 0.5 billion people with diabetes and another 0.5 billion with cardiovascular disease, including overlaps. Hence, there's a mismatch in the perceived impact on revenue growth and the actual patient population. Additionally, coverage is a critical question. While these drugs show promising outcomes, determining the appropriate cost to achieve these results is crucial. Much discussion has revolved around what insurers and pharmacy benefit managers will do, but the true payers are the employers and companies that cover these expenses. Rising medical costs and inflation will certainly factor into this as we move into the next year. In the short term, however, we've noticed a positive effect on the diabetes business. Our recent analysis revealed that many Libre users are also on these medications. Those using both tend to engage with both products more frequently compared to other users. This suggests higher therapy compliance, which should improve health outcomes. This complementary relationship in diabetes treatment is not unusual; over my 20 years, I've seen a pattern of patients utilizing various tools together, whether it's different types of insulin or other medications. Thus, the introduction of more treatment options benefits patients. Looking ahead, we recognize that we need to leverage data more effectively. Since the launch of Libre, we've gathered extensive de-identified glucose data. As of now, we have nearly 50 billion hours of glucose monitoring data, making Libre an ideal platform for assessing effectiveness outside of controlled trials and in real-world settings. We can analyze the performance of different drugs over time, how well they manage time in range, and so forth, both at the population level and for individuals. Moreover, with Abbott's diverse portfolio spanning nutrition, diagnostics, and treatment, we see opportunities to add value for patients using these medications. It's widely known that all drugs come with side effects, including muscle mass loss. Our expertise in nutrition gives us a chance to develop products that can help mitigate such side effects. Overall, the science and biology behind this are excellent, benefiting public health in the short term. While I believe the concerns surrounding this are exaggerated, there are still numerous questions to address over the long term, considering the points I've mentioned.

Really appreciate that, Robert. Maybe if I could sneak 1 more in on CGM, something that I think has really flown under the radar with the GLP-1 noise is you've recently gotten type 2 basal coverage in France. You have it in the U.S. and Japan as well. Just thinking about future opportunities in countries to approve type 2 basal, which could materially expand your reimbursed coverage opportunity around the world. How should we think about that? And how do you size that opportunity over the next few years for Abbott?

We had a strong quarter, seeing a 28% increase. International growth was at 26%, and in the U.S., we continued to perform well with over 30% growth. As you mentioned, we experienced a positive impact from basal coverage, especially in international markets, which is encouraging as we see international growth accelerate again. Last year, there were questions about our international growth, and our focus was on upgrading the Libre 3. Now, our sales team is revitalizing demand generation, and much of that growth, as you noted, is coming from the basal segment, particularly in France and Japan where we secured differentiated reimbursement. Over the last 12 months, we've added around 150,000 basal users, with a significant portion occurring in the latter half of that period, indicating ongoing acceleration. I was pleasantly surprised by the rapid progress in U.S. coverage; currently, around a third of commercial payers have adopted some level of basal coverage, which is a positive trend. The U.S., Japan, and France are all performing well in terms of basal coverage, providing a strong growth momentum. We also have substantial data supporting the benefits for these patients, as seen in the French claims data. This presents a great opportunity, and we have been focused on generating clinical evidence, expanding our salesforce to engage primary care teams, and investing in direct-to-consumer advertising where possible. This is a key growth driver for our goal of reaching $10 billion by 2028. While it's an important driver, it's not the only one, and we have significant momentum in this area.

Robert and Phil just wanted to follow up on Josh's question earlier, and I appreciate you're not going to give 2024 guidance. But just at a high level, there's a few puts and takes I can think of, Robert, I appreciate the momentum in the underlying business, but you will have competition coming on the EP side, which has been a strong double-digit grower looking at MitraClip and a quarter of double-digit growth, that was great to see, like how sustainable is that? And comps are just inherently potentially a little bit tougher. So if you could maybe walk through in a little bit more detail. Some of the puts and takes at a high level that we should consider nutrition, tough comps there, should consider as we think about 2024, that would be awesome.

Yes, I'm not sure we'll conduct a formal review here, but there are many points to discuss. I'd like to emphasize that we have a growth model and forecast that, over the past two years, has been somewhat affected by COVID and its impact on testing. However, we've managed to maintain high single-digit growth and significant double-digit growth in our bottom line this year, largely due to investments made in 2022. Currently, our top-line growth has been supported without needing to increase SG&A significantly. The high single-digit growth and double-digit bottom line growth persist even through the pandemic, particularly with the fluctuations in COVID testing. As those testing numbers decline, we are seeing clearer trends now, and I am optimistic about delivering strong results in 2024. Though there are macroeconomic factors at play, I feel confident about the aspects we can control. Regarding Electrophysiology, we acknowledge the competition and have still achieved mid-teen growth in Europe over the past nine months. We are encouraged by our position in that market. For MitraClip, we’ve recorded double-digit growth for the last three quarters, largely driven by international sales, and we are beginning to see a recovery in the U.S., which was up 5% this quarter, showing improvement from the previous quarters. Competition exists in both international and U.S. markets as well. You mentioned comparisons, and while I acknowledge the challenges, particularly with nutrition this year, it's important to note that every company faces comparisons annually. Even if we account for some of those comparisons in our Q3 results, we would still be seeing double-digit growth. I am confident in our forecast of high single-digit growth and double-digit EPS growth. Despite the challenges, we have strong prospects and a robust pipeline of products set to launch. While there are always challenges, I believe that overall, we are in a strong position in our markets.

Nutrition, your comments, if I remember them correctly, are that you are back in a leadership position in the Nutrition business. Are you back at 100%? Are you humming along? Do you feel like there's anything that's lagging or maybe ahead of the game? And I'm going to squeeze in your current thoughts on M&A, particularly given a lot of pullbacks in valuations.

We did not expect to regain all of our market share in just one quarter. Our approach is to show gradual increases in our market share month by month. Currently, a third-party measure indicates that we achieved a leadership position in September. While we aren't fully back to our pre-recall levels yet, I believe we will be there by the end of the year. I estimate we are about 90% of the way back to where we were before the recall. It's encouraging to see consistent growth across all segments of our market share. In the WIC channel, we have been the market leader since the start of the year, which reflects our strategy to focus on that underserved population. In the non-WIC channel, we are also experiencing steady month-to-month market share gains. The team has done a commendable job, and our shelves are well-stocked. Now, we need to continue executing our demand generation effectively, and I feel positive about our efforts to recover market share.

M&A, particularly given pullbacks on valuations?

Yes. Well, listen, we've completed 3 transactions over the last 6 months. We acquired CSI and in the process of integrating that business. I think it's going to be a nice addition to our vascular business and start to reposition that business to kind of more higher growth markets. This quarter, we announced the acquisition of Bigfoot and this is just going to be able to allow us to broaden our offerings with Libre and provide a nice opportunity from a global perspective, and then also an announcement on the EPD side to expand access to biosimilars. So we've been active, and we continue to be active. Yes, I think valuations have come down. The same way they came down, let's say, post pandemic in that 2022 time frame. It's a good opportunity. Like I've said, I think sometimes companies need to understand if it's a short term or if there's something more fundamental in that valuation, but we're in a great strategic position to be able to execute on our M&A strategy, which is really focused on can we add value to the asset. And does it fall into our strategic framework of areas that we want to invest in and grow in the ones that I highlighted here are strategic, and we believe that we can add a lot of value to them. So we've got plenty of capacity to engage. And if there's the right opportunity that comes along in this period, we'll be ready.

Robert, congrats on the good print here. I had 2 questions. My first one is, could you just elaborate on this China VBP for Diagnostics. How big is Core Lab in China for you guys at this point in time? And I think I heard 20% would be impacted next year? Is the assumption or rest of Core Lab would be impacted in fiscal '25, like how do these contracts flow up? Because my understanding is you will see volume gains or those volumes and the asset price headwinds?

Yes. The situation is developing, as it was recently announced that proposals are due from the provinces participating in the bidding process within the next 30 days. Following that, there will be an evaluation period lasting another 30 to 60 days. I expect that things will likely commence in late Q1 and continue into Q2. Currently, the list of assays being considered under the volume-based procurement represents about 20% of the market, with our annual sales in China being approximately $1 billion. Specifically, these assays focus on infectious diseases and some fertility-related tests. There hasn’t been any communication about expanding this to other testing areas like oncology or hormones, so this will be our primary focus for 2024. There is potential for volume growth, especially since we hold substantial market share in some segments, while in others, we have less, which offers opportunities for expansion. In segments where we have a higher market share, we may feel more pricing pressure, but we could counteract that by increasing volume in areas where our share is lower. It's straightforward, and we’ll see how this unfolds. Our team has prior experience with volume-based procurement in China, having navigated it with various products in our portfolio. They are well-equipped to manage this effectively, including adjustments to our cost structure as necessary. Overall, the team has a solid strategy in place, and we'll monitor how this situation develops.

That's helpful, Robert. And my second one, I know you touched upon PFA. I think Abbott's launching their own PFA at some point in fiscal '25, '26. How should we think in the interim, right? I think your peer had pretty robust assumptions for what percentage of procedures would be PFA. Is Abbott concerned about share loss when you think about that medium-term time frame? And are there offsets to it, right? When you haven't touched upon Lingo. I think previously you had said Lingo could be as big as Libre, where will be on Lingo launch?

We need to monitor how other companies perform to determine if we are gaining or losing market share. However, I believe we still have strong, sustainable growth. Looking ahead to 2024, I expect our growth will generally align with the market, which historically has been in the double digits. We have some solid innovations coming out in the RF segment. Our EP business, particularly the PFA product aimed at AF ablations, along with our strong positions in VT and SVT ablations, is promising. A significant portion of our sales also comes from mapping, diagnostics, and consumables, which I anticipate will remain stable. Thus, I see a solid opportunity for our EP portfolio to grow in line with the market in 2024. In response to the earlier question, we have multiple avenues to achieve our high single-digit growth rates, supported by a strong portfolio and presence in dynamic markets. Although Lingo wasn't previously mentioned, it presents a substantial growth opportunity for us. We are starting a controlled launch in the U.K. to refine our marketing strategies. The insights gained have been excellent, and I'm looking forward to a full-scale launch in the U.K. next year. Additionally, we aim to file for Lingo in the U.S. by the end of this year, which will offer another significant growth opportunity for us.

So maybe follow up on a couple of pipeline opportunities and growth drivers, one being TRILUMINATE and TriClip, sort of if you could maybe walk us through the expected pathway for commercialization in the U.S. on that front? And then back to diabetes, I know the GLP-1s dominated to the discussion there, but with Tandem rolling out integration with their pump and kind of making wider availability here of closed-loop integration in Q4. Just it would be great to hear your thoughts on what that ramp looks like, what additional support or efforts you expect will be required on your end? And just what we can expect over the next 12, 18 months, that's out there and available to patients.

Certainly. Regarding TriClip, we submitted it for FDA review earlier this year. I understand that CMS will also review it in parallel. I believe we will likely see a panel review, which is not unexpected since many novel therapies, including TAVR and MitraClip, have undergone this process. Currently, we anticipate the panel review to occur around January, although this may change. Despite the expectation of going through a panel, I remain very enthusiastic and confident about TriClip’s potential. These patients are in serious condition with limited treatment options. The TRILUMINATE study has shown that we can effectively reduce TR, which we believe is crucial. The safety profile of TriClip will also play a significant role as we aim to establish a new category. There are about 5 million people globally suffering from TR, and I see this as a billion-dollar opportunity. We are dedicated to creating a strong position in this market through product innovation and solid clinical evidence. What was your other question? Yes, it's my understanding here that we'll see a launch sometime by the end of this year with Tandem. And we're excited about that. There's about 150,000 to 200,000 new pump users globally. So I think this is an area that we've historically haven't been a player in, and now we will be a player in. We've launched an AID system in Europe, let's say, more towards the end of last year into this year, and I was reviewing the results of the team. I mean that pump company has had tremendous growth partnering with us. And so that's a proof point there that when you bring in the choice and the option and you put it together with Libre that there's a real strong value proposition to connect the pump with Libre. And then as I've said, we want to be a leader in this space, not just be a competitor. So there's a lot of work ongoing right now with our dual analyte glucose ketone sensor, which we believe there's a lot of applications there, Matt, but I think one of the clear applications and value propositions is to be able to kind of pair that with an insulin pump and have a much more richer algorithm and safety algorithm in the insulin delivery system. So we feel good about that.

Operator, we will take one more question, please.

Just a couple of quick ones. First, what is the updated expectation for COVID testing revenue here in '23? And then second one, Robert, you alluded to gross margin expansion in '24. Can you just frame the sources of gross margin? I assume nutrition is a key driver there. And then maybe just bigger picture, and I appreciate that everyone in the industry is facing these challenges. But is there visibility into clawing back to pre-COVID gross margin levels?

Sure. There's visibility for the first half of 2024, but after that, I wouldn't say there is. However, we do have a plan to drive gross margin and its expansion. Looking ahead to next year, there are a couple of elements that will benefit us, such as lower commodity costs, which were significant challenges for us in 2022 and 2023. On one hand, there are commodity costs in nutrition and other commodity costs affecting the entire company. We've seen, like many companies, those costs beginning to decrease. This is especially important for us regarding nutrition, which relies heavily on various commodity inputs. Additionally, we are experiencing lower freight and distribution costs. Many companies are seeing this as well, but we are noticing improvements not only in rates but also with more normalized supply chains, which allow us to use different types of freight to reduce costs, avoiding air freight as much as possible. We have a solid process and dedicated teams working on gross margin and improvement plans, and they have been very active over the last 12 to 18 months. I expect these teams to keep delivering on their strategies for cost reductions and a favorable product and portfolio mix. As our faster-growing, higher-margin businesses and new products take up a larger portion of our overall sales, this will also contribute positively. We recognize that gross margin is essential for achieving double-digit bottom-line EPS growth and this is something we focus on every year. The environment is looking more favorable for our teams to work in. On your COVID question, I’ll let Phil provide more details.

Jayson, relative to 2023 COVID testing sales forecast full year is about $1.5 billion here.

Okay. So I'll just wrap up here with a few comments. It's clear that we're seeing broad-based growth across the entire company. As I said in my comments, we've now delivered double-digit organic sales growth here for the past 3 quarters and forecasting that type of growth again this next quarter EPS contributions and the growth in the base business has increased every quarter, and we've exceeded the expectations we set for the initial guidance of the year. The pipeline to some of the points that were made there, a big kind of opportunity for us going into 2024 is our pipeline, and it continues to be productive with several new product approvals, indications reimbursement and geographic expansions there. So momentum is clearly building and well positioned for a strong end of the year and going into 2024.

Thank you, operator, and thank you all for 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.